Project Management

Resource Allocation

Resource Allocation
Time allocation is called scheduling Related to time is allocating other resources Altering schedules can alter the need for resources and timing of resource needs At any given time a firm will have fixed level of resources But in Project environment the needs keep changing

Resource Allocation
Resources include 5 Ms Example.
Suppose for project X the need for a particular resource varies between 70 to 120% This means this resource will be under utilized for some time and over utilized at some other By smoothing the use of resource (by adjusting the project schedule) it may be possible to make efficient use of the resource.

This topic covers .Resource problems.

Trades offs involved Allocation to one project and multiple projects Critical Path method Crashing a Project Resource loading and Leveling Resource Constrained Schedules Multi project Resource Management Critical Chain

Critical Path Method - Crashing a Project

CPM includes a way of relating the project schedule to the level of physical resources allocated to the project This allows the project manager to trade time for cost, or vice versa In CPM, two activity times and two costs are specified, if appropriate for each activity
Chapter 9-1

Critical Path Method - Crashing a Project

The first time/cost combination is called normal, and the second set is referred to as crash Normal times are normal in the same sense as the m time estimate of the three times used in PERT Crash times result from an attempt to expedite the activity by the application of additional resources
Chapter 9-2

Critical Path Method - Crashing a Project

Careful planning is critical when attempting to expedite (crash) a project Expediting tends to create problems; and the solution to one problem often creates several more problems that require solutions Some organizations have more than one level of crashing

Chapter 9-3

Critical Path Method - Crashing a Project

Use of three times may reduce this kind of situation to some extent, but can not totally rule out the same Deterministic times are more prone to changes Lat minute changes by clients, unforeseen situations make crashing away of life

Example
We need to crash the activities of some project to ensure timely completion We have the labor and materials But we do not have specialized equipment Our equipment is committed else where We can not hire it locally We can hire it from a far off place but it costs a lot

Crashing Sample Network

3 8

6
1 3 2 10 4 11 0 5

6 7 5

Critical Path = 3 + 6 + 8 + 6 = 23 Time Units

Crashing An Example
Activity Normal Time Normal Cost Crash Time Crash Cost Slope Max Crsh Tm

1-2 2-3 2-4 2-5 3-6 5-7 6-7

3 6 10 11 8 5 6

$50 $80 $60 $50 $100 $40 $70

2 4 9 7 6 4 6

$70 $160 $90 $150 $160 $70 $70

Cost/Time Slope
Step1 compute a cost /time slope that can be crashed. Slope is defined as Slope = (Crash cost Normal cost)/(Crash Time Normal time) Slope is the Cost Per day of crashing a project Slope is negative which means As time required for a project or task is reduced, cost is increased

Cost/Time Slope
In the above activity 6-7 can not be crashed Calculating the slope this way might give the impression that activities can be crashed in increments of one day But this is not true Example An activity could be carried out in eight days or Four days (No intermediary times are possible) The crash has to be four days in this case

Crashing Sample Network

3 $100

$80
1 $50 2

6
4 5

$70 7

Normal Project Total Cost = $50 + $80 + $100 + $70 + $60 + $50 + $40 = $450

Crashing
First task Develop a table or graph of cost of the project as a function of the projects various completion dates Starting with the normal schedule, crash selected activities one at a time, to decrease the project duration at the minimum additional cost

Crashing
Two principles
1. Focus on critical path when trying to shorten the duration of the project. (with the exception that the resource needed for one activity, not on the critical path is needed for another project) 2. when shortening a project duration, select the least expensive way to do it.

AOA example is easier to illustrate than AON

Crashing An Example
Activity Normal Time Normal Cost Crash Time Crash Cost Slope Max Crsh Tm

1-2 2-3 2-4 2-5 3-6 5-7 6-7

3 6 10 11 8 5 6

$50 $80 $60 $50 $100 $40 $70

2 4 9 7 6 4 6

$70 $160 $90 $150 $160 $70 $70

-20 -40 -30 -25 -30 -30 0

1 2 1 4 2 1 0

Crashing Sample Network

Critical Path = 23 Days 6 3 1 $50 2 3 10 $60 4 $50 11 5 $40 5 7 $100 8 6

$80

$70

Normal Project Total Cost = $50 + $80 + $100 + $70 + $60 + $50 + $40 = $450

Crashing Sample Network

Critical Path = 23 Days 6 2 1 $70 2 3 10 $60 4 $50 11 5 $40 5 7 CrashedPath = 20 Days 6 $160 6

$80

$70

Crashed Project Total Cost = $70+ $80 + $160 + $70 + $60 + $50 + $40 = $530

Crashing Sample Network

Critical Path = 23 Days 4 $160 10 2 $60 4 $50 11 5 $40 5 7 3 CrashedPath = 18 Days 6 $160 6

2 1 $70

$70

Crashed Project Total Cost = $70+ $160 + $160 + $70 + $60 + $50 + $40 = $610

Crashing Sample Network

Further crashing of CP is not possible as we have used up the complete (maximum) crash time possible. Crashing other paths will not shorten the project duration

Fast-Tracking
Another way to expedite a project is known as fast-tracking It refers to overlapping the design and build phases of a project Because design is usually completed before construction starts, overlapping the two activities will result in shortening the project duration
Chapter 9-4

The Resource Allocation Problem

A shortcoming of most scheduling procedures is that they do not address the issues of resource utilization and availability Scheduling procedures tend to focus on time rather than physical resources Time itself is always a critical resource in project management, one that is unique because it can neither be inventoried nor renewed
Chapter 9-5

The Resource Allocation Problem

Schedules should be evaluated not merely in terms of meeting project milestones, but also in terms of the timing and use of scarce resources A fundamental measure of the project managers success in project management is the skill with which the trade-offs among performance, time, and cost are managed

Chapter 9-6

The Resource Allocation Problem

The extreme points of the relationship between time use and resource use are these:
Time Limited: The project must be finished by a certain time, using as few resources as possible. But it is time, not resource usage, that is critical Resource Limited:The project must be finished as soon as possible, but without exceeding some specific level of resource usage or some general resource constraint

Chapter 9-7

The Resource Allocation Problem

If all three variables - time, cost, specifications are fixed, the system is overdetermined In this case, the project manager has lost all flexibility to perform the trade-offs that are so necessary to the successful completion of projects A system-constrained task requires a fixed amount of time and known quantities of resources

Chapter 9-8

Resource Loading
Resource loading describes the amounts of individual resources an existing schedule requires during specific time periods The loads (requirements) of each resource type are listed as a function of time period Resource loading gives a general understanding of the demands a project or set of projects will make on a firms resources

Chapter 9-9

Resource Loading
Is an excellent guide for early, rough project planning Because the project action plan is the source of information on activity precedences, durations, and resources requirements, it is the primary input for both the project schedule and its budget The action plan links the schedule directly to specific demands for resources
Chapter 9-10

Resource Loading
The PERT/CPM network technique can be modified to generate time-phased resource requirements The project manager must be aware of the ebbs and flows of usage for each input resource throughout the life of the project It is the project managers responsibility to ensure that the required resources, in the required amounts, are available when and where they are needed
Chapter 9-11

Resource Leveling
Resource leveling aims to minimize the period-byperiod variations in resource loading by shifting tasks within their slack allowances The purpose is to create a smoother distribution of resource usage Several advantages include:
Less hands-on management is required May be able to use a just-in-time inventory policy

Chapter 9-12

Resource Leveling
When resources are leveled, the associated costs also tend to be leveled The project manager must be aware of the cash flows associated with the project and of the means of shifting them in ways that are useful to the parent firm Resource leveling is a procedure that can be used for almost all projects, whether or not resources are constrained
Chapter 9-13

Resource Leveling - Example

Constrained Resource Scheduling

There are two fundamental approaches to constrained allocation problems: Heuristic Methods Optimization Models Heuristic approaches employ rules of thumb that have been found to work reasonably well in similar situations Optimization approaches seek the best solutions but are far more limited in their ability to handle complex situations and large problems
Chapter 9-14

Heuristic Methods
Heuristic approaches to constrained resource scheduling problems are in wide, general use for a number of reasons:
1. They are the only feasible methods of attacking the large, nonlinear, complex problems that tend to occur in the real world of project management 2. While the schedules that heuristics generate may not be optimal, they are usually quite good- certainly good enough for most purposes

Chapter 9-15

Heuristic Methods
Most heuristic solution methods start with the PERT/CPM schedule and analyze resource usage period by period, resource by resource In a period when the available supply of a resource is exceeded, the heuristic examines the tasks in that period and allocates the scarce resource to them sequentially, according to some priority rule Technological necessities always take precedence

Chapter 9-16

Heuristic Methods
Common priority rules:
As soon as possible As late as possible Shortest task first Most resources first Minimum slack first Most critical followers Most successors Arbitrary
Chapter 9-17

Heuristic Methods
Most priority rules are simple adaptations of the heuristics used for the traditional job shop scheduling problem of production/operations management Most heuristics use a combination of rules: a primary rule, and a secondary rule to break ties As the scheduling heuristic operates, one of two events will result:
The routine runs out of activities before it runs out of resources The routine runs out of resources before all activities have been scheduled

Chapter 9-18

Optimizing Methods
The methods to find an optimal solution to the constrained resource scheduling problem fall into two categories:
Mathematical programming Enumeration

Mathematical programming can be thought of as liner programming (LP) for the most part
Chapter 9-19

Optimizing Methods
Linear programming is usually not feasible for reasonably large projects where there may be a dozen resources and thousands of activities In the late 1960s and early 1970s, limited enumeration techniques were applied to the constrained resource problem Tree search, and branch and bound methods were devised to handle up to five resources and 200 activities
Chapter 9-20

Multiproject Scheduling and Resource Allocation

The most common approach to scheduling and allocating resources to multiple projects is to treat the several projects as if they were each elements of a single large project Another way of attacking the problem is to consider all projects as completely independent To describe such a system properly, standards are needed by which to measure scheduling effectiveness

Chapter 9-21

Multiproject Scheduling and Resource Allocation

Three important parameters affected by project scheduling are:
Schedule slippage Resource utilization In-process inventory

The organization (or the project manager) must select the criterion most appropriate for its situation

Chapter 9-22

Multiproject Scheduling and Resource Allocation

Schedule slippage, often considered the most important of the criteria, is the time past a projects due date or delivery date when the project is completed Resource utilization is of particular concern to industrial firms because of the high cost of making resources available The amount of in-process inventory concerns the amount of work waiting to be processed because there is a shortage of some resource
Chapter 9-23

Multiproject Scheduling and Resource Allocation All criteria cannot be optimized at the same time
As usual, the project manager will have to make trade-offs among the criteria A firm must decide which criterion to evaluate its various scheduling and resource allocation options
Chapter 9-24

Mathematical Programming
Mathematical programming can be used to obtain solutions to certain types of multiproject scheduling problems These procedures determine when an activity should be scheduled, given resource constraints Mathematical programming, however, is rarely used in project management to handle the multiproject problem (mostly, heuristics are used)

Chapter 9-25

Mathematical Programming
The three most common objectives of mathematical programming are:
1. Minimum total throughput time (time in the shop) for all projects 2. Minimum total completion time for all projects 3. Minimum total lateness or lateness penalty for all projects

These objectives are most appropriate for job shop type solutions to resource constraints

Chapter 9-26

Heuristic Techniques
There are scores of different heuristic-based procedures in existence They represent rather simple extensions of wellknown approaches to job-shop scheduling:
Resource Scheduling Method Minimum late finish time Greatest resource demand Greatest resource utilization Most possible jobs
Chapter 9-27

Critical Chain
Eliyahu M. Goldratts Theory of Constraints

Traditional Project Estimation Techniques Ineffective

Time and Resource Constraints Usually Violated PMs Rely on Padding of Schedules and Budgets Unknown Nature of Event Interaction
Fear, Uncertainty, Doubt Psychological, Organizational, and Physical

Critical Chain - Approach

Bottleneck Management Activities with Several Predecessors and/or Successors Add Time Buffers at Bottleneck Events
Safety Stock Equivalent in Manufacturing Just-in-Time with Just-in-Case Statistically-derived Path Buffers

Establish the Critical Chain for Scarce Resources Prioritization of Resources in Chain Events
Communication of Walt Needs is Critical to Success