Chapter 8

Resource Allocation

Allocating Resources to the Project

Allocation of physical resources to one or multiple projects. At any given time, the firm may have fixed level of various resources like - labor-hours of various types of professionals - machine hours of various types of machinery - hours of computing time - specialized locations The project schedule should be adjusted to smooth the use of the resources

Critical Path MethodCrashing a Project

Time and cost are interrelated The faster an activity is completed, the more it costs Change the schedule and you change the budget Thus many activities can be speeded up by spending more money

What is Crashing / Crunching?

To speed up, or expedite, a project Of course, the resources to do this must be available Crunching a project changes the schedule for all activities This will have an impact on schedules for all the subcontractors Crunching a project often introduces unanticipated problems

Direct Cost vs. Indirect Cost

Direct cost increases if the activity duration is to be reduced. The Indirect cost decreases if the activity duration is to be reduced.

Activity Cost Slope

Crash Cost - Normal Cost Slope Crash Time - Normal Time

An Example of Two-Time CPM

Activity SlopesCost per Period for Crashing

Negative slope: as the time required for a project or task is decreased, the cost is increased.

Crashing the Project

When crashing a project, first task is to develop a table or graph of the cost of a project as a function of the projects various possible completion dates.

Crash selected activities, one at a time, to decrease the project duration.

Crashing the Project

Two principles:
Focus on the critical path(s) when trying to shorten the duration of a project. (Crashing a non-critical activity will not influence project duration.) When shortening a projects duration, select the least expensive way to do it.

Crashing example
D [10,8] 10

5 6

Direct Cost Rs. 25,500 Indirect Cost Rs. 200/day

Step 1
Path ADG AEH BH Normal 21 37 35 Crashing A by 2 day 19 35 35

CFH

25

25

Step 2
Path ADG AEH BH Normal Crashing A Crashing E, B by 2 day by 3 days 21 19 19 37 35 35 35 32 32

CFH

25

25

25

Step 3
Path Normal Crashing
Crashing A by 2 day E, B by 3 days Crashing H by 2 days

ADG

21

19

19

19

AEH
BH CFH

37
35 25

35
35 25

32
32 25

30
30 23

Crashing Table

Question
3

A [9,6] 210

G [5,3] 180

H [2,1] 300

Direct Cost Rs. 37,500 Indirect Cost Rs. 250/day

Solution

Question 1:
Events Normal Crash

Activity 1-2
2-3 2-4 2-5 3-4 4-5 5-6

Time (days) 3
6 9 7 8 5 3

Cost (Rs) 360

1440 2160 1120 400 1600 480

Time (days) 2
4 5 5 4 3 2

Cost (Rs) 400

1620 2380 1600 800 1770 760

Indirect cost: Rs100/day

Question 2:
Normal Activity Time (days) 8 4 2 10 5 3 Cost (Rs) 100 150 50 100 100 80 Time (days) 6 2 1 5 1 1 Crash Cost (Rs) 200 350 90 400 200 100 Slope

1-2 1-3 2-4 2-5 3-4 4-5

50 100 40 60 25 10

Indirect cost: Rs. 70/day

Risks in Project Crashing

Various external and internal factors may lead project manager to go for crashing, but it usually affects the quality of work as the time taken (besides cost) is the major issue on his mind: New resources aren't going to be familiar with the tasks at hand, so they will probably be less productive than current team members. Who will guide the new members up the learning curve? Usually it will be the most productive members of the team, who could themselves be working to get the task finished more quickly. Being available does not equal being qualified. For example, while outsourcing, one can't be sure that workers are trained enough to deliver as per expected standards.

Project Fast Tracking

Fast tracking means that the activities that are normally done in sequence are instead performed partially in parallel. In other words, Fast tracking is applied by re-scheduling various activities within the project to be worked on simultaneously instead of waiting for each piece to be completed separately. Fast-tracking always involves risk that could lead to increased cost and some rework later. A good rule of thumb is that sequential activities can sometimes be fast-tracked by up to 33%. In other words, if you're fast-tracking, you can start the second of two sequential activities when the first activity is 66% complete.

The Resource Allocation Problem

As discussed, CPM/PERT ignore resource utilization and availability Critical resources cant be renewed or inventoried. Schedules need to be evaluated in terms of both time and resources (scarce ones) Time Limited vs. Resource Limited

Resource Loading
Resource loading describes the amount of resources an existing schedule requires Gives an understanding of the demands a project will make of a firms resources

Resource A

Resource B

Resource Leveling
Approach to even out the peaks and valleys of resource requirements so that a fixed amount of resources can be employed over time. Less hands-on management is required May be able to use just-in-time inventory Improves morale Fewer personnel problems

Resource Leveling

Continued

When an activity has slack, we can move that activity to shift its resource usage May also be possible to alter the sequence of activities to levelize resources Small projects can be levelized by hand Software can levelize resources for larger projects Large projects with multiple resources are very complex to levelize

Resource Leveling Steps

Create

a project activity network diagram and mention the duration of the activities Calculate EOT( earliest occurrence time) for all the events. This helps in calculation of float/ slack of activities Develop a time-phased resource loading diagram Identify any resource conflicts and begin to smooth the loading table using slacks

Resource Leveling Techniques

Shift the start date of an activity within its slack time 2. Split the activity within its slack time
1.

Resource Leveling Example:

Activity
1-2 1-3 1-4 2-3 2-4 3-5 4-5

Duration Manpower Req.

6 10 6 10 4 6 6 8 4 9 7 6 17 6

Q: Reduce the peak manpower requirement and smoothen the period to period resource requirement.

Solution

Question:

A job requires the following resources:

Six crane operators have been recruited for the job. How would you manage the job so as to complete it at the earliest?

Constrained Resource Scheduling

Heuristic Approach An approach, such as a rule of thumb, that yields a good solution that may or may not be optimal. An approach, such as linear programming, that yields the one best solution.

Optimization Approach

Heuristic Methods

The only feasible way on large projects While not optimal, the schedules are very good Take the CPM/PERT schedule as a baseline They sequentially step through the schedule trying to move resource requirements around to levelize them Resources are moved around based on one or more priority rules

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

Heuristic Methods

Continued

These are just the common ones There are many more The heuristic can either start at the beginning and work forwards Or it can start at the end and work backwards

Optimization Methods
Finds the one best solution Uses either linear programming or enumeration Not all projects can be optimized Approaches only work with small to medium projects

Multi-Project Scheduling and Resource Allocation

Scheduling and resource allocation problems increase with more than one project The greater the number of projects, the greater the problems One way is to consider each project as part of a much larger project However, different projects have different goals so combining may not make sense Must also tell us if there are resources to tackle new projects we are considering

Standards to Measure Schedule Effectiveness

1.

2.
3.

Schedule slippage Resource utilization In-process inventory

Schedule Slippage

The time past a projects due date when the project is completed Slippage may cause penalties Different projects will have different penalties Expediting one project can cause others to slip Taking on a new project can cause existing projects to slip

Resource Utilization
The percentage of a resource that is actually used We want a schedule that smoothes out the dips and peaks of resource utilization This is especially true of labor, where hiring and firing is expensive

In-Process Inventory
This is the amount of work waiting to be processed because there is a shortage of some resource Similar to WIP in manufacturing The cost here is holding cost

Heuristic Techniques
Multi-projects are too complex for optimization approaches Many of the heuristics are extensions of the ones used for one project

Additional Priority Rules

Resource scheduling method Minimum late finish time Greatest resource demand Greatest resource utilization Most possible jobs