Project Management: A

Managerial Approach

Chapter 9 – Resource Allocation

© 2006 John Wiley and Sons, Inc.

 Overview

• Critical Path Crashing

• Resource Leveling
• Resource Constrained Schedules
• Multiproject Resource Management
• Critical Chain

© 2006 John Wiley and Sons, Inc.

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

© 2006 John Wiley and Sons, Inc.

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
© 2006 John Wiley and Sons, Inc.
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

© 2006 John Wiley and Sons, Inc.

Chapter 9-3
 Crashing – Sample Network

3 8
6 6 6

3 2 10 7
1 4 0
11 5 5

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

© 2006 John Wiley and Sons, Inc.
 Crashing – An Example
Activity Normal Normal Crash Crash Max
Time Cost Time Cost Slope Crsh Tm

1-2 3 $50 2 $70

2-3 6 $80 4 $160
2-4 10 $60 9 $90
2-5 11 $50 7 $150
3-6 8 $100 6 $160
5-7 5 $40 4 $70
6-7 6 $70 6 $70
© 2006 John Wiley and Sons, Inc.
 Crashing – Sample Network

3 $100
$80 6 $70

$50 2 7
1 4

“Normal” Project Total Cost = $50 + $80 + $100 + $70 +

$60 + $50 + $40 = $450
© 2006 John Wiley and Sons, Inc.
 Crashing – An Example
Activity Normal Normal Crash Crash Max
Time Cost Time Cost Slope Crsh Tm

1-2 3 $50 2 $70 20 1

2-3 6 $80 4 $160 40 2
2-4 10 $60 9 $90 30 1
2-5 11 $50 7 $150 25 4
3-6 8 $100 6 $160 30 2
5-7 5 $40 4 $70 30 1
6-7 6 $70 6 $70 0 0
© 2006 John Wiley and Sons, Inc.
 Crashing – Sample Network
Critical Path = 23 Days
3 8
6 $100 6
$80 6 $70
3
10
$50 2 $60 7
1 4

$50 5 $40
11 5
“Normal” Project Total Cost = $50 + $80 + $100 + $70 +
$60 + $50 + $40 = $450
© 2006 John Wiley and Sons, Inc.
 Crashing – Sample Network
Critical Path = 23 Days “Crashed”Path = 20 Days
3 6
6 $160 6
$80 6 $70
2
10
$70 2 $60 7
1 4

$50 5 $40
11 5
“Crashed” Project Total Cost = $70+ $80 + $160 + $70 +
$60 + $50 + $40 = $530
© 2006 John Wiley and Sons, Inc.
 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
© 2006 John Wiley and Sons, Inc.
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
© 2006 John Wiley and Sons, Inc.
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
manager’s success in project management is the
skill with which the trade-offs among
performance, time, and cost are managed

© 2006 John Wiley and Sons, Inc.

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

© 2006 John Wiley and Sons, Inc.

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

© 2006 John Wiley and Sons, Inc.

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 firm’s resources

© 2006 John Wiley and Sons, Inc.

Chapter 9-9
 Resource Loading

• 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

© 2006 John Wiley and Sons, Inc.

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 manager’s responsibility to ensure
that the required resources, in the required amounts,
are available when and where they are needed

© 2006 John Wiley and Sons, Inc.

Chapter 9-11
 Resource Leveling

• Resource leveling aims to minimize the period-by-

period 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

© 2006 John Wiley and Sons, Inc.

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
© 2006 John Wiley and Sons, Inc.
Chapter 9-13
Resource Leveling - Example

© 2006 John Wiley and Sons, Inc.

 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

© 2006 John Wiley and Sons, Inc.

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

© 2006 John Wiley and Sons, Inc.

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

© 2006 John Wiley and Sons, Inc.

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
© 2006 John Wiley and Sons, Inc.
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

© 2006 John Wiley and Sons, Inc.

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

© 2006 John Wiley and Sons, Inc.

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
© 2006 John Wiley and Sons, Inc.
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

© 2006 John Wiley and Sons, Inc.

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

© 2006 John Wiley and Sons, Inc.

Chapter 9-22
Multiproject Scheduling and Resource Allocation

• Schedule slippage, often considered the most important

of the criteria, is the time past a project’s 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

© 2006 John Wiley and Sons, Inc.

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
© 2006 John Wiley and Sons, Inc.
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)

© 2006 John Wiley and Sons, Inc.

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

© 2006 John Wiley and Sons, Inc.

Chapter 9-26
 Heuristic Techniques

• There are scores of different heuristic-based

procedures in existence
• They represent rather simple extensions of well-
known approaches to job-shop scheduling:
– Resource Scheduling Method
– Minimum late finish time
– Greatest resource demand
– Greatest resource utilization
– Most possible jobs

© 2006 John Wiley and Sons, Inc.

Chapter 9-27
 Critical Chain
• Eliyahu M. Goldratt’s “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

© 2006 John Wiley and Sons, Inc.

 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

© 2006 John Wiley and Sons, Inc.

Copyright 2006 John Wiley & Sons, Inc.
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© 2006 John Wiley and Sons, Inc.