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Chapter 9 Resource Allocation

Chapter 9 Resource Allocation. Introduction. This chapter addresses: Trade-offs involved to crash cost Relationship between resource loading and leveling Some approaches used to solve allocation problem. Critical Path Method – Crashing a Project. One important difference between CPM & PERT:

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Chapter 9 Resource Allocation

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  1. Chapter 9Resource Allocation Chapter 9 Resource Allocation

  2. Introduction • This chapter addresses: • Trade-offs involved to crash cost • Relationship between resource loading and leveling • Some approaches used to solve allocation problem Chapter 9 Resource Allocation

  3. Critical Path Method – Crashing a Project • One important difference between CPM & PERT: • CPM included a way of relating the project schedule to the level of physical resources • trade time for cost, or vice versa • Can specify 2 activity times and 2 costs • 1st time/cost combination- called normal • 2nd combination called crash • Normal – usual ‘average’ time, resources • Crash – expedite by applying additional resources Chapter 9 Resource Allocation

  4. Critical Path Method – Crashing a Project • Allocation problem requires more careful consideration-additional resources? • Many things make crashing a way of life on some projects (i.e last minutes changes in client specification, without permission to extend the project deadline by an appropriate increment) • Careful planning is critical when crashing project – need to consider feasibility of expediting work (e.g equipment availability) Chapter 9 Resource Allocation

  5. Critical Path Method – Crashing a Project Where: slope = cost per day of crashing a project When slope is negative : indicate the time required for a project is decreased, the cost is increased Slope = crash cost – normal cost crash time – normal time Chapter 9 Resource Allocation

  6. The dollars per day slope of activities is relevant only if the whole crash increment is useful • Crashing may involve a relatively simple decision to increase groups of resources (labor-shovel, Ditch-Witch Technology) • If do changes in technology tend to produce discontinuities in outcomes and also in cost. Chapter 9 Resource Allocation

  7. Principles to crash a project • Focus on the critical path when trying to shorten the duration [resource ready] • Select the least expensive way to do it Chapter 9 Resource Allocation

  8. Crashing a Project (E.g Two-Time CPM) *Partial crashing allowed **Partial crashing not allowed Chapter 9 Resource Allocation

  9. e b a c d 1 2 3 4 5 6 7 8 A CPM Example Normal Schedule, 8 days, $120 Chapter 9 Resource Allocation

  10. e b b a a c c d d 1 1 2 3 4 5 6 7 8 2 3 4 5 6 7 8 e e b b a a c c d d 1 1 2 3 4 5 6 7 8 2 3 4 5 6 7 8 e 7-day schedule, $160 6-day schedule. $220 4-day schedule, $350 5-day schedule, $260 Chapter 9 Resource Allocation

  11. Network critical path is a-b-e, project duration is 8 days, normal total cost is $120 • The decision about which activities to crash depends on how much to reduce the duration • On the benefit side, some projects have penalty clauses that make the parent organization liable for late delivery- sometimes bonuses for early delivery Chapter 9 Resource Allocation

  12. On the cost side, figure below shows the time/cost relationship of crashing the project All crash a + b + 2d + 2e a + d + 2e - b a + b a All normal Chapter 9 Resource Allocation

  13. Fast Tracking • Another way to expedite a project • Term used for construction projects • Refers to overlapping design and build phases • Design completed before construction starts,so overlapping will result shortening the project duration • Build before design completed-more design changes • Loss productivity, increased cost, loss time Chapter 9 Resource Allocation

  14. Fast Tracking (cont.) • Studies revealed that: • more design changes in fast tracking – the number of project change orders not significantly different than not fast-tracked project • Dependent on effective feed-back and feed-forward communication Chapter 9 Resource Allocation

  15. 2 d a c 1 4 b e 3 SOLVED PROBLEM Find the lowest cost to complete the project in 10 days Chapter 9 Resource Allocation

  16. 3 2 6 3 a 0 d 12 c 5 1 4 7 4 b 3 e 8 Answer Current time and cost: 12 days and $210 Since the critical path is a-c-e, we only initially need consider these 3 activities: a: cannot be crashed c: can cut 3 daysat an extra cost of$40 but only results in project completion by day 11, due to b. To reach 10 days, cut b by 1 day, total extra cost$90 e: can cut e by 2 days for an extra cost of $60 and results in project completion by day 10. Thus, cut e 2 days at a cost of $60. Chapter 9 Resource Allocation

  17. RESOURCE ALLOCATION PROBLEM • A fundamental measure of the PM’s success in project mgmt is the skill with which the trade-offs among performance, time and cost are managed • The extreme points of the relationship between time use and resource are: • Time limited • Resource limited Chapter 9 Resource Allocation

  18. RESOURCE LOADING • The amount of individuals resources an existing schedule requires during specific time periods • Resource loading can be illustrated by: • Resource usage calendar • Modified PERT/CPM AOA diagram (similar with Gantt Chart) • PM responsibility: • Demand for resources does not exceed resource capacities • Ensure that the required resources, in the required amounts Chapter 9 Resource Allocation

  19. Resource Usage Calendar Chapter 9 Resource Allocation

  20. a j d 1 2 6 7 (4,0) (0,2) (0,6) e 3 (2,1) f 3 (1,1) g b i 1 3 5 (6,3) (2,1) (1,0) c dummy 4 1 (3,1) h 4 (0,2) 0 5 10 15 20 25 30 35 40 45 Modified PERT/CPM AOA Diagram(Refer Ch 08 Slide 26) Chapter 9 Resource Allocation

  21. RESOURCE LEVELING • Aims to minimize the period-by-period variations in resource loading by shifting tasks within their slack allowances • Purpose to create a smoother distribution of resource usage • Advantages; • Much less hands on management • Be able to use ‘just in time’ inventory policy with right quantity delivered • If the resource being leveled is people, it improves morale and results in fewer problems in the personnel and payroll offices Chapter 9 Resource Allocation

  22. E.g: Network 2 a, 2 [2] c, 5 1 4 [4] b, 3 [2] 3 The activity time is shown above the arc, and resource usage (one resource, workers) is in brackets below the arc. Chapter 9 Resource Allocation

  23. 10 a 8 a 6 b c c 4 c c 2 b b 1 2 3 4 5 1 2 3 4 5 Days Before Resource Leveling Activity Workers Days Chapter 9 Resource Allocation

  24. a Activity b c 1 2 3 4 5 Days After Resource Leveling 10 8 Workers 6 a b 4 c 2 1 2 3 4 5 Days Chapter 9 Resource Allocation

  25. RESOURCE LOADING/LEVELING AND UNCERTAINTY • If happens excess capacity,the alternative that we can consider: • Try to level the demand, moving some of it forward and some backward • Try to alter the supply of working hours-trade off time between periods of over capacity and periods of under capacity • Might expend additional resources-contract worker for overload period, subcontract the workload • Which cheaper?Delay or subcontract? Chapter 9 Resource Allocation

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