Chapter 9

Resource Allocation

Copyright 2009 John Wiley & Sons, Inc.

Critical Path Method—Crashing 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
Activity Slope

Crash Cost - Normal Cost

Slope 
Crash Time - Normal Time
An Example of Two-Time CPM

Table 9-1
Activity Slopes—Cost per Period for
Crashing

Table 9-2
Crashing the Project

Figure 9-1a
Seven Day Schedule

Figure 9-1b
Six Day Schedule

Figure 9-1c
Five Day Schedule

Figure 9-1d
Four Day Schedule

Figure 9-1e
Cost-Crash Curve

Figure 9-2
The Resource Allocation Problem

 As discussed, CPM/PERT ignore resource

utilization and availability
 With external resources, this may not be a
problem
 It is, however, a concern with internal
resources
 Schedules need to be evaluated in terms of
both time and resources
Resource Allocation

 It is common to see the resource allocation

problem in terms of manpower, but it can
apply to equipment and capital as well
 Resource allocation in project management
is very similar to capacity planning in
production management
 Both the approaches to the problem and
potential solutions to the problem are very
similar
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 firm’s
resources
Resource A

Figure 9-6a
Resource B

Figure 9-6b
Resource Leveling

 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
Constrained Resource Scheduling

Heuristic An approach, such as a

Approach rule of thumb, that yields
a good solution that may
or may not be optimal.

Optimization An approach, such as

Approach linear programming, that
yields the one best
solution.
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. Schedule slippage
2. Resource utilization
3. In-process inventory
Schedule Slippage

 The time past a project’s 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
Goldratt’s Critical Chain

1. Optimism
2. Capacity should be equal to demand
3. The “Student Syndrome”
4. Multitasking to reduce idle time
5. Assuming network complexity makes no difference
6. Management cutting time to “motivate” workers
7. Game playing
8. Early finishes not canceling out late finishes