7/11/13

Proj Cost & Schedule Control

Week 4: Advanced Scheduling and Crashing - Lecture

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Scheduling, Schedule Crashing, and Resource Allocation and Leveling

Introduction | CPM and Time Cost Trade Off (Crashing) | CPM Crashing ... Demonstration Problem | PERT Network Processes | CCPM Network Processes | Resource Allocation and Leveling | Resource Leveling ... Demonstration Problem Introduction The network process that is the basis for developing project schedules was introduced last week. We will now present some additional variations on the basic network process that will allow us to improve on the scheduling process. We will look at the concepts of Critical Path Method (CPM) with schedule crashing based upon a time/cost trade off, statistical evaluation of project schedules, program evaluation and review technique (PERT) for projects with risky schedules, and the theory of constraints concept with Critical Chain Path Method (CCPM). Our second major topic for this week is the allocation of resources to the project tasks. As the project manager we have to determine how to have just the right amount of resources available at just the right time. This is a lofty but obtainable goal which gives a hint to the complexity of assigning human and other resources to the project. The complexity arises because both quantity and timing must be coordinated in an environment of shifting project and organizational demands. For this reason, we will also look at some tools to level resources and adapt work flows to make things run more efficiently. CPM and Time Cost Trade Off (Crashing) We will work with the time/cost trade off called crashing, used to reduce the duration of a project schedule. Crashing a Project Schedule : CPM ... two types of time/cost combinations: 1. Normal ... the schedule that is typically estimated as the most likely for each task. An estimate for the cost of each task will be made considering this normal schedule. 2. Crashed ... the result of expediting the activity by the application of additional resources. Crashing is usually undertaken on critical path (the longest paths) activities to shorten project duration. Note: When crashing, only reduce the critical path to the point of the next longest path. At that point you have created/added a new critical path and now must repeat the process with multiple critical paths in mind. Other Definitions: Time limited ... project must be finished on time, using as few resources as possible. Resource limited ... project must be finished as soon as possible, without exceeding some specific level of resource use, or some general resource constraint. System-constrained task ... fixed time and resource crashing activities, a process to reduce the schedule duration with added cost: 1. Develop cost slope for each activity; cost slope is "$ per day" or other cost/time combination. 2. Look for activity on the critical path with lowest slope (i.e. cost/time unit). 3. Iteratively crash activities on the critical path until the desired combination of time/cost for project is achieved. Crashing a project schedule costs money. It should only be done when the benefit/cost has have been analyzed and it is determined to be of value to the business. CPM Crashing ... Demonstration Problem Crashing a Project Schedule ... Problem 4-3 The Cost Slope: Optimizing Crashing Schedules Given a project with the data below: Normal Time 8 Crash Time 6 Normal Cost 1000 Crash Cost 1500
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Task A

Predecessor --

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B C D E F G

-A B C D E, F Total Budget: $4,600

6 4 5 7 4 10

3 3 3 5 4 8

150 400 500 800 250 1500

600 500 700 900 250 1900

Question: Calculate the most cost-effective way to meet the goal. Goal: Reduce the schedule duration on this project to 22 days. Solution: 1. Draw the project network diagram .

2. Calculate the critical path. Paths and durations for this project are: Path 1: Start, A, C, E, End = 8 + 4 + 7 + 10 = 29 days Path 2: Start, B, D, F, G, End = 6 + 5 + 4 + 10 = 25 days

What is the critical path? Click to view answer

3. Calculate the crash cost per day for each critical task. Normal time - crash time = days available for crashing Crash cost - normal cost = cost of crashing Cost of crashing/days available = crash cost per day Normal Time 8 Crash Time 6 Normal Cost 1000 Crash Cost 1500 Crash Cost per Day 250 cp Path Time 8
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Task Predecessor A -

2nd Path Time

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B C D E F G

A B C D E, F

6 4 5 7 4 10

3 3 3 5 4 8 Total Budget =

150 400 500 800 250 1500 4600

600 500 700 900 250 1900

150 100 100 50 7 4

4 200 10 29 10 25

4. Look for the activity on cp with the lowest cost per unit. Crash it as required to reduce the project duration. 5. Continually crash activities until desired combination of time/cost for project is achieved. 6. Be aware that if dual critical paths are created, multiple tasks must be crashed to continue to reduce the project duration. Note: 1) When crashing two or more critical paths with common activities, we must consider crashing a common task as the most costeffective solution as opposed to crashing individual activities on each path. 2) Each task is limited in the number of days it can be crashed due to physical or other constraints. As you crash, we can no longer crash an activity once it is reduced to its crash time. The table below shows the six crash steps to reduce the project duration from the normal time of 29 days to the desired crashed duration goal of 22 days. Crash Days CP Time 29 100 100 400 250 27 26 24 23 100 200 600 850 Additional Crash Cost Project Cost $4,600 $4,700 $4,800 $5,200 $5,450

Task

Cost/Day

Cost

2nd Path Time 25 25 25 23 23

Initial schedule and cost E C G A 2 1 2 1 50 100 200 250

At this point, the CP A-C-E-G is equal in length to the next longest path. To further reduce the project schedule, we will have to reduce both paths. A D Solution In this project, the lowest cost crashing solution is to crash E, C, G, A, and D. This will reduce the schedule to the desired 22 days. 1 1 250 100 250 100 22 22 $1,100 $1,200 $5,700 $5,800 23 22

What is the additional cost to reduce the duration to 22 days? Click to view answer

There are many ways to crash a task and here we added resources, at a cost. This allows the tasks on the critical path to get finished quicker. Expert Says Test your knowledge of concepts learned in this lecture. Answer the following question by typing your reply in the textbox. Then click "Compare Response" to find out what the professor says.

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View transcript here

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CPM cost duration history ... a graph showing the increase in cost per unit for crashing a project is useful for demonstrating to clients or managers the increased costs associated with speeding up a project. This can also be used to evaluate the effects of crashing on projects with incentive and penalty clauses, or with resource availability and utilization options. The graph aboves portrays the solution for our demonstration problem with a resulting $5,800 crash cost and 22 days. At this point we have met our goal and do not need to crash any further. Another approach is to start by fully crashing all tasks in the schedule; that is, use the crash duration values in the network and calculate the schedule. Then "relax" activities starting with the most costly, non-critical path activities until the desired combination of duration and cost is reached. PERT Network Processes CPM is a de-facto standard for project scheduling. There are other types of network analyses that are important to understand. You will not need these in all projects, but when you do you need to be aware they exist and what their advantages are. A schedule may be improved where there is considerable risk or uncertainty in the task estimates by using the PERT process. Example Problem 4-4 Given a project with the following data and the Z Value Table on page 254: Activity Optimistic Time(a) A B C D E F G H I J K L The critical path for this project is: B - F - J A: Calculate the expected time (TE) for critical path activities. B: Calculate the scheduled duration (S) for the project using the TE of critical path tasks. C: What is the probability of the project being complete in a desired time (D) of 44 days? D: What is the probability of the project being complete in a desired time (D) of 38 days? Answer A Activity TE Variance (a + (4m) + b) / 6 ((b-a) / 6) squared B 11.50 1.36 F 20.17 0.69 J 9.83 0.25 B Schedule = 41.5 Days Sum of variance for CP = 2.31 Square root of variance for CP = 1.52 C 44 Days Z = (D-S) / 1.52 = 1.65 Probability (from table) = 0.4501 0.4501 +0.500 = 95% D 38 Days Z = (D-S) / 1.52 = -2.31 Probability (from table) = (0.4896) 0.4896 +0.500 = 1% 5 7 4 6 15 18 17 14 4 8 5 3 Pessimistic Time(b) 10 14 7 12 26 23 29 22 7 11 9 6 Most Likely Time(m) 7 12 5 8 22 20 24 17 6 10 8 4 Expected Time (TE) 7.17 11.50 5.17 8.33 21.50 20.17 23.67 17.33 5.83 9.83 7.67 4.17

This process is usually a part of project management software such as MS Project. Expert Says
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Test your knowledge of concepts learned in this lecture. Answer the following question by typing your reply in the textbox. Then click "Compare Response" to find out what the professor says.

View transcript here

CCPM Network Processes Critical chain project management (CCPM) is based upon the theory of constraints (TOC) developed by Eliyahu Goldratt. It was initially used in manufacturing environments but was expanded for use in project management. Our text covers this process so I will not go into details here. I will say that it is different and unique in some of the principles it uses. It uses the basic critical path process but introduces different concepts on how to manage the project using the CPM process. It also requires all levels of management to accept these different philosophies and processes to manage a project. I believe it has merit, but of course, it will not be for everyone. Resource Allocation and Leveling "How do you have just the right amount of resource available at just the right time?" Resource needs vary as the project progresses which means the amount of resources required will fluctuate, making the task even more difficult. It is beneficial to the project not only that the right resources be available when needed but also that, to the best of our ability, we schedule the resources on an even basis to reduce the changes in the team's work schedule. This example will illustrate how to accomplish this. Resource Load Diagram - Demonstration Problem 4-1 Task Duration (days) Predecessor (units) Number of Programmers Required A B C D E F 10 5 10 10 15 5 n/a n/a B A D D 5 5 10 5 5 5

The dark line with the arrows shows the tasks that must be done on time (Tasks A, D, E, and F) or the entire project will be delayed. Tasks B and C are not on the critical path and may be delayed (but not any longer than the tasks on the critical path) without affecting the project length. Problem Data Solution
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Level this project given the constraint that only 10 programmers are available. Resource Load Diagram:
1. Determine the critical and other paths.

Total resource use: Total resource demand Days 1...5 5...10 10...15 15...20 20...25 25...30 30...35 Unleveled 10 15 15 5 10 5 5 Leveled 10 10 10 10 10 10 5

CP = A - D - E = 35 days B - C - F = 15 days A - D - F = 25 days 2. Plot resource loading against time for each activity. Start with the CP: Task A uses 5 and takes days 1 through 10. Task D uses 5 and takes days 10 through 20, after its predecessor, A. Task E uses 5 and takes days 20 through 35, after its predecessor, D. Task B uses 5 and takes days 1 through 5, concurrently with A; (as resource use is cumulative, plot B on top of A). Task C uses 10 and takes days 5 through 15, concurrently with A and D, and after its predecessor, B. Task F uses 5 and takes days 20 through 25, concurrently with E, after its predecessor, D.

Note that leveling in this case assumes task C can be:

1. slowed down; and 2. split.

If C cannot be split, task F could be delayed to start on day 25 after C is complete. If C cannot be slowed down, it will have to be delayed to start on day 35 and the project completion will be delayed until day 45.

Resource Load Diagram: Leveling will force Task C to be completed later in the project; this could change the critical path and delay the entire project. Gantt Chart Per Initial Project Plan Task A B C D E F Duration 10 5 10 10 15 5 CP = 11 WEEKS Total Resources 15 10 5 B A 10 15 C C A 15 C C D D F E E F 5 10 5 5 0 0 Week# 5 R=5 R=5 R =10 R = 10 R=5 R=5 R=5 R=5 R=5 R=5 10 R=5 15 20 25 30 35 40 45

Gantt Chart After Resources are Leveled Task A B Duration 10 5 Week# 5 R=5 R=5
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10 R=5

15

20

25

30

35

40

45

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C D E F

10 10 15 5

R =5

R=5 R=5

R=5 R=5 R=5 R=5

R =5

R=5

R=5

CP = 11 WEEKS Total Resources 15 10 5 B A C A C D C D F E C E F 10 15 15 5 10 5 5 0 0

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Week # 1 2 3 4 5 6 7

Weekly Cash Flow Before Leveling $20,000 $30,000 $30,000 $10,000 $20,000 $10,000 $10,000

Weekly Cash Flow After Leveling $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $10,000

Note that leveling resources provides a much more even cash flow and leads to more manageable financial management and control. Conclusion
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Resource leveling ... shifting tasks within their slack time to even out demands on resources which are common to different tasks. Advantages: Less management is required when resource use is constant. If the resource is people, leveling improves morale. Constrained resource scheduling: If the quantity of resources available is limited we have a resource constrained project. If the resources available are less than required it will result in an increased schedule or additional cost to resolve. Two approaches to solve the problem Heuristic methods ... this will produce a solution but not necessarily the best solution. Start with the PERT/cpm schedule and analyze resource use period by period, resource by resource; if resource supply is exceeded in a given period, examine tasks and allocate resources to them sequentially, according to some priority rules. Priority rules: (examples) shortest task first most resources first minimum slack first most critical followers most successors If excess resources are left idle, they can be reassigned in the organization or used to accomplish future tasks. If resources are exhausted, tasks must be slowed or delayed. Optimization ... this will produce the best solution based upon the project requirements and objectives. There are two types of optimization: mathematical (linear) programming and enumeration. These are complex and we will not address these methods here. Resource Leveling ... Demonstration Problem Demonstration Problem 4-2 This example introduces the cost factor into the resource leveling problem in a resource-constrained project. In the case where we need to add resources to avoid increasing the project schedule, we need to understand how to determine the additional cost involved. Use the Gantt chart to determine and resolve resource conflicts. Example: Problem Data Activity Predecessor Duration A B C D E ----A B C&D 6 Weeks 2 Weeks 1 Week 3 Weeks 4 Weeks Resources Required 3 Drill Rigs, 6 Laborers 4 Trucks, 1 Laborer 2 Backhoes, 2 Laborers 2 Drill Rigs, 4 Laborers 3 Trucks, 1 Laborer C B Solution

Activity Resources A Drill Rigs Laborers Trucks Laborers Backhoe Laborers D Drill Rigs Laborers E Trucks Laborers

Cost Calculation 6 x 3 x $2,000 = $36,000 6 x 6 x 40 x $10 = $14,400 2 x 4 x $1,000 = $8,000 2 x 1 x 40 x $10 = $800 1 x 2 x $3,000 = $6,000 1 x 2 x 40 x $10 = $800 3 x 2 x $2,000 = $12,000 3 x 4 x 40 x $10 = $4,800 4 x 3 x $1,000 = $12,000 4 x 1 x 40 x $10 = $1,600 Total Budget =

Total Cost

$50,400

$8,800

Resource Constraints Resource Cost (per unit) 3 Drill Rigs 4 Trucks 2 Backhoes 8 Laborers Calculate:
1. the total budget for the project. Are there any resource

$6,800

$2,000 per week $1,000 per week $3,000 per week $10.00 per hour

$16,800

$13,600 $96,400

conflicts?
2. the most cost-effective method of resolving the conflict ...

either by adding or leveling resources (additional resources can be obtained at a 50% cost premium).

GANTT Chart The line for each task shows the number of weeks needed to complete each task as well as
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which tasks must be done first before the next task can start. Task A and B can be done at the same time at the start of the project (week 0), Task D must wait until Task B is complete before starting at week 2; Task C must wait until week 6 when Task A is complete. Task E cannot start until Task C is complete at week 7. Resource Use (cumulative) by Week Week Number

Resource
Drill Rigs Trucks Backhoes Laborers

1 3 4

2 3 4

3 5

4 5

5 5

6 3

10

11

12

13

14

15

3 2

10

10

10

Resource conflict exists between tasks A and D. These tasks need five drill rigs and 10 laborers; only three drill rigs and eight laborers are available. The time frame of the conflict is weeks 3, 4, and 5. The Effect of Adding or Leveling Resources: We can add resources, level the resources, or a combination of the two. Adding Resources: Adding resources at a 50% premium: 2 Drill Rigs x 3 weeks x $2,000 x 0.50 = $6,000 2 Laborers x 3 weeks x 40 hrs. x 0.50 = $1,200 Adds a total of $7,200 to the budget. The schedule remains the same. Note that only the premium (50%) is added; the original budget included all resources required, including those in conflict. Leveling: Delay D to weeks 7, 8, and 9 using slack. This will delay the start of E by 2 weeks and the project completion by 2 weeks until week 13. There are no extra costs. Combining Leveling and Adding Resources: The third option is a combination. Shift the start of D to week 5 within the slack for the task. We now have reduced the conflict from 3 to 2 weeks. We then add resources to cover those 2 weeks. The extra cost at a 50% premium is: 2 Drill Rigs x 2 weeks x $2,000 x 0.50 = $4,000 2 Laborers x 2 weeks x 40 hrs. x 0.50 = $800 Adds a total of $4,800 to the budget. The schedule remains the same. Note that only the premium (50%) is added, the original budget included all resources required, including those in conflict. This option preserves the schedule, but at a reduced cost because we also used the slack available to level the resources. Discussion To solve these problems, draw the Gantt chart and use a grid like that shown to accumulate resources of each type. Compare resource use to constraints to determine if conflicts exist. When leveling, if you move a task you have to recalculate total resource use from the start of the moved task to make sure additional conflicts have not been made. The needs of the project and business will dictate which of the solutions the project manager should use. Note: This is the method used by Microsoft Project and other PM software to determine and level resource conflicts. Software can be a helpful tool to resolve complex resource conflict problems.

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