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Chapter 8 Scheduling Resources and Costs Chapter Outline 1. Overview of the Resource Scheduling Problem 2. Types of Resource Constraints 3. Classification of a Scheduling Problem 4. Resource Allocation Methods A. Assumptions B. Time-Constrained Projects: Smoothing Resource Demand C. Resource-Constrained Projects 5. Computer Demonstration of Resource-Constrained Scheduling A. The Impacts of Resource-Constrained Scheduling 6. Splitting Activities 7. Benefits of Scheduling Resources 8. Assigning Project Work 9. Multi project Resource Schedules 10. Using the Resource Schedule to Develop a Project Cost Baseline A. Why a Time-Phased Budget Baseline Is Needed B. Creating a Time-Phased Budget 11. Summary 12. Key Terms 13. Review Questions 14. Exercises 15. Case 8.1: Blue Mountain Cabin 16. Case 8.2: Power Train, Ltd. 17. Appendix 8.1: The Critical-Chain Approach A. Time Estimates B. Critical-Chain in Action C. Critical-Chain versus Traditional Scheduling Approach D. CCPM and Splitting Tasks E. Monitoring Project Performance F. The CCPM Method Today 18. Appendix Summary 19. Appendix Review Questions 20. Appendix Exercises 20. Appendix Case A8.1: The CCPM Dilemma Chapter Learning Objectives After reading this chapter you should be able to: LO 8-1 To understand the differences between time-constrained and resource-constrained schedules. LO 8-2 Identify different types of resource constraints. LO 8-3 Describe how the smoothing approach is used on time-constrained projects. LO 8-4 Describe how leveling approach is used for resource constrained projects. LO 8-5 Understand how project management software creates resource constrained schedules. LO 8-6 Understand when and why splitting tasks should be avoided. LO 8-7 Identify general guidelines for assigning people to specific tasks. LO 8-8 Identify common problems with multi project resource scheduling. LO 8-9 Explain why a time-phased budget baseline is needed. LO 8-10 Create a time-phased project budget baseline. Appendix Learning Objectives After reading this appendix you should be able to: LO A8-1 Define what is meant by the term “critical chain”. LO A8-2 Identify the reasons why projects are late even when estimates are padded. LO A8-3 Describe the basic critical-chain methodology. LO A8-4 Describe the differences between critical chain scheduling and the traditional approach to scheduling. Review Questions 1. How does resource scheduling tie to project priority? Resource scheduling ties to project priority because resources are limited. Remember, the priority system ranks projects which then determines which project each resource should work on first. 2. How does resource scheduling reduce flexibility in managing projects? Resource scheduling systems usually reduce flexibility because when resources are considered, computer routines use slack to get an “efficient” schedule. When slack is used up, flexibility is lost and the risk of delaying the project increases. If the resource conflict occurs on the critical path, the project is delayed. 3. Present six reasons scheduling resources is an important task. Several reasons for scheduling resources are to: Check if existing resources are adequate and available. Decide which resources have priority. Assess the impact if another project is added to the pool. Determine where the real critical path is. Are there unforeseen dependencies? See what happens to the risk of being late if slack is used up developing a schedule. Decide if outside contractors have to be used. Decide if an imposed project duration is realistic. Students should not be limited to these reasons; there are many more reasons for scheduling resources. 4. How can outsourcing project work alleviate the three most common problems associated with multi project resource scheduling? Outsourcing can be used to reduce project slippage, improve utilization of critical resources, and avoid resource bottlenecks. For example, project delays can be avoided by contracting key activities when resources are not available internally. Likewise, hiring consultants to help with on an IT project, for example, allows critical IT people to work on specific problems, while the outsiders work on standard programs. Not only does the project get done on time, but the company avoids hiring extra IT personnel to meet a short term need. 5. Explain the risks associated with leveling resources, compressing or crashing projects, and imposed durations or “catch-up” as the project is being implemented. The risks associated with leveling, crashing, and “catch-up” are similar to those noted in question two. Flexibility is decreased and risk of delay is increased. For example, slack is used up and may cause other bottlenecks later in a sequence of activities. Having time buffers at merge points before the project begins could help avoid some of the need to crash activities. Decoupling critical activities can help to cut time if decoupling is possible and resources can be shifted; however, the risk is typically reduced only slightly. 6. Why is it critical to develop a time-phased baseline? Other systems do not measure how much work is accomplished for the money spent! Hence, without time-phasing cost to match your project schedule, it is impossible to have reliable information for control purposes. Exercises 1. Given the network plan that follows, compute the early, late, and slack times. What is the project duration? Using any approach you wish (e.g., trial and error), develop a loading chart for resources, Electrical Engineers (EE), and resource, Mechanical Engineers (ME). Assume only one of each resource exists. Given your resource schedule, compute the early, late, and slack times for your project. Which activities are now critical? What is the project duration now? Could something like this happen in real projects? Instead of taking nine days the duration has been extended to 11 days and all activities are critical. Resource shortages are common in real projects and this problem demonstrates the impact resource constraints can have on project schedules. 2. Given the network plan that follows, compute the early, late, and slack times. What is the project duration? Using any approach you wish (e.g., trial and error), develop a loading chart for resources Carpenters (C) and Electricians (E). Assume only one Carpenter is available and two Electricians are available. Given your resource schedule, compute the early, late, and slack times for your project. Which activities are now critical? What is the project duration now? Resource constraints extend the project duration from 12 days to 14 days and Activity 2 which was part of the original critical path is no longer critical path. All other activities are critical which illustrates the key point that resource constraints tend to increase the sensitivity of project networks. 3. Compute the early, late, and slack times for the activities in the network that follows, assuming a time-constrained network. Which activities are critical? What is the time-constrained project duration? Note: Recall, in the schedule resource load chart the time-constrained scheduling interval (ES through LF) has been shaded. Any resource scheduled beyond the shaded area will delay the project. Without consideration of resources the project is estimated to take 13 time units and the critical path is 2 4 6 (see network diagram). Assume you have only three resources and you are using a computer that uses software that schedules projects by the parallel method and following heuristics. Schedule only one period at a time! Minimum slack Smallest duration Lowest identification number Keep a log of each activity change and update you make each period—e.g., period 0–1, 1–2, 2–3, etc. (Use a format similar to the one on page 259.) The log should include any changes or updates in ES and slack times each period, activities scheduled, and activities delayed. (Hint: Remember to maintain the technical dependencies of the network.) Use the resource load chart to assist you in scheduling (see Figures 8.4 and 8.5). List the order in which you scheduled the activities of the project. Which activities of your schedule are now critical? Recompute your slack for each activity given your new schedule. What is the slack for activity 1? 4? 5? Log of Parallel Method of Scheduling 8-3 PERIOD ACTIVITY CHANGES 0-1 2 Schedule Activity 2 (first by minimum slack rule) 1 Schedule Activity 1 3 Delay Activity 3 ES to period 1. Reduce slack to 0 5 Delay Activity 5 ES to period 6. Reduce slack to 0 1-2 3 Delay Activity 3 ES to period 2. Reduce slack to -1 5 Delay Activity 5 ES to period 7. Reduce slack to -1 6 Delay Activity 6 ES to period 11. Reduce slack to -1 2-3 3 Delay Activity 3 ES to period 3. Reduce slack to -2 5 Delay Activity 5 ES to period 8. Reduce slack to -2 6 Delay Activity 6 ES to period 12. Reduce slack to -2 3-4 3 Schedule Activity 3 4-5 4 Schedule Activity 4 5-6 - No changes 6-7 - No changes 7-8 - No changes 8-9 5 Schedule Activity 5 Log of Parallel Method of Scheduling 8-3 (continued) PERIOD ACTIVITY CHANGES 9-10 - No changes 10-11 - No changes 11-12 - No changes 12-13 6 Schedule Activity 6 4. You have prepared the following schedule for a project in which the key resource is a tractor(s). There are three tractors available to the project. Activities A and D require one tractor to complete while activities B, C, E and F require 2 tractors. Develop a resource-constrained schedule in the loading chart that follows. Use the parallel method and heuristics given. Be sure to update each period as the computer would do. Record the early start (ES), late finish (LF) and slack (SL) for the new schedule. Log of Parallel Method of Scheduling: Exercise 8-4 PERIOD ACTIVITY CHANGES 0-1 B Schedule Activity B (first by minimum slack rule) A Schedule Activity A 1-2 - No changes 2-3 - No changes 3-4 - No changes 4-5 C Delay ES of Activity C to 5. Reduce slack to 1 5-6 D Schedule Activity D (minimum slack rule) C Schedule Activity C E Delay ES of Activity E to 6. Reduce slack to 1 6-7 E Delay ES of Activity E to 7. Reduce slack to 0 7-8 E Delay ES of Activity E to 8. Reduce slack to -1 F Delay ES of Activity F to 11. Reduce slack to -1 8-9 E Delay ES of Activity E to 9. Reduce slack to -2 F Delay ES of Activity F to 12. Reduce slack to -2 9-10 E Schedule Activity E 10-11 - No changes 11-12 - No changes 12-13 F Schedule Activity F 5. Develop a resource schedule in the loading chart that follows. Use the parallel method and heuristics given. Be sure to update each period as the computer would do. Note: activities 2, 3, 5, and 6 use two of the resource skills. Three of the resource skills are available. How has slack changed for each activity? Has the risk of being late changed? How? Log of Parallel Method of Scheduling: Exercise 8-5 PERIOD ACTIVITY CHANGES 0-1 2 Schedule Activity 2 (minimum slack rule) 1 Schedule Activity 1 1-2 3 Delay ES of Activity 3 to 2. Reduce slack to 2 2-3 3-4 3 4, 3 Delay ES of Activity 3 to 3. Reduce slack to 1 Activities 3, 4, 5 are eligible to be scheduled. Schedule Activity 4 (minimum slack rule) Schedule Activity 3 (minimum slack rule) Delay ES of activity 5 to 4. Reduce slack to 1 4-5 5 Delay ES of Activity 5 to5. Reduce slack to 0 5-6 5 Delay ES of Activity 5 to 6 .Reduce slack to -1 6-7 5 6 Delay ES of Activity 5 to 7. Reduce slack to -2 Delay ES of Activity 6 to 9. Reduce slack to -1 7-8 5 Schedule Activity 5 6 Delay ES of Activity 6 to 10. Reduce slack to -2 8-9 No changes 9-10 6 No changes 10-11 6 Schedule Activity 6 Notice that after adjusting the schedule to accommodate limited resources that there is now no slack in the schedule and that every activity is critical. This increases the risk that the schedule will take longer than planned since if any of the activities are delayed the project is delayed. 6. You have prepared the following schedule for a project in which the key resource is a backhoe(s). This schedule is contingent on having 3 backhoes. You receive a call from your partner, Brooker, who desperately needs one of your backhoes. You tell Brooker you would be willing to let him have the backhoe if you are still able to complete your project in 11 months. Develop a resource schedule in the loading chart that follows to see if it is possible to complete the project in 11 months with only 2 backhoes. Be sure to record the order in which you schedule the activities using scheduling heuristics. Activities 5 and 6 require 2 backhoes, while activities 1, 2, 3, and 4 require 1 backhoe. No splitting of activities is possible. Can you say yes to Brooker’s request? 7. You are one of three carpenters assigned to complete a short construction project. Right before the start of the project, one of your fellow carpenters was hospitalized and will not be available to work on the project. Develop a resource-constrained schedule in the loading chart that follows to see how long the project will take with only 2 carpenters. Be sure to record the order in which you schedule the activities using the scheduling heuristics. Activities A, B, C, D, E, G, and H require 2 carpenters to complete. Activity F requires only 1 carpenter. No splitting of activities is possible. You will receive a bonus if the project is completed within 15 days. Should you start planning how you will spend your bonus? You should not spend time planning how you are going to spend your bonus. The schedule will take 16 days. 8. Given the time-phased work packages, complete the baseline budget form for the project. 9. Given the time-phased work packages and network, complete the baseline budget form for the project. 10. Given the time-phased work packages and network, complete the baseline budget form for the project. 11. Given the time-phased work packages and network, complete the baseline budget form for the project. 12. The National Oceanic Research Institute is planning a research study on global warming in Antarctica. The 16-month network schedule is presented below. It is followed by budgets for each activity. Create a time-phased budget for the research project in the form provided. Note: All the costs associated with Hire Staff occur during the first month of that activity. Case 8.1 Blue Mountain Cabin Jack and Jill Smith have just retired and want to build a small, basic cabin in the Blue Mountains of Vermont. They have hired Daryl Hannah as the general contractor for the project. She has assembled a team of three workers to complete the project: Tom, Dick and Harry. Daryl has negotiated a cost-plus contract with the Smiths whereby she will receive 15 percent beyond the cost of labor and materials. Before they sign the contract the Smiths want an estimate of how much the project is likely to cost and how long it will take. Darryl has estimated that the cost for materials, permits, etc., will total $40,000. She wants to determine labor costs as well as how long the project will take. This is one of several projects Daryl is managing, and other than occasionally helping out, her role is strictly limited to supervising. She has devised the following master plan and assignments. Note that Dick is the only skilled plumber in the group while Harry is the only skilled electrician. Tom is a general carpenter and can assist them with their work. Dick and Harry each get paid $300 a day while Tom gets paid $200 per day. Darryl has negotiated a 10 percent management reserve to deal with unexpected problems. Unused funds will be returned to the Smiths. Prepare a short proposal for the Smiths that includes a Gantt chart with resources assigned, and cost estimates if the project starts on 8/1/16. Did resource limitations affect the final schedule? If so, how? What financial risks does this project face? What can the Smiths do to protect themselves against those risks? Students should be able to work this case by hand (draw their own network) or enter the information in MS Project. The key is that after leveling to resolve resource over-allocations the construction is extended by 4 days. Below is a sample proposal To: Smiths, Jack and Jill From: D. Hannah Re: Blue Mountain Cabin My crew and I are excited about the prospect of building your dream cabin. Costs Labor $12900 Materials $40,000 DH $7935 Total $60835 10% Management Reserve: $6083.50* The project is estimated to take 20 work days and be completed on 8/25/16 with an 8/1/16 start date. The work schedule is detailed below. *Unused funds will be returned to owner. Answer to specific questions: Resource limitations extend the project by 4 days. The chief financial risk is that this is a cost plus contract and even if the costs exceed the Management Reserve the Smiths are responsible. The Smiths could renegotiate a fixed price contact and include the 10 percent management reserve so that Darryl is responsible for costs that exceed the reserve. Case 8.2 Power Train, Ltd. We have smashing systems for reporting, tracking, and controlling costs on design projects. Our planning of projects is better than any I have seen at other companies. Our scheduling seemed to serve us well when we were small and we had only a few projects. Now that we have many more projects and schedule using multiproject software, there are too many occasions when the right people are not assigned to the projects deemed important to our success. This situation is costing us big money, headaches, and stress! (History and Claude Jones Sections Left Out Due to Space Limitations.) What Next? Potential expansion into the truck power train business is not feasible until the confusion in project scheduling is solved or reduced significantly. Jones is ready to tackle this problem, but he is not sure where to start. What criteria should he consider? What should be the sequence for selecting and assigning people to projects? This case points to a very typical problem in practice. Students will come up with a wide variety of approaches depending on their experience and business acumen. After some discussion, the authors break the class into small teams and ask each team to come up with a simple system of rules which can be used with current project management software and which attacks the issues found in the Power Train case. Some of the issues mentioned below need to be considered when developing any resource scheduling system. The heuristics suggested in the text are indeed very efficient in minimizing project delays. A major key to their use is the breakdown of people skills and/or equipment type—for example, mechanical, civil, electrical engineers. Unfortunately, there is a tradeoff. The larger the classification, the less discriminate the heuristic is in selecting the “right” people for projects. If the classification is more detailed, the heuristics will do a better job of selecting, but project delays (because of required resources) will likely be increased. The better software companies have built in flexibility for assigning people to projects. As project priority systems and project offices become more popular in project driven organizations, scheduling systems which link projects to priority and people assignments are showing up in multi project environments. A common student format and sequence for their approach and scheduling rules are shown below: Rule 1: Select Key People Manually: This selection cannot be overridden by the computer or by priority; it is fixed. This rule is usually used for assigning only very key individuals to a project. The rule skirts the priority system and its overuse may increase delays in other projects which have a high priority. Rule 2: Priority: The priority of the project in the portfolio is used as the first cutting criterion. In other words, the project with the highest priority gets first pick on people needed. A Variation: Most software systems allow specific activities within a project to have priority. This is simply a priority system within a project. Here, however, priorities are set manually ranking activities—1, 2, 3,…,n. If a resource conflict exists, the software assigns the resource to the activity with the highest rank. Otherwise, the standard rules of minimum slack, shortest duration, and lowest identification number are used. Clearly, this general system above has a strong link to strategy by using the priority portfolio as a cutting criterion. Again, care should be taken to see that manual selection is not overused. Manual overuse can result in significant delays on other projects which have a high priority. Conversely, manual intervention can be used to reduce the risk of a specific project being delayed. Again, the breakdown of people by skills is not perfect. Some manual intervention will be necessary. The degree of breakdown tradeoff will always exist. Notice that a system such as the one suggested above allows management to estimate types of resources that may be needed in the future. The system also keeps track of resource availability by skill type. Below is an undergraduate response to the case setting. MBA’s and executives are more creative and detailed. Their systems usually cover more exceptions and include more detail, but they also frequently miss the point that all their “special cases” contribute to delays in other projects and reduce the effectiveness of resource utilization. Student Response Inputs: Project priority system which ranks projects Rank of project complexity by low, medium, or high Resources divided into 2 or 3 groups depending on skill within a skill (e.g., Programmer 1, 2, 3 with 1 being highly skilled) Rule 1. Prioritize all projects Rule 2. Categorize project by low, medium or high complexity (1 = high, 10 = very low) Rule 3. Apply resources by group level The student form suggested is below: Project Priority Complexity Skill by Type Needed & Group level (e.g., engineer, group 1) Low Medium High Group 1 Group 2 Group 3 1 x x 2 x x 3 x x 4 x x 5 x x In place of complexity, factors such as technology, size, product class, risk, and speed could be used. The moral of the case is “Don’t let priority drive selection of key people,” or “Don’t waste super stars on low priority projects.” Appendix 8.1 Review Questions 1. Explain how time is wasted in management of projects. Time is wasted by people finishing an activity early and not warning the resource of the next activity to prepare to start early. Or, time is wasted by simply using safety time to work on other tasks. 2. Distinguish between project and feeder buffers. Feeder buffers exist to avoid delays in the critical chain. They are placed at the end of a chain of non-critical activities that merge into the critical chain. Project buffers exist to cover uncertainty or interruptions and to ensure the project duration is met. 3. Buffers are not the same as slack. Explain. Buffers are not expected to be used. They are used when delays force their use. Slack can be used for almost any reason. Buffers can be only used to protect the critical chain or project from being delayed. Appendix 8.1 Exercises 1. Check out the Goldratt Institute’s homepage at http://www.goldratt.com for current information on the application of critical-chain techniques to project management. At press time the Goldratt Institute’s homepage features several cases the successful application of CCPM. 2. Apply critical-chain scheduling principles to the Print Software, Inc., project presented in Chapter 6. Revise the estimated time durations by 50 percent except round up the odd time durations (i.e., 3 becomes 4). Draw a CCPM network diagram similar to the one contained in Figure A8.3 for the Print Software project as well as a Gantt chart similar to Figure A8.4. How would these diagrams differ from the ones generated using the traditional scheduling technique? Below is the CCPM network drawn for the Printer Software project. Next is the CCPM Gantt chart created for the Printer Software project. Students’ work will vary depending upon the software they use to draw the Gantt chart. Key differences between Critical Chain (CC) and CCPM schedules include: The project duration for CC is 115 while for CCPM it is 58 with a 22 project buffer. So even if all of the buffer is used, the project will be 35 days earlier than CC. The CC schedule is driven by ES while the CCPM is driven by LF. Buffers are strategically located on CCPM schedule while slack is shared across non-critical activities. Case A8.1 The CCPM Dilemma Pinyarat worked in the IT department of a diversified IT firm. She was describing the firm’s early encounters with critical-chain scheduling to a friend in another IT firm. Three years ago management decided to add 10 percent time to all activity estimates because almost all projects were coming in late. One thought was people were simply working too hard and needed some relief. This approach did not work! Projects still came in late. Next, management decided to take away the extra time for activities and add 10 percent for project estimates to ensure project durations would be met. Again, nothing improved and projects continued to come in late. Recently, the firm hired a consultant who promoted critical-chain scheduling, which was implemented for all projects in her division. Almost all failed to perform. Pinyarat explained, “The estimates were basically impossible. The activity durations got squeezed down to less than the 50 percent guideline. We were late on nearly every task. In addition, I was not allowed to put in a big enough project buffer, which only added to projects being late. One colleague who was working on six projects gave up and quit; he said he was killing himself and saw no hope of things getting better. My projects are not the only ones having big problems. Some people had no idea why anyone would use CCPM scheduling. To quote one of my best programmers: ‘They ask for an estimate and then they cut it 50 percent or more.’ What kind of game is this? Apparently they don’t trust us.” (Rest of case not shown due to length.) Ideas found in most plans of action: Problems: Buy in is not apparent. There is clear evidence of little or ineffective training. Senior management is altering the CC methodology. Multitasking is prevalent and inefficient. Action Plan: (assume use of CC scheduling) Start CC training immediately. Get buy in before trying CC scheduling again. Try on one project as an experiment. Use 75 percent confidence in place of 50 percent. Cut multitasking of critical resources to two or three projects to avoid contentions. Don’t alter time estimates—just reduce them by 50 or 25 percent. Solution Manual for Project Management: The Managerial Process Erik Larson, Clifford F. Gray 9781259666094, 9780078096594
