Stochastic Economic Balance Principles for Project Planning: Feeding Buffers, Crashing, and Sequencing

A feeding buffer is created by starting a project activity before its latest start time to provide adequate protection against project delay. Assuming linear costs for starting activities earlier and a linear project delay penalty, early optimization models for project buffers addressed simple project network structures and invoked the newsvendor model as an approximation. Recently, it had been shown that when the gating activities precede the only stochastic elements in a project, then there exists an exact generalization of the newsvendor model that characterizes the optimal feeding buffers. This insight led to an effective and efficient solution approach by simulation. We show that this result also holds when stochastic elements exist elsewhere within the project. Therefore, the same simulation approach applies. This yields practically optimal feeding buffers even when it is impossible to compute the completion time distribution. The same insights can be used for sequencing decisions and, with a slight enhancement, for optimal crashing decisions. The method works even when activities are statistically dependent.