Project Portfolio Management: Capacity Allocation, Downsizing Decisions and Sequencing Rules

This paper aims to gain insight into capacity allocation, downsizing decisions and sequencing rules when managing a portfolio of projects. By downsizing, we mean reducing the scale or size of a project and thereby changing the project's content. In previous work, we have determined the amount of critical capacity that is optimally allocated to concurrently executed projects with deterministic or stochastic workloads when the impact of downsizing is known. In this paper, we extend this view with the possibility of sequential processing, which implies that a complete order is imposed on the projects. When projects are sequenced instead of executed in parallel, two effects come into play: firstly, unused capacity can be shifted to later projects in the same period; and secondly, reinvestment revenues gain importance because of the differences in realization time of the sequenced projects. When project workloads are known, only the second effect counts; when project workloads are stochastic, however, the project's capacity usage is uncertain so that unused capacity can be shifted to later projects in the same period. In this case, both effects need to be taken into account. In this paper, we determine optimal sequencing rules when the selection and capacity-allocation decisions for a set of projects have already been made. We also consider a combination of parallel and sequential planning and we perform simulation experiments that confirm the appropriateness of our capacity-allocation methods.