© 2000 The TOC Center of Australia Pty Ltd 1 Critical Chain Overview – AIPM 2003 MktgCCSEAV01grh The TOC Centre of Australia Pty Ltd The TOC Centre of Australia Resource Optimisation Using Critical Chain Buffer Management in the Multi Project Environment Presented by: David V Hodes Tel: Mobile: Fax:

© 2000 The TOC Center of Australia Pty Ltd 2 Critical Chain Overview – AIPM 2003 MktgCCSEAV01grh The TOC Centre of Australia Pty Ltd The TOC Centre of Australia Product Suite

© 2000 The TOC Center of Australia Pty Ltd 3 Critical Chain Overview – AIPM 2003 MktgCCSEAV01grh The TOC Centre of Australia Pty Ltd Critical Chain Projects

© 2000 The TOC Center of Australia Pty Ltd 4 Critical Chain Overview – AIPM 2003 MktgCCSEAV01grh The TOC Centre of Australia Pty Ltd Some Critical Chain Results The first time out, we took 26 days out of a 71-day hypermarket re-fit, a 37% increase in capacity Matador Refrigeration The industry standard to get the plant up and running to 90% capacity is about 46 months. The plant was recently completed and is up to 90% production in 13 months Harris Semiconductor We succeeded in dropping our average turnaround time per aircraft visit from three months to two weeks… Israel Aircraft Industries We originally scheduled to take 13 months to deliver – and the team did it in six months Honeywell DAS

© 2000 The TOC Center of Australia Pty Ltd 5 Critical Chain Overview – AIPM 2003 MktgCCSEAV01grh The TOC Centre of Australia Pty Ltd The Idea Factory The reward The Project The Market The Idea Operations

© 2000 The TOC Center of Australia Pty Ltd 6 Critical Chain Overview – AIPM 2003 MktgCCSEAV01grh The TOC Centre of Australia Pty Ltd The Cash Flow Of An Idea On time $ Time Late Extra cost Market follower pricing disadvantage Trapped resources Early Monopoly advantage Market leader pricing advantage Cost reduction The next new idea Freed resources

© 2000 The TOC Center of Australia Pty Ltd 7 Critical Chain Overview – AIPM 2003 MktgCCSEAV01grh The TOC Centre of Australia Pty Ltd When Ideas Become Projects They are late They are over budget They frequently change in scope Standish Group ( ) 30% of projects canceled before finished 75% of completed projects are late Average cost overruns are 189% Average time overruns are 222%

© 2000 The TOC Center of Australia Pty Ltd 8 Critical Chain Overview – AIPM 2003 MktgCCSEAV01grh The TOC Centre of Australia Pty Ltd What About The Measures? “Show me how you measure me, and I’ll show you how I perform. Measure me in an illogical way, and don’t be surprised if I behave illogically” Dr Eli Goldratt Is the goal task conformance or project performance?

© 2000 The TOC Center of Australia Pty Ltd 9 Critical Chain Overview – AIPM 2003 MktgCCSEAV01grh The TOC Centre of Australia Pty Ltd Global Versus Local Optima What we want to do is: Finish projects on time Finish projects on budget Finish projects on scope Shorten project lead times Finish more projects What we do is: Manage to finish tasks on time Measure resources on utilisation Micromanage task flow Detailed risk analyses Detailed specifications

© 2000 The TOC Center of Australia Pty Ltd 10 Critical Chain Overview – AIPM 2003 MktgCCSEAV01grh The TOC Centre of Australia Pty Ltd Uncertainty Is At The Heart Of The Problem Vendor performance is unreliable Required tasks are not fully known Time to complete any given task varies Delivery of needed tools, equipment, and material is uncertain Resource availability cannot be guaranteed

© 2000 The TOC Center of Australia Pty Ltd 11 Critical Chain Overview – AIPM 2003 MktgCCSEAV01grh The TOC Centre of Australia Pty Ltd The Issue of Duration Risk 10% probability 50% probability 95% probability BC is not necessarily 2xAB Task Duration

© 2000 The TOC Center of Australia Pty Ltd 12 Critical Chain Overview – AIPM 2003 MktgCCSEAV01grh The TOC Centre of Australia Pty Ltd How Risk Relates To How We Are Measured When we put safety into each task… Projects seem to be longer than necessary Parkinson’s Law: work expands to fill the time available Tasks seldom finish early “Student syndrome” prevails: 2/3 of work done in last 1/3 of time Task startTask end Activity

© 2000 The TOC Center of Australia Pty Ltd 13 Critical Chain Overview – AIPM 2003 MktgCCSEAV01grh The TOC Centre of Australia Pty Ltd The Effect Of Multi-tasking

© 2000 The TOC Center of Australia Pty Ltd 14 Critical Chain Overview – AIPM 2003 MktgCCSEAV01grh The TOC Centre of Australia Pty Ltd Unlevelled Schedule

© 2000 The TOC Center of Australia Pty Ltd 15 Critical Chain Overview – AIPM 2003 MktgCCSEAV01grh The TOC Centre of Australia Pty Ltd Load to Capacity of C

© 2000 The TOC Center of Australia Pty Ltd 16 Critical Chain Overview – AIPM 2003 MktgCCSEAV01grh The TOC Centre of Australia Pty Ltd The definition of the Critical Chain is the longest set of dependent steps, taking task precedence and resource contention into account. Critical Chain

© 2000 The TOC Center of Australia Pty Ltd 17 Critical Chain Overview – AIPM 2003 MktgCCSEAV01grh The TOC Centre of Australia Pty Ltd Identify Critical Chain  Load levelled (finite capacity)  Critical Chain identified

© 2000 The TOC Center of Australia Pty Ltd 18 Critical Chain Overview – AIPM 2003 MktgCCSEAV01grh The TOC Centre of Australia Pty Ltd Managing The Critical Chain Shrink the times to 50% probability of completion – aggregate protection in the feeding and project buffers Σ = Buffer

© 2000 The TOC Center of Australia Pty Ltd 19 Critical Chain Overview – AIPM 2003 MktgCCSEAV01grh The TOC Centre of Australia Pty Ltd Types Of Buffers Project buffer: Placed before the customer, to protect our commitment to the customer (the external constraint) Feeding buffer: Placed at each point where non-critical tasks join the critical chain, to protect against precedence conflicts on non-critical tasks

© 2000 The TOC Center of Australia Pty Ltd 20 Critical Chain Overview – AIPM 2003 MktgCCSEAV01grh The TOC Centre of Australia Pty Ltd CC, Fb and Pb  Project buffer task 13  Feeding buffers tasks 3 and 8

© 2000 The TOC Center of Australia Pty Ltd 21 Critical Chain Overview – AIPM 2003 MktgCCSEAV01grh The TOC Centre of Australia Pty Ltd Critical Ratio Critical Ratio = work to completion time to completion (work+buffer)

© 2000 The TOC Center of Australia Pty Ltd 22 Critical Chain Overview – AIPM 2003 MktgCCSEAV01grh The TOC Centre of Australia Pty Ltd Scenario 1  Status date represented by red line (8am Sunday 4 th November)  Purple bars represent projected start and finish times  Project buffer (Pb) penetrated  Feeding buffer (Fb) task 8 penetrated  Resource buffer (Rb) tasks 5 and10 scheduled against expected start  Task 4 most critical to work on, as a delay here causes immediate Pb penetration

© 2000 The TOC Center of Australia Pty Ltd 23 Critical Chain Overview – AIPM 2003 MktgCCSEAV01grh The TOC Centre of Australia Pty Ltd But How Do We Manage The Complex, Multi-Project Environment? Project Portfolio Portfolio Selection The pacing resource Individual Critical Chain Projects Buffer management policies Project Pipeline Analyse Resource Decide

© 2000 The TOC Center of Australia Pty Ltd 24 Critical Chain Overview – AIPM 2003 MktgCCSEAV01grh The TOC Centre of Australia Pty Ltd The Classic Multi-Project

© 2000 The TOC Center of Australia Pty Ltd 25 Critical Chain Overview – AIPM 2003 MktgCCSEAV01grh The TOC Centre of Australia Pty Ltd Classic Multi-Project Statistics

© 2000 The TOC Center of Australia Pty Ltd 26 Critical Chain Overview – AIPM 2003 MktgCCSEAV01grh The TOC Centre of Australia Pty Ltd TOC: Critical Chain, Drum and Buffer Management

© 2000 The TOC Center of Australia Pty Ltd 27 Critical Chain Overview – AIPM 2003 MktgCCSEAV01grh The TOC Centre of Australia Pty Ltd TOC Statistics

© 2000 The TOC Center of Australia Pty Ltd 28 Critical Chain Overview – AIPM 2003 MktgCCSEAV01grh The TOC Centre of Australia Pty Ltd Test Results

© 2000 The TOC Center of Australia Pty Ltd 29 Critical Chain Overview – AIPM 2003 MktgCCSEAV01grh The TOC Centre of Australia Pty Ltd So What’s the Choice? You manage the constraint… Or the constraint manages you