Critical Chain Project Management

Outline Overview of Theory of Constraints Revisit conventional project management (Critical Path Management) Overview of Critical Chain Project Management

Theory of Constraints Founder, Eliyahu M. Goldratt, ca Popular writings –The Goal –It’s Not Luck –The Haystack Syndrome –Critical Chain

Theory of Constraints A system improvement philosophy (as opposed to a process improvement philosophy) Organizations live or die as systems, not as processes Success or failure a function of how well different component processes interact with one another

Theory of Constraints Systems are analogous to chains, or networks of chains Like a chain, a system’s performance is limited by the performance of its weakest link The weakest link is the system’s constraint

Theory of Constraints Step A Step B Step C Step D Step E INPUT OUTPUT Market Demand: units/d 20 units/d 8 units/d 6 units/d 9 units/d How many units can be produced per day? What is the constraint?

Theory of Constraints Step A Step B Step C Step D Step E INPUT OUTPUT Market Demand: units/d 20 units/d 23 units/d 18 units/d 17 units/d Now how many units can be produced per day? What is the constraint?

Theory of Constraints Another basic principle of TOC –A large number of undesirable effects will be caused by a relatively small number of core drivers –Eliminating a very few core problems can result in a huge improvement

Theory of Constraints Five Focusing Steps 1.Identify the system constraint 2.Decide how to exploit the constraint 3.Subordinate everything else 4.Elevate the constraint 5.Go back to Step 1, but beware of “inertia”

Theory of Constraints Drum-Buffer-Rope application on the factory floor –Drum – the capacity constraint Drumbeat sets the pace –Buffer – placed at constraint ensures that “drum” never runs dry –Rope – connection between constraint and release of material to the line synchronizes release of material with pace of the constraint

TOC Drum-Buffer-Rope ABCDE RM FG 11 Parts per Day 9 Parts per Day 5 Parts per Day 8 Parts per Day 15 Parts per Day Drum Buffer Rope

TOC and Projects –How does all this relate to projects? Repeating a basic principle of TOC –A large number of undesirable effects will be caused by a relatively small number of core drivers –Eliminating a very few core problems can result in a huge improvement

Undesirable Effects in Projects US DOE –From , DOE conducted 80 major system acquisition projects –DOE has completed 15; most finished behind schedule and over budget –31 other projects terminated after expenditures over $10 billion –Cost overruns and schedule slippages continue to occur. GAO Report GAO/RCED-97-17, November 26, 1996

Undesirable Effects in Projects US DOD –"Despite DOD's past and current efforts to reform the acquisition system, wasteful practices still add billions of dollars to defense acquisition costs. Many new weapons systems cost more and do less than anticipated, and schedules are often delayed." GAO Report GAO/HR-97-6, February 1997

Undesirable Effects in Projects Projects funded by the World Bank –"Time overruns have gone down, but forecasts are still optimistic. On average, operations evaluated in 1994 to 37 percent longer to implement than originally scheduled, down from 48 percent in 1993, and 54 percent in the cohorts." "Evaluation Results for 1994," Operations Evaluation Department, World Bank, 1995

Conventional Project Management Emphasis on –On time Achieving task estimates Making intermediate milestones Making promised due date –Within budget –Prescribed performance

Conventional Project Management Critical Path Management Critical path – path with zero slack –If all tasks on schedule, project on schedule –If one or more tasks off schedule, project off schedule

Critical Path Project Management A B C D E F Start Stop Activity-on-Node Critical Path: That sequence of tasks which represent the longest time required to complete the project =8 > =7, or 2+3+2=7

Conventional Project Management Task Time Estimating Take best guess at how long a task will take Consider the effect of unknowns or unplanned interruptions Add sufficient safety to be able to deliver with 90% probability

Time 25% 50% 90% T 50 T 90

The Conflict

Conventional Project Management Uncertainty is an important factor in project scheduling Workers must meet task completion requirements Workers feel task timings need to be long enough to allow for uncertainty

Critical Path Project Management If critical path tasks finish late, the project is late If critical path tasks (or others) finish early, workers often feel compelled to stay busy Parkinson’s Law –Work expands to fill the time allotted Student syndrome

Critical Chain Project Management The TOC philosophy applied to project management attempts to remove the undesirable effects (late, over-budget, and under- performance projects) by attacking individual measurements and uncertainty.

Critical Chain Project Management How to protect the project due date from Murphy and Parkinson –Build the schedule with target durations too tight to allow/encourage diversion of attention –Get rid of task due dates –Charge management with the responsibility to protect project resources from interruptions –Limit multiple project assignments

Critical Chain Project Management Uncertainty always present – it doesn’t go away Take the safety out of each of the critical path tasks and lump them into a safety net at the end of the project Identify constraints along the path and set up buffers in front of tasks that can suffer from the constraint (constraints = time and resources) Allow tasks to start when predecessors are completed and resources are available

Critical Chain Project Management Critical Chain - set of tasks which determines overall project duration, taking into account both precedence and resource dependencies; improvement along Critical Chain will likely result in improvements to the project as a whole; improvements elsewhere will not Project buffer - protects project commitment dates from fluctuations on the Critical Chain Feeding buffer - protects Critical Chain from fluctuations on feeding tasks; provides the possibility for Critical Chain tasks to start early Resource buffer - protects the Critical Chain from lack of availability of required resources; also provides the possibility for Critical Chain tasks to start early

Critical Chain Project Management Project Buffer Task 1 Original Critical Path Original Critical Path with Buffer (Safety removed from individual tasks)

Critical Chain Project Management About Buffers –Identify the points at which to place project, feeding, and resource buffers –Buffer sizes determined approximately, based either on average task duration estimates, or a combination of average and worst-case duration estimates –Individual buffer sizes can be adjusted based on intuitive assessment of risk –Buffer insertion may cause the Critical Chain, and hence the project completion date, to be pushed later

Critical Chain Project Management The Critical Chain approach to scheduling helps minimize project duration and WIP, delay investment as far as possible, and maximize the chance of on-time completion

Critical Chain Project Management The success stories …..

Critical Chain Project Management Lucent Technologies –On-time performance through use of CCPM has increased to 90%+ Harris Semiconductor –Applied CCPM to building a fabrication plant that generates millions $ in revenue PER DAY. The plant was completed 34 MONTHS AHEAD OF SCHEDULE.

Critical Chain Project Management ESCO Corporation –Is completing a conversion project traditionally scheduled at 12 months, but on- track for completion in 9 months Lord Corporation/Mechanical Products Division, Information Services Group –Traditionally, projects were 55% longer than estimated. After CCPM implementation, they achieved: 90%+ on-time performance 60% capacity increase 50% reduction in project durations

Critical Chain Project Management Saturn Development Corporation - Construction of new car dealerships –History 20% overspent Project length 6-9 months Debate over whether it was on time –After implementing TOC/Critical Chain Within budget Project length 4 months On time per original plan/promise

Critical Chain Project Management Better Online Systems - Connectivity solutions for IBM midrange systems –Situation A project that was shooting for a due date 9 months out that no one believed –Replanned with a Critical Chain Schedule New target due date 3 months earlier than original –Managed with Buffer Management Beat the new target by a month (4 months sooner than the original questionable target)

Critical Chain Project Management References –Goldratt, E.M., Critical Chain, North River Press, 1997 –Newbold, R. C., Project Management in the Fast Lane: Applying the Theory of Constraints, St. Lucie Press/APICS, 1998 –Leach, L. P., Critical Chain Project Management, Artech House, 2000

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