1. © Washington State University-20101 Fundamental Exam Review Applications: Project Management Segment The Theory of Constraints jholt@wsu.edu http://www.engrmgt.wsu.edu/ James R. Holt, Ph.D., PE Professor Engineering & Technology Management Disclaimer: The material in these slides were developed over time and represents Dr. Holt’s personal views and approach to TOC. It is not the view of Washington State University nor TOCICO. It may be dated, incomplete or absolutely wrong. While the text and figures in this presentation are helpful to facilitate teaching and discussion of these topics, without the words that go with the slides, the presentation is not complete and may not even make sense. This material is made available in the public domain as a service. Individuals may use this material as resources to teach their own TOC review seminars as long as they give reference to the source. There is no promise nor expectation that these materials are either necessary or sufficient to pass any of the TOCICO certification exams. Anyone using these materials should continue to study from the many other sources of excellent TOC literature available. In many cases, common knowledge is included here without reference. If you would like to improve any of these files, please do so. Your contribution will be included in future postings. Dr Holt.

2. © Washington State University-2010 2 TOCICO Segmented Fundamentals Exam Fundamentals Certificate Multiple Choice Exam (Identify, Exploit, Subordinate, Elevate, Go to Step 1) Fundamentals Certificate of TOC Philosophy Fundamentals Certificate of TOC Thinking Processes Fundamentals Certificate of TOC Applications Fundamentals Certificate of TOC Finance & Measures Inherent Potential Inherent Simplicity Inherent Win-Win Five Focusing Steps Three Questions Conflict Cloud Negative Branch Ambitious Target DBR T, I, OE PQ Type Problem Project Management Replenishment

3. Intro to Critical Chain Project Management Projects Are:  Unique  Dependent on Precedence  Activities Not Well Known  Highly Variable  Share Resources  Concurrent with Other Projects  Valued by Scope, Schedule and Cost 3 © Washington State University-2010

4. Undesirable Effects of Projects Projects Are:  Usually Late  Have Too Many Changes  Often Over Budget  Lots of Rework  Many Priority Battles  Resources Not Available When Needed  Jeopardize Scope for Cost or Schedule 4 © Washington State University-2010

5. Projects are Balancing Acts Quality and Scope Timing and Schedule Budgeted Costs 5 © Washington State University-2010

6. Then things Combine Precedence Structure Statistical Variation Human Behavior Quality and Scope Timing and Schedule Budgeted Costs 6 © Washington State University-2010

7. And Reality Sets In Quality and Scope Timing and Schedule Budgeted Costs Precedence Structure Statistical Variation Human Behavior Bumpy Road of Reality 7 © Washington State University-2010

8. Due Date Problems Thanks to Rees Furbeck who prepared some of these graphics 8 © Washington State University-2010

9. Change Problems 9 © Washington State University-2010

10. Rework Problems 10 © Washington State University-2010

11. The Core Problem (Constraint) Meet original commitments Do whatever it takes to meet an endangered original commitment Not jeopardize any other original commitment Compensate for early mis- estimations / mis-calculations Not compensate for early mis- estimations / mis-calculations The original commitment is realistic The safety we are allowed is not enough to absorb the glitches 11 © Washington State University-2010

12. How To Understand Project Problems It is hard to examine one project and find a pattern to the problems.  There are too many excuses.  There is so much variability in tasks that the solution (problem) changes with every look. Its better if we could examine the same project executed over and over again to look for trends.  Simulation can do this  Thru-Put Critical Chain Simulator! 12 © Washington State University-2010

13. Understanding Variability What is 8 times 8? 8? Or 8±1?What is 8? 64? Are you sure? So, what is 8±1 times 8±1? Somewhere between 49 and 81! With 64 being the most likely. Before we go to the Simulator… 13 © Washington State University-2010

14. Good Statistics Variability Adds as the Square Root of the Sum of the Squares (Central Limit Theorem Variability reduces when combined) + = + Watch Simulation 01 14 © Washington State University-2010

15. Bad Statistics + = + Assembly: If one is late, they are all late. Watch Simulation 02 15 © Washington State University-2010

16. Resource Conflict Watch Simulation 04 16 © Washington State University-2010

17. Look at a Real Project Sim 5 Watch Simulation 05 Commitment 70 Days 17 © Washington State University-2010

18. One Simulation Run Commitment 70 Days Actual 72 Days 18 © Washington State University-2010

19. Results of 1000 Runs Commitme nt 70 Days 19 © Washington State University-2010

20. Sim 05 Treats Tasks as Normal Distributions Task Duration Distribution for Activity A1 Theoretical and Actual Simulation Data 20 © Washington State University-2010

21. But, Are Project Tasks Normal Activities? How long did it take you to drive to work this morning? What is the least time it has ever taken? What is the most time it has ever taken? What is the average time to drive to work? Is the average closer to the shortest? Is the average closer to the longest? 50% Estimate 85% Estimate Time -> Probability 21 © Washington State University-2010

22. Skewed Distribution for Sim 6a Task Duration Distribution for Activity A1 Theoretical and Actual Simulation Data 22 © Washington State University-2010

23. Results of 1000 Simulations 6a (skewed) Scheduled @50% Probability Commitme nt 70 Days 23 © Washington State University-2010

24. Try Adding Safety time to each Task Scheduling 11 Days per Task Scheduled @60% Probability Commitme nt 77 Days 24 © Washington State University-2010

25. Maybe 13 Days per Task would do it? Scheduled at 75% Probability Commitment 91 Days 25 © Washington State University-2010

26. Try Giving 16 days per Task as a Big Safety Cushion Scheduled @ 85% Probability Commitment 112 Days 26 © Washington State University-2010

27. Getting Better at Hitting our Projections, But... Rees Furbeck’s clever graphic 27 © Washington State University-2010

28. Engineering Optimism Question: If you have 16 days to to a 10 day project, when do you start? Immediately! Or, After 6 days. Or, After 10 days (since you know you are faster than average and can probably do it in 6 days). Normal level of effort Assigned Due Date Level of Effort Student Syndrome 28 © Washington State University-2010

29. I hate Student Syndrome! Normal level of effort Assigned Due Date Level of Effort Self Imposed Overtime It wears People out! And, they think its their own fault! 29 © Washington State University-2010

30. There is another Problem Question: You fought tooth and nail to get the 16 days you wanted to do the 10 day project. If you finish in 14 days, will you go around advertising early completion? What if you finish in 10 days? How about 8 days? Wonder of wonders 6 days? This is called Erroneous Reporting of Completion time! A second similar rule: Parkinson’s Law --Work expands to fill the time available 30 © Washington State University-2010

31. With 75% Erroneous Reporting Appearance: Boy are We Good! We made our Due Dates! Sim 06, Tasks Scheduled @ 16 days, only 25% report early completion 31 © Washington State University-2010

32. Now Add Student Syndrome Expected Completion: 7*18 day=126 Days Sim 06, Tasks Scheduled @ 18 days (85% confidence), only 25% report early completion, and late starting (Student Syndrome and Parkinson’s Law) 32 © Washington State University-2010

33. Student Syndrome and 75% Erroneous Reporting Distribution used to simulate individual task duration. Only 25% of the time were true times reported. 33 © Washington State University-2010

34. (Scheduled 18 days for each Task) 85% Probability Commitment 126 Days 34 © Washington State University-2010

35. Increasing Safety to 19 days (Scheduled 19 days for each Task) Commitment 133 Days 35 © Washington State University-2010

36. Huge Safety -- 22 Days (Scheduled 22 days for each Task) Commitment 154 Days 36 © Washington State University-2010

37. A 90% Estimate of this 70 Day Project is: 154 + Days 37 © Washington State University-2010

38. Consider Three Individual 70 Day Projects in Parallel! Simulation 9a Multi-Project Student Syndrome 75% Erroneous Reporting, 90% Estimate Resources Shift and stay until complete (one task delays another). 38 © Washington State University-2010

39. One Project Delays Another Project 1 as first Priority: Scheduled 154 Task Duration 22 Days 90% Probability Commitment 154 Days 39 © Washington State University-2010

40. Rather than Delaying, try Alternating Task 1 My Assignments Task 2Task 3 10 days Task 1Task 2Task 3Task 1Task 2Task 3 5 days Everything Takes Twice as Long!!!!!!!!!! 40 © Washington State University-2010

41. I Hate Multi-Tasking Even More! 41 © Washington State University-2010

42. Painful Results! 42 © Washington State University-2010

43. The CCPM Solution to Project Management Scheduling The last session was pretty depressing  Project Structure is a problem.  Task Variability is a worst problem.  Human Behavior (as a result of attempting to deal with structure and variability)-Ahhh! Result, a single project planned for 70 days stretches to 160 days! Three 70 day concurrent projects exceed 350 days! 43 © Washington State University-2010

44. Painful Situation! 44 © Washington State University-2010

45. We have Maxed Out! “We are caught in a vicious cycle which leads us to inflate our estimates and press for more people, just to see the completion dates of our projects slipping more and more into the future... “... until the time to do the project becomes so long or the compromises on the content become so large that the clients tell us, “If that’s the case we’ll go elsewhere !” Eli Goldratt 45 © Washington State University-2010

46. We must improve or lose business and people “At that Stage, a very unsatisfactory equilibrium is reached: “Lead times are long “Visibility is lost “The work environment is chaotic “There is a loss of ability to make decisions “Everything is done by pressure.” Eli Goldratt 46 © Washington State University-2010

47. Remember this Image? Quality and Scope Timing and Schedule Budgeted Costs Precedence Structure Statistical Variation Human Behavior Bumpy Road of Reality The Solution must address all three causes! 47 © Washington State University-2010

48. Is A Solution Possible? Many people have done it (See AGI Web) Example: Israeli Aircraft Industries Israeli Aircraft Industries - Wide Body From a letter to Dr. Goldratt, February 23, 1997, “In the wide body aircraft directorate, average turn around time per aircraft reduced from THREE MONTHS to TWO WEEKS. Backlog (Customer orders) has increased from two months to one year.” 48 © Washington State University-2010

49. What are the elements of the Solution? It makes no sense to intentionally schedule conflicts. Prioritize the work, Work the priorities. Stagger the release of work (Remember the Job Shop Game)(Video)Job Shop GameVideo Communicate what is important to those who can make a difference How? 49 © Washington State University-2010

50. Multi-Project Simulation 9c Red is the Tightest Scheduled Resource 50 © Washington State University-2010

51. 1. Prioritize - Stagger Projects Stagger based on de-conflicting Red Resources (others may conflict between projects) 51 © Washington State University-2010

52. Staggering helps a bit but there is still Multi-Tasking First Project Median 169 Second Project Median 219 (total time 323) Third Project Median 235 (total time 367) 52 © Washington State University-2010

53. Let’s Do This by Fixing Each Project – One Project at a Time! Let’s look at the single Project CCPM Solution for a few minutes before we return to the Multi-Project 53 © Washington State University-2010

54. Our Empirical results on projects are not good. We need protection! 12345678910 Empirical Completion Distribution Due Date Buffer If we buffer our existing schedule, we just add more time! This is counter productive! We are worse off. Even worse than before! 54 © Washington State University-2010

55. Let’s take advantage of good statistics. If we finish early, we can move on to the next task. Don’t waste Safety Allocated. 12345678910 Completion Distribution Buffer Before: 85% Estimate Due Date Completion Distribution Buffer After: 50% Estimate 12345678910 Buffer Eliminate waste 55 © Washington State University-2010

56. Let’s take advantage of good statistics. If we finish early, we can move on to the next task. Don’t waste Safety we Allocated. 12345678910 Completion Distribution Buffer Before: 85% Estimate Due Date Completion Distribution Due Date Buffer After: 50% Estimate 12345678910 Notice, we are only changing the schedule. Actual work distributions are the same. If we finish early, we can capture the advantage. 56 © Washington State University-2010

57. We can buffer the variability of activities along the Critical Chain, but where else? Completion Distribution Due Date Buffer After: 50% Estimate 123456 78910 Make sure non-critical, side chains are de-coupled from the Critical Chain 57 © Washington State University-2010

58. Add Feeder Buffers Completion Distribution Due Date Buffer After: 50% Estimate 123456 789 10 Make sure non-critical, side chains are de-coupled from the Critical Chain 58 © Washington State University-2010

59. Add Assembly (Feeder) Buffers Completion Distribution Due Date Buffer After: 50% Estimate 123456 789 10 Make sure non-critical, side chains are de-coupled from the Critical Chain 59 © Washington State University-2010

60. Add Assembly (Feeder) Buffers Completion Distribution Due Date Buffer After: 50% Estimate 123456 789 10 Make sure non-critical, side chains are de-coupled from the Critical Chain 60 © Washington State University-2010

61. Add Assembly (Feeder) Buffers Completion Distribution Due Date Buffer After: 50% Estimate 123456 789 10 Make sure non-critical, side chains are de-coupled from the Critical Chain 61 © Washington State University-2010

62. Add Assembly (Feeder) Buffers Completion Distribution Due Date Buffer After: 50% Estimate 123456 789 10 Make sure non-critical, side chains are de-coupled from the Critical Chain 62 © Washington State University-2010

63. Next Step, Add Resource Buffers Completion Distribution Due Date Buffer After: 50% Estimate 123456 789 10 This is a ‘Notification’ step (communication buffer) to make sure resources soon to be used on Critical Chain Activities will be Ready and Available. 63 © Washington State University-2010

64. Single Project Buffered Project Buffer Resource Buffers Critical Chain Simulation 08 Commitment 95 Days Feeder Buffers 64 © Washington State University-2010

65. CCPM Simulation 08 Results End of Buffer 95 50% Completion No Multi-Tasking Buffer Management Previous Median 65 © Washington State University-2010

66. Now, Let’s look at Multi Project We Schedule Each Project individually according to Critical Chain Project Management. We stagger the projects according to a selected strategic drum (resources) We include a buffer between projects (on the drum) All Estimates are at 50%. Use Buffer Management to prioritize resource allocation. 66 © Washington State University-2010

67. Stagger Projects w/Buffer Buffer Between Projects Too 67 © Washington State University-2010

68. Result with 50% schedule and Buffers First Project Median 96 90%@110 Expected Second Project Median 180 90%@210 Expected Third Project Median 216 90%@245 Expected 68 © Washington State University-2010

69. Notice: All Three 70 day projects were completed within 240 days. 69 © Washington State University-2010

70. Bottom Line There is lots to gain Particularly in Multi Project Environments Single Projects 20% reduction Multi Projects 50% reduction 70 © Washington State University-2010

71. 71 Student Exercise - Small CCPM The following tasks are estimated at 50% probability of completion already. Schedule this project. -80 -70 -60 -50 -40 -30 -20 -10 0 A 20 B 15 C 10 D 10 E 10 F 5 Feeder Buffer Project Buffer Resource Buffer Project Buffer

72. Critical Steps Prioritize work Avoid scheduling conflicts Schedule Aggressively (remove wasted safety) Insert adequate safety in the right places (less than that taken out) Communicate Time Remaining Manage Resources according to Buffer Status Sequence multiple project on strategic resource with large buffer. 72 © Washington State University-2010

73. Project Type Processes The Goal: Successful Project Delivery (single or multiple) The Measure: Deliver on Time, In Budget, Desired Content. The Constraint: The Critical Chain of Events w/ Resources Applies to processes where Touch time=Flow time. ~ 73 © Washington State University-2010

74. Project Type Processes A. Successful Project B. Meet Threatened Commitments D. Do whatever it takes C. Don’t Jeopardize other Commitments D’. Don’t take aggressive actions The Conflict Cloud: The Paradigm Shift: Don’t Waste Safety, Schedule Aggressively, Aggregate Buffers, Communicate “Time Remaining”, Negotiate Capability 74 © Washington State University-2010

75. The Behavior/Results The Aggressive Schedule Exploits the Constraint. Reducing Conflict, Staggering and Buffers Subordinate (de-couple) the System Processes. Buffer Management measures Buffer Penetration Red-> Immediate Action Yellow-> Learn about what to fix next Green-> Allow the system to run Constraint Focus typically results in 25 to 60% reduction. Relay Race mentality and Buffer Management assigns resources. Continual Improvement changes the culture and creates really effective teams. What do we learn here to apply to Daily Lives? 75 © Washington State University-2010

76. Project Management Lessons Learned Variability/Variety Happens - Expect Accidents, Hardships, Mistakes, Disasters, etc. Plan Aggressively (Not too Aggressive, Not too Safe, Just Right-50%) Buffer for the Worst (have 95% confidence of survival) Say, “No!” to Bad Multi-Tasking (Sequence-Don’t Overload) Work on What is Important When its Important Use Buffer Management to flow from Priority to Priority Communicate ‘Time Remaining’ Don’t Forget important Quadrants Covey Urgent Not Urgent Not Important Important CC PB FB OE 76 © Washington State University-2010

77. Strategy and Tactic Tree Project Strategy and Tactic Tree http://www.wsu.edu/~engrmgmt/holt/em534/SandT-Projects.pdf © Washington State University-2010 77