1. Rev. 2: 2/8/99 1 Larry Leach 813 240-5534 lleach@Advanced-Projects.com 2/8/99

2. Rev. 2: 2/8/99 2 Explain why the critical chain, not the critical path, is often the constraint of a project Exploit the constraint (critical chain) of a project Subordinate everything else to the project goal Define buffers used in Critical Chain Project Management Exploit the multi-project constraint Objectives

3. Rev. 2: 2/8/99 3 100 % project success rate (scope, schedule, cost) Reduced project duration (1/2 or more) Increased project Throughput with no resource increase Critical Chain Users Report:

4. Rev. 2: 2/8/99 4 Reduced manager and worker stress Minimal investment Rapid results Critical Chain Users Report:

5. Rev. 2: 2/8/99 5 Successful Users & Clients Include Harris Semiconductor Lucent Technologies Honeywell DAS Balfour Beatty Israeli Aircraft Company Better On-line Solutions Saturn Development Corp

6. Rev. 2: 2/8/99 6 TQM PMBOK TOC CCPMCCPM

7. Rev. 2: 2/8/99 7 Critical Chain PMBOK Links Project Management 1 Integration 2 Scope 3 Time 4 Cost 5 Quality 6 Human Resources 7 Communications 8 Risk 9 Procurement *Critical chain impacts shaded blocks.

8. Rev. 2: 2/8/99 8 Deming’s System of Profound Knowledge System Variation Psychology Knowledge

9. Rev. 2: 2/8/99 9 Deming’s Production System Products (or Projects) to Customers Raw Material from Suppliers Production Functions Customer Feedback Improve System

10. Rev. 2: 2/8/99 10 All Processes Have Variation and Uncertainty Common cause variation: variation within the capability of the process Special cause variation: variation due to influences outside the process or assignable causes within the process

11. Rev. 2: 2/8/99 11 Two Mistakes Are Inevitable! 1. Treat common-cause variation as if it were special cause variation. 2. Treat special cause variation as if it were common cause. It is impossible to eliminate both mistakes. Both mistakes increase variation!

12. Rev. 2: 2/8/99 12 The Deming/Nelson Funnel Experiment

13. Rev. 2: 2/8/99 13 Results of Test 1: Do not move the funnel!

14. Rev. 2: 2/8/99 14 Test 2: Move the funnel by the amount that the ball missed the target. Funnel location before ball drop Y X Move the funnel to here Example: Adjusting gun sights (the funnel) by measuring the deviation of each shot on the target. Machine auto-adjust X Y Location of ball after drop

15. Rev. 2: 2/8/99 15 Test 2 Results: Always worse…treating common cause variation as if it were special cause!

16. Rev. 2: 2/8/99 16 Test 3: Adjust the funnel by the amount that the ball missed the target; but first move it back to the origin. Funnel location before ball drop Y X Move the funnel to here Example: Periodic calibration Nuclear proliferation X Y Location of ball after drop

17. Rev. 2: 2/8/99 17 Test 3 Results: Move the funnel relative to the target. Worse yet. (Note scale increase!)

18. Rev. 2: 2/8/99 18 Test 4: Place the funnel over the last place the ball dropped. Funnel location before ball drop Y X Move the funnel to here Example: Worker training worker Estimate activity duration based on last time This years budget based on last years Legal system: precedent X Y Location of ball after drop

19. Rev. 2: 2/8/99 19 Test 4 Results: Place the funnel over the last place the ball landed. Better to take two aspirins and call in the morning. (Note scale increase!)

20. Rev. 2: 2/8/99 20 Mistake 1: Treating common cause variation as if it were special cause Changing the critical path Taking action (e.g. expediting, OT) based on small schedule and cost variances (5%- 10%) Processing project change actions based on small schedule or cost variances

21. Rev. 2: 2/8/99 21 Mistake 2: Treating special cause variation as if it were common cause. Including special cause events in the contingency analysis (or PERT or Monte Carlo type simulations) Increasing schedule estimates to respond to delays in another project (where the cause of the delay could be removed through root cause elimination)

22. Rev. 2: 2/8/99 22

23. Rev. 2: 2/8/99 23 Resource Leveled Critical (?) Path ECB A 6. Feeding Buffer 4. Project Buffer ABC CD 2. Critical Chain 1. Resource conflicts removed. 3. Reduced Task Times RB 5. Resource Buffers 7. ‘Late’ start

24. Rev. 2: 2/8/99 24 Goldratt’s Theory of Constraints Products (or Projects) to Customers Raw Material from Suppliers Production Functions System Throughput Limited by a Constraint

25. Rev. 2: 2/8/99 25 Theory of Constraints (TOC) IDENTIFY the constraint EXPLOIT the constraint SUBORDINATE everything else to the constraint Only then, ELEVATE the constraint Do not let mental INERTIA stop you here…do it again!

26. Rev. 2: 2/8/99 26 Reference (Deterministic) Critical Path Project Plan ABC EC B A C D Resource Leveled Critical (?) Path ABC EC B A C D Critical Path Resource Time

27. Rev. 2: 2/8/99 27 IDENTIFY Constraint: Longest project path Includes resource constraint Never changes (reduce mistake 1!) ABC C D System

28. Rev. 2: 2/8/99 28 Project duration too long* Not enough of the right resources* Schedule over-run* Budget over-run Under scope Too many changes

29. Rev. 2: 2/8/99 29 Prepare a Task Duration Estimate Write down the time, in minutes. Leave this room, purchase specified item, and return it to this room. Specification: 4 inch three ring binder, white, with clear cover, binding, and back (slip-in), and slip-in pockets inside.

30. Rev. 2: 2/8/99 30 How do you feel about your estimate? Do you feel your estimate is pretty accurate? Do you feel that this task is simpler than most of your preventive and corrective action tasks? Do you feel your ability to estimate this task is as good, or better, than your ability to estimate your project task times?

31. Rev. 2: 2/8/99 31 Example Group Result

32. Rev. 2: 2/8/99 32 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 00.511.522.5 Activity Time or Cost P All Project Activity Times Are Uncertain Estimates Minimum Time/Cost Most Likely Time/Cost Long ‘tail’ means no definite upper limit

33. Rev. 2: 2/8/99 33 How do you define contingency?

34. Rev. 2: 2/8/99 34 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 00.511.522.5 Activity Time or Cost P Contingency Definition Must Specify Base Contingency?

35. Rev. 2: 2/8/99 35

36. Rev. 2: 2/8/99 36 Focus On Milestones And Variances Drives Low-risk (90%+) Activity Duration Estimates Scheduled Duration Cumulative Completion Probability

37. Rev. 2: 2/8/99 37 C Deliver projects in shortest time A Successful career B Keep my commitments D Include contingency in my estimates D’ Do not include contingency in my estimates Current situation: Resources focus on D while management pushes for D’.

38. Rev. 2: 2/8/99 38 Solution Direction: Align individual success (policy, measures) with the needs for project success by effective management of uncertainty. Feasibility: Many projects complete in one half or less the previous time, all of the time, with people reporting greater satisfaction. C Deliver projects in shortest time A Successful career B Keep my commitments D Include contingency in my estimates D’ Do not include contingency in my estimates Because: The ‘only way’ to complete the project on time is to plan for and complete each task on time.

39. Rev. 2: 2/8/99 39 Critical Path Schedule Hides Contingency In Each Activity Activity 1Activity 2Activity 3Activity 4Activity 5

40. Rev. 2: 2/8/99 40 Date-driven Human Behavior Uses Scheduled Activity Time 0 1 2 3 4 5 6 00.511.522.5 Activity Time or Cost P 1 = Plan Time or Cost

41. Rev. 2: 2/8/99 41 IDENTIFY the Project Constraint Uncertainty: –Variation in estimate –Variation in task performance Dependent events: resources

42. Rev. 2: 2/8/99 42 EXPLOIT variation by taking contingency out of each task, and moving it to the end of the chain. Task 1Task 2Task 3Task 4 Task 1Task 2Task 3Task 4 Combining variances Central limit theorem

43. Rev. 2: 2/8/99 43 (Smaller) aggregated Buffer at end of chain (Exploit) Critical chain differs from critical path by: Resolving resource contentions first (Identify) Using 50 % probable activity times (Exploit) ABC CD

44. Rev. 2: 2/8/99 44 Buffer Provides Anticipatory Measure to Exploit Constraint 12345 BUFFER Watch Plan Act And, eliminates many type 1 mistakes!

45. Rev. 2: 2/8/99 45 Buffer Tracking Predicts Action Need Time 0 1/3 2/3 1 x x x x x x x x x x Plan Act Project Buffer

46. Rev. 2: 2/8/99 46 Subordinate Merging Paths With ‘Feeding Buffers’ FB Project Buffer Isolates the critical chain from common cause variation in feeding paths!

47. Rev. 2: 2/8/99 47 Exploit With Roadrunner Task Performance Start as soon as input is available Work 100% on the project task Turn in work as soon as it is complete

48. Rev. 2: 2/8/99 48 Critical chain task gets priority over non critical chain task Priority to task with buffer in greatest jeopardy for tasks on like chains Non-project work lowest priority Psychology Exploit With Buffer Management

49. Rev. 2: 2/8/99 49 Subordinate to the Critical Chain Eliminate start and stop time for each activity (Only start dates for chains, and end of Project Buffer!) Late start feeding chains No intermediate milestones (But...there is a way to meet client or regulator demands.) Psychology

50. Rev. 2: 2/8/99 50 Information tool Does not add time to project schedule Notifies resources and resource managers when they will be needed on the project May use incentives for subcontractors Reduces need to change critical path (chain) due to common cause variation

51. Rev. 2: 2/8/99 51 Resource Leveled Critical (?) Path ECB A 6. Feeding Buffer 4. Project Buffer ABC CD 2. Critical Chain 1. Resource conflicts removed. 3. Reduced Task Times RB 5. Resource Buffers 7. ‘Late’ start

52. Rev. 2: 2/8/99 52

53. Rev. 2: 2/8/99 53 Resources must multi-task Projects are late Quality deteriorates

54. Rev. 2: 2/8/99 54 The Project Team’s Dilemma: Management Imposes New ‘Priority’ Project Because? Successful employee Meet my prior commitment Respond to the new priority Complete first project task Start new project task

55. Rev. 2: 2/8/99 55

56. Rev. 2: 2/8/99 56 Project Exercise Four tears vertical Five tears horizontal

57. Rev. 2: 2/8/99 57 Task ATask BTask C Task A Task B Task C

58. Rev. 2: 2/8/99 58 Consider Unloading Ships... Five ships arrive. Each requires 5 person-days to unload. Each owner wants his ship unloaded ASAP. You have five people to unload the ships. Simple…assign one to each ship. Starting each one right away (the sooner you start…) each ship is unloaded on the end of the fifth day.

59. Rev. 2: 2/8/99 59 Put all five resources on ship 1 the first day, ship 2 the second day, etc. Result: ShipNew (days)Old (days)Saved 1 1 5 4 2 2 5 3 3 3 5 2 4 4 5 1 5 5 5 0 Nobody loses. Four of five clients done sooner. Cost = $ 0

60. Rev. 2: 2/8/99 60 IDENTIFY: Multi-project resource constraint EXPLOIT: Prioritize projects (Drum) SUBORDINATE: Stagger project start ELEVATE INERTIA

61. Rev. 2: 2/8/99 61 Delaying Projects Accelerates Completion! BUFFER Individual Project Schedules (Note resource contention) Synchronized Multiple Projects Accelerate and Reduce Resource Contention BUFFER Synchronizing (Constraint) Buffer Constraint Resource BUFFER

62. Rev. 2: 2/8/99 62 Multiple Projects Select a Drum resource Identify project priority Stagger project start to the drum schedule Use Capacity Constraint Buffers to separate project starts

63. Rev. 2: 2/8/99 63 Selecting the Drum Resource. THE PURPOSE OF IDENTIFYING THE DRUM IS TO STAGGER THE PROJECTS. The drum candidates should be highly loaded resources which are expensive or can not be easily elevated. THERE IS NO DRUM FOR SINGLE PROJECT IMPLEMENTATION! THERE IS LITTLE DOWNSIDE TO SELECTING THE ‘WRONG’ DRUM. You will stagger the projects nearly correctly, and the ‘real’ drum will assert itself.

64. Rev. 2: 2/8/99 64 Prioritize the Projects Prioritize projects based on their contribution to the company goal: for profit making companies, to make money now and in the future. Considerations may include: Expected Throughput of the project. Market Competition Future client relationship Company vision THE PURPOSE OF THIS PRIORITY IS SIMPLY TO STAGGER THE START OF THE PROJECTS.

65. Rev. 2: 2/8/99 65 Creating A Drum Schedule 1. Identify the drum resource. 2. Prioritize the projects. 3. Lay out the plan for each project. 4. Collect the drum demands. 5. Assign the resources according to the priority. 6. Schedule the project start as late as possible based on drum availability. 7. Schedule project completion downstream from the drum resource start.

66. Rev. 2: 2/8/99 66 Drum Schedule Example BBB CC AAA Time Resource available = 2 Priority: 1. A 2. B 3. C Highest Priority Lowest Priority Stack the drum demand for each project, assuming it started today. Resource Supply # of drum resource

67. Rev. 2: 2/8/99 67 Drum Schedule Result A & B can start immediately. C start date determined by ‘backing up’ from this point: the constraint use date. BBBC CAAA Push the overflow later in time, until you can ‘drop it in’ to start with a CCB CCB Drop into next slot # of drum resource

68. Rev. 2: 2/8/99 68 Adding A New Project Commitments exist for the yellow, green, and blue projects. The Orange Project comes up. Management decides it’s priority is higher than blue, and lower than green. The resource can not be elevated.

69. Rev. 2: 2/8/99 69 Adding A New Project BBBCC AAA Time Now D CCB Earliest available, without impacting A or B. Scheduled start of orange project No impact on C # of drum resource

70. Rev. 2: 2/8/99 70 Management Behavior Only create feasible single project plans; with rational buffers and end date determined by the plan Select the Drum resource Prioritize existing projects Create the drum schedule Schedule new projects: –Create the single project plan –Set the new project in the priority list –Update the drum schedule –Schedule the new project

71. Rev. 2: 2/8/99 71 Management Behavior (Ctd.) Enable resources to avoid (bad) multi-tasking Avoid actions that may encourage date driven behavior Enable resources to engage in roadrunner task performance Give positive feedback as long as the resources engage in roadrunner behavior, especially when they over-run 50-50 estimated duration Use the buffer report to allocate resources Use the buffer report to make project decisions

72. Rev. 2: 2/8/99 72 Buffer Summary Project Buffer –One per project –Size using duration estimate differences Feeding Buffer –One for each non-critical chain –Size using duration estimate differences Resource Buffer –Critical chain only –Size to resource need

73. Rev. 2: 2/8/99 73 Buffer Summary Capacity Constraint Buffer –Between projects –Equal to the preceding task Drum Buffer –Before first use of CCR –Size as feeding buffer for preceding chain

74. Rev. 2: 2/8/99 74 Explain why the critical chain, not the critical path, is often the constraint of a project Exploit the constraint (critical chain) of a project Subordinate everything else to the project goal Define buffers used in Critical Chain Project Management Exploit the multi-project constraint Objectives

75. Rev. 2: 2/8/99 75 Implement effective process for: Management leadership and behavior Client alignment Resource behavior Buffer Management Organization specific obstacles Potential unintended consequences Path Forward