© avraham y. goldratt institute 1998 1 an introduction to the theory of constraints - breakthrough...

© Avraham Y. Goldratt Institute 1998

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An Introduction to the Theory of Constraints

- breakthrough solution for Project Management

Presenter Robert Bolton

MS Project Users Group

8th February 2000


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Objective of this session

Examine the effects of the problems we are facing in projects & Project Management today

Understand the source of these problems Understand how TOC addresses the source of these problems Results to date

Aim of TOC: Complete projects on or before the scheduled due date.


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The nature of Projects?

Anyone ever have or heard of a project taking longer than scheduled?

Anyone ever have or heard of a project going over budget?

Anyone ever have or heard of a project cutting specifications or scope?


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Why is it so difficult to manage projects to deliver on time, within budget and with the full specifications/scope intact?

Unforeseeable difficulties with vendors who supply equipment

Longer than expected in meeting Government and/or regulatory requirements

Unrealistic schedule

Unreliable (but cheaper) vendors or contractors

Unforseen emergencies

Difficulties in matching skilled resources with project need.

EtcWhat are the resulting effects ?


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What is the current experience?

Standish Group Statistics (IT Projects)

30% of projects cancelled before finished 75% of completed projects are late Average cost overruns of 189% Average time overruns of 222%

Standish Group survey results can be found at http://www.standishgroup.com


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Project characteristics

All projects have two things in common:

1. They involve high uncertainty.

2. They involve three different and opposing

commitments:

Due date, budget, and content


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Could the three opposing commitments / problems be caused by the uncertainty inherent in all projects?

Often projects have difficulty

finishing on time

Often projects have difficulty staying within

budget

Often scope or specifications are cut from a project

Uncertainty in Projects?


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Is uncertainty really the source of allthese problems?

If it is, then we would never be able to find a project that had a lot of uncertainty in it that finished significantly ahead of time - and that finished within budget and with specifications intact!

But, there has been at least one - the U2!

It was completed in 8 months, it beat its budget and met full specs!

What this means is that uncertainty is not the cause of our three problems. What cause could account for our three problems and the success of the U2?

Perhaps it has to do with the way we manage uncertainty!


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Perhaps it has to do with the way wemanage uncertainty!

Often projects have difficulty

finishing on time

Often projects have difficulty staying within

budget

Often scope or specifications are cut from a project

THE WAY WE MANAGE

UNCERTAINTY IN PROJECTS?

Adding significant safety everywhere, then wasting it!


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Which time are you likely to promise?

Your boss asks you when you can have a specific project task ready. You are already busy. Your boss does expect you to meet your commitments. You also take your commitments very seriously. There may be some unexpected surprises (uncertainty) you will have to deal with in doing the task.

With no difficulties at all, time A is a very slight possibility. With some surprises, time B is very likely. If a major disaster occurs, time C is likely.

Which time are you likely to give? Probably C, maybe even C+.

In projects, with the expectation that we will give realistic estimates of how long the task will take, when asked, we will likely give a similar response. If we have to keep our commitments and we know that our given time will be cut, we might give a time as long as C++!

A B C

Probability of Task Duration Time

50 %

80 - 90 %


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The “student syndrome”

Task Scheduled,Available Start Date

Task ScheduledCompletion Date

XMurphy


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The multiplying effect of multi-tasking

In order to keep each project on track, a resource does half of task A, then half of task B, then half of task C, then finishes task A, then B, then C.

How long does each task take to complete?

What happened to the safety time?

Task AProject 1

One Week

Task BProject 2

One Week

Task CProject 3

One Week 1/2 A 1/2 B 1/2 C 1/2 A 1/2 B 1/2 C

How Long?


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Delays are passed on — gains are not

Merging paths don’t allow us to benefit from tasks completed early - What’s the impact on the total project if Task A is done in only 3 days?

What if Task C takes 8 days?

What if Tasks A, B, and C, through some miracle, all get done in 2 days? (Will Task D be ready to start 3 days early?)

Task B5 Days

Task D10 Days

Task A5 3 DaysX

Task C5 8 DaysX


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Project Management Evaporating Cloud- Stuck between a rock and a hard place

Successfully manage uncertainty in

projects

Objective

Don’t add protection time to most tasks

Prerequisite

Add protection time to most tasks

Prerequisite

Account for uncertainty in

estimating task times

Requirement

Meet critical timing needs (while addressing

uncertainty)

Requirement

Because the best place to handle the

project uncertainty is at each task

Assumption

Because there is no way to add sufficient protection that results in short enough lead

times

Assumption


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10

20

16 16

1610

Let’s consider a simple project

Theoretical this project should finish within 56 days.

Will it?


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How do we measure a project?

A project has three elements:

Completion Date - when the benefits are realised (Throughput)

Scope or specifications - the definition of what is needed to be achieved so that benefits will be realised.

Budget - the money invested to get the benefits

Money Benefits


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10

20

16 16

1610

Statistics - What is the chance that the project will be completed on time?

The probability of the total project to finish on time is 26%

Upper path - 0.8*0.8*0.8 = 51.2%

Lower path - 0.8*0.8 = 64%

Integration: 32.7%

Let’s assume that each task has a probability of 80% to be finished on time.


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Project Management Evaporating Cloud- Adding “injections” to the reality of the conflict

Successfully manage uncertainty in

projects

Objective

Don’t add protection time to most tasks

Prerequisite

Add protection time to most tasks

Prerequisite

Account for uncertainty in

estimating task times

Requirement

Meet critical timing needs (while addressing

uncertainty)

Requirement

The project only protects what is

critical for handling uncertainty

Injection

Because the best place to handle the

project uncertainty is at each task

Assumption

Because there is no way to add sufficient protection that results in short enough lead

times

Assumption

We use aggregated buffers and shortened duration times for the

task times

Injection


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Project Planning: Direction of the Solution

Have strategic protection times - Buffers

5 85

8 8

10 Project Buffer 28

Feeding Buffer 16

10

20

16 16

1610


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Change in behaviours allows aggregated buffers to be smaller than the individual safety.

ie There is less Multi-tasking!!!

5 85

8 8


FB 8

5 85

8 8


Feeding Buffer 16


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Does it ever happen that a resource is needed in two places at the same time?

A5

C 8B5

D8 C 8

E10 Project Buffer 14

FB 8

What happens if the lower path experiences uncertainty beyond its durationtimes and the top doesn’t? Won’t we have a need for the C Resource at the same time?

Solution: The Critical Chain


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Identifying the Critical Chain

B5 C8

D8 C8

A5

E10

Resource dependencies are identified once resource contention is removed.

Finally, the longest path of dependent events - the Critical Chain - is identified. ( We have already removed the safety from the task times, which was half of original task estimate).

A5 B5

E10D8 C8 C8


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A feasible and immune schedule

A5 B5

E10D8 C8 C8

A5 B5

E10D8 C8 C8 Project Buffer 17

FB5

Buffers - Strategic protection of the Due date


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Buffers are used to provide focus and early warning to protect the critical chain and due date

BUFFER

OKWATCH& PLAN

ACT

RemainingProject Buffer:

0 6 7 12 13 17

RemainingFeeding Buffer:

0 2 3 4 5 5


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Project control - Buffer Management

The mechanism for gathering data provides us a glimpse into the future - so we can take action before we are in too much trouble.

The organization gathers the information for the status of the buffers in the following way:

Each resource that is working on the project gives a “daily” status of the time they estimate they still need to work until the task is complete. That information is used to calculate whether any buffer time would be gained or lost if these time estimates proved true.

This “daily” interaction is key to reinforce new behaviors and to provide opportunities to mentor resources.


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Project Management the TOC Way - summary

Project Management the TOC Way has fivemain components:

1. A synchronization mechanism that allows projects to be started later, but finished sooner and that clarifies resource assignment priorities. - i.e. Multi Project. 2. Planning processes that account for the needed dependencies and completion criteria. 3. Scheduling processes that concentrate safety where it will provide the most protection. 4. Changes in behavior that support a world class relay team culture. 5. Mechanisms that create “Project Control & Visibility” to assist in global decision making. Ie due dates.


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The change is both logistical and cultural!

Building and scrutinizing individual project networks in a way that significantly reduces the opportunity for missing critical dependencies.

Constructing project schedules in a way that recognizes both resource and path dependencies.

Placing safety strategically to protect the project, not the individual tasks.

Eliminating behaviors that waste safety.

Managing resource assignments according to which project has the greatest need. (Buffer Management)

Managing project progress according to buffer depletion - taking corrective actions when and only when required.

Software required to support:

Prochain Solutions - MS Project Add-on www.prochain.com

Concerto - ERP solution Thruput.com


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Results -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 Critical Chain

Within budget

Project length 4 months

On time per original plan/promise


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Results -Harris Semiconductor - new $250m plant

New technology product - first 8-inch discrete power wafer fabNew raw material, new automated technologyNew facility, doubling capacityProject scope - construction, installation, ramp-up,Focus on actual delivery of production via the Critical Chain

Industry norm

Groundbreaking to first silicon - 28-36 months

Time to ramp production - 18 months

Harris results with Critical Chain

Groundbreaking to first silicon - 13 months

Time to ramp production - 21 days


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Results -Israeli Aircraft Industries

Wide-Body Aircraft DirectorateMulti-project maintenance operation

History

Average visit per aircraft - 3 months

Amount of work committed by customers- 2 months

One year after implementing Critical Chain

Average visit per aircraft - 2 weeks

Amount of work committed by customers- 1 year


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Results -Balfour Beatty Civil Engineering (UK)

1st Project - By pass road (A13) 80 M GBP - 2.5 yr

Half way stage - well behind schedule

Handover 2 weeks early -

99% complete vs Industry norm of 80%

2nd Project - 8km highway (A50)- 35M GBP- 2.4 yr

Beat tender program by 9.5 weeks

45 weeks earlier than contract completion date.

Increased Project Profit Margin.


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Results - June 1999 - Elbit Systems - Israel

Advanced Military Systems - 1,900 People (50% Engineers)

All projects management by TOC (36 projects 1 -2 years each)

Visibility of meeting contractual milestones months ahead

Two major platform upgrade programs met schedule within 2 weeks

Excellent synchronisation of Program Teams based on a common language

Recognising the fact that most of the resources in the company might be idle part of the time.


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Results - June 1999 - Seabridge - Israel

Telecommunications start-up - with Multi-Service Access Platform (50 people - 35 in R&D)

Purchased by Siemens & NewBridge in November 1997

To deliver Release 2.0 by March 1998 - Bonus tied

Performance - 5 months late

CEO reads Critical Chain - decides to implement Sept 1998

1st project on schedule; 2nd project 2 months early; 3rd on track to meet “Unrealistic time constraint”;

Major review by Siemens on company turnaround


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TOC is the ability to construct and

communicate common sense solutions

Developed by

Dr Eli Goldratt

and

The Goldratt Institute

You have been experiencing an application of Theory of Constraints


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For further information, books & details of services to improve your projects please contact:-

Robert BoltonAssociate of the Goldratt Institute

Probative Solution Pty Ltd

Tel: 02-9357 1455 Fax: 02-9357 1499

Mobile: 0412-235 616

e-mail: [email protected]

or

Visit web site: www.goldratt.com

© avraham y. goldratt institute 1998 1 an introduction to the theory of constraints - breakthrough...

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