Εισαγωγή στην Θεωρία των Περιορισµών και η εφαρµογή της στην διαχείριση έργων «Critical Chain Project Management

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1 Εισαγωγή στην Θεωρία των Περιορισµών και η εφαρµογή της στην διαχείριση έργων «Critical Chain Project Management Εκδήλωση του PMI-GREECE Αθήνα 17/12/2008

2 Highly Dispersed Supply Chain Business complexity is increasing Dynamic Markets Limited Resources Geographies Vendors Production Logistics Market channels Functionally Need for an Integrated Approach Complex Products and Projects

3 Traditional Approach: Divide and Conquer Division of Labor breaks down linkages complex systems into manageable chunks. Which is harder to manage? Fundamental belief: There are no complex systems in reality.

4 Systems Thinking Systems almost always have the peculiarity that the characteristics of the whole cannot (not even in theory) be deduced from the most complete knowledge of the components, taken separately or in other partial combinations. The Growth of Biological Thought Ernst Mayr (Biologist ) A system is a whole consisting of two or more parts (1) each of which can affect the performance or properties of the whole (2) none of which can have an independent affect on the whole, and (3) no subgroup of which can have independent affect on the whole. In short, then, a system is a whole that cannot be divided into independent parts or subgroups of parts. Russell Ackoff & Edward Deming

5 You cannot solve a problem with the same thinking that caused the problem Albert Einstein

6 Η αλυσίδα είναι ένα σύστηµα το οποίο αποκτά χρησιµότητα «αξία» όταν λειτουργήσει ως ένα σύνολο. Τα συστατικά της µεµονωµένα δεν έχουν χρησιµότητα. Θεωρούµε την αλυσίδα στο σύνολό της Και όχι τα τµήµατά της

7 Οι αλυσίδα προσοµοιάζει τα διασυνδεδεµένα τµήµατα µιας επιχείρησης Μια επιχείρηση είναι απλή όπως στην προηγούµενη διαφάνεια ή πιο πολύπλοκη σαν αυτή ή αυτή

8 Νίκος Λεών Ηαλυσίδατηςεπιχείρησης Η αλυσίδα αντέχει όσο αντέχει ο ασθενέστερος κρίκος της. Γιαναλειτουργήσειηαλυσίδαβέλτισταως ενιαίο σύνολο πρέπει ορισµένοι «κρίκοι» να υπολειτουργούν. Ηενδυνάµωσητωνήδηισχυρών«κρίκων» της αλυσίδας δεν αυξάνει την συνολική αντοχή της. Τα 5 βήµατα προς την αέναη ανάπτυξη* 1. Εντοπισµός του ασθενέστερου κρίκου 2. Επιλογή του καλύτερου τρόπου πλήρους εκµετάλλευσης του ασθενέστερου κρίκου 3. Επιβολή στους υπόλοιπους κρίκους να λειτουργούν στο ρυθµό του ασθενέστερου κρίκου 4. Ενδυνάµωση του ασθενέστερου κρίκου 5. Επιστροφή στο βήµα 1 (Προσοχή στον κίνδυνο της αδράνειας) (* Theory of Constraints) Λεών Σύµβουλος Μηχανικός

9 Date 16/12/2008

10 The Goal of the company To satisfy the market now and in the future The Goal - to make money now and in the future To satisfy the team now and in the future

11 TOC BODY OF KNOWLEDGE More than 25 years of development and evolution THEORY OF CONSTRAINTS 5 Focusing Steps Throughput Accounting Thinking Processes Generic Solutions Management of Technological Innovation 1. Identify the system s constraint 2. Decide how to exploit the constraint 3. Subordinate everything to the above decision 4. Elevate the system s constraint 5. If after these steps the constraint has been eliminated, Return to point 1 (be careful of inertia) 1. Throughput (T): Value created by the organization through sales (SR VC) 2. Investment (I): Money tiedup in the organization 3. Operating Expenses (OE): All the money the organization has to spend in order to transform the investment into throughput 4. Net Profit (NP): T - OE 5. Return on Investment (ROI): NP/I 6. Productivity: T/OE 7. Capital Turns: T/I. 1. UDE Evaporating Cloud (EC) 2. Current Reality Tree (CRT) 3. Core Conflict Cloud (CCC) 4. Future Reality Tree (FRT) 5. Negative Branch Reservations (NBR) 6. Pre-requisite Tree (PRT) 7. Transition Tree (TrT). The Thinking Processes Are the Methods to Identify and Remove Non-physical Constraints Policies Strategies Measures Work practices Human Relations 1. Operations and Production: Planning of the flows synchronized to the constraints (Drum-Buffer- Rope-DBR). Control and dynamic protection of the flows ( Buffer Management ). Routings Analysis to synchronization ( V-A-T Analysis ) 2. Distribution and logistics: Pull from the distribution chain ( Replenishment ) 3. Project management and engineering: Managing single and multi projects Critical Chain Method. Control and protection of the project regarding time, costs and content Buffer Management 4. Marketing: Construction of a win-win offer to the market Unrefusable Offer 5. Sales: getting an order and closing of a contract TOC buy-in. 6. Strategy and Tactics: design a rigorous strategic plan and implementation The roadmap for management of technology Why technology is useful? What limitation does it overcome? Which rules allow to live with the limitation? How must the old rules be changed? How do we have to use the new technology under the new rules? How to implement the technology after the new philosophy has been adopted?

12 The Thinking Processes What to Change? The true nature of the problem - the dilemma that results in the system s current symptoms. To What to Change? The solution that yields significant desirable effects. How to Cause the Change? The implementation plan that will focus efforts and get people off of the fence.

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14 Because... A resource standing idle is a major waste. Manage well. Constantly fight to reduce waste. Constantly fight to increase flow. Use efficiencies as prime measurement. Don't use efficiency as a prime measurement. The production management conflict

15 Drum, Buffer, Rope Bottleneck (Drum) A B C D E F Market Communication (rope) Inventory buffer (time buffer)

16 DISTRIBUTION B Reduce costs. D Hold less inventory. A Manage well. C Protect sales. D' Hold more inventory.

17 TOC's approach to Market constraint The Unrefusable Offer Construct an offer that is simply too good for the market to refuse (aka Mafia Offer) Segment Markets Not resources Resource determining Throughput Potential when the market is the constraint : Business Development Resource

18 V A T Plant Types

19 Average Results from 400 case studies

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21 Results Results obtained in 2 years

22 CRITICAL CHAIN PROJECT MANAGEMENT

23 It s s time for

24 a breakthrough in your performance!

25 These companies delivered breakthroughs in performance

26 The USA aerospace and defence industries use Critical Chain project management techniques

27 The US Navy manage projects with Critical Chain its main operations methodology.

28 The Ministry of Land, Infrastructures and Transportation of Japan (MLIT( MLIT) recommends that all projects awarded are managed with Critical Chain Project Management. All contractors who use CCPM get higher records in construction quality rating (better chance to win next contract)

29 The results speak for themselves.

30 What would it be like if you could Complete more projects with the same resources? Complete projects in drastically shorter times? More than 25% shorter than you do now. Clearly demonstrate a positive impact of improved project performance on your bottom line?

31 What would it be like if you could Complete more projects with the same resources? Complete projects in drastically shorter times? More than 25% shorter than you do now. Clearly demonstrate a positive impact of improved project performance on your bottom line?

32 What would it be like if you could Complete more projects with the same resources? Complete projects in drastically shorter times? More than 25% shorter than you do now. Clearly demonstrate a positive impact of improved project performance on your bottom line?

33 If this sounds too good to be true Then remember DuPont, HP, LSI Logic, and Proctor & Gamble thought so too, at first. These companies products were not reaching the marketplace fast enough. Key personnel were suffering burn out. Now, these and hundreds of other companies are using Critical Chain on thousands of projects.

34 See what John Pitts, CEO of BAe Fight Simulators & Training, has to say about the impact of Critical Chain Project Management. We have gone from absolute turmoil and chaos to a position where this is our competitive advantage

35 John s problems are not unique! Did you know that with the exception of Critical Chain Projects the largest # ever study into conventional project performance found That 75% of projects are consistently late and over budget! # Athabasca University Study, 2001

36 These headlines are not uncommon 80% of IT projects are late Standish Group Report, 2000 Most defence projects take too long and cost too much. Seven of the 10 largest smart procurement projects are late and over budget. National Audit Office, UK, Dec 2002

37 Traditional project management PERT approaches were invented in the USA aerospace & defence industries, and Critical Path was invented by Dupont in the 1950 s.

38 Why would the inventors of traditional project management approaches switch to use a new approach?

39 Because they have found an approach that consistently delivers better results.

40 Confluence - Software Now maintains a 95% on-time performance record with its software projects. Many of its projects are completed well ahead of schedule.

41 Harris Corporation - Semiconductors $250 million Project Raptor was completed and ramped up in 13 months while the industry norm is 54 months.

42 Lucent Technologies - Telecommunications New product lead times reduced by 50% and development capacity tripled. (17 projects vs. 5 before, with no staff increase)

43 Intel In this project the Pizza indicator was almost zero. It means that people went home on time Rony Mann, ICG-I Q&R and Planning Manager

44 Radianz - Technology Handling as many as 35 simultaneous projects, project performance has gone from less than 20% to greater than 70% of all projects delivered on time with full scope.

45 Major General Lott The Theory of Constraints gave us an opportunity; a structure if you will; to maximise the potential of our employees..

46 Critical Chain project management has something that conventional project management hasn t.

47 SIGMA aerospace Wayne Brazier Operations Director It is without doubt the best tool that I have ever come across

48 In the 90 s best selling author of The Goal & business guru Dr Eli Goldratt set up a team to analyse why so many projects fail. First Pilot Project Standard Oil (1990) The book Critical Chain was published in They found

49 That the traditional Critical Path project management approach has some fundamental weaknesses!

50 And that s why the track record of project delivery across all industries is so poor.

51 From the analysis a solution was designed. A solution to manage the uncertainties in projects. And it works!

52 ιάλειµµα 15 λεπτών

53 PMBOK C C P M TOC TQM

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

55 Deming s System of Profound Knowledge System Variation Knowledge Psychology

56 Deming s Production System System Customer Feedback Raw Material from Suppliers Improve Production Functions Products (or Projects) to Customers

57 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

58 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!

59 How does critical chain work? There are a number of improvements both Algorithmic and Behavioural Let s have a look at some.

60 Consider this: A project consists of a number of tasks. In order to deliver our project on time we need to deliver our tasks on time. In order to deliver our tasks on time we need to create a good plan. One of the things we need for a good plan is reasonably accurate task time estimates. Nothing very radical? But

61 Career Prospects What are the career prospects of the person making the task estimates if they regularly deliver their tasks late? Not good.

62 How confident do you feel about the task estimates you make? 30% sure? 50% sure? 80% sure? 100% sure? Most people would like to be at least 80% sure of delivering on their commitments. What does that mean for task estimation?

63 The prevailing rule of project management: The way to ensure that the project will finish on time is to try to make every task finish on time. probability of completion probability of completion 50% 80% time 50% 80% time The higher the uncertainty the bigger the tail!

64 Project management B Meet commitments. D Choose estimates higher than 80%. A Be considered a reliable person. C Don t exaggerate. D Choose estimates close to 50%

65 The wrong rule of project management The way to ensure that the project will finish on time is to try to make every task finish on time. The new rules Don t turn estimates into commitments. Move the protection from the task level to the project level. Use buffer management to set priorities.

66 Student Syndrome and Parkinson s Law When >50% confidence level of task duration is used, student syndrome kicks in Chance to finish early is minimal Problems are encountered deeper into project

67 It means every task has some safety. If you are going to be reliable and have a career then your task estimates will have to contain some safety. The greater uncertainty and risk of the task, the greater the safety included in your safe estimate. Time What it could take Best estimate More or less safety Safe estimate Career safe, 80% confident task estimate

68 This is what a project looks like Task 1 Task 2 Task 3 Task 4 Time A set of dependent tasks

69 Acknowledge tasks safety buffer Task 1 Task 2 Task 3 Task 4 safety safety safety safety Time A set of dependent tasks Each task has some safety in it

70 Object is to complete project at end of Task 4 Task 1 Task 2 Task 3 Task 4 safety safety safety safety Time A set of dependent tasks Each task has some safety in it Project is completed at the end of task 4

71 Do you have insurance? Most people do. Now a quick detour. It makes a lot of sense, doesn't it? Spread the risk by having a shared pool of funds to draw from in times of need. You most probably think it is safer. And you are right. Why not apply the same concept to projects?

72 This is what you normally do Task 1 Task 2 Task 3 Task 4 safety safety safety safety Each task has its own safety insurance

73 Consider moving the safety into a pool Task 1 Task 2 Task 3 Task 4 safety safety safety safety Task 1 Task 2 Task 3 Task 4 safety

74 Consider moving the safety into a pool Task 1 Task 2 Task 3 Task 4 safety safety safety Task 1 Task 2 Task 3 Task 4 safety safety

75 Task 1 Task 2 Task 3 Task 4 Until you have created a project buffer Task 1 Task 2 Task 3 Task 4 Buffer a project buffer

76 Now the next key point! One of the benefits of using insurance is that mathematically, you need less in a pooled buffer than you need if you protected each task separately.

77 Consequently We can cut project duration with no increased risk! Task 1 Task 2 Task 3 Task 4 Buffer So depending on the project and the Critical Chain distinctions that are applied to the project, one can now cut project duration between 20% to 50%. Task 1 Task 2 Task 3 Task 4 Buffer Typical reduction of 25%

78 See that again Task 1 Task 2 Task 3 Task 4 Buffer Before Task 1 Task 2 Task 3 Task 4 Buffer After 25% earlier

79 Important note! Since most organisations don t deliver their projects on time anyway, we don t recommend cutting the buffer on the first few projects. First win the trust and hearts of the project teams. When the project teams realise they are able to consistently deliver projects early then they will begin the process of cutting the project buffer and planning to deliver earlier.

80 But note the pooled buffer is NOT a traditional buffer If a task takes longer than the best estimate, then that task causes a buffer penetration. Task 1 Task 2 Task 3 Task 4 Buffer Task 1 Task 2 Task 3 Task 4 Buffer Task overrun pushes out remaining tasks Resulting in a buffer penetration

81 Why are so many projects delivered late? One reason is because The project manager finds out about problems too late in order to take corrective action. Can you tell from the picture blow if the ball is going to hit the target?

82 ???? You can t unless you know the trajectory! Traditional project management approaches don t provide a simple project trajectory.

83 Advance warning enables early corrective actions Critical Chain approaches provides a trajectory report of project health. It does this by tracking and recording the rate at which the project buffers are penetrated. With Critical Chain Buffer reports you have a simple, graphical one page early warning system that will enable you to take corrective action way in advance of traditional reporting approaches.

84 A B C Critical chain differs from critical path by: Resolving resource contentions first (Identify) Using 50 % probable activity times (Exploit) C D Νίκος Λεών (Smaller) aggregated Buffer at end of chain (Exploit) Λεών Σύµβουλος Μηχανικός

85 Exploit With Buffer Management 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

86 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

87 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

88 Buffer Management 100% ACT % Project Buffer Used PLAN WATCH Start % Critical Chain Complete Complete Buffers allow focus, simplify priorities and provide early warning on the health of the project.

89 Buffer Provides Anticipatory Measure to Exploit Constraint BUFFER Watch Plan Act And, eliminates many type 1 mistakes!

90 Buffer Tracking Predicts Action Need 1 2/3 Plan x 1/3 0 x x x Act x x x Project Buffer x x x Time

91 Subordinate Merging Paths With Feeding Buffers Project Buffer Isolates the critical chain from common cause variation in feeding paths! FB FB

92 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

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94 Task A Task B Task C Task A Task B Task C

95 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.

96 Put all five resources on ship 1 the first day, ship 2 the second day, etc. Result: Ship New (days) Old (days) Saved Nobody loses. Four of five clients done sooner. Cost = $ 0

97 Supermarket queue analogy

98 IDENTIFY: Multi-project resource constraint EXPLOIT: Prioritize projects (Drum) SUBORDINATE: Stagger project start ELEVATE INERTIA

99 Delaying Projects Accelerates Completion! Individual Project Schedules (Note resource contention) BUFFER BUFFER Synchronized Multiple Projects Accelerate and Reduce Resource Contention BUFFER Constraint Resource Synchronizing (Constraint) Buffer BUFFER

100 Multiple Projects Select a Drum resource Identify project priority Stagger project start to the drum schedule Use Capacity Constraint Buffers to separate project starts

101 Let s revisit one of the benefits of early delivery Let s say you have a 10% return on a project that takes one year to complete. You can now deliver 25% earlier with no increase in costs. Consequently your annual project return goes up. By 33% to 13.3%!

102 Same profit in shorter time means greater Return return Before: 10% Profit 6 months 1 year time Return After: 13.3% Profit 6 months 1 year time

103 Can you ignore this? A potential bottom line improvement of 33%. Your resources are free to begin work on the next project sooner. Your cash flow has been improved by earlier payment. Can you afford to wait? This is why Critical Chain is catching on. Time is money!

104 You could keep on doing what you have always done in the past, hoping for a better result, or

105 you can now explore the benefits of

106 Critical Chain Project Management.

107 Critical Chain tested extensively in both large and small organisations. It s easier to use, schedules are shorter with increased safety, administration is reduced, your attention is focused and it works!

108 Many people are now delivering breakthrough results. This is what they are saying

109 Procter & Gamble Senior Project Manager It is the best project management philosophy and tools I have seen.

110 Our cycle time has reduced by more than 80%, and throughput increased by over 100%. USA Naval Sea Systems Command

111 Out of the first 60 projects managed with Critical Chain, 55 were completed on or before time.

112 Given the project-driven nature of our growth, Critical Chain is a strategic tool for the CEO.

113 The results speak for themselves.

114 Strategic Budgeting System and Goal Budgeting: Tactical: The process by which funds are allocated to tasks/deliverables and dept s to make sure they are effective and cost efficient Operational: Monitor the spending of funds vs. budget to prevent budget overruns, whilst at the same time safeguarding the delivery of necessary actions/deliverables etc Goal: Allocate funds in such a way that they are spend cost effectively on products and services that have the best contribution (ROI) towards the goal of the system

115 Where would the waste be? We ve precut slices. Based on your hunger level, feel free to grab as many slices as you can. Because, if you re still hungry, you may not find any pizza waiting for you. If you can t finish your share, you can to toss it in the garbage. local optimization an holistic approach We have a whole pizza and we also have a pizza cutter. Cut a slice for yourself, small or large based on your hunger. There will always be a pizza waiting for you.

116 Recommended Reading

117 Ο Νίκος Λεών είναι σύµβουλος µηχανικός µε πάνω από 25 χρόνια εµπειρία στο χώρο του management επιχειρήσεων και της βιοµηχανίας και εξειδικεύεται στον σχεδιασµό και την υλοποίηση συστηµάτων που στοχεύουν στην ευθυγράµµιση, τον συγχρονισµό και την σύγκλιση της παραγωγής και των Operations µε τη στρατηγική και το business, και την επικερδή για την επιχείρηση ενσωµάτωση της στην εφοδιαστική της αλυσίδα. Ανάλογα µε την φύση της εργασίας και τον βαθµό εξειδίκευσηςπου απαιτείται, η Leon Consulting ενεργεί αυτοτελώς ή συνεργάζεται µε εξειδικευµένες εταιρείες ή συµβούλους Έλληνες και Ξένους. Η φιλοσοφία µας είναι να προσφέρουµε υπηρεσίες υψηλού επιπέδου που προσδίδουν αξία στον Πελάτη µας.

118 Questions?

119 Σας Ευχαριστώ Είµαι στη διάθεσή σας Νίκος Λεών Ειδικός Σύµβουλος Παραγωγικότητας Επιχειρήσεων Τηλ