Larry Leach 813 240-5534 lleach@Advanced-Projects 2/8/99

1. Critical Chain Project Management (CCPM) Improves Project Performance Larry Leach 813 240-5534 lleach@Advanced-Projects.com 2/8/99

2. Objectives • 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

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

4. Critical Chain Users Report: • Reduced manager and worker stress • Minimal investment • Rapid results

5. Successful Users & Clients Include • Harris Semiconductor • Lucent Technologies • Honeywell DAS • Balfour Beatty • Israeli Aircraft Company • Better On-line Solutions • Saturn Development Corp

6. PMBOK TOC C C P M TQM

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

8. System Deming’s System of Profound Knowledge Variation Knowledge Psychology

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

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. 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. The Deming/Nelson Funnel Experiment

13. Results of Test 1: Do not move the funnel!

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

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

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

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

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

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. 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. 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. Single Project CCPM

23. 1. Resource conflicts removed. 3. Reduced Task Times 2. Critical Chain A B C RB A C D 5. Resource Buffers RB RB RB B E C 4. Project Buffer 7. ‘Late’ start 6. Feeding Buffer Key Features of Critical Chain Plan 8. Buffer Management Resource Leveled Critical (?) Path

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

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. Resource Critical Path A B C A C D B E C Resource Leveled Critical (?) Path A B C A C D B E C Reference (Deterministic) Critical Path Project Plan Time

27. Critical Chain • IDENTIFY Constraint: • Longest project path • Includes resource constraint • Never changes (reduce mistake 1!) A B C System C D

28. Typical Project Undesired Effects • Project duration too long* • Not enough of the right resources* • Schedule over-run* • Budget over-run • Under scope • Too many changes

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. 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. Example Group Result

32. Most Likely Time/Cost Long ‘tail’ means no definite upper limit Minimum Time/Cost All Project Activity Times Are Uncertain Estimates 1 0.9 0.8 0.7 0.6 0.5 P 0.4 0.3 0.2 0.1 0 0 0.5 1 1.5 2 2.5 Activity Time or Cost

33. How do you define contingency?

34. Contingency Definition Must Specify Base 1 0.9 0.8 0.7 0.6 0.5 P 0.4 Contingency? 0.3 0.2 0.1 0 0 0.5 1 1.5 2 2.5 Activity Time or Cost

35. Contingency is the difference between a 50% probable estimate and a 90% probable estimate.

36. Focus On Milestones And Variances Drives Low-risk (90%+) Activity Duration Estimates Cumulative Completion Probability Scheduled Duration

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

38. Because: The ‘only way’ to complete the project on time is to plan for and complete each task on time. B Keep my commitments D Include contingency in my estimates A Successful career C Deliver projects in shortest time D’ Do not include contingency in my estimates 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.

39. Critical Path Schedule Hides Contingency In Each Activity Activity 1 Activity 2 Activity 3 Activity 4 Activity 5

40. Date-driven Human Behavior Uses Scheduled Activity Time 6 5 4 P 3 2 1 0 0 0.5 1 1.5 2 2.5 Activity Time or Cost 1 = Plan Time or Cost

41. IDENTIFY the Project Constraint • Uncertainty: • Variation in estimate • Variation in task performance • Dependent events: resources

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

43. Critical Chain • Critical chain differs from critical path by: • Resolving resource contentions first (Identify) • Using 50 % probable activity times (Exploit) A B C C D (Smaller) aggregated Buffer at end of chain (Exploit)

44. 1 2 3 4 5 Buffer Provides AnticipatoryMeasure to Exploit Constraint BUFFER Watch Plan Act And, eliminates many type 1 mistakes!

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

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

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. 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

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. Resource Buffer Aids Having Resources When Needed • 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