Transcript TOC & CCPM

Theory
of
Constraints
James Henderson
March 20, 2002
Agenda
Introduction
What is going on in today’s projects?
What is Theory of Constraints?
• Five Focusing Steps
• Thinking Processes
• Critical Chain
• Buffers & Dealing with Uncertainty
• Drum - Buffer - Rope
Who is using TOC today?
Questions & (possibly) some Answers
Closing Remarks
Overview Presentation on TOC
March 20th/JRH
What’s going on in today’s
Projects - Processes - Systems?
Overview Presentation on TOC
March 20th/JRH
Constraints Happen
Whether you are a functional manager over the production of widgets or a
Project Manager over the development and implementation of the next
major whiz bang solution to the market’s needs, you rely on a good
production / process flow or project network to ensure the success.
The problem is that…
“constraints happen”
...and things don’t go according to the plan.
Theory of Constraints (TOC) takes the “systems approach” to overcome
those constraints. TOC focuses on the few critical elements that truly
influence / control the productivity of the system instead of trying to control
all of the elements.
Overview Presentation on TOC
March 20th/JRH
Historical data
Project Type
Time
Cost
50 new products (new chemical entities,
compounded products, or alternate dosage
forms) in ethical drug firm
1.78X
1.61X
69 new products in proprietary drug laboratory
2.95X
2.11X
20 management information system projects
2.10X
1.95X
34 DOD systems
from “planning estimate”
from “development estimate”
N/A
N/A
2.11X
1.41X
10 major construction projects
N/A
3.93X
10 energy process plants
N/A
2.53X
Overview Presentation on TOC
March 20th/JRH
What kinds of things go wrong in projects?
• Usually original due dates are not met.
• Too often resources are not available when needed (even
when promised).
• There is constant pressure to add more projects.
• Necessary things are not available on time (information,
specifications, materials, designs, authorizations, etc.)
• There are fights about priorities between projects.
• There are budget over-runs.
• There is pressure to begin before specs are written.
• There are too many changes… etc. etc. etc.
Overview Presentation on TOC
March 20th/JRH
What is the key to success?
According to Tom Peters… “Velocity”...
...Faster = more market share
...Faster = shorter pay-back period
...Faster = more rapid learning and change
...Faster = smaller target for changes
Overview Presentation on TOC
March 20th/JRH
Profound Knowledge
W. Edwards Deming maintained that real quality
improvement isn’t possible without profound knowledge,
according to Deming, profound knowledge comes from:
An understanding of the theory of knowledge.
Knowledge of variation.
An understanding of psychology.
Appreciation for system.
Overview Presentation on TOC
March 20th/JRH
The System the Project Goes Through is the Company
Raw
Material
Investment and
Operating Expenses
Revenue
Throughput = Revenue - Raw Materials
Net Profit = Throughput - Operating Expense
Return on Investment = Net Profit / Investment
Overview Presentation on TOC
March 20th/JRH
So…What is
Theory of Constraints?
Overview Presentation on TOC
March 20th/JRH
Theory of Constraints
Goldratt contends that systems are analogous to chains, or
networks of chains. Like a chain, the system performance is
limited by the weakest link.
This means that no matter how much effort you put into improving
the processes of a system, only the improvements to the weakest
link will produce any detectable system improvement.
Throughput is limited by the weakest link... the constraint!
(A system might be generally defined as a collection of interrelated, interdependent components or
process that act in concert to turn inputs into some kind of outputs in pursuit of some goal.)
Overview Presentation on TOC
March 20th/JRH
Theory of Constraints - Three Important Concepts
Every system can be modeled as a net of chains
The weakness of the system is the weak link in the chain, the
constraint
A project schedule to get a product rapidly through the
system must account for the constraint
Improving the throughput of the system (company) is the
highest leverage point for improving profitability
Overview Presentation on TOC
March 20th/JRH
Theory of Constraints Covers Many Things
Five
Focusing
Steps
Thinking
Processes
Critical
Chain
Drum
Buffer
Rope
Overview Presentation on TOC
March 20th/JRH
Five Focusing Steps?
Overview Presentation on TOC
March 20th/JRH
Theory of Constraints - FIVE FOCUSING STEPS
(Which will Strengthen the Chain)
1. Identify the Constraint
2. Exploit the Constraint
3. Subordinate everything
to the Constraint
4. Elevate the Constraint
5. Repeat for the new
Constraint
Overview Presentation on TOC
March 20th/JRH
Theory of Constraints - FIVE FOCUSING STEPS
1. Identify the System's constraints.
The process is analyzed so that a task or activity that limits the productivity of an entire system can
be identified. A system constraint may be identified by a long queue of work or long processing times.
2. Decide how to exploit the system's constraints.
In this step, decisions must be made on how to modify or redesign the task or activity so that work
can be performed more effectively and efficiently.
3. Subordinate everything else to the above decision. (step 2)
Now, management directs all its efforts to improving the performance of the constraining task or
activity and any other task or activity and any other task or activity that directly affects the constraining
task or activity.
4. Elevate the system's constraint.
In this step, additional capacity is obtained that will increase (elevate) the overall output of the
constraining task or activity. This differs from step 2 in that the added output comes from additional
purchased capacity, such as buying a second machine tool or implementing a new information
technology.
5. If, in the previous step, a constraint has been broken, go back to step 1
but do not allow inertia to cause a new constraint
This sets up a process of ongoing improvement. As a result of the focusing process, the improvement
of the original constraining task or activity may cause a different task to become a constraining task or
activity. Inertia could blind management from taking steps to improve the system's output now limited
by a new constraint.(1)
Overview Presentation on TOC
March 20th/JRH
Thinking Processes?
Overview Presentation on TOC
March 20th/JRH
Theory of Constraints - THINKING PROCESSES
- CATEGORIES OF LEGITIMATE RESERVATION Clarity If I were reading the issue to someone else would they truly understand?
Entity Existence
Does the entity exist in my reality?
Causality Existence
When I read aloud exactly what I wrote using if...then, does it really make sense to me?
Cause Insufficiency
Are the written causes for an entity sufficient to justify all parts of the entity?
Additional Cause
Is this really the only major cause? If the cause is eliminated, will the effect be almost
eliminated?
Predicted Effect
Do the unavoidable outcomes exist?
Cause Reversal
What if we have things going the wrong way?
Tautology
Tautology is a rare case where there is circular logic. IF A THEN B. IF B THEN A.
(Entity = the issue / problem)
Overview Presentation on TOC
March 20th/JRH
Theory of Constraints - THINKING PROCESSES
- SIX LAYERS OF RESISTANCE Layer 1
We don't agree on the Problem
Layer 2
We don’t know where to start
Layer 3
We don't see how the proposed solution will solve the Problem(s)
Layer 4
"Yes, but ...", i.e., the proposal looks good on paper, but there are some
negative side effects foreseeable if we implement the solution
Layer 5
It may work, but there are too many, or too difficult, obstacles blocking
implementation
Layer 6
Fear of going at it alone - doesn’t see how to get there.
Overview Presentation on TOC
March 20th/JRH
Critical Chain?
Overview Presentation on TOC
March 20th/JRH
Theory of Constraints - Critical Chain
The Fundamentals of Critical Chain
• Must have a plan that is precedence based
• Estimate schedule duration at ~50% confidence level (vs. 90%)
• Eliminate resource contention
• Use and manage “Buffers” (“Buffers” placed at end of series of
tasks to account for schedule variation)
• Consciously eliminate uncertainty
• Multi-tasking (Focus on one task until complete)
Overview Presentation on TOC
March 20th/JRH
Task Duration Estimates
Task duration estimates must be reduced to the point where:
People doing the work know there is a good chance (but not a
certainty) that they will finish in the allotted time.
Managers and people doing the work know there is an good
chance of finishing late and a good chance of finishing early.
And, people doing the work must know that:
Management is not going to make unrealistic due date
commitments based on these reductions.
These actions give the overall project a higher chance of
success.
There will be no penalty for not finishing within the estimated
time.
Overview Presentation on TOC
March 20th/JRH
What are 50-50 Probability Task Times?
Critical Chain Uses Time “B”
Probability
of Task
Duration
Time
A
B
Time
C
When asked to provide an estimate of when you can have a specific task ready,
what answer do you give?
If everything goes perfectly, there is a slight possibility of finishing within time A
Even with some surprises (uncertainty), time B is very likely
If a major disaster occurs, time C is likely
Overview Presentation on TOC
March 20th/JRH
The Differences Look Like ...
Critical Path
Critical Chain
Activity A
Activity B
Resource AResource BResource C Resource A Resource D
Resource A Resource C
Task
Reschedule
task to
resolve
conflict
Time
Overview Presentation on TOC
March 20th/JRH
Resolves Resource Contention
The critical chain by definition is a set of tasks that determines
project length
 considers tasks dependencies
 considers resource capacity
distinguished from Critical Path in this way
Project
Completion
10:Design
4:Design
6:Prototype
4:Develop
8:Develop
4:Test
Overview Presentation on TOC
March 20th/JRH
Resolves Resource Contention
The critical chain by definition is a set of tasks that determines
project length
 considers tasks dependencies
 considers resource capacity
distinguished from Critical Path in this way
Project
Completion
10:Design
4:Design
6:Prototype
8:Develop
4:Develop
4:Test
Overview Presentation on TOC
March 20th/JRH
Buffers
&
Dealing with Uncertainty
Overview Presentation on TOC
March 20th/JRH
Dealing with Uncertainty
Traditionally we protect TASKS from uncertainty by adding
“Safety” to our schedule and by working to “Due Dates”
… So what is the impact of working to Due Dates and Putting
Safety Everywhere?
Believe it or not . . .
 Safety is wasted
 Delays are passed on
 Gains are not
Let me explain...
Overview Presentation on TOC
March 20th/JRH
Dealing with Uncertainty
How the Safety Gets Wasted
Student Syndrome
I have plenty of time, I’ll start tomorrow
Parkinson’s Law
The amount of work done is directly related to the time
allocated …
No early finishes
Bad Multitasking
Doing several things at once takes longer than doing one
thing at a time
We always need to look busy
We always need to make everybody busy (or look busy)
Fire-fighting
Overview Presentation on TOC
March 20th/JRH
Dealing with Uncertainty
Why Eliminate Multi-Tasking?
Multi-tasking extends both task and project completion
Task A
Tasks assigned
to a resource
3 days
3 days
3 days
Task B
Task C
Should happen:
Task A
3 days
Could happen:
A
B
Task B
Task C
3 days
3 days
C
A
B
C
6 days
Does happen:
A
B
C
A
B
C
7 days
Overview Presentation on TOC
March 20th/JRH
Dealing with Uncertainty
How long will it take?
If Task A takes 5 days to complete
If Task B takes 5 days to complete
If Task C takes 5 days to complete
Task A
5 Days
Task B
5 Days
Task D
10 Days
and…
If Task D takes 10 days to complete
Task C
5 Days
How long is the project?
Overview Presentation on TOC
March 20th/JRH
Dealing with Uncertainty
Delays are passed on and Gains are NOT
If Task A finishes in only three days
Is there a benefit to the whole?
Task A
5 3 Days
X
If Task C takes eight days to finish
What’s the impact on the whole?
Task B
5 Days
Task D
10 Days
If Tasks A, B, and C, through some
miracle, all finish in two days?
Will Task D be ready to start three
days early?
Task C
5 8 Days
X
Protecting Individual Tasks Provides Little Protection!
Overview Presentation on TOC
March 20th/JRH
Dealing with Uncertainty
Remember, traditionally we protect TASKS from uncertainty with Critical
Chain scheduling, we protect THE ENTIRE PROJECT, not individual tasks
Protect the project from critical chain disruptions
Project Buffer
5:Design
2 Dev
4: Dev
2:Dsn 3:Proto
2:Tst
6.5: Project Buffer
Protect the critical chain from disruptions
Feeding Buffer
5:Design
2:Dsn 3:Proto
2: FB 2 Dev
4: Dev
2:Tst
6.5: Project Buffer
“Buffers” to protect the project are ESSENTIAL elements of the schedule
Overview Presentation on TOC
March 20th/JRH
Using the Buffers to Monitor Project Status
Buffers Provide Focus and Early Warning
BUFFER
WATCH
& PLAN
OK
ACT
Remaining
Project Buffer:
20
15 14
8 7
0
7 6
4 3
0
Remaining
Feeding Buffer:
8
Overview Presentation on TOC
March 20th/JRH
Use the Buffers to Monitor Project Status
% Project Buffer Consumer
Project Buffer Status Report
Status Date
Schedule On-Track
Develop Contingency Plans
Act on Contingency Plan
Overview Presentation on TOC
March 20th/JRH
Drum - Buffer - Rope?
Overview Presentation on TOC
March 20th/JRH
Theory of Constraints - THE DRUM CONCEPT
DRUM
BUFFER
ROPE
The Drum Concept utilizes a common resource between projects
to act as the drum beat (with some protection - buffer) for
releasing each new project into the environment (pulling the rope).
Overview Presentation on TOC
March 20th/JRH
Theory of Constraints - THE DRUM CONCEPT
(Staggering Projects based on the “Drum Resource”)
The constraint is called “the drum” - it sets the pace & provides
a means to stagger projects & set priorities across projects.
Project 1:
6:Prog
2:CS
3:Eng
Feeding
5:HW
2:CS
6:Prog
Project 2:
2:CS
Drum schedule:
3:HW
5:HW
Project
Feeding
3:Eng
5:HW
3:HW
5:HW
3:HW
2:CS
Project
3:HW
Overview Presentation on TOC
March 20th/JRH
Who is using TOC & CCPM?
&
What are the Results?
Overview Presentation on TOC
March 20th/JRH
Who is using TOC & CCPM Today?
Industry
Literature
240
No. of
TOC
Articles
90
‘90-’94
’94-’98
Plus Over 40 books devoted to TOC
Computing Tools
Plus Others
Government
AFOTEC
Education
Consulting Firms
Under Secretary of
Defense for
Acquisition
Tony Rizzo
Boeing
Int. Schedules Maturity Model
Plus Others
BCA
• IASL
• Flight Test
• 777 AFIT
• MR&D Chem/SHEA
F-22
• Wing Assy
C-17
• Flight Test
Overview Presentation on TOC
March 20th/JRH
Results
Harris Semiconductor
New technology product - first 8-inch discrete power wafer fab
New raw material, new automated technology
New facility, doubling capacity
Project scope - construction, installation, ramp-up,
Focus on actual delivery of production via the Critical Chain
• Industry norm
Ground-breaking to first silicon - 28-36 months
Time to ramp production - 18 months
• Harris results with Critical Chain
Ground-breaking to first silicon - 13 months
Time to ramp production - 21 days
Overview Presentation on TOC
March 20th/JRH
Results
Israeli Aircraft Industries
Wide-Body Aircraft Directorate Multi-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
Overview Presentation on TOC
March 20th/JRH
Results
Examples of Industry Successes - TOC 2000










$5M incremental profits on first project
$11M increased revenue on same first project
5 weeks schedule reduction on delivery to market
First to Market
Competitors Withdrew
5%-10% savings of revenue
$37M increase in no. of profitable programs
2-4 month cycle-time reduction
$400k per project reduced carrying costs
Recovered strained customer relationship





15% capacity increase projected (goal 50%)
Savings on 1st project paid for full implementation
Full-deployment planned within 1-yr (150 programs)
Enhanced visibility into resource requirements
Enables quick response to replans
AFOTEC
Overview Presentation on TOC
March 20th/JRH
Questions
&
(Possibly) Some Answers
Overview Presentation on TOC
March 20th/JRH
Closing Remarks
Overview Presentation on TOC
March 20th/JRH
How can you Learn More?
By Willian H. Dettmer
By Eliyahu M. Goldratt
By Robert C Newbold
Overview Presentation on TOC
March 20th/JRH
THANK YOU!!
Overview Presentation on TOC
March 20th/JRH
BIO
After leaving the United States Air Force in 1988, James joined The Boeing
Company (formally The McDonnell Douglas Corporation). He holds a Bachelor
of Sciences Degree in Business Management, and a Jonah Certification from
the Goldratt Institute (through the University of Washington).
James is a member of the Project Management Institute (PMI), and has served
on the Orange County Chapter’s Corporate Advisory Board for Project
Management Practices. He is currently at work on obtaining his Project
Management Professional certification from the PMI organization.
JAMES
HENDERSON
As Senior Program Manager at the Boeing Company, James has directed and
supported million-dollar projects ranging from re-engineering of development
processes, to relocating work between company components, to redesigning
products to improve quality, cycle time and cost.
James currently manages the engineering processes for the military air-lifter known as the C-17. In
addition, he oversees internal applications development of technology projects (internal R&D type
projects) for the Aircraft & Missiles Southern California (A&M SoCal) programs, and is the Steering
Team Lead for the A&M SoCal Leadership Development Program.
Recognized for his expertise in Project Management practices, Lean Engineering, System
Engineering, Resource Planning, Design Processes, and Production Engineering, James is a program
advisor for the application of Critical Chain Project Management principles at the Boeing Company.
Utilizing fundamental Project Management techniques, and Constraint Based Project Management
(Theory of Constraints – TOC), James guides program leaders in the development of comprehensive
program plans.
Overview Presentation on TOC
March 20th/JRH