Week09 cc single_project_slides_v1

Date/reference/classification 1
Session 9
Critical Chain
Single-Project Management
Reducing Project Duration by 25%
& Increasing Due Date Performance
Without Changes of Resource Capacity
Dr. Thomas Lechler Phone: (201) 216-8174
Babbio Center 416 FAX: (201) 216-5385
email: tlechler@stevens.edu

Date/reference/classification
2
© T. Lechler, Ph.D., 2013
1. Paradigm Question: Process Value
How much would your organization gain if over 90%
of the projects are finished in time?
How much would your organization gain if all new
projects starting next month finished 15-25% sooner?
• Reduced project cost?
• Faster time-to-market?
• Greater responsiveness to customers?

3
1. Paradigm Question: Management Problems
Why is it so difficult to manage projects which
deliver on time, within budget and with the full
specification or scope intact ?
•__________________________________________________
•__________________________________________________
•__________________________________________________
•__________________________________________________
•__________________________________________________

4
1. Paradigm Question: Project Manager’s Dilemma
• PRESSURE TO INCREASE SAFETY TIME - in order to complete projects on time
• PRESSURE TO REDUCE OVERALL PROJECT SCHEDULE - in order to meet the
customers need for shorter lead times
Be a good
Project Manager
Complete Projects
on time
(to be realistic)
Add protection
to tasks
Don’t add
protection to
tasks
PrerequisiteRequirement
Respond to
customers need for
short lead times
(quick response)
Objective

5
1. Paradigm Question: CPM Management of Uncertainty
Often projects
have difficulty
staying within
budget
Often scope or
specifications are
cut from project
The Way We Manage
Uncertainty in
Projects
Often projects
have difficulty
finishing on time
YOU CAN’T IMPOSE CERTAINTY ON UNCERTAINTY
YOU MUST LEARN TO MANAGE THE UNCERTAINTY

6
1. Paradigm Question: CPM Estimation
Average Work Uncertainty
Multitasking Set-up Time
Task Estimate - (Duration)
Basic Estimation Equation: W = U * D
W: Estimate of Work
U: Units of Resources
D: Duration
 Inflated Estimates!

7
1. Paradigm Question: CPM Assumptions
Basic assumptions of the CPM paradigm:
1. Each task is scheduled with 90% likelihood thus the project is
scheduled with 90% likelihood. But:
Due date on a big project may be less than 10% likely even if the
single tasks are scheduled with 90%!
2. The critical path does not change. But:
The critical path changes in many projects!
3. Good and bad luck average out. But:
Good luck is wasted and bad luck accumulates because
- Scheduled tasks are started with delays (Student Syndrome)
- Early task finish is often not reported (Parkinson’s Law)
=> What are the consequences?

8
1. Paradigm Question: CPM Assumption 1
Two scenarios:
1. All single tasks on the critical path are planned with 90%
accuracy: The probability to achieve the planned finish date is:
38% (=0.9 EXP 9)
2. One of the 9 tasks could be only planned with 80% accuracy and
one with 50%. The likelihood to achieve the planned finish date is:
18%!
Start
0d 9/1
(a) Initiate project
5d 9/1
(b) Assign PM
2d 9/8
(h) Design IPF
9d 9/12
(g) Conduct IPD
training
5d 9/28 (m) Conduct IPF
training
7d 10/5
(j) Prepare business
case
7d 10/5
(l) Finalize IPP
9d 10/18
(k) Write IPP
3d 10/13
(e) Develop project
schedule
10d 9/28
(i) Assign resources
1d 10/12
(d) Form PDT
12d 9/12
(f) Prepare expense
estimates
9d 9/28
Concept DCP
0d 10/28
(c) Establish
constraints
6d 9/8
(n) Reproduce
documents
8d 10/14

9
Critical Path is not stable!
Determine budget
4 1d
Wed 6/1/94 Wed 6/1/94
Selection
6 120h
Thu 6/2/94 Wed 6/22/94
Theme
7 2d
Thu 6/2/94 Fri 6/3/94
Date
8 3d
Mon 6/6/94 Wed 6/8/94
Site
9 1w
Thu 6/9/94 Wed 6/15/94
Costumes
10 1w
Thu 6/16/94 Wed 6/22/94
Hire
11 168h
Thu 6/23/94 Thu 7/21/94
Caterer
12 2d
Thu 6/23/94 Fri 6/24/94
Entertainment
13 9d
Mon 6/27/94 Thu 7/7/94
Keynote speaker
14 2w
Fri 7/8/94 Thu 7/21/94
Public relations
15 88h
Fri 7/22/94 Fri 8/5/94
Rent Equipment
18 40h
Mon 8/8/94 Fri 8/12/94
Invitation list
5 1d
Wed 6/1/94 Wed 6/1/94

10
– Finish early —
do we gain?
• Can the next task
start early?
• Good luck is
wasted.
– Finish late —
do we lose?
• The next task is
forced to delay
• Delays are
accumulated.
Good luck is wasted and bad luck accumulates!
Task1: 10 Days
Task2: 10 Days
Task3: 10 Days +2 D
Delay 2 Days
Due Date
Delay 2 Days
+2 D
Task1: 10 Days
Task2: 8 Days
Task3: 10 Days
2 D
Due Date Not
2 Days Earlier
2 Days Earlier

11
Task safety wasted:
– as a student, did you start on assignments immediately?
– you had plenty of time, so you started later!
 Task safety is wasted right at the beginning
3
10
90%
A
B
wasted
7
70%student
syndrome
50% Task estimates include
safety, but what if we
start later?
Student Syndrome

12
Report early finish after 5 days?
– There is always a bit more to do (polishing)
– The next person isn’t ready to start anyway
– Next time the estimate gets cut
 We erroneously report when we’re done
actual
50% 90%
1|0|0 |5 1|5
time
probability
5 ?
Task estimates include
safety, but what if we
get lucky, and finish
early?
Parkinson’s Law

13
Slow starts and false finish reporting contaminate project metrics:
• Safety is systematically wasted!
• Initial expectations seem to be unrealistic…
expected
actual
B
3 2
student
syndrome
false finish
reporting
5
© 2000 ZULTNER & COMPANY
probability
Combined Effects of:
Student Syndrome and Parkinson’s Law

14
1. Paradigm Question: CPM Limitations
Limitations of Critical Path Methods (CPM)
• CPM resource allocation leads to minimal single
project duration (local optimum)
• CPM does not explicitly take variation (risk) into
account
• CPM does not maximize the throughput of a multi-
project system (global optimum)
Critical Path Method leads to sub-optimal resource allocation!

15
1. Paradigm Question: CPM Vicious Cycle
The Vicious Cycle of CPM
– More and more safety is added
over time
How to break the vicious cycle?
– Applying Critical Chain
Project
Is Late
Cut Schedule
“it’s just too long”
Add
Safety
Struggle
to Deadline
Blame
Assigned
Goldratt, Viewer Notebook, 1999, pp.75

16
1. The Paradigm Question: System Problems
It’s the system, stupid!
“Pit a good person against a bad system and the system will
win all the time.”
(Rummler and Brache, 2002)
Deming’s 85/15
• 85% of faults are process related, and it is management’s
responsibility to solve them
• 15% of faults are the responsibility of individual
employee’s
• Most of the time management is focusing on the “15”
rather than the “85”, trying to find the guilty person rather
than to improve the process
Deming, W.E., “Out of the Crisis”, MIT, CIA, Massachussetts, 1986

17
“If you do what you always
did, you’re gonna get what
you always got”
Yogi Berra
1. The Paradigm Question: Why change?

18
1. The Future of Project Management
• Critical Chain allows to shorten your projects
• minimum 15-25% reduction
• on large projects, often more than 25%
• NO added resources (and less overtime!)
• NO sacrifice of value or features
• NO increase in risk
• NO cutting of quality

Date/reference/classification 19
Critical Chain
Performance Impact

20
On-time performance N CPM N CC
Greater Than 90% 9 7% 8 53%
80% To 90% 12 10% 3 20%
70% To 80% 18 15% 1 7%
60% To 70% 20 17% 0 0
50% To 60% 18 15% 1 7%
40% To 50% 15 12% 0 0
Less Than 40% 27 22% 0 0
No Response 2 2% 2 14%
Results from: http://www.pdinstitute.com/surveys/surveyresults.htm
Question: On-time performance for the projects of my organization is:
CC promises higher due date performance!
2. Critical Chain Performance Impact: Average

21
2. CC Performance Impact: Selected Cases
• Harris Corporation
• Microelectronics plant, Mountaintop, PA
• Project Goal: To be operational in 27 months
• Facility Construction:
• Critical Chain Plan: 18 months
• Result with CC: 13 months, 4% over budget
• Industry norm: 28-30 months
• Facility Operation:
• Result with CC : Full production in 21 months
• Industry norm 46-54 months total

22
Lucent Technologies: Fiber Optic Cable Business Unit
Situation before CCM
• Product realization cycle for
Fiber Optic Cable was same as
its competitors.
• Designs based on tools took
longer time to come to market.
• Many designers were overloaded
and multi-tasking on several
projects simultaneously.
Situation After CCM
• Goals of implementation were
achieved.
• On-time delivery was markedly
improved
• The organizations capacity to
develop products markedly
increased.
• With no increase in staff, the
number of projects were
completed.
• The production introduction
interval was reduced by 50%.

23
Successful Cases of Companies That Used Critical Chain
• (http://www.goldratt.com/success.htm)
• Seagate Technology
• F-22 Project Raptor
• Lucent Technologies
• The Clowes Group
• Valmount Industries
• BAE Systems (this article can be viewed
in(www.ets.news.com)

24
CC-Project Before After
Warfighter Systems
Testing (US Air Force
Operational Test &
Evaluation Center)
18 projects in 6 months.
On time delivery unknown.
26 projects in 6 months.
75% projects on time;
30% reduction in cycle time.
Aircraft Repair and
Overhaul (US Naval
Aviation Depot, Cherry
Point)
Average turnaround time (TAT)
for H-46 aircraft was 225 days.
Throughput was 23 per year.
Reduced TAT to 167 days, a 25%
reduction while work scope was
increasing.
Throughput is 46 per year.
70% reduction in backlog
Submarine Maintenance
and Repair (US Naval
Shipyard, Pearl Harbor)
Job Completion Rate 94%
On-time delivery less than 60%.
Cost per job was $5,043.
Job Completion Rate now 98% On-time
delivery 95+%.
Cost per job reduced 33% Overtime
reduced by 49%
$9M saving in first year.

25
2. CC Performance Impact: Summary
The Impact of CC across approx. 80 cases:
• Increased systems throughput ~ 20%
• Reduced project schedule ~ 15% - 40%
• Increased on-time delivery ~ 93%
• Reduced backlog ~ 30% - 70%
• Reduced overtime ~ 20% - 50%
CC shows dramatic performance improvements!

26
3. What is CC? Critical Chain vs. CPM
Traditional PM scheduling problems:
• Resource conflicts
• Delays
• Uncertainty (scope change, context, resources)
CC offers a solution:
• Performance improvement with same resource base
• Reduces resource conflicts
• Reduces uncertainty
• Addresses multi-project environments

27
3. What is CC? Critical Chain vs. CPM
Critical Chain three level approach:
1. Philosophical Level: Theory of Constraints
2. Single-Project Level: Managing Variation
3. Multi-Project Level: Systems Approach
Critical Path one level approach:
1. Single Project Level: Managing Due Date
• Does not account for variation
• Does not account for behaviors
• Does not account for multi-project system
Critical Chain promises advantages over CPM!

28
3. What is CC? Philosophical Level: ToC
Theory of Constraints:
1. Systems perspective
2. Focus on the system’s bottle neck
3. Throughput mindset
4. Avoid sub-optimization
5. Use simple tools
Elyahu Goldratt, “The Goal,” 1988

29
3. What is CC? Philosophical Level: ToC Steps
Theory of Constraints:
Step 1: Identify the system's constraint(s)
Step 2: Decide how to exploit the system’s constraint(s)
Step 3: Subordinate everything else to the above decision
Step 4: Elevate the system’s constraint(s)
Step 5: If in the previous step, a constraint has been broken go
back to step 1, but do not allow inertia to become the
system’s constraint
Elyahu Goldratt, “The Goal,” 1988

30
3. What is CC? Philosophical Level: CC Estimation
Average Work
Touch
Time
Uncertainty
Buffers
Multitasking
Minimize
Set-up Time
Basic Estimation Equation: W = U * D

31
• Realistic task estimates are 90% estimates.
• They include safety
– to assure on-time completion despite unknowns
In 90% of the cases the task will be finished EARLIER!
In 10% of the cases the task will be finished LATER!
55
50%
90%
1|0|0 |5 1|5
time
probability
10%
10
expected safety commitment
task duration
4. What is CC? Single-Project Level: Local vs. Global Safety

32
4. What is CC? Single-Project Level: Local vs. Global Safety
Is trying to keep every task on-time an efficient way
to make the project deadline on time?
Probability of meeting the due date 73%!
5
50%
90%
5
50%
90%
5
50%
90%
105
5 10
105
traditional
committed
project
duration:
30 days
D
E
A
D
L
I
N
E

33
4. What is CC? Single-Project Level: Buffer Sizing
55
25 75
8.665
25 25+ + =
project buffer
safety
take
square
root
square standard deviation
50% 90%
5 5
5
55
duration
55
safety
duration
duration
safety
Single-Project Level: Local vs. Global Safety
How much buffer is needed for a 90% Due Date estimate?
Goldratt’s Heuristic: Buffer Size = 50% of accumulated safety!

34
4. What is CC? Single-Project Level: Buffer Sizing
An efficient way to manage risk:
– pool task variation in a project buffer,
– the project schedule is shorter,
– risk is not increased!
555
expected duration safety
8.66
50%
90%
project buffer
savings
15 6
© 2000 ZULTNER & COMPANY
Critical
Chain
committe
d project
duration:
24 days
D
E
A
D
L
I
N
E

35
4. What is CC? Single-Project Level: Buffer Management
2|02|5 1|0 |0
9
5 5 5
-1 day
minimum buffer required
6 5 8
5
3 10
5
+2 days
5
10
-5 days
finished!
2
1
3
1|5 |53|0
8.6
7.1
5.0
actual buffer
+1 buffer-days
+5 buffer-days
+5 buffer-days
BUFFER STATUS
How many buffer-days
are needed to meet the
due date with 90%
probability?
How could good and
bad luck averaged
out?
Buffers absorb risks
CC Buffer Metric: Actual Buffer/Minimum Buffer Required

36
6:Prog 3:HW
5:HW
Feeding Buffer
2:CS
6:Prog 3:HW
3:Eng 5:HW4:CS 2:CS Project Buffer
Resource Leveled Critical Path (in Red)
Critical Chain (in Red) Buffered Schedule
Individual activities are scheduled at their average durations (no safety
margin) 15%-25% decrease of project duration
4:CS 3:Eng
CPM Network
CC Network
4. What is CC? Single-Project Level: Feeding & Project Buffers
Due Date

37
4. What is CC? Single-Project Level: Resource Buffers
For Relay Runners
– resources get a countdown
– assure the resource can start immediately
– activities start as soon as possible
NOT when the schedule says
3
10
A
B
Resource
Buffer
7
start!
10
current task next task
3
10
2
1
three days to go
two days to go
one day to go
good luck strikes—early finish
the plan

38
4. What is CC? Single-Project Level: Relay Runner Effects
Resources seem to be working “faster” but
• Overtime goes down
• Speed may go down
• Throughput goes way up
• Quality goes up (slightly to a lot)
• Projects take much less time
• Resources will be idle more often
• Resource utilization goes down

39
4. What is CC? Single-Project Level: Computation Steps
Critical Chain computation steps for single project schedule:
• Compute baseline schedule using average activity durations and ALAP
• Aggregate safety margins into Project Buffer
• Identify Critical Chain (CC)
• Protect CC using Feeding Buffers
• Try to keep baseline schedule and CC fixed during execution
• Use buffers as proactive warning system during execution

40
7. What is CC? Summary
CC (1996):
• Feeding Buffer
• Resource Buffer
• Project Buffer
CC Metrics
• Actual Buffer/ Minimum required buffer
• Due date performance (% of milestones finished or mean project
duration and its standard dev.
• Operating expenses (# of hours invested)
• Inventory (amount of work in process not finished yet, hours invested
in unfinished work orders/activities)
• Project Quality (# development cycles and # of changes)

41
7. What is CC? Summary
Critical Chain Advantages (CC)
• Provides a systems approach for managing multiple
projects sharing a set of resources
• Improved system throughput (global optimum)
• Explicitly takes variation (risk) into account
• Efficiently! (reduces time to market)
• Provides a visible, and powerful way to manage risk and
likelihood of on-time delivery
• A base for real risk management (reduces % of late
projects)
Critical Chain promises advantages over CPM!

42

43
Implementing CC: Creating a Project Schedule
The Five Focusing Steps of ToC
1. Identify the constraint
2. Exploit the constraint
3. Subordinate everything else to the above decision
4. Elevate the constraint
5. Don’t let inertia become the constraint
(If the constraint is broken, go to 1)

44
Implementing CC: Step 0
Before creating the CC project schedule
• Define the project and its purpose
• Define the fundamental measurements for the project

45
1. Identify the Critical Chain
A. Lay out the project network with all tasks as late as possible
(latest completion time of tasks)
B. Working backwards, identify the contention (usually resource) to
address next
C. Remove the contention by adding more resources, or moving
tasks earlier
D. Continue until all conflicts are resolved
E. Identify the longest dependent chain

46
Implementing CC: Step 2-4
2. Exploit the Critical Chain
Use 50% task times and a project buffer
3. Subordinate everything else
• Protect the CC with feeding buffers
• Resolve new conflicts from buffers by moving tasks earlier
4. Elevate (shorten) the Critical Chain
Add resources, change procedures, etc.

47
5. Go back to step 1. Do not allow inertia to become the constraint!
We have now applied the Five Focusing steps of Theory of Constraints
(ToC) to schedule a project

48
Implementing CC: Case 1
• Variation…
– Non-critical path
• if it slips, could impact the critical path
– Protect the critical path — with a feeding buffer
• absorbs non-critical path variation
• prevents the critical path from shifting
10 10 16
20
1616
A
5 5 8
FB 1188
C
PB 1410
CPM Project Plan
CC Project Plan

49
20 60
20 40 20
60
Airframe
+10
Component
Aircraft
Complete
20 30
30
Let’s establish a Critical Chain Schedule
Aircraft Project – Traditional Schedule
Engine
+20
Critical Path: 140 Months
Aircraft
Start

50
10 30
10 20 10
30
Airframe
Engine
Component
Aircraft
Complete
10 15
15
Cut task estimates by 50%
Aircraft
Start

51
10 30
10 20 10
30
Airframe
Engine
Component
Aircraft
Complete
10 15
15
Push all tasks to start as late as possible.

52
10 30
10 20 10
30
Airframe
Engine
Component
Aircraft
Complete
10 15
15
Eliminate Resource Contention

53
10 30
10 20 10
30
Airframe
Engine
Component Aircraft
Complete
10 15
15
Resource contention eliminated by moving
Component branch 15 months backward.
+15

54
10 30
10 20 10
30
Airframe
Engine
Component Aircraft
Complete
10 15
15
+15

55
10 30
10 20 10
30
Airframe
Engine
Component
Aircraft
Complete
10 15
15
Engine branch 5 months backward.
+5
+15

56
10 30
10 20 10
30
Airframe
Engine
Component Aircraft
Complete
10 15
15
+5
+15

57
10 30
10 20 10
30
Airframe
Engine
Component Aircraft
Complete
10 15
15
Airframe branch 5 months backward.
+5
+5
Aircraft
Start
+15

58
10 30
10 20 10
30
Airframe
Engine
Component Aircraft
Complete
10 15
15
The longest path through the network considering both
TASK and RESOURCE DEPENDENCIES is the Critical
Chain (CC = 70 months).
+5
+5
Aircraft
Start
CC
+15

59
10 30
10 20 10
30
Airframe
Engine
Component Aircraft
Complete
10 15
15
Implementing CC: Buffer Management (Project Buffer)
Using Buffer Management: Project Buffer
Project Buffer = 38.08 months (accurate calculation)
Total project duration = 108 months
+5
+5
Aircraft
Start
Project Buffer
CC
+15

60
10 30
10 20 10
30
Airframe
Engine
Component Aircraft
Complete
10 15
15
Implementing CC: Buffer Management (Feeding Buffer)
Using Buffer Management: Feeding Buffers
Locations of feeding buffers
+5
+5
Project Buffer
+15

61
10
10 20 10
30
Airframe
Engine
Component Aircraft
Complete
10
Implementing CC: Buffer Management (Feeding Buffer)
Using Buffer Management: Feeding Buffers
Durations of feeding buffers moves project start to an
earlier start date!
Total project duration: 129 months
15
30
15 PB=38FB=26.5
FB=30
FB=10

62
Implementing CC: Conclusions
10 30
10 20 10
30
Airframe
Engine
Component Aircraft
Complete
10
Use Project Buffer
Use “Float” as “quasi feeding buffers”
Total project duration = 108 months compared to
Standard schedule with 140 months
Aircraft
Start
Project Buffer
CC
15
15FB=5
FB=5

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