LEANMAP Operations Consulting
Operations Consulting and Lean Management for worldclass Efficiency

Lean Prosjekt Ledelse

On-Time and on-Budget

In the Lean Project Management Seminar, participants learn modern way of managing projects based on Theory of Constraints (TOC). Different from traditional thinking, TOC addresses not only the technical but also behavioral aspects of managing the “Critical Chain”. Outcome is a significantly shortened timeline (up to 4x faster) and reduced risks of delays and cost overruns. The seminar is ideal for everyone who has gained some project experience already and wants to strengthen skill and capability to manage complex, high risk, multidimensional, or global projects.

Seminar Brief

  • Seminar: Lean Project Management based on Theory of Constraints (TOC)
  • Application: projects with high complexity, high impact, high risk
  • Process: learn principles and apply to actual project
  • Duration: 2+2 day seminar (theory, certification) + 2 days e-support
  • Outcome: Lean Project Management (LPM) certificate

Managing the Critical Chain

  • Modern approach to project management
  • Based on dual approach, considering technical and behavioral dimension
  • Improves decision analysis by managing the chain, instead just individual parts
  • Reduces the impact of behavioral problems by eliminating slack
  • Behavioral problems are biased estimates, procrastination and wasting buffers

Typical Applications

  • Start-ups
  • New product launches
  • Mergers, acquisitions
  • Restructuring, consolidations

Keys to cut Time

  • Remove buffers from single tasks and put it at the end of the chain
  • Always consider both, critical path AND resource constraints
  • Management focus on minimizing project completion time
  • Method is total elimination on slack, downtime, wait-times
  • Managed by monitoring and communicating buffer status

Key Assumptions

  • Effective management = controlling cost + protecting throughput
  • Critical path – the longest chain of dependent steps
  • Buffer – typically 50% of the lead-time to protect the system
  • Waste – in projects and production, most time is spent for wait & queue
  • Failure – main reason for delay and failure is the embedded uncertainty
  • Budget – overruns and delays are common and not an exception
  • Fault – low-level managers point inwards, top-managers outwards
  • Plan – in most projects, tasks and schedule run out of sync
  • Safety – people add up to 200% margin to protect their schedule (CYA)
  • Risk – the higher the perceived uncertainty, the more safety is added
  • Experience – people estimate according their worst past experience

PERT Diagram

  • Program Evaluation and Review Technique (PERT)
  • Project management technique to determine the time required for completion
  • Each activity is assigned a best, worst, and probable completion time estimate
  • Estimates are used to determine average completion time +variation
  • Times are used to identify the critical path and completion times

Example

105 days for machines, 120 days for building, 150 days to finish:

  • 90 days to setup the building
  • 30 days to equip the building
  • 30 days to install the machines
  • 25 days to select the vendor
  • 80 days lead-time for machines

Critical Path

  • Longest chain of dependent steps – determining project completion
  • Any delay in the critical path will delay the entire project
  • Previous example: critical path = 90+30+30 = 150 days

GANTT Chart

Unlike PERT diagrams, GANTT involves decisions when to start each path

- Starting late:
  • Investments are postponed until needed, no cash tied in inventory
  • No time slack; all paths become critical, lost focus, risk of project-delay
    |—-90—-|-30-|
    |-30-|
    |*|15|—-90—-|

- Starting early:

  • Additional safety margin, goods and time in inventory = buffer
  • Many tasks started simultaneously, lost focus, risk of project-delay
  • Money is tied up for items in wait and queue
    |—-90—-|-30-|
    |-30-|
    |15|—-90—-|*|

- Optimum Start:

  • Starting early -or- starting late will both jeopardize the ability to focus
  • Best start can NOT be found mathematically using optimization procedure
  • Use Theory of Constraints and “common sense” instead – principles:

Traditional Thinking – Flaws in traditional Project Measurement

  • Does NOT differentiate between critical and open (non-critical) path
  • Ineffective measurement based on completion percentage
  • Calculation:  [project-progress] = [work-done] : [work-open]
  • Result: 95% on time but remaining 5% tasks delay the project by 200%

Traditional Thinking – Impact to Budget and Schedule

When one path is delayed, managers often try to compensate the time lost by progressing in another path. But all advance gained in an open path must wait for the delayed path anyway. Therefore, this method is totally ineffective and counterproductive.

Modern Thinking – Effective Project Management

  • Induce the parts to do what is good for the system as a whole
  • Direct managers to the point that needs their attention
  • Focus on winning against the competition
  • Controlling cost AND protecting throughput requires a new way of thinking

Breakthrough – Theory of Constraints (TOC)

  • New management philosophy
  • Approach is based on mathematics and human behavior
  • Proven by a broad spectrum of robust applications

Chain Analogy

  • Views the company as a chain, each department represents a link
  • Each department drains money, no department is free
  • Total cost of the organization is the sum drained by each department
  • Total cost is the sum of departmental cost (all links/weight of the chain)

Traditional: managing by Cost

  • Inducing many local improvements to reduce cost weight of individual links)
  • Improvement happens, when total cost is reduced (weight of the chain)
  • Managing companies to COST is most common since the industrial revolution

Modern: managing by Throughput

  • Managing throughput is a new, contradictory philosophy to common wisdom
  • Focuses not only on the individual links, it also considers the LINKAGE
  • Example: a pile of links has the same weight as a chain with the same number of links, but its strength is zero as the links are disconnected
  • Interaction between links determines the strength of the chain
  • Interaction between departments determines the strength of a company
  • The weakest link determines the strength overall (break=zero strength)
  • Improving an area that is not the weakest does not improve performance
  • Strengthening a strong link does not improve the chain’s strength = waste
  • Conclusion: spot improvements are considered waste, NOT progress

Panic: the “End-of-Month Syndrome”

  • Month-start: managed to COST, efficient batches, no overtime
  • Month-end: managed to THROUGHPUT, shipping at all cost, “get it out!”
  • Companies that follow this method will not survive long-term
  • Ten years ago, 80% shipped on time at moderate failure-rate was ok
  • Today, 90% shipped on time at the same quality-level is intolerable
  • Today, customers have choices – not much room for errors and delays

Pareto Principle is bad for Links and Chain

  • Managers focus on solving 20% top urgent problems, reaping 80% benefits
  • 80/20-rule works only for independent variables; links managed separately
  • When linkage is important (organization or chain), PARETO does not work!

TOC is a 4 Step Process

  1. Identify the system’s constraints
  2. Exploit the system’s constrains – make decision
  3. Subordinate everything to the above decision
  4. Elevate the system’s constrains

Strengthening the Bottleneck

  • Synchronize everything in front of the bottleneck to its demand and pace
  • Inspect before in front of the bottleneck to hand over only good parts
  • Buffer in front of the bottleneck to compensate for supply-fluctuations
  • Avoid down-time under any circumstances
  • Improve bottleneck-capacity by adding equipment and/or improving flow
  • Replacing bad/erroneous policies

Bottleneck in the “Cost-World”

  • Non-bottlenecks are forced to work at maximum speed (to be “efficient”)
  • DISASTER as the total system cannot keep up and inventories increase

Bottleneck in the “Throughput-World”

  • Non-bottlenecks are restricted to match the pace of bottlenecks
  • COST is controlled and excess inventory, queue/wait is avoided

Use the ‘Evaporating Cloud’ to resolve Conflicts

  • Resolve the conflict by challenging the assumptions
  • Use the model of “The Evaporating Cloud” to resolves conflicts
  • State the problem as a CONFLICT between two NECESSARY conditions
  • Do NOT compromise or optimize, expose the underlying assumptions
  • Challenge the assumption until one breaks and the conflict disappears
  • Do not compromise to get out of the conflict:
  • Two methods measure the height of a tree to be 10m &20m = CONFLICT
  • Does a compromise makes sense? Averaging the two results to 15m?
  • CONFLICT is usually the indication of a faulty assumption
  • Solution: challenge the assumption using the Evaporating Cloud

The Effect of Safety-Margins

- Conditions:

  • Estimates are based on previous WORST-CASE EXPERIENCES
  • Each management-layer adds its own safety-margin
  • Everyone protect their estimates from a global cut
  • Safety-margin becomes the largest part of the estimated project-time
  • Deviations do NOT average out in sequential steps
  • Delays accumulate and advances are not taken advantage of

- Result:

  • Safety-margin disappears
  • Delays are passed onto next step
  • The project does not benefit from early finishes at all

- Multitasking:

  • Multitasking is a problem as it increases lead-time in most cases
  • Interrupting work-in-progress for urgent tasks often doubles lead-time
  • Example for sequential tasks AABBCC (= 2 days to complete each task XX)
  • Example for multitasking ABCABC (= 4 days to complete each task X–X)

10 Principles of TOC in Production

  1. Goals: (a) minimize WIP, (b) sync work-centers (c) maximize throughput
  2. Identify the bottleneck (BN) and utilize it to 100%
  3. All feeding work-center must have larger capacity than the Bottleneck
  4. Protect Bottleneck from breakdown, add prev. maintenance and emergency-teams
  5. Put BUFFER in front of the Bottleneck to protect it from supply variations
  6. The BUFFER-SIZE adjusted to 50% of cumulative lead-time (all tasks)
  7. Ensure perfect quality of material into the Bottleneck to avoid wasting Bottleneck-time
  8. Synchronize the Bottleneck with the last work-center to avoid increasing WIP
  9. Measure total efficiency (entire system), NOT local spot efficiency (work center)
- Example: synchronization in an assembly-line:
  • Conveyor-belt makes fastest work-center wait for an empty slot on the belt
  • JIT-System: a container-system that limits WIP between work-centers

TOC-Model, the ‘Soldier-Analogy’

  • A troop of solders leave the camp for a march (= start production)
  • Slowest soldier (=bottleneck) is in the middle
  • At the beginning the soldiers are packed together
  • With marching, the distance between first and last soldier is increasing
  • In front of the slowest soldier, the line is spread; behind him: condensed
  • The distance (=lead-time or WIP) between first and last solder is large
  • First soldiers must stop and re-group (= stop & wait, throughput is lost)
  • Being more efficient means walking faster
  • Higher pace increases lead-time and loss for regrouping (=lost throughput)
  • Solution: tie first/fastest solder to slowest (synchronize to bottleneck)
  • Slack in the robe (=inventory) allows fastest solders to take a short rest
  • Use rest for maintenance without stopping the slower solder (=bottleneck)
  • The condensed line behind the slowest soldier is considered inventory/buffer
  • Buffer can be used when “behind-soldiers” need to stop to solve a problem
  • Behind-soldier can easily catch-up again (faster than the bottleneck)

Pitfalls – when traditional Project Management fails

  • Protect the whole project by protecting each individual step
  • Each step is padded with large safety time
  • Delays because of student syndrome – waiting until the last minute
  • When unexpected problems delay a single task, the entire project is late
  • Milestones dictate fixed time for each task – limits ability to manage project
  • Delays because of multitasking: switching between tasks doubles lead-times
  • Delays accumulate and advances are wasted

Definition of a Bottleneck

  • A resource with limited capacity producing below demand
  • Prevents the entire company from making more money
  • Bottleneck in projects it is the CRITICAL PATH

Safety/Buffer according to TOC-Principles

  • No task is buffered, all safety* is added at the end of the critical path
  • Example of traditional project mgmt:   AA****BB****CC****DD****
  • Example of TOC project management: AABBCCDD********(-savings-)
  • Protect critical path from problems at non-constrains (feeding path)

Principles of TOC-Scheduling

  • Cut the original time-estimate (4 wks) by half (2 wks)
  • Use half of the trimmed time as feeding-buffer (1 wk)
  • The saved time (1 wk) is the improvement compared to traditional management
  • Eliminated safety (for individual task) makes people uncertain to be on time
  • Eliminates procrastination and allows better follow-up by project-leader
  • Traditional: “Don’t push me, I have two full weeks to complete”
  • TOC: “Please help, I need to get this done fast”
  • The human behavior aspect of TOC
  • Leader shows concern for the schedule and assists people
  • People cooperate because they want to succeed meeting the tight due date

TOC-Project-Example

  • The following examples shows the main path (critical path) and two feeding paths that are non-critical
  • The buffer/safety is marked with (*)Non-critical FP1-CP2:                     |-FP1-|**|
    Critical CP1-CP4:        |—CP1—|—-CP2—-|–CP3–|-CP4-|************|
    Non-critical FP2-CP3:            |-FP2a-|–FP2b–|*****|

Rules for TOC–Management

  • Add safety to compensate problems/delays in the schedule
  • Alert people 1wk/3days/1day to ensure full preparation and start on time
  • Account for all advances and delays
  • In case of early/late completion, move all dates closer/out and adjust buffer
  • Report daily buffers and estimated completion-dates
  • Don’t use milestones (fixed); use estimated completion-dates (flexible)
  • Priority – activities reducing project buffer need to be handled first
  • Measure only advancement on the critical path (%-completion)
  • Pay premium for early completion and penalty for delays
  • Only win/win situations exist in TOC
  • If a situation appears as win/loose › the problem is captured to narrowly

When critical Resources become the Bottleneck

  • The following examples shows the main path (critical path) and two feeding paths that are PRESUMED non-critical – but both require the same specialist “X” to do the work
  • Buffer/safety in the diagram is marked with (*)Presumed non-critical?                           |XX|—-|**|
    Critical path CP1-CP4:           |——|————|—-|—–|************|
    Presumed non-critical?                 |—|XXX|**|
  • Paths become critical if they need the same resource at the same time
  • The CRITICAL CHAIN is the longest chain of dependent steps
  • When a resource with limited capacity is required per project plan on two independent paths, steps must be done SEQUENTIALLY instead parallel
  • The longest chain = PATH-dependent and RESOURCE-dependent
  • Drawing the CRITICAL CHAIN now = CP1-CP2-CP3-X-X-CP4
  • The limited resource is now the constraint is X
  • FEEDING-BUFFERS must be rearranged in FRONT of the constraint
  • Now resource-X can start immediately without delay
  • This process is called: “Removing resource contention between two steps“
  • Postpone one of the two parallel steps to become a sequential step:Critical path:                             |**|XX|—-|
    Critical path:           |——|————|—-|—–|************|
    Critical path:                    |—|XXX|**|

Key Conclusion: Manage Time-Money!

  • Always use Time*Money for decision-making instead of considering time and money separately!
  • Apply TOC principles when managing high-risk, high-complexity, or high-impact projects
  • Contact us to train your people and plan the critical chain of your key projects
  • We also offer interim Management assistance to bring delayed projects back on trac
 
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