Maximizing Profitability Part 35

In my last posting I told you I would tie Goldratt’s 5 Focusing Steps into Critical Chain Project Management (CCPM) and also provide a summary of what I’ve written on this subject. Let me refresh your memories on Goldratt's focusing steps while simultaneously tying them into Critical Chain Project Management:

1. Identify the system’s constraints: For a single-project environment this simply means identifying the Critical Chain or the longest chain of longest path of dependent tasks within a project determines the actual duration of the project. The critical chain is therefore the constraint. In a multi-project scenario, there is a drum resource that limits the number of projects that an organization can manage and deliver. This resource, more than any other controls the flow of projects and is considered the constraint.

2. Decide how to exploit the constraint: For a single project scenario, this simply means focusing on the critical chain tasks to make sure that the required work is done so without unnecessary delays. In a multi-project situation, this means that projects should be prioritized and then staggered according to the drum resource’s capacity, making sure it is not overloaded.

3. Subordinate everything else to the above decision: As you might have concluded, this simply means that non-critical chain tasks cannot and must not interfere with or delay work on the critical chain. In order to avoid this scenario, we have strategically placed feeding buffers to prevent delays on the critical chain. In a multi-project situations, non-critical resources may have to wait in favor of the critical chain resources.

4. Elevate the system’s constraint: For single and multi-project environments, this typically means investing in additional resources or even increasing the capacity of resources that impact both the critical chain or project throughput. Many times this might mean spending money or using non-critical resources to critical chain tasks.

5. Return to step 1: When one project is completed, identify/insert the next one and proceed to step 2.

Summary of Key Points

• In a fairly recent survey (The Chaos Report) by the Standish Group, studying nearly 10,000 IT projects across America, it was reported that 52 % of projects ended up costing greater than 189 % of the original budget, 31 % were cancelled and only 16 % of the projects were completed on time and on budget. The fact is, there are many other reports from numerous industry types, from all over the world, that all conclude the same thing, project completion rates are abysmal!

• Ninety percent of the Project Managers around the world are using a project management method called Critical Path Method (CPM) and have been doing so for many years. CPM uses a “fudge factor” to protect projects from inevitable uncertainty. That is, when developing the project plan, durations for each individual task are estimated by the resources responsible for executing them and then a safety factor is added to each of the tasks by the resource responsible for completing them. In Critical Chain Project Management (CCPM), individual tasks durations are removed and replaced with a project buffer.

• In traditional project management (CPM) tracking is done so by calculating the percentage of individual tasks completed and then comparing that percentage against the due date. CCPM tracks progress on the critical chain against buffer consumption.

• There are behavioral issues associated with traditional project management (CPM). These issues are the Student Syndrome (or procrastinating start of the project because of the built-in safety buffers), Parkinson’s Law (Work expands to fill the available time), and Multi-tasking (moving back and forth between multiple projects thus extending the duration of all of the projects). CCPM eliminates these behavioral issues by eliminating individual task durations, using the relay runner scenario (i.e. passing on a task as soon as it is completed), and staggering or pipelining the projects (i.e. delaying project starts)

• Whereas CPM completion rates are clearly abysmal, completion rates using CCPM are excellent (i.e. typically >90%) and the completion times are usually 40-50% faster. In addition, when comparing scope and cost, surveys of companies using CCPM, CCPM is a far superior project management method.

I hope you have enjoyed this series on Maximizing Profitability and that you have found it helpful. In my next series of postings, I will be discussing a variety of subjects which will include the Theory of Constraints Parts Replenishment Model. I will demonstrate how to virtually eliminate stock-outs while reducing your parts inventory in the neighborhood of 40-50%. In closing, if you have a specific subject you'd like me to focus on, just send me an email to ras8202@live.com.