Critical Chainby ELIYAHU M. GOLDRATT

Book Review and Core Concepts

Group Member

Shafa'at Gilani

Muhammad Iqrash Awan

Amber Younas

Sarosh Tasneem Raja

Sabeen Rashid

Introduction

Business Novel – a niche in the business education market.

An artistic attempt to teach the concepts of “Project Management”.

Story of: a professor trying to attain his tenure at a university's business school;

a business school's struggle to improve enrollment; and

a firm trying to reduce product development time.

Gives a real life feel and builds a real life context.

What is a Project?

"A set of activities aimed to achieve a specific objective and have a clear start, middle and end.“

“Some block diagram of the various steps that must be accomplished in order to achieve the objective, showing which steps should be done in sequence and which in parallel”

Projects are measured on three criteria: Time

Quality

Budget

Project Basics

A project will run out of time but not out of excuses.

Top management blames externalities like vendors for delay and project team blame on internal politics and top management.

Think Tank A group of people finding solutions for problems

Problems common to all projects

Budget Overruns (Cost Overruns) Actual cost exceeds budgeted. It makes project difficult to succeed, may increase

payback period, caused because of delays in project.

Time Overruns When projects doesn’t complete in time as specified in project plan, it occurs

due to more dependency on outside vendors.

Compromising the content Compromised on original specifications

Uncertainty existing in every project is the underlying main cause for most problems. People are not blind to it and they do add a lot of safety in their planning.

Gaussian CurveTo plot the probability of activity completion as a function of time, it would look like the long-tailed curve

"The higher the uncertainty the longer the tail of the distribution,“

To protect against uncertainty, you put safety i-e The difference between the median of the probability distribution and the actual estimate.

PERT and Gantt Techniques

PERT A statistical tool used in Project management that is used to represent tasks

involved in a project.

It shows the minimum time needed to complete the total project.

Critical Path The longest chain of dependent steps (Longest in time)

It determines the time it will take to finish the project.

Any delay on the critical path will delay the completion of the project.

Project manager must focus on it

PERT and Gantt Techniques

Gantt Charts Unlike PERT diagrams, involve decisions.

The decision of the planner when to start each path.

Some chose the late start while others chose the early start.

Early start vs. Late start------ An optimization problem

What is progress?

Progress is measured according to the amount of work, or investment, already done, relative to the amount still to do.

Projects take so long to complete their last ten percent. It's because, in measuring progress, we overlooked the importance of the critical path.

Project Evaluation – Major Flaw

Execution of project evaluation/ measurement is essentially flawed and leads to stealing away management focus and wastage of resources.

It ought to: Encourage parts to form an holistic view of project,

Direct management attention to points requiring immediate attention.

Theory of Constraints

TOC: new management philosophy, new research methods, robust application.

TOC instills that the cost (weight of chain) and throughput (links between the chain and the weakest one) worlds need to be taken in tandem.

Though entailing differing management practices, the above have no room for compromise.

To strengthen the chain: Identify the constraint (physical/ policy),

Decide how to exploit the current system’s constraints,

Subordinate everything else to above decisions,

Elevate the system’s constraints.

Theory of Constraints

As per TOC core problem of our organizations is: the only way to achieve good cost performance is through good local performance everywhere. (an idea disputed by the analogy of the bottleneck)

Rather than seeking a compromise unearth the underlying assumptions!

Current Reality Tree

UniCo. example reaffirms the fallacy that TOC denounces, i.e. the basic assumption of crowning principles of the cost world.

Constraint: Prime operational measurement (tonnes/ hour).

Safety Insertion

Inserting safety in the equation: estimates are based on a pessimistic experience, the end of the distribution curve.

the larger the number of management levels involved, the higher the total estimation.

estimators also protect their estimations from a global cuts.

Yet despite the safety insertion, delays occur due to: Limited incentive to report advance work and student syndrome,

Multitasking lengthens lead times for steps,

Dependencies between steps, which may cause advances to be wasted.

Importance of Multi-tasking

How despite of advances a project may end up being delayed in its entirety.

Importance of Multi-tasking

How multitasking leads to greater lead times.

Production Application of TOC

Step1 Identify the Constraint

Constraint = Bottleneck= machine X

There can be multiple bottlenecks

Need: 100% utility of the work center

Solution: put enough stock before bottleneck

x

Flow of materials

TOC and flow of materials

Step 2 Exploit (don’t lose any time on critical path)

Reduce pile of inventory before bottleneck

All work centers before X need to work at more capacity

Difference btw 1st and last work center is WIP

Time elapsed btw 1st and last work center till finished good making is essentially Lead time

Rate of the bottleneck determines rate of the system

Solution: all work centers must work at the rate of bottleneck through Assembly lines and JIT systems

TOC and flow of materials

Step 3 Subordinate (synchronize critical path with non-critical path steps to reduce

time wastage)

Protect a step with safety time

Combine the first work center with the slowest work center and the bottleneck

Critical path dictates the lead time and so time needs not to be wasted at Critical path steps

Project buffer is needed i-e complete the project before time.

1 2 3 4

1 2 3 4Project buffer50% faster, 200% safety time at each step

FBFeeding buffer from non-critical path

Critical path

TOC and flow of materials

Step 4 Elevate extra time

TOC and flow of materials

Step 4: Go back:

Progress on critical path needed to be measured

Time wastage on non-critical path also need to be monitored

Individual buffer time for each step needs to be calculated Prioritize the steps according to the lesser buffer time they take

People needs to be focused monitoring the process

Types of Projects

Done by vendors and subcontractors. Example: Plant expansion project.

Done mainly using company resources. Example: Product development.

Each come with its own set of unique problems.

Vendors and Subcontractors Projects

Less control over the working.

Can become bottlenecks if other projects are dependent on them.

Less recognition of penalties associated with delays.

Chances of being pushed to low priority.

Think from the perspective of the vendor.

Negotiating with Vendors

Win-lose situation do not exist.

Offer money for shrinking the lead times.

Longer durations and late projects help the vendors: Longer durations lead to changes.

Changes mean extra charges and extra revenue for vendors and sub contractors.

Questionable concepts

Working on step-N, present on a non-critical path

Delayed to the extent that it is feeding on project buffer

Does this mean that critical path starts now at N?

Changing the CP means changing position of feeding buffers

Will mess up the whole project

Unprotected by buffers, delay will intensify

Charlie’s problem

X = Resource

No accuracy, lack of certainty

So does the sequence really make a difference?

Real difference= difference > project uncertainty

Project buffer is where we dampen the accumulated efforts of all the uncertainties

Critical path: the longest path

Critical chain: chain of steps that are the constraint/resource dependent

Batch activities since the resource X is not loaded entire time of the project

Critical chain removes resource contention within a project

Resource contention means that the same resource is supposed to do two different steps at the same time

Removing resource contention between two steps necessitates postponing one of those steps

Problem: which step to postpone?

When dealing with multiple projects, no manager would want his to be delayed

Identify > Exploit > Subordinate

A project/department can act as a bottleneck for multiple projects relying on a single resource

Protect it with buffers or it will reduce the total amount of projects delivered in total

Prioritize them on the basis of targeted completion dates

Since all buffers are individual project based, have a specific bottleneck-buffer

What's a constraint?

Resource constraint: exhausts one feeding buffer after another

Overloaded departments ARE NOT constraints