critical chain in russia

8/8/2019 Critical Chain in Russia

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Critical Chain in RussiaCritical Chain in Russia

11 years experience11 years experience

Vladimir Liberzon, PMPVladimir Liberzon, PMP

[email protected]@mail.cnt.ru


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Critical Path DefinitionCritical Path Definition

The PMBOK GuideThe PMBOK Guide defines the Critical Path asdefines the Critical Path as

those activities with float less than or equal to athose activities with float less than or equal to aspecified value, often zero.specified value, often zero.

Float is the amount of time that an activity mayFloat is the amount of time that an activity may

be delayed from its early start without delayingbe delayed from its early start without delayingthe project finish date.the project finish date.

Early start is the earliest possible point in time atEarly start is the earliest possible point in time at

which uncompleted portions of an activity (or thewhich uncompleted portions of an activity (or the

project) can start, based on the network logicproject) can start, based on the network logic

andand anyany schedule constraints.schedule constraints.


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Critical Path DefinitionCritical Path Definition

This definition corresponds with the CriticalThis definition corresponds with the Critical

Path interpretation in the Russian PMPath interpretation in the Russian PMsoftwaresoftware Spider ProjectSpider Project that wasthat was

launched to the Russian market 11 yearslaunched to the Russian market 11 years

ago.ago.

In this interpretation schedule constraintsIn this interpretation schedule constraints

include network logic, resourceinclude network logic, resourceconstraints, financial constraints, supplyconstraints, financial constraints, supply

constraints, calendar constraints andconstraints, calendar constraints andimposed dates.imposed dates.


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Resource Critical PathResource Critical Path

& Critical Chain& Critical Chain Thus defined the Critical Path (we call itThus defined the Critical Path (we call it

Resource Critical Path/RCPResource Critical Path/RCP) is the) is thesame as the Critical Chain but withsame as the Critical Chain but with

financial and supply constraints added tofinancial and supply constraints added to

the Critical Chain definition.the Critical Chain definition.

RCP is the true critical path by the PMBOKRCP is the true critical path by the PMBOKGuideGuide definition and the common criticaldefinition and the common critical

path notion is that particular case whenpath notion is that particular case whenproject resources are unlimited.project resources are unlimited.


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Success Driven Project ManagementSuccess Driven Project Management

The project management methods andThe project management methods and

tools that we use last 11 years have manytools that we use last 11 years have manycommon features with the methodscommon features with the methods

suggested by the Critical Chain theory, butsuggested by the Critical Chain theory, but

there are also differences.there are also differences.

In this presentation we will discuss theIn this presentation we will discuss the

proven PM methodology that have beenproven PM methodology that have beenused in hundreds of Russian companies forused in hundreds of Russian companies for

many years. We call itmany years. We call it Success DrivenSuccess DrivenProject Management (SDPM).Project Management (SDPM).


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Success Driven Project ManagementSuccess Driven Project Management

Proven methodology of projectProven methodology of project

planning, performance analysis andplanning, performance analysis andproject control.project control.

Integrates scope, time, cost, resourceIntegrates scope, time, cost, resourceand risk management.and risk management.

We will also discuss some notions, tools, andWe will also discuss some notions, tools, and

methods of project planning and performancemethods of project planning and performance

analysis that are common in Russia andanalysis that are common in Russia andnecessary for SDPM understanding.necessary for SDPM understanding.


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Resource Constrained SchedulingResource Constrained Scheduling

in Spider Projectin Spider Project Resource constrained scheduling takes intoResource constrained scheduling takes into

account not only resource constraints but alsoaccount not only resource constraints but alsofinancial and supply constraints.financial and supply constraints.

Resource constrained schedules are optimizedResource constrained schedules are optimized

using sophisticated algorithms.using sophisticated algorithms.

The software simulates financing and supplies,The software simulates financing and supplies,

calculates cash and material flows.calculates cash and material flows. The next slide shows cumulative expenses, performanceThe next slide shows cumulative expenses, performance

cash flow (financing and spending during constructioncash flow (financing and spending during construction

phase) and project cash flow for a sample project.phase) and project cash flow for a sample project.


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Resource Constrained SchedulingResource Constrained Scheduling

in Spider Projectin Spider Project Financing and supplies simulation is veryFinancing and supplies simulation is very

important in commercial projects when projectimportant in commercial projects when projectgoals include profit.goals include profit.

Activity floats are calculated usingActivity floats are calculated using

resource leveling not only on a forwardresource leveling not only on a forward

pass but also on a backward pass.pass but also on a backward pass.

These resource constrained floats show realThese resource constrained floats show realfeasible time reserves for activities execution.feasible time reserves for activities execution.


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Activities with the zero resource constrainedActivities with the zero resource constrained

floats are calledfloats are called resource criticalresource critical.. Resource critical activities constituteResource critical activities constitute

Resource Critical Path (RCP)Resource Critical Path (RCP)..

RCP may consist of activities that are notRCP may consist of activities that are notlinked to each other.linked to each other.

RCP is a true critical path by PMBOK GuideRCP is a true critical path by PMBOK Guide definition.definition. Critical Chain is only one case of RCP (the Critical ChainCritical Chain is only one case of RCP (the Critical Chain

definition does not account for financial and supplydefinition does not account for financial and supplyconstraints).constraints).


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In the sample project below activities 2 and 4In the sample project below activities 2 and 4

require the same resource A.require the same resource A. There is a need for resource leveling.There is a need for resource leveling.


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Sample project schedule after leveling.Sample project schedule after leveling.

Activities 3, 4 and 2 constitute RCP thoughActivities 3, 4 and 2 constitute RCP thoughactivity 2 does not depend on others.activity 2 does not depend on others.


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Risk Simulation in Spider ProjectRisk Simulation in Spider Project

Deterministic, single, estimates produceDeterministic, single, estimates produce

plans with a low probability of success.plans with a low probability of success. Risk simulation produces more reliableRisk simulation produces more reliable

results.results. Risk simulation may be based on MonteRisk simulation may be based on Monte--

Carlo approach (impossible to use for largeCarlo approach (impossible to use for large

projects) or based on 3 scenarios approach.projects) or based on 3 scenarios approach.

Spider Project uses 3 scenarios approach.Spider Project uses 3 scenarios approach.


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3 scenarios approach3 scenarios approach

3 estimates are made for:3 estimates are made for:

Resource usage or productivity ratesResource usage or productivity rates Work scope & volumeWork scope & volume

Activity duration (if estimated directly)Activity duration (if estimated directly)

Cost estimatesCost estimates Calendar/weather variationCalendar/weather variation

Identified risk events are estimated toIdentified risk events are estimated toreflect their consequences, including riskreflect their consequences, including riskresponse plans in optimistic, mostresponse plans in optimistic, most

probable and pessimistic projectprobable and pessimistic projectscenarios.scenarios.


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3 scenarios approach3 scenarios approach

All three scenarios are calculated.All three scenarios are calculated.

The probability curves are rebuilt using theThe probability curves are rebuilt using thethree values obtained (for dates, costs, materialthree values obtained (for dates, costs, materialrequirements).requirements).

The desired probability of meeting projectThe desired probability of meeting project(phase) finish dates, costs and resource(phase) finish dates, costs and resourcerequirements determines desired finish dates forrequirements determines desired finish dates for

the whole project and its phases, their desiredthe whole project and its phases, their desiredcosts, and other project results (profit as ancosts, and other project results (profit as anexample).example).

These data form a basis for negotiating andThese data form a basis for negotiating andapproval to proceed.approval to proceed.


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Success ProbabilitySuccess Probability

UsualUsual goals:goals:

Complete project ASAP with minimum cost, & alsoComplete project ASAP with minimum cost, & also

Develop plan with guaranteed 100% success.Develop plan with guaranteed 100% success.

But 100% reliable plan will not be competitiveBut 100% reliable plan will not be competitive

today.today.

A competitive, realistic plan must:A competitive, realistic plan must:

Make success of project probable (something lessMake success of project probable (something less

than 100%than 100% -- depends on market competition)depends on market competition) But still make it acceptable to project stakeholdersBut still make it acceptable to project stakeholders

Requires evaluation & negotiation of variousRequires evaluation & negotiation of various

target success probabilities leading to welltarget success probabilities leading to well--informed decision to proceedinformed decision to proceed


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Success ProbabilitySuccess Probability

Negotiations may establish new targets.Negotiations may establish new targets.

Success probability is defined as theSuccess probability is defined as theprobability of meeting approved targetsprobability of meeting approved targets --

dates, costs, quantities.dates, costs, quantities.

Success probability is the bestSuccess probability is the bestindicator of current project statusindicator of current project status

during execution.during execution. The optimistic schedule is used for settingThe optimistic schedule is used for setting

task schedules for project implementers.task schedules for project implementers.


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Contingency ReservesContingency Reserves

Critical schedule is the backward (from theCritical schedule is the backward (from the

target dates) resource constrained scheduletarget dates) resource constrained schedule

using most probable estimates.using most probable estimates.

Contingency reserves or buffersContingency reserves or buffers -- differencedifference

between activity start times (and cost,between activity start times (and cost,material requirements) in the optimistic andmaterial requirements) in the optimistic and

critical schedules.critical schedules.


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Success Probability TrendsSuccess Probability Trends

Success probabilities are calculatedSuccess probabilities are calculated

periodically & stored.periodically & stored.

Their trends are used to estimate projectTheir trends are used to estimate project

performance.performance.

Negative (downward) success probabilityNegative (downward) success probabilitytrend indicates corrective action needed.trend indicates corrective action needed.

Positive success probability trend indicatesPositive success probability trend indicatesperformance is OK.performance is OK.


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Success Probability TrendsSuccess Probability Trends

Success probabilities change due to:Success probabilities change due to: Performance resultsPerformance results

Scope changesScope changes

Cost changesCost changes

Risk changesRisk changes Resource changesResource changes

Even if everything is fine with the projectEven if everything is fine with the project

performance but new risk events were identifiedperformance but new risk events were identifiedand included in the pessimistic project scenario,and included in the pessimistic project scenario,

success probability trends may show thatsuccess probability trends may show that

corrective action is necessary.corrective action is necessary.

i i


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MotivationMotivation

by success probability trendsby success probability trends Project managers are encouraged to solveProject managers are encouraged to solve

uncertainties ASAPuncertainties ASAP This can increase success probabilities evenThis can increase success probabilities even

with activity finish delays & cost overrunswith activity finish delays & cost overruns

Postponing problem activities leads toPostponing problem activities leads to

negative trends in success probabilitiesnegative trends in success probabilities

This attribute of success probability trendsThis attribute of success probability trendsis especially useful in new productis especially useful in new product

development project managementdevelopment project management


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ExampleExample

The next slide shows success probabilityThe next slide shows success probability

trends for another sample project.trends for another sample project.

The trends show that this sample projectThe trends show that this sample project

will meet budget requirements (100%will meet budget requirements (100%

probability of meeting baseline and targetprobability of meeting baseline and targetcost) but will be late.cost) but will be late.


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ExampleExample


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SDPM & Earned ValueSDPM & Earned Value

SDPM success probability trends reflectSDPM success probability trends reflectperformance results plus networkperformance results plus networkdependencies & project risks and maydependencies & project risks and maybe used as a perfect projectbe used as a perfect project

performance management tool.performance management tool. Earned Value Analysis reflects onlyEarned Value Analysis reflects only

performance results.performance results. EVA approach is not totally integrated.EVA approach is not totally integrated.

EVA problems are illustrated in theEVA problems are illustrated in thefollowing slides for the sample projectfollowing slides for the sample project


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Sample ProjectSample Project Our sample project consists of 3 activities.Our sample project consists of 3 activities.

Activities 1 and 3 need the same resource.Activities 1 and 3 need the same resource.

Sample project baseline schedule is shown below:Sample project baseline schedule is shown below:


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Sample ProjectSample Project

Cost of Activity 3 is $100, cost of activities 1Cost of Activity 3 is $100, cost of activities 1

and 2 are $10.and 2 are $10.

If activity 3 was performed first (in spite ofIf activity 3 was performed first (in spite of

the baseline schedule) then after the firstthe baseline schedule) then after the first

week the SPI will be 10 or 1000%week the SPI will be 10 or 1000% But onBut on--schedule completion will beschedule completion will be

impossible!impossible!


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Earned Value problemsEarned Value problems

This example shows that Earned ValueThis example shows that Earned Value

Analysis results do not produce reliableAnalysis results do not produce reliable

information about project performance.information about project performance.

EV does not pay attention to the networkEV does not pay attention to the network

logic and successful performance on nonlogic and successful performance on non--critical activities could hide the seriouscritical activities could hide the serious

problems in the critical path.problems in the critical path. EV does not consider project resources.EV does not consider project resources.

EV will not notice if project riskEV will not notice if project riskestimations were changed.estimations were changed.


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Project Performance BaselineProject Performance Baseline

And at last one critical question:And at last one critical question:

What is project baseline?What is project baseline?


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Project performance baseline should includeProject performance baseline should include

contingency reserves.contingency reserves.

These reserves should be applied to theThese reserves should be applied to the

whole schedule.whole schedule.

Critical Chain theory called these reservesCritical Chain theory called these reservesProject Buffers.Project Buffers.

A schedule that includes these reserves andA schedule that includes these reserves anddefines start and finish dates and costs ofdefines start and finish dates and costs ofevery activityevery activity does not existdoes not exist..


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There are several performance managementThere are several performance management

baselines used at different management levels:baselines used at different management levels:

Project Team BaselineProject Team Baseline (does not include(does not includereserves),reserves),

Project Management BaselineProject Management Baseline (includes(includescontingency reserves),contingency reserves),

Management BaselineManagement Baseline (include contingency(include contingency

and management reserves),and management reserves),

Executive baselineExecutive baseline (include contingency and(include contingency and

management reserves and planned profit).management reserves and planned profit).

SDPM Project PerformanceSDPM Project Performance


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SDPM Project PerformanceSDPM Project Performance

MeasurementMeasurement In SDPM project performance is measuredIn SDPM project performance is measured

against a set of target dates and costsagainst a set of target dates and costsdefined for the project phases.defined for the project phases.

At any time you will be able to see currentAt any time you will be able to see current

probabilities of meeting target dates andprobabilities of meeting target dates and

costs and their trends.costs and their trends.

These trends will help you to estimate if theThese trends will help you to estimate if theproject (phase) performance will meetproject (phase) performance will meet

project team, project management,project team, project management,management and/or executive targets.management and/or executive targets.


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SDPM and Critical ChainSDPM and Critical Chain -- commoncommon

You may notice that SDPM and Critical ChainYou may notice that SDPM and Critical Chainapproaches have a lot in common.approaches have a lot in common.

Resource Critical Path is the same as CriticalResource Critical Path is the same as CriticalChain.Chain.

Critical Chain project buffer may be regarded asCritical Chain project buffer may be regarded asan analogue of SDPM contingency time reserve,an analogue of SDPM contingency time reserve,

Feeding buffers are similar to resourceFeeding buffers are similar to resource

constrained floats.constrained floats. Both the SDPM and Critical Chain approachesBoth the SDPM and Critical Chain approaches

recommend to use the optimistic estimates forrecommend to use the optimistic estimates for

setting the tasks for project implementers.setting the tasks for project implementers.


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SDPM and Critical ChainSDPM and Critical Chain -- differentdifferent

We cannot agree with the Critical ChainWe cannot agree with the Critical Chain

theorytheory

s assumption that one should alwayss assumption that one should always

avoid multitasking.avoid multitasking.

The assumption that only one project drumThe assumption that only one project drum

(in our terminology(in our terminology -- critical) resource existscritical) resource existsis also dubious. Our experience shows thatis also dubious. Our experience shows that

critical resources are different at differentcritical resources are different at differentphases of the project lifecycle.phases of the project lifecycle.


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Usually there are many subUsually there are many sub--critical activitiescritical activities

belonging to the different network pathsbelonging to the different network paths

and even the minor delays in the executionand even the minor delays in the execution

of subof sub--critical activities can lead to changescritical activities can lead to changes

in the RCP.in the RCP. This comes into conflict with the CriticalThis comes into conflict with the Critical

Chain theoryChain theorys assumption that the Criticals assumption that the CriticalChain never changes during the projectChain never changes during the project

execution.execution.


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Critical Chain theory is more qualitativeCritical Chain theory is more qualitative

than quantitative.than quantitative. Time & cost reserve usage evaluation:Time & cost reserve usage evaluation:

SDPM:SDPM: Success probability trendsSuccess probability trendsshow if reserves expended faster orshow if reserves expended faster or

slower than planned;slower than planned; More effective than:More effective than:

CC:CC:Qualitative judgment whetherQualitative judgment whether

buffers were properly utilized.buffers were properly utilized.

Integrated project performanceIntegrated project performance


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Integrated project performanceIntegrated project performance

informationinformation For effective project management, trulyFor effective project management, truly

integrated information is required:integrated information is required: Scope, Schedule, Resources, Cost, Risk.Scope, Schedule, Resources, Cost, Risk.

This information is presented in successThis information is presented in successprobability trends.probability trends. Identifying the resource critical path andIdentifying the resource critical path and

calculating success probability trends help tocalculating success probability trends help toproduce more successful projectproduce more successful projectperformance.performance.


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ExperienceExperience

Over past 11 years SDPM was successfullyOver past 11 years SDPM was successfully

applied to hundreds of projects inapplied to hundreds of projects inMetallurgyMetallurgy

Oil & GasOil & GasShip BuildingShip Building

Software DevelopmentSoftware DevelopmentTelecommunicationsTelecommunications

OthersOthers

AerospaceAerospace

BankingBankingDefenseDefense

Engineering &Engineering &ConstructionConstruction

ManufacturingManufacturing


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THANK YOU!THANK YOU!

We would appreciate your commentsWe would appreciate your commentson this presentation andon this presentation and look forwardlook forwardto further feedback and exchangeto further feedback and exchange..

Contact EContact E--mail:mail: [email protected]@mail.cnt.ru Web:Web: www.spiderproject.ruwww.spiderproject.ru

critical chain in russia

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