What would you do if government suddenly became a really demanding client? Oded Cohen

Public Sector Efficiency
Conference

Contractors parallel session:

"What would you do if the government
suddenly became a really demanding
client?"
Vilnius, September 2012
Copyright © 2012 by Oded Cohen Oded Cohen – TOC For Contractors 1

Oded Cohen
Oded has nearly 35 years of experience in
developing, teaching and implementing TOC
methodology, solutions and implementation
processes working directly with Dr. Goldratt all
over the world. Among the countries to which
Oded brings his expertise are the USA, Canada,
Japan, India, China, the UK, Poland, Russia,
Ukraine, Colombia, Chile, Peru, Turkey and
many others.
Oded has authored multiple TOC articles and
contributed to several TOC books.
Oded in the is the author of Ever Improve – A
Guide to Managing Production the TOC Way,
published in June 2010. Oded co-authored the
book Deming & Goldratt: The Theory of
Constraints and the System of Profound oded.cohen.gs@gmail.com
Knowledge – The Decalogue. www.toc-strategicsolutions.com
Together with Jelena Fedurko Oded has co-
authored the book TOC Fundamentals, recently
published in Russian.
Copyright © 2012 by Oded Cohen 2

Supplying to the State/Government
• This session is for contractors that provide the State or the Government
deliverables that have the nature of projects.
• Typical projects are in construction, infrastructure, IT, new product
development, etc.
• As such contractors are expected to meet three conditions – the projects
that they are committed to fulfill should be:
 On Time
 Within Budget
 According to the agreed specifications (promises)
• The Reality of projects is dominated by uncertainty. As such it is extremely
difficult and seems unrealistic to expect to meet the three conditions of
Time, Budget and Specifications.
• Nevertheless, it is likely that more and more State bodies may demand from
the contractors to meet these conditions.
Contractors may find such situations challenging.
Let’s see what TOC offers.

TOC Offer – CCPM
Critical Chain Project Management

CCPM Implementations in the Public
Sector Working with Contractors
• Defense -
 MRO - Maintenance, Repair and Overhaul
 New Product Development
• Infrastructure – Roads, Bridges, Railway, Buildings
• Utilities -
 Air Control
 Water, Electricity etc.


Results Summar y of many dif ferent
project companies

• Delivery Performance >95%
• Lead Time reduced by 30%
• Costs reduced by 15-20%
• Capacity increased by 30-50%

All without any significant investment – just
changing the rules, policies and measures

Results achieved within 6-9 months


What is unique about CCPM –
Critical Chain Project
Management?
TOC provides a managerial approach to better manage uncertainty that
dominates projects.
 TOC recognizes that key constraint of projects is the Critical
Chain – the shortest chain of dependent activities while the
dependency is not only logical but also through the resource
availability.
 Critical Chain is used for better planning and better controlling
the execution of projects plans.
• In Project Planning – CCPM promotes good and realistic project
plans with built-in protection – Project Buffers and Feeding Buffers.
• In Project Execution – CCPM promotes Buffer Management, Priority
setting, Early Warning and Recovery Actions.
• TOC Provides focus by setting the measurement for project
management – to be a reliable provider.
• Outstanding performance – reliability and competitive lead times can
bring the provider more sales.

Why is it so difficult to deliver on time
• There are too many uncertainties stemming from
 the nature of the project (first time, new technology etc.),
 the lack of control (customers’ instructions, bureaucracy, other contractors
etc.)
 and Murphy – what can go wrong – will!

• Typical situations that can block the progress of State Projects:
 There are too many cost overruns against budget – materials, resources etc.
 Existing projects are disrupted by ‘extra work’
 Many tasks (activities) take longer than planned
 Progress payments are not received when expected
 Revisions for late changes to scope hold us up
 Too much rework
 Too much overtime (especially before milestones and towards the end of the
project)
 Too many resources are not available when needed (they have many
simultaneous tasks)
 Priorities constantly shift
 Top management under pressure to add more resources
 Often scope or specifications are cut from a project
TOC claims that a Core Problem is responsible for the existence of the
majority of these problems.
Any solution must address the Core Problem.

Understanding the
Problem
Current Reality

B D Core Problem
A A conflict diagram - Core Cloud
C D’
B D
Ensure the project Take
is on-time corrective actions
and in full that compromise
(according to specs) project budget
A
commitments
Run projects
successfully
D’
C Do not take
corrective actions
Protect budget
that compromise
commitments
project budget
commitments


Analysis and solution application
What to change? What to
change to?
Low Performance High Performance
Measurements Measurements

Future Reality
• Elements of the
Current Reality

GAPS solution
and • Closing the Gaps
Gap Analysis
• Logic of the solution
• Benefits

Core TOC direction of solution
Problem PIVOT


The TOC Pivot – Managing Constraints

Lift
The
PIVOT GAP
TOC
Block

THE PAST TODAY THE FUTURE

What is the constraint of the project management?
When does the system create value for the goal of making more money?
The shorter is the time to complete the project – the better!
At the completion of the project – Throughput is generated and money
invested is starting to be returned!
Conclusion: Projects have the TIME constraint.


TOC Direction of Solution

CCPM –
Critical Chain Project Management:
The TIME constraint of the project is

Future Reality
presented through the Critical
Chain – the longest chain of
dependent activities. Managing the
project through the CC is geared
to finish the project in a safe and
quick way.

TOC direction of
solution


Overview of the TOC Solution
for Project Management
CCPM


TOC Solution for Single Project
Management
Strategy:
The Project is On Time, In Full & Within Budget

Tactics:
The Project organization implements Critical Chain project management

Mindset:
Projects to Customers Planning Execution Control
are the Injections 2-4 Injections 5-9
Prime Driver – the Drum

Injection 1
The Prime
Measurement


CCPM – Injection 1
Achievement of the delivery
commitments is established as a
Prime Measurement for managing
project environment


DE Achievement of the delivery commitments is
E
established as a Prime Measurement for
N
D
B
U
R managing project environment
Inj

Measuring On Time Delivery
1. Reliability - The number of projects that were delivered on-time (or
early) versus the total number of projects within time “buckets” (e.g.
month, quarter, year). [Percentage]

2. For internal use: The amount of money that has been delivered on time
or early versus the total value of the projects within time buckets
[Percentage].

3. Also for internal use : The financial impact of the late delivery – T$D –
Throughput Dollar Days. [the amount of money delayed multiplied by
the number of days late]


Project Planning the TOC Way

CCPM - Injections 2-4


Management
Tactics:

Mindset:
Projects to Customers Planning Execution
are the Injections 2-4 Control
Prime Driver – the Drum Injections 5-9
Injection 1

Injection 2 Injection 3 Injection 4
Project Planning Critical Chain
Diagrams Plan Buffers

Criteria for a Good Project Plan:
• Provide Financial Benefits
• Realistic
• Immunized against Disruptions


Project Planning Diagrams are in place
with tasks resourced and estimated for
duration – while estimates of durations are
challenging but achievable


DE
E Project Planning Diagrams are in place
N
D
with tasks resourced and estimated for duration – while
B
U
Inj R estimates of durations are challenging but achievable
Project Planning Diagram

Build a diagram of task dependencies and check its quality in accordance
with the following criteria:
 Completeness – No more than 400 tasks
 All dependencies are identified
 The deliverables ("output") of each task clearly known
 All tasks are connected "Finish-Start”
 Feasibility
 Required resource(s) – main resources, no fractional and no specific names
 Duration of tasks – no forced dates

CCPM-Injection 2 establishes a mechanism and procedures to develop a quality
diagram of the project plan, with duration of the tasks to be
set “Challenging, but achievable“.


DE Project Planning Diagrams are in place
E with tasks resourced and estimated for duration – while
N
D
B
U
R
Inj estimates of durations are challenging but achievable

Estimation times – Current reality in projects

Why? Because of
Task duration - Behavioral reasons
the behaviour of
for 80% probability distribution
managers –
in planning phase
managers ask for
•Students syndrome estimations
in execution –
• Parkinson’s Law
they treat
Probability of

• Bad multitasking estimations as
completion

justified
commitments

Tasks contain a
lot of safety! 50% 80% Time

DE
Project Planning Diagrams are in place
E
with tasks resourced and estimated for duration – while
N
D

B
U

R
Inj estimates of durations are challenging but achievable
Task duration – Behavior
Estimation times – must go through a challenging process
Probability of

Probability of
completion

50%80% Time completion 50% 80% Time

TOC approach – estimates of duration should be challenging but achievable!
In majority of the cases the duration with 50% probability equals HALF the
duration with 80% probability.


Critical Chain determined through
resolving resource contention


DE CCPM – Injection 3
E Critical Chain determined through resolving
N
D

B
U
resource contention
R
Inj

Making the project plan realistic means that we identify and
address resource contention situation. This is
happening when the plan calls for the same resource to
perform more than one task at the same time.
Two mechanisms are used to handle the situations:
1. By re-assigning resources that are likely to be available
when needed by the plan
2. By sequencing the tasks by creating dependence
between tasks due to availability of resources – this is
the Critical Chain


N
D

B
U
resource contention
R
Inj

Sorting out Resource Contention:
The Critical Chain is the chain of dependent events - one
that takes into consideration all dependencies (including
resource dependency).

Critical Path Promise = 56 days
G10 B10 M16
Letter and M16 - Resource contention! C20 Finish
Colour = Resource
W16 M16

Critical Chain G10 B10 M16
C20 Finish
W16 M16 68 days

N
D

B
U
resource contention
R
Inj

The role of Critical Chain in managing projects
The Critical Chain is the chain of task and resource
dependencies that prevents the project from being
planned in a shorter interval, given finite resources.

The Critical Chain provides the major focus and back bone
for the planning. It plays even more important role in
controlling the execution of the plan.

Hence – the name of the solution - CCPM


Buffers are inserted in strategic
points


E

N
D
Buffers are inserted in strategic points
B
U

R
Inj

Reality in projects – Working to task due dates
What happens if it takes more than 10 days -
Plan 10 10 16

Actual > 10 (15) 10 16
RESULT - The delay of 5 days is passed on - the project is
”said to have “moved to the right
What happens if it takes less than 10 days -
Plan 10 10 16

Actual <10 (6) 10 16

Because of working to task due dates
the positive variation is not passed on (usually)

DE
E Buffers are inserted in strategic points
N
D

B
U

R
Inj

Buffer – is a protection mechanism
The Critical Chain of each project is being protected by the
placing of sufficient time buffers at strategic points within
the flow of tasks:
Project Completion Buffer (PB)
Feeding Buffers (FB)
Feeding
Buffer - Project Completion
FB Buffer - PB
G10 B10 M16
C20
W16 M16


Execution Control
the TOC Way

CCPM - Injections 5-9


Management
Tactics:

Mindset: Planning
Projects to Customers
Execution Control
are the Injections 2-4 Injections 5-9
Prime Driver – the Drum
Injection 1

Injection 5 Injection 6 Injection 7 Injection 8 Injection 9
Reporting Resource Recovery POOGI Critical
Buffer Management
Priority
availability Actions Resources

Criteria for Good Execution Control : Priority, Recovery, POOGI
The Reality of the Project Execution – DELAYS!

The TOC Way means: Manage through the Buffers!

Introduction to Execution Control

Buffer Status

The penetration to the buffer states the amount of days
consumed from the buffer.
Buffer is split into three parts and the consumption zone is
colored by a relevant color – green, yellow, and red.

The planned size 100%
of the buffer project
completion Buffer
consumption

The buffer status is used for Self-expediting, Priority of assigning
of resources and for Prompting management actions and
decisions


CCPM - Injection 5

Tasks are performed according to the
status of their corresponding buffers
through using Buffer Management.
Resources inform daily how much time it
will take them to complete the task.


CCPM-Injection 5
Tasks are performed according to the status of their
corresponding buffers through using Buffer Management.
Resources inform daily how much time it will take them to
complete the task.

Buffers Status


CCPM-Injection 6
Resource Availability is monitored in
anticipation of a new planned task


E
DE CCPM-Injection 6
Resource Availability is monitored in
N
D

B
U

R
Inj
anticipation of a new planned task
In order to ensure resources for the tasks in CC
– look ahead!

The length of the project is determined by the CC.
Any delay on CC can bring the whole project to be late.
When a resource is not available for a task on CC and the task has to
wait for the resource – it causes delays on CC.
In order to prevent such situations – project manager must ensure that
all resources assigned for CC were available when they are needed.
This can be achieved through early check and early warning.
This is like a “wake-up call” for a resource on CC.


CCPM-Injection 7
BM for recovery actions is in place


DE
CCPM-Injection 7
E BM for corrective actions
N
D

B
U

R
Inj
(expediting) is in place
Restoring the level of the Buffers

The reality of the project is DELAYS!
The penetration to the buffer presents a risk to the
expected completion of the project.
When the trend of Buffer Consumption is too high or
when the remaining level of buffer is below
Low(=RED!), managers are expected to come with
ideas of how to restore the buffer to higher level.
These ideas are discussed and actions agreed.


CCPM-Injection 8
Buffer penetration reasons are
reviewed periodically for POOGI


DE
CCPM-Injection 8
E Buffer penetration reasons are
N
D

B
U
reviewed periodically for POOGI
R
Inj

Buffer Management Statistics
The commitment to POOGI is performed through collecting
statistics of major reasons for delays while the buffers
are depleted. The reasons are collected and used for
statistical analysis.
A periodically meeting to review the statistics of the
reasons for buffer penetration is held.
The meeting is used to decide on the necessary actions to
eliminate causes for buffer penetration. Improvement
initiatives are agreed and the progress of implementing
these initiatives is monitored by the Buffer Management
Committee assigned.

CCPM-Injection 9
Resources are monitored as potential
CR – Critical Resources


DE
CCPM-Injection 9
E Resources are monitored as potential
N
D
B
U
Inj R CR – Critical Resources

Please note that in reality there is a pressure to dedicate
resources to projects. This stems from the demand for
resources to be available when needed (as per the
evolution of the original plan). Nevertheless – resources
can be used in more than one leg of the project and
hence can become critical.
Even though the Critical Chain mechanism ensures that
there is no resource conflicts and contentions in the plan
– the unfolding reality can cause resource contention
and highly utilized resources can cause delays and
penetration to the buffer.


CCPM Implementation Map
Deliverables for starting the next phase

Phase 1 Phase 2 Phase 3

Mindset: Planning Execution Tactical Strategic
Customer Systemic Control technical deliverable:
orders are the approach to & deliverable:
Prime Driver project plan Global Projects are
for managing diagrams CCPM for delivered on time
improvements
projects – planning and within budget and
The Drum execution according to
control is in original promises
place

Deliverable: Top Deliverable: There is a
management accepts good enough plan that
the business serves as a base for the
opportunity associated proactive execution
with on-time delivery control


What would you do if government suddenly became a really demanding client? Oded Cohen

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