Critical chain project management (CCPM)

Revision as of 17:16, 24 September 2015

Critical Chain Project Management (CCPM) is a method of planning, executing and managing projects that are using the uncertainty as a possibility rather than as a threat. The methodology was developed by Dr. Eliyahu M. Goldratt in 1997. Goldratt´s Theory of Constraints (TOC), and the following book called "Critical chain", was the root for this method. This theory consists of a collection of methods and algorithms to describe supply chain management. An objection is to streamline the transfer of ingredients from the factory all the way through the distribution chain where that particular product is put onto market. The reason why Goldratt came up with this method was because projects often got delayed, there were increases in costs during the project and the deliverables were often less than first promised. Normal process of project planning, with a project team, what tasks to be accomplished, and what sequence, must be defined before the method becomes useful. The main principle with the CCPM is to strip off the risk of starting the project late or finish it early, and instead put some extra time into a buffer.

History/background

Figure 1: Eliyahu M. Goldratt (1947-2011), http://www.business-improvement.eu/toc/Goldratt_The_Power_of_Cause_and_Effect.php

Eliyahu M. Goldratt was born in Israel in 1947, and died in 2011. During his life he worked as an educator, author, scientist, philosopher and business leader. After completing a Master of Science, he obtained a Doctorate in Philosophy, both at Bar-Ilan University. Besides developing several business management methods, he also held patent in various areas, i.e. medicine and mechanics. Goldratt is said to be a thinker who motivated others to think. He encouraged his listeners to consider their business practices again with a fresh, new vision. ^[1]

Authorship

In Eliyahu M. Goldratt´s first book, called “The Goal (1984)”, he writes about a manager that has problems regarding his manufacturing plant. Goldratt argues that elements of an organization and their interdependencies can predict if the organization will do what should be done. As a result, the number of opportunities will increase when the number of interdependencies increases. A constraint is something that plays a part of a physical, social or financial restriction. Goldratt defines the elements controlling the performance of the system as constraints. When you have a restriction, and want to improve the performance of the system, it is required to follow the rule “more is better”. This means that the total input will be higher if the production rate of the constraint element increases. On the other hand, if you have a non-constraint element and want to improve the performance of a system, the rule will be “more is worse”. The lead times will increase when working at full capacity because the recourse will give excess inventory so that the constraint resource will be choked. ^[2]

Goldratt describes three measurements that can control the manufacturing plant;

• Throughput: The money generated from sales, which means the value of sales minus TVC (Truly Variable Cost). TVC is the cost of making and selling additional units.
• Investment: The money tied up in the system.
• Operating expense: The name given to the rest of the money, except TVC, which incurred to turn investment into sales. This includes wages etc.

Goldratt claims that decisions can be made by evaluating the effect from these three measurement, in the written order. ^[3]

He introduces the Drum-Buffer-Rope (DBR) method, that is about producing only what is needed, and to avoid overproduction. This methodology is called OPT, Optimized Production Technology. In Goldratt´s second book, called “It´s not Luck (1994)”, concept form Market and Logistics are included in the OPT. This has become the Theory of Constraints (TOC). The third book, “Critical chain (1997)”, demonstrates the implementation of TOC to Project Management. ^[2]

Theory of Constraints

A methodology where the main principle is to identify the most important limiting factor, i.e. constraints, to avoid these from preventing to reach a goal. The constraints should be systematically improved until they no longer can be seen as a limiting factor. A succeeded implementation of TOC will give the following benefits;

• Increased profitt
• Fast improvement
• Improved capacity
• Reduced lead time
• Reduced inventory ^[4]

Methodological basis

When using the CCPM method the focus should be on changing the deadline managing and multitasking. In a project there will always be added some intermediate deadlines, and when everyone reaches their deadline in time, the project is on time. When we go into the individual task level we will find the basic problem with deadline management, the fact that we have to hold the people who own the work responsible for meeting those deadlines. Parkinson’s law says that the time you have to perform a task is the time you will use. The more time that is given to finish the job, the longer it will take to finish. ^[5] The task owner always wants as much time as possible, while the project manager wants an earlier commitment as he wants the project completed as soon as possible. This often causes negotiation around commitment date. The problem is that if a project actually finishes before deadline it is rarely delivered earlier than the date of the deadline. This is because if the work is delivered before time there is a risk of getting less time for the next project.

Uncertainty is accounted for by putting safety time to each task. Although the tasks rarely finish early even without any uncertainties. The student syndrome can be the reason for this, which occurs when procrastinating the assignment as much as possible. The CCPM method determines that we can´t tell what the real priorities are because the critical path is not the whole solution, it depends on how the multitasking is done and the work is assigned. Goldratt´s method don´t claim that all the multitasking should be removed, but that the excessive multitasking should be removed. Excessive multitasking is for example when the employers are being forced to switch from doing their current task, even though it could have been completed. This can also be related to resource bottleneck, which is a designation for when resources are being tied up in other tasks than they are supposed to. Goldratt claims that this will lead to delay because of bad productivity. ^[6]

Deadline management can both strengthen and weaken the project when trying to excel, where excel means meeting equipment really quickly and reliable without burning people out. The deadline will create urgency, which will get people focused. It will create priorities and it will keep the project existing by don´t changing how people work and therefore don´t risk making things worse. At the same time the urgency will be only for the deadlines, there will be a lot of individual deadlines from the individual tasks. People who works with the different task will automatically set in safety time which will cause multitasking. This may cause that the deadlines will add uncertainty regarding that you don´t know when people are conducting their task, only that they will do it sometime before the deadline.

Goldratt claims that if the time is compressed for each task in a project we can gain significant improvement in speed and productivity. Two things have to change to get there; the deadline management and multitasking.

Core principles

Figure 2: Buffer consumption with green, yellow and red projects., https://www.youtube.com/watch?v=7Xf-waj23P8

The main goal using Critical Chain Project Management is to speed up the project with up to 30 %, increase the predictability above 90 % and increase the productivity. This is done manly by reducing stress, errors and wasted time. ^[7]

In the CCPM method, the main focus is on the resources, and not on the different tasks involved in the project, program or portfolio. In programs the resources can be shared across multiple projects. The method wants to produce a hierarchical resource assignment, where the least specialized resource who is competent at doing the task gets to do it.

There are three rules that are required to follow when using the Critical Chain Project Management method.

Relative global urgency

The first is relative global urgency, which means that urgency should apply both for the entire portfolio and for each individual task, is required to follow when using the CCPM method. The method gives less time for each task in the project, program or portfolio, and then it is added a buffer-box in the end. If there is any delay the project will overlap the buffer time. The buffer consumption tells if the project is in schedule, and if not, how delayed it is. The manager´s focus should be where the buffer consumption is at it´s highest, usually called the red projects. In the other areas (green and yellow) he/she is usually not needed.

Clear, stable priorities

Clear, stable priorities allows us to focus, specially on the few things that are important, and is therefor also required when using the CCPM method. The main focus here is to avoid multitasking. It is preferred that if one person is needed for two different tasks, he finishes the first one before starting the next task. The critical chain is the longest chain of tasks taking in to account resource limitation. This can be used to define the expected lower limit for the possible lead time of a project. To complete the critical chain schedule, the project buffer is added in the end. The multitasking will most likely also be reduced by using task lists that reveal which tasks is the most critical. If one resource is needed for two projects, and the projects are planned to go at the same time, the CCPM method recommend to start one of the projects after the other one is finished. The method determines that by pushing out the second project things will go more quickly, because then multitasking is reduced.

Relay race culture

To establish a relay race culture from thinking in terms and deadlines, to think as if in a relay race, is also a factor required for the CCPM method. Every person that is involved in the program or project have something physical to pass on to the next resource in the chain, comparable to the baton in a relay race, when their work is finished. The culture for the work needs to be changed, so that it is acceptable to be both late and early. The focus should be on one task at the time, and as quick as possible. This can be done in three different ways. A senior leadership team can be established, which oversees the change effort. They should not use much time managing the implementation, but rather use their time learning about the changes and support them. Alternatively work rules can be created. Examples of rules can be; “work in priority sequence until done”, “minimize interruptions” and/or “it is okay to say no or not now, when in the middle of working on an important task”. Last but not least a communication plan can also be established, where the main focus is to look at “what is happening”, “what is not happening” and “what should be happening”.

The three factors mentioned can be described as the heart of the critical chain approach. If all of these are conducted the project, program or portfolio will be faster, more predictable and have an increasing productivity according to the Critical Chain Project Management method. ^[7]

The Critical Path Method

Figure 3: An example of a project network with the critical path marked red, http://www.pmknowledgecenter.com/dynamic_scheduling/baseline/critical-path-or-critical-chain-difference-caused-resources

In the The Critical Path Method (CPM), a network diagram for a project is constructed, and its activities are based on their dependencies and relationships between those activities are included. The durations are factored, and those relationships is what we call a critical path. The longest critical path through our schedule network has zero or negative total flow. In the critical chain method, resources are factored in to the critical path, together with resource availability and resource scarcity. This is called resource constraints critical path. Where there are constraints or limited resources, duration buffers are added. Thus is the critical chain method to be done after the critical path is already constructed, and the resources are factored in and the duration buffer is added. ^[8]

Creating a CCPM schedule

To create a Critical Chain Project Management schedule there are three steps to go through. Step 1 is to add buffers, dependencies and durations. Step 2 is to calculate the project buffer duration. And step 3 is to calculate the feeder buffer(s) duration. An easy example would be if one project includes three activities. Activity A has a duration of 20 days. Activity B is parallel with activity A, and has a duration of 18 days. Activity C is executed after A, and has a duration of 6 days.

The first thing that has to be done is to identify the critical path. In this examples the critical path will be activity A and C. Calculated total duration of the project will be 26 days.

In step 1 the feeder buffer(s) are added to the end of each non-critical path. In this example there is only one non-critical path, and this is activity B. The project buffer is also to be added in step 1, this is added to the end of the last task, in this example after activity C. This buffer is added to protect all of the activities on the critical path. Also the dependencies must be updated. The feeder buffer must be added for activity B to C, predecessor for the project buffer is only activity C. In the end everything must be hooked together correctly. The method seeks to use the best estimate, or 50 % probable, individual activity time estimated. The activity time is reduced according to Parkinson´s law, and to avoid student syndrome. ^[9] Based on 50 % probability the durations must be modified, so that activity A has a duration of 10 days instead of 20, B has a duration of 9 days and C has a duration of only 3 days.

During step 2 the duration of the project buffer is calculated. As mentioned, the project buffer is protecting the critical path, which in this example is activity A and C, with a duration of 13 days together in the CCPM schedule. 50 % probability gives a project buffer duration of 6,5 days. This is calculated by dividing 13 by 2. The project buffer appears as a part of the critical path. The feeder buffer(s) duration are calculated in step 3. The feeder buffer protects the non-critical path, which will usually be multiple, but in this example there is only one (activity B). It is important to know that the buffer protects the entire path, and not each task, so it is added in the end of every non-critical path, and not after every task. The feeder buffer(s) are usually also set to 50 % of the path. In this example B has a duration of 9 days in the CCPM schedule, which gives a feeder buffer duration of 4,5 days. In this example this will give a new critical path to the project. The rule here is to set the feeder buffer(s) to 50 % of the path unless it creates a new critical path, like for this example. Then the duration of the feeder buffer must be reduced until it won´t give a critical path through the network. In this example the feeder buffer must be reduced to only one day. ^[10]

Figure 4: Shows the result of the example presented above, https://www.youtube.com/watch?v=t803JLLoi38

CCPM in Japan

The CCPM was quickly adapted as a method in Japan, especially in the governments construction projects. The construction projects in Japan often has a tight timescale because earthquake damage should be repaired before the next typhoon season. A Japanese construction company called Sunagogumi decided to use CCPM on a river bank reinforcement project for flood protection on the Tonebetsu river. The project was originally scheduled for mid-October, but finished at mid-August instead with the usage of CCPM. The early finish avoided exposure to the typhoon season. An other advantage of using CCPM in this case was that it made it easier for the company to inform the local community and government of the progress.

After this success Sunagogumi was able to win projects in tighter timescales and more projects was to be completed with the same resources. The improved communication with the government department lead to a collaborative development involving five pilot projects in this district. In parallel to this a government initiative for improving the government response to the contractors called “One Day Response” was being tested. Combined with CCPM this proved to be very effective. The duration was reduced by 20 % and the profits was increased by an average of 7 %. This has now resulted in the broad adoption referred to as Human Centered Project Management. The government officials are committed to respond within 24 hours when there will be project buffer consumption because of their delay. In 2007 this initiative was launched along with the launch of the Win-Win-Win Public Work Reform, which is a public works initiative that was introduced nationally in 2009. The government can not promote CCPM directly, but it is clear that CCPM is an essential part of the new approach. ^[11]

Advantages and disadvantages

Advantages of using the CCPM method is that the project manager is put in control of contingency and that it allows time to act if things slip. Behavior changes makes the most significant difference, which can be both an advantage and a disadvantage. When people in the organization are set to this specific change it can work out nicely. If only a few of the people in the organization miss out on the change, it can prevent the significant difference. The biggest advantage from this methodology is the capability of delivering projects on time.

Disadvantages of using Critical Chain Project Management method is mainly to adapt the team to the changes the use of this method requires. Additionally, the method require commitment from project team, from the project manager and from the stakeholders. There can be a lot of setbacks if the team doesn´t know the method and see the finish line. The methodology defines the activity duration as the major factor affecting the ability to complete the project in time. External pressure, internal politics and distorting estimates to win the project is also relevant to finish before deadline, and should also be addressed. ^[12] The methodology is nor supported by any major planning packages.

CCPM has got a lot of positive feedback, but the feedback is often from organizations who started out with weak, or non existing project management methodology. The methodology has been out for only a short period of time, therefor it is hard to assess any long-term benefits. ^[12]

If an organization don´t have effective project planning and controlling processes, run a relatively large number of quite similar projects in a matrix environment where the main concern is to meet the deadlines, Critical Chain Project Management can be a good method.

References

1. ↑ [1] TOC - Theory of constraints. (2012) Biography of Eli Goldratt (Internet) Available from: https://www.toc-goldratt.com/en/biography-of-eli-goldratt (Read 14.09.15).
2. ↑ ^{2.0 2.1} [2] Correia, F. & Abreu, A. (2012) An overview of Critical Chain applied to Project Management. ISEL, Polytechnic Institute of Lisbon (Internet), Available from: http://www.wseas.us/e-library/conferences/2011/Barcelona/MEQAPS/MEQAPS-45.pdf (Read: 10.09.15).
3. ↑ [3] Goldratt UK (2007) Throughput Accounting (Internet) Available from: http://goldratt.co.uk/resources/throughput_accounting/index.html (Read: 14.09.15)
4. ↑ [4]
5. ↑ [5] Fluent time management (2010) Parkinson's Law (Internet) Available from: http://www.fluent-time-management.com/parkinsons-law.html (Read 16.09.15).
6. ↑ [6] Goldratt UK (2012) How Bad is Bad? (Internet) Available from: http://www.goldratt.co.uk/articles/pm/badmulti.html (Read 10.09.15).
7. ↑ ^{7.0 7.1} [7] Newbold, R. (2011) Critical Chain Project Management (Internet video) Available from: https://www.youtube.com/watch?v=7Xf-waj23P8 (Seen 10.09.15).
8. ↑ [8] Passionate Project Management (2014) Critical Path vs. Critical Chain (Internet video) Available from: https://www.youtube.com/watch?v=3oYhEwKqu8g (Seen 16.09.15).
9. ↑ [9] Leach, L (1997) Critical Chain Project Management Improves Project Performance. API - Advanced Project Institute (Internet), Available from: http://www.cin.ufpe.br/~gmp/docs/papers/The%20critical%20chain.pdf (Read: 15.09.15).
10. ↑ [10] Bryant and Stratton College (2012) Critical chain example (Internet video) Available from: https://www.youtube.com/watch?v=t803JLLoi38 (Seen 16.09.15).
11. ↑ [11] Stratton, R. (2009) Critical Chain Project Management Theory and Practice, Nottingham Trent University (Internet), Available from: https://www.ntu.ac.uk/nbs/document_uploads/94592.pdf (Read: 18.09.15).
12. ↑ ^{12.0 12.1} [12] Raz, T., Barnes, R. & Dvir, D. (2003) A Critical Look at Critical Chain Project Management, Project Management Journal (Internet), Available from: http://www.csb.uncw.edu/people/rosenl/classes/OPS100/A%20Critical%20Look%20at%20Critical%20Chain%20Project%20Management.pdf (Read: 18.09.15).

Annotated bibliography

• Correia, F. & Abreu, A. (2012) An overview of Critical Chain applied to Project Management. ISEL, Polytechnic Institute of Lisbon (Internet), Available from: http://www.wseas.us/e-library/conferences/2011/Barcelona/MEQAPS/MEQAPS-45.pdf (Read: 10.09.15)

• Stratton, R. (2009) Critical Chain Project Management Theory and Practice, Nottingham Trent University (Internet), Available from: https://www.ntu.ac.uk/nbs/document_uploads/94592.pdf (Read: 18.09.15).

• Raz, T., Barnes, R. & Dvir, D. (2003) A Critical Look at Critical Chain Project Management, Project Management Journal (Internet), Available from: http://www.csb.uncw.edu/people/rosenl/classes/OPS100/A%20Critical%20Look%20at%20Critical%20Chain%20Project%20Management.pdf (Read: 18.09.15)