Project management applications of the theory of constraints beyond ...

More documents

Recommendations

Info

76 H. Steyn / International Journal of Project Management 20 2002) 75±80too large because people might tend to commit themselvesonly on time estimates that they could meet with ahigh level of certainty. Also, managers or co-ordinatorsat each level within an organisational hierarchy couldbuild in their own reserves on top of the reserves built inby the people reporting to them. It is furthermorebelieved that there is a tendency to waste time as a resultof reserves that are liberal. Should these assumptions becorrect the author supports this view), it wouldstrengthen the case for critical chain scheduling. However,should the assumptions be incorrect the TOC wayof scheduling will still reduce project duration becauseof the e€ect of aggregation [3].In traditional project scheduling the critical path doesnot take resource availability into account and resourceallocation is done as an additional step. The criticalchain, however, takes resource availability into accountto the extent that activities done by the same resourceare scheduled in series. To prevent non-critical activitiesfrom delaying critical ones, feeding bu€ers are placedwhere non-critical paths feed into the critical chain. Afeeding bu€er contains most or all of the contingencyreserve relating to the relevant non-critical path. Propermanagement of the feeding bu€ers prevents the criticalchain from changing during project execution and leadsto a rigorous project plan [3].3. Reasons for the emphasis on schedulingIn applying the TOC concepts to project managementGoldratt and other advocates of the TOC approach limitedthemselves initially to project time management anddid not venture into other aspects of project management.Here is why: the TOC approach prescribes that theconstraint of a system has to be identi®ed and attentionfocussed only on the constraint until it is not a constraintany more. Project duration is considered the major constraintof projects in general. Three reasons for identifyingproject duration as the constraint are discussed below.3.1. Positive cash ¯owobtained fasterProject costs often escalate as a result of extendedduration. As the schedule of a project with a ®xed scopeincreases, costs usually increase [4]. Furthermore, revenuesare often reduced as a result of delays. Projectduration and project budget are sometimes traded o€with the assumption that reduced project durationwould be possible only with an increase in project costs.The most common time±cost trade-o€ technique withthis assumption is one that was developed in 1957 by theDuPont Company and Remington Rand Univac. Thisis often referred to as the Critical Path Method or CPM.The reason for this apparent discrepancy is that authorson techniques such as CPM often consider the projectitself as an end on its own, while in reality the projectoften only exists to create another system or product.The objectives of many projects are to establish products,services or other outcomes that exist well beyondproject closure. The product life cycle as opposed to theproject life cycle has to be considered. The project lifecycle only forms the ®rst phase of the product life cycle.Although the product life cycle is described in systemsengineering literature and in certain literature on projectmanagement such as BS6079 [6], it is neglected in much ofthe other literature on project management that considerhand-over, project closure and the lessons learned as theultimate goal. Each system has a goal. If the goal of theproject is to deliver a speci®c product or system, theresulting product or system should have some bene®cialgoal. In business the goal normally is to generate moneythrough sales. The objective of the project should be tomaximise the revenue of the resulting system or product.Total product life-cycle costs and total product life-cyclebene®ts rather than the project budget) should be themain considerations. To plan and execute a project normallyresults in an initial negative cash ¯ow. The objectiveof the rest of the product life cycle should be to obtainsome bene®t a positive cash ¯ow in the case of projectsdone for business reasons). If project risks are takeninto account, the positive cash ¯ow should generally farexceed the negative cash ¯ow. Therefore, if a projectwere to be delayed, the overall e€ect on cash ¯ow orother positive outcome) could be expected to be impaired.If the product life cycle as opposed to project life cycle) isconsidered, it often makes sense to reduce project durationin order to improve the internal rate of return evenif it requires greater expenditure during project planningand execution. The optimisation of total product lifecyclebene®t is the ®rst motivation for the assumptionthat project duration is a very important constraint.3.2. Contingency cost of delaysA second motivation for considering duration as animportant constraint is that the contingency cost ofproject delays could be very high. For example, marketshare could be lost if a project is delayed. This is mentionedin the context of new product development inCritical Chain [2].3.3. Preventing changes to stakeholder needsA third reason is that it is believed that extended projectduration not only leads to escalation of overheadcosts, but also leads to scope changes because stakeholderneeds could be expected to change over time.While scope changes are often not allowed, there arecases where scope changes during the project life cycleare permitted. When a project is completed early there isless time for the stakeholders' needs to change and
H. Steyn / International Journal of Project Management 20 2002) 75±80 77thus certain scope changes could be eliminated. This isespecially applicable to the development of productswhere changes in market needs or in technology couldbe addressed by subsequent product generations. Recentexamples include the development of mobile telephonesand certain computer-related products). In industrieswhere the project deliverable has an extended life e.g. inthe construction industry), expediting the project wouldalso eliminate scope changes. However, in certain casesit might be argued that a project should not be rushed inan attempt to prevent such scope changes.These three reasons provide the motivation for theinitial focus of applying TOC principles to reduce projectduration. Obviously the development of a schedulingtechnique for a single project had to be developed beforea technique for multiple projects could be developed.Three applications of TOC beyond the ``criticalchain'' application to single project scheduling are discussedbelow, viz. application to multi-project environments,cost management and risk management.4. Application of TOCprinciples to managing resourcesin multi-project environmentsIt is estimated that up to 90%, by value, of all projectsare carried out in the multi-project context [7]. Theproblem of allocating resources to concurrent projects isnot new: it is fundamentally the same as the problem ofscheduling a ``job shop'' where multiple jobs are routedthrough a workshop with a number of dissimilar machinesor resources such as lathes, milling machines, drillpresses and heat treatment facilities. Job shop schedulingreceived ample attention in the 1960s and 1970s.Elton and Roe [8] say that TOC works well whendealing with individual projects but falls short inexplaining how companies could best manage a portfolioof projects. Senior managers, therefore, need to supplementthe guidelines given by Goldratt [2] with otheradvice. They maintain that managers need to know howto juggle a portfolio of projects, and that the only advicethat the book Critical Chain [2]) o€ers on that subject isto make sure to allocate resources carefully across projectsto minimise the constraints on shared resources.What managers need is a wider perspective of aggregateproject planning such as is explained by Wheelwrightand Clark [9]. The statement by Elton and Roe [8] ``...to make sure to allocate resources carefully acrossprojects...'' is a fair description of what the novel, CriticalChain [2] o€ers on the topic of managing multipleprojects. However, in addition to the simpli®ed descriptionof the approach to allocate resources to multipleconcurrent projects described in the novel, a method hasbeen developed to address resource allocation in themulti-project context. This material is still mentionedonly super®cially in literature in the public domain andis currently addressed only in proprietary course material[10]. The basic principles are discussed below.The TOC approach involves ®ve steps [1,2]:1. identify the constraints) of the system;2. decide how to exploit the constraints);3. subordinate non-constraints to the decisions) onexploiting the constraints);4. elevate the constraints) in other words: take stepsto ``widen the bottleneck''); and5. by returning to Step 1 above, determine whether anew constraint has been uncovered, rendering theconstraint under consideration a non-constraint orless critical.For a single project Goldratt [2] de®nes the criticalchain the path that determines project duration) as theconstraint. In a multi-project environment concurrentprojects commonly depend on a pool of shared resources.A resource that is overloaded limits the number ofprojects that the organisation can execute and thus presentsa further constraint. The objective is to maximizethe number of projects that the organization can doconcurrently. The concept of the critical chain removesresource contention within a single project but it doesnot address resource contention among projects. Therefore,another way had to be found to allocate scarceresources to multiple concurrent projects.Applying the ®ve-step TOC approach implies that theresource or resources) constraining the capacity has to beidenti®ed TOC Step 1). Then the sequence of work to beperformed by such a Capacity Constraining ResourceCCR) has to be scheduled TOC Step 2). The scheduling ofother resources should be subordinated to this scheduleTOC Step 3). To accomplish Step 3 a CCR Bu€er isinserted before each task performed by the CCR. This typeof bu€er is sometimes also called a ``drum'', ``strategicresource'' or ``bottleneck bu€er''). Such bu€ers are illustratedin Fig. 1 where CCR indicates activities that areperformed by the Capacity Constraining Resource. Thesebu€ers prevent the CCR from having to wait when a precedingactivity has been delayed. In this way, non-constraintsare subordinated to the constraint and the riskFig. 1. CCR bu€ers inserted to prevent the CCR from being delayed.Adapted from proprietary course material [10].
Page 1: International Journal of Project Ma

Project management applications of the theory of constraints beyond ...

Create successful ePaper yourself

Delete template?

Save as template?