Critical Chain

1
Critical Chain

• Team 7
• David D. Cho
• Minyoung Kim
• Bin (Raymond) Xiao
• Hua Zhang

2
Chapter 1

• The Company Genemodem
• Impressive Track Record Profits growth in 6
  consecutive years
• CEO Daniel Pullman (fully supported product
  development project)
• VP of Engineering Issac Levy (insisted on hiring
  a consulting firm to do an in-depth analysis of
  Genemodems product development)

3
Chapter 1 contd (The Problem)

• The Challenges
• 1. Short product life-span
• (like a triangle, only six
• months, continue to
• shrink)
• 2. Long product development time (roughly twenty
  four months)
• Resolution Drastically cut development time

4
Chapter 1 contd (The Project)

• Target Drastically cut development time
• Think tank Mark Kowalski, Ruth Emerson and Fred
  Romero
• Test ground A226
• Time span Before A226 is ready (roughly 16
  months)
• Resources No budget restrictions
• Incentives 10,000 shares each (current price
  62.48, 62.4810,000624,800)

5
Chapter 1 contd (The Think Tank)
6
Chapter 2

• Place University (Business school)
• Characters Rick Silver (Associate Professor),
• Jim Wilson (Full Professor)
  
• Main Event
• - Mr. Rick Silver is newly assigned to
  teach a
• course in the Executive MBA.
• - He is recommended by Jim Wilson, due to
  his
• unique style of teaching through open
  discussion.
• - Jim Wilson suggests Rick Silver to teach
  Project
• Management course and also he needs
  Rick Silver
• in finishing some interesting research.

7
Chapter 3

• Place A dinner event for Universities
  Presidents
• Characters Ms. BJ von Braun and 4 other
• presidents
• Main Event
• - Ms. BJ initiated conversation with other
  presidents
• about recent decrease in the number of
  MBA applicants.
• - Presidents are sharing about their ideas of
  that
• reasons for the decrease could be both
  over capacity of
• business schools and less demand of
  MBA degree.
• - They also talks about that Ivy leagues
  are not
• experiencing any decrease due to their
  reputation
• and strong financial ability to attract
  academic calibers.

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Critical Chain

• Chapters 4-6

9
What is a project?

• Textbook definition
• A set of activities aimed to achieve a specific
  objective and have a clear start, middle and
  end.
• Professor Silvers definition
• A complex initiative that needs pictures,
  diagrams, time charts, or showing sequential or
  parallel steps in order to manage it.

10
General Project Problems

• Regardless of industry or project type, there are
  three common problems to all projects
• Budget overruns
• Time overruns
• Compromising content

11
Conflicts - The Meeting

• B.J Von Braun -
• President of University
• Saturating demand for new MBAs
• Overextending capacity
• Large fixed overhead for business program that
  might potentially decline

• Christopher Page
• Dean of Business School
• Demand will not taper off
• Need investments to maintain talent in the
  business schools
• Talent will bring increase reputation and
  increase demand

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Meeting Adjourns

• Agreements
• Ability of graduates to get jobs as indicators of
  demand
• Use of survey tool as measurement
• BJ VonBraun already has the results she gets
  Page to agree to the decision-making conditions,
  then shares results with him.

13
Class Example New Production Facility Built in
Malaysia

• Sacred cow project for CEO
• Project is grossly over budget and significantly
  late
• Payback period pushed from 3 to 5 years, which
  still seems unrealistic
• All use uncertainty as reasons for delay - Upper
  management blames external environment and lower
  ranks blames internal sources

14
Conclusions

• Most problems in projects are direct or indirect
  results of uncertainty
• Most individuals add a safety margin to any
  deadline, usually around 80

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Critical Chain Chapter 7-9

• IOM580 Project Management Team 6
• Leon Tseng, Jasmine Yeh, Troy Yu, Hiroshi Harima

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Chapter 7

• Scene 1 Conversation between B.J. and Chris Page

We shouldnt change with such small fluctuation
Trim the budget according to the forecast!!
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Chapter 7

• Scene 2 Conversation between B.J. and Bernard

Business schools fail to deliver the markets!!
Management is art. It cannot be taught as a
science
18
Chapter 8

• Rick and Jim talk about the research subject
  Overdue and Overruns

Agree, but.
The budget overruns are not the main reasons for
the extended payback period
It is caused by the delays in completing projects
19
Chapter 9

• Rick explains PERT and Gantt techniques to
  students

Critical path is
Make an early start and keep the slack!!
Should postpone the investments until really
necessary
Its an optimization problem!!
20
Chapter 9

• Class discussion gets heated

The issue must be addressed from managements
point of view, too!!
if starting too many things managers would be
bound to lose focus
Using late starts, we lose slacks and everything
becomes important
The control mechanism measures the progress of
the project. The problem is that by the time the
progress report indicates something is wrong,
its usually too late.
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Chapters 10-12 OverviewTeam 8Jake Detels, Tom
Martin, Christopher Maynard, John Portwood
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Chapter 10

• Early vs. Late Start of Critical Path
• A waste of time
• Concentration on minor considerations and neglect
  the major ones
• The main thing is for the project manager to
  focus
• Both early and late start jeopardize the ability
  to focus, even though to different degrees
• Measuring Progress of Projects
• Measurement should induce the parts to do what is
  good for the system as a whole
• Measurement should direct managers to the point
  that needs their attention

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Chapter 11

• Manage for Cost or Manage for Throughput
• Theory of Constraints (TOC)
• Only one or two true constraints in system
• TOC says that conflict implies a faulty
  assumption and that must be corrected
• Example The only way to achieve good cost
  performance is through good local performance
  everywhere (Sub-Optimization)
• Incorrect assumption and root of
  problems in many organizations
• Strengthening the Chain
• 1) IDENTIFY, 2) EXPLOIT,
  3) SUBORDINATE, 4) ELEVATE

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Chapter 12

• Prime Measurement
• Again, there is only one (or two) constraints in
  a system
• Identification of the system constraint should
  drive identification of the Prime Measurement
• The main reason for an operational measurement is
  to induce the departments to do what is good for
  the company as a whole
• Tell me how you measure me and Ill tell you how
  Ill behave.
• Book examples changes at a steel mill

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Critical Chain Chapters 16 thru 18
Group 3 Katelyn Fang Sherry Liu Kevin
Nagatori Adam Terry IOM 580 Dr. Ardavan
Asef-Vazir Spring 2009
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Chapter 16

• Pitfalls of Managing a Program
• Pad each steps completion dates.
• Pad each step with a lot of safety time
• Waste safety time
• Student Syndrome
• Multi-Tasking
• Delays accumulate and advances do not

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Chapter 16 (cont)

• Bottleneck a resource with capacity that is not
  sufficient to produce the quantities that the
  market demands.
• Critical Path the constraint of the project.
• Feeding Buffer a buffer used by the non-critical
  path so that it does not affect the critical path.

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Chapter 16 (cont)
Before / Most Common
Project Plan with buffer at each step
After / Best Way
Project Plan with buffer at Critical Path and
Feeder Buffers for Non-Critical Path
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Chapter 17

• Monitoring Progress
• Before gt Monitor critical path by complete
• After gt Adding feeding buffer monitoring
• Days consumed on feeding buffer
• Days consumed compared with original buffer days
• Days left on feeding buffer
• Conclusion gt Focus on continuous monitoring

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Chapter 18

• 2 Types of Projects
• Projects done solely by the company
• Reduce lead time estimates
• Eliminate milestones
• Frequent reporting
• Projects done by vendors and subcontractors
• Talk their language
• Pay for vendor responsiveness
• Penalty for not finishing a project on time
• Cash Flow
• Sales
• Market Share
• Stock Value

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The Critical Chain

• Group 2 Chapters 19-21

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Lose-Lose to Win-Win

• Student (Ted) looks at the relationship between
  contractors and owners
• Lose-Lose
• Contractor bids low to obtain contract
• Contractor makes more money off of changes and
  delays
• Owner pays high price for changes
• No incentives for contractor to complete the
  project on time

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Lose-Lose to Win-Win

• The Win-Win relationship
• Owner benefits from a project which is completed
  early
• Owner shares this benefit with contractor in
  incentive bonus for finishing early
• Owner punishes contractor for finishing late with
  heavy penalties
• Contractors no longer bid on price but ability to
  complete project faster