The Theory of Constraints

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The Theory of Constraints

• AN OVERVIEW

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The Theory of Constraints (TOC) is a body of
knowledge that has been developed over the past
twenty years by Dr Eliyahu Goldratt. This body
of knowledge challenges many of the assumptions
about how we currently manage our businesses and
organisations.It is based on the logic of cause
and effect and has been derived from the hard
sciences.
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The Theory of Constraints is based on the premise
that-Every real system, such as a business,
must have within it at least one constraint. If
this were not the case then the system could
produce unlimited amounts of whatever it was
striving for, profit in the case of a
business.. Dr Eli Goldratt
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Types of Constraint

• THE MARKET
• CAPACITY
• RESOURCES
• SUPPLIERS
• FINANCE
• KNOWLEDGE OR COMPETENCE
• POLICY

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Drum - Buffer - Rope
ROPE
DRUM
20
20 B
16 E
18 D
15 A
10 C
B
BUFFER
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The Five Steps

• Step 1 Identify the system's constraint(s)
• Step 2 Decide how to exploit the systems
  constraint(s)
• Step 3 Subordinate everything else to the above
  decision
• Step 4 Elevate the systems constraint(s)
• Step 5 If in the previous step, a constraint has
  been broken go back to step 1, but do not allow
  inertia to become the systems constraint

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Development of TOC

• Dr Eliyahu Goldratt
• Original Discovery
• Optimised Production Technology
• THE GOAL by Goldratt Cox
• Range of Applications
• Invest NI TOC Business Improvement Programme
• Local Examples
• MBA Elective Module

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TOC Applications

• 1. Production
• 2. Distribution and Supply Chain
• 3. Financial Management
• 4. Marketing
• 5. Strategic Planning
• 6. Project Management

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Critical Chain Project Management

• THE THEORY OF CONSTRAINTS APPROACH
• TO
• PROJECT MANAGEMENT

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Why is it so difficult to manage projects
which deliver on time, within budget and
with the full specification or scope intact
?

• __________________________________________________
  
• __________________________________________________
  
• __________________________________________________
  
• __________________________________________________
  
• __________________________________________________

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Why is it so difficult to manage projects
which deliver on time, within budget and
with the full specification or scope intact ?

• Inadequate or poorly defined requirements
• Competing priorities
• Clients changing their mind
• Unforeseen events (Murphy)
• Poor communications
• Unsatisfactory means of measuring progress
• Key people not available when needed

• Pressure to meet unrealistic due dates
• Factors outside our control
• Essential information not available on-time
  (designs, specifications, materials and
  authorisations)
• Too much re-work
• Lack of leadership or good management

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Often projects have difficulty staying within
budget
Often scope or specifications are cut from project
Often projects have difficulty finishing on time
CAUSE ?
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Often projects have difficulty finishing on time
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How Do We Manage Uncertainty ?

• Set clear objectives
• Identify all the tasks
• Sequence the tasks logically
• Look for potential problems
• Ask for the maximum resources
• Manage the project by focusing on the Critical
  Path
• Add an element of safety to each task to cover
  any contingencies

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How Much Safety Do We Add ?

• HOW MUCH DO WE NEED ?

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Probability of Task Duration Time
Aggressive Estimate 50 Confidence
Safe Estimate 85-95 Confidence
Median
Prob
Time
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Project Managers Dilemma

• PRESSURE TO INCREASE SAFETY TIME - in order
  to complete projects on time
• PRESSURE TO REDUCE OVERALL PROJECT SCHEDULE -
  in order to meet the customers need for shorter
  lead times

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How Do We Protect Ourselves From Uncertainty
?
Prerequisite
Complete Projects on time (to be realistic)
Add protection to tasks
Objective
Be a good Project Manager
Respond to customers need for short lead
times (quick response)
Dont add protection to tasks
Prerequisite
Requirement
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YOU CANT IMPOSECERTAINTY ON
UNCERTAINTYYOU MUST LEARN TO MANAGETHE
UNCERTAINTY
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The Reasons Contingency TimeGets Wasted

• 1. PARKINSONS LAW
• - Student Syndrome
• - Procrastination
• - Bells and Whistles
• 2. LOSS OF POSITIVE VARIATION
• 3. MULTI-TASKING

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Milestone date
Student syndrome performance
Effort
Activity time
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Loss of Positive Variation
A - 10 Days
B - 10 Days
D
C - 10 Days
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Sequence of Steps

• Reduce activity duration estimates by 50
• Eliminate resource contentions and identify the
  CRITICAL CHAIN
• Insert a PROJECT BUFFER aggregating contingency
  time
• Size and place FEEDING BUFFERS on all paths that
  feed the critical chain

• Schedule activities to start no sooner than
  necessary protected by buffers
• Operate RELAY- RUNNER performance (eliminate
  student-syndrome and multi-tasking)
• Eliminate milestones
• Control the project using BUFFER MANAGEMENT

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Due-Date
RB
RB
10
FB
15
10
15
30
10
FB
30
10
FB
20
Proj Buf
RB
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CRITICAL PATH CRITICAL
CHAIN

• Places high value on the completion of tasks on
  time ,
• Employs techniques to minimise slack or float,
• Uses the amount of slack or float to set
  priorities.

• Places low value on tasks being completed on
  time,
• Inserts buffers even on paths that are critical,
• Manages buffers to minimise unplanned expediting,
  overtime and other costly deviations from
  schedule.

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Cultural Issues

• 1. Implementing Critical Chain requires
  changes in Policy, Measures and Behaviour,
  i.e. Culture.
• 2. The technical changes are relatively
  straight- forward, it is the change in mindset
  that is the more challenging aspect.
• 3. Changing the culture needs good
  leadership.
• 4. Our measurements are determined by others.

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Cultural Issues (contd.)

• 5. Customers expect progress according to a plan
  (progress payments, value measures).
• 6. Critical Chain project management is variable,
• it allows ebb and flow of work.
• 7. CCPM is ahead of the normal external
  control with its focused approach to measuring
  and reporting progress.
• 8. Work remaining versus percentage complete.

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Managing Multiple Projects

• 1. Prioritise the Projects
• 2. Plan Projects as per Critical Chain
• 3. Stagger the Projects
• 4. Report the Buffers
• 5. Manage the Buffers

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SummaryProject Management The TOC Way

• 1. BUILDING REALISTIC PROJECT NETWORKS
• - Necessary Dependencies
• 2. CONCENTRATING THE SAFETY WHERE IT MATTERS
• - The Buffer Concept
• 3. STAGGERING THE RELEASE OF PROJECTS
• - The Drum Concept
• 4. RELAY RUNNER WORK ETHIC
• - Teamwork
• 5. BUFFER MANAGEMENT
• - Control

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Ultimate Objective

• 1. The system is defined
• 2. The goal of the system is determined by the
  owner(s)
• 3. The constraint of the system is identified
• 4. All measurements are in line with the goal
  and the constraint

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Having a valid TOC network is one necessary
condition for successful project management. It
is not, however, sufficient. There are at least
four other necessary conditions to be met.

• The project must be for the correct problem,
• The overall objective of the project, when
  achieved, must solve the correct problem,
• The scope and design of the project must deliver
  the solution to the problem (the TOC project
  network is key here),
• The execution of the project schedule must
  deliver the scope and design of the project,
  achieving the overall objective within budget and
  on time. (This is the cultural and logistical
  change provided through Critical Chain and Buffer
  Management.

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Multi - Tasking
TASK A
TASK B
TASK C
A
B
C
A
B
C
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Parkinsons Law

• WORK EXPANDS TO FILL THE TIME AVAILABLE