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Critical Chain

by ELIYAHU M. GOLDRATT
Book Review and Core Concepts
Group Member
Shafa'at Gilani
Muhammad Iqrash Awan
Amber Younas
Sarosh Tasneem Raja
Sabeen Rashid
Introduction
Business Novel a niche in the business education market.
An artistic attempt to teach the concepts of Project Management.
Story of:
a professor trying to attain his tenure at a university's business school;
a business school's struggle to improve enrollment; and
a firm trying to reduce product development time.
Gives a real life feel and builds a real life context.
What is a Project?
"A set of activities aimed to achieve a specific objective and have a clear
start, middle and end.
Some block diagram of the various steps that must be accomplished in
order to achieve the objective, showing which steps should be done in
sequence and which in parallel
Projects are measured on three criteria:
Time
Quality
Budget

Project Basics
A project will run out of time but not out of excuses.
Top management blames externalities like vendors for delay and project
team blame on internal politics and top management.
Think Tank
A group of people finding solutions for problems

Problems common to all projects
Budget Overruns (Cost Overruns)
Actual cost exceeds budgeted. It makes project difficult to succeed, may increase
payback period, caused because of delays in project.
Time Overruns
When projects doesnt complete in time as specified in project plan, it occurs
due to more dependency on outside vendors.
Compromising the content
Compromised on original specifications
Uncertainty existing in every project is the underlying main cause for most
problems. People are not blind to it and they do add a lot of safety in their
planning.

Gaussian Curve
To plot the probability of activity
completion as a function of time,
it would look like the long-tailed
curve
"The higher the uncertainty the
longer the tail of the distribution,
To protect against uncertainty,
you put safety i-e The difference
between the median of the
probability distribution and the
actual estimate.



PERT and Gantt Techniques
PERT
A statistical tool used in Project management that is used to represent tasks
involved in a project.
It shows the minimum time needed to complete the total project.
Critical Path
The longest chain of dependent steps (Longest in time)
It determines the time it will take to finish the project.
Any delay on the critical path will delay the completion of the project.
Project manager must focus on it
PERT and Gantt Techniques
Gantt Charts
Unlike PERT diagrams, involve decisions.
The decision of the planner when to start each path.
Some chose the late start while others chose the early start.
Early start vs. Late start------ An optimization problem

What is progress?
Progress is measured according to the amount of work, or investment,
already done, relative to the amount still to do.
Projects take so long to complete their last ten percent. It's because, in
measuring progress, we overlooked the importance of the critical path.

Project Evaluation Major Flaw
Execution of project evaluation/ measurement is essentially flawed and
leads to stealing away management focus and wastage of resources.
It ought to:
Encourage parts to form an holistic view of project,
Direct management attention to points requiring immediate attention.
Theory of Constraints
TOC: new management philosophy, new research methods, robust
application.
TOC instills that the cost (weight of chain) and throughput (links between
the chain and the weakest one) worlds need to be taken in tandem.
Though entailing differing management practices, the above have no room
for compromise.
To strengthen the chain:
Identify the constraint (physical/ policy),
Decide how to exploit the current systems constraints,
Subordinate everything else to above decisions,
Elevate the systems constraints.

Theory of Constraints
As per TOC core problem of our
organizations is: the only way to
achieve good cost performance is
through good local performance
everywhere. (an idea disputed by
the analogy of the bottleneck)
Rather than seeking a compromise
unearth the underlying
assumptions!

Current Reality Tree
UniCo. example reaffirms the
fallacy that TOC denounces, i.e.
the basic assumption of
crowning principles of the cost
world.
Constraint: Prime operational
measurement (tonnes/ hour).

Safety Insertion
Inserting safety in the equation:
estimates are based on a pessimistic experience, the end of the distribution curve.
the larger the number of management levels involved, the higher the total estimation.
estimators also protect their estimations from a global cuts.
Yet despite the safety insertion, delays occur due to:
Limited incentive to report advance work and student syndrome,
Multitasking lengthens lead times for steps,
Dependencies between steps, which may cause advances to be wasted.
Importance of Multi-tasking
How despite of advances a
project may end up being
delayed in its entirety.

Importance of Multi-tasking
How multitasking leads to
greater lead times.

Production Application of TOC
Step1
Identify the Constraint
Constraint = Bottleneck= machine X
There can be multiple bottlenecks
Need: 100% utility of the work center
Solution: put enough stock before bottleneck


x
Flow of materials
TOC and flow of materials
Step 2
Exploit (dont lose any time on critical path)
Reduce pile of inventory before bottleneck
All work centers before X need to work at more capacity
Difference btw 1
st
and last work center is WIP
Time elapsed btw 1
st
and last work center till finished good making is essentially
Lead time
Rate of the bottleneck determines rate of the system
Solution: all work centers must work at the rate of bottleneck through Assembly lines
and JIT systems

TOC and flow of materials
Step 3
Subordinate (synchronize critical path with non-critical path steps to reduce
time wastage)
Protect a step with safety time
Combine the first work center with the slowest work center and the bottleneck
Critical path dictates the lead time and so time needs not to be wasted at Critical
path steps
Project buffer is needed i-e complete the project before time.

1 2 3 4
1 2 3 4
Project buffer
50% faster,
200% safety time
at each step

Feeding buffer from non-critical
path
Critical
path
TOC and flow of materials
Step 4
Elevate extra time

TOC and flow of materials
Step 4: Go back:
Progress on critical path needed to be measured
Time wastage on non-critical path also need to be monitored
Individual buffer time for each step needs to be calculated
Prioritize the steps according to the lesser buffer time they take
People needs to be focused monitoring the process
Types of Projects
Done by vendors and subcontractors.
Example: Plant expansion project.
Done mainly using company resources.
Example: Product development.
Each come with its own set of unique problems.
Vendors and Subcontractors Projects
Less control over the working.
Can become bottlenecks if other projects are dependent on them.
Less recognition of penalties associated with delays.
Chances of being pushed to low priority.
Think from the perspective of the vendor.
Negotiating with Vendors
Win-lose situation do not exist.
Offer money for shrinking the lead times.
Longer durations and late projects help the vendors:
Longer durations lead to changes.
Changes mean extra charges and extra revenue for vendors and sub contractors.

Questionable concepts
Working on step-N, present on a non-critical path
Delayed to the extent that it is feeding on project buffer
Does this mean that critical path starts now at N?
Changing the CP means changing position of feeding buffers

Will mess
up the
whole
project
Unprotected by
buffers, delay
will intensify
Charlies problem
X = Resource
No accuracy, lack of certainty
So does the sequence really make a difference?
Real difference= difference > project uncertainty
Project buffer is where we dampen the accumulated efforts of all the
uncertainties
Critical path: the longest path
Critical chain: chain of steps that are the constraint/resource dependent


Batch activities since the resource X is
not loaded entire time of the project
Critical chain removes resource contention within a project
Resource contention means that the same resource is supposed to do two
different steps at the same time
Removing resource contention between two steps necessitates postponing
one of those steps
Problem: which step to postpone?
When dealing with multiple projects, no manager would want his to be
delayed

Identify > Exploit > Subordinate
A project/department can act as a bottleneck for multiple projects relying
on a single resource
Protect it with buffers or it will reduce the total amount of projects
delivered in total
Prioritize them on the basis of targeted completion dates
Since all buffers are individual project based, have a specific bottleneck-
buffer

What's a constraint?
Resource constraint: exhausts one feeding buffer after another
Overloaded departments ARE NOT constraints

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