The Critical Chain-Book Review

SYMBIOSIS INSTITUTE OF MANAGEMENT STUDIES (SIMS)

OPERATIONS AND PRODUCTIONS MANAGEMENT ASSIGNMENT-1
BOOK REVIEW ON

THE CRITICAL CHAIN

(By DR. ELIYAHU M. GOLDRATT) DATE OF SUBMISSION: 5th October 2010

SUBMITTED BY EKTA SINGH 1A 22

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The Critical Chain-Book Review

1) ABOUT THE AUTHOR

Eliyahu Moshe Goldratt (born August 15, 1948) is an Israeli physicist who became a business management guru. He is the originator of the Optimized Production Technology, the Theory of Constraints (TOC), the Thinking Processes, DrumBuffer-Rope, Critical Chain Project Management (CCPM) and other TOC derived tools. He has authored several business novels and non-fiction works, mainly on the Theory of Constraints.

2) PLOT INTRODUCTION
Critical Chain is written as a novel, not like a project manager's how-to guide. This book is a story about a professor trying to attain his tenure at a university's business school. The plot is used to maintain interest in the subject and provide a real life feel to the book. It provides plenty of real-world examples. The plot of the novel is fourfold: 1. A professor trying to become tenured, 2. A business school's struggle to improve enrollment, 3. Teaching philosophy, 4. Applying the Theory of Constraints to project management The goal of the book is the last point, but Goldratt makes it clear that educational systems must change to better accommodate the quickly changing world of business. The book walks the reader through a series of steps to establish the principles for the discussion. It is written for someone with a modicum of project management background.
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The book starts by pointing out the problems with how time estimates are normally done on projects. It then provides a primer on the Theory of Constraints and an example of its implementation in a steel mill. With the foundation set, it proceeds to show how the Theory of Constraints can be applied to schedule generation, resources constraints and multiple projects.

3) PLOT SUMMARY
The book provides a range of tools and processes to support Risk Management and the protection of project value. A common thread them is a forward-looking approach to the management of projects. Planning with Network Building looks forward to the objectives of the project before considering the path of activities to get there. The Critical Chain Schedule looks forward to the final project deliverables without being distracted by intermediate task due dates that only serve to sub-optimize schedule performance. Relay race resource behaviors look forward with fine focus on the making timely handoffs with quality. Synchronization looks forward to the capabilities of the pipeline. And Buffer Management eschews percent complete or earned value of completed work as water over the dam, and instead looks forward to the work remaining, and its variation and risks.

Management of uncertainty and risk in an effort to deliver promised project value with certainty is what project management is all about, and risk and uncertainty lie in the future. Critical Chain Scheduling and Buffer Management is not only a technique for the development and tracking of project schedules. It is a coherent and comprehensive approach to project management that encompasses and effects other processes and practices associated with project management as well. Most importantly, its implications for looking forward and taking appropriate actions for accepting, avoiding, and mitigating risk are significant and beneficial.

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4) ESTIMATES

Goldratt claims that the current method of generating task time estimates is the primary reason for increased expense of projects and their inability to finish on time. The commonly accepted principle is to add safety (aka: pad or slop) to generate a task time length that will essentially guarantee the step gets completed. He asserts that estimates for a task are based on individuals providing values that they feel will give them an 80-90% chance of completing the step, these estimates are further padded by managers above this person creating a length of time to complete a task that is excessive - as much as 200% of the actual time required. It is this excessive padding that has the opposite effect - guaranteeing the task will run full term or late. As counter intuitive as this seems, he provides examples of why this is the case. This predisposes the people on the project to consume the time estimate by:

1. Triggering the "student syndrome" in the resource assigned to the task - they have more than enough time to do the task, therefore they start the task late using up all the safety. 2. Encouraging multitasking. The safety is added knowing that the resource will not be able to focus on the task and hence encouraged to multitask on
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multiple projects at a time, which significantly impacts all projects. 3. Not claiming early completion. In order to preserve the safety concept in future projects, resources do not report tasks completed early. Obviously, though, there is no way to hide a late completion.

5) THEORY OF CONSTRAINTS PRIMER

The book presents a primer for Theory of Constraints. This is done in the form of a lecture by a professor who has recently returned from a sabbatical at a large conglomerate that uses the Theory of Constraints. The discussion focuses on the current methods of measuring success at a work center (cost and throughput) and shows how they are contradictory to the success of the production line as a whole. The book enumerates the five principle steps of the Theory of Constraints: 1. Identify. Identify the bottleneck of the system. 2. Exploit. Exploit this bottleneck, making its throughput efficient by changing processes, equipment maintenance procedures, training, policies, etc. 3. Subordinate: Subordinate the throughput of all other work centers to this work center. 4. Elevate. Invest in this work center to increase its throughput - add equipment, manpower, etc. 5. Inertia. Start the process over on the line to determine the new bottleneck. This philosophy keeps the cost and throughput models at odds with one another since the subordination process necessarily decreases efficiency. Hence, evaluation criteria for properly managing a work center must change to properly reward the organizations success.
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The book points out this conflict with respect to an axiom in the Theory of Constraints that states that if two concepts are in direct conflict, then there is an assumption as part of those concepts that is incorrect.

Steel Mill Example

To illustrate, the book uses an example of a steel mill with significant production problems, excess inventory and cost issues. It methodically assigns all the issues of the plant to the method in which success of a work center is measured. The errant assumption is efficiency being measured by tons of steel per hour. The flaw in the measurement is that not all material takes the same length of time to produce and not all work centers have the same throughput. It concludes the sources of the problems for the steel mill are: Issue Causes Yard inventory Over producing product to minimize set-up impact, Producing excess high-throughput material Instead of sitting idle, produce unneeded product. Raw material shortage Over consumption of material to produce material in inventory After subordination, the key is to maintain a small buffer of material in front of the bottleneck to ensure it never stops producing due to lack of material.

6) BASIC PRINCIPLES
After laying this groundwork, the book turns to applying this to Project Management. After declaring the constraint to be the schedule's critical path, the book maps out a set of terms. The result is:
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Production term Work center Product Pre-work center inventory Project term Task Time Work buffer from the feeding tasks of the critical path Bottleneck resource

Bottleneck work center

It proposes a method of schedule generation where all tasks are estimated at a reasonable time for completion. This would be a time estimate that would give the resource a 50%-60% chance of completing the task on time. The theory being that one task may take less than its estimated time but another may take more - on the average evening out. Since there is no safety, the conditions above that cause misuse of time on the task do not exist. Safety is not added to individual tasks. Safety is added to the project as a whole (at the end) or to the end of a sequence of tasks feeding the critical path.

7) RESOURCES INFLUENCES

Using numerous analogies and examples, the concept of a resource buffer is introduced. This concept claims that one must ensure the resource bottleneck on the critical path is always busy and stays focused. They should be: Kept on task. In other words, minimize multitasking Be ready for the assignment; even if it means they are idle waiting for dependencies to complete. The book introduces increasingly complex situations to remove the non-practical classroom approach until it reaches two common project situations: A bottleneck resource on the critical path and non-critical paths, Multiple projects contending for constrained resources,
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The book emphasizes that the project manager has to understand that he or she is not working with absolutes. Resolution of these issues are not absolute. The time estimates are just that - estimates - they cannot be treated as absolute times. This is essential for the following two points.

8) RESOURCE CONSTRAINTS

A project example is given with a single bottlenecked resource on multiple paths. Since this resource is over utilized on multiple paths its tasks need to be considered when determining the project duration. This results in the introduction of the term critical chain - the aggregate of the critical path and the constrained resource leveled tasks.

9) MULTIPLE PROJECTS
Projects are going to use common resources. Organizations need to accommodate parallel projects while staying inside the Theory of Constraints concepts. This requires developing a prioritization scheme for the resource to determine the correct order to do work (i.e. due date of the project). As before, once the scheme has been developed, the resource needs to be focused (not multitasking) on completing the task by the due date.

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COST OF MONEY

The book closes by introducing a concept for a method for determining which projects should be selected for execution. It is based on looking at the investment in each project in terms of money-days. Money-days is the product of the investment in the project and its duration.
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REVIEW

As mentioned in the introduction the book is written as a novel with a lot of discussion. This form makes it very pleasant to read. The topics of the book are presented to the reader through the conversations and the discussion professor Silver has with his students, colleagues and people from business Also the discussions concern a lot of examples and analogies which makes it easy for the reader to see the application of the theories. The parallel stories make the story more enjoyable and they do not disturb the real story. As also mentioned in the introduction that it was few figures. The figures that are there are vital, but on some occasions I think there should have been some more figures.

Concerning the content of the book it is I think, good to have some knowledge about project management and critical chain theory before reading it. By that I mean that the background from the Project management course was enough to understand the problems and enjoy the book. Through the classes of professor Silver and the problems of the students the reader is introduced to the TOC, critical path and critical chain. Different topics are explained through the answers to questions that the students address. Other concepts such as the Triple Constraint of project management are covered.

In the lectures the class identifies the problems their projects are having, and from that the theory is developed. The classes usually ends with some consensus about the problems often stated as professor Silvers summary of the lecture. These statements I think are conceptual errors that occur in project management and may work as warnings or helpful tips within ones own project if one bears them in mind. An example is:

There is no way to achieve good throughput performance through good local

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performance

By that one means that one must optimize the system as a whole, which implies identifying the bottleneck.The book will not function as a reference book, because of the form of the book, but it serves its purpose as an inspiration and introduction to the problems and solutions (at least according to this theory).

How will this affect my work? Well what I can say that it was very inspiring to read after dealing with the topic in our classes and I look forward to learning more in our coming lectures. The method appears effective and with the additional tools we have learned about on how to discover when the project is eating into the buffer, it appears even more suitable. At least I will be able to structure my work in such a way that I identify the necessary tasks to reach it. Hopefully I will also be able to use this when I start my career in the future.

What I also found very interesting was the teaching method of professor Silver in the book.This discussion forum appealed to me, in the way he was able to include his students into the lecture. I should be able to use as a tool in presentations.

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CONCLUSION

Critical Chain is a well written book by Eliyahu M. Goldratt useful for project managers, senior managers and definitely potential managers like us dealing with, or who would be dealing in future with, one of the most difficult challenges of developing highly innovative new products. In fact not just managers but all those who havent read are missing a wonderful opportunity for professional and personal development.

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