Goldratt’s Critical Chain

A Technical Summary

© Copyright Chesapeake Consulting, Inc., 1997 All rights reserved. No parts of this document may be copied or reproduced without the express permission of Chesapeake Consulting, Inc.

This document is structured according to the TOC five step focusing process and its two prerequisites. 1997 -2 . This document assumes the reader has been exposed to the Theory of Constraints and the TOC Measurement System.Technical Summary of Goldratt’s Critical Chain Introduction The purpose of this document is to summarize the technical aspects of applying the Theory of Constraints (TOC) to project management as outlined in the book Critical Chain by Eli Goldratt. Inc. © Copyright Chesapeake Consulting..

) is “to improve the financial well being and quality of life of all stakeholders”. A business system with the above purpose will be used as an example of a larger system. Inc.g. And with further analysis. etc. For example. Therefore. such as churches. In the chart below the solid line shows the typical sales cycle of a product. the purpose of a business system (as opposed to non-business systems.) and by the appropriate resources in order to generate the desired result. projects (e. Define the System’s Purpose Since a project is a system operating within a larger system. By combining the key element of project lead time and the stated purpose of the larger business system. etc. it can by concluded that a project contributes to the larger system’s purpose by completing as early as possible. engineering.Technical Summary of Goldratt’s Critical Chain Prerequisite 1 . time.) are being planned and implemented within larger business systems (e. $ Time Based on this. drug producing company. a project is a system. fire/police departments. but the concepts outlined in the remainder of the document can be applied to non-business systems as well. software development company. 1997 -3 . etc.) everyday.g.Identify the System and its Purpose Identify the System As defined in Webster’s New Collegiate Dictionary. the purpose of a project (in a business © Copyright Chesapeake Consulting. the earlier a product is introduced the sooner and potentially longer you can reap the benefits of selling that product. According to Stephen Covey. the purpose of the project system can be defined. By definition a project is a set of interacting and/or interdependent tasks that must be completed according to specific parameters (e. a system is “a regularly interacting or interdependent group of items forming a unified whole”.g. As this chart shows. the dashed line represents the point in which sales would begin if the product were introduced earlier.. etc. software. Now that the purpose for the larger business system has been defined. a manufacturing company. it is concluded that a project is a system that operates and interacts within a larger system. budget. new product development. then the purpose of the larger system needs to be defined before defining the purpose of the project.

. 1997 -4 . © Copyright Chesapeake Consulting. Inc.Technical Summary of Goldratt’s Critical Chain system) is to complete as early as possible so that the financial well being and quality of life of all the stakeholders is improved quicker.

e. the sooner completed the better for all the stakeholders).Technical Summary of Goldratt’s Critical Chain Prerequisite 2 . but it does mean that any decisions in spending should be based on the amount of incremental Net Profit (NP) improvement that would be generated by finishing earlier versus the incremental increase in Investment (I) required to make that happen (ROI = NP/I).. the method for measuring the success of the project should be based primarily on the ability of the team to meet or beat the schedule (i.Determine the System’s Measures Based on the purpose of a project. 1997 -5 . This method for measuring is in contrast to the more traditional method of measuring a project’s success according to the team’s ability to manage cost first and time second. This is not meant to imply that the cost is not important. © Copyright Chesapeake Consulting. Inc.

which is addressed in the subordination step of this process). So. of dependent steps. Realistically this resource will work on these various tasks in one of the two following manners • at different times until all tasks are complete (also known as multitasking. then we must determine what are the tasks and/or resources that determine when is the earliest a project can complete. 1997 -6 . Therefore the © Copyright Chesapeake Consulting. in terms of time. Because time is the primary attribute of meeting the purpose of a project (“…complete as early as possible…improved quicker”). thereby completing a task prior to starting another. Therefore dependencies between steps can be a result of a path and/or a common resource. then the constraint of a project is the critical path/s. then the constraint of a project is not necessarily the critical path. It is widely accepted that the critical path of a project is the longest chain. 10 5 10 10 15 15 10 20 Critical Path 10 5 15 5 The only problem with this conclusion is that there maybe multiple tasks on various noncritical paths which are required to be completed by the same resource.Identify the System’s Constraint A constraint is anything that limits the system from realizing a higher performance relative to the system’s purpose.Technical Summary of Goldratt’s Critical Chain Step 1 . in terms of time. In this example the critical path is 60 days (determined by adding up the total times for each chain of dependent steps). the longest chain.. Inc. of dependent steps. In either case. See figure below and note that all numbers are in units of days. of dependent steps may not be the critical path. Since the dependencies between steps is not necessarily a result of a path. in terms of time. or • in some specified sequence (typically of his/her own choosing). if time is the primary measure of a project and the critical path is the longest chain.

Goldratt states this as the definition for critical chain.Technical Summary of Goldratt’s Critical Chain constraint of a project is the longest chain. 1997 -7 . of dependent steps (where the dependencies are a result of paths and/or common resources). 10 X 5 X 10 10 15 X 15 10 20 Critical Chain 10 X 15 5 X 5 © Copyright Chesapeake Consulting. See figure below and note that X identifies tasks performed by a common resource. in terms of time. Inc. and the dashed line with an arrowhead defines the critical chain (which is determined to be 75 days long versus the 60 day long critical path)..

In contrast. why do projects still run late using this process. isn’t this methodology (of adding as much as 200% safety) counter to the purpose of the project? Why do projects still run late with all that safety? The answer is that the safety is wasted.first. The problem begins with the determination of expected time for completing each task. remembering where you were and what you were doing) © Copyright Chesapeake Consulting.e.Decide how to Exploit the System’s Constraint Since the critical chain is the constraint of a project. Inc. this boss will inject another level of safety to insure the task/s will complete on time based on his/her last bad experience. so the project will be scheduled to complete sooner. any time lost on the critical chain is lost forever. It appears that the higher the uncertainty of anyone making the estimates the larger the safety time factor.Technical Summary of Goldratt’s Critical Chain Step 2 . it is imperative to do everything you can to minimize any lost time on the critical chain. has about 200 days safety time estimated). a project scheduled for 300 days. After all the expected task completion times are collected by the project team. Generally a project manager and team identifies the tasks to be completed and the expected time to complete each task. and second. i. As a result the project will complete later than expected and the stakeholders will not reap the benefits as quickly as possible. putting down one task and then picking up another. There are two issues here .e. 1997 -8 . then they inflate the estimates by another factor.waiting till the last minute to start because the resource knows he/she has plenty of time due to all the safety he/she included 2. The resource estimates the time based on his/her last bad experience. The student syndrome . There are three mechanisms for wasting safety: 1. and add the critical path time to the expected start date to determine the expected complete date.e. this also requires many “setups” (i. thereby increasing the lead time for a specific task by the amount he/she is working on other task. The reason for this is that it is their experience that management will cut the overall project lead time by a similar factor. thereby injecting safety time to insure completing the task/s on time. Therefore. exploit the system’s constraint Before defining solutions to minimize impact of lost time on the critical chain and take advantage of time gained on the critical chain. any time gained on the critical chain will improve the chances of the project completing early and the stakeholders will reap the benefits quicker. Each resource is typically asked to define how long it will take to complete their specified task/s. It is speculated that the typical project lead time includes about 200% safety time (i. Then they add up the times on each path. If a particular resource’s boss is responsible for several tasks. identify the critical path.a resource has several tasks for various projects to complete and attempts to work on them simultaneously. Multitasking . it would be helpful to understood how projects are traditionally scheduled and executed. and take advantage of any gains in time on the critical chain..

Inc. Project and Feeding Buffers In order to exploit the critical chain according to the purpose 1. the safety and advances are wasted. thereby reducing the opportunity to waste safety time. or late. Isn’t this traditional methodology counter to the purpose of a project? The answer is yes.Technical Summary of Goldratt’s Critical Chain 3. • The safety times located where non-critical chains meet the critical chain are called feeding buffers (these buffers are analogous to constraint and assembly buffers in manufacturing Drum-Buffer-Rope implementations). 2. because as shown in the answer to first question. Each resource is measured according to his/her ability to complete their task on budget and in the time scheduled (i. sum the individual safety times on the critical chain and each non-critical chain. The project buffer protects the project scheduled completion date from Murphy events on the critical chain (and non-critical chains where the feeding buffer is used up and causing time to be lost on the critical chain. the safety time will not be wasted by any specific task that plans for it but doesn’t use it. and locate these new safety times at the end of the critical chain and anyplace where the non-critical chains meet the critical chain • The safety time on the end of the critical chain is called the project buffer (this buffer is analogous to the shipping buffer in manufacturing DrumBuffer-Rope implementations). This reduction in task times minimizes the impact of the student syndrome (i. therefore they will not wait as long to start).e. 1997 -9 . resources have less time to complete their specific tasks. strip out from each task time a large percentage of the safety time • The task time should be reduced to a level where the resource has a 50% chance of completing on time versus 100% chance of completing on time (as traditionally done).e. reduce the accumulated safety times of each chain by some factor. the purpose). local optima) versus being measured on the project being finished on time or early (i. thereby guaranteeing the project will finish either on time late (if “all goes well”). delays are frequent because of Murphy and the effects of the first two mechanisms. © Copyright Chesapeake Consulting. feeding buffer is defined in next bullet). The primary cause of this behavior is rooted in how resources are measured.delays accumulate faster over time than the advances. Dependencies between steps .e. but advances are not taken advantage of because of built in safety in each task in combination with the behaviors in mechanisms 1 and 2. the traditional methodology for measuring an individual resource according to their ability to finish their task in the allotted time (a local optimum measurement) is no longer valid. A more global measurement system should be used to encourage the behavior of individual resources to be more focused on completing the project early or on time (the purpose of the project). By locating the safety time of the critical chain in one location. As a result..

© Copyright Chesapeake Consulting. Note after the defined calculations are completed a project buffer of approximately 10 days is created and located at the end of the critical chain (signified by the P. 12 X 12 8 4 F. notation. Critical Chain 8 X 12 2 F.. assume 20% of the estimated times are safety. In the example. As shown in the example. notation).B. then locate a project buffer at the end of the critical chain equivalent to the accumulated safety time on the critical chain reduced by 20% (follow same procedure for feeding buffers on non-critical chains).B. it is possible for the project to be completed as early as 60 days. Reduce all times by 20%. The length of the critical chain now becomes 70 days.B. 1997 -10 .Technical Summary of Goldratt’s Critical Chain The feeding buffers protect the critical chain from the impact of Murphy on non-critical chains. therefore yielding 3 days of safety time to be used for the project buffer. The feeding buffers are designated by the F. 16 10 P. 4 X 4 1 F. 8 X 4 X 8 8 2 F.B.B. an estimated time of 15 days becomes 12. Inc.B. but in approaching the completion of tasks in this manner.B.

Each task on the schedule should be completed prior to beginning the next scheduled task (see exploitation step for discussion of multitasking and its contribution to wasting safety time). etc. In the event of this possibility. if the decision does not effect the critical chain). In doing this he problem of multitasking will be resolved. Inc. policies. This will then improve the project’s ability to finish earlier (the purpose). institute the following rule for project execution: When a task completes on the critical chain (and non-critical chains.) to the maintaining and/or improving of the critical chain schedule (i. By adhering to this rule. locate safety time prior to the tasks this resource is responsible. The safety time should be large enough to insure the resource has at least a 50% chance of finishing the specific tasks on time. © Copyright Chesapeake Consulting. This safety time is called a resource buffer.. thereby causing a delay in starting and finishing the task.Technical Summary of Goldratt’s Critical Chain Step 3 . gains made on the critical chain will not be lost because of the student syndrome. Gains on non-critical chains decrease the possibility of non-critical chain Murphy events impacting the critical chain. Resource Contention and Resource Buffers Another issue that can cause a loss of time on the critical chain is resource contention. 1997 -11 . completing the project on time or early by minimizing the impact of Murphy and taking advantage of gains on the critical chain).e. Resource contention occurs when everything is ready for a task to be started but the appropriate resource is working on something else. begin the next task as soon as possible. A schedule should be created prioritizing the tasks (the tasks included may be on the critical or non-critical chains of various projects) expected to be in that resource buffer according to the following priority • critical chain tasks • these tasks should be sorted according to the scheduled project completion dates • tasks that are dependent on each other must be sequenced as they are in the project plan • non-critical chain tasks • these tasks should be sorted according to the scheduled project completion dates • tasks that are dependent on each other must be sequenced as they are in the project plan. and reduce even more the potential effects of Murphy occurring in a following critical chain tasks.Subordinate everything else to above decision/s The next step in this process is to subordinate all other activities (decisions. The Golden Rule of Subordination In order to take advantage of gains made on the critical chain.

As a history of projects is created using the critical chain methodology.Technical Summary of Goldratt’s Critical Chain The project team should frequently notify the resource of the progress of the scheduled tasks. then the project team can identify the cause. These buffers provide a focused method for identifying and working only the issues that are causing or may cause time to be lost on the critical chain. If the buffers are consistently larger at the end. Buffer Management Remember. The resource can continue to work on other tasks until the scheduled task appears at which time the resource immediately starts the scheduled task and completes it before continuing to perform other work. then you may want to increase the buffer © Copyright Chesapeake Consulting. This notification should begin no later than the scheduled start date of the resource buffer. the risk of not completing the project early or on time increases (which is counter to the purpose). if the current date is later than the scheduled date.. The opposite is true as well. and used in prioritizing work. if the actual completion date is earlier than the scheduled completion date. then you may want to reduce the buffer sizes at the beginning of future projects. Therefore as the project buffer decreases (which is caused by falling behind schedule on the critical chain). Inc. a review of the buffers before and after would be beneficial. so that the resource will be prepared when the tasks are available to be started. the project buffer was established to protect the project planned completion date. If the buffers are consistently smaller at the end. that the calculation for decreasing the project buffer is based on the fact that time lost on the critical chain is lost forever. each identifying a level of concern and awareness. The project buffer increases by the amount of time equivalent to the current task’s scheduled completion date minus the current task’s actual completion date. if the project buffer increases (which is caused by completing tasks on the critical chain ahead of schedule) the possibility of completing early is increased (which is the purpose). If the project buffer is decreasing. The buffers can be divided into two or three areas. The feeding buffers can be increased and decreased in the same manner. Now that there is an executable project plan in accordance with the purpose. This calculation uses actual completion date instead of current date. Note. The project buffer decreases by the amount of time equivalent to the current date minus the current critical chain task’s scheduled completion date. The project team should also monitor feeding buffers and make adjustments before a noncritical chain causes problems on the critical chain. define and implement solutions. a methodology to monitor the project and identify problems which may impact completing the project as planned must be developed. 1997 -12 . because the gain is not realized until the task is actually completed.

© Copyright Chesapeake Consulting. which should reduce the critical chain of future projects. Inc.Technical Summary of Goldratt’s Critical Chain sizes. Also.. 1997 -13 . information relating to causes of buffers decreasing can be used to focus improvement efforts.

Reduce number of dependencies caused by common resources To reduce the number of dependencies caused by common resources. out source some/all of the project’s tasks to subcontractors. Reduce the time to perform tasks Assuming that the tasks are necessary. The solutions may include technology improvements.Technical Summary of Goldratt’s Critical Chain Step 4: Elevate the System’s Constraint The next step in the process is to elevate the constraint. a review of the critical chain tasks may provide opportunities for eliminating tasks either because they are no longer valid or through some technological advance. and/or outsourcing to subcontractors. etc. i.). Based on this definition. should you contract consultants to manage an ERP Software System implementation project. thereby reducing the critical chain of a specific project or projects and/or future projects. out source or train. For companies who are not project dependent. policy changes. Remember that the critical chain is defined as the longest chain. 1997 -14 . For companies who are project dependent. training. should you hire additional resources or utilize subcontractors.g. But.g. cross training. you can reduce the time on the critical chain by either reducing the number of dependent tasks. Any combination of these options applied appropriately may reduce the time required on the critical chain. etc. of dependent steps (where the dependencies are a result of path/s and/or common resource/s). and/or reducing the number dependencies caused by common resources. etc. © Copyright Chesapeake Consulting. in terms of time. Options to increase the resources available to perform these particular tasks include . reduce the length of the critical chain..hiring.). make more available to perform the tasks. identify the reasons for the amount of time required to complete. and implement the appropriate solutions. Any opportunity for improvement should be tested using the ROI calculation. Reduce the number of dependent tasks It would be expected that every task on any chain or path are necessary to the successful completion of a project. review common critical chain tasks. this approach should take into consideration the impact of this investment not only on the short term of a specific project or projects but over many future projects (e. this approach would take into consideration the impact the investment had on the rare project (e. make large technology investments or rent. Inc..e. Compare the expected incremental improvement in Net Profit versus the incremental investment required to get that improvement in Net Profit. reducing the time to perform specific tasks.

If the constraint is not broken and a satisfactory project plan is developed.be sure future critical chains are not made longer because of invalid policies. measurements (emphasis on time and overall project completion versus cost and individual task completion). It is important to be careful to consider the following: • • • incremental improvement in Net profit versus the incremental Investment required to get that profit (ROI = NP/I) ability of the new non-critical chain tasks and resources to subordinate to the new critical chain risks associated with disrupting the project If after elevating the critical chain moves. go back to Step 1. As the plan is executing. 1997 -15 . Be sure a critical chain is not made longer because of invalid policies. return to step one and follow the process.. rules or assumptions. utilize the various rules (such as starting tasks on critical chain as soon as possible and no multitasking).Technical Summary of Goldratt’s Critical Chain Step 5: Do not allow Inertia to become the system’s constraint. implement the plan. Elevating the constraint during an active project could cause the critical chain to move. rules or assumptions. Inc. In the case where elevation is directed at future projects (especially companies who are project dependent). © Copyright Chesapeake Consulting. and buffer management techniques to manage the project. it must be emphasized . If in the previous steps the constraint is broken.