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# Critical Chain

by ELIYAHU M. GOLDRATT
Book Review and Core Concepts
Group Member
 Shafa'at Gilani
 Amber Younas
 Sarosh Tasneem Raja
 Sabeen Rashid
Introduction
 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 doesn’t 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 system’s constraints,
 Subordinate everything else to above decisions,
 Elevate the system’s 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:
 Dependencies between steps, which may cause advances to be wasted.
 How despite of advances a
project may end up being
delayed in its entirety.

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 (don’t 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
 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
Charlie’s 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