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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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      A              B          C       D       E



      10/hr        10/hr       10/hr   10/hr   10/hr




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                       Drum - Buffer - Rope

ROPE
                                 DRUM
                         20
                         20
                                               18   16
          15
                                  10

          A               B       C            D    E



                                      BUFFER

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                      The Five Steps

   Step 1:         Identify the system's constraint(s)
   Step 2:         Decide how to exploit the system‟s
                   constraint(s)
   Step 3:         Subordinate everything else to the above
                   decision
   Step 4:         Elevate the system‟s 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 system‟s 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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 AVRAHAM Y GOLDRATT INSTITUTE
    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    Pressure to meet unrealistic
  requirements                     due dates
 Competing priorities            Factors outside our control
 Clients changing their mind     Essential information not
 Unforeseen events (Murphy)       available on-time (designs,
                                   specifications, materials and
 Poor communications
                                   authorisations)
 Unsatisfactory means of
  measuring progress              Too much re-work
 Key people not available        Lack of leadership or good
  when needed                      management


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                               Often projects    Often scope or
  Often projects               have difficulty
  have difficulty                                specifications are
                               staying within    cut from project
  finishing on time            budget




                                 CAUSE ?


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Often projects             Often projects    Often scope or
have difficulty            have difficulty   specifications
finishing on time          staying within    are cut from
                           budget            project




                       The Way We Manage
                          Uncertainty in
                            Projects


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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%   Safe Estimate
                                      Confidence     85-95%
                                                     Confidence
                         Median
Prob




        Time
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               Project Manager’s 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
Objective                        on time                Add
                                                        protection
                                 (to be realistic)      to tasks
  Be a good
  Project Manager


                                 Respond to
                                                       Don’t add
                                 customers need for
                                 short lead times      protection to
                                                       tasks
                                 (quick response)

                           Requirement                Prerequisite
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              YOU CAN‟T IMPOSE
          CERTAINTY ON UNCERTAINTY

        YOU MUST LEARN TO MANAGE
             THE UNCERTAINTY



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            The Reasons Contingency Time
                    Gets Wasted

       1. PARKINSON‟S LAW
           - Student Syndrome
           - Procrastination
           - Bells and Whistles
       2. LOSS OF POSITIVE VARIATION
       3. MULTI-TASKING


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                                                   Milestone date




Effort                          Student syndrome
                                performance




                                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       Schedule activities to start
  estimates by 50%                no sooner than necessary
 Eliminate resource              protected by buffers
  contentions and identify       Operate „RELAY- RUNNER‟
  the CRITICAL CHAIN              performance (eliminate
 Insert a PROJECT BUFFER         student-syndrome and
  aggregating contingency         multi-tasking)
  time                           Eliminate milestones
 Size and place FEEDING         Control the project using
  BUFFERS on all paths that       BUFFER MANAGEMENT
  feed the critical chain

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                                                            Due-Date
                                          RB


   RB

           10                  FB    15         10



    15                   30         10         FB


                        30                10    FB



          RB                                         20   Proj Buf

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      CRITICAL PATH                 CRITICAL CHAIN


 Places high value on the       Places low value on tasks
  completion of tasks on          being completed on time,
  time ,                         Inserts buffers even on
 Employs techniques to           paths that are critical,
  minimise slack or float,       Manages buffers to
 Uses the amount of slack        minimise unplanned
  or float to set priorities.     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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                               Summary
            Project 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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                       Parkinson’s Law


       “WORK EXPANDS TO FILL THE TIME
                AVAILABLE”




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