Planning for the management of constraints under a dynamic environment of uncertainty and optimisation of scarce resources
Learning Objectives: · Effectively manage uncertainty and maximise the use of scarce resources in a dynamic project environment · Shift your thinking from localised efficiency towards system effectiveness.
Projects by their very nature are plagued by high levels of uncertainty. The single, most outstanding characteristic of a project environment is uncertainty. Planning and managing uncertainty is critical for project success.
Another dominant attribute of most projects is the scarcity of critical resources. Resource constraints are particularly prominent to a dynamic multi project environment.
The traditional approach to Project management at time falters under the stress resulting from the high level of uncertainty together with constrained resources inherent to a project environment. A new approach is needed to deal with the mounting technical and management risks placed upon scarce resources in the development and deployment of sophisticated products, systems and facilities. This need for a new and effective approach is found in the contemporary body of knowledge known as the Theory of Constraints (TOC).
TOC provides a common sense workable solution to the age old management challenge of providing more with what we have. Within a project context what this means is focusing on the true critical paths of projects with a totally fresh innovative approach to safety buffers and scarce resource management without necessarily having to compromise "time to market", performance, and cost. TOC goes on to further provide practical effective solutions to dissolving the complexity of a dynamic multi project environment via an inventive scheduling methodology that enables an effective staggering of project time schedules in accordance with the system constraints.
TOC is generally best known through the management bestseller book “The Goal” by Dr. Eli Goldratt and his project management book "The Critical Chain".
Goldratt’s innovative project management approach has been adopted as a leading part of the “arsenal” of managerial techniques by a wide variety of successful organizations around the world, including Boeing, Lucent Technologies, Delta Airlines, Israel Aircraft Industries, Daimler Chrysler, Westinghouse, The United States United States Air Force, Navy and Marines, The Israeli Defence Forces; and more recently NASA. TOC`s methodology has also begun making inroads in Australia with prominent companies such as BHP.
TOC`s Building Blocks: In order to have an understanding of this innovative approach it is necessary to be introduced to TOC`s building blocks. The methodology of TOC`s building blocks is broken down into 5 steps: · Identifying the constraint (i.e. the "Bottleneck") · Exploit the Constraint (i.e. "Take what you’ve got to get 100% use of the constraint") · Subordinate to the Constraint (i.e. "Rearrange others to what you need to maintain 100% of the constraint") · Elevate the Constraint (i.e. "Innovate to get greater than 100%) · Identify the new Constraint - continual improvement loop.
The above 5 steps provide the key to effectively managing uncertainty and to maximizing usage of scarce resources. Note that the 5 steps all focus on the System constraint.
Why focus on the constraint? Let`s think for a moment by going back to basics and asking ourselves the question "what really is the ultimate goal of commercial organizations?" In the final analysis the answer is obviously profit. How much profit? As much as possible! What we are talking about here is an infinite goal, as opposed to a commercial target which is obtainable and as such finite. Since we are talking about something infinite, we can logically conclude that there must be a constraint in the system, otherwise we would reach it. Goldratt, the founder of TOC, who is a Dr. of Physics, has concluded that if we wish to improve the performance of a system, meaning to bring it closer to its goal, then the area to focus on is the constraint itself. By managing the constraint we can gain the most leverage in improving the performance of our organization.
How best then to manage the constraint? TOC has developed an extremely powerful methodology whose strength is in its simplicity and common sense approach to problem solving. At the heart of this methodology are 5 sequential steps:
The first step is to identify the System Constraint. Identifying the correct "entity" is critical, since the whole doctrine is based on managing the constraint. At times the answer is obvious, as is the case of some capacity bottlenecks. At other times the constraint can be more subtle, such as incorrect performance measurements. Furthermore one must take care in distinguishing between problems that are symptoms of incorrectly managing the constraint but not in themselves constraints.
The second step is to "exploit" the constraint, or in other words how can we achieve close to 100% utilization of the constraint. Here TOC differs from traditional thinking. Under more traditional thinking, when confronted with a bottleneck, the thing to do is to "break it". However TOC reminds us that normally we are required to invest additional capital and resources in "breaking" a constraint. Before we go down that road then more than likely the constraint or bottleneck provides us with additional capacity that we haven`t used. For example, if we have a work centre that is a true bottleneck, before investing in additional capacity for it, what we should do is to ensure that we don`t waste the capacity it has. How? – through many steps; for example by having it work more shifts; by placing a safety buffer of work material in front of it; by applying quality control before the bottleneck so it as not to waste its capacity on damaged work in process; and the list of common sense intuitive solutions flows on.
The third sequential step is to "subordinate" non constraint factors to the constraint. What this means is that non constraints have to support the constraint by being available to either feed the constraint or NOT to "interfere" with the constraint`s operation hence reducing the constraint`s throughput. That availability is made possible by gating the entry of work assignments in accordance to the pace of the constraint. Resource centres need to work in accordance to the pace of the constraint rather than aiming to work according to their own maximum utilization. We need to remember that ultimately the throughput of the entire system is determined by the throughput of the constraint. Not only is no benefit gained by pushing more work assignments into the system beyond the pace of constraint; but by pushing more work into the system we inadvertently create disorder and prevent non constraints from being available for the constraint.
The fourth step is referred to as "elevating" the constraint. It is at this stage that we go to work redesigning the way we would normally operate the constraint, so as to gain additional throughput from the constraint itself. Again remember that the overall performance of our system is dependent on the performance of the constraint. If for example we can alleviate some of the workload on the constraint by off loading to non constraints, which by virtue of being non constraints have additional capacity, then we have increased the overall performance of the system. There may come a point where we break the constraint by investing additional resources; however this will involve doing a cost benefit analysis.
Once we reach the point of breaking the constraint it means that invariably we have come to a new constraint. Remember, by virtue of the fact that we are moving towards an infinite goal, we must then by logic come up against a new constraint. Hence, we have now come around in an upward spiral progression and reached the fifth step where we need to identify the new constraint and once more go through the sequential steps that lead us on the path of continual improvement.