WHITE PAPER. Application of CCPM (Critical Chain Project Management) to generate gains for industrial customers

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1 Application of CCPM (Critical Chain Project Management) to generate gains for industrial customers Shirish M. Kulkarni, Jayanti Das, and Ajay Deshpande (Presented at Project Management Leadership Conference, QAI 2009) Version 1.1 July 2009 WHITE PAPER

2 Copyright Notice Geometric Limited. All rights reserved. No part of this document (whether in hardcopy or electronic form) may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, to any third party without the written permission of Geometric Limited. Geometric Limited reserves the right to change the information contained in this document without prior notice. The names or trademarks or registered trademarks used in this document are the sole property of the respective owners and are governed/ protected by the relevant trademark and copyright laws. This document is provided by Geometric Limited for informational purposes only, without representation or warranty of any kind, and Geometric Limited shall not be liable for errors or omissions with respect to the document. The information contained herein is provided on an AS IS basis and to the maximum extent permitted by applicable law, Geometric Limited hereby disclaims all other warranties and conditions, either express, implied or statutory, including but not limited to, any (if any) implied warranties, duties or conditions of merchantability, of fitness for a particular purpose, of accuracy or completeness of responses, of results, of workmanlike effort, of lack of viruses, and of lack of negligence, all with regard to the document. THERE IS NO WARRANTY OR CONDITION OF NON INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS WITH REGARD TO THE DOCUMENT. IN NO EVENT WILL GEOMETRIC LIMITED BE LIABLE TO ANY OTHER PARTY FOR LOST PROFITS, LOSS OF USE, LOSS OF DATA, OR ANY INCIDENTAL, CONSEQUENTIAL, DIRECT, INDIRECT, OR SPECIAL DAMAGES WHETHER UNDER CONTRACT, TORT, WARRANTY, OR OTHERWISE, ARISING IN ANY WAY OUT OF THIS DOCUMENT, WHETHER OR NOT SUCH PARTY HAD ADVANCE NOTICE OF THE POSSIBILITY OF SUCH DAMAGES. Confidentiality Notice This document is disclosed only to the recipient pursuant to a confidentiality relationship under which the recipient has confidentiality obligations defined herein after. This document constitutes confidential information and contains proprietary information belonging to Geometric Limited, and the recipient, by its receipt of this document, acknowledges the same. The recipient shall use the confidential information only for the purpose defined above for which this document is supplied. The recipient must obtain Geometric Limited s written consent before the recipient discloses any information on the contents or subject matter of this document or part thereof to any third party which may include an individual, firm or company or an employee or employees of such a firm or company. The recipient acknowledges its obligation to comply with the provisions of this confidentiality notice. 2

3 Contents Abstract Introduction Need for CCPM CCPM Methodology Differences with Critical Path Method Buffer Management in CCPM Sources of wastages in project CCPM Methodology as applied for Industrial Projects Five focusing steps of Theory of Constraint used to design the solution Planning project using CCPM methodology CCPM Project Tracking Buffer Management Key Project Parameters Buffer Management Buffer Recovery Plan Strong Gate Control Application of CCPM to Software Services Projects Why Change? Objective What to change? Pre requisites for the Change Case Studies to the Industrial Customers Gains for Industrial Customers: Critical Success Factors Key Learning About the Conference PML 2009 Project Management Leadership Conference Conclusion About the Author About Geometric

4 Abstract CCPM (Critical Chain Project Management) is a Project Management Methodology based on Theory of Constraints (TOC). TOC is an overall management philosophy introduced by Dr. Eliyahu M. Goldratt in his 1984 book titled The Goal, which is geared to help organizations continually achieve their goal. The idea of CCPM was introduced in 1997 in his book, Critical Chain. Application of CCPM has been credited with achieving projects 10% to 50% faster and/ or cheaper than the traditional methods (i.e. CPM, PERT, Gantt, etc.) developed from 1910 to 1950's. Geometric Ltd has been using CCPM methodology and has reaped the resulting benefits both internally and externally. This paper summarizes the application of this methodology to the software services projects for the industrial customers. The gains due to the application of this methodology for both fixed cost and T&M (time and material) type of projects are passed on to the customers in the form of value add or direct tangible benefits. The main aim is to be able to deliver "more in same" or "more in less" to the demanding industrial customers and hence to achieve the customer delight/ satisfaction. In the current business context of slowdown, the customers are demanding more in less (or more in same) CCPM aims at enabling this goal to be achieved in a systematic manner. 1. Introduction Project Management is becoming more and more challenging with the demanding industrials customers. The current economic situation is forcing the service providers to go up the value chain by continuously improving to deliver more and more value to the customers. The CCPM methodology aims at addressing the basic problems in the areas of estimation, planning and execution of the projects. The approach addresses the issues related with human behavior systematically. The gains are achieved by removal of buffers and making them available at the appropriate stages of project. The approach is to challenge the resources to continuously do better by measuring them and tracking the project progress with the bigger picture. CCPM has been used in Geometric for last 3 years and has been clearly shown to achieve the gains which the customers are demanding. The gains are in the form of delivery ahead of time, delivery of more features in the same time and improvement of quality of deliverables. This paper aims to discuss the CCPM methodology, its application to the software services projects and specifically to the demanding industrial customers. 4

5 2. Need for CCPM In Project Management, we often hear from the Project Managers the following as their pain points. This is common to all types of projects viz. engineering, construction, software development or product development. Even though the projects are diversified, the complaints are basically the same. 1. Usually original due dates are not met 2. There is significant re work 3. Too often resources are not available when needed (even when promised) 4. Delays in getting approvals 5. Necessary things are not available on time (specifications, designs, authorizations) 6. Too many customer changes 7. There are fights about priorities between projects 8. Actual work is significantly more than what was originally planned. 9. Projects are full of surprises 10. Projects commitments are always on 3 dimensions of time, content and budgets. 11. Dealing with each surprise puts pressure on one of the commitment 12. When we act upon to take care of one commitment, the others tend to get compromised 13. Bigger uncertainty bigger conflict 14. More commitments bigger conflict 3. CCPM Methodology CCPM (Critical Chain Project Management) is a Project Management methodology based on Theory of Constraints (TOC). It is aimed to deliver projects 10% 50% faster compared to traditional methodologies and achieves these improvements through a process of waste reduction. The Critical Chain is defined as the longest chain with critical task considering the resource contention. CCPM technique is used in the key phases of the project i.e. Project Planning and Project Monitoring and Control. 5

6 With traditional project management methods, 30% of the lost time and resources are typically consumed by wasteful techniques such as bad multi tasking, student syndrome, in box delays, and lack of prioritization. The phenomenons are explained in detail in the following sections Differences with Critical Path Method The critical chain is the sequence of both precedence and resource dependent terminal elements that prevents a project from being completed in a shorter time, given finite resources. If resources are always available in unlimited quantities, then a project's critical chain is identical to its critical path. Following are the distinguishing features between CCPM and Critical Path Method. 1. The use of (often implicit) resource dependencies. Implicit means that they are not included in the project network but have to be identified by looking at the resource requirements. 2. Lack of search for an optimum solution. This means that a "good enough" solution is enough because, a. As far as is known, there is no analytical method of finding an absolute optimum (i.e. having the overall shortest critical chain) b. The inherent uncertainty in estimates is much greater than the difference between the optimum and near optimum ("good enough" solutions) 3. The identification and insertion of buffers: a. Project buffer b. Feeding buffers c. Resource buffers 4. Monitoring project progress and health by monitoring the consumption rate of the buffers rather than individual task performance to schedule Buffer Management in CCPM CCPM uses buffer management instead of earned value management to assess the performance of a project. Some project managers feel that the earned value management technique is misleading, because it does not distinguish progress on the project constraint (i.e. on the critical chain) from progress on non constraints (i.e. on other paths). Event chain methodology can be used to determine the size of project, feeding, and resource buffers. 6

7 3.3 Sources of wastages in project There are four main reasons as to why the task safety is wasted. These are due to Parkinson s Law, Student s Syndrome, De synchronization and Multitasking. Let us look at the effects of each of these parameters 1. Student s syndrome 2. Parkinson s effect 3. De synchronization 4. Multitasking Student s syndrome: Start the latest in any activity and hence late detection of uncertainty in the project Realistic Estimate (90%) Effort 8 hr day Time Once resources have provided a safe task deadline, they tend to plan their tasks around this deadline and focus on trying to deliver against the same. Other urgent work gets the attention rather than the task at hand whose due date is out there somewhere. Remember, safety was put in not only to protect against activities that needed urgent attention, but also uncertainties. By starting a task later than originally planned, we have wasted the safety that we have provided for in the task, considerably risking the task deadline. This is the effect of Student s syndrome If a resource does manage to complete and deliver his task early of schedule because uncertainty did not hit the task, he will receive kudos. Achieve this twice in a row and it is likely that the resources will be suspected of over estimating the task. In such a scenario, even if the resource finishes the task early, he does not 7

8 report the early finish. In addition to this, we may still not be able to start the next task due to a resource dependency working on some other task. This delay propagates across tasks and its effect is clearly seen at an integration point within the project. So in essence, time gained is not reported whereas time lost propagates and affect the Project schedule Parkinson s Effect: Work expands the time available for completion 1. Long initial mobilization time for resources, after getting the project 2. Most tasks meet the gates or miss them; rarely are they done ahead of time 3. Continue polishing the task (try more iterations), because the module leader is busy in urgent features 4. Add more whistles to fascinate the user 5. Let me take the challenge to do it on my own 6. Follow up very closely with customer for feedback close to important gates De synchronization Delays accumulate, but gains do not. The delays do not get transferred to the completion of the project Multitasking Resource is not dedicated for a task till completion. Issues with the priority handling for various tasks. 8

9 One of the other large causes of project delay is due to multitasking. Multitasking has 2 major negative impacts on project deadline Consider three tasks. Without multitasking, Task 1 would be finished in 12 days, Task 2 in 24 days and Task 3 in 36 days. With Multitasking, Task 1 will finish in 28 days, Task 2 in 32 days and Task 3 in 36 days. Hence there is a 16 day delay in task 1 and 8 day delay in delivering Task 2. Hence we will lose the advantage of delivering projects early. 4. CCPM Methodology as applied for Industrial Projects Following section describes the CCPM Methodology as customized to be applied to the industrial projects in Geometric Five focusing steps of Theory of Constraint used to design the solution 1. Identify the system constraints 2. Decide on how to exploit the above constraints 3. Subordinate everything else to the above decisions 4. Elevate the system constraints 5. Check if constraint is broken 4.2. Planning project using CCPM methodology 1. Identify project goal 2. Develop project network 3. Identify critical chain 9

10 4. Identify project buffer 5. Create the plan with critical chain and project buffer 4.3. CCPM Project Tracking Buffer Management 1. CCPM does bring out changes in project execution 2. The completion buffer and feeding buffers provide a robust mechanism to set the priorities 3. The priorities are set according to the type and the percentage of buffer consumed 4. Daily tracking is a critical success factor for tracking of CCPM projects 4.4. Key Project Parameters 1. % Longest chain complete: This indicates the progress on the critical chain of the project. 2. % Buffer penetration: This indicates the % of buffer consumed against the total project buffer 3. Critical resources: The resource generating contention a. Identify the most critical resource and ensure his activities are strongly WIP controlled. b. Mostly he is the tech lead and is encouraged to devote himself to design and review activities only. 4. Stopped activities: These are the ones which, if on the critical chain are going to result the buffer penetration. We must make sure to make resources available for activities on critical chain. 5. Daily activity tracking with focus on a. Effort Remaining b. Resolution of Issues faced c. Precise tasks assignment to individual d. Visual Control with Status Flash e. WIP control f. Strong Change Management to ensure minimal addition of new tasks to the commitment 10

11 g. All decision are subjected to its impact on critical chain 4.5. Buffer Management Following shows a snapshot of the buffer management chart used for tracking the project progress. The percentage critical chain completion and the buffer penetration is tracked on a daily basis. This gives a clear picture of the state of the project and the corrective actions could be decided in the form of the buffer recovery plan. This provides the management a dashboard for the progress of the project. % Buffer Penetration % Critical Chain Complete 1. Daily morning project meeting for tracking 2. A project team needs to expedite only if it s in the RED zone. 3. Objective should be to get back to YELLOW zone at the earliest. 4. Focus should be on the critical chain where we have the delay Buffer Recovery Plan Buffer Recovery Plan should be updated when the project is in red or yellow zone. 1. If the project state is in green zone, it indicates that project is moving fast on the longest chain. Therefore no specific action is required. 2. If the project state is in yellow (amber) zone, it indicates that the buffer penetration is same or slightly more than the longest chain complete. 3. Buffer Recovery Plan should be discussed in Buffer Management Meeting which will be participated by the entire team. 11

12 4. The team members should be encouraged to provide solutions to help recover the buffer Strong Gate Control 1. A task is marked as complete in CCPM with effort remaining as 0, only after it passed the quality gate check. 2. These ensure no pilling up of incomplete tasks and also reduce the rework effort. 5. Application of CCPM to Software Services Projects The following defines the CCPM framework and how it s applied for the Software Services Projects Why Change? The change required to address some of the challenges faced in executing industrial customer projects. Following is the list of challenges 1. Industrial Customers are extremely demanding 2. Their strategies are currently aiming at improving margins by getting more in same or even more is less this translates as a challenge for the delivery organization to continuously improve in each of the deliveries and phases of the project 3. They do not have mature understanding about the software development process 12

13 4. Customers are not ready to sign off the intermediate artifacts which are baseline for the software projects (e.g. elaborated requirements, design specifications, test plans etc) this brings in a huge ambiguity in the Industrial Projects, which gets translated as buffers in the estimates 5. The specifications are not elaborated in details and get detailed out during the execution of the project brining in surprises late in the project cycle 6. Original deadlines of the projects are generally not being met 7. There is significant amount of re work 8. Too often resources are not available when needed (even when promised) 9. Specifications, designs, authorizations were not provided from the start of the project 10. Too many customer changes during the execution of projects 11. There are fights about the priorities between tasks 5.2. Objective 1. Vision: Deliver the projects within the constraints of Quality, Time and Cost to the expectation of the customer and build the operational consistency for continuity of engagement 2. Tactical Goals: a. Improve margins for each project ensuring the Quality, Cost and Schedule parameters b. Develop competencies to manage and execute projects within budget c. Bring about consistency of effort expended in execution of projects What to change? The change has to be brought into the current Project Execution Environment. Following are the areas that the changes are inevitable 1. Estimation Process: If we look at the process of estimation, we arrive at the project deadline date which is a deterministic deadline by linking together a set of dependent task estimates which are probabilistic in nature. We then monitor the performance of this task against the milestone or deadline 2. Nature of Estimation: Since task estimates are probabilistic in nature, they will typically follow a normal distribution curve. 3. Uncertainty and Buffers in Estimation: 13

14 a. Estimators give duration estimates that they believe have a high probability of completing the work in, by adding safety time in their task estimates b. The reason this is done is because of the need to compensate for uncertainty and the fear that their estimates may get cut during a review process. In addition to this there are other activities which are currently on the resource s desk which need urgent attention. So in effect all estimates provided have considerable safety Pre requisites for the Change 1. Top Management buy in for the change in the Project Management Methodology 2. Training and competency building for the Project Managers, the leads and the team 3. Creating a win win vision for team members, leads, Project Managers, Senior Management and the customers 4. Change in the thought process for the Project Management a. From task based to the buffer based tracking b. To track the overall project status, instead of individual milestone completion c. Assigning work as soon as possible to the team members d. Trying to keep project resources busy at all times 5. Customer buy in for the change in project management activities specifically for the customer managed projects 5.5. Implementing the Change: 1. Identify all the possible obstacles for the implementation ahead of time 2. Get the team charged up with the mission of implementing the change 3. Address all six layers of resistance in advance LAYER 0. "We/I don't have a problem." The is a clear resistance at the root there is no problem, so why to change? LAYER 1. "You don't understand my/our problem(s)." May be, we have the problem, but LAYER 2. "...we don't agree on the direction of the solution." 14

15 "OK, you do understand my problem(s), but This is not a solution for me LAYER 3. "...your solution can't possibly produce the level of results you say it can." Fine, this is one of the solutions for us, but it will not produce the desired results LAYER 4. "...your good solution is going to cause some bad things to happen." This is a solution for our problem, but it will result into following other problems. LAYER 5. "...there are some significant obstacles that prevent the implementation." OK it might result into good things, but following are possible blocking issues for he implementation LAYER 6. Unverbalized fear. All that is fine, but I am afraid that something will go wrong 4. Implement the changes in the phased manner and keep a check on the measures for being sure to monitor the feedback 5.6. Measuring the success of the Change: 1. Identify Measures and Metrics as indicators for the success of the change 2. Monitor the metrics on a continuous basis 3. Encourage the team to create visual controls for the metrics for being open about the current state of the team 4. Apply immediate corrective action for the measure going outside the control boundaries defined 15

16 6. Case Studies to the Industrial Customers Case Accelerated Integration Solution Development The Problem Product OEM required to demonstrate the use of their PLM products integration with CAD product a Korean auto major The Auto major sent a set of 26 usecases for delivery to Geometric Initial rough estimates were given at 6 months of elapsed time Detailed estimates made after Geometric s visit to client indicated greater effort required Customer timelines were 4months The Solution Use CCPM to compress timelines Take on as fixed bid and deliver productively in 4 months Benefits Scoped Project delivered ahead of schedule and within budget despite complexities 6% additional revenue due to ability to accommodate Change Request in the same timeframe Productivity gain of time shared with Product partner Customer confidence in delivery facilitated product license sale and repeat business Case - Accelerated Furniture software Customization The Need Customize the Furniture software for leading furniture manufacturer Complete development of BOM (Bill of material) Customized printing functionality Linking with ERP system The Solution Reduced Work In progress ( WIP ) and hence reduced Multitasking Active Task Management Defined Feature Completion Criteria Benefits Eliminated waste resulted in more time for Integration Testing leading to High Product Quality No additional efforts close to release. Delivered 30% more Product functionality 20% reduction in Time Schedules 11% savings in cost 16

17 Case : Accelerated Development of Feature Rich Product The Need Apparel Vertical Product Development for Leading Software PLM Product OEM Geometric Developed a Solution with a Joint Go To Market Strategy with the OEM for Deployment of the Solution at Customer Site The Solution Reduced Work In progress ( WIP ) and hence reduced Multitasking Active Task Management Benefits Greater effort spent on Integration Testing resulting in High Product Quality No additional efforts close to release We delivered 17% more Product functionality There was a 12% reduction in Time Schedules 6.1. Gains for Industrial Customers: All the above factors contributed a better CSI for the industrial customers and hence the continuity of the business for the same. One of the customers has signed a contract for the whole FY10 ahead in time. The other customer was always insisting on small duration fixed cost project, has got convinced to get into a quarterly contract with Geometric. Another customer has been consistently demanding a reducing TCO and Geometric could meet this expectation by showing the productivity improvements of 20% and predictability in the engagement. Following chart shows the gains achieved for one of the project Without CCPM With CCPM Features Planned [A] Bugs [B] Other Enhancements [C] 4 15 Total Work [D] = [A*5+B+C] Planned Effort in Person Months [E] Productivity [D/E] Productivity Improvement 24% The main achievements through CCPM are marked in the following areas 17

18 1. Productivity: Better throughput for the AMS engagement More features delivered to the customer in the same time frame 2. Quality: For the same amount of work to be delivered, testing and stabilization phase gets more time which can improve the quality 3. Schedule: Projects delivered early 4. Operational Predictability: Early warnings, Corrections and confidence in downstream operations 5. CSI (Customer Satisfaction Index): Is a direct measure for the feedback about the deliverables. Geometric has a standardized template to receive the CSI for each of the project during various phases of the project. Covers all the aspects by which customer can express their opinion about the ongoing or closed project. The CSI for the engagement 6.2. Critical Success Factors 1. Need for in depth knowledge about the TOC concepts at the Project Manager level 2. Need for the thorough knowledge about CCPM execution methodology 3. Buy in from the Top Management and from the project teams 4. Effective use of the internal champions from Delivery/Production teams to drive execution. This ensures scalability of implementation 5. Upfront definition of gains measures (define the measure to calculate the gains) 6. Mapping of the Team s goals to the Individual s KRAs (Key Result Areas) 18

19 7. Key Learning 1. CCPM is a powerful methodology for projects with well defined scope and detailed specification. It s Implementation is easy for fixed price projects. 2. For Time & Material projects, the value has to be brought out by running the projects with defined scope and duration. This has been established effectively in the industrial projects handled in Geometric. 3. Active task management and buffer tracking are the key success factors. They provide early warning signals about the project. 4. The involvement of the customer in the whole implementation and hence the regular demos is an important aspect for the customer to realize the benefits of the approach tangibly. 5. The buffer trend line acts as powerful motivator and visual control to seek help or management intervention 6. CCPM methodology works fine if there are no changes in the plan during the project execution and milestones dates are clearly defined. Conclusion Geometric has customized CCPM methodology for handling the software services projects for the industrial customers and built tools for automating the process of planning and tracking. The gains generated were appreciated by the industrial customers. Geometric benefitted internally due to the competency and capability generated. Geometric has been able to leverage the CCPM methodology for Project Management of the software services projects for industrial customers. Customer Delight has been the key focus area for Geometric and CCPM has proven to be a definitive approach to achieve the same in a structured manner. Operational Excellence is a basic tenet of the management strategy for Geometric. CCPM is able to build the foundation for the Project Management for achieving the same. CCPM helps reduce the TCO for the customer resulting into continuing business. The Business Excellence is measured in the parameters like top line and bottom line. CCPM is geared to ensure the growth in the topline by the continuation and increase in the revenue and growth in the bottom line with the improvement in the margins. 19

20 About the Authors Shirish M. Kulkarni is working as Director Growth Accounts in Geometric and is heading the Growth Initiatives, Markets and Deliveries in key Accounts. He has about 19 years of industry experience. He has been driving various process and business improvement initiatives. Innovation and Process Improvement are his areas of interest. E mail: Shirish.M.Kulkarni@geometricglobal.com Jayanti Das is working as the Processes and Productivity expert in Geometric and has 10 years of experience. She is driving the CCPM initiatives to achieve improvements across projects in Geometric. She has keen interest in the TOC and is a certified TOC expert. E mail: Jayanti.Das@geometricglobal.com Ajay Deshpande is working as a Delivery Manager for one of the strategic accounts for Geometric. He has industry experience of about 12 years and is instrumental in the growth of the account from it s inception. Ajay has delivered value to the customer using the CCPM methodology for various projects. Ajay has a keen interest in the operational excellence and is leading some specific competency improvement initiatives. E mail: Ajay.Deshpande@geometricglobal.com About the Conference PML 2009 Project Management Leadership Conference 2009 The 5 th Annual International Project Management Leadership Conference [PML 2009] is a unique forum for exchanging, learning and accelerating implementation of best practices in the domain of Project Management. The conference is built on the theme of Role of Project/Program Management in achieving Operational and Business Excellence. PML 2009 aims to highlight the extent to which Project Management processes and practices can improve the Top line and Bottom line in organizations and enhance Organizational Competence, especially during the current economic situations. 20

21 About Geometric Geometric is a specialist in the domain of engineering solutions, services and technologies. Its portfolio of Global Engineering services and Digital Technology solutions for Product Lifecycle Management (PLM) enables companies to formulate, implement, and execute global engineering and manufacturing strategies aimed at achieving greater efficiencies in the product realization lifecycle. Headquartered in Mumbai, India, Geometric was incorporated in 1994 and is listed on the Bombay and National Stock Exchanges. The company recorded consolidated revenues of Rupees 5.98 billion (US Dollars million) for the year ended March It employs close to 3000 people across 10 global delivery locations in the US, France, Romania, India, and China. Geometric is assessed at SEI CMMI Level 5 for its software services and ISO 9001:2000 certified for engineering operations. For further details, please visit 21