Critical Chain in Engineering Projects IPMA, Eindhoven, Feb 16, 2012 Christoph Lenhartz COO, VISTEM GmbH & Co. KG Member of the Board, TOCICO
Christoph Lenhartz Co-Founder & COO VISTEM GmbH & Co. KG Diplom-Kaufmann, MBA (USA) TOCICO certified, Certified Consultant (bdvb) Constultant, author and speaker on Strategy Organisational development and growth Theory of Constraints Critical Chain Project Management Experience Project manager of development and (post merger) integration projects in IT, logistics, automotive, manufacturing Head of logistics and planning automotive Management positions in consulting Member of the Board, TOCICO and Eliyahu M. Goldratt Fundation Projektcontrolling in der Praxis 2
Tonight s Topics 1 A Look at Engineering Projects and their Problems 2 Basic Solution Elements 3 How Von Ardenne Achieved Lasting and Significant Results 2/16/2012 3
Some Characteristics of Engineering Projects Engineer-to-order (ETO) projects New, customized, often large, and highly complex products Usually the customer is not located next door Often requiring constant interaction with the customer Extremely high uncertainty Development, projects and service compete for specialized resources 2/16/2012 4
Why Are Engineering Projects Special? Due dates are never met There are too many changes Resources are not available when needed Specifications are missing Priorities change (again and again) Suppliers don t deliver on time Tasks overrun their budgets There is a lot of rework Although the projects are different the problems are the same everywhere! 2/16/2012 5
Multi-Project Management Resources work in different projects at a time The company is a matrix organization: Resource managers (line managers) Project managers Employees report to their resource manager, not to the project manager The project manager is responsible for delivering a project, but he has nearly no real authority/power The resource manager serves several projects, which compete for resources. Prioritization is not transparent.
A Vicious Cycle Resources are scarce WiP (Work in Process) is high Projects compete for resources. Projects fight for resources. The usual result is: Resources are spread across projects Bad multitasking There is always the possibility to do more projects SETUP Task for Project A SETUP Task for Project B Tasks und Projects take much longer than necessary SETUP Task for Project C SETUP Task for Project A SETUP Task for Project B SETUP Task for Project C SETUP Task for Project A Critical Chain SETUP Task for Project B SETUP Task for Project C SETUP Task for Project A SETUP Task for Project B SETUP Task for Project C 7
A Vicious Cycle Resources are scarce The usual result is: Resources are spread over projects Bad multitasking There is always the possibility to do more projects WiP (Work in Process) is high Other effects: De-synchronisation Bad multitasking with management and support functions Projects take much longer than necessary Critical Chain 8
A Vicious Cycle Resources are scarce Lead time Long lead times INCREASES Uncertainty and Murphy WiP (Work in WiP (Work in Process) Process) is high INCREASES Delays Delays INCREASE There is always the possibility to do more projects Start ASAP Critical Chain 9
Effects of Bad Multitasking Capacity De-Synchronization Lead times Touch time Quality Bad multitasking
Basic Solution Elements Reduce WIP Prioritize projects Build CCPM project plans (aggressive but possible timelines with strategically located buffers) Stagger projects by Virtual Drum (effective system capacity) Daily Task Management, Execution Control Buffer management to set stable and consistent operative priorities Only work according to the priorities As lead times get shorter and reliability increases, increase Virtual Drum capacity Focused ongoing improvement Actively market reliability and speed to capitalize on the operational improvements and utilize the growth potential 2/16/2012 11
Case Study: Von Ardenne Anlagentechnik A leading manufacturer of equipment for industrial vacuum processes of plasma and electron beam technologies Key competences: thin-film technologies for photovoltaics and architectural glass electron beam technology research and development 16.02.2012 12
Projects at Von Ardenne The need for projects develop new products and technologies to ensure competitiveness in strategic markets develop new applications to meet market requirements fulfill up to 40 parallel customer orders for different products and markets Projects need to be executed fast: Time to market and short delivery time for products and projects is key success factor delivered on time: Milestones for customer s investment and business plan must be met 16.02.2012 13
A Complex Project Landscape Many projects of different size and kind at a time 40 projects from 500k to 17Mio and 8-24 months lead time Different departments and specialists have to cooperate Highly skilled specialists are needed to support different phases of the projects Assembly and commissioning require resources for long time on site Long lead time parts impact project schedules, suppliers sell slots Fast growing markets leading to more business and many parallel projects Resource priorities based on fire fighting High delay risks, causing customer complaints and penalties Capacity build up limited Risk of losing market share in a fast growing market 16.02.2012 14
And a Double Vicious Cycle Assembly & Commissioning Start asap Long turnaround on problems and questions CT/ lateness grow Fight for resources High WIP Start asap CT/ lateness grow High WIP More problems and questions Fight for resources Layout & Design 2/16/2012 15
Results (1/2) 16.02.2012 16
Results (2/2) 16.02.2012 17
What Did the Change? Pipelning Buffering Exc. 1. Allow only 3 Field Assemblies at a time, freeze all other projects 2. Restart a frozen project only if another project has finished assembly 3. Implement 2 Full-Kit-Points 1. Build templates tasks are real work 2. Create project plan for every project 3. Shift safety from every task to project and feeding buffers 4. Don t use dates and deadlines to manage tasks 1. Task management (remaining duration and controlled start) 2. Execution review 16.02.2012 18
The Implementation Blueprint 16.02.2012 19
Success Factors Sense of urgency on most levels Commitment and active involvement of senior management Sales actively involved in implementation Clean-state approach ready to fully embrace 3 rules Consulting as implementation support: Getting buy-in Good solution design Post go live coaching and handholding Trouble shooting Adopt CCPM/TOC as a guiding strategic framework for the company to become an ever flourishing company Culture, processes, paradigms 2/17/2012 20
Lessons Learned Implementation Mistakes to Avoid Before Delegating method selection Not analyzing predicted effects Delegating implementation to external consultants Underestimating bad effects of multitasking Ignoring corporate influence and policies: Controlling, reporting, KPI Objectives Corporate initiatives Overlooking negative effects of success At Start Weak introduction by CEO Freezing < 25% load Not terminating 80% of internal projects Using a negative list We learned some of these the hard way so you can avoid them! During Starting a step before the preceding one is complete: success = predicted effects achieved or: learning from a deviation Looking for complex solutions to complex problems/situations Resolving conflicts by compromises Assuming people resist change Thinking I know 2/16/2012 21
Bad Multitasking Enemy #1 of Project Productivity
Two Tools to Take Home Reducing work in process and bad multitasking is key and can even be implemented without full CCPM Do tasks in sequence Relay runner approach Optimale resourcing Full Kit is another universal principle Never start without complete preparation Applicable anywhere: Clear order Engineering Operating theatre Kitchen 2/16/2012 23
Some other Organizations Using CCPM
Visit www.vistem.eu for more information! THANK YOU! www.vistem.eu Christoph.Lenhartz@vistem.eu +49 6252 795 307-0