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

2 Projektcontrolling in der Praxis

Tonight’s  Topics

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1 A Look at Engineering Projects and their Problems

2 Basic Solution Elements

3 How Von Ardenne Achieved Lasting and Significant Results

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

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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!

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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

There is always the possibility to do more projects

Projects compete for resources.

Projects fight for resources.

The usual result is: • Resources are spread

across projects • Bad multitasking

Tasks und Projects take

much longer than necessary

Task for Project A SE

TUP Task for

Project B SETU

P Task for Project C SE

TUP

Task for Project A SE

TUP Task

for Project B SE

TUP Task

for Project C SE

TUP Task

for Project A SE

TUP Task

for Project B SE

TUP Task

for Project C SE

TUP Task

for Project A SE

TUP Task

for Project B SE

TUP Task

for Project C SE

TUP

7 Critical Chain

A Vicious Cycle

Resources are scarce

WiP (Work in Process) is high

There is always the possibility to do more projects

The usual result is: • Resources are spread

over projects • Bad multitasking

Other effects: • De-synchronisation • Bad multitasking with

management and support functions

Projects take much longer than necessary

8 Critical Chain

A Vicious Cycle

Resources are scarce

WiP (Work in Process) is high

There is always the possibility to do more projects

Long lead times

Delays

Uncertainty and Murphy

Start ASAP

WiP (Work in Process)

INCREASES

Lead time INCREASES

Delays INCREASE

Start ASAP

9 Critical Chain

Effects of Bad Multitasking

Bad multitasking

Lead times

De-Synchronization

Capacity

Touch time Quality

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

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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

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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

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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”

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• 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

And a Double Vicious Cycle

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Fight for resources

CT/ late-ness grow

Start asap

High WIP

Fight for resources

CT/ late-ness grow

Start asap

High WIP Long turnaround on problems and

questions

More problems and questions

Layout & Design

Assembly & Commissioning

Results (1/2)

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Results (2/2)

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What Did the Change?

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Pip

elni

ng

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

Buf

ferin

g

The Implementation Blueprint

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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

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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

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We learned some of these the hard way –

so you can avoid them!

At Start • Weak introduction by CEO • Freezing < 25% load • Not terminating 80% of

internal projects • Using  a  “negative  list”

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”

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

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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