Velocity Accelerators®: Critical Chain Project Management

 

One of the areas we single-out for deeper discussion in a Pipeline workshop™ – what we call Velocity Accelerators® – deals with the imperative of replacing the current method used to schedule jobs;  actually, the current method used to schedule a portfolio of jobs.

The nature of the workflow in homebuilding production is project portfolio management.  Yes, there is workflow performed in processes, but those processes are generally embedded, enabling, and supporting;  process workflow is different than project workflow.  The process of building a home – what we call the Start-to-Completion process – is actually the management of multiple projects that share resources.  It is the structuring and the management of a portfolio of job schedules, with interdependencies and interactions of tasks and resources.

The current method of project scheduling is known as the Critical Path Method (CPM), which evolved from the Program Evaluation and Review Technique (PERT) in the 1950s;  it has been in existence for more than sixty years;  it is the method used in every homebuilding ERP suite.

PERT and CPM were designed for programs with large, complex structures (Polaris weapons system, Manhattan Project), but the Critical Path Method has become the de facto standard for scheduling all types of projects:  aerospace/defense, software development, product development, research, and – yes – construction.

The problem with CPM is that it was not designed for managing a portfolio of projects, and it was not designed to function in environments where velocity is important, where faster cycle time and higher inventory turns are critical drivers of business outcomes.

Where it must contend with variation and uncertainty, CPM offers only a buffer of additional time – individual task durations lengthened to protect the completion date of each task, but not necessarily the completion date of the project.

For the most part, builders are oblivious to the effects of variation on their production system.  The cost of variation is always the same:  it is the Gross Income lost from all of the closings that never occurred, from houses that were never built with the capacity they paid to have;  for a profitable builder, it is Gross Income that would have become Net Income, and ultimately, Net Profit.

It’s a lot of money.

Moreover, CPM considers task dependency (the predecessor-successor relationships of tasks) in its work breakdown structure, but it does not resolve resource contention;  it does not consider situations in which tasks of different projects/jobs depend on the availability of resources that do not have sufficient capacity to meet the demand being placed upon them.

These two factors – dealing with variation and resolving resource conflict – should be anathema to builders.

CPM was not designed to contend with the production environment homebuilding presents.  It is not the problem (the problem is variation and resource conflict), but CPM is benign to the solution.  ProChain Solutions’ Rob Newbold (Project Management in the Fast Lane) told me that he would go further, saying:  “CPM supports values that perpetuate the problems of homebuilders.”

Which brings us to Critical Chain Project Management.

Developed in 1997, Critical Chain addresses task dependency and resource contention, and it replaces padded durations intended to protect task completion dates with buffers that protect the completion date of the project/job;  CCPM is much more aware of system constraints.  Most importantly, Critical Chain reduces the duration of projects – the cycle time of houses under construction.

Consider this exercise excerpted from one of the RB Builders: Lessons from the Pipeline© business case studies used in a recent Pipeline workshop™:

RB Builders’ newly-acquired division has a construction schedule of 120 calendar days, but its actual cycle time is 180 calendar days.  There is wide agreement that it should be able to build its homes in far-less than 120 days, because the schedule reflects “highly certain” task durations.  Switching from CPM to CCPM would immediately reduce the schedule from 120 days to 96 days, cutting the schedule by 20% with no diminution of confidence;  it would reduce the actual 180 day cycle time by almost 50%.

Critical Chain Project Management does more than just reduce the length of construction schedules.  It also specifies a set of rules preventing behaviors that consume (and waste) the safety built into task durations.  It installs a release mechanism that pulls starts into the system and keeps work-in-process at the levels required to produce faster cycle times.

It implements simple, visual tools to manage production.

Builders can put a number of these practices into place without changing the scheduling algorithms from Critical Path to Critical Chain.  Critical Chain will not be a complete solution until management technology wakes up and addresses it.  But – it all starts with knowledge.

Come.  Participate.  Learn.

 

Critical Chain Project Management is one of five Velocity Accelerators® (along with Business Process Improvement, Epic Partnering™, Building Information Modeling, and Open-Book Management and Team-Based Performance Compensation) that will be explored at the next Pipeline workshop™, October 18-19, 2017, at the Ponte Vedra Inn and Club, in Ponte Vedra Beach, Florida.

Delivered by SAI Consulting and Continuum Advisory Group.  Sponsored by BUILDER and BuilderMT.

Cost is $875.00 per person;  for team pricing, inquire here (flgroves@saiconsulting.com)

Details:  www.buildervelocity.com