Lean project management

1. Lean project management Johann Packendorff Ek dr, docent Kungl Tekniska Högskolan Skolan för Industriell teknik och management

2. Development trends Management Management Management Line-based operations Line-based operations Line-based operations Industrialized Project operations Project-based operations Projects Projects 1980 2000 ?

3. Towards project portfolio management Scientific management Lean manufacturing Mass manufacturing Toyota system MTM TQM PM as core competence Stage-gate models PM offices OPM3 Lean eng. Project portfolio management Matrix organizations Gantt schedules Network planning Critical chain Risk management Certifications PMBOK MBO Project management 1900 1920 1940 1960 1980 2000

4. Benefits from Portfolio Management • Portfolio value • maximised • increased by • 2x to 3x • (META) • Alignment • Projects are aligned with business objectives • Value • Focus on projects that deliver value to customers and shareholders • Strategic • Focus on projects that increase the strategic capability • Timeliness • More projects are completed on time and budget • Balance • Portfolio has the right balance of high, medium and low risk projects • Right Number • Portfolio has the right number of projects plus Develops Trust, Shared Vision and Communication with the Business Portfolio spend decreased by 10-40% (META) Source: Portfolio Management for New Products, Cooper, Edgett, Kleinschmidt (Perseus Books, 2001)

5. Where does your organisation stand in relation to Portfolio Management? 1. Projects are aligned with business objectives 2. Portfolio contains very high value projects 3. Spending reflects the business strategy 4. Projects are done on time 5. Portfolio has good balance of projects 6. Portfolio has right number of projects 1 Poor 2 3 4 5 Excellent Source: Portfolio Management for New Products, Cooper, Edgett, Kleinschmidt (Perseus Books, 2001) p149

6. 1 2 3 4 5 Maturity levels for Portfolio Management… MANAGED INITIAL REPEATABLE DEFINED OPTIMISING Ad Hoc Initiatives are selected for investment based on ad hoc processes. No overview is maintained of all investments Business cases may be needed for initiatives: Typically based on simple financial metrics. Business cases are considered in isolation. Once approved, there is no consistent or effective management and tracking of benefits. Making Lists Business cases are needed for most initiatives. Business cases are scored and assessed primarily on financial measures. An investment approval lifecycle is established and followed. But there are no effective processes to track the outcomes of investments and to manage the investment portfolio as a whole. Portfolio View Business cases are essential for all initiatives. The whole portfolio is captured and outcomes are tracked and reported, using basic measures of financial value, alignment, risk and initiative health. Refined Metrics Robust metrics of financial value, alignment, risk and health are established. Initiatives are categorised. Scorecards are used to summarise portfolio composition and health. Project selection is integrated with resource management. Portfolio management is pro-actively used as a means of aligning the portfolio to business strategy, through a cyclical investment process. Dynamic Execution There is feedback and continuous improvement. The portfolio is continuously monitored and adjusted to maximise its value. Portfolio management is no longer tied to cycles. Dynamic portfolio management is the accepted process. Value Initial tool implementation and investment capture. Extended metrics and scoring. Dynamic analysis and measurement. Capability

7. Organizations People Projects Key PMI Standards

8. Situation Leads to.. Results in.. Can’t kill projects Too many projects, resource collisions Quality of execution suffers Underestimation of risks and costs Projects not aligned to strategy Reluctance to say no to projects Overemphasis on Financial ROI Over budget Projects Late Lack of Capacity Focus Business needs not met Projects are “sold” on emotional basis -- not selected Benefits not received No strong review process Lack of confidence (in IT) No clear strategic criteria for selection The Symptoms We Regularly See Arising From Poor Portfolio Management

9. The ”evil circle” for project workers Competition and rationalisation Market Organisation 1. Neglect of capacity issues 5. Success out of heoric action 2. Assumptions of organisational slack 4. Too much work ordered to individuals Individual 3. Assumptions of high individual capacity Project

10. Lean Project Management

11. Points of departure Value = A capability provided to the customer at the right time and at an appropriate price, as defined in each case by the customer. Features of the product of service, availability, cost and performance are dimensions of value. Waste = any activity that consumes resources but creates no value.

12. Value-adding time • Typically 90-95% of total lead time is non-value added • Examples of non-value adding activities:- Overproduction- Excess inventory- Defects- Waiting- Underutilized people- Excess motion- Transportation

13. Lean manufacturing A manufacturing philosophy which shortens the time line between the customer order and the shipment by eliminating waste.

14. Lean Manufacturing

15. Order-to-Delivery Cycle Manufacturing Cumulative Lead Time Distri- bution and Customer Service Custo- mer Places Order Order Entry Engi- neering Design Sched- uling Manufacturing Lead Times Purchasing Lead Times Order-to-Delivery Cycle

16. Lean manufacturing focuses on eliminating waste in processes • Lean manufacturing is not about eliminating people • Lean production is about expanding capacity by reducing costs and shortening cycle times between order and ship date • Lean is about understanding what is important to the customer

17. Lean thinking • Specify value- can only be done by the ultimate customer • Identify the value stream- exposes the enormous amounts of waste • Create flow- reduce batch size and WIP • Let the customer pull product through the value stream- make only what the customer has ordered • Seek perfection- continuously improve quality and eliminate waste

18. Non-blaming culture • Problems are recognized as opportunities- It is OK to make legitimate mistakes- Problems exposed due to trust • People are not problems, they are problem solvers- Find solutions, do not ask ”who did it” and ”how shall we punish him/her?”

19. View on profits • Old way: Price = cost + profit • New way: Price – cost = profit

20. Machine Breakdowns Out-of-Spec Materials Workload Imbalances In-Process Inventory Quality Problems Quality Problems Worker Absenteeism Material Shortages Uncovering Production Problems Visible Production Problems are Only 5% of the Total! • We must lower the water level!

21. Implementation success factors • Prepare and motivate people • Employee involvement • Share information and manage expectations • Identify and empower champions • Strategic alignment of lean initiatives • Ask WHY? At least 6 times • Deep commitment to excellence • Atmosphere of experimentation • Wise and realistic measurement and reward systems • Implement pilot projects and market quick wins

22. Evicence of progress • Smaller lot sizes • Increased capacity/throughput • Higher inventory turns • More available floor space • Improved workplace organization • Improved quality • Reduced inventories • Reduced lead times • Greater gross margin • Improved participation and morale

23. Waste--Operations (1) Waste from overproduction (2) Waste of waiting time (3) Transportation waste (4) Inventory waste (5) Processing waste (6) Waste of motion (7) Waste from product defects

25. Individual effectivenessWheelwright & Clark (1992)

26. Three kinds of time • Calendar time: The actual duration of a task from start to finish • Work time: The percentage of the calendar time that resources are available • Value-added time: The amount of work time that is actually value-added, i.e. that something is done during that time that the customer will gladly pay for.

27. Principles of lean project management • Precisely specify the value of each project • Identify the value stream for each project • Allow value to flow without interruptions • Let the customer pull value from the project team • Continuously pursue perfection

28. 1. Precisely specify the value of each project • Value is anything that a customer will gladly pay for • Internal and external customers • An activity on a project is value-added if it transforms the deliverables of the project in such a way that the customer recognizes the transformation and is willing to pay for it. • Get rid of excessive hidden features, excessive complexity. Use one-page project summaries.

29. 2. Identify the value stream for each project • Every task within a project should be directed toward creating deliverables (i.e. outcomes with a customer value). • The sequence of activities producing the project’s deliverables is the project’s value stream. • Value stream mapping – focusing on assumed high-waste segments

30. 3. Allow value to flow without interruptions • A started project represent accumulating value • Projects that are kept queuing or waiting represents waste. • Projects are resource constrained, not time constrained. Think ”critical chain” instead of ”critical path”! • Do not start projects ASAP, start them when there are available resources. Starting a project sooner does not mean it will end sooner. • Construct reservation systems for key resources. Use dedicated resources, calculated buffers, identify bottlenecks. Never use FIFO, always make priorities. • Use just-in-time decision making, just-in-time information flows and urgent stand-up-meetings

31. Critical path thinking Identify logical task flow in order to see what path of activities is the longest. By making sure all activities on the critical path is performed on time, the project as a whole will be delivered on time. Activities should be given time estimations and the started ASAP in order to keep the deadline. Problem: Resources often forgotten, high risk of delay when overloading resources

32. Critical chain thinking After identifying the critical path, one must also consider the resources necessary to perform these activities. The critical chain is the longest path through the project after resource leveling, i.e. making sure that each resource are used no more and no less than its availability. In the critical chain, buffers are used to handle variations – if not you must estimate each activity at its worst case duration. Otherwise there will be collisions => bottlenecks => delays

33. The critical path uncovered

34. Resource leveraged critical path

35. Resource leveraged critical path with 50% duration reduction and buffers

36. Buffer management

37. Buffer management at portfolio level

38. Obstacles to the value flow • Functional departments. Lack of resources (caused by bad resource planning or project collisions) imply bottlenecks, queues and waiting times. • Executive gate meetings and sequential approval cycles. • Fire fighting and expediting. • Changing requirements. • Managerial interference i.e. organizational problems causing both waste and human irritation!

39. 4. Let the customer pull value from the project team • Each deliverable in a project has a downstream customer. • That customer must be identified and activated as a demanding recipient of the deliverable. • Tasks are linked to each other, not dependent. • Customers are involved in the execution of the task from the beginning and are expected to provide frequent review and feedback • Customers are expected to participate in stage-freeze-processes

40. 5. Continuously pursue perfection • Continuous efforts are required for the maintenance of a lean project management system. • Teams must be persistently intolerant to waste.

41. For each theme • Introductorylecture, ended by a set of discussionquestions • Set of articlespublished at the coursehomepage or handedout in paper format • Hand-in of group report, containing (1) literaturereview, (2) group’sopinions/answers to discussionquestions • Plenarydiscussionseminar, all groupsexpected to be able to make short presentations and participateactively, following the instructions of the lecturer • Of the fivequestions in the final writtenexam, at leastfourwill be identical with discussionquestionsraisedduring the course

42. Discussionquestions for April 13th • Each group shall make short summaries of the literature and be prepared to present this summary in class (about 4 pages) • Give examples of the seven wastes as applied to (1) a construction project, (2) a corporate training project • Formulate five arguments for, and five arguments against, the application of lean thinking to project management • Consider the five principles of lean project management in this lecture. For each principle, identify at least two success factors to make the principle work in practice • If you succeed to implement lean project management, what would be the unwanted consequences of this success – i.e., what do you not want to happen? • All summaries and answers/reflections to questions shall be handed over to Johann in paper format at the beginning of the seminar. Use the standardised cover form!!!