Throughput Accounting Agile Expertise Centers Strike Gold

Copyright © 2021 - Daniel Doiron
Throughput Accounting:
Comment les Centres d’Expertise Agiles
peuvent Frapper (mint) de la Monnaie
par Daniel Doiron, CPA
01 02 03

2
Daniel Doiron,CPA –The Agile Agonist
https://www.linkedin.com/in/danieldoiron/
Copyright © 2021 Daniel Doiron
Je suis le seul CPA au monde à donner des cours de Throughput Accounting en
présentielle dans le cadre d’un programme de formation continue obligatoire
pour un chapiter CPA, celui du Québec.
J’ai également écrit le premier livre traitant du Throuhgput Accounting pour le
travail intellectuel,le modèle actuel du Throughput Accounting étant trop axé
sur le monde industriel et manufacturier.
Ce livre,‘Seeing Money Clearly’emprunte des avenues jusque là inexplorées.
Toutes ces trouvailles et nouveautés sont miennes.
Je dispense donc des cours de Throughput Accounting aux CPA du monde entier
ainsi qu’aux Centres d’Expertises Agile ou je suis axé sur l’execution et la
livraison.
Plus d’informations sur mon site https://agileagonist.com

3
What is ToC ?
A management philosophy
that focuses on the whole by
subordinating to the parts.
The Theory of Constraints by Dr Kevlyn Youngman

4

Dr Eli Goldratt on Cost Accounting
‘’Almost all decisions based on cost
accounting are utterly wrong.’’

5

Dr Eli Goldratt on Cost Accounting
‘’Cost Accounting is productivity’s public
enemy number one.’'

6
Accounting
Money
Revenue
Cost
Cost Accounting:
Decrease Cost
Time
The opposing forces of Cost
Accounting and Throughput
Accounting
Throughput Accounting:
Increase Revenue

7
Copyright © 2021 – Daniel Doiron

Demings - My favorite quote of all time
It’s not enough to do your best.You have to know
what you are doing and then do your best!


8
A) Introduction –Qu’est-ce que le Throughput Accounting ?
La performance financière –Ford,Ohno et Goldratt
B)
Les composantes de la capacité
D)
La réalisation du Projet en mode CCPM
H)
E)
F) Frapper de l’argent – Gestion du processus ou value stream
G) Les données pour un projet Agile
I) Varia – Questions etc.
C) Intégration de concepts : Einsten, Demings, Little, Reinertsen, Lucas
Agenda
Positionnement stratégique d’une contrainte selon TH, I et O

9
Throughput Accounting for Knowledge Work – A first !
This book puts the emphasis on making money.
Making money and making profits are two
different things.

10
The ToC domain – John Ricketts

11
Copyright © 2021 by Daniel Doiron
… Is a lot of things:
• An accounting system
• A financial application
• An improvement initiative – POOGI –Process of On-Going
Improvements and
• The decision making arm of the Theory of Constraints
Note: A thorough understanding of the 5 Focusing Steps is
mandatory.
Photo by afif-Kusuma on Unsplash
Throughput Accounting ...

12
Five Focusing Steps – POOGI – Which is the most difficult?
01
Identify the Constraint
Step One
02
Exploit the Constraint
Step Two
04
Elevate the Constraint
Step four
05
Repeat !
Step five
03 Step three
Subordinate everything to the Constraint

13
Subordinating is much harder !
01
Identify the Constraint
Step One
02
Exploit the Constraint
Step Two
04
Elevate the Constraint
Step four
05
Repeat !
Step five
03 Step three
Subordinate everything to the Constraint

14
Capacity and demand
Bottleneck
Any kind of resource that cannot deliver up to the demand
that is placed on it


15
Capacity and demand
Constraint
The one thing that prevents us (our entire organization) from
delivering more of whatever it is we have to deliver


16
Subordinating vs Exploiting the Constraint – From Dr Kelvyn
Youngman
Exploitation and
Subordination Reframed as
Productivity and Utility

17
Subordinating to vs Exploiting the Constraint
Big Batch Size Small Batch Size
Photo by Ivan from Pexels Photo by Toa Heftiba on Unsplash

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Subordinate
Exploit
Big Batch Size Small Batch Size
Photo by Ivan from Pexels Photo by Toa Heftiba on Unsplash

19
Thinking Fast Thinking Slow
Photo by Charlie solorzano on Unsplash Photo by tai s captures on Unsplash

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Thinking Fast Thinking Slow
Subordinate
Exploit
Photo by Charlie solorzano on Unsplash Photo by tai s captures on Unsplash

21
S LA C K B U S Y
Photo by Colin Avery on Unsplash
Photo by Mert Kahveci on Unsplash

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Exploit
Subordinate
S LA C K B U S Y
Photo by Colin Avery on Unsplash
Photo by Mert Kahveci on Unsplash

23
Don’t Stop & Measure Start/Stop & No Measure
Photo by Charles Deluvio on Unsplash
Photo by Fleur on Unsplash

24
Don’t Stop & Measure Start/Stop & No Measure
Subordinate
Exploit
Photo by Charles Deluvio on Unsplash
Photo by Fleur on Unsplash

25
Higher Logical Level Lower Logical Level
Photo by Orren Jack Turner - Common Createives Photo by Rishi Ragunathan on Unsplash

26
Exploit
Subordinate
Higher Logical Level Lower Logical Level
Photo by Orren Jack Turner - Common Createives Photo by Rishi Ragunathan on Unsplash

27
Setup Costs No Setup Costs
Photo by Gustavo campos on Unsplash Photo by luc van loon on Unsplash

28
Subordinate
Exploit
Setup Costs No Setup Costs
Photo by Gustavo campos on Unsplash Photo by luc van loon on Unsplash

29
What is the big deal compared to the others ?
Shewart
Plan Do StudyAct (Learning)
Lean Six SIGMA
Define Measure Analyze Improve
Control
Colonel BOYD
Observe Orient Decide Act
ADKAR
Awareness, Desire, Knowledge,Activity &
Reinforcement
5 Whys
CMMI
Capability Maturity Model Integration
Deming
Plan Do Check Act

30
What is the big deal compared to the others ?
TOC is an improvement model.
We focus on the constraint!

31
TA – Throughput Accounting
With only 3 variables to understand -
TH,OE et I –Operational Management
becomes child’s play.Both erudites and
experts are playing on a leveled field and
motivation is aligned for all system
participants.Only 3 questions need to be
answered in this specific order to forge
ahead :

32
ahead :
Will my action increase Throughput (TH)? (Sales minus
TotallyVariable Cost –TVC)

33
ahead :
TotallyVariable Cost –TVC)
Will my action diminish Investment or Inventory(I)? (All
the money in the system)

34
ahead:
TotallyVariable Costs –TVC)
Will my action diminish Investment or Inventory(I)? (All
the money in the system)
Will my action diminish Operating Expenses (OE)?
(Money required to turn Inventory into Throughput)

35
Costs – TVC or not TVC
A totally variable cost is variable only if
it changes with production levels!
A totally cost is variable only if it has a correlation
coefficient of r=1:1 with sales.
All other expenses are
Operational Expenses

36
FLASH QUIZZ !!!
Can anyone here give me a case where TVC would exist in Knowledge Work?

37
B)
D)
H)
E)
Agenda

38
Down History Lane
Ford, Toyota and Theory of Constraints
The Quest for Flow

39
History: Ford – TPS – Theory of Constraints
Stellar Financial Performance Systems of the past !
Note: Lean wants to reduce waste. Six Sigma wants to reduce variability.ToC tells you where to focus your improvement efforts!

40
History: Ford – TPS – Theory of Constraints
Financial performance systems
based on signals that tell us
when to stop working!
This goes against what
traditional cost accounting
tells us!!!

41
Limited workspace – No inventory variability

42
Limited workspace – No inventory variability

43
Ford – World Record !
5,000
assembly parts
81 hours
From mining to consumer

44
https://amp.ibtimes.co.uk/paris-canal-saint-martin-clean-pictures-bikes-chairs-trolleys-emerge-sludge-1536564
High WIP hides the constraint !!!! Low WIP reveals the constraint!

45
TPS – inspired from USA super markets (Small Batch Size)

46
Small inventory in cell – High variability

47
TAICHII OHNO – POOL ANALOGY & REDUCING POOL SIZE

48
More on TPS !! Taiichi Ohno
Pursue Pull (Flow)
I do not care about Waste*
I do not care about Costs*
Inventory as a liability
Source : ‘Standing on the Shoulders of Giants’ by Dr. Goldratt

49

50
TPS – Toyota production system
Stable environment
Stable product line
predictable demand

51
ToC – Inventory replenishment based on time
Flow management Drum,Buffer,
Rope …
… According to Theory of
Constraints or TOC (Eliyahu
Goldratt)
Beats the
production pace
Drum
Non-bottlenecks
Y Y Y X Y Y Y
Finished goods
shipment
Non-bottlenecks
Bottleneck
resource
Rope
Controls releases
to production
Buffers
Protect
bottleneck & sales
Protection
Raw material
Protection

52
Buffer Size 50% DDP – As simple as A/B = 9/3
9 3
FULL
KITTING
MERGE DONE
Waiting for In Process
STEP 1 STEP 2 STEP 3 ……………… STEP N
B
A
3

53
DBR Kanban Board – Calculating Column Buffer Size
For 50% DDP - Due Date
Performance
A/B = 9/3 = 3 items
Once replenishment signal is
sent upstream, there is a 50%
chance of arriving on time at
the constraint. (DDP)
3

54
Buffer Size to 80% DDP – As simple as A/B*80/100 = 4.8 or 5
9 3
FULL
KITTING
MERGE DONE
B
A
5

55
Initial setup
9 3
FULL
KITTING
MERGE DONE
B
A
5
12
1
2
3
4
5
6
7
8 9
11
16
10
15
14
13

56
Day A – Upstream Flow Indicator GREEN
9 3
FULL
KITTING
MERGE DONE
B
A
5
12
2
3
4
5
6
7
8 9
11
16
10
15
14
13
1

57
Day B – We can consider moving more tickets to ‘In Process’
9 3
FULL
KITTING
MERGE DONE
B
A
5
12
7
8
9
11
16
10
15
14
13
1
5
6
4
2
3

58
Day C – Business as usual
9 3
FULL
KITTING
MERGE DONE
B
A
5
12
7
8
9
11
16
10
15
14
13
1
2
3
4
5
6

59
Day D – humming along
9 3
FULL
KITTING
MERGE DONE
B
A
5
12
7
8
9
11
16
10
15
14
13
1
2
3
4
5
6

60
Day E – Queue Discipline – First in – First serve in DBR column
9 3
FULL
KITTING
MERGE DONE
B
A
5
13
15
1
2
4
5
6
12
3
9
7
8
10
11
16
14

61
Day F – Again we could consider moving to ‘In Process’
9 3
FULL
KITTING
MERGE DONE
B
A
5
13
15
1
2
4
5
6
12
3
10
11
16
14
8
9
7

62
Day G – TH boards are silver bullets – No need for beauty contest
9 3
FULL
KITTING
MERGE DONE
B
A
5
13
15
1
2
4
5
6
12
3
11
16
14
8
9
7
10

63
Day H – I can manually put on ticket in system here !
9 3
FULL
KITTING
MERGE DONE
B
A
5
13
15
1
2
4
6
12
3
11
16
14
8
9
7
10
5

64
Day I – No need to replenish yet, but we should raise awareness
9 3
FULL
KITTING
MERGE DONE
B
A
5
13
1
2
4
6
12
3
11
16
14
8
9
7
10
5
15

65
Day J
9 3
FULL
KITTING
MERGE DONE
B
A
5
13
1
2
4
6
12
3
16
14
8
9
7
10
5
15
11

66
Day K – DBR buffer RED
9 3
FULL
KITTING
MERGE DONE
B
A
5
1
2
4
6
3
14
8
9
7
5
15
11
10
16
12
13
17
18
19
√
√
√

67
Day K
9 3
FULL
KITTING
MERGE DONE
B
A
5
1
2
4
6
3
14
8
9
7
5
15
11
10
16
12
17
18
19
13
√
√
√

68
Day L
9 3
FULL
KITTING
MERGE DONE
B
A
5
1
2
4
6
3
14
8
9
7
5
15
11
10
12
17
18
19
13
√
√
√
16

69
Day M
9 3
FULL
KITTING
MERGE DONE
B
A
5
1
2
4
6
3
14
8
9
7
5
15
11
10
12
17
18
19
13
√
√
√
16

70
Day N
9 3
FULL
KITTING
MERGE DONE
B
A
5
1
2
4
6
3
14
8
9
7
5
15
11
10
12
17
18
19
13
√
√
√
16
20
√

71
Day O
9 3
FULL
KITTING
MERGE DONE
B
A
5
1
2
4
6
3
14
8
9
7
5
15
11
10
12
17
18
19
13
√
√
√
16
20

72
Day P – Ticket 18 makes it in !
9 3
FULL
KITTING
MERGE DONE
B
A
5
1
2
4
6
3
14
8
9
7
5
15
11
10
12
17
18
19
13
√
√
16
20

73
Day Q – Stress – Stress – Stress ????
9 3
FULL
KITTING
MERGE DONE
B
A
5
1
2
4
6
3
14
8
9
7
5
15
11
10
12
17
18
19
13
16
20

74
DBR Scheduling Insights
Thinking Moment
• DBR scheduling removes cognitive bias in the replenishment decision making
process
• DBR scheduling minimizes WIP
• In using DBR Scheduling we will have a way to reduce Wait Time to the minimum
that is necessary to prevent the Constraint from starving

75
Theory of Constraints
Works in all
spheres of the
economy
High
variability
High
instability

76
B)
D)
H)
E)
Agenda

77
Concept Integration
of Great Thinkers

78

Demings Impact on Agile Thinking
• Demings 14 points -Drive out fear, Improve
constantly, Joy at work etc.


79

• 95% of performance is dictated by systems


80

• 95% of performance is dictated by systems
• Planning, estimating are wasteful


81

Kanban Event Driven Risk Management. What is it ?
Risk will become visible on the Kanban
board as soon as it materializes!
Then you pull the andon cord!
Photo by airfocus on unsplash

82

Lucas Critique – 1976 (1995 Nobel Winner)
• Importing models without concerns of their original
context and intent will lead to incorrect results and
practices


83

practices
• We can argue that the lack of concern for common cause
variation –Lean Manufacturing –was wrongly adopted by
agile at large


84

practices
• We can argue that the lack of concern for common cause
variation –Lean Manufacturing –was wrongly adopted by
agile at large
• This is addressed subsequently by Donald Reinertsen


85

Little’s Law
• Littl’e Law –Dr John Little –has been proven scientifically


86

Little’s Law
• Kanban,in a stochastic fashion,and the Theory of
Constraints,in a deterministic manner,both leverage Little’s
Law


87

Little’s Law
Law
• When applied properly,it can bring stability and
predictability to any system


88

Little’s Law
Law
• When applied properly,it can bring stability and
predictability to any system
• A stable and predictable system stands a better chance of
being around next year !


89
Little’s Law expressed as a CFD
Time
Customers
serviced or
products
delivered
Delivery
Demand
Increase Capaciy
Span of Control
Shape Demand
Sphere of Influence

90
Airport Example - CFD
Time
Number
of Planes
Departures
Arrivals
When the departure rates of planes is less than the arrival rate, instability occurs.
Number of planes
at the Airport!
Things are getting
out of control!

91
TAKE HOME – at work and over the last 18 months?
Time (18 months)
Number
of
Projects
Projects
Finished
Projects
Started
When the finish rate of projects is less than the starting rate, instability occurs.
Number of active projects
is getting out of control!

92
What a stable system looks like!
Time (18 months)
Number
of
Projects
Projects
Finished
Projects
Started
is stable !

93
Want an even more stable system? Just reduce WIP!
Time (18 months)
Number
of
Projects
Projects
Finished
Projects
Started
is stable !

94
Getting to Flow with Little’s Law
A stable and predictable system has a better chance of being around next year.
Customers
serviced or
products
delivered
Delivery
Demand
The quest for predictability
and stability

95
Getting to Flow with Little’s Law
Customers
serviced or
products
delivered
Delivery
Time
Demand
Why don’t we shape demand instead and forego the cost of extra capacity ?
Desired
Demand

96

Donald Reinertsen – 2009
‘’In Knowledge Work,Common Causes have a
greater impact than in manufacturing.Therefore,
Common Causes should be taken into
consideration, especially for finding improvement
opportunities.’’

97
Explicit Risk Management and Common Cause
Explicit Risk Management’s focus
• Unexpected variation
• Management by exception

98
CCPM Buffer Management & Unexpected Variation
CCPM By Dr Eli Goldratt WAS INSTRUMENTED TO DETECT UNEXPECTED VARIATION
Critical Chain Project
Management
Project
Buffer
Expected Variation
(Do Nothing)
Normal Variation
(Plan)
Abnormal Variation
(Act)

99

Einsten
‘’We cannot solve our problems with the same
thinking we used when we created them.’’


100
What is your Agile Center of Excellence to do ?
Execution and Delivery issues with:
• Scrum
• XP
• SAFe
• DA etc.
Photo by k-mitch-hodge-wZfndoCA1rA on unsplash

101
Who are you gonna call?

102
Wolfram Müller – Blue Dolphin

103
B)
D)
H)
E)
Agenda

104
Capacity components
Productive, Protective & Excess

105
Excess
(Performance)
Protective
(Necessary)
Productive
(Mandatory)
The BLUF on capacities …

106
Constraint is PHASE B
PHASE B PHASE D
PHASE A PHASE C
CAPACITY
--------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
But when we look at the Constraint … Management is easier

107
But when we look at the Constraint …
2 5 2 1
FULL
KITTING Waiting for In Process
Phase A Phase B Phase C Phase D
Waiting for In Process Waiting for In Process
DONE
Flow Time in Hours per Feature = 10

108
NO CONSTRAINTS!
PHASE B PHASE D
PHASE A PHASE C
CAPACITY
--------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
Lean thinks that Flow is supported by leveling capacity !!!
Note: Balancing FLOW is not done by balancing CAPACITY ! FLOW issues are self revealing in a low WIP system!
And so we must manage the entire system as
anything above productive capacity is deemed as
waste.

109
NO CONSTRAINTS!
PHASE B PHASE D
PHASE A PHASE C
CAPACITY
--------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
Lean thinks that Flow is supported by leveling capacity !!!
Note: Balancing FLOW is not done by balancing CAPACITY ! FLOW issues are self revealing in a low WIP system!
According to Lean and Cost
Accounting, all that is above the red
line is waste to be eliminated

110
B)
D)
H)
E)
Agenda

111
Constraint is PHASE B
PHASE B PHASE D
PHASE A PHASE C
CAPACITY
--------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
Constraint positioning – TH, I and OE ….

112
B)
D)
H)
E)
Agenda

113
The Corbett Sanction
SLACK & WIP
Operating Expenses Waste
Free Products,
Variance & Risk
Minting Money & Thoughput
Accounting

114
Accounting
The Corbett Sanction,
SLACK & WIP
Free Products,
Variance & Risks

115
Creation of and management of slack
Buyer beware …
There is this flawed mental model that slack is given to you.
That you merely have to lower WIP to create slack
This is a dangerous proposition

116
The Effect of Capacity Utilization on SLACK – Principle Q3
Note: Drawing inspired and adapted from the work of Mr.Donald Reinertsen on principle Q3
0
5
10
15
20
Queue
Size
Capacity Utilisation
Deterministic
Stochastic
10% 100%
80% 90%
20% 30% 40% 50% 60% 70%
Capacity utilisation is a good proxy variable for SLACK

117
Excess
(Performance)
Protective
(Necessary)
Productive
(Mandatory)
A more modern & scientific approach

118
Constraint is BUILD
Define Build
Analyse Design
A Standard Process – BUILD is the constraint
Produce
Implement
-------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------

119
Define Build
Analyse Design
SLACK lives here by design!
Produce
Implement
-------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
Constraint is BUILD

120
Define Build
Analyse Design
Optimal WIP level for SLACK – Build phase and DBR
Produce
Implement
-------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
Constraint is BUILD
DBR

121
Define Build
Analyse Design
Optimal WIP level for SLACK – Build phase and DBR
Produce
Implement
-------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
Constraint is BUILD
DBR

122
SLACK & WIP
Free Products,
Variance & Risk
Accounting

123
Define Build
Analyse Design
Free Products and Negative Covariance !
Produce
Implement
-------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
Skip the Constraint and you have a free product while reducing overall execution risk!
Note: Not taxing the constraint reduces covariance and overall risk

124
SLACK & WIP
Free Products,
Variance & Risk
Accounting

125
Constraint is BUILD
Define Build
Analyse Design
All managerial activities have no costs but at constraint
Produce
Implement
Note: Do not create red tape on that account. At the constraint, make sure all activities are aimed at keeping the constraint busy

126
Define Build
Analyse Design
INSPECTION is Mandatory at Constraint
Produce
Implement
Constraint is BUILD

127
SLACK & WIP
General & Administrative
Expenses
Waste
Free Products,
Variance & Risk
Accounting

128
Define Build
Analyse Design
After the Constraint - Where the Co$t of WASTE Hurts
Produce
Implement
-------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------

129
B)
D)
H)
E)
Agenda

130
Execution of a CCPM Agile Plan
With a LITTLE help
Little’s Law The Trap The Plan
The Data

131
The Data
With a LITTLE help

132
Little’s Law Formulations
THEORY OF CONSTRAINTS KANBAN
𝑇𝐻 =
𝑊𝐼𝑃
𝐿𝑇
Increase Throughput Decrease Lead Time
𝐿𝑇 =
𝑊𝐼𝑃
𝑇𝐻

133
T
Analysis Design Development Test QA Deploy
#
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
AVG
Flow Time
Distribution
CCPM Buffer
DBR Buffer
Monitoring and Direction of a Solution in Execution
Manage Load/Flow – Scope
Manage Time L I T T LE ‘ S L A W
𝑇𝑃 =
𝑊𝐼𝑃
𝐹𝑇
𝐹𝑇 =
𝑊𝐼𝑃
𝑇𝑃
Buffer Penetration Governance while Executing a Project
50% 60% 70% 80% DBR Queue

134
Getting to my Flow Time Distribution – Week 1
T
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
#

135
Getting to my Flow Time Distribution – Week 2
T
#
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

136
Putting the labels and metrics
T
#
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
Mean

137
Adding the Buffer Thresholds from the mean
T
#
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
Mean
50% 60% 70% 80%

138
Watching my Tickets move and progress
T
#
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
Mean
50% 60% 70% 80%

139
T
#
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
Mean
50% 60% 70% 80%

140
T
#
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
Mean
50% 60% 70% 80%
Entering Common Cause

141
T
#
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
Mean
50% 60% 70% 80%
Entering Special Cause

142
Flow Time (WIP) Ageing Signal thresholds
T
#
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
Signaling Effect !
Mean
50% 60% 70% 80%
Note Well
✓ The buffer is not for padding

143
T
#
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
Signaling Effect !
Mean
50% 60% 70% 80%
Note Well
✓ It is for Work Execution management

144
T
#
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
Signaling Effect !
Mean
50% 60% 70% 80%
Note Well
✓ It comes at no cost!

145
T
#
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
Signaling Effect !
Mean
50% 60% 70% 80%
Note Well
✓ The traditional way is to put the 50/60/70/80 precent
thresholds at the mean

146
T
#
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
Signaling Effect !
Mean
50% 60% 70% 80%
Note Well
✓ Usually, the buffer is set at 50% of AVG FLOW TIME

147
T
#
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
Signaling Effect !
Mean
50% 60% 70% 80%
Note Well
✓ Usually, the buffer is set at 50% of AVG FLOW TIME
✓ But the buffer can be sized at 60% or 40%,
depending on the desired amount of signaling
needed!

148
Choose the sensitivity level you want !
T
#
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
Mean

149
The Data
With a LITTLE help

150
Geometry of WORK ITEMS on a CFD & Little’s Law
Time
OPERATIONALTHROUGHPUT
Average of XYZ work items over ABC days
Work

151
DECISION MAKING ARRAY
# Work Items CFD Avg Time Buffer Size Total Time
10 7 3.5 10.5
11 8 4 12
….
25 15 7.5 22.5
26 17 8.5 25.5
27 22 11 33
…
30 25 12.5 37.5
31 26 13 39

CCPM Buffer Management & Unexpected Variation
CCPM By Dr Eli Goldratt WAS INSTRUMENTED TO DETECT UNEXPECTED VARIATION
Critical Chain Project
Management
Project
Buffer
Expected Variation
(Have a Great Day!)
Normal Variation
(Investigate)
Abnormal Variation
(Act! Run! Do!)

153
The Data
With a LITTLE help

154
MISTAKES TO AVOID WHEN MAKING A CCPM AGILE PLAN !

155
Flow/Lead Time Data …
Work Items Averaga Lead Time
✓ SQL .7 Days
✓ Reports 1.5 Days
✓ CRUD 3 Days
✓ Architecture 5 Days
✓ Automation Scripts 2 Days
✓ Interfaces 3.5 Days
✓ Data Profiling 1 Day
✓ Database Management Tickets .5 Days
Sources : Scatter Plot and Flow/Lead Time Distribution

156
CCPM PLAN
Work Item Average Lead Time Quantity Total Time
Reports 1.5 10 15
Data Profiling 1 8 8
Architecture 2 5 10
CRUD 3 3 9
TOTAL CCPM Chain 26 42
CCPM BUFFER (50%) 21
Project Total 63

157
FLAWED CCPM PLAN
Work Item Average Lead Time Quantity Total Time
Reports 1.5 10 15
Data Profiling 1 8 8
Architecture 2 5 10
CRUD 3 3 9
TOTAL CCPM Chain 26 42
CCPM BUFFER (50%) 21
Project Total 63

158
The Data
With a LITTLE help

159
Plan without planning with
Flow Time Data & Little’s Law!
TH
𝑇𝑃 =
𝑊𝐼𝑃
𝐹𝑇
……….
Time 18
Days
50
Work Items
9 Day Buffer
Day
27
"Now suppose we have 50
items that we can forecast
take 18 days …"

160
27 days
Apr 1 Apr 27
Apr 18
Project Representation – CCPM AGILE PLAN

161
27 days
Apr 1 Apr 27
Apr 18
Project Representation – The DRUM
The critical chain is the drum

162
27 days
Apr 1 Apr 27
Apr 18
Project Representation – The Buffer
The CCPM buffer is the buffer

163
27 days
Apr 1 Apr 27
Apr 18
Project Representation – The Rope
The due date is the signal that a new
undertaking can start!

164
Subordinating to vs Exploiting the constraint
DRUM BUFFER ROPE

165
DRUM BUFFER ROPE

166
DRUM BUFFER ROPE

167
DRUM BUFFER ROPE

168
CCPM and Buffers #1

169
27 days
Apr 1 Apr 27
Apr 18
BUFFER BURN RATE : You are consuming the time buffer at 2.775 the amount of work that needs to be delivered.For a work
item that would normally take one day (the DRUM),you are spending 2.75 days to do it.
CCPM and Buffers #1
Variable Value
Actual TH = WIP to Date / Lead Time to Date 14/7 = 2.0 work items done per day
Expected Lead Time = Total WIP / Actual TH 50/2.0= 25 days is the new timeline
Lead Time Difference = Expected Lead Time –Average Lead Time 25-18 = 7 days difference –Target date is 24 April
%Buffer Consumption = Lead Time Difference * 100 / CCPM Buffer 7*100/9 = 77%
%Work Completed = WIP To Date * 100 / Total WIP 14*100/50 = 28%
Buffer Burn Rate = %Buffer Consumption / %Work Completed 77/28 = 2.75
Little’s Law !
Apr 7 Apr 24

170
CCPM and Buffers # 2

171
27 days
Apr 1 Apr 27
Apr 18
BUFFER BURN RATE : You are consuming the time buffer at 0.175 the amount of work that needs to be delivered.For a Work
Item that would normally take 1 day (the DRUM),you are completing it in 0.175 days.
CCPM and Buffers #2
Little’s Law !
Apr 12
Variable Value
Actual TH = WIP to Date / Lead Time to Date 37/12 = 3.08 work items done per day
Expected Lead Time = Total WIP / Actual TH 50/3.08 = 16 (16.23) days is the new timeline
Lead Time Difference = Expected Lead Time –Average Lead Time 16-18 = -2 days difference –Target Date is 16 April
%Buffer Consumption = Lead Time Difference * 100 / CCPM Buffer -2*100/15 = -13%
%Work Completed = WIP To Date * 100 / Total WIP 37*100/50 = 74%
Buffer Burn Rate = %Buffer Consumption / %Work Completed 13/74 = 0.175
Apr 16

172
B)
D)
H)
E)
Agenda

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