Showing posts with label TOC. Show all posts
Showing posts with label TOC. Show all posts

Monday, February 27, 2017

TOC and the Kanban


Remember TOC: The Theory of Constraints? Goldratt explained it in his business novel "The Goal".

TOC is alive and well if you use Kanban in your WIP management

First, you may ask, before considering the theory:

What is a constraint?
  • Limitation on throughput

What’s throughput?
  • Stuff, outcomes, that are valuable to business or client
  • That which is value-add to the business value proposition
  • Debris is not throughput; it’s overhead

Now, what's the Theory?:
Once a stage is full, there’s no advantage to keep piling up WIP inventory at earlier stages

And, what is it that I'm supposed to do as manager re TOC?

Subordinate to the constraint
  • “Efficiency” of widgets/hour at earlier stages is meaningless
  • To clear the constraint, subordinate all resource allocations to the priority of working on the constraint
    All hands on deck rule
And, how can I make a constraint more capable so that I can improve throughput?
  • Add similar resources (parallelism)*
  • Re-organize methodology at the constraint
  • Re-tool or re-train
  • Avoid constraint by going a different direction


* Beware of Brooks Law: adding resources to a late project makes it later (Fred Brooks: "The Mythical Manmonth")



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Monday, December 26, 2011

That velocity thing

Jim Highsmith, a guru in the agile space, has an interesting post on that velocity thing. Velocity, you will recall, is the agile name--originally an XP name--for the rate throughput can be delivered to customers, or, if not delivered to customers, the rate at which throughput--finished deliverables--can be queued for rollout according to some rollout strategy and workflow.

 
Now, the idea of throughput is not an agile thing, per se. Go back to the mid-1980s to Eliyahu Goldratt's Theory of Constraints (TOC). TOC is all about optimizing at the enterprise or project level  maximum throughput to customers. Velocity was not a Goldratt idea, but Eliyahu certainly focused on cadence, using the metaphor of the drum-buffer-rope.

 
Of course, project managers may know Goldratt for his theory of the "Critical Chain", a risk management strategy for insuring on-time delivery. Critical chain is an outgrowth of TOC, and it's Goldratt's idea of how to put some of his throughput management ideas into the body of knowledge for project management.

 
I digress--as often happens here at Musings--so back to Highsmith's lament: he says that having positioned velocity as a calibration metric on team performance, project managers should not then count on teams to achieve the predicted performance because a emphasis on performance may then trump quality, the ultimate goal of an agile project. Even the customer may become part of the problem. In his words:

 
  • Velocity is increasingly being used as a productivity measure (not the capacity calibration measure that it was intended to be) that focuses too much attention on the volume of story points delivered.
  • Focusing on volume detracts from the quality of the customer experience delivered and investing enough in the delivery engine (technical quality).
  • Giving the product owner/manager complete priority control makes the problem worse—we have gone from customer focus to customer control that further skews the balance of investing in new features versus the delivery engine. 
Dean Leffingwell makes a similar point in his book "Agile Software Requirements: Lean requirements practices for teams, projects, and enterprises". He says that if the velocity metric is turned back on the team by managers, the team will do one of three things:
  1. Practice continuous improvement to meet management objectives
  2. Sacrifice quality in the name of speed, or
  3. Sandbag estimates to create velocity buffers
Of course, my point is not to use the metric to amp up productivity, (that's Highsmith and Leffingwells's fear) but to use the metric as an expectation suitable for estimating. If you can't estimate, what's the point of the metric?

And, they've got a point about sacrificing velocity if quality is the ultimate driver. But that puts 'better' as the nemesis of 'good', and puts in question the real advantage of agile that, in my mind, is delivering best value (which could be different from best quality, though I've not thought that all the way through).

And, you ask, what's my idea of best value? Simply put:

 
  • Best value is the most valuable outcomes achievable, as judged by the customer, for the investment available from the sponsor
  • Best value is the most bang for the buck, a best compromise of scope and quality in context of fixed investment and a critical need date.

By the way, I'm all about throughput. You really can't do a decent job as a agile manager unless you can benchmark for throughput and then hold teams accountable.

 
The issue is: accountable for what? I say the answer to Highsmith's issue is to get the iteration backlog right with the customer and the project team at the point of release planning. Once planned for best value, then bring on the throughput!

 
 
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Saturday, July 17, 2010

Throughput accounting

Throughput accounting is a form of earned value measurement and it is closely aligned with the Theory of Constraints [TOC]. Throughput accounting can be summarized this way
Throughput accounting measures the value added to the business, process, or entity by virtue of project accomplishments

Value added is only measurable as an accomplishment, presumably an operational difference in the business, process, or entity that makes a meaningful difference.  In effect, what is being measured is how much more valuable is the entity now than before. If expenses are lower, than the business is a more valuable transformer of revenue into profit. If a public sector mission is more effectively accomplished, then the entity is a more valuable contributor to public "welfare".

Value added is a "difference calculation"; in EVM terms, it's a variance. The absolute values of each factor in the difference are less important that the difference itself.

So, what's not accounted for in this variance calculation? Answer: operating expenses [OE] of the project...expenses traditionally called 'actual cost' [AC]. Why exclude AC? The idea is that PMO's and project shops, particularly IT shops, have more or less fixed operating costs. If not this project, then some other will absorb resources. Also, most IT projects involve contributions from non-IT sales and operations staff that are 'fixed costs'. Unless there is some direct incremental expense, like a special tool or facility, or a direct contract for services...like a consultant...then the day-to-day OE of the project is not included in the value difference. If there are such direct and incremental expenses, then they are included as part of the value variance.

The figure below gives a pictorial of this idea. "A", "B", and "C" refer to different projects


What's the tie-in with the TOC? TOC is about managing limitations to throughput, where throughput is defined as something a customer or stakeholder would find valuable. Insofar as a constraint can be minimized or mitigated, throughput increases. Thus, the need for throughput accounting.

Some AGILE practitioners have adoped this idea also. In fact, there is a pretty good book on the subject: David J. Anderson's 2004 text "Agile Management for software engineering -- apply the theory of constraints for business results"

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