This is the eighth and final post in this eight part series that covers the fundamental theory of project management. The focus of this post is Lean Project Management. The series is based on our online learning course Hands on Project Management Theory and Practice.
In this post we will discuss the concepts of Lean Project Management. Lean Project Management deals with maximizing value to the customer and other stakeholders while minimizing project waste. We will explain the concepts of value and waste, and will show how to translate the voice of the customer to measurable benefits, or value, as well as how to analyze the value of alternative project plans to find the efficient frontier of project solutions. We will see how lean indicators can be used to minimize waste and to find the efficient frontier of project plans and thus to achieve the goals of Lean Project Management.
Lean Project Management is based on the ideas developed and implemented in the Toyota Production System, also known as TPS. The leading idea is to focus on maximizing the value to the customer, where value - in its simplest form, is anything the customer is willing to pay for. TPS simultaneously tries to minimize waste such as waste of money, waste of time, waste of resources, and waste of unnecessary transportation.
Another definition of value is anything that satisfies the needs and expectations of the stakeholders, i.e. provides benefit to the stakeholders.
Value to the customer and the other stakeholders can be estimated by translating the voice of the customer and the needs and expectations of the stake holders into a set of requirements for the project. These include several types of requirements:
- Time-related requirements such as a project due date or minimum time to market.
- Cost-related requirements such as a target cost for the project, or minimum project cost.
- Functional requirements such as the speed of a car, the efficacy of a new drug, or the payload of an airplane.
Since these requirements may vary in their importance to the stakeholders, there is a need for some weighting scheme to measure value.
A simple tool for estimating the value of different solutions or plans for a project starts with definition of criteria or performance measures based on the voice of the customer and the needs and expectations of the project stake-holders. Each criterion is a performance measure that represents a need or expectation.
Next, a weight is assigned to each criterion based on its relative importance to the customer and the project stakeholders. A score is given to each alternative solution relative to each criterion.
By multiplying each score by the relative weight and summing up these values for each of the alternative solutions, a measure of value or total benefit of each solution is calculated.
By adding the estimated cost of each solution to the analysis, a benefit-to-cost ratio is calculated as a basis for evaluation of possible solutions.
Another way to combine cost and benefit in the evaluation process is to plot the efficient frontier of Pareto efficient solutions.
The efficient frontier shows all project plans whose cost and benefit are not dominated by other plans.
The horizontal axis represents the estimated cost of the project if the corresponding plan is adopted, and the vertical axis represents the value of that plan. Each point represents a project plan. In the above example, plans numbered 1, 2, 3 and 4 are efficient and are on the efficient frontier, while plan 5 is dominated by plan 2, as plan 2 provides the same benefit for a lower cost. Similarly, plan 6 is dominated by plan 4, as plan 4 provides higher benefit for the same cost.
Trade off analysis is made simple, as the benefit tends to increase with the cost along the efficient frontier.
Typically each system requirement in the project has an accepted range. When a project plan is selected, the evaluation of each criterion can be calculated. The project manager should make sure that the result is within the desired range. In the case where the evaluation of a requirement is better than the desired value, this can indicate waste as it typically costs more or takes more time to achieve a result which the customer is not willing to pay for.
This is known as over design or gold plating. On the other hand if the evaluation of a requirement is lower than the desired range, the plan is infeasible with respect to that requirement.
During the project life cycle and especially in the planning phase the project manager should focus on the benefit and on the waste in the project.
Some examples of wastes in the project are money wasted on idle resources and penalties charged for late project completion.
It is important to understand that the weight assigned to each criterion is subjective and depends on the needs and expectations of the stakeholders and the voice of the customer. Since these are subject to change, it is important to keep the customer and other stakeholders involved in the project planning process and to get their input throughout the execution process.
Involving the stakeholders and getting the voice of the customer throughout the entire project life cycle is an important enabler in Lean Project Management.
When the score of each criterion (based on the evaluation) is multiplied by the weight of that criterion, it is possible to estimate the value of the project plan by adding up the weighted scores; this is the estimated benefit of the project plan.
To demonstrate the calculation of the score let's look at the radar example where the radar range should be between 10 (with a score of 0) and 12 (with a score of 100) miles. If the evaluation of the range for a given project plan is 11, then the score will be interpolated by a linear function, and since eleven is halfway between 10 and 12, the score will be 50.
If the evaluation of the range for a given project plan is 14, then the score will be the maximum possible of 100, but it is over designed the project team should check if this over design causes waste. As an example, it could be possible to reduce the cost of the project by changing some activities to less expensive modes while still maintaining a range of 12 miles.
In the Lean Project Management approach, waste is defined as anything that the customer or the stakeholders are not willing to pay for. Waste of money is a very clear example, but other sources of waste are possible, such as the waste of time or resources.
The waste of money is presented in the project budget as the cost of idle resources and the cost of penalties paid for late completion.
Any constraints that are violated by the project plan cause waste. The time constraint is the project due date, while the cost constraint is the target cost of the project. Cash flow constraints are imposed by the available funds. If the cash position is negative in any period, the project runs out of money and might be terminated due to bankruptcy.
The PTB Analytics automatically calculates and presents the efficient frontier of a scenario in a bubble chart. Each bubble represents an efficient project plan. The number inside each bubble and its size represent the duration of the corresponding project plan.
In the Bubble chart, the horizontal axis is the cost of the project plan while the vertical axis is the benefit of the project plan. An efficient solution can be selected simply by clicking twice on its bubble in the efficient frontier screen. Once selected, the PTB can simulate the plan and the user can fine-tune it by assigning and releasing resources, changing the start time of activities, and splitting activities when needed.
To summarize, Lean Project Management is an important approach in project management. Following it leads to improved project results, as waste is minimized and value maximized.