Too Big to Change The Cost Side of CCPM

TOCICO 2014 Conference

Too Big to Change

The Cost Side of CCPM

Presented By: CMS Montera Date: June 11, 2014

TOCICO 2014 Conference

Agenda

CCPM solution

CCPM solution

CCPM benefits

CCPM benefits

Corporate environment requirements

Corporate environment requirements

Scheduling conflict

Scheduling conflict

Direction of the solution

Direction of the solution

Change Management considerations

Change Management considerations

TOCICO 2014 Conference

Who is CMS Montera?

• CMS Montera Provides Management Solutions and Software to

TOCICO 2014 Conference

Stagger the release of projects into execution in order to limit the number of active projects in the pipeline

Buffer project plans in order to better protect against unknowns

Prioritize task execution based on project completion vs. buffer consumption

Prioritize

Stagger Buffer

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CCPM Solution

Need to create a project network to Schedule Tasks and then ensure resource availability to support timely execution

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CCPM Solution – typical results

More Sales / Profit

Lower

Costs

Happy

Customers

More

Capacity

• Most organization that decide to follow CCPM methodology can achieve these results

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• recognize current and predict future

revenue by tracking material arrival and labor utilization

• calculate profit margin (project & business)

• resource time tracking

• budget comparisons

• connecting arrival of materials to project tasks Many larger, especially project based, organizations need to forecast revenue, perform financial analysis, and provide financial

reporting Many larger, especially project based, organizations need to forecast revenue, perform financial analysis, and provide financial

reporting

Business Environment Requirements

• These activities require fairly precise resource schedule (at a point in time)

• In addition, most of these activities are already supported by multiple of software tools - primarily to support accounting

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In order to achieve business results possible with the use of CCPM methodology, these organizations are

often forced to run two parallel systems:

In order to achieve business results possible with the use of CCPM methodology, these organizations are

often forced to run two parallel systems:

Critical Chain to get business results (task scheduling) Critical Chain to get

business results (task scheduling)

Traditional PM approach to perform financial reporting

(resource scheduling)

Traditional PM approach to perform financial reporting

(resource scheduling)

Business Environment Requirements

TOCICO 2014 Conference Schedule Resource Effort Successful Project Based Business Effective Project Execution Accurate Financial Reporting & Forecasting Schedule Task Durations

Scheduling Conflict

• Detailed resource schedule is often in conflict with dynamic CCPM-based task schedule

• In traditional PM, task schedules subordinate to resource schedules

• CCPM is opposite – resources need to subordinate to tasks. This creates 2 issues: 1. Impacts financial reporting (need resource effort and timing)

2. When resources are not available, task durations are too optimistic (create network gaps - especially on the longest / most penetrating chain)

TOCICO 2014 Conference Schedule Resources and Effort Successful Project Based Business Effective Project Execution Accurate Financial Reporting & Forecasting

Schedule Tasks and Durations

Scheduling Conflict

erroneous assumption

Erroneous assumption

• We often believe that scheduling resources and effort is not necessary

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Estimate task duration AND resource effort during project planning and execution

Estimate task duration AND resource effort during project planning and execution

Schedule tasks AND schedule resources but provide continuous impact on project / chain delay

Schedule tasks AND schedule resources but provide continuous impact on project / chain delay

Show the impact of fixed resource dates on the project buffer (buffer penetration / Delay Days measure)

Show the impact of fixed resource dates on the project buffer (buffer penetration / Delay Days measure)

Determine the impact of fixed resource dates on resource load / organizational capacity and associated delays

Determine the impact of fixed resource dates on resource load / organizational capacity and associated delays

Link task, resource AND effort to financial reporting and forecasting software tools

Link task, resource AND effort to financial reporting and forecasting software tools

TOCICO 2014 Conference

How to cause the change?

A very effective change management tool is to remove the “old system and process” to prevent people from migrating back

A very effective change management tool is to remove the “old system and process” to prevent people from migrating back

In our experience this is impractical since most of the tools are imperative to sustain the financial processes of the business (large organizations)

In our experience this is impractical since most of the tools are imperative to sustain the financial processes of the business (large organizations)

In addition, there are many existing software tools to support these processes – CCPM software often adds to the plethora of tools

In addition, there are many existing software tools to support these processes – CCPM software often adds to the plethora of tools

Therefore, the CCPM implementation and supporting software not only need to enable the CCPM process but also support and simplify the financial / cost side of the business to create buy-in and sustainability Therefore, the CCPM implementation and supporting software not only need to enable the CCPM process but also support and simplify the financial / cost side of the business to create buy-in and sustainability

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How to create POOGI?

In order to create a Continuous Improvement process and

enable wider CCPM adoption by large organizations we need to create tools to:

In order to create a Continuous Improvement process and

enable wider CCPM adoption by large organizations we need to create tools to:

• monitor buffer penetrations created by resource scheduling decisions

• provide financial reporting and analysis capability (i.e. performance to budget, CPI index, etc.)

Recognize that Cost World Reporting is necessary and must be subordinated to the overall CCPM framework

Recognize that Cost World Reporting is necessary and must be subordinated to the overall CCPM framework

Unless you satisfy the Financial Reporting Need when

implementing enterprise wide CCPM in large, publicly traded organizations – they just might be “Too Big to Change” 

Unless you satisfy the Financial Reporting Need when

implementing enterprise wide CCPM in large, publicly traded organizations – they just might be “Too Big to Change” 

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Presenter Bios

• Jack Warchalowski is the President of CMS Montera.

• Prior to CMS, Jack was the head of operations for the High Tech manufacturer, Ernst & Young management consultant, and a project

engineer with Babcock & Wilcox.

• Jack is a Certified Management Consultant and a Professional Engineer registered in Ontario. He holds an MBA degree from the

Wilfrid Laurier University and a Bachelor of Applied Science in Mechanical Engineering from the University of Waterloo in Waterloo, Ontario. In addition, Jack is certified by the TOCICO in all aspects of TOC.

• Duncan Patrick is the Executive VP with CMS Montera (CMS).

CMS provides management solutions and software to accelerate projects and optimize operations.

• Prior to CMS, Duncan was a member of the senior leadership

team of an industrial distributor, Ernst & Young management consultant, and Landman for Husky Oil.

• Duncan is a Certified Management Consultant registered in

Ontario. He holds an MBA degree from the Richard Ivey School of Business, Western University and a Bachelor of Commerce degree (with distinction) from The University of Calgary. Duncan is certified by the TOCICO in all aspects of TOC.