Industry Challenges

Real estate and infrastructure projects have observed significant growth in the last few years despite challenges & uncertainties related to the industry and market conditions.  Rising material costs is squeezing the bottom-line, unavailability of internal & external resources is creating stressful working conditions and conflicting priorities, increasing work in process is creating cash constraints, shortening project delivery periods are further stressing the resources and system – overall leading to project delays, budget overruns and quality compromises.  As an outcome of these industry-related challenges, coupled with increasing competition, top-line and bottom-line are constrained for growth.   

The industry challenges discussed above create internal business effects which are undesirable:

• Planning is subordinated to execution – creating an environment where full-kitting is not available, rework is expected, resource allocations are not defined and complete project clarity is not available;
• New insights are found during execution, which elongate the project delivery period leading to budget overruns;
• Multiple project fronts are open in parallel constantly changing priorities for internal functional departments – leading to confusion between functions;

Theory of Constraints Intervention

The primary objective of real-estate and infrastructure firms is to make money through speedy and timely project completions, resulting in faster inflow of revenue.  Other related objectives are to complete the projects within stipulated budget and scope for enabling a healthy bottom-line and creating customer satisfaction.  This is in conflict to current business dynamics where project delays and cost overruns are commonplace. 

The prevalent project management paradigm breaks down the project into tasks, and each task is managed with defined timelines.  Uncertainty, potential effects of murphy and resource contentions are not considered in the planning phase.  The planning output is thus inadequate and lacking completeness.  The drawbacks of the partial plan are observed during the execution cycle – observed through disharmony in the system.  TOC challenges the following aspects of project management & execution:

• Task Completion: Focus to complete each task on time;
• Student Syndrome: There is embedded significant safety for each task.  Task safety gets consumed, but tasks are frequently delayed.
• Parkinsons Law: Work expands so as to fill the time available for its completion;
• Integration Points have to wait for all prior tasks to be complete; Delay in any task leads to delay in next activity in the chain;  Delays are transferred, whereas gains are not transferred;
• Murphy Exists:  Uncertainty exists in each project environment, and hits without notice, leading to project delays.
• Bad Multitasking: In a multi-project environment, resources are contending between multiple projects, each pulling for resource allocation priority.  Whenever there is bad multitasking the actual time invested in working on the task and the lead time of completing the task are drastically different;

Theory of Constraints offers a powerful alternative management paradigm, a paradigm shifting mechanism for project management & execution.  Deploying the five focusing steps for real-estate and infrastructure companies, TOC offers a set of business level interventions to enable business growth and profitability.  TOC enables completing projects on time within the stipulated budget & scope – thus creating a differentiated value proposition and competitive edge for the business. TOC Way of Managing Projects provides a direction of solution based on the below set paradigms:

1. Focus on project completion – establish estimated compressed timelines for task completion;  Task timeline estimations do not become commitments;
2. Include resource planning as part of project plan – stagger project activities subordinating to resource contention; This will eliminate bad multitasking;
3. Identify the constraint, i.e. the longest chain of dependent tasks (considering task time estimates & resource allocations)
4. Establish a project buffer for protection against murphy;  Aggregate the safety embedded from each critical chain task and use it to protect the entire project;
5. Project is managed & reviewed based on critical chain completion & buffer consumption;
6. It does not matter how much work was already put into the task – it matters when the project will be completed: Resources should report their estimates on when the task they are working on will be completed;

This TOC Way of managing projects is also known as Critical Chain Project Management.  Some benefits observed by deploying CCPM are as follows:

• On-time / Early project completion and within budget;
• Optimal cash invested at any given time; Limited work in process;
• Clearly defined and visible priorities for each resource; No conflicts between resources;
• Strong visibility of project progress for all levels of management.  Clear visibility of project completion date and associated risks;  Early warnings in case of delays for control and corrective actions;

Avenir Expertise

Avenir, with its team of TOC Experts deliver significant growth for their clients.  Our engagement model is based on closely working with the client in strategy development and implementation of the TOC Solution.  Within a six-eight month period Avenir consultants are able to establish and deploy the solution.  Immediate internal gains are observed within three-six months, while system gains of financial benefits will be gained as projects nearing the completion. 

We have deployed TOC Solutions across various industry segments in India and abroad – an international player in real estate, infrastructure project for roads, MRO of cement plant and ship building activity are some of our successes.