How to Determine if Your Operations Management Project is in Trouble
While it’s nice to know that your operations management project is ahead of schedule and under budget, the actions you’ll take are probably minimal (other than patting everyone on the back!). What you are really concerned about is whether your project is in trouble. What would be even nicer is to figure out whether the project looks like it’s headed in trouble before it actually is!
There are a number of ways to accomplish this kind of foresight. All of them involve visual charts that reveal trends. The earned value progress chart is the most popular option. Other options are the project run chart and the buffer penetration chart.
A project run chart
The next most common way also uses earned value, but also incorporates some of the ideas from a process control chart. However, this version, which is called a project run chart, is simpler. The idea is to graph the schedule progress index (SPI) and cost progress index (CPI) over time.
If your CPI and SPI are equal to or greater than 100 percent, you’re in the green zone and in good shape. If either your SPI or CPI index falls below 100 percent but remains above 90 percent, you’re in the yellow zone and caution is advised. Make sure that you have plans in place in case things get worse, particularly if either index dips below 90 percent.
If either of your indices drops below 90 percent, you are in the red zone. Performance is poor, and you probably need to execute any correction plans you have in place. (Hopefully, you made these while you were in the caution zone!)
The progress of your CPI and SPI is going to have statistical fluctuations, just like everything else in operations management (or in life, if you are in a more philosophical mood). Sometimes things are going to go better, sometimes worse. So just because you are in the yellow zone does not mean that you need to panic. It just means that you should be watchful and be prepared.
Utilize slack with a buffer penetration chart
Another version of the run chart is used sometimes to watch the progress of the critical path. The critical path contains all those activities that, if delayed, will delay the project as a whole. They have no slack in them.
The idea is to establish a project time reserve or buffer, which accounts for the fact that there will be some statistical variation in completing your project’s critical path, just like for everything else in operations management. The schedule buffer accounts for the fact that — even if your estimates are correct — at times you are going to be behind schedule. The question is how much of this is normal.
The typical approach is to establish an expected (mean) time estimate to complete the project and a maximum time estimate that would be expected under normal statistical circumstances. There are a number of ways to do this. One way that works well is to make the P50 estimate the expected time estimate, and to make the P95 estimate the maximum time estimate.
For example, your project’s critical path may have a P50 of 8 months and a P95 of 12.5 months. You set these to be expected and maximum estimates. Then, your Buffer = Maximum – Expected = 12.5 months – 8 months = 4.5 months. Each month you determine how many of the critical path activities you have completed.
You’ll need to determine the planned completion date of this last critical path activity. Once you have determined that, just subtract it from the time into the project.
In this project, the last activity completed in the critical chain during September was supposed to be completed 6.9 months into the project according to plan. However, by September, 9.0 months have elapsed since the beginning of the project. So your buffer penetration is 6.9 months – 9.0 months = –2.1 months of buffer penetration.
If instead, you were ahead of schedule on the critical path, the convention is to graph a zero for buffer penetration. For example, in February, the last completed activity of the critical chain was planned to be completed in 2.5 months. Yet two months have elapsed. Because 2.5 months – 2 months = 0.5 months is a positive number, you graph it as having zero buffer penetration.
Otherwise, the buffer penetration chart works like the project run chart for SPI and CPI shown earlier. Green is okay. Yellow means caution. This is when you want to figure out any contingency plans. Red means it’s time to activate these contingency plans.