I also alluded to the fact that BAE Systems Flight Simulation and Training was making a concerted effort to change this paradigm. I didn't go into specifics on how we were doing this because, quite frankly, we weren't far enough along in our process to make any bold claims or guarantees. However, as we enter 2001, I want to share with you the progress we've made and state confidently that we are meeting our commitments and will continue to do so.

Theory of constraints

Just over two years ago we began implementing a methodology based on the theory of constraints (TOC). The core idea in TOC that has been popularised by Dr. Eli Goldratt of the Avraham Y. Goldratt Institute, is that every organisation or system has at least one constraint. A constraint in a business setting could be any factor limiting a company from achieving its full potential. In other words, the constraints - whether they are managed or not - will determine the throughput of the organisation.

Within TOC there is an enabling methodology known as critical chain project management (CCPM) that we have adopted to manage multiple programmes by synchronising assets and resources for maximum throughput. As with any business, ours can be viewed as a linked sequence of processes that transform inputs into a product - in our case, a simulator. In TOC, an analogy is often drawn between this linked sequence and a chain.

If you want to improve the strength of the chain, concentrate your efforts on strengthening the weakest link. To do this, first identify the weakest link, which is the constraint.

Then concentrate on improving the weakest link without subjecting the organisation to too great a load. Eventually, the weakest link will improve to the point where it is no longer the weakest link, thus eliminating the constraint and maximising throughput.

Where we were

Before explaining ToC and CCPM a little more, I think it's important to understand the kind of environment we operate in. Like many other companies in the simulation and training industry, we operate in a low-volume, multi-project environment. The high fidelity, complex training devices we build are not the kind of products you walk into your local store to buy. We're typically performing a dozen or more programmes at the same time, but each calls for the end result to be a unique training device that has specific features and requirements.

A better way to do business

Two years ago we recognised that we had some issues to deal with internally and our assessment of the marketplace in general indicated that customers were becoming increasingly frustrated with missed schedules. We were struggling with schedule commitments and not completely satisfying customer requirements. We had very little uniform data or information to use to make management decisions. On several projects, we had made commitments where we knew we weren't going to make money. All of these factors influenced our decision to find a better way to manage our programmes, and ultimately a better way to manage our business.

Allow me to share a story with you that I think illustrates our application of CCPM to programme management using the TOC methodology. About the time we started our implementation of CCPM in the summer of 1998, I had a customer tell me flat out: "You guys are going to miss the schedule." We were contractually committed to delivering simulators to this customer at the end of 1998 and we continually assured this customer we would meet that date. Near the end of 1998, six months into our CCPM implementation, we had built our first critical chain networks and determined we would, in fact, miss our contractual obligation. CCPM also told us we'd have the simulators ready in the summer of 1999.

Before taking our beating from this customer, however, our team wanted to exhaust all possibilities to see if we could shorten the schedule.

A group of our engineers suggested that if we had a certain piece of existing hardware and performed a few workarounds, we could shave three months off our new schedule and have the simulators ready in the spring. So we decided to put our new critical chain management network to the test and had some of our theory-of-constraint experts perform some what-if scenarios.

Sure enough, they determined that we could save time on the schedule with this piece of hardware. Problem was our TOC experts said the savings would be two days, not the three months originally predicted. You see, right behind that particular set of tasks we thought could save the day, was another chain of events that was constrained by some things we just couldn't effect in the short term.

We told the customer we would have the simulators ready in the summer of 1999 because our CCPM system told us that's when they'd be ready after taking into account all the variables. Instead of measuring where the programme stood based on inferential data and gut feel, we used a calculated, disciplined approach that left no argument on when we'd be finished. The end result was we met our revised delivery commitment almost to the day and restored our credibility with the customer.

Implementation of TOC throughout our business has not come without its share of pain. It has required a complete change in the culture of the organisation. We no longer have functional areas constructing and implementing solutions in isolation. We've had to overhaul many of our planning and budgeting processes so that schedule and cost performance is visible across the entire organisation.

Our work with critical chain management in a multi-project environment has five key components:

• Project synchronisation - we're now able to stagger the start of projects in order to complete them faster. This may sound like a contradiction, but by minimising or eliminating the conflict for resources, you address a constraint and strengthen the chain.
• Planning processes - all our planning now takes a macro view of the organisation and accounts for the tasks and resource dependencies across all programmes.
• Scheduling and budgeting processes - critical chain management gives senior management and programme management up-to-date schedule and cost performance across the entire enterprise, and programme to programme. Any potential problems are quickly identified.
• Behaviour changes - CCPM promotes a world-class team culture.
• Control mechanisms - we now have project control and visibility to assist in global decision making.

Although we'll never be completely finished with our exploitation of CCPM because of its bias toward continuous improvement, the results to date have been outstanding. For example, we used our critical chain network to identify a specific constraint in our organisation related specifically to electrical engineering.

As a result, our internal research and development team developed an innovative new approach to distributed input/output processing that will eliminate this constraint while providing significant savings in time and money. We have used CCPM to avoid a significant increase in our manufacturing staff and reduced the material-carrying costs on each of our programmes. The application of CCPM to programme management, using the theory of constraints methodology, leads to a truly comprehensive and unified approach to managing and synchronising programmes and resources. It has helped us set a new standard for the management of programmes if maximum throughput in our organisation is to be achieved. By applying the hard science of systems constraint theory to an environment that relies on talented human resources, we've been able to reach a new level unique in our industry.

The real benefit, however, comes in how we're better able to serve our customers. We can confidently predict what our delivery dates will be and then deliver on our commitment to meet those dates.

We've seen evidence of this over the summer when we delivered two E-2C simulators to the US Navy on time and an F/A-18E/F trainer to Boeing and the Navy two weeks ahead of schedule. I've been telling our customers for the past year that we were going to understand very clearly what they're asking for, and then commit honestly to what we can or cannot deliver. We're making a concerted effort to create a win/win approach with our customers.

Committed reputation

Using CCPM and TOC, I'm now ready to stake our company's reputation on the commitments we make. For the customers who consider schedule and delivery commitments of paramount importance, those customers now have a simulation and training company they can trust to deliver. Two years ago I used to have a recurring nightmare. All our customers were gathered in my office and each was demanding to know when their simulators were going to be delivered. I would wake up in a cold sweat, knowing at the time that I couldn't possibly have answered them with any confidence. That nightmare is now a thing of the past.

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