Framework: An Integrated Approach to Portfolio, Program and Project
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I. INTRODUCTION TO TOTAL COST MANAGEMENT - CHAPTER 2 - THE TOTAL COST MANAGEMENT PROCESS MAP
2.1 Basis of Total Cost Management Processes
This section describes the fundamental basis or foundation of the TCM process and defines the process mapping conventions used in the Framework. Sections 2.2, 2.3, and 2.4 further describe the respective processes of TCM, Strategic Asset Management, and Project Control.
2.1.1 TCM Is Based on Process Management Principles
The pursuit of increased productivity and quality has been a driving force of worldwide business management for decades. Process management and process reengineering emphasize the need for enterprises to identify their work processes and continually improve them. At the same time, global mergers, acquisitions, and reorganizations in the digital age have created continual disruption, deconstruction, and re-birth in the economy. This seeming chaos demands speed and flexibility while putting a premium on innovation and leadership. Effective processes are needed to support continuous quality improvement while nurturing innovation and change without chaos.
TCM as described in the Framework is a process map that supports continuous process improvement while being flexible. It is not intended to be a set of rigid rules or work procedures. While each of the sub-process maps of TCM may look rigid when set on paper, users may chose to emphasize those process steps that are most critical to their situation. Steps can be skipped when they are not applicable and information flows can be modified to suit the needs of the enterprise. If the enterprise or market is growing, the emphasis can be placed on asset creation and scheduling aspects. On the other hand, if the enterprise or market is mature, the emphasis may be put on asset maintenance and cost aspects. In practice, the processes are quite flexible.
In addition, TCM supports cross-functional integration and multi-skilling. Few enterprises in a dynamic environment can afford to have cadres of functional specialists. However, multi-skilling may come at the price of having less experience, skill, and knowledge than desired in any one function. Weaknesses in individual skill and knowledge place a premium on having reliable, integrated processes like TCM.
2.1.2 The Basic TCM Process ModelPlan, Do, Check, and Assess (PDCA)
The TCM process model is based upon the "PDCA" management or control cycle, which is also known as the Deming or Shewhart cycle. The PDCA cycle is a generally accepted, quality driven, continuous improvement management model. PDCA stands for plan, do, check, and assess, with the word check being generally synonymous with measure. The word assess is sometimes substituted with act as in to take corrective action. The PDCA cycle is the framework for TCM because (1) it is time-proven and widely accepted as a valid management model, (2) it is quality driven, and (3) it is highly applicable to cost management processes, which are cyclical by nature.
The PDCA cycle in TCM includes the following steps:
These steps are repeated as activities and time progress until such time as the asset or project life cycle is complete. Figure 2.1-1 illustrates the PDCA process steps.
Figure 2.1-1 The Plan, Do, Check, Assess Cycle
Two underlying tenets of the PDCA process cycle and process management in general are that:
Measurement is a key element that is often lacking in management systems that focus on planning. However, use caution in what and how you measure"playing for score" is not the way to achieve the desired improved outcomes.
A cyclical process model is useful because strategic assets and the projects that create them each have an inherent life cycle. With each stage or phase of the asset or project life cycle, successive iterations of the cost management process are required. Each iteration of the cycle achieves a new or improved level of performance or progress for the asset or project.
2.1.3 The Asset Life Cycle
The PDCA control process takes place within the context of the asset and project life cycles. The life cycle describes the stages or phases that occur during the lifetime of an object or endeavor. The stages or phases are sequential groupings of processes that result in an intermediate deliverable or progress milestone.
While the life cycle for a given asset has a defined beginning and end, the process actions are not a straight linean asset is usually modified and recycled many times with ongoing ideation leading to changes and improvements. The life cycle of a strategic asset can be summarized in five stages as follows:
Resource investments are made via the execution of projects during the asset ideation, creation, operation, modification, and termination phases. Figure 2.1-2 illustrates the asset life cycle of a factory as it passes through time.
Figure 2.1-2 Asset Life Cycle of a Factory
2.1.4 The Project Life Cycle
Within the life cycle of an asset, projects are temporary endeavors for the ideation, creation, modification, or termination of assets. Projects have a defined beginning and end. In the asset life cycle, only operation is not generally considered a project endeavor. However, there may be many projects within the operation phase of an asset to maintain, relocate, modify, repair, enhance, or otherwise improve the utility of the asset. The elements of the project life cycle are often referred to as phases. Each phase yields one or more deliverables or outputs that become resources or inputs for the following phase. The deliverable may be a requirements document, a plan, a design document, a model, and so on. The life cycle of most projects can be summarized in four sequential phases as follows:
These phases are recursive; this means that each phase may be a project in itself that produces a deliverable but not the final asset. For instance, the ideation phase has a life cycle including planning for ideation, executing the ideation process, and closure of the ideation phase (e.g., completion of a requirements document). At this recursive level, the closure of a phase usually represents a hand-off of a deliverable and achievement of a project milestone, decision point, or gate. If the deliverable does not pass the phase gate review, it is returned for correction or the project may be killed or terminated.
While the project phases discussed above are performed sequentially, they usually overlap to some extent. Fast tracking, concurrent engineering, and similar terms refer to project strategies that have highly overlapping phases to achieve faster cycle times.
2.1.5 Continuous Improvement During a Life Cycle
The two-dimensional PDCA cycle and traditional asset and project life cycle illustrations, such as Figures 2.2-1 and 2.2-2, do not adequately illustrate the concept of progress through time or continuous improvement. Two-dimensional illustrations infer that one is always returning to the starting point, or that work follows a sequential line from beginning to end. In fact, with each iteration of the PDCA cycle, the asset portfolio or project performance or state is continually improvedit does not return to its original state. An assets life cycle may include scores of projects to modify the asset. Likewise, a project may go through many iterations of design. In addition, innovation may lead to discontinuous leaps in performance or progress.
There are many ways to illustrate the concept of continuous improvement or progress through time including cyclones, spirals, wheel and axle, and other diagrams. In each of these diagrams, the circular motion aspect illustrates some cyclical process (e.g., PDCA) while the axis or axle represents progress through time or phases. Figure 2.1-3 illustrates the TCM concept for a project life cycle with PDCA shown as a spiral. The axis represents the life cycle phases of a project from ideation through closure. The spiral attempts to show that the plan-do-check-assess process is employed continually to achieve various milestones or deliverables at each phase of the project life cycle. The asset life cycle can be represented in the same way by substituting the asset life cycle phases along the axis.
Figure 2.1-3 TCM Applies the PDCA Concept Throughout the Project or Asset Life Cycle
2.1.6 General Process Mapping and Diagramming
As was discussed previously, TCM is a quality driven process. Processes represent real work with which to create and deliver value to customers. A process consists of inputs, outputs, and mechanisms that transform the input to meaningful outputs. Outputs of one process may be inputs to another. The transforming mechanisms are referred to in the Framework as tools, techniques, or sub-processes.
These processes are illustrated in the Framework with block diagrams (i.e., blocks connected with arrows). The blocks represent a transforming mechanism or tool, technique, or sub-process. The TCM processes are "governing" or directing processes that deal with information rather than physical objects; therefore, the arrows represent the input and output flow of information or information products rather than physical objects. The arrows may be double headed indicating two-way flow or feedback. Groups of blocks surrounded by a dashed outline indicate alternative tools, techniques, or sub-processes or those performed in conjunction with each other using the same inputs and outputs. Input and output arrows that tie to separate diagrams are labeled with the related Framework chapter or section numbers that they tie to. Figure 2.1-4 illustrates the basic diagramming conventions used in the Framework.
Figure 2.1-4 Process Map Representations as used in the TCM Framework
The Framework includes high-level, integrative process "maps" showing basic inter-relationships and sequencing of processes, and a rudimentary flow of information. The processes are mapped or diagrammed to the highest meaningful level of abstraction. These maps are not intended to be detailed data-flow, flow chart, procedural, logic, or other type of work definition diagrams. A process map does not show the way work is doneit attempts to balance the requirements of communication and content. A single block in a diagram may represent a complex process that would require an entire text to fully explain and document, and a single arrow may represent a large volume and variety of information and data products.
2.1.7 Key Concepts for Processes
The following concepts and terminology described in this and other sections are particularly important to understanding the process and life cycle basis of TCM:
.1 Process. A series of actions bringing about a result.
.2 Business Processes. There are various types of business processes including governing, asset creating, value adding, and enabling. TCM is a "governing" process. Governing processes direct or control other processes. A project is an "asset creating" process in that its output is an asset. Value adding processes are those that provide enhanced outputs to the external customer. Enabling processes are those that establish or provide capabilities for the other processes.
.3 Process Map. A diagram of a process that illustrates high level groupings of sub-processes and their interrelationships. A process map does not illustrate the way work is done at a detailed level.
.4 PDCA Cycle (Shewhart or Deming cycle). A basic management process first described in the 1930s. It is conducive to process management and control by inherently incorporating continuous improvement and measurement.
.5 Recursive Process. A process model that repeats itself when one of the steps of the process is described at a lower level of detail. As described in Section 2.2, the project control sub-process of TCM is a recursive application of the PDCA process model.
.6 Inputs and Outputs. The inputs to projects are resources and the outputs are assets. An asset may be a resource to a downstream process. Internal to the process maps, inputs and outputs are information and information products that are produced or utilized by tools, techniques, and sub-processes.
.7 Tools, Techniques, and Sub-processes. These are the transforming mechanisms and technologies that convert the inputs to outputs.
Further Readings and Sources
PDCA Cycles and Processes
Juran, Joseph M. and A. Blanton Godfrey. Jurans Quality Handbook, 5th ed. New York: McGraw-Hill, 1999.
Fosberg, Kevin, Hal Mooz, and Howard Cotterman. Visualizing Project Management. New York: John Wiley & Sons, Inc., 2000.
Galloway, Dianne. Mapping Work Processes. Milwaukee: ASQ Quality Press, 1994.
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