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| David Cuykendall Click for Index Page |
A prediction is synonymous with a forecast, which serves as a necessary step in bridging the gap between monitoring progress, and taking action.
A forecast defined: “Based on the best knowledge at hand, what is expected to happen."
Forecasts require reliable progress measurement in order to project the future, for you cannot properly initiate action without valid predictions. Improving the validity of projections will provide strong grounds for improving actions.
This being said, what actually is a “forecast”— what is it based on? Are forecasts based on tracking data (trends in current data), historical data (trends in data from previous periods) or both?
Blinded driver analogy
The only information available for forecasting is what you planned to happen, what actually happened, and the rate or means in which it has been happening. Consider an analogy expressed as a car driving down the highway with the windshield painted over.
The driver is unable to look down the road, into the future, for information that will keep the car on the right path (forecasting). The only information available to the driver is that observed by looking out the side and rear windows – looking at where you are and where you have been, respectively (monitoring progress). It is possible to drive successfully like this by: (1) continually monitoring progress, and (2) taking action to immediately correct small deviations.
Travelers analogy
In this analogy, two friends embark on a ten-day road trip with $100 between them, leaving a budget of $10/day. After two days, they have spent $20 – great, they are precisely on budget! Another couple days pass, and at the end of day 4, the friends check their wallets and determine that they have spent a total of $46. Although spending to date is slightly more than planned, there are no worries, for they believe they shall easily be able to get by on the remaining $56, at $9/day. Yet another two days pass, and after leaving the tip for dinner at the end of day 6, they count their remaining funds to be $32. They have spent a total of $68 in six days, a rate of $11.33/day – moderately over the budgeted $10/day – leaving only $8/day for the remaining four days. One friend is worried that at the rate they are spending, they will not have sufficient funds to finish their trip. To this, the other friend responds, “Don’t worry, we’ll be just fine. We can make it on $8/day.” The first friend shrugs his shoulders, sighs, and gives a nod of approval.
Two more days pass and because of the one friend’s calming reassurance that there was nothing to worry about, the pair fails to pay as close attention to their budget as they probably should have. On days 7 and 8, they spent $12 each day, which did not seem too far over budget after spending at a previous clip of $11.33/day. The wallets come out, and the friends count their remaining funds – “Eight dollars left for two days!”
It does not appear that the dynamic duo will have enough money to finish their trip.
This analogy clearly illustrates the importance of knowing when you are no longer on budget. In this case, any rate over $10/day is over budget. At the end of day 8, the friends reached a point where there was no way they could finish their journey – $4/day was completely unrealistic funds for completion.
Once realized that their spending rate was over budget, an “alarm” should have been going off, indicating that they need to take corrective action, otherwise they are in danger of running out of money. They did recognize early on that they were over budget, yet continued spending without worries, confident with their budget situation.
Another factor to consider is how any type of early warning indicators is viewed in terms of a pessimistic, realistic, or optimistic approach. Often, optimism rules supreme, as was the case in this example where one friend continually reassured, “Don’t worry, we’re okay, we’ll finish within our budget.” If a realistic approach to early warning indicators is not taken, there are only so many “don’t worry’s” before there’s an “uh-oh.” In this regard, if reliable early-warning tools are developed and are quantitative, they will serve as a powerful instrument to help prevent the “uh-oh’s” of industry – interpreted as “behind schedule, over budget.”
Toothpaste expansion analogy
Consider the analogy of a toothpaste tube, where the toothpaste represents the commodity being consumed in the activity (whether it is money, gallons of fuel, crew-hours, etc.), and the length of the tube represents the activity duration, with completion date being the end of the tube.
The idea is that the amount of toothpaste in the tube remains constant, as will the cumulative planned progess for the activity.
The baseline schedule is set to complete on time, with the planned commodity consumption scheduled for the planned duration. As time progresses actual progress has underperformed, squeezing the toothpaste in the tube (remaining commodity) to its first location. The planned schedule has shifted to the right, and because of the underperformance, in order to complete by the planned deadline, the toothpaste is squeezed further towards the end of the tube, requiring an increased diameter of the opening of the toothpaste tube to accommodate the full volume of toothpaste.
After another sub-par period of work, the schedule is further behind. The toothpaste is still restricted by the end of the tube, consequently stretching further the diameter of the tube in order to fit the constant amount of toothpaste. The consumption rate of the commodity increases to its limit in an effort to complete the activity on time. This commodity consumption limit represents the maximum production rate of this activity; for example, maximum production rate restrictions may include availability of resources or equipment.
Again, the failure to perform results in an updated schedule. However, the consumption rate has reached the maximum for that commodity. The only option to perform the remaining work is to extend the completion date, decreasing the maximum commodity consumption value within the limits. As the commodity consumption maximum increased and shifted to the right, the activity was under increased danger of finishing late. Ultimately, the schedule completion date needed to be shifted to accommodate the underperformance. In our toothpaste analogy, there was no longer room for the toothpaste in the tube. The tube had expanded to its limits and it was time to get a longer toothpaste tube.
The toothpaste analogy illustrates that when there is underperformance and deviation from the planned schedule, the remainder of the activity compensates for this by expanding the production of each subsequent period. While the expanded schedule appears to balance the variance evenly, it may expect unreasonable production rates for particular periods.
The key is distribution of the expanded work to the time frames with work that is most likely to expand, rather than evenly distributing expansion among all remaining times. There are restrictions that limit the relative expansion of certain periods of the activity.
Relative work expansion for each time period is considered by assigning all remaining time of the activity an Expansion Factor (EF). The EF measures the degree to which the amount of work planned for any one time frame can be expanded, relative to all other time frames on the activity. By expanding certain time periods more than others, the peaks and valleys of forecasted work are exaggerated.
Forecasting required performance on a period basis produces trends whose purpose is provide an early warning before the time period expansion reaches an undesirable and unattainable level. An understanding of what considerations determine the expansion factor is important for time period.
The expansion factor
When the actual cumulative value of a commodity consumed deviates from the planned value, the expansion factor has the important role of allocating this deviation to the appropriate time periods. For this reason, numerous factors are considered to establish the ability to expand the work in each time period.
The expansion of each time period is relative to the other time periods on the activity. Considering this, each EF is defined as a number from 0-10. A time period with an EF of 10 is allocated twice as much of the deviation (cumulative planned to date minus cumulative actual to date) as a time period with an EF of 5, and ten times as much as a time period with an EF of 1. Should every time period be assigned with a value of 10, or any other uniform number, all time periods expand the same amount – expansion is relative. Time periods with an EF of zero are not allocated any of the deviation, for they are regarded as lacking the ability to expand the work.
To define expansion factors, various considerations are taken into account. These limitations on ability to expand the work include but are not limited to the following:
Type of work
The expansion factors define the ability to expand the work; therefore, the type of work scheduled has a major influence on how much expansion can take place. For instance, certain phases of the activity may be more welcoming.
Sequence
Linear work or work performed in sequence (Activity A must be completed before activity B, which must be completed before Activity C) limits the amount of expansion. Whichever periods these activities are scheduled for, the expansion factors reflect this.
Amount of float
The amount of work in a month on the critical path may influence the amount of expansion in that time period. Periods with more work on the critical path, and less activities with float, may be more restricted to expansion than periods with less critical activities and more float.
Weather
Seasonal weather patterns influence the degree to which the amount of work planned can be expanded, whether they be cold harsh winters, rainy seasons, excessive heat, or even a moderate climate that has very little effect on the ability to expand. Furthermore, the weather affects certain activities more than others.
Physical space limitations
A lack of physical space in facilities related to the activity may restrict the amount of additional resources and ability to increase production and expand the work.
Resource availability
Limits on available labor, equipment, and raw materials bind the ability to expand the work.
Other work
The current activity may not be the only activity going on. This may tie into the point above, in the need for labor and equipment resources on other activities. During these periods, expansion of work may be limited.
Where in the activity duration
Often, activities have a learning curve, where it may be difficult to expand work at the beginning of the job. Once past this initial period, the middle of the activity may be more allowing to expanding the work. Furthermore, the end of the activity may be a period not desired to be relied on for expanding the work – pushing work onto the end of the activities is dangerous for timely completion.
History of expansion
The history of expansion on current and similar activities affects the definition of expansion factors. This knowledge aids in forecasting the ability to expand certain work, under certain conditions. On the current activity, the history of ability to expand work to date may influence the opinion of the ability to expand future work, so as not to exclude good and known information.
The above list is not inclusive of all considerations for defining the expansion factors. Whatever the dynamics in defining the expansion factors, the goal is to make all considerations necessary to best predict their ability to expand the work over the life of the activity.
Tracking of commodities consumed, used in production
One of the main reasons for tracking and reporting activity commodities consumed is that they reflect activity performance; in regards to time, how close actual schedule performance is with respect to where it needs to be. Commodity consumption-loaded schedules allow for a control system that effectively mirrors the advancement of the activity.
Driving commodities are those commodities essential to the completion of the activity, a handful of resources that reflect progress. The most common driving commodity is money, whether it is money earned or money spent. Cash flow is aggregate, in that it may encompass all aspects of the activity – resources, labor, indirect costs, etc. Linear feet of pipe cannot be converted to cubic yards of concrete, yet both can be converted to cash values. Another advantage of tracking cash flow is that nearly all activities budget payments for work completed, and in turn, cost-load the schedule.
While cash flow is the most common commodity loaded on schedules, there are varieties of other driving commodities that reflect progress. Inputs such as man-hours, crew-hours, and raw materials are consumed throughout the process.
Conversely, outputs may also tracked be tracked for specific items. The driving commodities of each activity vary in accordance with the type of activity, yet the goal stays the same: reflect progress through tracking a manageable component of the activity.
Performance of the activity comes from the comparison of where we are with respect to where we planned to be, or actual versus planned. This compare stage of schedule control reflects the current status of the activity; yet to forecast required performance, the ability to expand future work must be projected.
