Wednesday, November 28, 2012

Focus and Leverage Part 170

One of the pleasures of being a part of a turn-around is seeing the transformation of the systems, people, product and customer.  On this last point, the customer, I want to relate an event that took place about five months after we began our transformation.  This event was a visit we had from one of the purchasing executives from BMW in Germany.  Since we had improved so rapidly, he decided to pay us a visit to see first-hand just what we had done to improve our quality and delivery.

I mentioned in my last posting that there were 48 measurement points to determine how well the hard top mounted to the vehicle.  We greeted the executive team that had accompanied the purchasing executive, exchanging pleasantries and getting to know each other until he announced that he was going to our manufacturing area and that he would randomly select a completed hard top and have it mounted on their Z3.  He further stated that his quality manager would inspect all 48 control points for conformance to specs.  The quality manager took his time, inspected each point and concluded that all points met BMW’s specs.  The purchasing executive’s eyebrows rose in disbelief and with a very heavy German accent said, “Mr. Sproull, the measurements are only part of what we expect.”  He then said, “Mr. Sproull, you will drive me on the Interstate at a high rate of speed and I will listen for air entering into the vehicle.”

He and I drove to the Interstate and he instructed me to accelerate until he told me to stop, which I did.  His ear was pressed close to the hardtop mounting area as he listened for the slightest sound of air passing under the hardtop.  At 65 mph there was no sound, so he instructed me to accelerate again up to 75mph, but still no air entering the vehicle.  He had a very disappointed look on his face so, on my own, I continued to accelerate to 90 mph, then 100 mph and finally to 105 mph.  He looked at me with a fearful look on his face and instructed me to return to our facility.  We had passed his functionality test with flying colors!!

When we returned, he explained that he wanted to mount a black hardtop on his vehicle so that he could compare our paint job to his.  Painting at our facility was something we now took pride in, but not so in the beginning.  When I had arrived at the Kentucky plant I saw first-hand just how bad our paint jobs were.  We had a very old paint booth which was apparently full of dust particles that ended up on the surface of our vehicles.  I put together a team of maintenance mechanics and explained that we needed to figure out a way to keep our paint booth free of particles and that I needed some good ideas.  To make a long story short, one of the maintenance mechanics had a side business for lawn sprinklers.  He had this bright idea that if we mounted such a system in the paint booth, we could actually clean the air between paintings by emitting a fine mist of water.  We tried it and it worked like a champ!

Back to our story.  The purchasing executive randomly selected a completed black top and we mounted it on his vehicle.  We parked it in a highly lighted area and he scrutinized it for a good 30 minutes.  When he was finished, he summoned me to the vehicle, looked me in the eye and said, “Mr. Sproull, we have a serious problem!”  I asked him what the problem was and he told me that our paint job did not match the paint job on his vehicle.  I was shocked because I knew our painting was the best in the industry.  When I asked him what was wrong with our hardtop’s paint job, he sneered at me and said absolutely nothing!  The problem was with his own vehicle.  There was an enormous amount of orange peel on his vehicle’s surface.  My response to him was, “Would you like us to add orange peel to our hardtop’s surface?”  He looked at me and simply said, “I don’t find any humor in that remark!”

Yes, this day was one of our great days for our plant.  All of the hard work and dedication of our employees had paid off as the purchasing executive from Germany told us that he wished all of his suppliers were as good as we were.  I asked him to speak to my employees and let them know his feelings which he did.  That day was clearly a turning point for our plant both in our reputation and the morale of our workforce.  They had pride for the first time in years and I’ve always believed that “people who feel good about themselves….produce great results.” 

Just for the record, the first month that I took over this failing facility we lost about $600,000, but within two and a half months we were making roughly $500,000 per month.  It was such a joy to see this wonderful team of people doing to well…..I was so proud of every single employee for it was them that made it all happen!!  One of the things the management team learned and something I insisted upon that all improvement ideas would be considered on their merit as long as they didn’t violate company rules, safety policies or customer requirements.  I can honestly say that 95% of all of the solutions came directly from the shop floor workers…..the true subject matter experts.  Since that fateful turn-around, I have successfully used this basic idea….what I call active listening.  It worked for me then as a GM and it continues to work for me as a consultant.

The saga will continue in my next posting as I will continue to share both good and not so good experiences.

Bob Sproull


Tuesday, November 27, 2012

Focus and Leverage Part 169

One of the other key things I learned by reading The Goal was the whole idea of Throughput Accounting (TA).  I had never been introduced to TA so it was an eye-opening experience for me.  Actually, I had never been responsible for a company’s financials before and had difficulty understanding some of the “rules” of cost accounting.  I was being held accountable to traditional cost accounting and quite frankly some of the rules made no sense at all to me so I was questioning things.  For example, how could excess inventory be viewed as an asset?  Isn’t inventory tying up cash?  And as I explained in my last posting, running all process steps to the maximum capacity only served to drive Work-In-Process (WIP) inventory higher and since we had discovered that there was a direct correlation between having excess WIP and elongated cycle times, it made no sense to do so.  But those were the rules of engagement that I was being judged on.

When I read The Goal I had an epiphany of sorts.  Goldratt introduced the world to a new way of looking at profitability through a completely different spectrum.  While Cost Accounting preaches their sermon of profitability through saving money, Goldratt argued that rather than trying to save money, companies should be focused on trying to make money and as I would soon discover, the two approaches are drastically different!

One of the principle lessons within The Goal is that the goal of for-profit companies is to make money now and in the future.  He analogized that just like a chain having a weakest link, so too does a company and this weakest link controls how much money a company will make.  He also explained that attempts to strengthen any other part of the chain (or company) will do nothing to drive profitability higher.  From an organizational perspective, this simply means that every decision or action taken must be considered based upon its impact on the goal of making money.  If the action or decision doesn’t get you closer to the goal, then don’t take that action.  Goldratt further explained that if you want to know if you’re moving in the right direction in terms of profitability, you should ask yourself three simple questions:
  • Does your action or decision result in more Throughput (T)?
  • Does your action or decision result in more Inventory ( I )?
  • Does your action or decision result in more Operating Expense (OE)?
If you answered yes to the first question, then it’s a good action or decision.  If you answered yes to either question two or three, then it might not be a good thing to do.  The optimum conditions for maximizing profitability are to have T increasing while I and OE are decreasing.  Notice I used the word “optimum” in terms of maximizing profitability.  It is certainly plausible to have OE increasing to drive T higher, it just won’t result in optimum profitability.  Let’s take a look at the definitions of these three components of profitability.
  • Throughput (T): The rate that the organization generates new money primarily through sales.   Goldratt provided this formula for T:

Throughput = Revenue (R) $’s minus Totally Variable Costs (TVC) or,

T = R – TVC

TVC includes things that vary with the sale of a single unit of product such as the cost of raw materials, sales commissions, shipping costs, etc.
  • Inventory ( I ): The money that an organization invests in items that it intends to sell. This category would include inventory of all kinds.
  • Operating Expense (OE): The money an organization spends to turn ( I ) into (T)which includes ALL labor costs, office supplies, employee benefits, utility bills, etc.

Goldratt further expanded his TA definitions still further by defining net profit, return on investment, productivity and inventory turns and he based them all on the three simple measures T, I and OE.  So with these simple definitions, our team was able to not only take actions and make decisions, but we were sure they would positively impact our bottom line.  Here are Goldratt’s other definitions:
  • Net Profit (NP) equals Throughput minus Operating Expense or NP – T – OE
  • Return on Investment (ROI) equals T minus OE divided by I or ROI = T-OE/I
  • Productivity (P) equals T divided by OE or T/OE
  • Inventory Turns (IT) equals T divided by I or T/I

Our team went against the company culture when we decided to use Throughput Accounting, but believe me it worked.  And because of the simplicity of the definitions for each, we were able to teach our workforce how to use them as well.  Before you ask, yes, we had to continue using Cost Accounting to satisfy GAAP reporting requirements, but for daily decision-making, we found Throughput Accounting to be vastly superior to Cost Accounting.

In my next posting we’ll continue the saga of our plant in Kentucky and as I said in my last posting, some of our experiences were positive and some were very negative.  We celebrated our positives and learned from our negatives.

Monday, November 26, 2012

Focus and Leverage Part 168

In my last posting I began relating the saga of my first experience in a manufacturing operations management role.  I had been hired as the new General Manager and was charged with the responsibility to either turn this failing facility around financially or close its doors.  I saw this as the largest challenge of my life because closing this facility would be a failure on my part and I hate failing.  Plus, there were some 250 employees who needed these jobs, so in my mind closing the plant was not an option.
In my last posting I talked about what we called a Herbie Hunt.  For those of you who have never read The Goal, Herbie was an over-weight boy scout with an overloaded back pack who controlled the pace of a boy scout’s overnight hike.  The troop finally figured out that if they could reduce the weight of Herbie’s back pack, the troop could increase the amount of distance covered on their hike.  This was how the authors of The Goal, Eliyahu Goldratt and Jeff Cox, chose to introduce the concept of the constraint.  Let’s continue now with story-line of this plant’s transformation.

One of the first constraint’s our team discovered was when it was time to mount the hardtop on the chassis of a BMW Z3.  Along the hardtop mounting surface there were 48 control points that had to be within the specification limits provided by BMW.  To our amazement, 36 of these points failed to conform to the specification limits.  Many of the points were above the spec limits and could be repaired, but many times they were below the limits and had to be scrapped.  In fact, approximately 20% of all of the tops fell into this category which caused deep financial pain for our plant.  I also discovered that the hardtop was 4 months late coming to market.
We formed a team of hourly employees and our one, lone Engineer to solve this problem which turned out to be an alignment issue within our bonding process.  The team determined the root cause of the mismatch in surfaces,  implemented an SPC initiative and the scrap level fell to almost zero which immediately improved both our on-time delivery metric and the customer’s perception of our quality.  We celebrated this success with a pizza party which brought our two camps that I mentioned in my last posting much closer together.  In addition, the morale of the work force as a whole jettisoned upward.

One of the problems I didn’t mention much in my last posting was the quality of materials being received from our suppliers.  I remember on at least two occasions scrapping an entire batch of resin used in our hardtop molding process.  We also had supplier delivery issues from the standpoint of on-time delivery.  Part of this was due to our inability to pay our bills on time and part of it was due to the poor processes that some of our suppliers had.  As some of you might have guessed, the previous leadership, in an attempt to improve profitability, chose the lowest cost suppliers which in some cases had the poorest quality and on-time delivery rates.  One of our hourly employees suggested that we have a Supplier Appreciation Day and invite all of our suppliers into our plant.  He reasoned that if they could see how their products were used and talk about the problems we were seeing with their products, there would be an immediate improvement in both quality and on-time delivery.  Another employee suggested that we pay all of our bills within 30 days as an incentive for suppliers to improve their delivery performance.  Guess what……both ideas worked!!  Within a matter of weeks, our supplier performance improved dramatically and because we were paying within 30 days we were able to negotiate significant early pay cost reductions which helped our bottom line.

I mentioned in my last posting that when we subordinated the rest of our process to the constraint, our efficiencies took a hit.  I remember our corporate office sending a team down to our plant to determine the cause of our deterioration in efficiencies.  They came unannounced….just sort of showed up at our front door.  I invited them into our conference room and they made a presentation demonstrating on a run chart the sudden decrease in efficiencies.  I let them finish their presentation and asked them if they had looked at any other performance metrics?  Of course they hadn’t!  I had anticipated a visit from corporate at some point, so I had prepared a brief presentation of my own for when they arrived.  The very first slide said it all.  It was a plot of weekly on-time delivery and I think it shocked them.  When I had arrived, the plant’s on-time delivery was just under 60% while the efficiencies were around 80% which was still too low for the corporate “experts.”  When they saw it, they didn’t believe it because even though the efficiency had dropped to around 65%, the on-time delivery now stood at 88% which was still not good enough for me.  Actually the most current week which had not yet been plotted now stood at 94%!!

I asked the “experts” if they would like to see how it was possible to improve on-time delivery while reducing our process efficiencies.  I went through my traditional drawings of the piping system and simple four-step process and explained the concept of a physical constraint that I’ve presented many times in other postings.  But for those of you who haven’t read these postings, here are the two drawings I used.

In this first drawing I asked the corporate “experts” the question in the box just beneath the drawing of the simple piping system.  They answered the question correctly in that it would be necessary to increase the diameter of Section C.  I also asked them if increasing the diameter of any other section would increase the flow of water through this system and again, they answered correctly by saying no, only Section C.  This exercise was intended to implant the concept of the system constraint firmly in their minds.  I then inserted a second drawing of a simple four-step process for manufacturing something.

I repeated the same questions I had asked about the piping system and they answered each one correctly.  I then asked them to tell me what would happen if I were to run every process step as fast as I could to increase efficiency like they wanted?  One of the "brighter" corporate folks got a smile on his face and said that you would end up with two piles of inventory… in front of Step 2 and an even larger one in front of Step 4.  When I asked him to explain, he said that because of the differences in capacities it would be a natural effect.  Since Step 1 could produce at double the rate of Step 2 the WIP in front of Step 2 would build up at a rate of one extra part per minute.  The pile of WIP in front of Step 4 would be even bigger.  I then asked this same man to tell me the rate at which I should run the current process and he correctly stated one part every 5 minutes to match the rate of the constraint.  Everyone had just experienced that concept of slowing down in order to speed up and that attempting to drive efficiencies upward could have a negative impact on on-time delivery.  The team from corporate packed up and went home.

In my next posting, we’ll dive deeper into what happened at this plant in Kentucky and describe some of the other things that took place….some good and some not so good.

Bob Sproull

Sunday, November 25, 2012

Focus and Leverage Part 167

My blog title, Focus and Leverage, is all about being able to identify the limiting factor in a system or process that controls the rate of units through it and then focus improvement efforts to leverage the potential gains to be made.  I’ve been using this methodology since the 1990’s and it has always provided significant improvements.  I had been hired by a company to facilitate either a best case turn-around or a worst case closure of a manufacturing facility.  This facility produced fiber glass hard tops on one side of the plant and convertible tops on the other side with approximately 250 employees working at this facility.

When I arrived at this site in Kentucky, I found it virtually in shambles.  It had just missed being unionized by five votes so the work force was pretty much split down the middle in terms of “camps” with one camp being pro-management and wanting to turn this plant around and the other camp, those who had voted to unionize the facility, having a very negative view of leadership.  From a financial perspective, the facility was on credit hold with some of its key suppliers and overtime was very high.  Customers were threatening to pull their business because of poor quality and terrible on-time delivery.  Absenteeism was high and morale was in the tank.  Sound like a fun place to work?

My background at the time had been almost exclusively Quality and Engineering with virtually zero operations experience.  My mentor from previous assignments had talked me into accepting this job offer and when I asked him why he had chosen me, since I had no previous operations experience, he simply told me that all I needed was my quality ethic and my people skills.  Little did I know that I would need much more than those two things.  There were two operation’s managers at this facility.  One had been there for 20 years and the other had just been hired.  Because I had no real operations management experience, I thought I could rely on my two Ops managers, but as I found out quite early on, that wasn’t a good thought.  Neither of them could offer and real vision for what we had to do to effectuate a turn-around.  I was starting to panic!

That first day I spent entirely (all three shifts) within the four walls of this factory, out on the production floor introducing myself to the employees and trying to get some sense of the true state of the business.  What I found that first day caused a great deal of anxiety for me personally because they were all looking to me for help….to save their jobs.  The next morning, in desperation, I visited the local library to find something, anything, on operation’s management to read.  That visit turned out to be a good move for me because in that library I discovered a small, partially hidden, paper-back book that would change the course of history at this plant in Kentucky.  This book would become my blue print for a complete transformation of not only this manufacturing facility, but for me personally and professionally.  The name of this book was The Goal – The Theory of Constraints – A Process of Ongoing Improvement by Eliyahu M. Goldratt and Jeff Cox.

I spent the remainder of my second day in my office and most of the night reading this manufacturing masterpiece.  There were concepts within this book that I had never heard of before.  I was so excited to get started applying these concepts, but I knew my team had to understand the teachings within this book before we could truly begin our transformation.  I found a local book store and purchased copies of The Goal for all of my direct reports and supervisors to read.  I over-nighted them in and mandated all of my direct reports to read this book in two days.  We had round-table discussions about the key teachings within this book on a daily basis and within a week we were ready to begin.

One of the first things we did was to establish a morning Herbie Hunt to search for and find the constraint.  Because we were losing so much money on the hard top side of the business, we started with it.  We would walk the process until we came upon a backlog of partially finished hardtops.  Once we found it, we then stopped and asked the operator why he or she felt that the process was blocked at their station.  We also asked this same person what they thought should be done to alleviate the backlog.  This technique turned out to have a multiple effects.  First, we were able to identify the constraint and then decide how to exploit it.  In the early going, it was clear that we had to subordinate the rest of the process to the pace of the constraint.  This was difficult because our corporate office tracked our overall efficiency and by asking the non-constraints to slow down, the overall efficiency took a nosedive.

Perhaps the most important effect of our daily Herbie Hunt was the true involvement of the hourly work force in our improvement effort.  They were amazed that someone was actually listening to them and that we not only solicited their ideas, but we implemented them exactly as stated, as long as no safety or customer rules were violated!  I remember one operator telling me that nobody had ever listened to the workforce before.  And so our improvement effort began…..

In my next several postings, I’ll continue discussing our improvement journey with real examples of the things we did, the barriers we encountered, the successes we achieved and the failures that resulted in key “learnings” for us as a team.

Bob Sproull

Saturday, November 24, 2012

Focus and Leverage Part 166

I am finally back from vacation and able to post a new discussion.  In the past several postings I have been discussing how hospitals can utilize the teachings of the Theory of Constraints (TOC).  TOC’s in its most simplistic form is based upon how well we can execute Dr. Goldratt’s Five Focusing Steps.

1.    Identify the System Constraint.  The system constraint is that part of the process that limits the flow of any system or process.  If you consider the overall flow of patients throughout the entire hospital, it can be found in the discharge process thus freeing up beds for new patients or at a lower level, passage of patients through an Emergency Department (ED) or a Surgical Unit (SU).  The key point is, there will always be a constraint within any system or process so you must locate it.  One of the best techniques for identifying the constraint is to map out the entire process from patient entry to treatment to discharge.

2.    Decide how to exploit the system constraint.  Once the constraint has been identified, we must decide why it is the system constraint and take the necessary actions to reduce its impact.  If, for example, we have discovered that the discharge process is the overall system constraint, we must focus our improvement efforts on the discharge process.  It makes no sense to improve the flow and throughput of ED patients if the discharge process isn’t freeing up hospital beds.  If that were the case, we would have a backlog of patients waiting for available beds.  This would be an example of a localized improvement which would not improve the overall system throughput.  In fact, all it would do is move the system constraint to the discharge process so all of your efforts would be wasted.  Yes, you would improve the throughput and flow through the ED, but patient satisfaction would deteriorate.

3.    Subordinate everything else to the exploitation decision.  Subordination in this context simply means that you should never out-pace your true system constraint.  In our ED example, there would be an automatic subordination of the ED to the pace of the discharge process.  Think about it…..if you increased the throughput of the ED without increasing the throughput of the discharge process, where would you place the influx of the ED patients?  In the hallways?  This is why it is so important to consider the “total” system before improvement efforts are initiated.  Subordination is by far and away the most difficult step to achieve because in most cases people seen as being idle is viewed as a negative.  When the capacity of one step in the process is greater than the capacity of the receiving process, the supplying process must “slow down” or a build-up or queue of patients will occur in front of the true system constraint.

4.    If necessary, elevate the system constraint.  If, after improvement efforts, the capacity of the true system constraint is still not able to handle the patient capacity, you may need to spend money, but most of the time Step 2, Exploitation, will alleviate the system constraint.  As an example, in one hospital I assisted, the hospital had no problems with the discharge process, but the time it took to free up a bed for an incoming patient had been identified as the constraint.  The team created a simple process map and found the constraint to be the time it took to clean and prepare a room for the incoming patient.  When we looked at the cleaning/preparation step in this process we discovered that only one cleaner was assigned to prepare the room.  My suggestion was to add a second cleaner to essentially cut the cleaning time in half.  The team immediately pushed back and said that they were not permitted to hire any additional staff.  But when they looked at the availability of cleaners they discovered that there was ample capacity to better utilize their pool of cleaners.  So for ED admissions, they were able to “double-up” the housekeeping staff and break the constraint and flow improved immediately without spending any money.

On the other hand, suppose they didn’t have additional capacity, what could they have done to break this constraint?  I explained to them that the cost of an additional cleaner would have been far less than the revenue increase they would have achieved.  This type of constraint would have been classified as an “artificial constraint” because the profitability improvement would have been such that it would have been justified.

5.    Return to Step 1, but don’t let inertia cause a new constraint.  Once the constraint has been broken, a new constraint will appear automatically and when it does, a review of the policies and procedures that were implemented to break the constraint must be reviewed to make sure that they will not impede the new constraint.

The lesson here is that by simply using Goldratt’s Five Focusing steps the flow of patients through a healthcare system can be dramatically improved.  The starting point should always be a system level mapping exercise to identify the true system constraint.  This most effective way of mapping the system is to actually become the object (i.e. patient, blood sample, etc.) moving through the process.  Once that is completed, Goldratt’s focusing steps can be implemented and you’re on your way.

Bob Sproull

Sunday, November 18, 2012

Focus and Leverage Part 165

I want to apologize for not posting something on either a hospital emergency room or surgical unit, but quite frankly, I have been so busy that I haven't had time to write.  So instead, I'm providing a link to an article that I think you'll enjoy reading.  I'm about to go on vacation so I want to wish everyone a very Happy Thanksgiving.  Here's the link:

Bob Sproull

Tuesday, November 13, 2012

Yet another 5 Star Review for Epiphanized!!

Here’s another 5 Star review of Epiphanized. Although posted under Debra Schranze’s name, it was actually written by Dan Schranze, Debra’s husband.  This make 13 of 13 reviews being 5 star reviews which Bruce and I are very proud of.  Thanks Dan for your kind words.

Bob Sproull
5.0 out of 5 stars Best TLS book!!!!, November 12, 2012
Debra R. Schranze (Simi Valley, CA United States) - See all my reviews

Amazon Verified Purchase

This review is from: Epiphanized: Integrating Theory of Constraints, Lean and Six Sigma (Paperback)

Epiphanized is the best TLS period!!!! Bob and Bruce have two components to this book, TLS novel and TLS appendix. If you read only 1 book on TLS, this is it. The book provides an excellent education on TLS. One word to describe this book, OUTSTANDING!!!! I am looking forward to their next TLS book.

Monday, November 12, 2012

Another great review for Epiphanized!!

I just had to pass along the latest review of Epiphanized: Integrating Theory of Constraints, Lean and Six Sigma from someone who goes by the handle of Continuous Improvement Coaching (CIC).  What we liked about this review is that the reviewer was able to share some specifics about how our book helped his company.  Bruce and I are so glad that our book helped his company to identify, focus on and exploit the true system constraint(s).  Thanks for sharing your glowing remarks CIC!!  This makes 12 out of 12 5 Star reviews.  Here’s CIC's review:

Bob Sproull

5.0 out of 5 stars Epiphanized, November 11, 2012

Amazon Verified Purchase(What's this?)

This review is from: Epiphanized: Integrating Theory of Constraints, Lean and Six Sigma (Paperback)

Epiphanized lives up to it's name, in a simple story it causes you to view your business with new eyes and new ideas. I was in the midst of doing annual planning as I read this and realized that while focusing on the front of our process would streamline the whole process(we had focused on the back of the process nearest the customer), paint in the middle of the process and purchasing of long lead time items was our constraint. We would not be one bit more successful until these two process constraints were minimized or removed.

If you are a leader of a business Epiphanized: Integrating Theory of Constraints, Lean and Six Sigma is a must read.

Sunday, November 11, 2012

Focus and Leverage Part 164

In this posting we will continue on with Russ Kershaw’s great case study of an oncology clinic and how the clinic used TOC, Lean and Six Sigma to create the capacity it needed to satisfy a growing need for chemotherapy. As I said in my last posting, in order to address the problems associated with this growing demand, the doctors, office manager, and staff for this oncology clinic examined various alternatives for increasing their ability to deliver chemotherapy to more patients.  .

Because the clinic’s current financial status was tenuous at best, significant capital expenditures to expand the clinic’s physical facilities at least in the short term, were not possible.  The office manager and staff were able to identify the constraint(s) in the treatment process by carefully examining the flow of patients at their clinic.  They did so by creating a process map with time estimates for each step in the process.  They compared their current patient volume to the calculated capacity at each step in the treatment process and determined that they had sufficient resources to handle the check-in process, perform lab tests, and perform the pretreatment process, but the unavailability of enough treatment chairs was found to be the primary cause for patient wait time.  To complicate matters, an excessive amount of work-in-process inventory (preprocessed patients) was building up in front of the chemotherapy treatment chairs, which is symptomatic of a physical constraint.

Just to refresh your memory on Goldratt’s 5 Focusing Steps and his process of on-going improvement:

1.    Identify the system constraint.  This team used the aforementioned process map with time estimates to determine that the chemotherapy treatment chairs were the system constraint.

2.    Decide how to exploit the system constraint.  This team focused Lean and Six Sigma to identify ways to off-load time from the system constraint and reduce variation within it.  Having a consistent and reliable process is absolutely necessary.

3.    Subordinate everything else to the system constraint.  There are two clear messages in this step:  (1) No part of the process in front of the system constraint can run faster than the system constraint and (2) you must never let the constraint sit idle.

4.    If necessary, elevate the system constraint.  If the actions taken by this team did not free up the necessary capacity on the constraint, then they might have had to spend money (purchase more chairs, add more staff, etc.) to generate more constraint capacity.  Fortunately, seldom does a team have to execute this step.

5.    Return to Step 1, but don’t let inertia cause a new system constraint.  Once the constraint is broken, the team had to review the policies and procedures that were in place to make sure they still apply and that they don’t create a new system constraint.

So the team completed Step 1 and now it was time to decide how to exploit the system constraint.  Once the team had identified the treatment chairs as the clinic’s constraint, they were able to implement TOC in two phases.  In the first phase, the office manager changed the patient scheduling process based on the capacity of the eight treatment chairs (This is the concept of subordination where processes upstream from the constraint can never out-pace it).  The purpose of this action was to reduce the waiting queue and time in front of the constraint which they knew would improve customer satisfaction and it worked exactly as planned, as both patient waiting time and patient complaints both declined.  The team knew that this change could only be considered as interim fix because the new schedule called for treatments outside the clinic’s normal work hours.  And in order to cover this new schedule, RNs and other staff had to work extra hours to accommodate the new schedule.  The team knew that if these extra hours continued, sooner or later there would be a morale problem with the RN’s, so it had to be a temporary fix.

Because the extra work hours were not sustainable, the team next focused their efforts on reducing time on the constraint.  This is the essence of Step 2, decide how to exploit the system constraint.  They examined the patient flow for opportunities to increase their capacity to administer chemotherapy by removing time from the constraint.  Their analysis found that the average 2.5 hours of treatment time within the constraint were categorized as follows:

·         Establish intravenous access                   0.25 hours

·         Administer prescribed drugs                      2.00 hours

·         Perform post-treatment education            0.25 hours

Total                                                          2.50 hours

Since reducing any of these times in the treatment chair would immediately increase the capacity of the constraint, the team executed some of the “easier” fixes first.  They found that the average treatment time could be reduced by about 15 minutes if their post-treatment education could be performed while the chemotherapy was being delivered rather than after it was completed. The RNs were adamant that this portion of the treatment process was critical and could not be compromised. The team consulted with the doctors and decided that this education piece could be completed during the final 15 minutes of chemotherapy so right away, they gained 15 minutes of new constraint capacity.

The team then investigated ways of reducing the time required to establish intravenous access to the patient’s arm or hand which required the insertion of a small plastic tube needed to deliver the medication.  They reasoned that if this could be done prior to the patient arriving at the treatment chair, then another 15 minutes of constraint time could be eliminated.  Logically they thought that this part of the process could be done while the patient was at the lab getting blood tests or during the pretreatment process.  The advantage was that the chemotherapy treatment could begin just as soon as the patient arrived at the chemotherapy chair.  The team decided that the lab technicians should be able to insert the intravenous access when the blood samples were being collected.  They tried it and it worked, so another 15 minutes of constraint time was eliminated by off-loading work from the constraint to another resource that was not capacity constrained.

Part of the 2 hours of chemotherapy treatment involved waiting for the pharmacist to mix the needed chemotherapy medications.  The process being used was patients would bring their doctor issued treatment orders with them when they moved to the chemotherapy treatment chairs.  The RNs reviewed the orders and then physically delivered them to the group’s pharmacist so that the specific chemotherapy medication could be provided.  While the chemotherapy medication was being prepared in the pharmacy, the patient had to wait.  The team simply changed to a multipart form for doctor’s orders with one copy accompanying the patient to the treatment chairs and the other part going directly to the pharmacist.  In taking this simple action, another 5 to 10 minutes of “dead time” was removed from the constraint.

The next activity the team changed was to reduce the time wasted looking for equipment and supplies, if and when the patients experienced negative side effects during their receipt of treatment.  In order to reduce this time, the team developed a simple mobile supply cart that contained all of the equipment and supplies that might be needed if treatment problems occurred during the chemotherapy treatment.  The cart was designed so that it could be moved easily from chair to chair and it practically eliminated the time wasted looking for any needed equipment and supplies (another 5-10 minutes).

The last improvements that the team developed were other opportunities for decreasing the treatment time while the patient was in the chemotherapy chair and, as it turned out, these improvements resulted in significant amounts of capacity.  The RNs indicated that patients receiving chemotherapy treatment for the first time (3 to 4 patients per week) required substantial pretreatment education.  This education often took an hour or more to deliver and was done so by the RNs while the patient sat in a treatment chair awaiting treatment.  The team concluded that if this training could be completed at a different time and/or location that an additional 5 to 6 hours a week could be gained for additional treatments.  

Another opportunity evolved when the office manager explained that very often the treatment chairs were used for other activities like blood transfusions.  This accounted for an estimated 9 to 10 patients per week with each transfusion taking 3 to 4 hours of chair time to complete.  The team concluded that if the transfusions could be performed at a different location, another estimated 30 hours of chemotherapy treatment time per week could be added to the clinic’s capacity. These issues (i.e. pretreatment education location and transfusions in different treatment chairs) are classic examples of policy constraints or the “way we’ve always done it” syndrome.  Goldratt told us that policy constraints typically account for over 90% of all constraints and this team’s actions demonstrated this truth.  By simply changing the existing paradigm, huge gains in treatment chair capacity were realized.

Finally, the RNs were required to review the lab results prior to beginning the chemotherapy treatment.  Since the nurses had to physically walk to the lab to get the results, the team reasoned that if they simply installed an inexpensive printer in the treatment room to print the lab results, the results would be available much sooner to the nurses and eliminate the nurse’s travel time to and from the lab.  Not a lot of time saved, but every minute saved is a minute gained in constraint capacity.

So with all of these “simple” changes and improvements to the chemotherapy process that the team made to the system constraint, what kind of improvements did they see in the clinic’s capacity?  Prior to the changes in the clinic’s chemotherapy process, realistically the clinic could handle, on average, 24 to 25 patients per day or roughly 125 patients per week.  After implementing their improvements to their treatment process, the clinic’s capacity increased to an average of 35 to 40 patients per day (~200 per week) or a 40% to 67% increase in the clinic’s treatment capacity.  Do you think patient satisfaction increased proportionally?  Do you think the clinic’s revenue increased?  You bet they did!  By using the basic TOC based process of on-going improvement (POOGI) in combination with Lean Six Sigma, without spending enormous sums of money, this clinic not only survived, it thrived!  Revenue jettisoned upward along with patient satisfaction!

While this case study was a great example of using this integrated approach, there are other areas within a typical hospital environment that can benefit enormously using the same techniques.  In my next posting we’ll take a look at some of these other areas within a typical hospital that could result in similar gains in throughput and patient satisfaction.

Bob Sproull

Friday, November 9, 2012

A really good article!!

Check out page 32 of this magazine for a good article on Theory of Constraints, Lean and Six Sigma....a la Mark Woepple.

Bob Sproull

Thursday, November 8, 2012

Focus and Leverage Part 163

In this posting I want to initiate a case study about an Oncology Clinic that Russ Kershaw wrote about in 2000 that was published by Management Accounting Quarterly entitled Using TOC to “Cure” Healthcare Problems.  For those of you interested in reading the entire article, here is a link to it.

The article is simply an excellent piece of work and Russ should be congratulated for this work!

For those of you not familiar with an Oncology Clinic, it’s an outpatient cancer treatment clinic that administers chemotherapy to patients.  The reason I want to present this case study is because it lines up quite nicely with my last posting and it will set the stage for future healthcare posts.  Quite frankly, as Russ rightfully points out in his article, it provides a good case study for examining the application of the Theory of Constraints to a healthcare setting.  With that said, let me give you some background.

Because the Oncology clinic administers basically one type of treatment to its patients, explaining the use of TOC principles is much simpler.  The oncology patients come to the clinic on as outpatients to receive their chemotherapy treatment. Depending on their cancer-related condition, the treatment may be drugs or medication which is usually administered over a carefully timed series of treatments.  The clinic treats about 600 patients on weekdays from 8:00AM to 5:00PM. Because of growing demand, it has been difficult to schedule all of the patients on a daily basis which has resulted in more patient complaints about the increasing wait times.  The problem is, if patient satisfaction continues to worsen, the fear is that patients will ultimately choose a different place for their treatments.  However, if the clinic can reduce these wait times by improving their capacity to handle patients,  it could be a significant financial opportunity for the clinic.  (Remember I told you in my first posting on the Affordable Care Act, patient satisfaction is a critical part of Medicare reimbursements, so patient satisfaction is something that must be considered.)

Figure 1 represents the process flow for this clinic whereby the patient first checks in with the receptionist and then goes and sits in a waiting room until they are summoned to go the lab for some blood work.  After the blood specimens are collected, the patient then goes into another waiting room until they are called to the exam room for the clinic’s pretreatment process.  The patient then sees the doctor in the exam room, then returns to a waiting room until it’s their turn to go to the treatment room for their chemotherapy.  When the chemotherapy is completed, the patient then returns to the receptionist to schedule a follow-up appointment.  Any time there are three separate waiting rooms, there is room for cycle time reduction.  The key is finding or identifying the system constraint and deciding how to exploit it.

Figure 1

The amount of time a patient spends in a treatment chair was determined to be the constraint as the time ranges from one to five hours, depending upon the treatment, but averages 2.5 hours.
In my next posting, we’ll talk about how the doctors, office manager, and staff at this oncology clinic examined various alternative for increasing the clinic’s capacity to deliver their chemotherapy.

Bob Sproull