Theory of Constraints Handbook - James Cox Iii [558]
The goal of service organizations is not always clear, particularly in nonprofit organizations.
Measurement and control are not trivial.
In service, the customer is often part of the process.
Service cannot be made in advance or stored as inventory.
Entities within the service process are not always visible or physical.
Bottlenecks within the service processes are, in many cases, hard to detect.
Many of the service organizations are nonprofit organizations.
Service organizations are usually labor intensive.
In many service industries, operations and core processes require high levels of IT capabilities. In these organizations, IT applications development resources are permanent bottlenecks (Pass and Ronen, 2003).
In most service organizations, there exists a high percentage of fixed costs—usually much higher than in a manufacturing firm.
One might get the impression that because of these characteristics, service organizations cannot utilize TOC and other practices developed by the manufacturing sector. The next paragraphs will show that this is not the case. Moreover, due to the existing gap in the implementation, service organizations have a huge potential for value enhancement.
Why the Need for Change?
Most service organizations lag behind the progress that industrial organizations have made in implementing new managerial management methods, such as TOC, Lean/Six Sigma, or Total Quality Management (TQM).
Most service organizations have not yet assimilated the understanding that they can leverage excellence in operations to increase shareholders’ value. Similarly, the notion of service quality is sometimes misinterpreted. In many cases, service organizations put some effort on Lean/Six Sigma implementations mainly in the operations. Usually, this effort does not improve the organization’s value in any significant way.
Proper management of the system’s bottlenecks, a change in local performance measures, lead time reduction, decision making, and pricing or costing procedures are major opportunities for the improvement of service organizations.
This chapter aims at presenting the state-of-the-art management concepts and tools, demonstrating their potential for value enhancement for service organizations. This chapter will also suggest proven routes for value driver identification and successful implementation in a variety of service environments.
Second, this chapter surveys the literature on TOC in service organizations. Third, a brief assessment of service management is presented. Fourth, concepts and tools of TOC and Focused Management for service organizations are described. Fifth, an implementation plan for service organizations is presented. Sixth, the remaining chapters of the services section are listed.
Survey of Service Organizations TOC Literature
Literature Mapping and Observations
Relative to the spread of TOC literature in manufacturing, logistics, and project management, little research has been conducted on TOC in services. In addition, there exist only a few papers describing TOC and Focused Management implementations in services.
Unlike manufacturing, project management, or distribution, the service environment has much higher variation. A bank is different from a production organization in its processes, information flow, and core problems. In general, we can classify manufacturing plants into V-, A-, or T-plants. In service organizations, the variation is much higher.
Some observations have been made from surveying the literature and are detailed in the following section.
From All Service Industries, TOC Is Relatively Most Popular in Healthcare Organizations
Of all service industries, TOC is relatively most popular in health care organizations. The reason might be the fact that hospitals, clinics, and other healthcare organizations are “production lines” dealing with billions of people per year. Some departments are, in fact, job shops. Others are V-, A-, or T-plants, and many can be considered as