Theory of Constraints Handbook - James Cox Iii [596]
The purpose of this chapter is to describe the tools, processes, and models used in an implementation of the TOC Viable Vision (VV)2 in a for-profit healthcare practice. A VV project is an approach whereby a company—any for-profit company—maps its strategy of how to achieve net profit within four years equivalent to its annual sales today.
Our approach emphasizes TOC tools for focusing the direction of health care system improvement from top to bottom. TOC Strategy and Tactics Trees (S&T)3 are used to set the strategic direction from the top with tactics underpinning each level of strategic action. TOC Thinking Processes (TP) are used to identify core problems and the action injections needed to resolve them. Then, with constraints identified and using the Five Focusing Steps (5FS), buffers are put in place. Information on buffer penetration is used to sharpen the focus on specific areas for application of Lean and Six Sigma processes. The combining of TOC, Lean, and Six Sigma is a happy marriage of planning and operational methods enabling extraordinary progress. How TOC is employed and how it provides focusing guidance to Lean and Six Sigma will become clear as the story unfolds. The TOC terminology and processes have been presented in other chapters in this handbook. However, in this chapter, I briefly introduce the terminology and concepts.
The Tools for Improvement
Now we examine TOC, Lean, and Six Sigma as the main tools for strategy and process improvement in a health care practice. Each of these is a powerful capability in its own right. Combined they bring together what is needed for dramatic organization results.
Theory of Constraints
Goldratt developed a number of important TOC tools useful in system improvement. The TP are useful in identifying and resolving problems. TOC also provides a performance measurement system (Throughput Accounting, TA) based upon identifying and measuring a few resources (leverage points or constraints) that directly link to overall system performance. In contrast, most traditional cost accounting and some newer accounting systems (activity-based accounting) measure individual departmental performance and assume incorrectly that these reflect global performance of the endeavor. TOC also provides a number of application tools to improve the flow of goods and services and therefore Throughput of the system. New physical process improvement tools (see Sections II and III), like Drum-Buffer-Rope(DBR) scheduling,Critical Chain Project Management (CCPM for multi-project)4, and Distribution/Replenishment for supply chain management and distribution provide system perspectives. Additionally, new marketing (Mafia Offers) and sales (Sales Funnels) approaches (See Section V) capitalize on competitive advantages. These tools have been used quite successfully in for-profit and not-for-profit organizations. One of the latest tools in TOC is called the Viable Vision (VV). As stated previously, in a VV implementation a company combines the use of the previous TOC tools by following logical hierarchical steps provided in an S&T to translate its current sales level into its profit in 4 years. This VV methodology provides hope and direction for any health care system. This methodology has been applied in a small health care company, Oral & Maxillofacial Surgery, a specialty group practice with significant financial results even in the recessionary economy. The company moved from practically no profits after paying doctors and the staff to over $3.5 million in profits per year in less than 8 years. This happened despite the time spent in learning the Lean, Six Sigma, and TOC concepts and selling them to the staff and to the doctors. Furthermore, when the focusing power of TOC points to areas where Lean and Six Sigma can be applied to increase profitability significantly, bottom-line results occur rapidly.
Lean
Lean provides