Theory of Constraints Handbook - James Cox Iii [614]
22 4:103 is not included.
Addendum: Excerpt from the Book Vision for Successful Dental Practice by Gerry Kendall and Gary Wadhwa
Steps to success for a private, academic, or government-run dental practice
1. Set a clear goal for the practice. It could be 100 percent increase in the value of the practice or profits in 4 years. Academic, government-run non-profit organizations can have a goal of 100 percent increase in patients served in 4 years while maintaining high quality and low cost.
2. Use a performance measurement system that captures the system performance rather than the individual performance of a department or particular doctor. TA and Finance focus on overall system performance.
a. Net Profits (NP) = Throughput (T) – Operating Expenses (OE); Throughput is the payment in the bank after completing the expected treatment on a patient.
b. Investment (I) decisions must filter through this formula. Investments are done in order to provide services to the patients or, in other words, to improve Throughput (T). If T > OE, it is a good investment because it will result in higher profits. Investments require capital and interest payments over a specific time period like 10 to 15 years. Some investments depreciate faster than others do. All investments result in increases in OE over time. The intended purpose of investment is to increase T and this increase must be greater than the OE due to this investment.
c. Return on Investment (ROI) = NP/I (Investment). Investment must be considered over the time period.
d. All marketing and advertising decisions must increase T > cost of marketing and advertisements.
e. All expansion of physical location, addition of operatories, purchase of equipment, and offering of specialized services must go through the tests of TA.
3. TOC’s basic premise is that every complex system is easy to manage (inherent simplicity) and it usually has one constraint or weakest link. This constraint determines the productivity or Throughput of the practice. Dental practices ideally should have the doctor as the key constraint, but sometimes the constraint could be an x-ray or CT scan machine or microscope in an endodontist’s office or limited physical space like in metropolitan cities where the available space is limited and extremely expensive. If the doctor is sitting idle, the constraint is assumed to be in the marketplace, which means that the practitioner might not be attracting patients to the office, or the constraint is internal and is obstructing the flow of the patients through the key constraining resource, the doctor.
It is usually easy to map out the different steps that the patient has to go through in our system in order to get dental care. We can then approximate the time it takes at each step and the usual delays in the flow of patients through these steps. This can give us an overview of where the constraint is located. If the patient has to go to an orthodontist, periodontist, and endodontist prior to completing the treatment, we could assume that the orthodontist’s office will be the key constraint because it takes the longest to complete the orthodontic treatment. We might be surprised that sometimes the wait time to see an endodontist might be 3 months. The whole treatment might take 1 week but the total time to process the patient through the endodontist’s office is 3 months and 1 week. This might be the key constraint to completing the patient treatment. The unfinished treatment is not Throughput until the whole service is completed to the patient’s satisfaction.
4. Determine how to exploit this constraint. We focus on the means to make our constraint both effective and efficient. Let us assume the constraint in our practice is the doctor time. We have to make effective and efficient use of the doctor time.