lean principles that dramatically impact process performance€¦ · lean principles that...

Lean Principles

that Dramatically Impact

Process Performance

17th AnnualSHS Management Engineering Forum

Dallas, Texas 2005

SHS - Dallas - 2005 2

Facilitators

• Chuck Monroe, Pegasus Organization, Scottsdale, AZ– Master Black Belt, Certified Six Sigma Black

Belt (ASQ) and Certified Management Consultant (IMC-USA)

• Ellen Ermer, Scottsdale Healthcare, Scottsdale, AZ– Consultant Organizational Effectiveness


Some Lean Principles

• Little’s Law – drives consistency in process’cycle time and allows rapid re-prioritization

• Process Flow – balances the work load to increase throughput with same resources

• Set-up time reduction – provides greater productivity, revenue & profits from expensive assets and/or constrained resources

• Waste Identification & Elimination – reduces non-value added operations


Process: SIPOC Supplier, Input, Process, Output, Customer

Key Lean Concepts

ProcessInput Output

Supplier Customer


Process: Series of steps or subprocessesaccomplishing task or mission

Key Lean Concepts

Guardian/PatientIntake Doc Registration

InsuranceCarrier

Authorizations

SchedulingAdmission

ClinicalCorodinator

InsuranceBenefit Rep Clincian

Insurance CarrfierBenefits


Process: Series of steps or subprocessesaccomplishing task or mission

Key Lean Concepts

Patient's Doctor

Patient & Guardian

Registration

Scheduling

Admissions Clinical

Coordinator

Insurance Benefit Rep

Clinician

Insurance Carrier Benefits

Insurance Carrier

Authorization Dept

Ongoing Treatment?

Write & Deliver Rx

Write & Deliver Authorization

Guardian Calls for

Appointment

Complete Pre-Admit Module.Obtain

Insurance Info.Email

New Patient Notification

Enter New Patient Name, Demographics & Insurance into System

Verify Insurance

Verify: Insurance Benefits,

CoPay, Rx is covered.

Verify Info from Carrier Matches Info

in System

SLT or Feeding?

Mail Case History Form &

Handbook

Mail Handbook

No

GuardianCompletes

Form(s)

Remind to bring Rx &

Authorization

Guardian

GuardianCompletes &

Delivers: Authorization, History & Rx,

Prepare for Evaluation

Review File for Completeness

Guardian

3 Days before Appt.: Coming

to Appt?

Remind to bring Rx,

Authorization, & Case History

Guardian

Yes

Reschedule Appt.

No

Guardian Completes Missing

Docs

Admit Patient, Scan Rx & Authorization, Obtain Consents,

Complete Required Str____ Packages

Guardian & Patient Arrive in Waiting

Room

Greet Patient in Waiting Room,

Move Patient to Exam Room,

Perform Evaluation

Verify LastBill DOS

Initiate Discharge

Fax New Authorization

Request & POTto Dr.

Sign & Return Authorization

SendCust.Sat

Survey

Guardian Completes &

Returns Customer Sat

Survey

Who Receives Cust Sat Survey?

Scan AuthorizationIs Patient

"SIngle Service"?

Initiate "Discipline Specific"

DIschargeNo

Yes

File Plan of Treatment

within 48 Hrs

Initiate billfor Service

Initiate Billfor

Service

No

Send Email Notification Insurance is confirmed

Received confirming Insurance

Email

Yes

ForwardAuthorization to

Insurance Carrier

Issue Insurance

Authorization

Request Next Appointment

Call for Appointment

Guardian

Good Appt.Mail Card

ScheduleAppt.

Mail Appt.Card

Guardian

Send Appt.Card

RecordClinicalNotes

Send Bill

Close Clinical

File

Approved?

Yes

Help Family Seek

Alternative Funds

No Successful FInding Funds?

Yes

InfromClerical Staff Treatmenrt

Ends

No

Patient Value Add Biz Value Add Patient Value Add Biz Value Add Biz Value Add Biz Value Add Biz Value Add Biz Value Add

Yes

Send Bill,Continue Treatment

Send Bill,End Treatment

Biz Value Add Biz Value Add Patient Value Add Biz Value Add


Process Cycle Time

Work In Process (WIP)

Throughput (Capacity)

Key Lean Concepts

Definition: Time for one item to transit processGoal: Minimize Mean Cycle Time and Variance

Definition: Number of Items in ProcessGoal: Minimize number of items in WIP

Definition: Number of Units (Items) exiting process per Unit of TimeGoal: Maximize Throughput


Key Lean Definitions• Velocity, Efficiency, Throughput, and Capacity of a

process:– Process Cycle Time (PCT): elapsed time from when

something or someone enters a process until they exit the process as completed or finished

– Work In Process (WIP): items or persons within the process– Exit Rate (Throughput): items exiting a process as finished

over a period of time

ProcessF

WIP

R

F

WIP

RR

RR

WIPWIP

FF


– Capacity: maximum throughput a process can deliver over a continuous period of time

– Bottleneck: the operation or step that inserts the largest amount of time delay into a process.(There can only be one bottleneck at a time in a process and it controls the exit rate from the process)

– Constraint: a bottleneck that is unable to produce at the exit rate required to meet customer demand

Key Lean Definitions


Traditional Processes:Lots of WIP = Long Cycle Times

TransportTime

Operation1

OperationTime

Operation2

InspectTime

Operation3

ReworkTime

Operation4

FRR

RR

FF

F

WIPWIP

WIP

WIPWIP

WIPWIP

WIPWIP

WIPWIP

WIP

WIPWIP

WIPWIP

WIPWIP

Thru

Put


Lean Processes:Time Trap Resolution Reduces WIP & PCT

TransportTime

Operation1

OperationTime

Operation2

InspectTime

Operation3

ReworkTime

Operation4

FRR

RR

FF

F

WIPWIP

WIP

WIPWIP

WIPWIP

WIPWIP

WIPWIP

WIP

WIPWIP

WIPWIP

WIPWIP

Thru

Put


Relationship Between WIP, PCT & Throughput

• Little’s Law* describes between WIP, PCT, & Throughput (also known as the Exit Rate):

PCT=WIP/Exit Rate• This is the most fundamental relationship for any

process• Used to size the inventory, people, paperwork,

projects• Shorter Cycle Times = More “Learning Cycles”

(Learning Cycles = no. of instances to learn about my process)*John D. C. Little


Cycle Time = WIP / Exit Rate“The Mickey Experience”

Cycle Time =

Cycle Time =

WIPExit Rate =

51/minute

5 minutes

…and then think about them in July…

Cycle Time =

Cycle Time =

WIPExit Rate =

131/minute

13 minutes

Think about the lines at Disney World in March…

…conclusion: Fixed Capacity (Exit Rate) + Increased People (WIP) = Longer Cycle Times (PCT)!


A Project Management Example• Traditional Approach: Start

all projects at once. Have each resource (4 in total) split their time evenly between 2 projects (each requiring 30 man-days of work)

Resources spread: Results accrue at the end

0 20 40 60 80

12345678

Projects

$$$s

Returned

Resources focused: Results accrue as projects are completed

0 20 40 60 80

12345678

Projects

$$$s

Returned

• Lean Approach: Minimizethe number of projects in process at any point in time. Team 2 people on a project.


Cycle Time Effect on Capacity• Cycle Time can indirectly influence Throughput (and thus

Capacity) by:– Increasing Labor and Constrained Resource

Productivity:• Fewer items and/or persons being processed at one time by the process

– Less Lost Paperwork, Information more easily traceable:• Fewer patients and patient information at any point in time, less confusion• Mistakes easier to catch, caught more quickly

– Increase in Accuracy and Timeliness (decrease in mistakes; greater ability to recover quickly when they do occur)


Lean Supply Chain

• Faster feedback on process performance (increased learning cycles)• Improved first pass yield (improved productivity)• Improved process stability (improved throughput)• Uncovers process deficiencies (forces problem resolution)• Less in-process & buffer inventories (reduced risk of things being overlooked)• Improved customer satisfaction (flexibility & responsiveness)

Cycle Time

Flexibility

Oldprocess

Newprocess

LeanImprovements

Long Cycle TimeLow Flexibility

Short Cycle TimeHigh Flexibility

Large Amt.of Inventory

SmallInventory


What is our Goal?• The goal of Lean Six Sigma Improvement projects

is to reduce variability in, and improve the speed of, a process.– Controlling and reducing Cycle Time, and cycle time

variability, will generate faster feedback cycles on improvement projects (increase process velocity and, thus, more cycles of learning).

– In addition, controlling and reducing cycle time (and cycle time variability) is a key driver for:• Increasing utilization of expensive capital resources • Facilitating productivity and capacity improvements


More Lean Definitions

• Lean Six Sigma definitions to describe the relationship between the velocity and efficiency of a process:– Process Cycle Efficiency (PCE): the efficiency of a

process is based upon the time in which value is added versus the total amount of time spent in the process

– Value-Add Time (VA Time): the amount of time that value is actually applied to a product while it is “in process”


Why Cycle Efficiency Matters

“Any process with low cycle efficiency will have great opportunities for cost reduction (and increases in service level). Most processes whether in service,

business, transactional, or product development run at cycle efficiencies of less than 10%. The result of

this (are) hidden costs in overhead, rework, invested capital...and unhappy customers.” *

*Mike George, Lean Six Sigma, McGraw-Hill 2002


Process Cycle Efficiency

Process Cycle Efficiency = Customer Value Add Time

Process Cycle Time

PCE = VAT

PCT


Process Cycle Efficiency (PCE)

World Class Cycle Efficiency Benchmarks*

High End PCE

Low-EndPCE

Application

80%30%Test/ContinuousProcess

50%10%TransactionalProcesses

25%5%Creative/CognitiveProcesses

*Source: Lean Six Sigma for Service, Michael George, McGraw Hill, 2002


Exercise:

Determine Process Cycle Efficiency

• Transactional ExampleIn analyzing the billing operations of a hospital, it was noted that the bill goes through 9 steps, and the average “touch time” per bill was 19 minutes. Over a week’s time, 30 bills were time stamped going into the process and again as they left the process. The average time they were in the process was 3.75 days (7 working hrs. per day).

The PCE was .32 hrs./3.75 x 7 = .32/26.25 = 0.0122

TimeCycleProcessObservedTotalTimeProcessValued"Customer"EfficiencyCycleProcess =


Process Sizing Formula

WIP – Patients, Receivables, Documents, Inventory

Exit RatePCT

Process WIPProcess WIP

WIP

PCT * Exit Rate


Process Sizing Examples

• Example:–A regional medical system issues approximately 1500 PO’s per week to its suppliers. It has been determined the average value-add time for a PO is 30 minutes. Assuming a buyer is 75% efficient, how many buyers are required to issue PO’s?

BufferExit RateProcess WIPProcess WIP

PCT


What About Variability?

“We have tended to use all our energy and Six Sigma science to move the mean [delivery time] to…12 days.

The problem is, as has been said, ‘the mean never happens,’ and the customer is still seeing variances in

when the deliveries actually occur – a heroic 4-day delivery time on one order, with an awful 20-day delay

on another, and no real consistency…

“Variation is evil.” – Jack Welch, 1998


Can We Tolerate Variability?• There will always be some variation present• We can tolerate this variation if:

– The process is on target, meeting performance specs.– The variation is small compared to the process specs.– The process is stable over time.

• However, as variability increases, cycle time increases.

• We need to recognize that variation should be minimized - the key is not just moving the mean, but reducing the span as well


Ratio of Actual Wait Time/ Machine time per unit,can be reduced by Total Productive Maintenance

R2 = 0.8723

R2 = 0.8908

R2 = 0.8162

0

5

10

15

20

25

30

35

40

60% 70% 80% 90% 100%

Utilization Percent

Wai

t Ti

me/

Ser

vice

Tim

e

High Variation

Moderate Variation

Lower Variation

Results based on over 5000 simulation runs of an 11 station, single part workstation

Variation in Demand or Supply Can Radically Increase Cycle Time

Ratio of Wait Time to Actual (Value-Added) Time per Item or per Patient


Why Use Work Control Systems?• Stabilize processes to more easily apply analysis

& improvement tools (Lean Six Sigma tools)

• Control & reduce number of items in a process, allowing focus on problem areas

• Control & reduce CT to generate faster feedback cycles on improvement projects

The primary goals of a work control system:Stabilize & then reduce PCT and CT variability


WIP Cap

ExitsStarts

Trigger

Work Control System DefinedDefinition:• A Work Control System establishes a WIP Cap on the amount

of “stuff” within a predefined physical work area or process.

• To maintain the WIP Cap, the Exits from the process trigger Starts into the process.

Establishing and maintaining the WIP Cap is the key to cycle time reduction!

Process WIPProcess WIP

PCT


The Power of a WIP Cap

With WIP Cap - Cycle time is both: reduced & stable

No WIP Cap - Cycle time fluctuates with the amount of WIP

Cycle Time

Cycle Time

Order5 each:A, B, C

Order5 each:A, B, C

Order5 each:A, B, C

Order5 each:A, B, C

Order5 each:A, B, C

Order5 each:A, B, COrder

5 each:A, B, C

Order5 each:A, B, C

Order5 each:A, B, C

Order5 each:A, B, C

Order5 each:A, B, C

Order5 each:A, B, C

Order5 each:A, B, C

Order5 each:A, B, C

Order5 each:A, B, C

Order5 each:A, B, C

ScheduleTreatment

VerifyInsurance

CreatePatientRecord

Receive Dr.

Referral

Receive Dr.

Referral

CreatePatientRecord

VerifyInsurance Schedule

Treatment


Work Control System Benefits• Efficiency: A pull system can attain the same throughput as a

push system, with less average WIP (and therefore, a shorter cycle time)

• Productivity: Less WIP means less “stuff” to get in the way, and thus more time spent adding value to the process

• Ease of Control: Pull systems rely on setting easily controllable WIP levels, creating a much more manageable process

• Quality Improvement: Low WIP (and associated cycle time) systems are more sensitive to quality (and therefore, force problem resolution) and facilitate it (by improving feedback andlearning cycles)


Work Control System Example

Emergency Room Admitting Process:• Limited number of patient resources• Patients assessed & assigned a priority by ER

doctors as they arrive, • Critical patients admitted into process

immediately – bed space & resources “added” to accommodate surges in demand & removed ASAP

• “Backlog” of patients managed allowing Marginal and Non-Critical patients admittance as resources freed up


How to Size aWork Control System

1. Determine current Process Cycle Time (PCT)2. Determine current Process Cycle Efficiency

(PCE)3. Identify appropriate target PCE 4. Calculate theoretical best PCT5. Calculate WIP Cap


PCT: time from release of a product into a process until it’s completion, approximated by using Little’s Law:

WIP: the “number of things in process” at any given time,

EXIT RATE: is the amount of work completed over a given period of time, which should also equal customer demand (“completions per hour”)

Step 1: Determine the Current Process Cycle Time (PCT)

RATEEXITWIP

PCT =


PCT = ???

Exit Rate = 20 orders/day

WIP = ä“Things in process”WIP = 100 orders

PCT= WIP/Exit RatePCT = 100 orders/20 orders per dayPCT = 5 days

Example:

Step 1. Calculating Current PCT

PatientRequests

ScheduleTreatment

Order5 each:A, B, C

Order5 each:A, B, C

Order5 each:A, B, C

Order5 each:A, B, C

Order5 each:A, B, C

VerifyInsurance

Order5 each:A, B, C

Order5 each:A, B, C

Order5 each:A, B, C

Order5 each:A, B, C

Order5 each:A, B, C

CreatePatientRecord

ReceiveDr.

Referral

Order5 each:A, B, C

Order5 each:A, B, C

Order5 each:A, B, C

Order5 each:A, B, C

Order5 each:A, B, C

PatientRequests

Order5 each:A, B, C

Order5 each:A, B, C

Order5 each:A, B, C

Order5 each:A, B, C

Order5 each:A, B, C


PCE: a measure of the relative efficiency in a process - the percentage of value-add time (delivering a service, changing contents, form, fit, function) that a product experiences in its production.

PCE is THE performance indicator for Work Control Systems.

Step 2. Determine Current Process Cycle Efficiency (PCE)

PCTTimeAddValuePCE% =


Example:

Step 2. Calculating Current PCEPCT = 5 days

Exit Rate:20 units/day

Our Example PCE is:PCE = 1.5 hrs / 5 days

PCE = 4.0%

BVA: 0.4 hrs BVA: 0.3 hrs BVA: 0.3 hrs BVA: 0.5 hrs

Order5 each:A, B, C

Order5 each:A, B, C

Order5 each:A, B, C

Order5 each:A, B, C

Order5 each:A, B, C

Order5 each:A, B, C

Note: 7.5 hrs. per day

ScheduleTreatment

Order5 each:A, B, C

Order5 each:A, B, C

Order5 each:A, B, C

Order5 each:A, B, C

Order5 each:A, B, C

VerifyInsurance

Order5 each:A, B, C

Order5 each:A, B, C

Order5 each:A, B, C

Order5 each:A, B, C

Order5 each:A, B, C

CreatePatientRecord

ReceiveDr.

Referral

WIP = Sum of all “things in process” = 100 units


Step 3. Determine Target PCETarget PCE: the PCE the process should be operating at based on “world-class” benchmarks.PCE Benchmarks based on type of process:

25%5%Creative or Cognitive50%10%Transactional

High End,World-Class

Low End,Typical

PCEApplication

Curr’t PCE<<‘Low End Typical’, target curr’t PCE x 10Curr’t PCE < ‘Low End Typical’, target ‘Low End’Curr’t PCE near ‘Low End Typical’, target ‘High End’


Step 4. Calculate Theoretical Best PCT

Theoretical Best PCT is “best” or lowest PCT achievable based on process characteristics. It is measured as:

PCETargetTimeVA

PCTTB =

Our Example PCTTB is:PCTTB = 1.5 hrs / 0.1

= 15 hrs

VACP is VAT along critical path. It does not include VAT of parallel process steps.

CP


Step 5. Calculate the WIP CapThe WIP Cap……determines the maximum WIP allowed within the process at any time. It is measured as:

RateExitPCTCapWIP TB ×=

Our Example WIP Cap is:WIP Cap= 2.0 days x 20 orders/day

WIP Cap= 40 orders


Example: SummaryBeginning State:

Desired State:

PCT = 5 days

WIP Cap = 100 orders

Exit Rate: 20 orders/day

Value Add time = 1.5 hrsPCE = 4.0%

PCT = 2.0 days

WIP Cap: 40 orders

Exit Rate: 20 orders/dayVA time: 1.5 hrs

PCE: 10%


How to Release WIP into a Work Control System

Release logic for Work Control Systems is all about discipline:

1.Count the WIP in your process2.Determine if you can release work or not:

– If the WIP >= WIP Cap, do not release any more work

– If the WIP < WIP Cap, release enough work to get to the WIP Cap or slightly above


Time WIP PCT PCE

Current Month 0 1.5 hrs 20 /day 100 5.00 4.0%

Step 1 Month 1 1.5 hrs 20 /day 80 4.00 5.0%




WIP Reduction Plan Example

Value Add Exits

Transitioning to WIP Cap Typically current WIP level is significantly greater than the WIP Cap level. Plan to reduce the WIP in steps.


Distribution

WIP CAP Reduces PCE from 14 to 2 Days & Variance from 48 to 4 Hours

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

0 2 4 6 8 10 12 14 16 18 20

Lead-Time to Customer (days)

% D

istr

ibut

ion

Mean Delivery Time Reduced

Time Variation Reduced


Project Case History

Registration/Reception

Endowaiting area

Pre-procedure

prepProcedure RecoverySchedule Visit

Outpatient Visit to Endoscopy Department


Project Case HistoryR

ecov

ery

Proc

edur

ePr

e-pr

oced

ure

Endo

scop

y w

aitin

gR

egis

tratio

nR

ecep

tion

Sche

dule

Vis

it

Patient calls to schedule

appointment

Patient “checks in”

Registration clerk takes insurance

and demographic information

Volunteer escorts patient to

endoscopy waiting area

Patient completes history form

Patient given medical history

form to complete & short explanation

by nurse)

Admitting nurse picks up completed

form

Admitting nurse takes competed

form to Endo secretary

Patient have questions? no

Nurse answers questions

yes

Endo secretary gets patient chart

ready

Physician& Staff ready for

Patient?

Patient waits

Patient taken topre-procedure

area

Patient vitals taken, IV started,

consent form signed

Physicianready &

available?

Patient waits

Nurse or Tech escorts Patient to procedure room

Physician speaks with Patient

Nurse preps Patient & area for

procedure

Procedure completed

Patient taken to Recovery by RN or

Tech

Procedure Nurse gives report to

Recovery Room Nurse

Patient monitored by Recovery Nurse

Patient escorted out of Department

by Volunteer



Reg&

Recp

EndoWaitArea

Pre-ProcPrep

Proc Recov

x VAT

x NVAT

12 5 15 40 45

3 90 60 7 0

117

129,760

ä

SchedVisit

5

129,600



PCE = VAT / CT

PCE = (x VAT ) / (xVAT +xNVA)

PCE = 117 / (117 + 129,760)

PCE = 117 / 129,877

PCE = ~ 0.09%



This is a Workshop

• That means we get to do some work and learn for ourselves about some of the Lean Principles

• Let’s get some experience with 2 Lean Principles– WIP Cap will stabilize our process’ cycle time– Balancing will allow us to accomplish more

with the same resources


References

• Little, John D. C., “Tautologies, Models and Theories: Can We Find ‘Laws’ of Manufacturing?, IIE Transactions 24:7 13

• More about Prof. Little: http://www.informs.org/Prizes/whoisLittle.html