The New Beginning Part 5

Part 5 is a continuation of my blog series on Matt Hutcheson and my new book, The New Beginning. This book is written as a business novel and is a sequel to my last book, The Secret to Maximizing Profitability.

 In Chapter 13, entitled The Expanded Case Study at Simpson Water Heaters, Tom begins by discussing the value of performance metrics and defines them as feedback mechanisms that tells a company how well they’re performing.  Tom then completes the case study presented in the previous chapter, by inserting target levels for a company’s Goal, Critical Success Factors and many of the Necessary Conditions.  The case study company then goes through an assessment of their company and then Tom describes how to insert various solutions at the base of the Goal Tree that should resolve most ot the issues facing the company in question.

 In Chapter 14, entitled Maximo’s Improvement Plan, Tom sets up a meeting at Maximo to review the individual Goal Trees from each hospital.  The team from Maximo Oncology Hospital presents their Goal Tree and Tom is impressed, especially with their use of lead and lag measures. The same team then presents their assessment results and completely surprises Tom by explaining that Maximo has decided to use the same Goal Tree at all of their hospitals. Tom then presents a healthcare case study involving a hospital that dealt with a STEMI type heart attack that impresses everyone in attendance.  Tom then instructs the team on how to insert improvement initiatives onto the base of their Goal Tree.  He finishes the discussion by explaining how to use several improvement tools, which includes a new tool, the Interference Diagram.

 In Chapter 15, entitled, More Training at Maximo, Tom introduces the team to Drum Buffer Rope, which includes the basic thinking behind how it works.  He explains that organizations must focus on the system as a whole, rather than isolated parts of it.  He goes into detail on what a system is and why it’s very important to think in terms of systems.  Tom then briefly describes variation and how it can negatively impact any organization. He goes into detail summarizing Goldratt’s Five Focusing Steps as well as the basics of Drum Buffer Rope.  Tom then describes three different types of DBR which are traditional DBR, Simplified DBR and Multiple Drum Buffer Rope.  It is the concept of M-DBR that he believes Maximo should pursue and then schedules another meeting at Maximo.

 In Chapter 16, entitled Simpson Water Heater’s Goal Tree, before leaving their facility the last time, Tom had instructed Matt Maloney, the Plant Manager, to lead a team to create their own Goal Tree.  When Tom arrived in the conference room to hear about Simpson’s Goal Tree, he saw it on the screen in front of him.  The team began presenting, but started with a review of their performance metrics, which were dreadful to say the least, especially with a negative profit margin.  The team then presented their completed Goal Tree with each entity tying directly into their performance metrics.  They then presented their assessment and listed two potential improvement initiatives.  The team then presents another assessment of what they believed would happen if they successfully implemented both of the improvement initiatives.  Based upon their implementation they then presented a future look at their performance metrics.  Tom was impressed and decided to contact the other three portfolio companies for an update to their metrics.

Bob Sproull

The New Beginning Part 4

 Part 4 is a continuation of my blog series on Matt Hutcheson and my new book, The New Beginning. This book is written as a business novel and is a sequel to my last book, The Secret to Maximizing Profitability.

In Chapter 9, entitled The Next Step at Maximo Health Center Complex, begins with Tom going to Maximo Health Center Complex to present TOC’s Parts Replenishment Solution and the Goal Tree.  He then explains the basics of how the Min/Max methodology works and why it typically results in excessive inventory with high levels of stock-outs.  He then presents TOC’s Replenishment Solution and why it typically results in a fifty percent reduction in inventory while virtually eliminating stock-outs.  Because of the length of time it takes to present this material, he reschedules his session on the Goal Tree for the following week.

 In Chapter 10, entitled   Drum Buffer Rope at Simpson Water Heaters, Tom flies to Detroit to present the details of Drum Buffer Rope (DBR) which Tom describes as a production planning and scheduling methodology.  Tom explains that DBR is designed to regulate the flow of work-in-process inventory through a production line based upon the pace of the slowest resource.  Tom explains that there are three schedules that must be maintained, namely shipping, the constraint, and material release.  Tom finishes his presentation by describing the importance of something he refers to as protective capacity.

 In Chapter 11, entitled Maximo’s Goal Tree, Tom presents a simple strategic tool used to create improvement plans.  He explains that the Goal Tree is a logic diagram that helps companies understand why they are not achieving their goal.  He then defines the span of control and sphere of influence that must both be defined before construction of a Goal Tree.  Tom then presents the basic structure of the Goal Tree by defining the Goal, Critical Success Factors and Necessary Conditions and then walks the team through the step-by-step process of how to create one.  The team of high-level executives from Maximo, then creates a high-level Goal Tree including lead and lag measures.  Tom then explains the process of using the Goal Tree to assess their organization, which the leaders do.  The chapter ends with Tom instructing the leaders to go back to their hospitals and create individual hospital Goal Trees.

 In Chapter 12, entitled Developing an Improvement Plan at Simpson, Tom explains that there is another part of the Theory of Constraints known as the Logical Thinking Tools.  He explains that many people who have gone through training on these tools have come away not knowing how to use them.  He then explains that the Goal Tree is a short-cut that can be used to assess a company’s weak points.  He then describes two types of logic, which are necessity-based logic and sufficiency-based logic.  He then explains that the Goal Tree uses necessity-based logic.  He goes on to explain the basic structure of a Goal Tree and then presents a case study of a manufacturing company creating a Goal Tree and then uses it to assess their company.

In my next post we will continue with this series on Matt Hutcheson and my new book, The New Beginning.

Bob Sproull

The New Beginning Part 3

Part 3 is a continuation of my blog series on Matt Hutcheson and my new book, The New Beginning. This book is written as a business novel and is a sequel to my last book, The Secret to Maximizing Profitability.  Here is a link to the new book:  https://www.routledge.com/The-New-Beginning-A-Business-Novel-on-How-to-Successfully-Implement-the/Sproull-Hutcheson/p/book/9780367688370 and a photo of the cover:

In Chapter 6, entitled Simpson’s New Beginning, located in Detroit, Michigan, Tom meets with the new Plant Manager, Matt Maloney.  Tom presents the basics of the Theory of Constraints and then a detailed presentation on TOC’s version of accounting known as Throughput Accounting. In this presentation, everyone in attendance gets to see how, by using this form of accounting, a different product mix can change the company’s profitability.  They also discussed the basics of Lean and Six Sigma, or at least how both had been used to improve Simpson’s profitability, but not at the level they had wanted or expected.  Simpson’s attempt to use Lean and Six Sigma was, of course, prior to having received assistance from Tom.  The chapter ends with Matt asking Tom if there was a way to combine Lean and Six Sigma with the Theory of Constraints.  Tom explained that they will see exactly how to combine the best of all three methods when he returns for another visit.

Chapter 7, entitled Maximo Health Center Complex’s New Beginning, begins with a review of potential performance metrics that they might use at this complex of hospitals to track their improvement results.  Tom plans a visit to Maximo Health Center Complex to present the basics of TOC, the importance of identifying the system constraint, plus a detailed look at Throughput Accounting to a group of leaders from each of the six hospitals within this complex.  His presentation of Throughput Accounting includes a case study, of all things, a sock making company.  At the conclusion of this training session, Tom invites Pete to a presentation on how to combine Lean, Six Sigma and the Theory of Constraints, to be held at Simpson Water Heaters in Detroit, Michigan.  Pete agrees to attend along with two LSS Black Belts from his complex of hospitals.

In Chapter 8, entitled Simpson Water Heaters Next Meeting, Tom presents how best to combine Lean, Six Sigma and the Theory of Constraints which will result in major improvements to profits.  Tom explains that too many companies believe that the key to improving profits is through how much money can be saved, when in reality profit improvement should be based upon how much money can be made.  Tom then presents a detailed look at how to combine these three improvement methodologies, the necessary tools, actions and focus and finally the expected deliverables.  This chapter ends with Tom explaining that he would be back to Simpson Water Heaters to present several other key methodologies, namely TOC’s scheduling and replenishment methodologies, as well as something called the Goal Tree.

In my next post I will continue with my series on Matt Hutcheson and my new book, The New Beginning, scheduled for release on March 5, 2021.

Bob Sproull

The New Beginning Part 2

This is the second post in my blog series on Matt Hutcheson and my new book, The New Beginning.

In Chapter 2, Tom gets invited to play a round of golf with his friend and former mentor Bob Nelson and two other men Tom’s never met.  The foursome decides who will be teammates and the round of golf begins.  Tom gets paired with Pete Hallwell, the CFO of a Hospital complex located in Pittsburgh.  As the round continues, Tom and Pete have many conversations about each other’s work.  Tom explains the tools he uses to make dramatic improvement in profits, and he does so in very simple terms that Pete can understand. To make a long story short, not only do Tom and Pete win the match and collect money from the other team, but Pete, because of his interest in Tom’s work, invites Tom to come to his complex.   Specifically, Pete, who was the Chief Financial Officer at Health Center Complex, was very interested in hearing more about Throughput Accounting.

In Chapter 3, Tom travels to Pete’s headquarters at Maximo Health Center Complex and presents the details of Throughput Accounting to Pete and two of his employees, who both work in Accounting.  The meeting goes very well as they discuss other subjects related to the Theory of Constraints.  In fact, the meeting went so well that Pete surprises Tom with an exclusive consulting offer with Maximo Health Center Complex which consists of six very different hospital types.

In Chapter 4, entitled The New Direction, Tom returns home from his meeting with Pete Hallwell and discusses the consulting opportunity he had received, plus the possibility of becoming an independent consultant with his wife, who is fully supportive.  Tom then contacts Bob Nelson to get his input into his decision on whether or not to accept Pete’s consulting offer.  Bob Nelson reassures him and lets Tom know that if he himself has consulting offers that he can’t take on himself, he will refer them to him.  Tom decides to accept the consulting offer, but when he “attempts” to resign from his Board seat, he gets a huge surprise.

In Chapter 5, Tom signs his consulting agreement with Maximo Health Center Complex and one of the first things he does is discussing the need to develop a list of performance metrics that they would track as they proceeded through their improvement journey.  In this chapter, Tom provides an example from a previous improvement effort where he had worked with a hospital in Chicago to improve their Emergency Department time for STEMI-type heart attack patients.  In his explanation, Tom presents an improvement tool known the Interference Diagram which proves very helpful to the improvement team.  Tom also meets with the Chairman of the Board of Directors, Jonathan Briggs, about a new list of portfolio companies for Tom to work with as part of his new consulting agreement.  One company, Simpson Water Heaters, stood out from the others because, in addition to their other poor performance metrics, their profit margins were in negative territory.

In my next post, I will continue with a summary of Matt and my new book, The New Beginning.

Bob Sproull

The New Beginning Part 1

As promised on my LinkedIn post, I am beginning a series of posts on Matt Hutcheson's and my new book, The New Beginning.  As I explained, this book is written as a business novel and it is a sequel to The Secret to Maximizing Profitability.  Matt and I hope you enjoy this series of posts.

As I said, the New Beginning is a sequel to my last book, The Secret to Maximizing Profitability.  In this book Matt Hutcheson and I demonstrate how the same principles and improvement tools apply to both Healthcare and Manufacturing environments.  Between Matt and I, we have both been fortunate to have worked in Manufacturing and, along the way, I added Heathcare to my resume.  While many people believe that the Theory of Constraints applies only to a manufacturing environment, we demonstrate through a business novel format just how wrong this thinking is.  No matter whether you are in a manufacturing setting or a healthcare setting, you will see that both settings can use an integrated Theory of Constraints, Lean, and Six Sigma methodology to drive profit margins to new levels.

 This book begins with Tom Mahanan, the former Finance Director for Tires for All, cherishing his huge royalty check for the improvement efforts he had completed for his Board of Directors. Tom had changed his career aspiration and was now an internal process improvement consultant. Tom was a huge fan of Kevin O’Leary from his favorite tv show, Shark Tank, and he had negotiated a royalty deal and it really paid off.   Tom had directed improvement efforts at six of the Board’s portfolio companies and the improvement results were astonishing!  On the six Portfolio Companies that Tom had worked with, the average % Profit Margins had increased from an average of 8.3 % to an astounding 27.6%!  And the improvement had occurred in a relatively short period of time, which very much excited the Board of Directors. The other key metrics that had improved were, the average % On-Time Delivery for the six portfolio companies, which improved from an average of 77.6% to 94.6%!

 Other performance metrics that demonstrated improvement under Tom’s leadership were, Average % Scrap for the six portfolio companies, which had improved from 5.9 % down to 2.1%. In addition, the average % Rework improved from 9.4 %, down to 2.9 %! Surprisingly, the average % Stock-Outs for the six portfolio companies had decreased from 10.1 % to 1.1 %. And finally, the metric that surprised the Board Members the most was what happened to the average Efficiency % which dropped from an average of 89.7 % to 68.3 %!

One metric that brought back happy memories for Tom was his discovery relative to percent efficiency. Before he had begun his improvement learning journey, percent efficiency was considered a key metric that should be driven higher, especially by the Board of Directors.  Tom remembered exactly what the Board Chairman said after seeing this graphic, where he said that he was totally confused by these results. While efficiencies nose-diving, at the same time the profits and delivery metrics were sky-rocketing upward.  Tom remembered that this was a true turning point for him, as he responded to Board Chairman’s question and his ensuing conversation. Tom had explained that believing that efficiency was a good performance metric was a false belief.   And he goes on to explain why this was true.

In my next post, we'll continue on with this series of posts.

Bob Sproull