Lean Process Improvement – A Means for Service Companies to Increase Productivity and Responsiveness

Lean has brought about amazing changes on the factory floor. Many U.S. firms recognize that in today’s markets, the speed of response to customer demands is a key competitive advantage. These firms have worked continuously to reduce their manufacturing cycle times. By applying lean concepts, companies have transformed the factory and made considerable reductions in manufacturing throughput times; reductions in cycle time in excess of 50 percent are not uncommon.

The principles of Lean Process Improvement can be applied to service processes as well as manufacturing processes. By rethinking and streamlining service processes, some companies have cut expenses by 10 to 30 percent and made steep improvements in internal and external customer satisfaction.

With a few exceptions, companies have been slow to apply lean process improvement principles to service processes such as finance, human resources, accounting, health care and customer service. The problem stems from waste being invisible in service processes. Unlike on the factory floor, where idle workers and stacks of inventory are clear signs of broken processes, waste is usually hidden when it comes to services. It tends to lie in wait between functions and departments, so companies only see a small portion of the problem.

Service processes usually lack standardization. Every employee may have a different method for completing the same task. This lack of standardization and consistency is costly. Complex, inefficient processes are slower, have higher error rates and decrease overall responsiveness and customer satisfaction. There is also a human cost when employees are underutilized by spending their time on low value tasks, they have less time for more rewarding – higher value-added tasks.

Identifying the Problems

Service providers need to embrace the end-to-end process philosophy

Adopting this philosophy is critical to seeing and eliminating waste. Process waste in the form of excess steps, redundant activities, and non-value-added tasks cannot be pigeon-holed. Inefficiency in one part of the process spill over into other activities and other processes.

Inconsistency is a problem for many service processes

For example, during an assessment of a prospective client we observed that each customer service representative (CSR) in the same transaction center handled identical customer lab requests differently. The processing times for each CSR was highly variable as much as 50% difference between CSRs. Further analysis revealed that some CSRs were using short cut methods that decreased their cycle times. The company did not engage in cross-training or knowledge sharing that would improve the overall process and reduce the time in handling lab requests.

Another typical observation of service processes reveal the Pareto principle effect:

A small proportion of the work eats up a large percentage of the total time. A brief sampling of the transaction center processing time for lab requests indicated that approximately 80% of the transactions took about 40% of the total time, the remaining 20%, the more complex ones, accounted for about 60% of the total time. Exceptions like these are an enormous burden on productivity and are typical for most service processes.

Many service organizations are lack the ability or to analyze the workarounds, exceptions, and rework that effect productivity:

In the factory, targets for output and capacity utilization are established and measured, but most service businesses are unable to measure these performance metrics.

In manufacturing, the customer doesn’t see or care about the production process itself, if the product is of acceptable quality and delivered on time. But in health care, banking, insurance, and other service industries the customer is the product moving through the process-and experiencing first-hand the frustration of inefficiency, Satisfaction is crucial, whether the customer is internal or external. Poor satisfaction is costly when it prompts the customers to take their business to a competitor.

Overcoming the Challenges of Lean Service

Making services lean has its challenges. It requires creative thinking in adapting the lean methods to a service environment. To be successful implementing Lean Process Improvement in the service industry requires rethinking of how work is currently done. Being successful in your lean service initiative require the following six components.

Select and map your cross-functional processes

Most processes typically cross functions and departments, not many people involved with them have a complete picture of the end-to-end workflow, interdependencies, and the hidden interfaces. This usually result in costly inefficiencies and high error rates. Before a service process can be improved, its steps must be transparent. A detailed analysis of the process and its subprocesses often reveals inefficiencies, workarounds, and complexity, as well as major performance improvement opportunities. Look for non-valued added steps and analyze information flows to identify silos and constraints.

Reduce complexity whenever possible

Complexity is a major contributor to process inefficiency. Rethink and redesign the process to eliminate elements that sap efficiency. Establish a subroutine for handling exceptions. This allows employees to work more quickly and productively with fewer interruptions.

Define and standardize the work

Focus on reducing variation and increasing knowledge of the process by gathering the input of the people doing the work to arrive at the best-known way to do the work. Once the best-known way is determined, document the methods so that the process steps are repeatable.

Exploit the power of big data

Dramatic advances in computing power and processing speed allow companies to gather large amounts of data and perform data analytics to minimize waste, reduce costs, and improve overall process performance.

Establish and track performance metrics

Establish a set of measures. These measures will help continuously monitor how well the process is performing to customer requirements and provide data that will help you identify and solve process problems.

Cross-train to increase productivity

In some service processes the workload is uneven at different times of the day leading to periods of high activity mixed with periods of downtime. Cross training employees to step in to assist in areas with high workloads can increase productivity and customer satisfaction while reducing these periods of uncontrolled activity.

Implementing lean process improvement in service processes requires continued commitment from the top, but lean is driven from the bottom-up. In other words, service workers are the best source of customer insight and process improvement, so it is important to involve them at the outset of the lean initiative.

For the last 50 years manufacturers have used lean tools to improve productivity, eliminate waste and improve efficiency. The same lean tools can be applied to the service industry, where inconsistency and a lack of standardization increases errors, slow response times and hurt customer satisfaction. By embracing the six components described above, service companies can increase productivity and customer responsiveness.