NOT YOUR FATHER’S SERVICE INDUSTRY

Lean methodology is a winner when it goes beyond manufacturing

Lean. Lean Six Sigma. Toyota Production System. Overhear a group of people discussing these concepts and, in the past, you might have jumped to the conclusion that they were talking about a manufacturing environment.

Not so any more. Today, more and more service industries are adopting - and adapting - lean methodologies and tools to help them satisfy their customers. Scratch the surface, and you will find lean principles underlying process improve- ment efforts in a diverse and ever-growing group of organizations. Banking, financial services, insurance, IT, telecommunica- tions, healthcare, energy and other types of utility suppliers, retail, and even state governments are harnessing the power of lean to deliver high quality service, decrease costs and waste, and increase satisfac- tion for ever more savvy and demanding customers.

Why lean in services?

Take a moment and think about the last time you wanted to buy a book. Twenty years ago, you might have taken a trip to a local bookstore and browsed the shelves. If you didn't find what you wanted, you might have requested a special order, waited a week or so, and made a second trip to the store when the book finally arrived from the warehouse.

Fast forward to today. Want to buy a book now?

Browse the Internet until you find the vendor with the lowest price and delivery cost, enter your order on an online form, push a button and the book arrives at your door in the next day or two. In today's ultra- competitive service market, no longer are customers willing to wait for goods and services. They want what they want, and they want it now ... for the price they are willing to pay for it ... delivered when they want it to be delivered ... directly to their computer or to their door.

In today's world, the Internet allows customers to choose from a huge variety of service providers - choices that were not available in the past when customers had to visit locations to buy needed or wanted services. Twenty years ago, if you needed to purchase car or home insurance, you would make an appointment to visit your local insurance agent. Want to buy an insurance policy today? Any number of online sites will provide you with a quote for their policy, as well as comparative quotes from other providers, all at the click of a button. Some banks and service orga- nizations don't even have brick and mortar locations anymore; they only exist on the Internet.

Recognizing that the customers of today have an increasing number of options available for choosing providers, service organizations have come to realize that unless they continually improve their quality, cost and delivery methods, they will not be able to keep current customers satisfied and will not be able to attract the new customers they need to keep grow- ing their organizations and beating the competition.

Lean - with its philosophy of focus- ing on the customer first, developing team members' creative problem-solving abilities to improve processes to satisfy customers, and with tried and true meth- odologies and tools for increasing quality, reducing costs and waste and improving delivery - is a perfect fit for the needs of today's service industries and service organizations.

What does lean look like in services?

It is easy to picture what lean looks like in a manufacturing setting. Parts are combined together to create a product as they travel along a set path of steps such as an assem- bly line. The process of putting those parts together, either manually by operators or automatically by machine, usually is visible and easy for an observer to see. Just walk the line and you will be able to look at a car, a computer or a snow blower go from component pieces to finished product.

Cycle times for each of the process steps usually are short and identical each time the step is performed. The order of the process steps usually remains the same. And while products are created to meet end customer specifications - red car with black leather interior, standard transmis- sion, sport package and chrome wheels - the end customer usually is not present during the creation of the product. The value stream can be mapped by walking the process. Wastes in the process will be possible to spot by observation.

Since services, such as the answer to a question by a customer service repre- sentative in a health insurance call center, are less tangible than products created on an assembly line, it often is harder to "see" that the service being created is going through a process. However, just as in manufacturing, services are provided by following a series of process steps to assemble required "parts," such as answers to questions or components of orders to be shipped, to create the service the customer wants and needs.

In services, the cycle times for each process step and the lead-time for the overall process might vary a good bit depending on the customer's need. In a health insurance call center, it might take a representative a short time to answer a customer's question about whether a provider is covered by the insurance, but it might take a much longer time to answer a question about a complicated claim. Moreover, a lot of the process might take place inside the service provider's head or inside the computer system the call center representative is using, making wastes harder to spot. Also in services, such as the one described in our call center example, the supplier may be the customer as well.

Because of these unique characteris- tics, lean methodologies and tools that focus on understanding customer needs, making the process visible, identifying and eliminating waste, and developing team members' problem-solving abilities can have dramatic effects on improvement.

Focus on the customer

In services, as in manufacturing, the first place to start, and the most important area to focus on, is understanding what your customer really wants and needs - not what your organization thinks or would like your customer to want and need.

The best way to find this out is to go directly to your customer. Creating focus groups to ask current, prospective and past clients about what their require- ments are and what their experience has been will allow your organization to gain information about customers' needs and understand strengths and gaps in the services that are being provided. Customer satisfaction surveys can be used to gather feedback on customers' current needs and experiences.

Because services often do not have quan- titative specifications, voice of customer feedback may be more qualitative. Using affinity diagrams to organize qualitative feedback by grouping similar answers into associated categories is a good way to "see" what customers are saying and to begin to understand the specific needs and wants of your particular customers. A Pareto chart can be created to analyze the results of the feedback and determine which areas of opportunity and which gaps your orga- nization should focus on first.

Think back to our example of ordering a book from an online vendor. Without asking the customer directly, the vendor might decide that customers will be more satisfied if their orders arrive the day before the specified delivery date. Asking the customer through the use of focus groups and surveys and then analyzing that data will help the vendor find out if this is true. Perhaps customers will be more satisfied or perhaps not. Maybe the book was deliv- ered while the customer was on vacation and got wet because it sat on the custom- er's porch overnight. That customer won't be pleased with early delivery.

Service organizations also can lever- age the fact that the people performing the services often interact directly with the customer. Customer service represen- tatives, as in the example of our health insurance call center, can gather informa- tion about wants and needs by listening to the customer and asking about their service needs and satisfaction. That information can be analyzed and used to improve service processes and deliver- ables.

Make the process visible

Because many service processes are not immediately visible and involve decisions made in service representatives' heads or involve complex computer system inter- actions, using lean tools and techniques to make the process and process wastes visible are even more important than in manufacturing.

1. Use value stream mapping to create an overview of how value flows to and from the customer to create a big picture of the service process. Start with the customer and work back through the process. Since the customer is often the supplier in a service process - the customer supplies the information needed to create the service and then receives the service - the value stream map might have a circular look, with the customer located at the top middle, as shown in Figure 1. The big picture service value stream map will be invalu- able for capturing computer system interactions and transfers of informa- tion that might not be readily seen when observing the process. Create the service value stream map by walking the process to observe what steps service providers are taking to create the service and how they are interacting with the systems they use to create the service. Use the voice of customer data gathered previously to determine what areas of the value stream should be improved first.

2. Once the high-level "big picture" value stream map has been created and areas of improvement identified, use swim lane process flow maps to draw out and make visible the underlying service processes. This is especially important in processes where multiple people complete the same process at the same time, such as call centers where multiple representatives take customer orders or answer customer questions. Ask team members to help create the swim lane map and identify as many possible decision points and transfers of infor- mation in the process as possible. Hanging a large piece of process flow map paper in a common team area and leaving Post-it notes nearby for the team members to fill out process steps and identify pain points allows people to see the variability in how work is done and to identify wastes and prob- lems in process steps. "Drawing out" the underlying service processes that make up the value stream allows team members to "see" how value is created for the customer.

3. After the underlying service processes are "drawn out," do time studies to focus on the specific steps in the process that have been identified as problematic. Observing and timing how multiple team members complete process steps will make wastes in the process visible and will allow decisions to be made on the most time-efficient ways to complete the processes. Time studies are particularly useful in iden- tifying transportation, motion and waiting wastes, all very common prob- lems in service processes.

Constantly identify and eliminate waste

The seven wastes that we teach team members to identify in lean implemen- tations in manufacturing processes (transportation, inventory, motion, wait- ing, overprocessing, overproduction and defect, also known by the acronym TIM WOOD) all exist in service processes too.

Because service processes often are less visible, wastes can be harder to identify. Unless wastes can be identified easily, countermeasures - changes to the process that do not include the waste - cannot be put in place. If wastes are not eliminated, customer satisfaction and organizational efficiency will continue to suffer.

Waiting and defect are two wastes that most often cause service organizations to lose customers. Let's say you've ordered that book from an online vendor. You check the box and pay for special 24-hour overnight shipping. You expect your book to arrive the next day. When you get home from work, however, you are disappointed to find your expected shipment has not arrived.

Somewhere in the process, there was a defect. Perhaps the order wasn't sent out on time from the shipping depart- ment. Perhaps there was a problem in the delivery process. But no matter the root cause of the problem, you, the customer, are unhappy. And since the book didn't arrive on schedule, you now are subject to another waste: waiting. Since you, the customer, have many options to choose from when ordering books online, you might decide to choose a different vendor next time. In other service industries such as healthcare, waiting and defect wastes can have serious consequences, as defects in diagnoses or medications prescribed can be a matter of life and death.

Overprocessing, the waste of doing more than the customer requires for the service, and overproduction, providing services in advance of or too often for the customer, are two wastes that also reduce efficiencies in service organizations. For example, think of customers who call health insurance call centers to see whether their plan covers the provider they want to see. If the customer service representative spews out information about other possi- ble providers, rates for services, etc., extra time is taken on the call, other customers are left waiting and the customers might be unhappy about receiving information they didn't ask for. Similarly, overprocess- ing waste, such as asking customers to repeat phone numbers or addresses so that they can be entered into multiple systems, also adds extra length to the call and delays for other customers. Overprocess- ing and overproduction wastes in service processes are often a leading cause of low productivity in service organizations.

Develop people's problem-solving abilities

As stated earlier, service processes are often people-centric, and the people execut- ing the process often deal directly with the customer during the service transac- tion. By focusing on developing all team membersÕ abilities to identify and solve problems and eliminate wastes through the use of the plan-do-check-act cycle, lean provides service organizations with a methodology to improve customer satis- faction and organizational efficiency on a daily basis.

When customers call the online book vendorÕs service center to complain that their book was not delivered at the requested and paid-for time, a team member in a lean service environment who has been trained to use PDCA not only will work with the customer to resolve the immediate problem, but will escalate the voice of the customer information gath- ered from the call. The problem may be made visible by posting it on a visual board displaying process problems the team has found. Then the team can look for, find and eliminate wastes in the process that caused the defect. This will prevent other customers from having that same, negative experience.

Service processes are complex and have many variables and decision points. Through repeated use of PDCA, lean harnesses the creative power of the people who execute the processes Ð those who know and understand them best Ð to identify and solve process and customer problems as they occur on a daily basis.

Beyond tools - lean culture in services

Often, lean is thought of and used only as a set of tools to remove wastes, increase process efficiency and decrease lead-time. However, it is only when lean is used as an underlying Òthinking systemÓ to identify and solve problems in the process where they occur and as they occur that service organizations can realize leanÕs greatest benefits Ð building in quality at the source and creating a culture of lifelong learning and improvement.

Because service processes often have subjective, variable customer specifica- tions, rely on complex interactions between people and computer systems and involve direct interactions with the customer during the creation of the service, guar- anteeing a high quality outcome each and every time is challenging. Team members who are empowered to use the PDCA cycle on a regular basis are able to move from simply processing orders or answering questions to identifying and solving prob- lems as they occur while they are creating the valued service with the customer. The customer receives the service they want, expect and need, Òright the first time,Ó exactly when itÕs expected. This is what it takes to turn a one-time order into satis- fied, loyal, repeat customers.

Team members who use PDCA on a regular basis to solve problems and create value with customers are learning constantly: learning what customers want and need, learning how to improve qual- ity, and learning how to eliminate wastes to improve process efficiency. Over time, using lean not just as a set of tools but as a Òthinking systemÓ to build a culture of life- long learning will allow the organization to respond to the ever-changing needs of its customers and to grow and change in line with those needs.

Focusing on the needs of the customer. Building in quality at the source. Harness- ing the power of team members to identify and solve problems as they occur. Improving process efficiency to increase productivity and reduce costs. In todayÕs ever-changing, competitive service envi- ronment where customers are always right and want what they want immediately, how can a service organization afford not to use lean philosophies, methodologies and tools? d

lean variety

Lean tools are making their way into all types of businesses, including service organizations.

When the Greater Elkhart Chamber of Commerce frst broached the idea of a daylong conference on lean, chamber offcials hoped they could draw a few dozen people, according to The Elkhart Truth. Instead, the Indiana newspaper reported, more than 185 showed up from all types of businesses. And examples of lean in action included traditional manufacturing, like a company that made plumbing fxtures, but also a local coffee shop.

Karyn Ross is a lean practitioner and coach with the Liker Leadership Institute. The lean Six Sigma black belt has worked with a wide vari- ety of financial services and other organizations, including Paychex Inc. and Zurich Insurance. Her areas of expertise include teaching PDCA, facilitating kaizen and other cross-functional improvement activities. She has been published in The Lean Management Journal.