Lean for Service Organizations and Offices: A Holistic Approach for Achieving Operational Excellence and Improvements

By Debashis Sarkar

Service organizations and offices worldwide are beginning to realize that only those companies that are efficient and able to meet the changing needs of customers will survive the fierce competition of the marketplace. Adopting lean puts anyone in a position more likely to build an intimate relationship with customers and build a foundation of operational excellence. Lean as a philosophy is new to the service companies, and many of them struggle to find the correct approach for its adoption. Many declare early victory after a few successful projects only to realize that the benefits do not sustain over a period of time. This happens because they do not really know what it takes for a holistic lean implementation in a service organization.!--nl--Lean has the ability to address a wide range of problems faced by service companies, such as: complexity reduction, sales force productivity enhancement, operations risk control, cost leadership, combining scale with flexibility, service excellence and improving employee morale & involvement. Many of the principles discussed in the book are based on the author’s first-hand experience in lean implementation. Being from a practitioner’s viewpoint, Lean for Service Organizations and Offices is light on theory and heavy on application, exactly what’s needed for a holistic and comprehensive lean transformation. Read an interview with the author in The Hindu.

• Language: English
• Publisher: ASQ Quality Press
• Release date: Jan 25, 2015
• ISBN: 9780873891493

Debashis Sarkar

Debashis Sarkar is a thought leader on service lean and conceptualized the DEB LOREX model for holistic lean transformation. He has catalyzed large number of operational excellence transformations and currently holds a business improvement leadership role in ICICI Bank. He was instrumental in scripting the quality roadmap for the bank and has designed its 5S, lean, process management, and other organizational excellence programs. Sarkar previously authored 5S for Service Organizations and Offices: A Lean Look at Improvements (ASQ Quality Press, 2006) and Lessons in Six Sigma: 72 Must Know Truths for Managers (Sage, 2004). He is the Chair of the ASQ Automotive Division Team India.

Book preview

H1316-SarkarCover.jpg

Lean for

Service Organizations and Offices

A Holistic Approach for

Achieving Operational Excellence and Improvements

Debashis Sarkar

ASQ Quality Press

Milwaukee, Wisconsin

Also available from ASQ Quality Press:

5S for Service Organizations and Offices: A Lean Look at Improvements

Debashis Sarkar

Managing Service Delivery Processes: Linking Strategy to Operations

Jean Harvey

The Executive Guide to Understanding and Implementing Lean Six Sigma: The Financial Impact

Robert M. Meisel, Steven J. Babb, Steven F. Marsh, and James P. Schlichting

Transactional Six Sigma for Green Belts: Maximizing Service and Manufacturing Processes

Samuel E. Windsor

Managing the Customer Experience: A Measurement-Based Approach

Morris Wilburn

Applying the Science of Six Sigma to the Art of Sales and Marketing

Michael J. Pestorius

Lean Kaizen: A Simplified Approach to Process Improvements

George Alukal and Anthony Manos

A Lean Guide to Transforming Healthcare: How to Implement Lean Principles in Hospitals, Medical Offices, Clinics, and Other Healthcare Organizations

Thomas G. Zidel

Root Cause Analysis: Simplified Tools and Techniques, Second Edition

Bjørn Andersen and Tom Fagerhaug

Competing for Customers and Winning with Value: Breakthrough Strategies for Market Dominance

R. Eric Reidenbach and Reginald W. Goeke

The Certified Manager of Quality/Organizational Excellence Handbook, Third Edition

Russell T. Westcott, editor

Enabling Excellence: The Seven Elements Essential to Achieving Competitive Advantage

Timothy A. Pine

To request a complimentary catalog of ASQ Quality Press publications, call 800-248-1946, or visit our Web site at http://qualitypress.asq.org.

American Society for Quality, Quality Press, Milwaukee 53203

© 2008 by ASQ

All rights reserved. Published 2007

Library of Congress Cataloging-in-Publication Data

Sarkar, Debashis.

   Lean for service organizations and offices : a holistic approach for achieving operational excellence and improvements / Debashis Sarkar.

      p. cm.

   Includes bibliographical references and index.

   ISBN: 978-0-87389-724-2

   1. Service industries—Management—Handbooks, manuals, etc.  2. Industrial management—Handbooks, manuals, etc.  I. Title.

   HD9980.65.S27 2007

   658—dc22                                    2007034601

ISBN: 978-0-87389-724-2

No part of this book may be reproduced in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher.

Publisher: William A. Tony

Acquisitions Editor: Matt T. Meinholz

Project Editor: Paul O’Mara

Production Administrator: Randall Benson

ASQ Mission: The American Society for Quality advances individual, organizational, and community excellence worldwide through learning, quality improvement, and knowledge exchange.

Attention Bookstores, Wholesalers, Schools, and Corporations: ASQ Quality Press books, videotapes, audiotapes, and software are available at quantity discounts with bulk purchases for business, educational, or instructional use. For information, please contact ASQ Quality Press at 800-248-1946, or write to ASQ Quality Press, P.O. Box 3005, Milwaukee, WI 53201-3005.

To place orders or to request a free copy of the ASQ Quality Press Publications Catalog, including ASQ membership information, call 800-248-1946. Visit our Web site at www.asq.org or http://qualitypress.asq.org.

To my daddy who is among the stars

and the almighty whose hands silently steer all my endeavors

Table of Contents

Lean for Service Organizations and Offices

List of Figures, Tables, and Exhibits

Preface

Note to Readers

1 Introduction

Lean Thinking

Lean Beyond Manufacturing

Lean and Service Economies

Addressing Symptoms Has Limited Value

Relevance of Lean to Service Companies

Lean and Operational Excellence

The DEB-LOREX Model

The Philosophies That Drive the DEB-LOREX Model for Lean Transformation

Wastes Are Symptoms

The Eight Wastes of Lean

The Dimension of Time in Lean

The DEB-LOREX Index

2 Blueprint for Implementation

Step 1: Leadership Alignment

Step 2: Identify Value Streams For Product Families

Step 3: Form Implementation Team

Step 4: Firm Up the Implementation Charter

Step 5: Redesign the Structure of the Organization

Step 6: Install Anchors

Step 7: List All Processes In the Value Stream

Step 8: Build Relevant Capabilities

Step 9: Select the Value Stream on Which You Want to Focus

Step 10: Ensure That All Stakeholders of the Value Stream Are on Board

Step 11: Ascertain What the Customer Values and Requires

Step 12: Map the Current State and Baseline the Process

Step 13: Visualize the Future State

Step 14: Dissect Process and Carry Out Detailed Process Analysis

Step 15: Deploy Lean Solutions

Step 16: Decide on Measurements and Dashboards

Step 17: Implement and Institutionalize the Processes

Step 18: Ascertain Health of the Lean Management System and Processes Through Assessments and Audits

Step 19: Launch Ongoing Improvement Regimens

3 Anchors

People

Processes

Partners

Problem Solving

Promotions

4 Lean Breakthroughs

Phase 1: Preparation

Phase 2: Action

Phase 3: Follow-Up

Appendix A Assessment of the Lean Management System: The DEB-LOREX Index

Appendix B Template for Management Report after LMS Assessment Based on the DEB-LOREX Model

References

List of Figures, Tables, and Exhibits

Table 1.1

Percentage of service sector in major economies of the world (as of 2005).

Figure 1.1

DEB-LOREX model of lean transformation and operational excellence.

Figure 1.2

The house of lean management system or DEB-LOREX model for lean transformation.

Figure 1.3

The two philosophies that comprise the DEB-LOREX model for lean transformation.

Figure 1.4

Cause-and-effect relationships of the DEB-LOREX model of lean transformation.

Figure 1.5

Types of waste.

Table 1.2

Treatment of process steps under lean.

Figure 1.6

Times used in lean.

Figure 1.7

Current and future states of lean journey.

Exhibit 1.1

Lean opportunity checklist: applicability of lean in the organization.

Figure 1.8

Local optimization creates waste within the value stream, as the focus of each of the departments is different.

Figure 1.9

Actual process yields versus functional yields.

Figure 1.10

End-to-end process for resolving quality issues pertaining to deliverables not reaching the customer on time.

Table 1.3

Characteristics of a process.

Figure 1.11

Differences between a process and a procedure.

Figure 1.12

A vehicle finance disbursement process as viewed by top management and process associates.

Figure 1.13

Approach to creating flow: first create flow within departments and then take it to the value stream.

Figure 1.14

Centralization of operations in a financial services company.

Figure 1.15

Geographical cells in an auto finance company.

Table 1.4

Skill inventory of employees.

Table 1.5

Skill summary: skill analysis of branch sales executive in a bank.

Table 1.6

List of global remittance products offered by a major financial services company.

Figure 1.16

Cost of complexity as a percentage of operating cost.

Table 1.7

Example of an A Day in the Life of ________. exercise.

Figure 1.17

Checkout process from an airport in India.

Exhibit 1.2

Template for finding wastes and redundancies in documents.

Figure 1.18

Example of customer being forced to create waste and the associated customer dissatisfaction and pangs to the organization.

Figure 2.1

Vision, culture, values, objectives, and outcomes.

Figure 2.2

Role of objectives in LMS journey.

Table 2.1

Organization’s readiness assessment for implementation of lean management system.

Table 2.2

Product family matrix.

Figure 2.3

Generic value stream.

Figure 2.4

Generic value stream of a mortgage finance business.

Figure 2.5

Generic value stream of a fast-moving consumer goods business.

Table 2.3

Key roles of corporate and value stream councils.

Exhibit 2.1

Template of charter for LMS implementation in an organization having multiple value streams (as adopted in a financial services business).

Exhibit 2.2

Template of LMS charter for a value stream.

Figure 2.6

Organizational structure for lean management system implementation.

Figure 2.7

Process of goal decomposition in an organization structured around value streams.

Figure 2.8

Organizational structure necessary for LMS implementation.

Figure 2.9

The firm within a firm—value streams as independent entities.

Figure 2.10

Structure of retail bank before commencing on the journey of lean transformation.

Figure 2.11

Value streams crafted around specific customer segments.

Figure 2.12

The five P’s of the lean management system.

Figure 2.13

The lean management system chain.

Table 2.4

Functions of the five anchors in a lean management system.

Table 2.5

Examples of value-creating, value-enabling, and support processes of a mortgage finance business.

Figure 2.14

Relationship between value-creating, value-enabling, support, and management processes.

Table 2.6

List of value-creating processes in various types of businesses.

Figure 2.15

Key process loops of a value stream.

Table 2.7

List of key capability-building programs required for the implementation of a lean management system.

Table 2.8

Details of capability-building training programs.

Figure 2.16

Approach for capability-building rollout during LMS implementation.

Figure 2.17

Elements of a generic value stream.

Figure 2.18

Value stream elements of an auto finance business.

Figure 2.19

Principal stakeholders in a value stream of an auto finance business.

Figure 2.20

Principal and enabling stakeholders in a value stream of an auto finance business.

Figure 2.21

Value stream stakeholder matrix showing the four types of stakeholders.

Figure 2.22

Example of a SIPOC–R diagram.

Figure 2.23

Example of a SIPOC-R for a motorcycle loan disbursement process.

Figure 2.24

Icons used for value stream mapping.

Figure 2.25

The process box yields a plethora of information.

Figure 2.26

Current-state value stream map of a financial services company.

Figure 2.27

Example of first-pass yield calculation.

Figure 2.28

Representation of a bundle corresponding to a pitch.

Figure 2.29

Using average demand to calculate takt time.

Figure 2.30

Cushion of two standard deviations for high variability in demand.

Figure 2.31

Future-state value stream map of a financial services process.

Figure 2.32

Phased future-state implementation.

Exhibit 2.3

Template for master list of processes to be taken up for future state.

Exhibit 2.4

Template for detailed implementation plan for future state.

Table 2.9

Problem types and methodologies to be adopted.

Exhibit 2.5

Template for time observation sheet.

Exhibit 2.6

Segregation of value-added steps from others in a process.

Exhibit 2.7

Template for determining activity times for each of the process steps.

Exhibit 2.8

Template for spaghetti diagram.

Figure 2.33

Batch and queue flow in mortgage processing.

Figure 2.34

Continuous flow in mortgage processing.

Figure 2.35

An example of an associate balancing chart.

Figure 2.36

Work content of associates in a data entry process.

Figure 2.37

Associate balancing chart after improvements.

Table 2.10

Action plan for associate numbers in decimals.

Table 2.11

Difference between buffer and safety resources.

Figure 2.38

Buffer resources for sudden spikes in demand.

Figure 2.39

The confluence of cycle time and takt time.

Figure 2.40

Impact of varying cycle times in a process.

Figure 2.41

Associate work content balancing chart.

Figure 2.42

Gap between cycle time and takt time.

Exhibit 2.9

Template for standard work combination table.

Exhibit 2.10

Template for standard operations display.

Figure 2.43

U-shaped cellular layout.

Figure 2.44

Example of straight-line layout.

Figure 2.45

The FIFO lane and supermarket approach to lean solutions.

Figure 2.46

Mortgage loan office example showing entry and exit of application forms.

Figure 2.47

Little’s law and lean projects.

Figure 2.48

Little’s law in customer-facing locations.

Figure 2.49

Stipulated inventory managed through an electronic signal in a credit processing cell.

Figure 2.50

FIFO lane for documents between two process steps.

Figure 2.51

Example of an innovative FIFO lane in transaction processing.

Figure 2.52

Example of a file holder that can be used as a FIFO lane.

Figure 2.53

Supermarket icon.

Figure 2.54

Depiction of use of kanban squares.

Figure 2.55

Example of withdrawal kanban.

Figure 2.56

Mechanism of a supermarket with production and withdrawal kanbans.

Table 2.12

Approach to calculating inventory at supermarkets (finished goods/work-in-progress)

Figure 2.57

Build-to-order pull system.

Figure 2.58

Build-to-store pull system.

Figure 2.59

Example of a heijunka box.

Figure 2.60

Unleveled processing of financial products—daily schedule.

Figure 2.61

Leveled processing of financial products—daily schedule.

Figure 2.62

The bullwhip effect.

Exhibit 2.11

Data collection template.

Figure 2.63

Holistic view of metrics.

Figure 3.1

The role of anchors in the DEB-LOREX management system.

Table 3.1

Anchors in the five P’s of the lean management system.

Figure 3.2

Service failures happen when no one owns the customer.

Table 3.2

Key focus areas for the chief customer officer.

Figure 3.3

The organizational structure of the customers’ cell.

Exhibit 3.1

Template for tracking reviews.

Table 3.3

Differences between LMS assessment and process audits.

Figure 3.4

Example scorecard of a financial services organization implementing lean management system.

Exhibit 3.2

Format of agenda for daily meeting.

Figure 3.5

Process partner in a mortgage sanction process.

Table 3.4

Differences between large improvement projects and small improvement projects.

Table 3.5

Examples of large and small improvement projects.

Figure 3.6

The LIP–SIP construct of improvements.

Figure 3.7

Small and large improvement projects embedded in Deming wheel of improvement in the company.

Figure 3.8

Theoretical, sawtooth, and continual improvement.

Figure 3.9

Improvement vault and idea-to-project prioritization.

Table 3.6

List of nonmonetary awards for LMS implementation.

Exhibit 3.3

A3 template for problem solving/improvement projects.

Exhibit 3.4

A3 template for strategy deployment.

Figure 4.1

Steps in a lean breakthrough.

Table 4.1

Typical schedule for a five-day lean breakthrough.

Table 4.2

Typical schedule for a five-day lean breakthrough for improving sales force productivity.

Exhibit 4.1

Template for 30-day action plan.

Exhibit 4.2

Typical content of a lean breakthrough closing presentation.

Exhibit 4.3

Template for managing audits of the process in which a lean breakthrough has been carried out.

Exhibit 4.4

Lean breakthrough progress dashboard.

Preface

Lean, as a concept, has been around for more than five decades. The work of James Womack and Daniel Jones in the 1990s popularized its adoption among manufacturing companies. With the ushering in of the 21st century, we now see it being leveraged by service companies.

Globally, service companies are realizing that interventions such as lean are a must in order to remain competitive. In the coming years, only companies that are efficient and able to meet the changing needs of customers will be able to survive the fierce competition of the marketplace. And relentless elimination of waste using approaches such as lean will be of immense help. Companies that adopt lean will be in a better position to build an intimate relationship with customers and create a foundation of operational excellence.

Lean as a philosophy is new to service companies, and many of them are struggling to determine the correct approach to its adoption. Many of them are declaring early ­victory after a few successful projects only to realize that the benefits are not sustained over a period of time. One of the reasons why this is happening is because they do not really know what it takes for a holistic lean implementation in a service organization. Little do they realize that a journey of lean requires implementation of a whole lot of things that need to work in tandem with the teams in the center.

Today, if Toyota is a successful company, it’s because of their full adoption of lean principles over the last 50 years and making them a part of their organizational fabric. Lean as a way of doing business has helped Toyota to deliver sustained results over many years. In 2003 Toyota surpassed Ford Motor Company as the world’s number two automaker in annual global vehicle sales, and analysts say it is on track to surpass General Motors in the coming years.

Lean methodology has the ability to address a wide range of problems faced by ­service companies, some of which include complexity reduction, sales force productivity enhancement, operations risk control, cost leadership, combining scale with flexibility, service excellence, and improving employee morale and involvement.

My friends who are CEOs and business leaders in service companies often ask me how they should go about implementing lean in their company. This book is the answer to their queries and questions.

Many of the principles that will be discussed in the book are based on what I have successfully implemented myself. Being written from a practitioner’s viewpoint, there is less of theory and more of application.

The approach recommended in this book (called the DEB-LOREX model) is just one of the ways by which service companies can go about adopting the lean philosophy. As a student of quality improvement I am sure that there may be many other successful approaches being developed that will sooner or later come to light. I would appreciate your feedback and comments at [e-mail].

Debashis Sarkar

Note to Readers

The term DEB-LOREX model stands for Deb’s lean organizational excellence model , which has been created by the author to facilitate lean transformation in service organizations.