Lean Application in Service

Lean in Non-Manufacturing

The service sector is at the beginning of major transformation period. Savings potential is an estimated 50-75% compared to traditional processing, accomplished through shorter cycles, continuous flow, and faster decisions. Maintaining competitiveness requires continuously improving productivity, “doing more and more with less and less”. Proven methods from manufacturing provide effective solutions for the service sector. Eliminating non-value adding steps and service features, while reducing response times of internal decisions and external requests dramatically improves efficiency levels.

Current Trend

Lean transformation starts by aligning value-creating activities, taking the waste out of the sales-to-service process and making value flow through the system without interruption, improving transactional speed by up to 400% while freeing up resources to further improve the value chain. In manufacturing, a customer receives the end-product of a process whereas in service the customer becomes part of the process itself. Even more consideration must be spent on adapting processes to the need of people. Globalization and commodization push production more and more offshore, with little more than R&D and personal service remaining in developed countries, such as the EU and US. Traditional manufacturing companies move into services to secure profits and fuel further growth. Example: GE banking, IBM consulting, P&W turbine-service. Today, the service sector represents a tremendous opportunity for Lean-application to reduce operational expenses, time for development, transaction, approval, and delivery. Lean techniques applied to service processes increases flexibility; allowing to adapt more quickly to changing customer tastes and demand. .

Lean Service Examples

Lean has been successfully applied to non-manufacturing sectors:

• Banking
• Farming
• Hospitals
• Education
• Accounting
• Call Centers
• Government
• Life-Sciences
• Administration
• Sales & Marketing
• Insurance & Healthcare
• Transportation & Logistic
• Research & Development

The Technical Aspect is just 20%

Lean Transformation includes the development and generation of the service itself, its delivery and management throughout the entire life cycle. Particular focus is given to the transactional process, operating system, skills and behaviors to sustain the gains. A Lean service process keep activities and information lowing rapidly through the system without interruption and backflow.

The Human Behavior Aspect is 80%

Running the businesses in a traditional manner for years, many managers lack the knowledge, skills and expertise to lead the transformation themselves. Lean requires the entire organization to change, not just the operational system, breaking down top-level goals into measurable tasks that employees at every level must clearly understand, accept, and meet. Lean also means tracking current performance against a target and taking relentless action on any deviation with root-causes analysis and corrective action.

Transition to Lean

Persistence and commitment is a prerequisite to overcome initial skepticism and barriers of traditional thinking. Once concepts and impact are proven, productivity and morale are rising. Transitioning towards a performance-culture, managers often must change themselves. Key success factors are:

1. Being absolutely clear on what is expected
2. Resolving problems quickly – decide and move
3. Defining ownership and holding people accountable

Lean Service must be measurable

Measuring waste and variability in manufacturing is easier than in service because more obvious and visible. Naturally, service-tasks depend on the behaviors and preferences of customer, provider and environment – which makes it more difficult to standardize, measure and track. Steps to make service performance measurable:

1. Identify cost-drivers and modify metrics to just measure those parameters
2. Apply cost-tree analysis to identify value-leaks, costs without adding value
3. Implement a system to track cost, quality, delivery, and customer satisfaction

100% Service Improvement

Traditionally operating service-businesses represent a vast opportunity for improvement. Lean transformations target to reduce cycle time and defect-levels by 50%. Examples from actual cases:

• Reducing approval-time for an insurance application from 25 to 4 days
• Reducing processing cost for a new order from USD 700 to USD 125
• Reducing time to review a trademark application from 30-40 days to 5 days
• Reducing design-to-launch time for a new LED lamp from 120 to 45 days
• Reducing time to distribute incoming mail from 2 days to 4 hours
• Reducing time for a health check from 2.5 hours to 30 minutes
• Reducing time for an oil-change from 2 hours to 9 minutes

Read how you can benefit from our Lean Transformation Program (LTP).