Professional Documents
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Applying the Lean Principles of Improving Performance at less Cost to the Office and Service Industry
Professor Peter Hines Lean Enterprise Research Centre Cardiff Business School
Agenda
Professor Peter Hines The Lean Principles How do they apply in the Office Environment Examples and cases from Europe Andrew Stewart Examples and cases from Australia Where do we go from here?
Lean in the Office & Service Sector
Researching, applying, Researching, applying, & communicating & communicating lean thinking lean thinking
S A Partners
En Lea ter n pr ise
Strategic Management
x Si a gm Si
Lean Principles
1 Specify what does & does not create value from the customers perspective
not individual firms, functions
or departments
Lean Principles
2 Identify all the steps necessary to design, order, & produce the product/service across the whole value stream
to highlight non-adding value waste
Overproduction Overproduction Waiting Waiting Defective Defective products products Material Material movement movement Unnecessary Unnecessary processing processing Operator Operator movement movement
Inventory Inventory
Lean Principles
3 Make those actions that create value flow
without interruption, detours, waiting
Lean Principles
4 Only make/produce what is pulled by the customer just-in-time
Lean Principles
5 Strive for perfection
continually remove successive layers of waste as they are uncovered
10
Common Goals
Pr Lea To oc n ol ess -K it
Extended Enterprise
in ha C on ly a t i pp gr Su Inte
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Significant growth of application of lean in services Much initially concerned back office manufacturing
i.e. that support manufacturing
13
Tangibility Spectrum
Salt Soft Drinks Detergents Cars Fast food Cosmetics outlets
Intangible Dominant
Tangible Dominant
Your Organisations
In groups Thinking about lean principles & the nature of service based organisations, consider:
What might be the challenges for applying lean thinking principles in an office or service organisation?
15
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Services Challenges
Understanding customer needs and expectations for services Tangibilising the service offering Dealing with a myriad of people & delivery issues Keeping promises made to customers Variation & capacity
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Nature of Demand
Value demand: the demand you want Failure demand:
demand caused by a failure to do something or do something right for the customer Mistake in treating all demand as units of production Planning tools developed some time ago. Now variety of demand v different cannot see demand
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The water is too cold Its broken down again I dont understand the letter you send me Waiter, wheres my soup? Ive been waiting in all morning, you said youd be here where are you You said youd repaired the fault in my car but it still does not work
Simple Case
Welsh Legal Services Commission Mapping the Correspondence Process
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Finance
Filing
Reception
Resource
Legal/Means Phase 2
Finance Phase 2A
2 hrs 1 wk 34 wks 1 hr
Backlog calculated using oldest date (worst case scenario) Not FIFO
Tag
1 hr
Reception Tag & Filing All file requests dealt with at the same time
Pull Need Yes File No No Skills Yes Process Post Post Bucket Skills Yes Process Post Post Bucket Post Bucket No 4 Senior Case Work Get File
1 wk
0.5 hr
13 to 248 days
Total
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Charge
Non Charge
Filing
Time
Resource
Read Letter
Read Letter
Charge post is sent to C/W with 10 15 10 15 File (no need to pull file at later stage)
mins
mins
Finance Phase 2A
No
Referral process: Matter would always be passed back to C/W after the Senior C/W has considered it, either with a work solution or guidance notes. This box to be emptied once daily 5 mins 5 mins (allocation rota)
Pull File
Non Charge post, where file 2 hrs if 5 mins needed, files to be supplied by rqrd filing 4 times daily (2 am, 2 pm) 10 mins10 mins from a tray in each pod. This activity is a priority
Process
Process
Process
2 hrs
2 hrs
Post Bucket
Post Bucket
Post Bucket
5 mins 5 mins
Calculated per piece of post Post split into 1st, 2nd, Dx
Total
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After the Lean Thinking Event Reduced by 197 and age clear
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2n d A 16 pr th A 30 pr th A 14 p r th M 28 ay th M a 11 th y Ju n 25 th e Ju ne 9t h J 23 uly rd Ju 6t ly h A 20 ug th Au 3r g d S 17 ep th Se p 1O 1 5 ct th O 29 ct th O c 12 th t N 26 ov th N 10 ov th D 24 ec th D e 7t c h Ja 21 n st Ja n 4t h F 18 eb th Fe 4t b h M ar 18 th M ar
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Value Criteria
Rank
Quality Decision
1
Quick Decision
4
Price
2
Cover
3
Support
5
Lean in the Office & Service Sector
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Competitive Environment
Factor
Products
Issue?
Products are not differentiated for our customers Little Innovation
Competitors
Brokers
Dominated by two players who do not add value Brokers become competitors Self Insurance dont buy it Credit Information
Quoting Nett transparency Lost business and devalue our product Lost business and inability to increase price walk away
Substitutes
Shrinking market and potentially invalidates the market Need for repositioning as a broader offer
34
Internal Environment
Strengths Knowledge and expertise of people systems, process, country risk, Geographical coverage Pay and conditions. Integrated IT systems Multi national proposition Centres of expertise. Insolvency and recovery expertise Depth and breadth of product range Good relationship with existing customers Opportunities Market is looking for an efficient producer. Weak competitors New owners? Weak Brokers. Direct distribution Quoting Net Trade sector activities. Cross unit alignment Group leverage on sales. Weaknesses Skill sets around buyer underwriting Operating Model Too many people in the comfort zone Flexi time Pay structure inflexible. Systems are inflexible Centres of expertise. Lack of one culture Group shackles? Play by the rules too often Lack Threatsof team working of this team Re-insurance pull out of market. Re-insurance New competitors More sophisticated customers. Self imposed constraints. Global economic situation.
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20m in Years 1- 4
Existing Consumers /Existing Products.
6m in Year 2-4
Existing Consumers / New Products
SME product trade finance Integrated recovery fee. Specialist capacity issues
0m in Year 1- 4
5m replace lost business
9m in Year 2-4
Lean in the Office & Service Sector
36
H ig h
r is k
NPD Process
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by:
in order to:
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manage the relationship with the wider group successfully understand, achieve and proactively manage customers expectations operate joined up, cost effective processes agree a common goal, through supportive culture and trust in our people. spot and convert growth opportunities in sales in current and new markets innovate in new offerings. identify and respond to changes in market conditions deliver the right number of appropriately skilled, motivated people.
Lean in the Office & Service Sector
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Measure
STRATEGIC ISSUE Customer Perception index. Speed Quality Profit Claims ratio. Cost ratio Culture index
Got one?
N Y N Y Y Y N
Customer retention % sales from new markets % sales from current markets Portfolio value % sales from new offerings Speed to Market STRATEGIC ISSUE People satisfaction index Skills index
Y N Y Y N N
innovate in new offerings identify and respond to changes in market conditions deliver the right # of appropriately skilled, motivated people.
N N
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by:
Grow the Credit Insurance business to 200m by 2006, delivering 15% return on sales. Delivering outstanding service at reasonable prices and delivering greater retention. Delivering significant growth from new sales developing integrated and aligned new offerings and then taking them to new markets. achieving greater trade sector alignment Creating a culture of innovation and performance within our business.
in order to:
Turn the UK business into a leading performer within GERLING NCM, securing its future and the future of our Lean in the Office & Service Sector people
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Min Typical (BUS) Typical (JUMP) Worst case (BUS) Worst case (JUMP) 1 7.25 33 40
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Opportunities Process
Enforce a single point of entry for customers that do not use the on-line system. Ensure that all possible customers use the system on all possible occasions.
Cultural
People dont like saying NO to customers.
Cultural
Educate internal staff and customers to help to build relationships.
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Min Typical (BUS) Typical (JUMP) Worst case (BUS) Worst case (JUMP) 1 2 18.67 19.67
The Benefits
Time Line Current Future 1.5
Resource
Current 0.3
Future 0.1
Bus
9.5
Jump
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by:
Grow the Credit Insurance business to 200m by 2006, delivering 15% return on sales. Delivering outstanding service at reasonable prices and delivering greater retention. Delivering significant growth from new sales developing integrated and aligned new offerings and then taking them to new markets. achieving greater trade sector alignment Creating a culture of innovation and performance within our business.
in order to:
Turn the UK business into a leading performer within GERLING NCM, securing its future and the future of our Lean in the Office & Service Sector people
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The plan
We had already completed mapping work within the UK division and had identified major savings within their Order Fulfilment process Having improved the speed & quality of their existing offering to existing customers, they then needed to turn their attention to growing new business The plan was to map their current Sales Acquisition Process and look at designing an improved process at no additional cost to the business
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Phases
RS
REFCLA into W/F Tray
Participants/Stakeholders
CST AM * IF
Policy Breach
Standards/Criteria
Pol Decision
1 10 days
+2-3 days Meeting + 1-2 days Meeting +1day Meeting
1 min
Before it is looked at query 10 day print?! All info either + or Info available online, in system Within Authorities Within TPE levels sub
Meeting
15-25 mins
Ring Customer
21-26
Decision Taken
Y
Ring Customer for further info Meeting for further Info Ring Buyer? Y
Info to CST Info to U/W Analyse Info Decision Taken Y Decision Taken
Info to CST
Info to CST
Y Info to CST
5-10 mins 2-3 days Issue: Cancellation of CLA why would U/W? 3-13 days 26-36 mins
Confirmation of Decision
Phases
Risk Services
RECLA into Tray
Future State REFCLA goes into Workflow Tray & Receiving Information Time Resources Participants/Stakeholders Line Account Mngr Customer Buyer 0
Policy Breach
Standards
Automatic allocation (to Invo. U/W) Within Authorities Within TPE levels Mandate to enable U/Ws to divulge customer name (our insured) when contacting buyer for information Customer & Buyer details are correct on the system Buyer/UW contact encouraged to help build relationships for portfolio control (Feasibility of someone else sourcing info for UW work already completed not practical in this context) Process in place to capture up to date info for active buyers AU Principles & practicalities agreed
6-16 mins
Take Decision?
10 mins
Info is provide
Info to Underwriter
Analyse Info
5-10 mins
Take Decision?
Y
Credit Limit Decision Issued Credit Limit Decision
Across group - What if examined to ensure max % (X) automatically underwritten Main speed of service target =no REFCLA in any tray older than X days Fully utilise credit check facility (review threshold of 10K? & price differential between credit check & credit limit) Group wide agreed priority progress in place Authority thresholds are value at risk & lay with nominated individuals rather than committee Interface system errors resolved within 24hrs Small limits thresholds reviewed Reduce amount of paper sent to imaging Quality measure to be defined
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The maps
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What we found
The business operated almost 100 % via brokers to whom they were paying commission of 15% direct to the brokers - 15.5m The brokers were not giving good value for money and were not accurately interpreting the VOC The conversion rate for enquiries was very low On the very odd occasion where they dealt with the customer direct, the level of conversion was very high over 80% No cohesive marketing strategy to support the Sales Acquisition Process hence low enquiry level The company were effectively order takers as opposed to order getters
Lean in the Office & Service Sector
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Phase 2
Market Research
Phase 3
Making Contact
Phase 4
Selling In
Phase 5
Selling On
100 %
50%
t ra teg
0 %
g tin rke Ma No
Conversion rate 8%
No S
current
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What we did
We devised a new future state Sales Acquisition Process with the team which removed their sole reliance on brokers and enabled them to get a clear understanding of the Voice of the Customer We devised a new sales structure to help them achieve this We identified the skills required at each phase of the process We identified the need for measures & targets at each phase of the process The new process will enable major sales performance improvement at no additional cost to the business
Lean in the Office & Service Sector
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Phase 2
Market Research
Phase 3
Making Contact
Phase 4
Selling In
Phase 5
Selling On
100 % 50%
ot a
0 %
st ra te gy
G ot
Enquiry rate 25% 50% Conversion rate 8% 50% Retention rate 75% 95%
a pl an
G
Current Future
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Current
Resource s Days 14 9 0.090.12 5.25
Future
Time Days See 2 217 See 4 35 84 84 33 47 59 30.40 47.8 Resourc es Days See 2 25.4 See 4
Change
Time Days See 2 0.72% See 4 Resources Days See 2 10.00% See 4 -88% -24% -24% 50%
Phases 1. Trade Sector Development (per TS) 2. Strategy - targeting customers/sectors 3. Enquiry Received (accepted/rejected) 4. Enquiry accepted to closure
5. Servicing
Average of 128 5.25 180 40% 7.9 reduction 44 1.15 Sales Closure 145 13.5 speed 13.5 145
91 121.5 0.5 1
0.65 -38% 4.00 -38% 4.00 -65% Average of 0.75 2.20 3 0.40 0.80
6.1 Renewal process (Reg & SME) 6.2 Renewal Process (key acct & global)
94
4.5
51
-0.33%
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Australian Case
1.6
FLOW (MINUTES) T I 2.2 0.2 1.0 0.2 1.7 0.1 1.2 2.4 8.5 0.5
1.6
Average process time 56 minutes Delays 45.3 minutes (81%) Transport 8.5 minutes (15%) 41 people actions
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Geographic location of functions (Admin, Cellar Door, Despatch) Separation of order taking and order entry Delays due to the manual transportation of information Frequent small transportation steps of information
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TRIGGER ENTER ORDER & PROCESS PAYMENT 1 WRITE TO STARTRACK 2 CREATE DESPATCH LABEL & TO DESPATCH Total
34.4 34.4
1.1
Lead time reduced by 17 minutes (30%) from 56 minutes to 38.7 minutes Delay reduced by 10.9 minutes (24%) Transport reduced by 5.5 minutes (64%) People interactions reduced by 20 (48%) Due to removal of one geographical location the movement of people is reduced
65
Average Process time (mins) Current State Future State Reduced by 56 39 30%
Geographic Locations
3 2
66
Average process time 4418 minutes Delays 4318 minutes (98%) Inspection 14 minutes (0.003%) Picking transport 62 minutes (1.5%) Manual transport 22.8 minutes (0.5%) 36 people interactions
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Aged and obsolete goods (150 pallet positions identified) Broken pallets at fronts of rows (due to Cellar Door).
Lean in the Office & Service Sector
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Lead time reduced by 1,576 minutes (36%) from 4418 minutes to 2842.1 minutes Delay reduced by 1558 minutes (36%) Transport reduced by 4.8 minutes (5%) Inspection reduced by 13.3 minutes (92%) People interaction reduced by 21 (58%) Distance travelled reduced by 241 metres (80%) All wasteful activity has been minimised
Lean in the Office & Service Sector
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Average Process time (mins) Current State Future State Reduced by 4418.2 2842.1 36%
Transport Time Inspection Time Delay (mins) (mins) Frequency (steps) 84.8 80.0 5% 14.4 1.1 92% 8 3 62%
Geographic Locations
2 1
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Any Questions?
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