Significant investments in “efficiency” methodologies over the past 10-20 years have ingrained Lean principles and philosophies into a wide variety of manufacturing organizations. Tools and techniques like “one-piece flow” and Kaizen are now commonly used for day-to-day operations and change situations.

However, adoption of Lean methodologies in the service sector is significantly lower. It’s not that Lean principles don’t apply to service processes – they generally do, and quite well. Impressive lean breakthrough examples have also been demonstrated multiple times in a wide variety of situations: claims processing, call centers, software development, patient waiting times...even elections management processes!

Achieving a "Lean Service" Breakthrough

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Part of the reason may be the higher margins and growth rates that some service sectors enjoyed (at least before the recession), which meant that internal efficiency improvement was simply a lower priority. But we’ve generally observed that it has more to do with a limited understanding of the value and applicability of “Lean” methods to service operations.

In this article we summarize the key principles of Lean operations management, provide examples of how fundamental Lean tools can be effectively applied to different types of service processes, and share advice on how to organize and drive a lean program within your own service operation.

Key Principles of Lean Operations Management

Lean principles have been around for literally hundreds of years, but global interest was propelled forward by the success of Toyota with its Toyota Production System (TPS). Despite their recent (and unprecedented) recalls, Toyota is still one of the most highly regarded firms in the world and the TPS approach integrated core Lean elements for application to all facets of their business in a disciplined manner. Similar methodologies such as (Lean) Six Sigma, pioneered by Motorola and embraced by GE, helped promote the applicability of Lean techniques to a variety of business environments.

Pundits, excited by the benefits that Lean has driven into their organization, tend to become overzealous about the merits of “their” methodology over others. Certainly it is important to choose a methodology, implement it rigorously, and stick with it. But achieving success with Lean doesn’t start with a methodology – understanding the key principles that make it possible to deliver the same level and quality of (or better) goods and services with lower costs needs to be your first step on the journey.

Lean operations focus on eliminating waste and minimizing lead times between customer demand and fulfillment. By constantly identifying and removing activities, purchases or resources that aren’t necessary to service delivery, the quality, speed and accuracy of customer service improves.

Across the most common methodologies, there are eight types of waste to target and eliminate:
     1. Inventory: Work-in-progress that is stored, therefore not generating value and also incurring cost.
     2. Waiting: Work-in-progress that is stalled until the next process step is available.
     3. Transportation: Moving goods, service information or customers more than absolutely necessary.
     4. Motion: Moving resources (people, equipment) to place where they’re needed.
     5. Overproduction: Producing or doing things before they’re actually required.
     6. Over-processing: Duplicate or inefficient activities due to poor product and service process design.
     7. Quality defects: Identifying, qualifying, and fixing mistakes.
     8. Mis-used talent: Producing goods or services that don’t actually meet your customer demands.

While most of these concepts were initially proven in manufacturing environments, all types of service businesses experience the same sources of waste. Service providers can also use the concepts to not only improve their operational efficiency but also their customer service experiences.

Applying Lean appropriately within a service context often means viewing your customer or their satisfaction as “the product” and looking for ways to:
     > Redesign stores, processes, websites and other customer contact points to increase efficiency,
     > Reduce workers – not laying people off, but minimizing the number needed to serve a customer,
     > Spend less on equipment that isn’t critical for improving the customer service experience,
     > Highly specify work with regards to its content, sequence, timing and expected outcome,
     > Enable direct customer connections, with unambiguous (yes/no) requests and responses,
     > Optimize materials stocking and replenishment to make them as “just-in-time” as possible, and
     > Delivering services which address customer needs both better and cheaper than competitors.

Sound simple? If it were, then everyone would be doing it well.

But understanding these principles and identifying where the opportunities to improve service performance exist is the first step towards making your operation as lean as possible.

Examples of Lean Applications in the Service Industry

Although most Lean tools and methods apply to service operations, their usage and terminology are often different. Here are examples of successful Lean tool applications within service environments:

Value Stream Mapping
An excellent tool for service industries, value stream maps help analyze the flow of materials and information needed to deliver goods and services to a customer. In a service desk within a department store for example, a map would start with information flows and triggers such as a customer contact and then segments activities that comprise 90% of the work such as returning goods, addressing complaints or fulfilling information requests. Standard procedures to minimize motion and waiting times are then developed such as decision-flow diagrams for training staff, and technologies like email notifications are leveraged. Root-cause analysis is also used to identify sources of complaints and dissatisfactions.

Line Balancing
Historically the discipline of the industrial engineer, line balancing is somewhat easier in a service environment because availability and flexibility of staff is the key variable. For example, a teller in a bank may spend only 6 out of 8 hours in day in direct customer service, and the remaining 2 hours are wasted in 1-2 minute segments. Rather than let unplanned activities fill the void, a priority list of service support tasks can such as restocking supplies, following a standardized procedure, can be used to not only reduce waste but also help eliminate other sources of poor service quality.

Kanbans
The Japanese term for “pull scheduling”, service businesses often use kanbans without knowing it and therefore often design and calculate them improperly. For example, instead of waiting for customer orders, a distribution center could be designed to automatically replenish goods based on consumed/sold goods (communicated electronically or via other triggers). The frequency and volumes of replenishments is calculated using minimum quantities, delivery lead times and demand fluctuation histories. Thus inventory waste is minimized by beginning with the pull of the downstream customer.

Cellular or “Focused Factory” Design
In a functionally designed operation, people go to different areas to perform different tasks such as a central copy center. In a “focused factory” design, all of the resources necessary to execute a process from start to finish are organized in the same (or close) location and operating structure, and “mini-factories” are designed to handle major different processing requirements. For example, some banks develop fast-track processes to handle lower-risk loans which include less-complex application forms, specially-trained credit approval officers and specialized websites for information and resources.

These are just a few simple examples. Many others exist, such as quick-change (SMED) procedures for a field service technician, 5S techniques for a telemarketers workspace, or a Kaizen (continuous improvement) approach to software development instead of traditional, sequential waterfall methods.

How to Organize and Drive a “Lean Service” Program

Most people understand the value of Lean principles relatively easily, especially when presented with some good examples. However, the root cause of failure in many Lean Service improvement programs resides within the development of an appropriate implementation strategy.

If you viewed all possible strategies on a spectrum between “big bang” (everywhere at once) and “one step at a time” (prove it in stages), most failures tend to lie close to one extreme or the other.

For example, Bain & Company recently surveyed almost 200 organizations who had tried to implement a company-wide Lean Six Sigma program. 80% of them reported that their efforts were not driving anticipated value or achieving savings targets. The common root cause was the use of a company-wide, big-bang approach in which scores of black belts were being trained and deployed. These major, front-end loaded expenditures killed the return on investment, and the effort to coordinate it distracted program leaders from focusing on areas where they could drive sufficient short-term savings.

At of the other end of the spectrum, as an example, StratForm consultants worked with an insurance provider who had previously tried deploying a Lean program for eight years with only limited impact. Their core strategy had been to focus on ”one project at a time” with a very small staff of resources who needed to justify their continued existence through savings. They successfully completed several projects and “survived” for eight years, but the net impact on the business as a whole was insignificant.

Simply put, the best implementation strategies follow a hybrid approach: implement the Lean program across the business in a reasonable timeframe (i.e., 18 months to 3 years) but with a strong focus on prioritizing opportunities and measured savings on a quarter-by-quarter basis. In other words, you need to maintain a steady stream of investment to gain momentum but also find ways for the program to pay for itself. Running “pilot” Lean projects in high-priority locations or processes in parallel with gradual training/certification of a “core team” of lean experts and the construction of supporting tools and communications vehicles is one example of an effective implementation strategy.

Although we cannot do justice to all the strategic considerations in just one short article, here is StratForm’s simplified “Top 10” list of Lean implementation success factors:
     1. Define what Lean means for your unique business and what it does not - Keep It Simple (St----).
     2. Set realistic, specific, measurable, time-phased goals - What gets measured gets done.
     3. Dedicate resources to the implementation program, at multiple levels – Make it someone’s job.
     4. Invest in the program according to your ROI guidelines – You get what you pay for.
     5. Have a roadmap with manageable short-term efforts – Think big, but start small.
     6. Get as many significant quick wins as quickly as possible – Target and focus.
     7. Involve everyone from top managers to workers – Less talk, more action.
     8. Tailor a chosen methodology to your culture – Pick a method, but use it wisely.
     9. Communicate, communicate, communicate – People need to hear things three times, at least.
     10. Benchmark yourself, internally and externally – Compete divisions, departments or the company.

If your service business knows and can prove that it runs an efficient operation that also surprises (in a positive way) and delights its customers, owners and other stakeholders, then congratulations – you have succeeded in implementing a Lean Service philosophy.

If you are one of the majority who still have a way to go or have tried and failed in the past, then give StratForm a call – we can help assess your needs and constraints, and then tailor an implementation strategy that will work within your unique service business culture.