Getting introduced to the notion of Lean or Lean manufacturing in the service sector, it’s all about recognizing that it’s a continuous improvement initiative. It has important elements, such as streamlining and improving processes. Taiichi Ohno is considered by many to be the father of what we call Lean today. According to Mr. Ohno, the essence of Lean is that we first calculate from the time that we receive an order for a product or service to the time we get paid for that fulfillment. The objective is to make that timeframe progressively shorter and shorter. Lean is about reducing waste across the entire value stream in terms of time and effort on the part of human beings. This results in maximized value, better efficiency, quality, and customer satisfaction. In the manufacturing sector there are many examples of Lean. One small company producing sheet metal and wire products moved away from a batch and queue approach to a Lean manufacturing approach. In doing so, they were able to drive down costs by 30% the first year, and reduce lead time per customer orders by 50%. Conversely, in the service sector, a large nonprofit financial services organization used the practice of Lean to focus on their process flows. They were able to reduce the time to respond to customer inquiries by 50%. They reduced their backlogs for claims by 80%. And measured a 50% improvement in customer satisfaction at the same time. There are many advantages to being lean, and it starts with improved process efficiency and flexibility by taking out the waste and removing the impediments to a smooth flow of products and goods. After that, it’s about reducing lead time and cycle times. How long does it take for us to fulfill that customer order? Can we speed that process while simultaneously improving the quality that we deliver to our customers? At the same time we can provide very meaningful communications with our stakeholders.
Stakeholders include our employees, our management, our vendors and even our customers through the application of techniques like Kaizen, or change for the better. Integrating people on teams and making improvements. We also explore opportunities to better leverage the resources that we have and reducing the resources that we need. These are very powerful techniques. The value of Lean to an organization has many facets, including that it creates a real purpose. And that purpose starts with the customer, as it does with Six Sigma. There’s a Japanese term called Gemba, which means going to the point of attack. In Lean, it is at the point of attack where value is created, where we actually do the work. We allow our employees to reach their full potential by being extremely inclusive. Lean, by the way, is a very team-based approach to continuous improvement. It leverages the technique of kaizen very much. Kaizen involves all employees in the process of continuous improvement. Lean identifies the value added activities and separates out non-value added activities in order to eliminate them as we go. This brings increased value to all of our stakeholders. We can drive this improvement to our bottom line by reducing wasted effort and time that doesn’t add value that our customers are willing to pay for. Let’s talk a little bit more about eliminating waste and what the value of this concept is. It involves identifying at the task level where we spend time and money. What adds value? What doesn’t add value?
And, of course, there are things that are necessary but don’t add value. We progressively determine how we’re going to separate the activities and eliminate the non-value added activities immediately. In the longer term, we work on the root causes for those necessary but non-value added activities to determine if we can do anything about those as well. We prioritize based on the voice of our customer. It’s important to recognize that this goes beyond what the customer gets in the product or service. It also includes our internal process customers. Who’s downstream in the process that depends on me to do my job right the first time? We need to understand their voice, and meet their needs as well. By doing that we become more flexible, and we can increase the speed of what we’re doing across the entire value stream. We also can begin to use a simple technique called Pareto, or Pareto diagramming, where we identify which 20% of the activities are associated with 80% of our opportunities or problems so that we can work to improve those. As we address those vital few major causes, this results in speeding up the processes inversely and proportionately and thus reducing work in process, or WIP. This in turn gives us great opportunities to minimize processes and product complexity by rationalizing and reducing redundancy wherever we find it in our processes. In summary, the cornerstones of Lean are eliminating waste, prioritizing the customer. Knowing that process flexibility increases speed. Understanding that 80% of problems are caused by 20% of the activities. Realizing that the speed of a process is inversely proportional to work in process, in minimizing process or product complexity.