Lean for service organizations and offices : a holistic approach for achieving operational excellence and improvements

247 Pages·2007·3.33 MB·English

by  Sarkar

Lean for
Service Organizations
and Offices
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To request a complimentary catalog of ASQ Quality Press publications,
call 800-248-1946, or visit our Web site at http://qualitypress.asq.org.
Lean for
Service Organizations
and Offices
A Holistic Approach for
Achieving Operational Excellence
and Improvements
Debashis Sarkar
ASQ Quality Press
Milwaukee, Wisconsin
A merican Society for Quality, Quality Press, Milwaukee 53203
© 2008 by ASQ
All rights reserved. Published 2007
Printed in the United States of America
13 12 11 10 09 08 07 5 4 3 2 1
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 (soft cover : alk. paper)
1. Service industries—Management—Handbooks, manuals, etc. 2. Industrial
management—Handbooks, manuals, etc. I. Title.
HD 9980.65.S27 2007
65 8—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
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Printed in the United States of America
Printed on acid-free paper
To my daddy who is among the stars
and the almighty whose hands silently steer all my endeavors

Table of Contents
List of Figures, Tables, and Exhibits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix
Preface. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiv
Note to Readers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xvi
Chapter 1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Lean Thinking. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Lean Beyond Manufacturing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Lean and Service Economies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Addressing Symptoms Has Limited Value . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Relevance of Lean to Service Companies. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Lean and Operational Excellence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
The DEB-LOREX Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
The Philosophies That Drive the DEB-LOREX Model for Lean
Transformation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Wastes Are Symptoms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
The Eight Wastes of Lean. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
The Dimension of Time in Lean. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
The DEB-LOREX Index. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Lessons from Lean Applications in the Service Sector. . . . . . . . . . . . . . . . . . 22
Chapter 2 Blueprint for Implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Step 1: Leadership Alignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Step 2: Identify Value Streams for Product Families. . . . . . . . . . . . . . . . 55
Step 3: Form Implementation Team. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Step 4: Firm Up the Implementation Charter. . . . . . . . . . . . . . . . . . . . . . 68
Step 5: Redesign the Structure of the Organization. . . . . . . . . . . . . . . . . 73
Step 6: Install Anchors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Step 7: List All Processes in the Value Stream . . . . . . . . . . . . . . . . . . . . 80
Build . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Step 8: Build Relevant Capabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Step 9: Select the Value Stream on Which You Want to Focus. . . . . . . . 91
vii
viii Table of Contents
Step 10: Ensure That All Stakeholders of the Value Stream
Are on Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Step 11: Ascertain What the Customer Values and Requires . . . . . . . . . 97
Step 12: Map the Current State and Baseline the Process. . . . . . . . . . . . 101
Step 13: Visualize the Future State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Step 14: Dissect Process and Carry Out Detailed Process Analysis . . . . 114
Step 15: Deploy Lean Solutions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
Assimilate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150
Step 16: Decide on Measurements and Dashboards. . . . . . . . . . . . . . . . . 150
Step 17: Implement and Institutionalize the Process . . . . . . . . . . . . . . . . 154
Sustain. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154
Step 18: Ascertain Health of the Lean Management System and
Processes Through Assessments and Audits. . . . . . . . . . . . . . . . . . . . 154
Step 19: Launch Ongoing Improvement Regimens . . . . . . . . . . . . . . . . . 155
Chapter 3 Anchors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157
People . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158
Processes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166
Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176
Problem Solving . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178
Promotions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187
Chapter 4 Lean Breakthroughs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195
Phase 1: Preparation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 196
Phase 2: Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197
Phase 3: Follow-Up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200
Appendix A: Assessment of the Lean Management System:
The DEB-LOREX Index. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205
Appendix B: Template for Management Report after LMS
Assessment Based on the DEB-LOREX Model . . . . . . . . . . . . . . . . . . . . . . 219
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 221
Index. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225
List of Figures, Tables,
and Exhibits
Table 1.1 Percentage of service sector in major economies of the world
(as of 2005).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Figure 1.1 DEB-LOREX model of lean transformation and operational
excellence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Figure 1.2 The house of lean management system or DEB-LOREX model
for lean transformation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Figure 1.3 The two philosophies that comprise the DEB-LOREX model for
lean transformation.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Figure 1.4 Cause-and-effect relationships of the DEB-LOREX model of lean
transformation.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Figure 1.5 Types of waste.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Table 1.2 Treatment of process steps under lean. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Figure 1.6 Times used in lean.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Figure 1.7 Current and future states of lean journey. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Exhibit 1.1 Lean opportunity checklist: applicability of lean in the
organization.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Figure 1.8 Local optimization creates waste within the value stream, as the
focus of each of the departments is different. . . . . . . . . . . . . . . . . . . . . . . . 26
Figure 1.9 Actual process yields versus functional yields. . . . . . . . . . . . . . . . . . . . . . . 27
Figure 1.10 End-to-end process for resolving quality issues pertaining to
deliverables not reaching the customer on time. . . . . . . . . . . . . . . . . . . . . . 28
Table 1.3 Characteristics of a process.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Figure 1.11 Differences between a process and a procedure.. . . . . . . . . . . . . . . . . . . . . 31
Figure 1.12 A vehicle finance disbursement process as viewed by top
management and process associates.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Figure 1.13 Approach to creating flow: first create flow within departments and
then take it to the value stream.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Figure 1.14 Centralization of operations in a financial services company. . . . . . . . . . . 33
Figure 1.15 Geographical cells in an auto finance company.. . . . . . . . . . . . . . . . . . . . . 34
ix
x List of Figures, Tables, and Exhibits
Table 1.4 Skill inventory of employees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Table 1.5 Skill summary: skill analysis of branch sales executive in a bank.. . . . . . . 36
Table 1.6 List of global remittance products offered by a major financial
services company.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Figure 1.16 Cost of complexity as a percentage of operating cost.. . . . . . . . . . . . . . . . . 40
Table 1.7 Example of an “A Day in the Life of ________.” exercise. . . . . . . . . . . . . . 42
Figure 1.17 Checkout process from an airport in India.. . . . . . . . . . . . . . . . . . . . . . . . . 43
Exhibit 1.2 Template for finding wastes and redundancies in documents.. . . . . . . . . . . 46
Figure 1.18 Example of customer being forced to create waste and the
associated customer dissatisfaction and pangs to the organization. . . . . . . 47
Figure 2.1 Vision, culture, values, objectives, and outcomes.. . . . . . . . . . . . . . . . . . . . 52
Figure 2.2 Role of objectives in LMS journey. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Table 2.1 Organization’s readiness assessment for implementation of lean
management system. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Table 2.2 Product family matrix.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Figure 2.3 Generic value stream. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Figure 2.4 Generic value stream of a mortgage finance business. . . . . . . . . . . . . . . . . 57
Figure 2.5 Generic value stream of a fast-moving consumer goods business. . . . . . . . 57
Table 2.3 Key roles of corporate and value stream councils. . . . . . . . . . . . . . . . . . . . 66
Exhibit 2.1 Template of charter for LMS implementation in an organization
having multiple value streams (as adopted in a financial services
business). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Exhibit 2.2 Template of LMS charter for a value stream. . . . . . . . . . . . . . . . . . . . . . . . 71
Figure 2.6 Organizational structure for lean management system
implementation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Figure 2.7 Process of goal decomposition in an organization structured
around value streams.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Figure 2.8 Organizational structure necessary for LMS implementation. . . . . . . . . . . 76
Figure 2.9 The “firm within a firm”—value streams as independent entities.. . . . . . . 76
Figure 2.10 Structure of retail bank before commencing on the journey of
lean transformation.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Figure 2.11 Value streams crafted around specific customer segments. . . . . . . . . . . . . 77
Figure 2.12 The five P’s of the lean management system. . . . . . . . . . . . . . . . . . . . . . . . 78
Figure 2.13 The lean management system chain. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Table 2.4 Functions of the five anchors in a lean management system. . . . . . . . . . . . 79
Table 2.5 Examples of value-creating, value-enabling, and support processes
of a mortgage finance business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Figure 2.14 Relationship between value-creating, value-enabling, support,
and management processes.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82