© 1998 by Prentice-Hall IncRussell/Taylor Oper Mgt 2/e

Chapter 15

Lean Operations in Services

and Support Functions

Lecture Outline

Goals of lean services Examples of lean service improvements

– Jefferson Pilot Insurance: Lean production– Blockbuster's Project Store

Principles of lean services– Waste elimination– Total quality management

Goals of Lean Services Waste is any amount of a resource that is not absolutely

required to produce and deliver a quality service when it is needed

The goals of lean services are to reduce waste, while improving service quality and timeliness

– Reducing waste will eliminate costs These goals are achieved by forced problem solving: The

firm sets challenging goals and forces itself to meet them Systems approach: consider the effects of proposed

changes on the whole company, suppliers, & customers

Jefferson Pilot's Lean Production(page 690)

This project focused on processing applications for new policies

Process re-design principles for this project– Co-locate linked processes in work cells– Standardize procedures– Eliminate loop-back– Set a common tempo, based on customer demand.

Takt time is the speed required to meet customer demand.

Jefferson Pilot's Lean Production (2)

Process re-design principles (continued)– Balance the workload among employees– Segregate complex processes.

JP set up a separate work cell for applications that required a doctor's statement.

In general, set up separate work cells or facilities for customers that require different resources or different types of processing.

Note: A work cell includes all the people and resources required for a particular process.

Jefferson Pilot's Lean Production (3)

Process re-design principles (continued)– Post performance results for the work cell (visible

control and immediate feedback)

Provided a board where employees could post problems & discuss solutions.

Tested these ideas in a model cell before implementing them for all applications

See performance results in textbook

Blockbuster's Project StoreLean Operations Project

Business objectives– Enhance the customer's experience– Increase sales

Allow employees to spend more time with customers

– Reduce costs– Reduce employee stress

Blockbuster's Process Re-Design

The goal was to simplify and standardize processes across U.S. stores

Key process re-design principles– Eliminated tasks that did not add value– Separated customer-related tasks from those that

did not involve customers (example: shelving videos)

– Reallocated the time saved to customer service

Blockbuster Steps in Process Re-Design

1. Collected data on– Processes used– Customer experiences– Customer satisfaction– How employees spent time (only 40% with

customers)– Employee frustrations

BlockbusterSteps in Process Re-Design (2)

2. Worked with employees to identify improvement ideas (brainstorming)

3. Tested the ideas in "learning" stores– Involved employees in designing new processes– Gave employees "ownership" of the process– Refined the ideas– Did cost/benefit analysis– Developed flowcharts for the new processes

BlockbusterSteps in Process Re-Design (3)

4. Trained employees in "pilot" stores to use the new processes

5. National rollout: Implemented new processes in all U. S. stores

– Human factors were the biggest obstacle to implementation

Principles of Lean ServicesWaste Elimination

Re-design processes to eliminate waste.– Eliminate unnecessary tasks– See Jefferson Pilot example for other methods.

Standardize processes. Train workers in the standardized processes. Re-arrange facility layout for a smooth work flow

– When possible, create a work cell for each process Use electronic document transmission to speed

work flow and reduce paper

Principles of Lean ServicesWaste Elimination (2)

Multi-functional workers are trained to perform varied tasks

Use promotions and pricing to level demand Eliminate interruptions or delays due to poorly

maintained equipment, inadequate computer capacity, etc.

Principles of Lean ServicesWaste Elimination (3)

Set standards for suppliers, and certify suppliersStandards may include cost, quality, on-time delivery,

frequent delivery, product flexibility, volume flexibility, design assistance

Reduce inventories by requiring suppliers to deliver frequently, when that is economically feasible

Track inventories using bar codes or RFID Track sales trends, and order accordingly

Principles of Lean ServicesTotal Quality Management

The principles of TQM that we studied previously apply here.

Toyota principle (page 706)– Before you do work, be clear about what you expect

to happen– Each time you finish a task, see if what you expected

actually happened– When there is a difference between what you

expected and what actually happened, solve the problem while the information is still fresh

Principles of Lean Services Total Quality Management (2)

Quality at the source – Work is inspected– By the person who did the work, or– At the next work station, or– By automated equipment or a computer

system Poka-yoke or mistake-proofing: make it

hard to do the job wrong (prevent defects)

Principles of Lean Services Total Quality Management (3)

Kaizen– Continuous improvement– Requires total employment involvement– Essence of kaizen is willingness and ability of

workers to spot quality problems generate ideas for improvement analyze problems perform different functions

- This requires training

Ch 15 - 28© 1998 by Prentice-Hall IncRussell/Taylor Oper Mgt 2/e

Principles of Lean Services Total Quality Management (4)

Visual control makes performance visible– Can be applied to cost, quality, productivity,

safety, etc.– Motivates people to solve problems– Provides continuous feedback on

performance