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Lean Service ManagementStreamlined processes can satisfy customers — and deliver new profits

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1 Lean Service Management / The MPI Group

If a perfect product has less-than perfect delivery, service, or support, customers will be unhappy —

and may look to competitors for alternatives.

Goods Are Not Good Enough

C onsumers and companies don’t just buy products today, they buy experi-

ences and solutions to problems. If a perfect product has less-than perfect delivery, service, or support, customers will be unhappy — and may look to competitors for alternatives.

Why?

Because customer experience is dramatically impacted by a company’s service-management capabilities, customers look to those that offer higher levels of:

n Responsiveness: Whether asking about delivery or for help with installation, customers want simple, fast access to answers — whatever format they choose (e.g., live person via phone, online chat, online FAQs, submit and receive emails, text messages).

n Service quality: Customers expect both perfect finished-goods quality and perfect service quality. They expect that what’s promised will be executed flawlessly (e.g., replacement

parts arrive as expected, repair services arrive on schedule, credits/refunds are distributed as indicated).

n Cost: B2B and B2C customers understand that service comes at a cost — but they expect it to correspond with the value of the product. For example, high-end, durable products are often accompanied by extended warranties that cover most service costs for a fixed period of time. Makers of lower-end products can offer extended warranties for a fee, or paid service on an as-needed basis (also at a cost).


1 “Unlocking the Field Service Supply Chain,” WBR Digital and Sutherland, Fall 2017.2 William Larrabee, “Recurring Revenue, How Much Does It Cost to Lose an RMR Customer?” Larrabee Ventures Inc.,

Aug. 26, 2018.3 MPI Manufacturing Study, The MPI Group, March 2018.4 “Digital Disconnect in Customer Engagement,” Accenture, March 2016.

Companies that fail to address service-management issues face significant challenges.

Elevating Service Management

Some companies have tried to follow the product-as-experience model

pioneered by Apple. But for many others, end-to-end service — or even consistent post-sale communication with custom-ers — remains an afterthought. In fact, 92 percent of field service companies do not have a centralized customer view (customer data, interactions, logistics, inventory).1 Companies that fail to collectively address service- management issues face significant challenges, including:

n Frustrated, alienated customers: Customers now benchmark best practices across industries. The buying and support infra-structure they experience with Apple and others on the leading edge of service is what they now expect from every company. If they don’t get it, they’ll look elsewhere.

n Lost customers: Losing customers is costly. For example, the loss of a $40 recurring-monthly-revenue customer costs $1,200 or more to replace with a new customer.2

With customer retention rates among manufacturers at 67 percent (average) — and with more than one quarter of manufacturers suffering from retention rates under 50 percent3 — revenues and profits are suffering, too. U.S. businesses have lost $1.6 trillion due to customers switching because of poor service.4

n Lower profits: Service offerings can significant-ly increase profits. In the equipment industry, for example, many makers now provide value-added services such as specifying machines across a production line (including those of competitors); installation; and leasing and maintenance. Others generate high percentages of revenues and profits from expanding distribu-tion opportunities to include comple-mentary or competitive products, offering customers a wider range of products. These approaches will work for other industries with clients similarly concerned about costs, technical expertise, access to goods, speed of delivery, regulatory compliance, and ownership liabilities and risks.


Lean thinking has transformed the production and material-handling

processes of countless companies, from manufacturers to healthcare institutions. Lean concepts focus on perfect satisfaction of customer requests; elimination of non-value-added activities (waste); development of standardized processes; and reliance on engaged, problem-solving workers. These methods are equally powerful for service management, and can deliver:

n Improved productivity: Streamlined service management processes allow companies to do more with fewer resources, boosting service revenue per employee. (For example, manufac-turers implementing lean strategies report sales per employee of $239,459 (average) vs. $207,787 of those not using lean.5

n Increased profits per service contract: Lean thinkers follow a profit = price – cost formula instead of a traditional price = cost + profit calculation (which puts profit into conflict with customer cost expectations). This forces lean organizations to continuously innovate in their service operations to reduce costs, increasing the value of each service transaction to both the customer and the bottom line.

n Long-term customer relationships: Once customers rely on services beyond the product itself, an enduring customer-supplier partnership forms, fostering additional product service purchases. This offers a stark contrast to the poor state of customer experiences at many manufacturers, with both parties stuck in low-value “buy-and-sell” relationships (Figure 1).6

Customer-Focused Service

Figure 1. Relationship with Customers

% of manufacturers

Buy and sell (e.g., cost and quality focus) 25%

Certification (e.g., broad qualifications established) 27%

Cooperation (e.g., sharing product ideas, best practices) 35%

Partnership (e.g., sharing resources, intellectual property, cost savings) 12%

Source: MPI Manufacturing Study

5 MPI Manufacturing Study, The MPI Group, March 2018.6 MPI Manufacturing Study, The MPI Group, March 2018.


n Intelligence and insights: Service management offers intelligence on how customers use products — and opportunities for improvement. Incorporating Internet of Things (IoT) technologies into service management can drive real-time data availability for a variety of value-added offerings,

such as scheduling maintenance or purchases of replacement parts. Not surprisingly, a critical objective for approximately one-third of manu-facturers when embedding smart devices and/or intelligence into their goods is to access data from the products or services in the field.7

Incorporating Internet of Things (IoT) technologies into service management can drive real-time data availability for a variety of value-added offerings, such as scheduling maintenance or purchases

of replacement parts.

7 MPI Internet of Things Study, The MPI Group, 2017.


When embarking on a journey to im-prove service management, start

with the end in mind — the ideal future state. What would lean service manage-ment look like in your organization?

First, all service processes must be focused on the customer. Every function, department, role, and employee across the enterprise and supply chain — parts providers, franchises, dealers, contracted technicians — must share a common vision and strategy for how service and support will enhance the customer experience. This will require best practices and technologies that support data visibility and transparency.

Across the service value stream, efficient handoffs must occur from role to role (e.g., from identifying customer’s service needs to dispatching repair

technicians) to streamline the flow of work and deliver customer satisfaction. A single version of the truth —accurate, real-time information shared among partners — will align customer focus, minimize delays, and eliminate redundant tasks, business systems, and applications.

Finally, as improved service manage-ment emerges, key performance indicators (KPIs) will be identified and monitored. Some KPIs are clear at the outset (e.g., zero customer complaints), but others will emerge to spur continuous improvement (e.g., new service revenues, new service clients). As Peter Drucker wrote: What gets measured, gets managed. And what gets managed, gets better.

Future-State Service Management

A single version of the truth —accurate, real-time information shared among partners — will align customer focus, minimize delays, and eliminate

redundant tasks, business systems, and applications.

Lean service management starts at the top, as senior leaders establish

a vision for lean service management (e.g., “We will be the market leader in supporting customers’ needs before, during, and after a product purchase”). These executives will develop and com-municate a long-term strategy detailing investments, roles, goals, and risks associated with enhancement of service and support, triggering a dialogue with core service functions to translate corpo-rate objectives into departmental goals.

At most companies, the first step in implementing a service-enhancement strategy will be the formation of a cross-functional improvement team with a senior leadership sponsor. The team will map current processes for services and support, documenting each step as it happens, such as:

n How are customer calls fielded?

n Who responds to customer complaints?

n How are maintenance or repair services scheduled?

n When are extended warranties or addi-tional services offered to customers?

n What value-added outreach is provided to customers (e.g., tips, guides)?

Separate teams may work on separate service processes, but all will share findings to align processes around customer needs.

It’s important, too, that process-mapping examine activities that occur prior to product or service purchases (potential customer awareness of service and support offerings) and extends through the life of the product. Specific items on maps will include:

n Flow of work (including goods, such as replacement parts) and information

n Total time required for all steps in the process

n Value-added time vs. non-value-added time (e.g., delays) for all steps and end-to-end process

n Quality measures

n Loopbacks, redundant actions, bottle-necks and/or rework that commonly occurs.

As problems are identified in the service process, they’re recorded on the map, typically with starburst icons and text that describe the issues (Figure 2). A major benefit of mapping is that it highlights how each department and partner impacts all other departments and partners across the process, both upstream and downstream.

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Getting Started with Lean Service Management

Figure 2. Mapping Surfaces Problems


Next, the team will establish initial performance targets for each process in support of corporate KPIs. Comparing current targets (if they exist) to future targets identifies gaps for the team to close. How the team intends to close those gaps will be represented in a future-state map that establishes new processes and workflows. (Note: Some gaps can and should be closed imme-diately to stabilize current processes; don’t wait on a future-state map to put out a current fire.)

Common lean tools and techniques used by these teams will include:

n 5S: Processes in disarray can benefit from the organizing principles of 5S — Sort (get rid of anything not required); Set in order (everything has its place); Shine (clean); Standardize (see below); and Sustain. An objective of 5S is to organize the physical or digital workplace and assist those in it with intuitive visuals.

n Standardized work: Every activity should have a common best practice or way of performing the work. Many current-state problems with service management result from workers performing identical functions in unique ways.

n Flow and pull: Work should move across the process one piece at a time. Where not practicable, practices are established to allow downstream processes to pull work as they’re ready (i.e., kanban system).

n Right first time, on time (RFTOT): Work must not move downstream until all components for the receiving department are in place. Managers who start tracking RFTOT across a process are often shocked by the low percentages, which highlights wasted time moving work back and forth, or

likelihood that work is done without critical information.

n Visible metrics: Throughout the service and support process, metrics of what occurs (hourly, daily, weekly) should be clear to all involved. Visual man-agement boards display metrics by the period.

n Huddles/meetings: Brief standup meetings with frontline staff and man-agement occur at the visual manage-ment boards prior to shifts. Managers and workers review metrics that miss targets, consider fixes, and discuss required help or senior leadership support. Issues from huddles move up the organization, where supervisors, managers, and executives also meet on a regular basis to review metrics and actions at their level, and address pressing frontline issues.

Next, the cross-functional team will experiment with the new future-state process, assessing its effectiveness and making adjustments. The PDCA cycle (Plan, Do, Check, Adjust) ensures the sustainability of changes prior to train-ing all staff on the new process. In large companies, where similar service and support processes exist among differ-ent sites, divisions, and product lines, a model area can trial lean changes prior to companywide implementation.

During the PDCA process, opportuni-ties for standardization via technology will emerge, such as creating a single, digital source for service and support information; automating handoffs; real-time updates to parts suppliers and field staff; and updated company-wide customer information (e.g., con-tract status, repair notes, warranties). But it’s critical the process itself be sta-bilized prior to automation; making the same mistakes faster via technology is a path to service and bottom-line failure.


Superior Service Management

Leaders at lean organizations realize that improving service and support

processes is an ongoing activity. As a company’s workforce gains confidence in its lean service management ca-pabilities, managers and workers will find ways to leverage this newfound strength: embedding intelligence and diagnostics into products for proactive service; innovating new, more efficient

processes to lower internal costs and pricing; and developing new business models with accretive profit potential (e.g., production of replacement parts, opening service stores).

Today’s marketplace rewards compa-nies with strong service and support capabilities. Is your firm ready to join them?

As a company’s workforce gains confidence in its lean service management capabilities,

managers and workers will find ways to leverage this newfound strength.

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