© 1998 by Prentice-Hall Inc Russell/Taylor Oper Mgt 2/e Chapter 15 Lean Operations in Services

Lecture Outline l Goals of lean services l Examples of lean service improvements –Jefferson Pilot Insurance: Lean production –Blockbuster's Project Store l Principles of lean services –Waste elimination –Total quality management

Goals of Lean Services l Waste is any amount of a resource that is not absolutely required to produce and deliver a quality service when it is needed l The goals of lean services are to reduce waste, while improving service quality and timeliness –Reducing waste will eliminate costs

Goals of Lean Services (2) l These goals are achieved by forced problem solving: The firm sets challenging goals and forces itself to meet them l Systems approach: consider the effects of proposed changes on the whole company, suppliers, & customers

Jefferson Pilot's Lean Production (page 690) l This project focused on processing applications for new policies l 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) l Process re-design principles (continued) –Balance the workload among employees –Segregate complex processes. l JP set up a separate work cell for applications that required a doctor's statement. l In general, set up separate work cells or facilities for customers that require different resources or different types of processing. l Note: A work cell includes all the people and resources required for a particular process.

Jefferson Pilot's Lean Production (3) l Process re-design principles (continued) –Post performance results for the work cell (visible control and immediate feedback) l Provided a board where employees could post problems & discuss solutions. l Tested these ideas in a model cell before implementing them for all applications l See performance results in textbook

Blockbuster's Project Store Lean Operations Project l Business objectives –Enhance the customer's experience –Increase sales l Allow employees to spend more time with customers – Reduce costs – Reduce employee stress

Blockbuster's Process Re-Design l The goal was to simplify and standardize processes across U.S. stores l 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

Blockbuster Steps 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

Blockbuster Steps 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 Services Waste Elimination l Re-design processes to eliminate waste. –Eliminate unnecessary tasks –See Jefferson Pilot example for other methods. l Standardize processes. l Train workers in the standardized processes. l Re-arrange facility layout for a smooth work flow –When possible, create a work cell for each process l Use electronic document transmission to speed work flow and reduce paper

Principles of Lean Services Waste Elimination (2) l Reduce physical inventories –Require suppliers to deliver quality products (for resale) or supplies on time l Eliminate receiving inspection if possible. –Order smaller quantities when that is economically feasible –Minimize transportation and distribution time –Bar code inventories and track them.

Principles of Lean Services Waste Elimination (3) l Organize documents and eliminate time spent hunting for documents –Electronic document management systems –Use 5S principles (page 702) l Multi-functional workers are trained to perform varied tasks l Eliminate production interruptions due to poorly maintained equipment, inadequate computer capacity, etc.

Copyright 2006 John Wiley & Sons, Inc.  Unneeded equipment, tools, furniture; unneeded items on walls, bulletins; items blocking aisles or stacked in corners; unneeded inventory, supplies, parts; safety hazards  Items not in their correct places; correct places not obvious; aisles, workstations, & equipment locations not indicated; items not put away immediately after use  Floors, walls, stairs, equipment, & surfaces not lines, clean; cleaning materials not easily accessible; labels, signs broken or unclean; other cleaning problems  Necessary information not visible; standards not known; checklists missing; quantities and limits not easily recognizable; items can’t be located within 30 seconds  Number of workers without 5S training; number of daily 5S inspections not performed; number of personal items not stored; number of times job aids not available or up-to-date  Keep only what you need  A place for everything and everything in its place  Cleaning, and looking for ways to keep clean and organized  Maintaining and monitoring the first three categories  Sticking to the rules  Seiri (sort)  Seiton (set in order)  Seisou (shine)  Seiketsu (standardize)  Shisuke (sustain) 5S ScanGoalEliminate or Correct

Principles of Lean Services Total Quality Management l The principles of TQM that we studied previously apply here. l 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) l 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 l Poka-yoke or mistake-proofing: make it hard to do the job wrong (prevent defects)

Principles of Lean Services Total Quality Management (3) l Kaizen –Continuous improvement –Requires total employment involvement –Essence of kaizen is willingness and ability of workers to l spot quality problems l generate ideas for improvement l analyze problems l perform different functions

Ch © 1998 by Prentice-Hall Inc Russell/Taylor Oper Mgt 2/e Principles of Lean Services (3) l Visual control makes performance visible –Can be applied to cost, quality, productivity, safety, etc. –Motivates people to solve problems –Provides continuous feedback on performance –Provides a basis for objective performance evaluation