Everyone knows the prime directive of business: faster, better, cheaper. Yet, when pressed for an explanation of what that really means, most executives can only express the desire to get the most work, in the least time, with the fewest people. When probed further on what is wrong with their business processes, responses are varied but predictable. We need more people. The computer systems are lousy. The customer’s demands are excessive.
Most executives fail to see the real problem. The real problem is the poor alignment of the business process to the customer needs and the excess steps in the process that brings no value to the customer experience.
Besides customer satisfaction, investing in service process improvement can quickly add real dollars to the bottom line. It is well established that approximately 80% of a company’s invested capital is the cost of people performing service related duties. So invested capital is really the “Cost of people.” Combined with empirical data that has shown that service costs are inflated by 30% to 80% waste, it makes logical sense to focus energy on improving service-side processes.
HOW LEAN SIX SIGMA FOR SERVICES IMPROVES THE BOTTOM LINE
“Services” normally encompass a company’s service-side infrastructure such as Human Resources, Operations, Marketing, Sales, Finance, etc.. A fundamental characteristic of most service-side processes is it that they rely on humans to accomplish their objective.
Service process improvement is challenging for the following reasons:
- They are slow and expensive because there is always to much Work-in-Process (WIP). This is primarily due to a failure to control WIP velocity (i.e. work is pushed into the process without regard to work exiting the process).
- Less than 20% of service process time adds value or enhances a customer’s experience.
- The less visible nature of service processes make the process harder to track and problems harder to identify, quantify, and fix.
- They have a tradition of individuality, freedom, and creativity.
- They are characterized by a lack of meaningful data for decision making.
- People, your major asset, are also the major cause of process variation.
- Customers cannot be treated like inventory.
Lean Six Sigma for Services is an extension of Six Sigma not a replacement. Lean Six Sigma for Services and Six Sigma work in tandem. Six Sigma brings disciplined, customer-centric, data-driven tools and techniques to measures process errors, identify variances, eliminate them, and bring the process under Statistical Process Control (SPC). Lean Six Sigma for Services focuses on speed and efficiency.
Lean Six Sigma for Services is perfect for improving service processes for the following reasons:
- It separates “value-added” from “non-value-added” work with Six Sigma tools to eliminate the root causes of non-value-added activities and (thus) their cost.
- It provides a means for quantifying and eliminating the cost of complexity.
- Like its Six Sigma counterpart, it focuses on customer satisfaction and quality by recognizing opportunities and eliminating customer defined defects.
- It recognizes that variation hinders the ability to reliably deliver high-quality services.
- It requires data-driven decisions and incorporates a comprehensive set of quality tools under a powerful framework for effective problem solving.
- It provides a highly prescriptive cultural infrastructure for sustainable results.
I have found that it is better to bring a process into statistical process control first (Six Sigma), then work on improving its capability (Lean). In other words, remove variation then raise performance level. When a business process has been “Leaned” it has the following characteristics:
- The process is under statistical control (i.e. assignable cause variation have been eliminated)
- The process operates at a cycle efficiency > 20%. Cycle efficiency is the value-add time within a process.
- It has a maximum cap on WIP to control velocity.
- It uses a pull system where new work is released into the process only when old work has exited.
- It uses visual controls to manage and monitor the process.
Lean Six Sigma for Services maximizes shareholder value by achieving the fastest rate of improvement in customer satisfaction, cost, quality, speed, and invested capital. It is a methodology, set of principles, and tools that focus on accelerating the speed of all processes across the enterprise by eliminating waste and non-value added steps.
Companies who have invested heavily in business process improvement have recognized several fundamental truths:
- Getting fast can actually improve quality
- Improving quality can actually make you faster
- Reducing complexity improves speed and quality
As you embark on improving business processes, stay focused on the the above fundamentals using Lean SIx Sigma for Services and you will see an improved bottom line.