Lean Thinking in Service Industry
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Transcript of Lean Thinking in Service Industry
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Professor Peter Hines
Lean Enterprise Research Centre
Cardiff Business School
Lean Think ing
Applying the Lean Principles of ImprovingPerformance at less Cost to the Office and
Service Industry
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Lean in the Of f ice & Serv ice Sec tor 2
AgendaAgendaProfessor Peter Hines
The Lean PrinciplesHow do they apply in the Office Environment
Examples and cases from Europe
Andrew Stewart
Examples and cases from Australia
Where do we go from here?
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Lean in the Of f ice & Serv ice Sec tor 3
Lean Ent erpr ise Researc h Cent reLean Ent erpr ise Researc h Cent re
Formed in 1994 by Prof Dan Jones &
Prof Peter Hinesc. 30 staff now
Researching, applying,& communicating
lean thinking
Researching, applying,& communicating
lean thinking
Mission
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Lean in the Of f ice & Serv ice Sec tor 4
Strategic
Management
Lea
n
Enterpr
ise
SixSigma
Supply Chain
Development
S A Part nersS A Part ners
Inspiring successthrough pioneering,
process-based
solutions
Working in Australia with:
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The Lean Pr inc ip lesThe Lean Pr inc ip les
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Lean in the Of f ice & Serv ice Sec tor 6
Lean Pr inc ip lesLean Pr inc ip les
1 Specify what does & does not
create value from the
customers perspective
not individual firms, functions
or departments
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Lean Enterpr ise Research Cent re
Lean Pr inc ip lesLean Pr inc ip les
2 Identify all the steps necessary to design, order,
& produce the product/service across the whole
value stream
to highlight non-adding value waste
OverproductionOverproduction
InventoryInventory
WaitingWaiting
Materialmovement
Materialmovement
Defectiveproducts
Defectiveproducts
Operatormovement
Operatormovement
Unnecessaryprocessing
Unnecessaryprocessing
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Lean in the Of f ice & Serv ice Sec tor 8
Lean Pr inc ip lesLean Pr inc ip les
3 Make those actions that create value flow
without interruption, detours, waiting
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Lean Pr inc ip lesLean Pr inc ip les
4 Only make/produce what is pulled by the
customer just-in-time
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Lean Pr inc ip lesLean Pr inc ip les
5 Strive for perfection
continually remove successive layers of waste as they
are uncovered
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Value St ream Managem ent Fram ew orka lue St ream Managem ent Framew ork
Policy
Deploym
en
t
Cros
s-Functional
Teams
SupplyCh
ain
Integration
Lean
Pro
cess
Tool-K
it
ValueStream
Management
Shared Vision Common Goals
Tools aligned to needExtended Enterprise
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Lean in an Of f ic eLean in an Of f ic e
Envi ronmentEnvi ronment
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Lean in the Of f ice & Serv ice Sec tor 13
Lean in t he Of f ic e & Serv ic eLean in t he Of f ic e & Serv ic eUK is Predominantly service based economy Service sector provides 71% of Gross Value Added
79% of all jobs (National Statistics)
Significant growth of application of lean in services
Much initially concerned back office manufacturing i.e. that support manufacturing
Now spreading to pure service industries Retail, health, repair & overhaul, financial services, insurances
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Tangibi l i t y Spec t rumTangibi l i t y Spec t rum
Tangible
Dominant
Salt
IntangibleDominant
SoftDrinks
Detergents
Cars
Cosmetics
Advertising
agencies
Fastfood
outlets
Fastfood
outlets
Airlines
Consulting
Teaching
Source: Shoestack (1977) in ServicesMarketing, Zeithaml & Bitner
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Lean in the Of f ice & Serv ice Sec tor 15
Your Organisat ionsYour Organisat ions
In groups
Thinking about lean principles & thenature of service based organisations,consider:
What might be the challenges for applyinglean thinking principles in an office orservice organisation?
Score these challenges in terms ofimportance (1 - not very, 5, Very)
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Sym pt om s o f Info rm at ion Wast eym pt om s of In form at ion Wast eBottleneck Departments
No Standard Work Practices
Errors and Rework
Long Unpredictable Lead Times
Many Validation Checks
Official/Unofficial Fast-Tracks
Ineffective Workload SchedulingNo Root-Cause Analysis
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Waiting for the computer system to process the application
DELAY - When the item is waiting
Obtaining a signature to permit the next step
INSPECTION - Insuring that everything is correct
by overseeingPlease could
you sign this
The distance an
application travels
within theorganisation
TRANSPORT - Movement of an item
Customer
Store documents and records or data in a computer file
STORAGE - When the item is stored
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Servic es Chal lengesServic es Chal lengesUnderstanding customer needs and expectations for
services
Tangibilising the service offering
Dealing with a myriad of people & delivery issues
Keeping promises made to customers
Variation & capacity
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Nat ure o f Dem andNat ure o f Dem and
Value demand: the demand you want
Failure demand:demand caused by a failure to do something or do
something right for the customer
Mistake in treating all demand as units of productionPlanning tools developed some time ago.
Now variety of demand v different cannot see
demand
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Fai lure Dem andFai lure Dem and -- ExamplesExamples
I dontunderstand theletter you send
me
The water istoo cold
You said youdrepaired the faultin my car but it
still does notwork
The goods yousent me aredamaged
Its brokendown again
Youve sentme the wrong
one
Waiter,wheres my
soup?
Sorry, I pressed2 and I thought itwould get me to
the claims
department
Ive been waitingin all morning, yousaid youd be here
where are you
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The c onsequenc e o f
ex c ess fa i lure
demand?
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Ex am ples f rom EuropeEx am ples f rom Europe
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Sim ple CaseSim ple Case
Welsh Legal Serv ic es Com m iss ionWelsh Legal Serv ic es Com m iss ion
Mapping t he Correspondenc e Proc essMapping t he Correspondenc e Proc ess
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Part o f t he Mapping TeamPart o f t he Mapping Teamnot sure about
this lean stuff,dont think it will
work here
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Lean in the Of f ice & Serv ice Sec tor 25
and t he res t o f t he Lean Teamand t he res t o f t he Lean Team
Its good toinvolve everyone
and it seems to be
making sense
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Financ e Phase 2A:Financ e Phase 2A:
LSC Current St at eLSC Current St at e
CustomerService Team
Finance Charge C/W Non ChargeC/W
Filing Reception SeniorFinance C/W
Standards & Comments
FinancePhase
2A
Time Reso-urce
MonicasTable
FinanceLegal/Means
Phase 2
Charge
ChargeNon
Charge
Tag
No
No
Yes
Yes
Pull
NeedFile
SkillsSkills
Get File
Yes
No
ProcessPost
ProcessPost
PostBucket
PostBucket
4 SeniorCase Work
Yes Yes
No No
Post
Bucket
2 - 7.5hrs
2 hrs
1 wk -34 wks
1 hr
3 9hrs
1 wk
13 to248days
Total
Variance depends on Case
Worker, variable location of sort
Backlog calculated using oldestdate (worst case scenario)
Not FIFO
Reception Tag & Filing
All file requests dealt with at thesame time
Assume 1 person processing post
Unable to quantify referral time
2 hrs
1 hr
0.25 hr
0.1 2hrs
0.5 hr
3:20 to5:15hrs
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Financ e Phase 2A:Financ e Phase 2A:
LSC Fut ure Stat eLSC Fut ure Stat e
Charge Non Charge Filing SeniorCase Worker
Standards & Comments
FinancePhase
2A
Time Reso-urce
Chargewith files
Non ChargeWith files
Pull File
SkillsSkills Referral
Yes Yes
No No
10 15mins
Read
Letter
Read
Letter
Need
File
Need
File
Yes Yes
No
Get File Get File
Process Process Process
Post
Bucket
Post
Bucket
Post
Bucket
No
5 mins
2 hrs ifrqrd
10 mins
2 hrs
5 mins
30 minsto 4 hrs25 mins
10 15mins
5 mins
5 mins
10 mins
2 hrs
5 mins
30 minsto 2 hrs30 mins
Training needed / cultural issues
to be addressed
Charge post is sent to C/W withFile (no need to pull file at laterstage)
Referral process: Matter wouldalways be passed back to C/Wafter the Senior C/W has
considered it, either with a worksolution or guidance notes. Thisbox to be emptied once daily(allocation rota)
Non Charge post, where fileneeded, files to be supplied byfiling 4 times daily (2 am, 2 pm)
from a tray in each pod. Thisactivity is a priority
Calculated per piece of post
Post split into 1st, 2nd, Dx
Total
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Af t er t he Lean Think ing EventAf t er t he Lean Think ing Event
Reduc ed by 197 and age c lear Reduc ed by 197 and age c lear
Complex
cases
Mixed
cases
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Non Charge Correspondenc eNon Charge Correspondenc e
Week ly Carr ied Forw ard Figures (by w eek )Week ly Carr ied Forw ard Figures (by w eek )
0
100
200300
400
500
600
700
800
900
2ndA
pr
16th
Apr
30th
Apr
14thM
ay
2
8thM
ay
11th
June
25th
June
9thJ
uly
2
3rdJ
uly
6thA
ug
2
0thA
ug
3rdS
ep
17th
Sep
1-Oct
15th
Oct
29th
Oct
12th
Nov
2
6thN
ov
10th
Dec
24th
Dec
7thJan
21stJa
n
4thF
eb
18th
Feb
4thM
ar
18th
Mar
Date 2004 - 2005
CasesAw
aitingAtten
tion
Week 1 Week 2 Week 3 Week 4 Week 5 Week 6 6+
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Sum m ary o f k ey benef i t sSum m ary o f k ey benef i t s
Turnaround time from 7 months to max time of5 days (3 day for simple)
Remove Waiting, Unnecessary backlog andInappropriate processing
Improved staff morale
Improved customer relations and satisfactionLack of waste/efficient processes
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Det ai led CaseDet ai led Case
EuropeanEuropean InsuranceInsurance
CompanyCompany
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Set t ing t he Cont ex tSet t ing t he Cont ex t
Major Insurance player in Global market with
Offices in over 20 countriesTotal turnover of approx 1.2 billion worldwide
UK & Ireland accounted for 145m approx.
Looking to grow the business to 200m by 3years and profit from 0% to 15% ROS
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Value Criteria Rank Insurance Company Performance
VsYour Expectations Our Competitors Your best OtherSupplier
Betterthan
Sameas
Worsethan
Betterthan
Sameas
Worsethan
Betterthan
Sameas
Worsethan
Quality Decision
1
Quick Decision
4
Price
2
Cover
3
Support
5
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Com pet i t ive Envi ronm entCom pet i t ive Envi ronm ent
Constrains grow thCompete on priceProducts are not differentiatedfor our customers
Little Innovation
Products
Shrinking market and potentiallyinvalidates the market
Need for repositioning as abroader offer
Lost business and inability toincrease pr ice walk away
Self Insurance dont buy it
Credit InformationSubstitutes
Redefine distribution channels
Reduced distribution costs
Quoting Nett transparency
Lost business and devalue ourproduct
Dominated by two players whodo not add value
Brokers become competitors
Brokers
Competition hits criticalmass/ market share
Opportunity to lead
Stops ability to increase price
Consuming new business
New Players
Changing main competitorsCompetitors
Significance LongTerm?
Significance ShortTerm?
Issue?Factor
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Threats
Re-insurance pull out of market.
New competitors
More sophisticated customers.
Self imposed constraints.
Global economic situation.
Opportunities
Market is looking for an efficient producer.
Weak competitors
New owners?
Weak Brokers.
Direct distributionQuoting Net
Trade sector activities.
Cross unit alignment
Group leverage on sales.
Weaknesses
Skill sets around buyer underwriting
Operating Model
Too many people in the comfort zone
Flexi time
Pay structure inflexible.
Systems are inflexible
Centres of expertise.
Lack of one culture
Group shackles?
Play by the rules too often
Lack of team working of this teamRe-insurance
Strengths
Knowledge and expertise of people systems,process, country risk,
Geographical coverage
Pay and conditions.
Integrated IT systems
Multi national propositionCentres of expertise.
Insolvency and recovery expertise
Depth and breadth of product range
Good relationship with existing customers
In t erna l Env i ronm entIn t erna l Env i ronm ent
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Existing Products /New Consumers
Trade sector alignment efficiencies
New Products /New Consumers
SME product
Specialist capacity issues
Existing Consumers / New Products
SME product
trade finance
Integrated recovery fee.
Specialist capacity issues
Existing Consumers /Existing Products.
New business replaces lost business MRA income
Price increases
Additionality.
0m in Year 1- 45m replace lost business
20m in Years 1- 4 6m in Year 2-4
9m in Year 2-4
Ansof f Mat r ixAnsof f Mat r ix Where w i l l w e grow ?Where w i l l w e grow ?
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Existing Products /New Markets New Products /New Markets
Existing Markets / New ProductsExisting Markets /Existing Products
Sales
Acquisition
Process
High
risk
NPD Process
Order FulfillmentNPI
SupplyChain
The Imp l ic a t ions o f t hese c ho ic es !The Imp l ic a t ions o f t hese c hoic es!
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We will: Grow the Credit Insurance business to 200m by 2006,delivering 15% return on sales.
Delivering outstanding service at reasonable prices anddelivering greater retention
Delivering significant growth from new sales Developing integrated and aligned new offerings and
then taking them to new markets. Achieving greater trade sector alignment Creating a culture of innovation and performance
within our business.
in order to: Turn the UK business into a leading performer within theGroup, securing its future and the future of our people
St ra t egic Di rec t ion St a t em entSt ra t egic Di rec t ion St a t em ent
by:
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The ability to.
manage the relationship with the wider group successfully
understand, achieve and proactively manage customers expectations
operate joined up, cost effective processes
agree a common goal, through supportive culture and trust in our people.
spot and convert growth opportunities in sales in current and new markets
innovate in new offerings.
identify and respond to changes in market conditions
deliver the right number of appropriately skilled, motivated people.
Our Cr i t ic a l Suc c ess Fac t orsOur Cr i t ic a l Suc c ess Fac t ors
Th A i t MTh A i t M
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Lean in the Of f ice & Serv ice Sec tor 40
N
N
People satisfactionindex
Skills index
deliver the right # of appropriately skilled, motivated people.
STRATEGIC I SSUEidentify and respond to changes in market conditions
% sales from new
offeringsSpeed to Market
Customer retention% sales from newmarkets
% sales from currentmarkets
Portfolio value
Culture index
Profit
Claims ratio.
Cost ratio
Customer P erceptionindex.
Speed
Quality
STRATEGIC I SSUEMeasure
N
N
innovate in new offerings
YN
Y
Y
spot and convert growth opportunities in sales in current and
new markets
Nagree a common goal, through supportive culture and trust in
our people.
Y
Y
Y
operate joined up, cost effective processes
N
Y
N
understand, achieve and proactively manage customers
expectations
manage the relationship with the wider business successfullyGot one?Critical Success Factor
The Appropr ia t e MeasuresThe Appropr ia t e Measures
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Lean Order Ful f i lm entLean Order Ful f i lm ent
ProcessProcess
St t i Di t i St t t
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We will: Grow the Credit Insurance business to 200m by2006, delivering 15% return on sales.
Deliveringoutstanding serviceat reasonable prices anddelivering greater retention.
Delivering significant growth from new sales
developing integrated and aligned new offerings andthen taking them to new markets.
achieving greater trade sector alignment
Creating a culture of innovation and performancewithin our business.
in order to: Turn the UK business into a leading performer within
GERLING NCM, securing its future and the future of our
people
St ra t egic Di rec t ion St a t em entSt ra t egic Di rec t ion St a t em ent
by:
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The Current St a t eThe Current St a t e
See the wall charts
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Current St a t e Sum m aryCurrent St a t e Sum m ary
27.43.628140Worst case (JUMP)
27.23.619933Worst case (BUS)
17.70.2657.25Typical (JUMP)
0.40.1181Typical (BUS)
MaxMinMaxMin
Resource (man-days)Time Line (days)
F t f t h t t tF t f t h t t t
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Feat ures o f t he c urrent s t a t eFeat ures o f t he c urrent s t a t e
Customers information comes in to many possible locations.
Lots of delays
Lots of reworking information key information not availablewhen required.
Dont talk to each other across departments
Authorisation based on value, not on risk causing significantdelays
We have 77,500 applications for 5k or less (26%) 64% are for SME customers
F t f t h t t tF t f t h t t t
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Feat ures o f t he c urrent s t a t eFeat ures o f t he c urrent s t a t e
Customer doesnt follow rules and neither do we!.
Risk averse at the moment automatic underwriting not beingapplied.
Using the wrong measures and targets driving departmental
behaviour.
Cross-country targets and standards / criteria are different.
Currently employing 1 FTE person just to input applications
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Analysing t he m apAnalysing t he m ap
Major Wastes / Issues Root causes Opportunities
Process Cultural Process Cultural
Multiple points of entry. Someget delayed and some may getlost causing delays and lostapplications (10% of applicationsdont use the on-line system) *
No overallsingle point ofentry for
customers.
People dontlike sayingNO to
customers.
Enforce a singlepoint of entryfor customers
that do not usethe on-linesystem.
Ensure that allpossiblecustomers usethe system onall possibleoccasions.
Educateinternal staffand customers
to help to buildrelationships.
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Fut ure St a t e Sum m aryFut ure St a t e Sum m ary
6.51.7100.2519.67Worst case (JUMP)
6.51.799.2518.67Worst case (BUS)
0.20.122Typical (JUMP)
0.10.021Typical (BUS)
MaxMinMaxMin
Resource (man-days)Time Line (days)
Th B fi tTh B fi t
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The Benefi t sThe Benefi t s
5.015.560.0160.5Worst Case
0.29.02.036.1TypicalJump
5.015.459.0116.0Worst Case
0.10.31.59.5TypicalBus
FutureCurrentFutureCurrent
ResourceTime Line
Average of72% reduction
Average of69% reduction
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Lean Sales Ac quis i t ionLean Sales Ac quis i t ion
ProcessProcess
St ra t egic Di rec t ion St a t em entSt ra t egic Di rec t ion St a t em ent
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We will: Grow the Credit Insurance business to 200m by2006, delivering 15% return on sales.
Deliveringoutstanding serviceat reasonable prices anddelivering greater retention.
Delivering significant growth from new sales
developing integrated and aligned new offerings andthen taking them to new markets.
achieving greater trade sector alignment
Creating a culture of innovation and performancewithin our business.
in order to: Turn the UK business into a leading performer within
GERLING NCM, securing its future and the future of our
people
St ra t egic Di rec t ion St a t em entSt ra t egic Di rec t ion St a t em ent
by:
Th l
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The p lanThe p lan
We had already completed mapping work within the UKdivision and had identified major savings within their
Order Fulfilment processHaving improved the speed & quality of their existingoffering to existing customers, they then needed to turntheir attention to growing new business
The plan was to map their current Sales AcquisitionProcess and look at designing an improved process at noadditional cost to the business
REFCLA Goes Into Working Tray Receiving Information
Participants/Stakeholders Time Line Resources Standards/CriteriahasesRS CST AM IF CUST BUYER Min Max
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n
Y
Y
+2-3 days
Y
*
+2-3 days +2-3 days + 1-2 days
Y
+1day
Y
110 days
1
1
2-3 days
3-13 days
ALLRS Allinfoavailable
1 min
15-25 mins
21-26
5-10 mins
26-36 mins
Before it is looked atquery 10 day print?!
All info either + or Info available online,in system
Within AuthoritiesWithin TPE levels
sub
70% of cases we haveenough info tounderwrite on
Issue: Cancellation ofCLA why wouldU/W?
Info to CST
REFCLA into
W/F Tray
Take
Decision
Decision
Taken
Info to U/W
Meeting
Decision Taken
DecisionTaken
Policy Breach
Meeting Meeting Meeting Meeting
Ring
Customer
Ring Customerfor further info
Confirmation
of Decision
Ring Buyer? Meeting withBu er
Info can beprovided
Pol Decision
Analyse Info
Info toCST
Info to CSTInfo to CST
Meeting for
further Info
Future State REFCLA goes into Workflow Tray & Receiving Information
Participants/Stakeholders TimeLine
Resources StandardsPhases
Risk Services Account Mngr Customer Buyer
N
Y
NY
N
Y
0
1
6-16 mins
10 mins
5-10 mins
21-36mins
Automatic allocation (to Invo. U/W)
Within Authorities Within TPE levels
Mandate to enable U/Ws to divulgecustomer name (our insured) when
contacting buyer for information
Customer & Buyer details are correct onthe system
Buyer/UW contact encouraged to helpbuild relationships for portfolio control
(Feasibility of someone else sourcing infofor UW work already completed not
practical in this context)
Process in place to capture up to dateinfo for active buyers
AU Principles & practicalities agreed
Across group- What if examined to ensure max %
(X) automatically underwritten
Main speed of service target =noREFCLA in any tray older than X days
Fully utilise credit check facility(review threshold of 10K? & pricedifferential between credit check &
credit limit)
Group wide agreed priority progressin place
Authority thresholds are value at risk& lay with nominated individuals rather
than committee
Interface system errors resolvedwithin 24hrs
Small limits thresholds reviewed
Reduce amount of paper sent toimaging
Quality measure to be defined
RECLA intoTra
Credit Limit
Decision
Letter
Meeting
for info
Info is
provide
Take
Decision?
Look at Case
& A nal se
Info to
Underwriter
Analyse
Info
Take Decision?
Credit Limit
Decision Issued
Credit Limit
Decision Issued
PolicyBreach
Meeting for
Info
Current state Four Fields map
Future state map
Mapping t he SalesMapping t he Sales
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Mapping t he Salespp g
Ac quis i t ion Proc essAc qu is i t ion Proc ess
ThTh
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Lean in the Of f ice & Serv ice Sec tor 55
The m apsThe m aps
Wh t f dWhat w e found
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What w e foundWhat w e found
The business operated almost 100 % via brokers to whomthey were paying commission of 15% direct to the brokers
- 15.5mThe brokers were not giving good value for money andwere not accurately interpreting the VOCThe conversion rate for enquiries was very low
On the very odd occasion where they dealt with thecustomer direct, the level of conversion was very high over 80%No cohesive marketing strategy to support the SalesAcquisition Process hence low enquiry levelThe company were effectively order takers as opposed toorder getters
The proc essThe proc ess c ur rent s t at ec ur rent s t at e
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The proc essThe proc ess c ur rent s t at ec ur rent s t at e
Phase 1 Phase 2 Phase 3 Phase 4 Phase 5
SettingDirection
SellingIn
SellingOn
MakingContact
MarketResearch
current
Enquiry
rate
Conversion
rate
Retention
rate
25% 8 % 75%
0%
50%
100%
No
Stra
tegy No
Marketing
What w e didWhat w e did
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What w e didWhat w e did
We devised a new future state Sales Acquisition Processwith the team which removed their sole reliance onbrokers and enabled them to get a clear understanding ofthe Voice of the Customer
We devised a new sales structure to help them achievethis
We identified the skills required at each phase of theprocess
We identified the need for measures & targets at each
phase of the processThe new process will enable major sales performanceimprovement at no additional cost to the business
How t he fut u re st a te c omparedHow t he fut u re st a te c ompared
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How t he fut u re st a te c omparedHow t he fut u re st a te c ompared
Phase 1 Phase 2 Phase 3 Phase 4 Phase 5
SettingDirection
SellingIn
SellingOn
MakingContact
MarketResearch
Current
Enquiryrate
Conversionrate
Retentionrate
25% 8 % 75%
50% 50% 95%
0%
50%
100%
Future
Got
astra
tegy G
otaplan
The Proc ess Benef i t sThe Proc ess Benef i t s
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The Proc ess Benef i t sThe Proc ess Benef i t s
-0.33%-0.46%
3514.5946.2 Renewal P rocess (key acct &global)
-10%
-20%
-
0.67%-
0.61%
0.40
0.80
30.40
47.8
0.5
1
91
121.5MinMax
6.1 Renewal process (Reg & SME)
-35%-84%-78%
-25%-68%-59%
0.752.20
3
334759
1.1513.513.5
44145145
MinMax
5. Servicing
-88%
-24%-24%
-38%
-38%-65%
0.65
4.004.00
35
8484
5.25
5.257.9
91.5
128180
Reg &
SME KeyAcctGlobal
4. Enquiry accepted to closu re
See 4See 4See 4See 40.09-0.12
1.23. Enquiry Received(accepted/rejected)
10.00%-0.72%
25.42179962. Strategy - targetingcustomers/sectors
See 2See 2See 2See 21450
( 700)
Per TS1. Trade Sector Developm ent (per
TS)
ResourcesDays
TimeDays
Resources Days
TimeDays
Resources Days
TimeDays
Phases
ChangeFutureCurrentCredit Insurance
Average of40%reduction
Sales Closurespeed
Average of 50%reduction inman hours
Business Benefi t s Sum m aryBusiness Benefi t s Sum m ary
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Business Benefi t s Sum m aryBusiness Benefi t s Sum m ary
Much improved levels of enquiry from 25% to 50%
Substantial conversion rate improvements from 8% to 50%
Much improved bottom line performance (15.5m Commission)
Major reduction in Customer waiting time identified over 40%
Dramatic reduction in man hours identified - over 50%
Planned Sales growth being achieved - 145m to 200m by 2006
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Aust ra l ian CaseAust ra l ian Case
Type One Orde rsType One Orders Current St a t eCurrent St a t eExamples of theUnderlying Cost
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Level 2 Sum m aryLevel 2 Sum m ary
Average process time 56 minutes
Delays 45.3 minutes (81%)
Transport 8.5 minutes (15%)
41 people actions
O T I D
TRIGGER RECEIVE ORDER (PHONE) ADMINISTRATION 2.4 7 2.2 0.21 WRITE ORDER TO STARTRACK ADMINISTRATION 6 1.6 11 1.0 0.2 0.4
2 CREATE DESPATCH LABEL ADMINISTRATION 8 16.8 10 1.7 0.1 15.0
3 ENTER ORDER CELLAR DOOR 49 13.3 3 1.6 1.2 10.54 PROCESS PAYMENT & TO DESPATCH CELLAR DOOR 51 21.8 10 2.4 19.4
114 56 41 1.6 8.5 0.5 45.3Total
Ave Time
(Minutes)
People FLOW (MINUTES)Number Step Area Distance
(Metres)
Australian Wine Producer
Type One Orde rsType One Orders Current St a t eCurrent St a t eExamples of theUnderlying Cost
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Ident i f ied Areas of Oppor t un i t yIdent i f ied Areas of Oppor t un i t y
Geographic location of functions (Admin, Cellar Door, Despatch)
Separation of order taking and order entry
Delays due to the manual transportation of information
Frequent small transportation steps of information
Type One Orde rsType One Orders Fut ure St a t eFut ure St a t eExamples of theUnderlying Cost
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Level 2 Sum m aryLevel 2 Sum m ary
O T I D
TRIGGER ENTER ORDER & PROCESS PAYMENT ADMINISTRATION 1.9 6 1.1 0.7 0.11 WRITE TO STARTRACK ADMINISTRATION 6 0.6 5 0.62 CREATE DESPATCH LABEL & TO DESPATCH ADMINISTRATION 8 36.2 10 1.7 0.1 34.4
14 39 21 1.1 3.0 0.2 34.4Total
Ave Time
(Minutes)
People FLOW (MINUTES)Number Step Area Distance
(Metres)
Lead time reduced by 17 minutes (30%) from 56 minutes to 38.7 minutes
Delay reduced by 10.9 minutes (24%)
Transport reduced by 5.5 minutes (64%)
People interactions reduced by 20 (48%)
Due to removal of one geographical location the movement of people isreduced
Type One OrdersType One Orders
Fut ure St a t e Sum m aryFut ure St a t e Sum m ary
Examples of theUnderlying Cost
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Fut ure St a t e Sum m aryFut ure St a t e Sum m ary
Average
Process time
mins
Delay Time
(mins)
Transport Time
(mins)
Delay
Frequency
ste s
Transport
Frequency
ste s
Geographic
Locations
Current State 56 45.3 8.5 4 38 3
Future State 39 34.4 3.0 2 20 2
Reduced by 30% 24% 64% 50% 47%
Type Tw o OrdersType Tw o Orders Current St a t eCurrent St a t eExamples of theUnderlying Cost
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Level 2 Sum m aryLevel 2 Sum m ary
Average process time 4418 minutes Delays 4318 minutes (98%)
Inspection 14 minutes (0.003%)
Picking transport 62 minutes (1.5%)
Manual transport 22.8 minutes (0.5%)
36 people interactions
Type Tw o OrdersType Tw o Orders Current St a t eCurrent St a t eExamples of theUnderlying Cost
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Ident i f ied Areas of Oppor t un i t yIdent i f ied Areas of Oppor t un i t y
Order visibility.
Stock visibility to allocation sheet. Manual transportation of information.
Visibility of up to date stock on hand and location.
Manual creation of picking slip. Stock accuracy.
Warehouse space.
Aged and obsolete goods (150 pallet positions identified) Broken pallets at fronts of rows (due to Cellar Door).
Type Tw o OrdersType Tw o Orders Fut ure St at eFut ure St a t e
Est im at ed Leve l 2 Sum m aryEst im at ed Leve l 2 Sum m ary
Examples of theUnderlying Cost
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-- Es t im at ed Leve l 2 Sum m aryEst im at ed Leve l 2 Sum m ary
Lead time reduced by 1,576 minutes (36%) from 4418 minutes to 2842.1
minutes Delay reduced by 1558 minutes (36%)
Transport reduced by 4.8 minutes (5%)
Inspection reduced by 13.3 minutes (92%)
People interaction reduced by 21 (58%)
Distance travelled reduced by 241 metres (80%)
All wasteful activity has been minimised
Type Tw o OrdersType Tw o Orders
Examples of theUnderlying Cost
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Fut ure St a t e Sum m aryFut ure St a t e Sum m ary
Average
Process time(mins)
Delay Time
(mins)
Transport Time
(mins)
Inspection Time
(mins)
Delay
Frequency(steps)
Transport
Frequency(steps)
Inspection
Frequency(steps)
Geographic
Locations
Current State 4418.2 4318.0 84.8 14.4 8 25 7 2
Future State 2842.1 2760.0 80.0 1.1 3 11 1 1
Reduced by 36% 36% 5% 92% 62% 56% 85%
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Where do w e go f rom here?Where do w e go f rom here?
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Any Questions?