Managing Operations Assignment

Executive Summary

The objective of this report based on the case study on ICICI Bank, is to provide the current state

of the claims process and how an efficient and ideal claims system should be, by implementing

with 5S technique and Lean Office in the bank. Claims management is one of the key business

processes which have a direct impact on Customer Satisfaction and overall relationship with the

carrier. Based on various survey results, average customer satisfaction is ‘Poor’ after going

through the claims process. This kind of resource intensive function will result in such poor

customer satisfaction.

ICICI Bank, being the second largest in the banking industry in India, with assets worth of

US$99 billion, with subsidiaries in Europe, North America and Asia, notably in Malaysia,

Singapore and Indonesia, ideal claims should be efficient or it will result in customer

dissatisfactions. As banking services are becoming more mature in age and volumes, the number

of claims arising will also increase. Constantly changing market conditions puts greater demands

in the service sector to focus more on customers and what actually adds value to them. Lean has

during the last decades had a great impact within the manufacturing industry, creating a whole

new competitive advantage if mastered.

In claims processing, the main goal of an organization is to decrease claim processing cost. The

same can be achieved by reduction in the claims processing TAT (turnaround time) and

improvement in their closure rate. This, in turn, will not only help the bank reduce the

operational claims expenses but also result in better customer satisfaction.

Table of contents

Introduction 4

1.1 Overview of ICICI Bank 4

1.2 Lean Services 5

Main Body

2.1 Defining the problems 8

2.2 5 S 9

2.3 What is 5 S 9

2.4 5 S as a part in Lean Services 11

2.5 Managing claims efficiently 11

2.6 Redesigning the Process 12

2.7 Lean process improvements with Lean Principles 13

2.8 Lean and six sigma approaches are just “fads” repacked from

Total Quality Management (TQM). Agree or disagree? 14

Conclusion 16

References 17-18

Word count: 3.913

Managing Operations – Assignment of 18

Introduction

1.1) Overview of ICICI Bank

ICICI Bank is an Indian multinational banking and financial services company headquartered in

Vadodara. As of 2014 it is the second largest bank in India in terms of assets and market

capitalization. ICICI Bank’s total assets of Rs.5,946.42 billion (US$ 99 billion) at March 31,

2014 and profit after tax Rs.98.10 billion (US$ 1,637 million) for the year ended March 31,

2014. ICICI Bank offers a wide range of banking products and financial services for corporate

and retail customers through a variety of delivery channels and specialized subsidiaries in the

areas of investment banking, life, non-life insurance, venture capital and asset management. The

Bank has a network of 3,800 branches and 11,162 ATMs in India, and has a presence in 19

countries.

ICICI Bank is one of the Big Four banks of India, along with State Bank of India, Punjab

National Bank and Bank of Baroda. The bank has subsidiaries in the United Kingdom, Russia,

and Canada; branches in United States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and

Dubai International Finance Centre; and representative offices in United Arab Emirates, China,

South Africa, Bangladesh, Thailand, Malaysia and Indonesia. The company's UK subsidiary has

also established branches in Belgium and Germany.

ICICI Bank was established by the Industrial Credit and Investment Corporation of India

(ICICI), an Indian financial institution, as a wholly owned subsidiary in 1994. The parent

company was formed in 1955 as a joint-venture of the World Bank, India's public-sector banks

and public-sector insurance companies to provide project financing to Indian industry. The bank

was initially known as the Industrial Credit and Investment Corporation of India Bank, before it

changed its name to the abbreviated ICICI Bank. The parent company was later merged with the

bank. ICICI's shareholding in ICICI Bank was reduced to 46 percent, through a public offering

of shares in India in 1998, followed by an equity offering in the form of American Depositary

Receipts on the NYSE in 2000. ICICI Bank acquired the Bank of Madura Limited in an all-stock

deal in 2001 and sold additional stakes to institutional investors during 2001-02.


In the 1990s, ICICI transformed its business from a development financial institution offering

only project finance to a diversified financial services group, offering a wide variety of products

and services, both directly and through a number of subsidiaries and affiliates like ICICI Bank.

In 1999, ICICI become the first Indian company and the first bank or financial institution from

non-Japan Asia to be listed on the NYSE. In 2000, ICICI Bank became the first Indian bank to

list on the New York Stock Exchange with its five million American depository shares issue

generating a demand book 13 times the offer size.

In October 2001, the Boards of Directors of ICICI and ICICI Bank approved the merger of ICICI

and two of its wholly owned retail finance subsidiaries, ICICI Personal Financial Services

Limited and ICICI Capital Services Limited, with ICICI Bank. The merger was approved by

shareholders of ICICI and ICICI Bank in January 2002, by the High Court of Gujarat at

Ahmedabad in March 2002 and by the High Court of Judicature at Mumbai and the Reserve

Bank of India in April 2002.

1.2) Lean Services

Lean services, is the application of the lean manufacturing concept to service operations. It is

distinct in that Lean services are not concerned with the making of ‘hard’ products. To date,

Lean principles of Continuous Improvement and Respect for People have been applied to all

manner of services including call center services, health care, higher education, software

development, and public and professional services. Conceptually, these implementations follow

very similar routes to those in manufacturing settings, and often use some of the same tools and

techniques. There are, however, many significant distinctions and the same tools can be applied

in different ways. A number of significant service sector organizations have come together to

form The Lean Service Forum to share knowledge, learn from each other and understand

different lean journeys.

Lean production has derived from TPS, which is a Japanese production philosophy. Since 1960

the TPS had its main impact on the manufacturing industry, presenting a whole new way of

thinking that often resulted in a sustained competitive advantage. During 1980-90, a large survey

of Japanese, American, and European car manufacturers was carried out, comparing these to

distinguish what separates Western production philosophies from Eastern. The survey resulted in


a book called; The Machine that changed the world, this book started a movement all over the

world towards Leaner way of manufacturing and has had many followers over the years.

During the last decade Lean production has after a successful track record in manufacturing

context, made its way into the service industry, foremost within hospitals and financial services.

Results from numerous surveys show that the translation of Lean production to match service

processes has not been all that easy and have sometimes resulted in stressed personnel, insecurity

and resigning employees.

Lean production was developed to reduce waste and improve quality, to do more with less, in a

manufacturing context. In an assembly line or machine park processes are visible and less

complex to identify in comparison with a service working environment. Wastes like stock and

excess tools in a manufacturing context are easily identified and eliminated and processes can be

improved just by rearranging assembly stations or machines.

In a service context products and production processes are not as visible and waste is not as easy

to identify. This makes the initial steps when implementing Lean production more complex and

often companies don’t adapt Lean as a concept or philosophy. Many companies don’t seem to


realize that implementing Lean production means to change the entire organizations values and

culture to fit Lean and not the other way around. ICICI Bank that it is operated from top-down,

something that will create some problems concerning the implementation of the Lean culture’s

flat organization with a free information flow and low-level decision-making. Organizations

must move the decision making down to levels that carries the proper knowledge instead of

going through layers of managers. An open information flow is an essential factor to create

cross-functional teams; this gets employees involved and helps to create the big picture. The

fundamental base in Lean is to involve everybody in the organization and creating a new way of

thinking.


Main Body

2.1) Defining the problems.

Looking at the current state of claims handling, A service sector like ICICI Bank claims center is

responsible for examining a claim and determining whether a claim is to be paid out or not based

on policy guidelines. A claim enters the center in a digital or manual format, where some claims

are automatically processed (using computer systems), while others are sent through to a team,

known as adjudicators, who will further evaluate the claims. From there a claim is sent through

an auditing process based on the amount where one or more auditors will check the claim and

appropriately adjust the claim if needed. Even with all of these checks in place, a claim may be

incorrectly paid out, paid in the wrong amount or denied when it should be approved.

There is a high variance in claim types and complexity, making it difficult to predict the time it

takes to complete the work. In addition, claims are currently processed by the first available

adjudicator taking on any incoming workload. This high variance makes it very difficult to

understand through put and the variance in quality.

To understand how Lean can be applied to administrative functions, it helps to think of

information as the product of the front office. If information is tied up in someone’s in basket or

otherwise idle, that explains why the lead time is so long. Another common problem in the front

office is the lack of an understanding of the total process and how all jobs are interconnected.

Employees focus on their own job responsibilities and departments work to meet departmental

measures, but no one has stepped back and asked, How does this whole process satisfy the

customer?


Current work breakdown structure is as per the figure bellow.

2.2) 5 S

5S is a basic, fundamental, systematic approach for productivity, quality and safety improvement

in all types of business.

2.3) What is 5 S?

5 S (Five S) is usually a part of, and the key component of establishing a Visual Workplace and

are both a part of Kaizen - a system of continual improvement - which is a component of lean

manufacturing. 5 S focuses on: having visual order, organization, cleanliness, standardization.

The results you can expect from a 5S program are: improved profitability, efficiency, service and

safety. The principles underlying a 5S program at first appear to be simple, obvious common

sense. And they are. But until the advent of 5S programs many businesses ignored these basic

principles.

5S was developed in Japan and stands for the Japanese words seiri (tidiness), seiton (orderliness),

seiso (cleanliness), seiketsu (standardization), and shitsuke (discipline). These words have been

adopted to English to maintain "5S."


“Sort”

Remove from the workplace all items that are not needed for current production (or office)

operation.

· Sorting means leaving only the bare necessities

· When in doubt, throw it away

“Set in Order”

Arranging needed items so that they are readily accessible and labelled so that anyone can find

them or put them away.

“Shine”

Sweep and clean the work area. The key purpose is to keep everything in top condition so that

when someone needs to use something, it is ready to be used. Cleaning a work area produces and

opportunity to visually inspect equipment, tooling, materials and work conditions.

“Standardize”


Define what the “normal” condition of the work area. Define how to correct “abnormal”

conditions. The standard should be easily understood and easy to communicate (i.e. visual

controls).

“Sustain”

Implement solutions to address the root causes of work area organization issues. All employees

must be properly trained and use visual management techniques.

2.4) 5 S as a part in Lean Services

Lean Services as a whole is a production practice that eliminates waste for the aim of creating

value. 5S is considered a tool of lean that combines with other lean tools such as Kanban,

Kaizen, TPM and other lean manufacturing techniques to create the most efficient workplace

possible. 5S is generally considered a good place to start as a pilot program for lean

manufacturing due to its five basic principles and how it organizes the workplace.

2.5) Managing claims efficiently

Managing the claims process more efficiently, aligning it with corporate business objectives and

achieving real-time operational awareness are high priorities for bank. Previous attempts to

improve the process have typically been limited to speeding up a series of often inefficient and

disconnected processes or of reducing manual steps. To significantly improve claims

management and give themselves the ability to adapt quickly to changing circumstances, bankers

must make more profound infrastructure changes that align claims processing with corporate

objectives for customer service, operational cost, and risk management.

To modernize their claims processing, bankers must address the three sides of the claims

triangle:-

• Reduce operational expense through increased efficiency and productivity throughout the value

chain.

• Improve service levels by implementing a faster, more visible, and more consistent approach to

claims settlement.

• Reduce indemnity cost through leakage control and pro-active fraud management.


In planning for changes and enhancements in claims processing, bankers must not lose sight of

the importance of customer satisfaction. While cost control is an important objective, so is

maintaining the highest possible quality of service and best possible customer experience.

2.6) Redesigning the Process

This discovery leads to adopt a variation of the U.S. Marines’ ideal of “Every man a rifleman.”

For bankers, this should come as “Every staff member a claims payer.” If necessary, everyone in

the company ought to be able to process the simplest of claims, and if needed to hire extra staff,

should be able to pull them off the bus stop outside our conference room window and teach them

to pay claims in an afternoon!

Accepting this as a goal, the process needs to be redesigned to support it. Instead of one manager

pushing claims out to individuals as she saw fit, the new process involved a team of experienced


processors classifying claims and forwarding them to a holding area for each classification. Each

class has standardized work and each staff member is certified to work on various classifications.

Now there is a pull system: a processor logs into the holding area for his or her level of

certification, takes up to a prescribed maximum, processes the claims, and pulls the next batch. If

the processor processes according to his or her training and the standard work, mistake proofing

is built in (no, I didn’t know what a poka yoke was — it was just common sense).

Before implementing the new process, it should be tried out. It could be measured how quickly

claims in each of the classifications could be processed, and all of them could be faster than the

old process.

Most of the improvements to the new process should come from the frontline workers. They

should know what body of knowledge was required for each classification. They would be

helpful to see potential failures ahead of time and will be helpful to find solutions as well.

Bankers should buy-in from them because they should be honored for their knowledge and

contribution to the company. Claims processors take pride in serving the customers, and

definitely they will not like it when they were falling behind.

Beyond training and re-training the claims processors, will certainly make everyone in the

company a claims processor. Every employee, from the C-suite down, had to take the claims

training for the lowest classification and pass the test with a score of 100 percent. This will give

a great resource from ending up behind schedule with processing. It also will improve the

customer service in which the bankers able to give in the call center and increased first call

resolution. Each year should require everyone to take a refresher course and pass the test again.

2.7) Lean process improvements with Lean Principles

Lean Process Improvement Step 1: Create a value stream map. Begin by observing end to end

process, setting aside time for interviews as needed. This will help to start with a high level idea

of the flow when we sit with both managers and frontline employees to get feedback and

understand the process from receiving a claim to paying out or denying a claim. Though

managers have a better idea of external flows and reporting, the details of the day – to – day

work is much more accurately captured by the folks doing the regular activities (it may be


helpful to have these sessions separately so individuals can speak more candidly). The value

stream map that created will breaks out the work by functions, the flows of different types of

work, exceptions, etc.

Lean Process Improvement Step 2: Analyze the workload. During this step we understand all of

the different types of incoming work, the complexities posed by each type of claim and payout

ranges. We should also create a logical categorization of the claim types. This categorization

helps to further identify claims with greater complexity that may need specialized groups to

handle them and simple claims that may be candidates for automation going forward.

Lean Process Improvement Step 3: Learn from the leaders. Lastly work with top performers to

understand tips and tricks they may have to share with colleagues. We can create a process of

continuous improvement by creating incentives to increase regular feedback, which helps to be

progressive in the approach to the claims handling process by taking greater input from frontline

workers. Many tools can also be developed based on this feedback to decrease wasteful

approaches to various activities. Working closely with top performers allows understanding the

plausibility of achieving more aggressive targets and realigning our metrics to create a more

productive work environment.

2.8) Lean and six sigma approaches are just “fads” repacked from Total Quality

Management (TQM). Agree or disagree?

The more recent concepts of Lean and Six Sigma have mainly replaced – but not necessarily

added to – the concepts of JIT and TQM. Lean and Six Sigma are essentially repackaged

versions of the former, and the methods seem to follow the fad (product) life cycle. The literature

offers fairly similar and rather general CSF for these methods, e.g. top management support and

the importance of communication and information. What seems to be missing, however, is the

need for a systemic approach to organizational change and improvement.

A prediction is, given the fad or product life cycle phenomenon, that there will be a new method

promoted soon, something perhaps already experienced with the borderline preposterous concept

of Lean Six Sigma. On the other hand, based on the gap in time between both JIT and lean, and

TQM and Six Sigma – a gap filled by BRP/reengineering – the next method will be process

oriented.


One could argue that the nature of the transitions from TQM to six sigma and from JIT to the

lean follow fad phenomena. Comparing the goals, approach, tools, history and CSF of these

methods, as well as reviewing the publication frequency in academia, the conclusion is that lean

and Six Sigma essentially share the same fundamental approach to change with JIT and TQM.

Furthermore, the ideas behind JIT and lean are not that different from the ideas in the quality

movement either. One difference could be the historical focus on the manufacturing industry of

JIT and lean. An obvious prediction is, given the fad or product life cycle phenomenon, that

there will be a new method promoted soon, something we perhaps are already experiencing with

the borderline preposterous concept of Lean Six Sigma. On the other hand, based on the gap in

time between both JIT and lean, and TQM and Six Sigma – a gap filled by BRP/reengineering,

the next method will be more process oriented.

In addition, since history does not repeat itself but it often rhymes, organizations should view

any new promoted change method critically – is it a fad or does it offer something substantially

new? There are tools, techniques and useful experiences from any change method. A major

contribution of the BPR movement, for example, is the importance of cross-functional processes,

not just processes, but cross-functional processes. Properly used, these tools can help an

organization improve performance. Finally, the importance of placing organizational change and

improvement methods in general under a systemic (process management) umbrella cannot be

overstated. This will increase organizational readiness for change and thus, hopefully, increase

probability of implementation success.


Conclusion

Claims processing is one among many critical banking service functions; it does not exist in

isolation. Dynamic claims processing approach recognizes the need to integrate claims

processing with other key functions and manage the process for maximum efficiency, visibility,

and flexibility. Implementing and receiving the benefits of active claims processing does not

require starting from scratch—it leverages existing front and back office systems to deliver

enterprise wide processing and connectivity. It is modular and implements BPM to standardize

processes and SOA to create reusable services. It improves the flow of information from claims

to servicing to underwriting to marketing, thereby enhancing an organization agility and

responsiveness to changing conditions. By enabling determined claims processing, it makes

possible for bankers to reduce risk exposure, improve customer service, control costs, and adapt

to change more quickly and easily—all of which can contribute to a much-improved competitive

position. Better use of technology, such as better claim solutions, telemedicine, etc. can

efficiently provide better customer services too, assuming the local infrastructure is in place to

take advantage of it.

Thus, I would like to recommend to the CEO of ICICI Bank of the above theories, frameworks,

techniques, whereby I have provided a concise overview of Lean Services and analysis which I

have done with environmental factors and technology changes. By analyzing and undertaking the

implementation of 5S techniques and Lean office and its various key components to derive and

support possible reasons that explained the strengths and weaknesses related to ICICI Bank. I

hope these will help to elevate the success in the business.


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Managing Operations Assignment

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