1. © 1998 by Prentice-Hall Inc Russell/Taylor Oper Mgt 2/e Chapter 15 Lean Operations in Services and Support Functions

2. 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

3. 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 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

4. 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.

5. 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.

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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

13. Principles of Lean Services Waste Elimination (2) l Multi-functional workers are trained to perform varied tasks l Use promotions and pricing to level demand l Eliminate interruptions or delays due to poorly maintained equipment, inadequate computer capacity, etc.

14. Principles of Lean Services Waste Elimination (3) l Set standards for suppliers, and certify suppliers Standards may include cost, quality, on-time delivery, frequent delivery, product flexibility, volume flexibility, design assistance l Reduce inventories by requiring suppliers to deliver frequently, when that is economically feasible l Track inventories using bar codes or RFID l Track sales trends, and order accordingly

15. 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

16. 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)

17. 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 - This requires training

18. Ch 15 - 28 © 1998 by Prentice-Hall Inc Russell/Taylor Oper Mgt 2/e Principles of Lean Services Total Quality Management (4) 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