Lean Process Management in the Service Industry

Lean process management in the service industry is a relatively new concept, and has yet to gain industry-wide support. It has been carried out successfully in select cases, although the traditional model for lean manufacturing cannot be followed exactly; lean can and must be modified in order to use it in the service sector.

Applied Example of Lean Service

At the life insurance provider Jefferson Pilot Financial (JPF), the lean model was applied successfully to their service organization in 2000. By treating the processing of insurance policies as a "manufacturing" process, lean manufacturing concepts could be more easily applied. The progression of an insurance policy could be broken down into several steps: application, underwriting, risk assessment, and issuance. By focusing on these main items and reducing all other wasteful steps in the process, the company saved substantial amounts of time and money. Reported in The Harvard Business Review: JPF reduced time from application to policy issuance by 50%, labor costs dropped by 26%, and reissues due to errors fell by 40% (Swank 124).

Adaptation to Lean Service

Many of the concepts of lean manufacturing can be used within the service industry. A pilot project to experiment on the small scale and refine the process is a good way to begin implementation of lean. Automation can take the form of computer programs, set up to do menial tasks, assigning rules to incoming email and using auto forward options in email, and having reports automatically generated and sent to appropriate people. Organizing sequential service processes geographically next to each other, instead of departmentalizing by specialization, or focusing on Takt, or the allowable amount of time per process in the sequence. Standardization can take the form of organizing files and the way forms are filled out. One of the difficulties in adapting lean concepts is related to the nature of the product of the service industry. As services cannot usually be "stocked" for times of high demand, like inventory in a manufacturing environment, an area of concern is service output "smoothness". This can leave human resources unused at times, and possibly requiring a flexible workforce. It was suggested by Bertels that in the case of a service industry such as an insurance company, "stabilizing the process requires that the first process to act as the pacemaker and to release new work in fixed quantities" (3). Here he is referring to insurance applications being released at a steady rate to the staff to try and maximize the "smoothness" of the work flow. This process could apply to any service that requires sequential steps be taken to obtain a finished product.

Opposition to LeanService

Employees may not like the lean adaptation of their work environment, some simply for the fact that "Things were fine the way they were." Some may view one of the "perks" of their job to be the variable demand for service, especially during periods of low volume. Many people choose not to work in a manufacturing environment for a reason. Others in the service industry may take pride in their ability to work autonomously. Treating service workers as steps in a "manufacturing" process could prove problematic; the idea of Takt may seem particularly inhumane, by setting standard times for completing a task, making one feel like a production robot.

Conclusion

As you can see, just about all the concepts of lean can be adapted for use in the service sector, but since it is not extremely popular, it is slow to be adopted. Many organizations would prefer to wait until someone else has used and perfected a new technique, and just copy the example. As with any new management or operations approach to be adopted by an organization, care should be taken to integrate it fully with current practices, or eliminate contradictory approaches. If lean is simply added to the current service management style, chaos can ensue, and management buy-in will never come to fruition. In order for lean services to work, a balance must be struck between standardization and automation, and the freedom to make decisions as an individual; ultimately, attention must focus on the elimination of wasteful steps in the process, and the efficient completion of value-added steps, not turning the service organization into a manufacturing plant.

Works Cited:

Swank, C. (2003), "The lean service machine", Harvard Business Review, October, pp.123-9.

Bertels, Thomas. (2006), "A Lean-Six Sigma Duo for the Office - A Case Study", http://improver.biz/uploads/files/A_Lean-Six_Sigma_Duo_for_the_Office.pdf, pp.1-4.

Abdi, F., Shavarini, S., Hoseini, S. (2006), "Glean lean: how to use lean approach in services industries?", Journal of Services Research, special issue, Vol. 6 pp.191-206.