Lean has made inroads in the Services industry but has considerably more opportunity for implementation. While it is fairly well accepted that Lean can do much for manufacturingit is less appreciated in the Services industry where it struggles to be recognized as a valid option to explore, much less implemented. Most of the delay stems from the belief that Lean does not apply to service functions. I come from a manufacturingbackground and Lean seemed a practical solution for me. Now that I work in the financial services industry, applying Lean to transactional processes has been a challenge of acceptance. I admit that even I hesitated momentarily when initially contacted for my current position. My manufacturing friends scratched their heads and asked“How does Lean apply to a financial services company?” I’ve found that it typically takes a few good examples and a reference or two to Lean Principles for the twinkle of recognition to light in their eyes. I’d like to share some of my experienceswith you in the hopes that your existing lean implementation will be more successful and rewarding; And if you haven’t begun using Lean for transactional processes yet, in an effort to light a twinkle in your own eye.

Although it may seem surprising at first applying the traditional Lean approach works very well in a service industry. Establishing a culture of Lean is the same as for any other industry and while I consider this the most difficult and critical activity for the success of Lean this article only addresses the use of Lean tools. I mention the culture change to emphasize the importance of this step and to encourage you to spend time establishing a Lean culture. The initial phase of creating the Lean Heart or Philosophy (desire and intention) is fundamental to creating the Lean Mind (techniques and tools).

Lean applications in the transactional world are often difficult to see even though the problems are essentially the same: wastes, sub-optimizations and only vague understanding of the process. Using Lean in these environments calls for a slightly different mindset however – any sleuthing skills will come in handy! Clearly identifying the potential areas for improvement is challenging because almost all of the transformations are done electronically and therefore are privy to only a few people at anyone time. The processes are too often gigantic “black boxes”. Sometimes knowledge of the process may be limited to the step that the person performs and perhaps the previous or next step. Typically there is an absence of ownership for processes; in fact what is a process is often not even recognized or identified as a process but is instead a chopped up procession of hand-offs with individual steps being performed by various people and departments. No one owns the process and even determining who could potentially own the process is problematic since a wide variety of people have portions of the process under their area of authority (the typical “silo” arrangement).

Added to all of these difficulties is the organic nature of the process itself. When organizational changes occur, tasks are transferred to different departments or individuals and some of the knowledge of that transactional process may be lost or distorted. It’s like the electronic version of telephone, where the message is corrupted as it moves from person to person. The same thing happens to the individual tasks or portions of the process so that at some point the process does not look as it was ever intended to look and has become full of waste and inefficiencies. Since no one person sees the entire process (there is no holistic view of the process) no one recognizes the wastes. One example of these challenges and how to address them is detailed in the following story.

Due to reorganizations within the company, theanalysis department took over the billing process for an online treasury tool for commercial customers. This service is a significant revenue generator for the companybut historically the billing process has been complex and labor intensive. Once the analysis manager began using the existing billing process she quickly realized that the data received from multiple inputs made it difficult to create the report used for billing. In Lean terms, there were many of the typical Wastes, such as the wait time to obtain data, defects in the incoming data and over-processingof data.

Two of the more frustrating parts of the process were gathering data for the report generation and manual research and sorting of the report to validate what was legitimate (and should be billed) and what was not legitimate. The analysis manager was familiar with Lean and realized that the billing issues could not be resolved inside the analysis department andthat a broader perspective was needed. She scheduled a meeting with those who had done the report in the past, those who were providing input, and the report writer to verify the data needed for the report and to see if the report could be changed to avoid or reduce the manual sorting portion. It was determined that the report could easily be changed to eliminate the manual sort (no one had ever asked before) and upon further review of the required data it was realized that one of the file codes which was considered an invalid code (and therefore manually deleted) was actually a valid file which required billing. When comparing the report with and without that code, the revenue difference amounted to $250,000 annually! This lone defect (which had been created in a previous transfer of duties) was hiding a small goldmine of revenue.

It is imperative that those working in transactional environments learn to view their tasks as part of an entire process, be able to identify the process and find a way to determine process owners. Obviously this requires collaboration within and across departments (and even geographical sites) as well as the desire and ability to claim responsibility for a process (regardless of formal authority for a process).

Another objection that I have heard to Lean is the fact that services can not build up inventory to address fluctuations in demand (or capacity) as a manufacturer can do. This is a relevantconcernand emphasizes the need to reduce the cycle time of the service process as much as possible. This requires a clear understanding of value from the customer’s perspective and knowledge of the different kinds of waste that can exist. Inventory looks different from our traditional understanding – instead of widgets, inventory is the request for a transactional process and may be represented by paper, emails or other electronic files. While inventory is exceedingly easy to see in a manufacturing environment, inventory is virtually impossible to see in a transactional environment. Another challenge is in “balancing the line” for requests since it is difficult to determine where the demand for a transactional process is building up and what other areas may have capacity to handle the request. You can not easily determine an “idle” employee or an “over-utilized” employee, especially if the work area is piled high in paperwork. Excess paperwork on a desk or in a work space may represent requests waiting to be done, completed work, or even documents to be destroyed. If the work load in an area can not be determined, it will be essentially impossible to level load the work. Much the same as on a manufacturing floor, an organizational tool such as 5S is a recommended first step for transactional environments.

The following example speaks to the need to understand inventory, know where inventory is located and understand how to level-load the work. A new manager inherited a department with a Service Level Agreement (SLA) of seven days, which means that the department has to complete a process within seven days of the request. However the average SLA performance was 30 days, in part due to the simple fact that they had no visibility as to where the requests were in the queue. They were working overtime every week and still could not catch up to the seven day SLA. A report could have been generated to track and report service requests but they would have had to wait several weeks to have this implemented. They also could have implemented a new work flow software tool that had been recently purchased. However, they wanted an immediate fix for the problem. The solution they found was a simple visual tool which would clearly show them the status of requests and let them know when they were in danger of missing their deadline. Since this process received hard copies of the request, they implemented a series of baskets labeled one through seven in a highly visible area (see Figure 1). As soon as a request came in it was placed in the first basket (basket #1); as each day passed the documents progressed down the row into the next basket. The entire department knew how many requests were in queue; they knew where the work was in relation to its deadline and when to take action to avoid missing their committed deadline. They used a standard FIFO (first in-first out) method and pulled work as they completed the previous transaction. Even those outside of the department can readily see the status of work; the color coded cards use the standard cautionary yellow for day five. Combined with cross-training, they were able to decrease the response time from an average of 30 days to an average of 48hourswith one fewer employee and no over-time.

Figure 1

Another major objection to Lean is that Services are considered a creative, flexible processthat can not be standardized. While there is a kernel of truth to this objection much of the waste in a process stems from thebelief that each customer request could or should be handled uniquely (hence the need for creativity) to best meet any possible customer need. In fact, the customer benefits from standardization in the processbecause standardization ensures quality and speed of service. Creativity is neededto design flexible points into a standardized process. The best way to find this combination of standardization and flexibility is to complete a Value Stream Map (VSM) for the entire process (customer request to customer delivery). This method differs only slightly from a traditional manufacturing Value Stream Map. Many people across several departments may be needed to complete one VSM. It is important to include everyone not only to stay true to the Lean principle of going to those who do the work but also to identify risks, redundancies, opportunities for flexibility and to begin collaborating which will also be needed for the kaizen activities.

The successes so far have convinced me that Lean is an obvious choice for those wishing to be more competitive and improve efficiency in the Service industry. I continue to field requests for help in implementing Lean throughout this organization; proof that while some of the obstacles to acceptance still exist, the need to achieve radical improvements overcomes resistance. Start the Lean journey in your service and transactional processes bylearning to “see”the whole process and its related inventory and the improvements will follow.