The Hindu Business Line : ‘Lean’ is more than a cost-cutting tool

Only through holistic and complete implementation of ‘lean’ can service companies reach the level of operational excellence that Toyota has achieved over the years.

DEBASHIS SARKAR, AUTHOR, ‘LEAN FOR SERVICE ORGANISATIONS AND OFFICES’.

Lean, you may be happy to learn, is hep in factories. “Lean manufacturing is the production of goods using less of everything: less material, less time, less energy, less human effort, less manufacturing space,” defines G.V. Dasarathi in a January 14-dated article on http://inhome.rediff.com. “The Nano is lean. It uses less steel, less plastic, less space and less energy to run.”

And you can make a fat folder with ‘lean’ news such as: Cisco speaking of how its customers realise the benefits of lean supply chain initiatives across a myriad of industries ( www.automation.com ); General Cable reporting better price realisation, and cost improvements from ‘lean’ initiatives ( www.earthtimes.org ); and the need to adapt lean-production programs to China’s ‘tradition of mass mobilisation,’ as ‘Operation China: From Strategy to Execution,’ a management guide by two McKinsey & Co. consultants, Jimmy Hexter and Jonathan Woetzel, which James Pressley reviews in www.bloomberg.com .

Lean, as a concept, has been around for more than five decades, says Debashis Sarkar, Chair of the ASQ (American Society for Quality) Automotive Division – Team India. “The work of James Womack and Daniel Jones in the 1990s popularised its adoption among manufacturing companies. With the ushering in of the twenty-first century, we now see it being leveraged by service companies,” writes Sarkar in his new book, Lean for Service Organisations and Offices: A holistic approach for achieving operational excellence and improvements ( www.asq.org ).

Many service companies are struggling to determine the correct approach to ‘lean’ adoption, he rues, in the course of a recent e-mail interaction with Business Line. “We find celebrations of early victory, and cases where benefits are not sustained over time.”

Sarkar, who currently holds ‘a business improvement leadership role’ in ICICI Bank has experience in designing 5S, lean, process management, and other organisational excellence programmes. His other books include 5S for Service Organisations and Offices and Lessons in Six Sigma: 72 Must Know Truths for Managers.

Excerpts from the interview:

You state that ‘lean’ manufacturing has to be part of the organisational fabric for full adoption. Would that work for service industry, which is diversified in nature? Are there examples of success?

Oh yes. Whether a company is in manufacturing or in services, the principles of lean can be applied across sectors, be it education, financial services, hospitality, food services, aviation or healthcare.

Whether a services company is a diverse multi-product entity or is into mono-line business, lean can be very effectively applied. It’s only through holistic and complete implementation of lean can service companies achieve the level of operational excellence which Toyota has achieved over the years.

So if you are looking for the Toyota of services, we still do not have a company out there. However, quite a few companies in the service sector have been seen encouraging results such as Tesco (UK), Jefferson Pilot Insurance (US), Wells Fargo Mortgage (US), and Washington Mutual (US).

Closer home companies such as ICICI Bank and Wipro have been successfully using lean for driving operational excellence. However, there are no shortcuts. Companies have to be at it to see ‘lean’ becoming a part of the organisational fabric over a period of time. Remember, partial adoption will only lead to partial results and you cannot expect lean to be a part of the organisational fabric.

Again, unlike as in manufacturing, where the inputs are ‘raw materials,’ in service industry, the inputs are ‘information.’ How does lean manufacturing (which primarily banks on throughput and value addition in the entire supply chain from vendors’ vendor to customers’ customer) apply to the service industry?

Information could be an input in both manufacturing and service processes. You are right; the proportion of information as an input is much higher in services. However, this does not really matter.

Wherever there are processes and people, there can be inefficiencies, and therefore lean can be applied. One of the tools quite effectively used is value stream mapping which helps to identify wastes in processes by capturing the material and product as the product moves from order to delivery. However, the approach to value stream mapping services should be done differently from the way it is done in manufacturing.

You state that ‘lean’ as an approach is extremely relevant to all countries whose economies are dependent on services.

Adoption of lean can help all service economies striving for operational excellence. With the increase in competition companies operating in these economies would be looking forward to methodologies that will reduce the cost-to-serve the customer. And, lean will provide the required wherewithal to achieve this.

However, it is quite parochial to use lean just as a cost-cutting tool. To get full value out of it, leverage it for revenue enhancement, customer convenience, complexity reduction, operational risk control, cost leadership, combining scale with flexibility, employee morale, and product development. Today bulk of the lean application in service economies is to bring down cost but it needs to change.

On the model you propose in your book.

The DEB-LOREX model, as I have named it, is a holistic approach to applying lean in service companies. It is a management system for achieving organisational excellence using the lean principles. Built around the philosophies of Lean and Systems Thinking; the key components of this model are leadership, people, processes, partners, promotions, problem solving, and value streams.

Since tracking or monitoring the entire process in a service organisation can be a humungous task, do you suggest a segregation of the organisation into multiple business units?

Yes, managing processes can be a challenge in services at times. This is especially because of the complexity, size and the span of the processes, which may cut across geographies. This is where metrics and end-to-end ownership of processes help. Getting the latter is not easy as many of the service companies are functionally organised.

However, a few companies are experimenting with end-to-end process ownership, which has helped them to manage the white-spaces in the processes. Also, to achieve flexibility, service companies can component-ise their processes into modular components with plug-and-play features.

This is especially required when centralisation of processes does not deliver further cost benefits and is also not possible due geographical regulatory constraints. Yet, to get sustained results from lean transformation, I recommend that organisations get carved around product families into multiple value streams.

The value stream is nothing but casting an organisation around product families with complete ownership of all the processes and its outcomes with the value stream owner.

This may look impossible but is a must for holistic lean organisational excellence. I see many service companies being forced to move towards such a structure in future.

You insist that service industry should embrace multi-skilling rather than multi-tasking, since it is the heart of lean manufacturing. Why?

Multi-skilling is an important technique in lean and I see many service companies adopting it going forward. While specialisation will be continue to be required for high-end niche-jobs, multi-skilling will be required for repetitive jobs wherein the skills can be imparted within a few months’ effort.

Multi-skilling helps to balance the workload among individuals and improves the overall productivity of the organisation. With multi-skilling the reliability of processes improves, as it is no more dependent on a few people.

As a part of lean transformation, I strongly recommend that there has to be a resource at a senior level who manages multi-skilling from a strategic perspective. Actually service companies are making a move in this direction but it is often ad hoc and is not looked at from a strategic perspective.

What are the challenges that you see with respect to lean adoption in service sector?

The following are the challenges:

Senior management involvement: Lean being looked as a strategic initiative and not as waste-elimination technique.

Culture: Making lean a culture requires doing a lot of things properly which is not easy and management needs to be patient.

Success stories: Without success stories it becomes difficult to explain what lean organisational excellence is all about.

Not knowing how to go about it: Some help comes from books on the subject.

End-to-end process ownership: Especially when process are complex and may cut across geographies and functions.

Trained resources: Competencies in the domain of service lean are quite rare and industry-wide work needs to done to develop this.

Accounting the benefits from lean adoption: This would require complete change in the way we do our accounting.

What is the future of lean?

Beyond process optimisation, lean has to be leveraged for product and process development. Beyond Toyota, lean product development is fairly new to manufacturing companies. Thanks to the research work done at University of Michigan today we have a lean product development process for manufacturing companies. Of course, it would take some time before this body of knowledge is used and customised for service design.

D. MURALI

T. MURRALI

http://AccountSpeak.blogspot.com

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