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Objective
Operations executives struggle to nd new ways to reduce cost while delivering high-quality service. Lean manufacturing concepts enable institutions to expand existing cost-reduction opportunities while simultaneously creating customer value. This study aims to help Operations executives: Identify at least 40% waste in their cost base; Apply Lean techniques and tools to reduce waste across Operations; Improve process ow by optimizing touch time and minimizing cycle time; and Embed Lean thinking in staff and the organization to drive sustainable transformation.
Executive Summary
40% of Operations Costs Are Wasteful Council research suggests that at least 40% of Operations expenses result from wasteful activities that add no value to the customer and therefore should be eliminated. The majority of these wasteful activities are caused by Operations executives managing increasingly complex service-fulllment processes that contain multiple handoffs and decision points. Work is more difcult to track and less tangible in a service environment, making hidden waste more prevalent. Furthermore, business stakeholders dene waste differently, resulting in institutions not measuring and reducing waste uniformly across the entire organization. Lean Adopters Identify More Waste and Operate More Efciently Lean institutions identify two times more cost-reduction opportunity than non-Lean adopters by seeking to eliminate non-value-added activities. Furthermore, Lean adopters operate more efciently, maintaining cost-efciency ratios that are considerably lower than the industry average. Lean Is Inexpensive and Generates Solid Returns Unlike other process improvement methodologies such as Six Sigma, Lean programs do not require signicant up-front capital investments or certication. Lean concepts are easy to apply given that they are, as one member stated, applied common sense. In addition, institutions leveraging Lean techniques report immediate results of 20% to 40% cost reduction in 12 to 18 months. Uncovering Customer Value by Challenging the Status Quo Lean empowers Operations executives and their staff to continuously challenge the status quo (e.g., reviewing legacy mandates and existing policies) to redene value according to customers. Rather than asking, How do I do this better? Lean adopters ask, Why do I do this at all? revealing unnecessary activities that should be removed to reduce cost and improve service. Lean Is Not a Fad While many nancial institutions remain skeptical about recent quality and process improvement methodologies, nancial institutions implementing Lean concepts demonstrate that Lean provides immediate and sizeable economic and service benets. A Council survey reveals that 38% of member institutions maintain formal Lean programs, many of which have been in place for at least two years.
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and leading institutions build these capabilities by establishing best practices that address four imperatives
Imperative #1: Take a Customers View of Waste
Precise Value Stream Mapping Page 65 To improve current processes quickly without sacricing quality, Merle Bank* leverages Lean tools including work study sheets and value stream maps to identify and quantify hidden waste. Merle prioritizes areas to reduce waste by ignoring legacy mandates and physical constraints.
Imperative #2: Run Operations Like a Factory Capability #2: Uninterrupted Operations Flow
Operations executives focus on making process activities ow efciently by optimizing touch time and minimizing cycle time. Making uninterrupted ow an operational goal embeds Lean efforts in day-to-day Operations and ensures they benet the customer and organization. Process Flow Visual Cues Page 87 Raven Bank* undertakes a Lean manufacturing initiative to remove paper-based waste and identify bottlenecks. Raven deploys visual cues to create a pull system to better manage capacity and balance workloads, ultimately reducing cycle times. Ofce to Factory Conversion Page 111 Akane Investments* deploys Lean/Six Sigma concepts to improve process ow by empowering employees and managers to proactively identify waste. Akane also collocates staff and improves capacity forecasting to reduce cycle time.
Imperative #3: Perfect Every Customer Interaction Capability #3: Link Customer Value to Employee Performance
Leading institutions understand the important link between customer value and employee behavior, and manage the variation of employee performance to drive customer satisfaction. Executives at these institutions strive to ensure that every customer interaction is performed awlessly and delivers precisely what the customer values. Automatic Contact Center Closed-Loop Process Page 145 By recording 100% of all customer interactions, Tima Insurance* uniquely understands the entire customer journey. Tima empowers each employee to self-assess and identify opportunities for improvement following customer interactions. Tima pinpoints discrete call representative behaviors that cause customer dissatisfaction and tailors coaching sessions to change individual staff behaviors and increase service quality.
Imperative #4: Make Change the Status Quo Capability #4: Sustainable Transformation
Leading institutions constantly adapt in response to changing customer needs. Establishing a culture where everyone, from the lowest level staff member to the CEO, is committed to the ideal of excellence and continuous improvement is a requisite to enable sustainable transformation efforts. Integrated Change Delivery Capability Page 171 Prudential plc embarks on a 1,000-day business transformation to rebuild its brand and regain customer trust. To drive its change efforts and ensure it delivers customer value, Prudential builds a dedicated business transformation capability driven by a QuarterMaster system and supported by a rigorous reporting structure.
* Pseudonym.
Challenge
Tool
Lean Diagnostic
Seven Wastes Table Label waste according to the seven waste categories.
Work Study Sheets Capture and measure the seven types of waste in each activity.
Value Stream Mapping Take a wingtipto-wingtip view of the process to uncover waste.
Waste Reduction Decision Tree Prioritize waste reduction tools to efciently and inexpensively eliminate waste.
Business Readiness Criteria Track core competencies to determine business units ability to successfully initiate change.
Change Absorption Assessment Take a forwardlooking view to evaluate business units ability to incorporate change initiatives.
Weekly Change Report Equip senior executives with actionable information and share it beyond the executive team.
Four-Step Governance Process Make trade-offs across project life cycle to ensure benets are realized.
Description
60
Overall BT Deliverables v Week Ending: 23/09/05
Summary
Go Live
Operational Considerations
Recruitment
Training
Partner Requirements
Management Information
Marketing
Mailing
IT
IT Support
Programme
Finance
A List
Programme Status Last Weeks RAG AMBER AMBER AMBER AMBER AMBER AMBER AMBER GREEN
This Weeks RAG AMBER AMBER AMBER AMBER AMBER AMBER AMBER GREEN AMBER AMBER GREEN
Criteria The implementation/go live date of the activity has been communicated and agreed between all interested parties. Business process manuals, disaster recovery, service support, and resource planning updated and signed off. Estimates for FTE, job descriptions, recruitment, built into long-term plan and can be met. Learning and development department aware of necessary training for new employees and upskilling training for current employees. A matrix reporting on all management information requirements by business area are established and the requirements agreed by the business reps as achievable. All brand values and business unit initiatives are communicated to Marketing. Marketing has full visibility into root causes of customer complaints. Agree on service-level agreements on work item tagging and imaging. The Technical Service Centre and On-Site Support have been updated. All e-mail addresses, log-in IDs, telephone service, and fax numbers are updated. The project has clearly articulated any changes to the standard operating model to the business area affected and end-to-end processes are documented. Communication plans have been formulated to ensure internal and external awareness of change activity. Deals which will require specic capital investment are agged to Finance at least four weeks prior to capital being required. Internal Audit and Compliance Monitoring are aware of the implementation of each deal and established process for ongoing measuring/monitoring.
Target Date Dec. 2005 Sept. 2005 July 2005 August 2005
Status Amber Red Green Green Amber Red Green Amber Amber Green Red Red Green Green
Owner Anderson Jackson White Harris Martin Thompson Garcia Clark Lee Walker Hall Allen King Young
Summary Adviser Service Voice Contact Corporate Customer Service Policyholder Customer PruDirect Partnerships Center Center Pensions Service Center Service Center Retention Executive Summary Overall, Customer Services and Distribution is poised to deliver signicant change across 2006. Caution is warranted as new product and service launches combined with technology upgrades and under resourcing bring various business units under pressure across 2006. Business Unit and Owner Adviser Service Center John Thomson Voice Contact Center Mary Davies Corporate Pensions Service Center Rita Lockhart Customer Service Center Michael Morris Policyholder Service Center Vince Gomez Customer Retention Contact Center Laura Smith PruDirect Isabel Williams Partnerships Tracy Perry
Programmes Require Exec Action or Attention
Machine cycle time Equipment downtime Waiting for materials and tools Waiting time between batch processing Poorly functioning machinery Inadequate tools Equipment with unbalanced ow Repetitive and unnecessary movement of parts Poor ergonomic design causing people to make unnecessary movement Producing more than is required to meet customer demand Running machines and/or making parts to keep people and machines busy High obsolescence and write-offs Producing what we can versus what the customer demands Long travel distances Unplanned premium freight Large batch containers
45 30
60 15
Waiting
Processing
6 9 15 Distance 5
Recruitment Training Partner Requirements Management Information Marketing Mailing IT IT Support Strategic Operating Model Communication Finance Risk and Compliance
Summary Signicant understafng combined with anticipated new product launches in Q3 contributes to Red status across the rst half of 2006. The VCC has been simultaneously hit by a 10% increase in call volume and unanticipated backlogs. As a result, training and development activity has been deferred to later in the year and the area remains under pressure. Anticipated new product launch in Q2 combined with the PMS upgrade is expected to put the area under pressure beginning in Q2.
AMBER AMBER AMBER AMBER GREEN AMBER Resources Resource Type RAG Issue GREEN AMBER Deliverables Red/Amber in next 4 weeks (to 21/10/05) Exec Business Forecast Project / Sponsor Sponsor Date Workstream Name AMBER AMBER AMBER AMBER GREEN
Incoming Customer Claim Mail 20% Sort Mail 0.3 56.0 1 8 1 Fax 80% Upload to Workow and Quality Check 2.8 32.0 1 8 1
Partners agree on processes, technology requirements, training, and service-level agreements. July 2005 Sept. 2005 Sept. 2005 Oct. 2005 Nov. 2005 Nov. 2005 April 2005 Sept. 2005 April 2005 June 2005
Green
Green
Green
Amber
Amber
Amber
Amber
Amber
Red
Red
Amber
Amber
1 1
2 2
3 3
4 4
5 5
Deliverable Description
Actions
Deliverable RAG Status AMBER AMBER AMBER AMBER AMBER AMBER AMBER AMBER AMBER AMBER
1 1
2 2
3 3
4 4
5 5
Motion
Overall level of change absorption is currently manageable with no signicant resourcing issues. However, volume is expected to spike in Q2 following the introduction of new service standards. The area is working through some challenges due to the introduction of new telephony infrastructure and, once complete, is expected to green status. The next phase of Embedding Retention into Customer Service will have signicant impact on the area through the end of the year. Resources are tight and regular communication of status reports will occur across the coming months to keep all apprised of progress. PruDirect is currently undergoing a large change program and is unlikely to be able to absorb further change activity until this is completed. No signicant change is planned which will impact the area other than planned technology infrastructure upgrades which are unlikely to cause any signicant issues. Training requirements and planned holidays across Q1 and Q2 will result in under resourcing which will limit the units ability to absorb signicant change activity early in the year.
Variance Table
Programme
10
Overproduction
12 17 Distance 4 35 15 54
L L
10 Queue Time
Suggested Action Steps Best Practices: Process Flow Visual Cues and Ofce to Factory Conversion
To establish continuous ow with minimal investment, you should 1. For each process activity, ask why it cant be eliminated ve times. 2 . Inser t visual cues in every paper-intensive process. 3. Make exceptions and quality checks that require less than 10 minutes from everyones job. 4. Optimize existing equipment settings to expedite manual tasks.
Inventory
RAG AMBER GREEN GREEN GREEN GREEN GREEN GREEN GREEN GREEN GREEN AMBER GREEN GREEN GREEN GREEN GREEN GREEN GREEN GREEN AMBER
Impact H M M M M M M L L L H M M M M M M M L L
Programme / Project
p. 9 9
20
NWW
Tool
L5. Position quality checks at the beginning of the process to ensure clean inputs.
6. Audit the applicable and leng th of all repor ts and forms every six months. 7. Make ow your operational goal across your depar tment .
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Transportation
C a se Stu d y
20
S o u r ce : O p e r a t i o n s C o u n c i l r e s e a r c h .
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