Lean system in services industry presentation ahmed adel

Master of International Business Administration (MIBA)

Lean Systems Adaption in Services Industry

Project Supervisor: Dr. Abd El Monem El Saied

By: Ahmed Mohamed AdelAcademic Year 2012

What is Lean Systems?

Why Lean systems?

Why in Services industry?

The Debate Between Man. And Services industryHow does it work?

Service Value Stream ManagementLean Systems disadvantages.

Conclusion

Contents

Lean System

What is Lean System?• Lean Systems is described as a

managerial philosophy which enhances the value perceived by the customers, by adding product and/or service features and by continuously removing non value added activities (i.e. wastes), which are concealed in any kind of process.

To reduce waste, the lean manufacturing is capitalizing on various tools at its disposal including regular process review.

In particular the five Lean principles proposed , these 5 principles are Define Value, Value stream, Flow, Pull and perfection.

The Process

Define Value

Identify Value

Stream

Make the stream

flow

Implement pull

system

Strive for Perfection

Lean System

How did it evolve? (Historical Background)

• Toyota production system (TPS) is considered the base stone of Lean Systems, introduced by Toyoda Sakichi (1867-1930) and Toyoda Kiichiro (1894-1952).

• TPS is described as an integrated socio-technical scheme that systematizes industrial and logistics for the automobile manufacturing companies, including interfacing with suppliers and consumers.

• According to Taiichi Ohno, the Japanese based production technology principle contributed most to the world in the latter half of the 20th century.

Toyoda Sakichi


Why Lean systems?




Conclusion

• It is well perceived about the lean system, that it greatly improves customer service, feedback, quality and profitability (Standard et al, 1999).

• It has been adapted by many multi-national manufacturing enterprises and shown significant positive impact on quality, cost, productivity and profitability.

Increase Quality

Decrease Cost

Increase productivity

Increase Profitability

Why Lean System?


Why Lean systems?


The Debate Between Man. And Services industry

How does it work?


Conclusion

Services Industry ImportanceWhy Shall it be applied in services industry?• Services industry application is

participating in the global GDP by 63.4%.

• Its participation in some countries GDP reaches almost 80%.

• Services industry needs of increasing quality, profitability , productivity and decreasing cost is as much essential as in manufacturing industry.

Services Output as a Share in GDP Country 1960 1970 1980 1985 1990 2011

(estimate)

Canada 46.2 52.4 53.8 55.7 69.7

Germ. 45.8 45.6 49.4 50.6 53.7 70.6

France 49 50.3 52.4 54.2 56.8 79.5

UK 54.9 57 59.9 63.1 77.8

Italy 59.4 57.5 58 58.8 73.4

Japan 57.8 59.7 58.5 59.4 71.6

The Debate about difference between Services and Manufacturing Industries• There is a debate initiated that there is fundamental difference between

manufacturing and services industry and whether they shall be treated in the same manner,

• The four major difference points (Grönroos, 1990)

1- Services are more or less intangible, 2- Services are activities or a series of activities rather than things, 3- Services are at least to some extent produced and consumed simultaneously, 4- The customer participates in the production process at least to some extent.

However:1- Dealing with a good or a service it is considered to be a demand for the client that should fulfill his needs and ensure his satisfaction via an organized set of processes.2- Lean System shall adapt and mutate to serve the service industry.3- Lean system has to redefine some of its steps to succeed.4- Service Value Stream Management has been introduced.

Types of WasteIn Services (Bicheno and Holweg, 2009)

1. Delay on the part of customers waiting for service.

2. Duplication. Having to re-enter data, repeat details on forms, copy information across, etc.

3. Unnecessary Movement.

4. Unclear communication, and the wastes of seeking clarification,

5. Incorrect inventory.

6. An opportunity lost to retain or win customers,

7. Errors in the service transaction, product defects in the product-service bundle.

In Production (OHNO, 1988)

1. Overproduction,

2. Unnecessary transportation,

3. Inventory,

4. Worker motion,

5. Defects,

6. Over processing,

7. Waiting


Why Lean systems?




Conclusion

Lean System Steps

Define Value

Is about providing the full value that consumer’s desire from their goods and services, with the greatest efficiency and least pain

Value Stream

Is a sequence of activities necessary to design, produce or manufacture and provide a specific good or service and describes as well which information, materials and worth flows.

Flow

Work should flawlessly flow from one value added process to another. All the efforts should be concentrated in eliminating & preventing any bottlenecks that may rise during the flow.

Pull

The goods should be driven by the customer demand which pulls the work through the system and not pushing the goods to the customer that not needed.

Perfection

Leverages the process knowledge of frontline workers

Lean principles proposed, these 5 principles are Define Value, Value Stream, Flow, Pull and Perfection.

1- Define Value• The customers are the ones

who define what they value in specific products and/or services.

• It is about providing the full value that consumer’s desire from their goods and services, with the greatest efficiency and least pain.

• Specifying Value must be carried out on a continuous basis as customers change their mind with time.

Value Add

can simply be distinguished as the activities that changes the form or function of a product or service and this is what the customer is willing to pay for.

Non Value Add

are the activities are those which don’t add value to the process and will not impact the specifications required by the customer.

Essential Non Value Add

is designed to insure that the value add activities are implemented correctly and completed to reduce waste (ex. Quality Control).

Waste Is the unintentional use or consumption of resources or during the process, leading to lose (time, money, materials, machine, manpower, etc…), cost increase will be a significant outcome of this loses.

2- Value Stream• The Value Stream is a

sequence of activities necessary to design, produce or manufacture and provide a specific good or service and describes as well which information, materials and worth flows.

VSM This approach1- Implements Visual Management as a way to communicate organizational goals and 2- Documents the relationships between the shop-floor processes and the control policies (such as production scheduling and production information), used to manage these processes.

Current State Map

A “current state” map is created to illustrate and define the flow of the current process and its performance levels.

Future state map

The “future or desired state” map is designed to show the desired flow of the process and its targeted performance levels.

• Consists in the definition of two maps, being a graphical representation of both materials and information flows within a facility

Value Stream Mapping (VSM)

Value Stream Mapping

Current state Map Future State Map

Value stream mapping uses group of previously defined icons that indicates activities and process flow.

3,4 Creating Value Stream Flow & Pull SystemValue Stream Flow Implementing Pull System

• The products should be driven by the customer demand which pulls the work through the system and not pushing the products to the customer that not needed.

• Under the lean concept work should flawlessly flow from one value added process to another forming a streamlined batches moving along from one step through the another one,

• All the efforts should be concentrated in eliminating and preventing any bottlenecks that may rise during the flow

Push system:A production method based on keeping up with preset inventory levels or with due dates for customer orders rather than customer demand.

5- Perfection• Leverages the process knowledge of frontline workers. • Management shall view all employees as intellectual assets capable of

improving the flow of value to customers.• The flawless flow is 100% quality compliant at the pull of the customer.• Every asset and every action shall have value add for the end customer.

Empowerment:Systems and polices in place that is helping each employee to take the relevant necessary data & information in order for him to take the right decision.

This increase employee engagement in the business and on the other hands promotes the ownership of each employee to what he is doing and fosters employee citizenship to the given enterprise.


Why Lean systems?




Conclusion

2.1 Service value stream mapping (SVSM)• SVSM tackles some critical points to adapt lean system in service industry.• A detailed map of a service a new set of icons shall be created; • Most of the lean approaches were adapted/modified • Concepts such as Takt-Time were redefined in a more suitable way.• SVSM follows a step by step procedure made of six points (Bonaccorsi,

Carmignani, & Zammori, 2011): 1. Commit to lean; 2. Learn about lean; 3. Choose the value stream to be improved; 4. Map the current state; 5. Identify the impact of waste and set the target for the improvement; 6. Map the future state.

2.2 Service value stream mapping (SVSM) Steps1- Commit to Lean

Unless the need of a change is sponsored (financially and in time and spirit) by the top management & transferred to all the employees, implementing lean concepts is doomed to be a failure.

2- Learn about Lean

Consists in the organization of learning/ training sessions on lean concepts.

This has the objective to increase commitment and to develop the skills to identify operational weaknesses hindering organizational effectiveness and efficiency.

3- Choosing Value Stream

It can be easily selected making a (SQ) analysis and organizing data.. Collected data should be sufficient to: 1) clarify customers needs; 2) ascertain the correctness of the defect categories; 3) give an importance weight to each defect and 4) classify in terms of criticality

4- Current State Mapping

This is a basic step of the lean project, as it defines the project’s baseline and forces the team to get acquainted with the process and to investigate and question how and why it is performed in a certain way.

5- Setting Targeted Improvement

- It is advisable to classify activities following two points of view: a process and a customer oriented perspective. - In case of mismatch, the customer oriented perspective should be preferred.- The service Cycle Efficiency is the main lean metric and is defined as the proportion of time

6- Future state Mapping

This is a visual tool that shows how a value stream can look after improvements have been implemented

Lean System Implementation Phases Phase Steps Involved Time frame

Get Started Find a change agent Get lean KnowledgeMap value Streams

Six months

Create a new organization Reorganize by product familyCreate a lean functionDevise a growth strategyInstill a perfection mindset

Six months to two years

Install Business Systems Introduce lean accountingRelate pay to firm performanceInitiate policy developmentIntroduce lean learningFight right size tools

Year three and four

Complete the implementation Apply previous steps to suppliers/customersDevelop global strategy

By end of the fifth year


Why Lean systems?




Conclusion

Lean System Disadvantage• Naturally, any system subjected to criticism regardless the stability, efficiency

and effectiveness of the system, the same applies on lean system as well. • The main criticism under focus is the human dimension of the system.• It was argued that it is not helping the job development any more, it’s more

leaning towards some activities and technical processes that affects dramatically worker disempowerment.


Why Lean systems?




Conclusion

Application in Service industry• South West Airlines, after applying Lean system findings:

1- the ONLY US airlines to make profit in 1990s.2- SWA can turn around a flight in 17 minutes Vs. 45 minutes for its competitors.

Large U.S. Retail Consumer Company 1- Response and resolution compliance for support calls increased to 97%+ from 70%. 2- Adherence to schedule for enhancement requests increased to 95%+ 3- 4,728 working hours are saved per month on reporting due to improved flow of information.4- 45 backlog enhancement requests only after 6 months of lean implementation, from 1,440 before Lean

Conclusion• The core objective of Lean system is to remove waste.

• Lean system is broadly adapted in the last thirty years in almost all kind of industries involving service, manufacturing and agriculture fields.

• Lean system has to change/adapt some of its basic steps to serve services industry, as services industry’s business nature and processes is different from manufacturing industry.

• Lean is a philosophy or a set of tools, specifically designed to serve its purpose by each type of product emphasizing the customer requirements and maintaining his needs as the main driver.

• The disadvantages of lean were mostly concerned on the dehumanized and missing empowerment; not taking into consideration communicating and adaption on all corporate levels specially the first line.

Conclusion (Cont.)• Lean system needs management believe in, understanding and guarantee to adapt

before proceeding with implementation.

• There was indication that Lean system has negatively affected product quality or profitability which are considered corporates main concern, on contrary, all the reviews emphasized remarkable positive change in profitability by the organization.

• Lean system shall be applied on phases, starting by a pilot run before applying across the whole organization; it shall consider while implementation the employee resistance that has been has been described earlier as one of the disadvantages of the whole system.

Finally “We are what we repeatedly do. Excellence, then, is not an act, but habit.”

Aristotle

“Costs do not exist to be calculated. Costs exist to be reduced.” Taiichi Ohno

“Make only what is needed, only when it is needed”Kiichiro Toyoda

Education

Lean system in services industry presentation ahmed adel