Lean Principles | Overview of Lean Principles |
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Page 8 of 10 Non Manufacturing EnvironmentsWe continue to see the shutters go up in businesses where making widgets is not the game. The Banking, Insurance, Professional and Financial Services and Administration and Support Services Industries are all suffering terrible waste and truly shocking service cycle time problems as a result of their adherence to traditional Western production management approaches.We have seen insurance, banking legal and accounting operations where if each unresolved insurance claim, loan application, audit or report were a motor vehicle, the organisation would have hundreds of thousands of square feet under cover to store the Work In Progress (their unfinished output at any point in time). We regularly see work organised in batch and queue style where one staff member has a continuous backlog (WIP equivalent) of 300 or 400 cases or applications at his or her step in the overall process. Instead of turning an application for finance or insurance complete and back to the customer in five days, the turnaround time of any particular application can take can be more like sixty days. A study of the actual work requirement on any single application may show that there is actually only twenty hours of work in any one of them. Where does the time go? The systemic cynicism in our society regarding claims to customer focus is astounding. Then the blame game begins. "it all the parts of my supply chain that I can't control that cause the delays". "It's out of my control". Yet the rush to devolve control to subcontractors continues unabated. Managing the supply chain extends to managing all the other organisation that comprise it. This is a difficult and largely unaccomplished task outside of a handful of non manufacturers. We see real estate agents carrying a portfolio of a hundred commercial properties for lease with several hundred potential lessors while trying to finalise negotiations one inch at a time. No wonder lessors start looking for space months before their lease is up. It's the lawyers, accountants and customers outside who are to blame according to some of these managers. The problem here is the design of work process. Many of the most expensive systems on the market today will simply mimic these issues and plenty of our clients have spent millions on expensive ERP systems to entrench the current paradigm of producing their output. Often customers don't have an effective option to turn toward. So called 'best practice' organisations simply quote their competitive status while dismissing the challenge. Behind these walls of virtual inventory are vast areas of waste relating to rework and poor quality as well as poor labour productivity and low capacity utilisation. If the difference between the real work time and the elapsed time is the difference between 20 hours and sixty days, you can hide a lot of waste in fifty nine days and four hours! Because the Work In Progress is virtual (takes up space in a computer memory or in a document file) managers in some of these businesses may kid themselves that these issues don't apply. The application of these principles is not only about reducing working capital which can relate principally to material costs. Don't forget, these businesses may not show material costs anything as high as the widget makers, but they still have equivalent costly inputs in space, labour and technology. In these industries a competitive edge in service outcomes is decisive. However as far as we can see, few in these industries have seen point of the application. These principles apply with equal force to all producers of goods and services. Just as you will see traditional approaches to managing and accounting in these businesses being applied, so are the problems associated with batching and queuing, layout and a lack of continuous processing approaches. |