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Strategic Financial Management

Holistic Approach To Be ‘Lean’
Instead of making ad hoc moves that lack strategic thrust, companies in service industry must embark on a holistic mission for the implementation of lean principles .....read more

Holistic Approach To Be ‘Lean’

Instead of making ad hoc moves that lack strategic thrust, companies in service industry must embark on a holistic mission for the implementation of lean principles

Reading Time: 6 minutes(931 Words)

Key learnings:

  • The concept of ‘lean manufacturing’ can be applied to service industries as well
  • However, only a commitment to implement the lean concept in a holistic and complete manner will bring sustained benefits

In recent years, several companies in service industries have been attempting to leverage the concept of “lean manufacturing”. However, barring a handful, others have not been successful in identifying the right approach to ‘lean’ adoption. They are able to achieve only some minor gains but are struggling to generate sustainable benefits.

Debashis Sarkar, Chairman of the ASQ (American Society for Quality) Automotive Division – Team India, contends that service companies can achieve operational excellence only through holistic and complete implementation of the lean concept. His recent book, “Lean for Service Organisations and Offices: A holistic approach for achieving operational excellence and improvements”, offers several tips for this.

Value stream mapping
According to Sarkar, “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”. Even within service industry, the concept can be applied very effectively, irrespective of whether a company is having a mono-line business or a diverse portfolio.

Sarkar elaborates, “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”.

Holistic approach
Sarkar is however unhappy that majority of corporations, particularly those operating in competitive service economies, look at the lean concept mainly as a cost-cutting tool. He asserts, “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”.

DEB-LOREX model:
Sarkar has proposed in his book a model, called the DEB-LOREX model, for service companies to develop a holistic approach in applying lean concept to their operations. He explains, “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”.

Value streams:
A major challenge in taking a holistic lean approach is that many of the service companies are organised functionally. In firms with diversified product portfolio, managing processes can be an enormous task. This is due to the complexity, size and the span of the processes, mostly across multiple geographies.

To manage this enormous challenge, Sarkar recommends dividing up the organisation into multiple ‘value streams’, around the product groups. He explains, “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”. Use of metrics and end-to-end process ownership would be a great help in this entire exercise.

Multi-skilling is the core technique adopted in lean manufacturing. Hence Sarkar recommends that service industry should encourage multi-skilling rather than multi-tasking. He elaborates, “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”.

Sarkar feels, “While specialisation will 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”.

Strategic thrust:
Though many service companies appear to be moving in the direction of holistic approach, their efforts are mostly ad hoc and lack a strategic thrust. Hence Sarkar urges, “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”.

Other tips:
Sarkar lists out the following recommendations to overcome various other impediments that can block the progress service firms in truly achieving a holistic and complete implementation of the lean concept.

  • Senior management involvement: They must view the adoption of lean concept as a strategic mission and not merely as a waste-elimination technique.
  • Culture: Bringing a lean culture across the entire organisation is a gigantic task, which needs to be pursued with determination and patience.
  • Success stories: Companies needs to share success stories with everyone, as otherwise it would be hard to explain what lean organisational excellence is all about.
  • Trained resources: As expertise available in the domain of service lean is limited, companies need to coordinate among themselves to develop such competencies at industry-wide level.
  • Accounting the benefits from lean adoption: Companies would have to bring about a total change in the way they do their accounting.

There is not even one service company that has achieved the quantum of success in applying the lean concept, similar to that of Toyota in the manufacturing arena. However, many firms like Tesco, Jefferson Pilot Insurance, Wells Fargo Mortgage, Washington Mutual, ICICI Bank and Wipro can be cited for using lean for driving operational excellence.

Sarkar comments, “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”.

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Nanthakumar P

Related Reading:

1.‘Lean’ is more than a cost-cutting tool - D. Murali and T. Murrali


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