Question

Lean concepts such as continuous improvement and waste reduction have long been used by manufacturing companies. Discuss how service firms can apply the same concepts. Why do you think many service companies are adopting these ideas?

Answer 1

Answer:
Lean is a concept used by manufacturing companies to reduce wastes, the basic idea is to maximize customer value and minimize wastes. Continuous improvement, a concept of lean is a method of streamlining work and reducing waste.

Service firms can apply the same concepts in the following ways:

Estimation of the current state: It includes analysis of the wastes associated with each activity. For example, in a hotel industry, mapping the process flow from registering a customer for room service to check out of the customer will find out the inefficient activity and wastes. Lean tools such as, Value Steam Mapping(VSM) and training course can be helpful for this situation.
VSM analyzes problems virtually and find out all wastes throughout the entire service process. It collects current data and map the process of information flow that associated with customer values.

Determining the target: Determining the target requires thorough knowledge of the organization's business strategy and requirements associated with the development of appropriate Key Performance Indicators (KPIs) from different levels of an organization. Lean tools such as VSM and Key Performance Indicator can be used here to create accountability and continuous development of the organization.

Type of wastes in service sectors:

Waiting Time: Long waiting times are waste both for the customers as well as for the companies. Unnecessary waiting times arise due to unplanned work flow, long processing times, lack of trained staffs and lack of resources. Lean tools such as standardised operations can be applied to reduce waiting time,improve service quality and to maintain continuous work flow.

Repeated Operations: Occurrence of repeated operations may be due to misunderstanding of customer requirements, communication gaps and lack of standard operations. For exa, in an home appliance service center, misunderstanding of customer complaints will result in handling the same complaints again and again and this will lead to wastage of time. Lean tools, such as, standardised operations and problem-solving A3 report can be applied in this situation to minimize misunderstanding and maximize customer value.

Inventory Mismanagement: Mismanagement in inventory results from poor forecast, unreliable suppliers, unplanned orders, poor communication and scheduling. Inventory forms the crucial part of every business, for example, in software industry there most be availability of antivirus softwares to protect the system, otherwise there will be a great loss to programmers and companies. In hospital industry life saving equipments should be always in stock, again excess inventory results in a waste, this can be handled by 5S. 5S is one of the lean tools to manage the inventory in service industries and provide effective operation.

Underutilization of Talents: Lack of training, poor organization culture and policy, poor performance appraisal, low salary and poor communication, all results in lack of motivation among employees to work and thus leads to underutilization of workforce. Lean tools, such as VSM and training courses should be applied to control underutilization of talents.

Yes many service companies are adopting these ideas to reduce wastes. Information technology, telecommunication, healthcare and finance sectors are using lean to provide better customer care with good business process management.
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