Abstract on “Lean service machine”

Submitted by: Submitted to:

Sudhanshu Mamgain Dr. Saurav Tiwari
SAP id: 500058366
Enrolment Number: R600217056
The paper talks about how lean principles can be applied in service
industry in order to improve their performance. The company is
Jefferson Pilot Financial, a full-service life insurance and annuities
company. The managers of Jefferson Pilot Financial recognized that
an insurance policy follows a series of steps or processes, much like a
product, from initial application, to underwriting, or risk assessment,
to policy issuance, and that lean production concepts could be applied
to these steps to reduce processing time, rework, idle time and other
waste in the system. To do this the company developed a "model cell"
that represented a minute study of the characteristics of its entire
system. This cell was developed around the concept of continuous
flow processing to minimize the build-up of work in process. Later,
the knowledge gained from the model cell was applied to the entire
company.
The 7 main design practices of lean manufacturing applied by the
team members are as follows:
Linked processes were placed near one another- Under the old
system, work was organized by function in separate
departments. This created delays in transferring applications to
other areas that performed other functions. These functional
silos were eliminated, e.g., receivers were relocated next to
sorters.
Use of Standardized Procedures- For example, prior to the
application of lean concepts, workers had been allowed to
choose their own systems for storing files. New or substitute
employees had difficulty finding files that had been stored in
various ways such as by policy number, by date received, and
alphabetically. The new system required all files be stored
alphabetically and in the same drawer at each work area.
Loop-backs were removed- Some processes involved returning
work to a previous step for further processing. This caused
confusion and idle time in some steps. For example, to solve a
loop-back problem in receiving, the receiving team was split
into two parts so that one group of workers received applications
 while another group assembled policies. This reduced delays
and waste by eliminating the confusion about what employees
should be doing and when they should do it.
Setting a common pace- Work flow was smoothed by applying
the concept of "takt" time. Takt time refers to pacing work based
on customer demand. The business established a takt time of six
minutes per application or ten applications per hour and
challenged employees to make improvements to reduce the time
required.
Workload balancing- The old policy of allocating applications
alphabetically was replaced by sequential allocation so that
every team received the same number of applications. This
reduced unnecessary delays in the system.
Segregating complexity- Tasks were separated into groups
based on the level of difficulty. Each group has a different
performance goal. For example, two groups were developed for
applications. One group handled cases where a physician's
statement was required, while another group handled less time
consuming cases that did not require a physician's statement.
This reduced the turnaround time for the simpler cases by 80%.
Posting performance results- Hourly productivity rates and
expectations were displayed on large white boards for all
employees to see. These boards became rallying points and
encouraged employees to improve the system.
Other lean concepts applied by Jefferson Pilot Financial included
stating performance and productivity measurements from the
customer's perspective and linking the measurements or metrics for
the lower levels to the measurements for upper level managers.
Another concept was related to achieving cost effective
investments. The idea is to apply lean production concepts before
automating a process, i.e., don't automate something that you
should not be doing in the first place. Also JPF divided operations
according to the status of the customers and the complexity of the
tasks. At each site there were now three cells: two handling
applications that required physicians’ statements (one for Premier
Partner customers, the other for all the rest), and a “fast track” cell
handling all applications that didn’t require doctors’ statements.
The company changed its formal structure, which had previously
been based on function and adviser type, to reflect the new system,
in which employees were organized by cell.
By applying the lean production concepts, the organization
produced the following results:
Turnaround time i.e. receipt of application to issuance of
policy, was reduced by 70%
Total labour cost for all applications were reduced by 26%
Reissues due to errors were reduced by 40%
The paper clearly shows that lean practices can be used in
manufacturing organisation as well as in service organisation. JPF
has the advantage that most of its existing frontline metrics
matched lean-production requirements fairly well. In areas where
metrics needed adjustment, the lean team collected four weeks’
worth of data in the new cell and established baselines from which
cell managers could set goals for the new processes. JPF showed it
that lean production concepts can be beneficial to any organization,
and it provides an approach, that others can use to become lean,
more productive and subsequently more competitive.