Service Process Improvement

1. Service Process Improvement MD254 Service Operations Professor Joy Field

2. Foundations of Continuous Improvement • Customer satisfaction • Focus on customer needs • Management by facts • Formal data gathering and statistical analysis • Respect for people • Assumptions about employees • Customers as co-producers • Support and engagement

3. Plan-Do-Check-Act (PDCA) Cycle • Plan • Documenting the current process, selecting the problem, determining possible root causes, and developing an action plan • Do • Implementing the process change on a trial basis and collect data on performance measures • Check • Review and evaluate the effect of the change • Act • If the experiment is successful, standardize the process change, provide training on the new process, and codify learning from the improvement process

4. Basic Tools for Quality andProductivity Improvement • Check sheet • Run chart • Histogram • Pareto chart • Flowchart • Cause-and-effect diagram • Scatter diagram • Control chart

5. Process Improvement Challenges in Services • High input and process variation • Variation reduction is a more complicated and sensitive issue than in manufacturing • Poor tracking of flow, especially of customers in the process • Customers cannot be treated like inventory • A tradition of individuality and employee discretion • Lack of meaningful data and data-based decision-making • Quality metrics are often subjective (although time is an example of an objective metric in transactional services) • Employees and customers cannot be controlled like machines

6. Six Sigma for Services Principles • Six Sigma: • Emphasizes the need to recognize high-impact, financially quantifiable opportunities and eliminate defects as defined by customers • Recognizes that variation hinders the ability to reliably deliver high-quality services • Requires data-driven decisions using a comprehensive set of quality tools • Provides a highly prescriptive cultural infrastructure for aiding implementation • When implemented correctly, promises and delivers $500,000 of improved operating profit per Black Belt per year • The Define-Measure-Analyze-Improve-Control (DMAIC) improvement process used in Six Sigma is analogous to the PDCA cycle

7. Six Sigma Organization Rolesand Responsibilities Executive Project Member • Own vision, direction, integration, results • Lead change • Part-time • Project-specific Champion All employees Green Belts • Understand vision • Apply concepts • Project owner • Implement solutions • Black Belt managers • Part-time • Help Black Belts Black Belts Master Black Belts • Full-time • Train and coach Black and Green Belts • Statistical problem solving experts • Devote 50%-100% of time to Black Belt activities • Facilitate and practice problem solving • Train and coach Green Belts and project teams

8. Sources of Variation in Services • Customer introduced variability • Arrival variability • Request variability • Capability variability • Effort variability • Subjective preference variability • Internal process variability • Process design • Employees • Equipment

9. Reduction of Variation in Services • Due to the involvement of the customer in the service process and the more intangible nature of service products, services tend to have more uncertainty (i.e., variation) than manufacturers. • Process standardization in services often involves defining a framework for action and customer interaction rather than a rigid sequence of steps. Any standard that causes “failure demand” (e.g. strictly limiting the length of customer service calls) is an inappropriate application of variation reduction. • Standard operating procedures provide a basis for evaluating service processes and assessing the impact of process changes. • Many service processes can be more standardized than they currently are, making services more efficient and effective (e.g. best-practice bundles in healthcare, separate processes for high and low complexity services such as insurance applications and grocery store checkout, Mandarin Oriental’s LQEs).

10. Lean Services Principles • The lean approach to process improvement includes: • A focus on customers (both internal and external) • Maximizing process velocity (i.e., flow) • Tools focused on analyzing process flow and delay times at each activity in a process • Eliminating waste • Separating “value-add” from “non-value-add” and addressing the root causes of non-value-add activities • Reducing unnecessary complexity and its costs

11. Throughput Time and Process Speed Little’s Law: • Throughput time is the amount of time an item (e.g. customer) takes to complete the process • Work-in-process is the number of items in progress • Average completion time is the number of items completed per unit time • If two of the three quantities are known, the other two can be calculated • Increasing process speed requires either reducing the WIP or increasing the completion rate

12. Services Wastes • Overprocessing • Trying to add more value to a service than what your customers want or will pay for • Transportation • Unnecessary movement of materials, products or information • Motion • Needless movement of people • Inventory • Any WIP in excess of what is required to produce for the customer • Waiting time • Any delay between when one process step/activity ends and the next step/activity begins • Defects • Any aspect of the service that does not conform to customer needs • Overproduction • Production of outputs beyond what is need for immediate use

13. Lean Six Sigma for Services • Lean Six Sigma combines the emphasis on maximizing flows and reducing waste from Lean with variation reduction and an organizational infrastructure and specific improvement process from Six Sigma. • Lean Six Sigma for services focuses on improving the customer experience and service outcomes by addressing poor flow and excess waste and variation in the service delivery process for both the firm and customer co-producers.

14. Lean Six Sigma DMAIC Tools(Lean tools in bold) Define Measure Analyze Improve Control • Project selection tools • PIP management process • Value stream map • Financial analysis • Project charter • Multi-generational plan • Stakeholder analysis • Communication plan • SIPOC map • High-level process map • Non-value-added analysis • VOC and Kano analysis • QFD • RACI and quad charts • Pareto charts • C&E matrix • Fishbone diagrams • Brainstorming • Details “As-Is” process maps • Basic statistical tools • Constraint identification • Time trap analysis • Non-value-added analysis • Hypothesis testing • Confidence intervals • FMEA • Simple & multiple regression • ANOVA • Queuing theory • Analytical batch sizing • Brainstorming • Benchmarking • TPM • 5S • Line balancing • Process flow improvement • Replenishment pull • Sales & operations planning • Setup reduction • Generic pull • Kaizen • Poka-yoke • FMEA • Hypothesis testing • Solution selection matrix • “To-Be” process maps • Piloting and simulation • Control charts • Standard operating procedures (SOPs) • Training plan • Communication plan • Implementation plan • Visual process control • Mistake-proofing • Process control plans • Project commissioning • Project replication • Plan-Do-Check-Act cycle • Operational definitions • Data collection plan • Pareto chart • Histogram • Box plot • Statistical sampling • Measurement system analysis • Control charts • Process cycle efficiency • Process sizing • Process capability

15. Examples of Lean Six Sigma Tools • Poka-yoke (mistake-proofing) • A poka-yoke device is a simple, often inexpensive, device that prevents employee and customer mistakes from becoming defects (e.g. e-commerce order forms, hospital wrist bands, spellcheckers). • A poka-yoke device undertakes 100% automatic inspection and prevents defects and/or stops or gives a warning when a defect is discovered. • Poka-yoke steps include: elimination (possibilities for accidents or errors are eliminated), replacement (replacing human actions by automated actions for safety and error reasons), facilitation (make the work easier to carry out and less error prone), detection (identifying mistakes before they become defects), and mitigation (reduce the effects of an error). • Design of experiments (DOE) • DOE is a method for simultaneously investigating anywhere from a handful to dozens of potential causes of variation in a process. Experiments are conducted by varying a number of factors according to a statistically-based plan.