Lean and Six Sigma in Service

By: Jack Reardon, Sr. Consultant QPS
Certified Lean Expert & Master Black Belt

In the service industry, we are experiencing a dramatic growth with poorly designed, inefficient, and over-burdened processes that are characterized by excessive waste in time and cost. The healthcare industry has grown rapidly in the last 10-15 years; the processes designed to handle thousands of claims a decade ago, are now trying to handle millions of claims! “We don’t have enough resources to handle the work”, cries the operations manager. The problem is that we keep throwing people at the problem, and if that is all that you do, it will never work. Just throwing more people at the problem, means you create more opportunities to make mistakes and overload the back end of the process.

Case Study 1

For example, in one company we had returned mail coming in the back door faster than we were sending mail out. Millions of dollars were tied up as we attempted to correct the problems one at a time. Each piece of mail had a check in the envelope, so we had to (a) open the envelope, (b) determine the problem, and (c) send it back to the issuing department or re-mail the check. The returned mail department loaded up on people to handle the volume. Meanwhile, we worked harder and faster to send the checks out the first time. Both processes were overloaded, and we worked overtime trying to keep up. Our project was to investigate and find out what was causing the returned mail.

In about a week, after analyzing some of the returns, we discovered the problem, tracking it all back to address changes. As we accessed the database maintenance area, we discovered that they had a backlog of about six weeks: the customer notifies us that they moved, and six weeks later, the database is updated. But, guess what happens during those six weeks? We send the checks to the wrong address! We had to fix this and fix it quick. We hired a third party to take our database and contact every person so as to verify all information in the database. Within six weeks, everyone in the database was up to date. Now, maintenance could keep up with the daily changes.

In about three weeks the returned checks decreased by 97%. Returned mail dropped to a trickle and was easily manageable. Now, we had an excess of resources that we could reallocate to needed areas.

Six Sigma

This example is just one minor process in a large multi-billion dollar organization; there are many other opportunities. Analyzing data and determining the root cause of any issue is what makes Six Sigma so powerful. A trained project team has the time, the resources, and the tools to address problems that wasted the corporation’s time and money for years.

Lean

The Lean side of the issue in service is performing a value stream map. This tool is becoming the most powerful Lean tool in the service world. The more complex the process, the more you need to do a value stream map. Question to ask include: Where, in the process, are we wasting time? Where is the non-value being added to the process?

Case Study 2

The following is an example of using the value stream map in the claims handling process. To address issues, we produced a 14 foot map delineating this very complex process. As a result, we discovered a step in the process that sent all the claims from one city to another. Asking why this happened, we discovered that all these claims went to that location because the lady who reviewed them had moved to that plant location. So, all the claims were sent to that location for her to review and then send back. She was, incidentally, the only person who knew how to perform this review. Further inquiry revealed that she left the company three years ago! But regardless, the company was sending millions of these claims for her to review! And who was reviewing them? It turns out she never told anybody about it. The other plant didn’t know what to do, so they just sent them back. Meanwhile, people back at the point of origin just assumed that she had performed her tasks and that she was returning processed claims. STOP!

We were able to immediately fix this process and stop the madness! Originally, the process required 162 days. The new process requires about 30 days.

If this is any indication of the kind of delays and waste that exist in processes, opportunities to improve abound! In the service industry, this is typical. Remember that most of these processes were designed to handle a couple of thousand items a month. Today we are using the very same processes, and trying to squeeze a million items in the same time frame. The point is that the process was not designed to handle this kind of volume; it is time to re-design these processes.

Value stream mapping is a process re-design tool. Let’s map out the existing or current process and then let’s re-design it without all the waste. Let’s balance the workload so the flow is smooth and efficient. It’s not a matter of just fixing a few problems in the process; it is a matter of completely re-designing the process. We find the same issues in other service related companies. Ironically, some of these issues are due to the success of the company. Success means the original process must now handle many more items than it was designed to manage.

About Jack Reardon

Jack Reardon has over 30 years experience in the Quality and Business Improvement field, specializing in Quality Management Systems and Improvement. His professional experience includes working at Data General Corporation for 15 years, including holding positions as the Corporate Quality Manager, Technical Operations Manager, Production Manager, and Customer Support Manager. He has also worked at Proconics International, Robotics as Director of Quality implementing TQM and ISO 9001, as Quality Manager and Plant Manager for National Perforating, an Aerospace supplier to Boeing, and as QA Manager for Insco Corporation, an automotive supplier of transmission gears.

Jack has provided coaching & training for ISO, Six Sigma and Lean at many companies. He has been a member of American Society for Quality for the last 12 years. In addition, he was an active member of the Worcester Section Executive Committee, holding several positions including Chairman. He also has ASQ Certified Quality Auditor, Provisional RAB Provisional auditor, and ASQ Certified Six Sigma Black Belt, as well as a Master Black Belt, Project Management, DFSS, and Certifications.

Quality & Productivity, Inc. provides you with the training you need to make breakthrough improvements in your process!