The Lean Service Machine

• JPF was a US service company.

• Top managers were looking for differentiations

• It identified superior service as a key.

• Problem were delay in processing, service, quality which undermined the value of policies

• JPF decided to adopt practices and tools of ‘Lean Production’.

What is Lean production?

• Lean production is a management philosophy derived mostly from the Toyota Production System (TPS) and identified as "Lean" only in the 1990s

• Its operation involved the processing of tangible like service product.

• JPF appointed a team of five members

• Outcomes contributed to remarkable 60% increase.

Lean production in a service context: Building the model cell

Companies can introduce lean system without disrupting operation

Lean production is built around the concept of continuous flow

processing.

• Placing linked process near one another All steps in a process the “value Stream” should be located close to one

another

• Standardizing procedures Files should be stored alphabetically and in the same drawer at each

workstation i.e., physical work space for data was standardized.

• Eliminating loop backs Work returns to a previous step for further processing creates delay

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

• Setting a common tempo 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.

• Balancing loads The old policy of allocating applications alphabetically was replaced by

sequential allocation so that every team received the same number of applications.

• Segregating complexity Cluster tasks of similar levels of difficulty into separated into groups with

their own performance goals.

Setting performance goals

Hourly productivity rates and expectationswere displayed on large white boards for allemployees to see. These boards becamerallying points and encouraged employees toimprove the system.

Measured performance and productivity formcustomer’s perspective

Process Step Metric Purpose of Metric

Input

Applications input per employee per hour. Individual performance.

Applications input by the staff per hour. Unit performance.

Underwriting support

Number of follow-up calls for medical tests and records per week.

Performance of unit supplying medical tests and records.

Phone calls answered per day. Unit performance.

Underwriting

Number of new cases, follow-ups, or approvals per week.

Individual performance.

Frequency of physician statements ordered from doctors.

Cost management (a cost is associated with each physicians statement).

Percentage of cases issued, declined, or rated. Individual performance.

Policy issuance

Policies issued per person per hour. Individual performance.

Policies issued by the entire issue staff per hour. Unit performance.

Rolling out the new system

Divide operations according to the status of customers and the

complexities of the task

Convincing the skeptics Everyone in the company needed to understand the new process design

It would require continual adjustment as the business environment changes and improvement.

Explained through “The Airplane Game”

The Airplane Game

Getting Started

Digging InAnalyzing

the ProcessFixing the Process

Redesigning from scratch

Capturing Lessons

Conclusion

• Although lean production is usually viewed from themanufacturing perspective, many of the concepts andtools were originally developed in service organizations(e.g., the visual system used by supermarkets toreplenish shelves) and can be effectively applied toservice organizations.

• The Jefferson Pilot Financial case provides considerablesupport for the argument that lean productionconcepts can be beneficial to any organization, and itprovides an approach others can use to become lean,more productive and subsequently more competitive.

Thank you