Lean Six Sigma in Field Service Organizations - Identifying and Eliminating Waste

You have no doubt read various examples where Lean Six Sigma was used to identify and eliminate waste in both manufacturing facilities and service companies (i.e. financial institutions and hospitals). Most of us can quickly see how concepts such as inventory reduction and improved product quality are applied to physical objects or documents. But what about Field Service Organizations where the primary product (a completed service request) is often vaguely defined and the main component (technical expertise) is intangible? How can we apply the same techniques to obtain the same results (increased speed, reduced costs, and improved quality)?

In this article we will focus on just one element of Lean Six Sigma: Waste Reduction. While service managers may intuitively suspect that there are many areas of waste within their organization, they may not realize that the same tools used to streamline production assembly lines can be used to improve field service processes.

Let's begin by comparing the fundamental activities performed in both a manufacturing facility and a service field organization:

System Inputs

Manufacturing: Product sales order is entered directly into the MRP

Field Service: Phone call or e-mail manually entered into SMS
Scheduling

Manufacturing: MRP checks parts stock lead times, current inventory, etc. before sending detailed demand to plant floor.

Field Service: Typically SMS only checks technician availability before dispatching (with limited detail).
Process Activities

Manufacturing: On plant floor - fabricating; assembling; testing.

Field Service: At customer site - replacing parts; troubleshooting; adjusting.
Completion

Manufacturing: Final QC inspection; Ship; Invoice.

Field Service: Customer Sign-off; Forward info; Invoice.

Although the specific tasks are different (along with the terminology), you can see that there are many parallels within the two processes. And, being similar processes they often are subject to similar sources of waste. Below we examine the most common areas of waste that are normally targeted by Lean Six Sigma projects.

Processing

Processing waste is often the results of over processing in both manufacturing and service. In manufacturing this refers to making products at higher (and more costly) specifications than required by the customer.

In a field service organization you can over-service a customer by exceeding the contractual Service Level Agreement (SLA). For example, you may provide an average one-hour on-site response when the SLA only specifies an average 4-hour response. While it is usually better to over-perform than under-perform on SLAs, it still represents waste as you are not matching the customer demand requirements - which can lead to higher costs or missed revenue opportunities.

TIP: Measure your actual response times separately for each service area and compare to the local competition. In some areas you may have a competitive advantage (e.g. lower than industry standard response times) that can be leveraged by your marketing team.

Transportation

On a manufacturing floor, products are transported from station to station throughout the process. When these are mapped and measured carefully, you will often find the product moves great distances throughout the facility, and represent potential opportunities to reduce waste.

Transportation waste in a field service organization takes the form of miscommunication. Service request information is transported (communicated) from the customer to the call center, from the call center to the field technician, and (often in paper form) from the technician back to a central billing location. If you have a separate dispatching or triage help desk, there are even more handoffs. Each handoff represents an opportunity to introduce delays, errors, and non-value-add activities.

TIP: Create a pipeline report that shows the number and average age of service requests in each stage of the process (Opened - Not Dispatched; Dispatched - Not Started; Started - Not Completed; Completed - Not Invoiced; Invoiced). This will help you to identify bottlenecks that are caused by transportation delays within the process.

Motion

There are several Lean Six Sigma tools that focus on creating effective work areas by, among other things, reducing the unnecessary and awkward movements an operator may experience while performing their activities.

Perhaps ironically, motion waste in a field service organization is often the result of an attempt to improve quality. For example, if a Dispatcher needs additional clarification of a SLA requirement, they may physically walk over to the Contracts area to retrieve a paper file. Likewise - especially during an end-of-month billing frenzy - the Invoicing team may run to the Finance area to find a "live" person to check credit status.

TIP: How often do you observe call center personnel walking around the office while speaking to customers over their wireless headphones? Consider physically rearranging the work areas and/or creating electronic data marts where customer account information will be easily accessed by everyone in the office.

Inventory

Spare parts inventories in either central warehouses or technician vehicles are often subject to management review and scrutiny. In fact, this may be the one area where you have already applied Just-In-Time or other Lean Six Sigma techniques.

However, inventory can also be thought of in terms of unutilized field service hours. These hours are typically non-productive and non-billable. Since Field Labor cost (excluding overtime) is essentially fixed, even minor productivity gains will have a significant impact on your bottom line.

TIP: Revenue-by-tech is an often-used and sometimes misleading measurement. Technicians can boost this metric by replacing more parts or increasing repair times. While your company may benefit from short term revenue, customer satisfaction and overall profitability will suffer. Technician productivity (hours billable / hours available) is a key metric for any field service organization and should be measured continuously and reported daily.

Waiting

Just like a worker on the production floor or a teller at the bank window, field technicians are generally paid even during idle times. But beyond this obvious cost concern, delays within a field service process are typically passed directly and immediately to the customer - leading to increased frustration and lower satisfaction.

There are multiple opportunities for waiting in a field service process including: Dispatching (technician waiting on service requests), Parts Shipping (technician waiting for parts to arrive at site), Invoicing (billing personnel waiting for completed paperwork from field technician), and Contract Administration (waiting for site audit information or pricing to enable contract set-up in SMS).

TIP: When measuring Time-To-Dispatch, make sure you measure from the service request Open time to the technician Accepted time (not when the call center first relayed the request to the field). This ensures you are measuring delays that impact the customer, not just when calls are "thrown over the wall" to the field.

Defects

Most manufacturing facility closely monitors product defects throughout the production process. The goal is to identify and correct defects before they are passed forward to downstream operations.

You are probably aware of (and currently measure) two of the most common and visible product defects in service organizations: Call Backs and Re-bills. But note that these are end-point defects, that is, they are often the results of other errors passed throughout the process. For example, the Call Center may mistakenly identify the wrong piece of equipment when the service request is entered into the Service Management System. This defect could lead to assigning/dispatching errors and/or the technician arriving to the site without the proper replacement parts. If the technician then returns the completed paperwork without correcting the product information, the Invoicing team may apply the incorrect pricing and payment terms. The same defect is passed through multiple operations causing multiple errors.

TIP: As a general rule, you should divide Call Backs into a least two categories: with and without parts. If parts were used, you may need to review stocking practices and policies. If no parts were used, it may indicate a technician training issue (insufficient troubleshooting or other repair skills).

Overproduction

Producing too much product is easily visible as excess inventory in a factory setting. But how does overproduction affect field service? Remember, your finished product is a completed service call. While it may seem counterintuitive that you could have too many completed service calls, you must consider this in terms of scheduling. For example, a technician may have four Preventive Maintenance (PM) visits scheduled over the next two days (two PM visits each day). If the technician completes all four PM visits on the first day you may feel you have gained some advantage. But what if these PM visits are performed at the expense of other non-PM service requests? What about the schedules of the other technicians in the same service area? Were their PM schedules affected as they covered the non-PM workload of the first technician? Did the service office as a whole experience more overtime expenses as the team scrambled to meet customers commitments?

Smoothing out field service production is as important as a manufacturing floor. Not only does it make you a more efficient organization, it also reduces the stress on the Dispatch Team, Field Management, and (most importantly) the customers by reducing the need to constantly adjust and communicate ETAs.

Tip: Segment the each field technician's labor hours by Time-of-Day, Day of Week, and Service Type (PM, non-PM, Install, etc.). Then compare this information among technicians working in the same service area. If the hours-distribution varies significantly among technicians it could indicate a scheduling or performance issue.

The items noted above represent just a few examples where waste could be found throughout the field service process. There are many, many more - each which could have a significant impact on your service business. Also, you may have noticed in the comparison above that manufactured products are typically subjected to various quality checkpoints throughout the production process. This helps ensure defects are not passed to the next work station (an important Lean Six Sigma objective) or, even worse, to the customer. However, field service events have no final inspection - except by the customers themselves. This factor alone should encourage you to consider using Lean Six Sigma to proactively identify waste and other process issues.

LR Lewis

This post was made using the Auto Blogging Software from WebMagnates.org This line will not appear when posts are made after activating the software to full version.

Now Is The Time For Process Improvement In Service Organizations

Introduction

U.S. service firms have been hit hard by the current downturn in the economy. Business slowdown in the service sector, combined with increased deregulation and foreign competition, has created a fiercely competitive environment. Many service industries have experienced difficulty in responding to these new circumstances. The magnitude of the problem is indicated by the wave of savings and loans closures, financial services bankruptcies, downsizing of real estate organizations, and banking mergers now occurring.

One of the reasons service firms have been particularly hard hit stems from their dismal lack of competitiveness. In the recent past, growth in demand for services was so strong; it gave the impression that service industries were "recession proof." Toiling under this false notion, service firms focused on increasing capacity to satisfy rising demand. They paid very little attention to improving quality and productivity. During the 1980s, while productivity in the manufacturing sector was growing at a rate of almost 4 percent per year, service sector productivity grew less than 1 percent per year.

Failure to improve quality and productivity has left many service firms unable to compete in today's economic environment. Mergers and downsizing are a short-term response to improving a service firm's competitiveness. With the new competitive environment expected to continue indefinitely, these changes may be a prelude to a massive shakeout within the service sector, similar in size and scope to the restructuring that occurred in the manufacturing sector.

Further exacerbating their woes, U.S. service firms need to drastically improve the quality of their outputs and outcomes just to maintain the status quo. Foreign competitors are making inroads into previously untapped markets (financial services, airlines, retailing, hospitality) based on their ability to produce high-quality products and services. They have proven that there is nothing mysterious about identifying customer needs, wants, and desires. To the chagrin of their U.S. counterparts, foreign firms are consistently delivering service levels that meet or exceed customer expectations.

Consequently, service managers need to recognize that "trimming the fat" and emphasizing "lean and mean" policies are only short-term, knee-jerk reactions to a lack of competitiveness. Actions such as these do not contribute to high quality, nor do they enhance productivity. In fact, if nothing more substantial is done to improve quality and productivity within the services sector in the U.S., there will be even more rounds of downsizing or mergers in response to declining competitiveness.

Continuous Improvement Strategies

To enhance their competitiveness, service firms need to embrace systems such as Lean, Six Sigma and practical problem solving, within their organizations to ensure continuous process improvement. These systems are capable of providing individual providers with the opportunity to meet and then surpass the challenge of competitors. A philosophy of continuous process improvement enables a service firm to cultivate a process-oriented way of thinking and developing strategies that assure continuous improvement involving people at all levels of the organizational hierarchy. Such a system requires a new organizational culture that considers change, rather than complacency, the norm.

In a change environment, continuous process improvement by all employees is repeatedly emphasized and supported by senior management. Service firms need to redesign their existing structure to develop multi-skilled employees, and establish team processes for continuous improvement.

Implementing a Process Improvement Strategy

A burning platform for implementing a continuous improvement system is widespread dissatisfaction with the current way in which the organization functions. In the case of profit-making service organizations, dissatisfaction is heightened by red ink or lost market share. However, with respect to non-profit service organizations such as government, education, and utilities, these kinds of competitive pressures are largely absent. Therefore, organizational dissatisfaction must be created from within by the leadership team.

Top management must provide leadership by establishing a vision for a better organization. This vision must then be communicated to all employees. Only by creating a high "discomfort index" can non-profit service organizations hope to create a desire, and thereby garner the necessary support, for organizational change. To sustain continuous improvement initiatives, top management should be aware of the crucial role it plays in helping to formulate the vision, mission and values of the organization. In this regard, the role of senior management must change from providing solutions to empowering others within the organization.

A Focused Approach to Process Improvement

Service organizations should consider a focused approach to process improvement because a disciplined, management led, focused approach is essential if process improvement efforts are to succeed. The approach must be targeted at improving the key business processes that provide a service to a customer. Most key business processes are cross-functional in nature which means they must be managed across all the functional areas that play roles in delivering the services.

Tightly focused process improvement initiatives produces results and enhances performance. In the end, the focus should be on the things that are most important to the organization, but are not being done well. Many times service organizations focus on the wrong things-the things that waste time and effort, which are of no value to the customer or to achieving the strategic goals of the organization.

Getting Focused

I use a four step proven approach for getting focused on process improvement.

Step 1: Prepare

In this step senior management and mangers organize and create a Leadership Team and develop a compelling vision, mission and set of values. They identify critical success factors and key organizational processes, prioritize those processes, and conduct an assessment of the organization to determine the current state and what the future state looks like.

The importance of this step cannot be overlooked because facilitative leadership is required to create a culture that encourages and rewards continuous process improvement. Strong leadership from management is a crucial determinant for maintaining process improvement.

Step 2: Plan

The second step is creating a strategic continuous improvement plan based on the results of the organizational assessment completed in step one. This plan has two components a process improvement plan so that those key processes important to the customer can be improved, and an organizational improvement plan to prepare the organization for the future.

The process improvement plan is designed to close the gap between current and future states and is used to select major improvement opportunities and form process improvement teams to improve the processes by eliminating non-value -added activities and closing performance gaps.

The organization improvement plan is a roadmap for establishing training, rewards and recognition, communications, and measurement programs that support the process improvement initiative.

Incentive and pay structures for motivating behavior and performance under continuous process improvement systems are purposely designed to encourage group team-building behavior and performance rather than individual effort/output. Rewarding non-group behavior tends to be counterproductive because financial rewards for individual performance send the wrong message to employees, who in turn will undermine the process-oriented or team approach.

Training refers to the skill building and staff development that is required for continuous process improvement. New capabilities are necessary if employees are to identify and solve problems as a team. If any of these elements are missing, the change process will break down. Therefore, as employees engage in continuous improvement, they need to acquire additional skills or be cross-trained to perform new or expanded roles and jobs.

Step 3: Execute

Once the process improvement teams have been formed and trained it is time to execute-actually improving the process. Process improvement teams examine the process to understand how the process works. They spend time analyzing data to determine how the process is actually working and measure its current performance. The next step is to decide how it can be improved and then test the improved process. Improvement may require refining, redesigning or reengineering the process. Based on their results the team makes recommendations for approval and implementation.

Step 4: Sustain

The final step is to sustain a process improvement culture. This step makes process improvement a way of life in the service organization. It demands carefully managed change to ensure the cultural shift from fire fighting to continuous process improvement. Sustainability only occurs when all employees not just process improvement teams have the necessary skills and the authority to do what is required to fix processes and make lasting improvements.

A key element of sustain is employee empowerment. The main drivers behind continuous process improvement mean that employees are increasingly in need of a broader and richer skill set along with the authority and responsibility to make customer-facing decisions. Job skills must be expanded to include not only the basic work tasks, but also the problem-solving skills necessary to change the way in which organizational work is performed. This enables them to respond to various demands. In other words, they must be empowered.

Employee empowerment means that a firm entrusts decision-making authority to frontline workers in situations where such authority traditionally resided solely with management. It is important to note that empowerment cannot be mandated from senior management. To feel empowered, a number of preconditions must be in place: (1) a shared vision and a common set of values must exist organization-wide; (2) individuals must be properly trained; (3) benefits must be fairly and equally distributed; (4) managers must have faith and confidence in their employees; and (5) the overall culture of the organization must support risk-taking and not pointing blame.

Summary

The service sector of the U.S. economy is undergoing a significant transformation. In its wake, traditional methods like restructuring and reorganizing are stop gap and fleeting solutions. Methods that were popular in the early 1980s (downsizing and mergers) no longer ensure long-term competitiveness, nor do they remedy the inconsistencies caused by knee-jerk reactions. A more focused approach for improving quality and productivity has to be found. One such alternative for increasing competitiveness is to introduce a focused approach to continuous process improvement into service organizations.

Willie L. Carter is the president and principal of Quantum Associates, Inc., Northbrook, Illinois. He is the author of the book "Process Improvement for Administrative Departments- The Key to Achieving Internal Customer Satisfaction", available on Amazon.com. Carter is a Certified Lean Sensei, Certified Manager of Quality/Organizational Excellence, and a Certified ISO 9000 Lead Assessor. For more information on how we help companies create customer value please visit our website at http://www.quantumassocinc.com. Willie can be contacted at wcarter@quantumassocinc.com or by phone at 847-919-6127.

This post was made using the Auto Blogging Software from WebMagnates.org This line will not appear when posts are made after activating the software to full version.