The Continuous Improvement Blog

How a service company transformed their back office operations with Lean

Written by Colin McArdle on 18 Apr 2018

back_office_operations

In today's increasingly competitive and demanding marketplace, there is a need for organisations in the service industry to minimise unnecessary costs, simplify processes, improve customer service, reduce non value adding activities and improve efficiency.

For businesses in the service industry, the cost of back office operations represent a significant portion of the total business overhead. And this is where companies should be focusing their process improvement and cost reduction activities.

For this reason, many Private Equity firms and private investors choose to apply Lean Management to their portfolio of companies in order to reduce the cost to serve and add value to the company.

In this blog post, we present a brief case study of how Kaizen Kulture Consultants successfully applied Lean to the back office operations of a UK service company to achieve a cost reduction of £590k.

We walk through the approach, key findings, recommendations and outcomes. Perhaps you could apply some of these improvements to your own back office operations?

Objective and approach

A service company with over 100 branches in the UK and more than 150 administration staff across all branches, were looking to centralise all their branch based administration activities to two locations.

The companies project team had designed a Target Operating Model (TOM) based on having up to  60 staff. Before proceeding with the implementation their private equity investor requested they enlist the help of Kaizen Kulture’s expert Lean Consultants to validate the TOM design and assumptions made.

The key objectives of the Lean Diagnostic Assessment were to:

  • Identify and measure the full spectrum of current state processing activities.
  • Identify and measure the impact of current state non-value adding activities.
  • Using the findings and solutions identified, determine the productivity gap from current state to optimised future state design.
  • Recommend the future state TOM design for Management consideration.

The current state analysis took place over a period of 4 weeks, where a number of Lean tools  were applied including Demand Analysis and segmentation, Value Stream Mapping, process design for continuous flow and the identification of issues preventing right first time quality.

Key findings and recommendations

The current state analysis highlighted a number of significant improvements to the proposed TOM. These included:

Problem 1: Application forms with duplicate information were taking too long to process.

Solution: Simplify and remove duplicates from forms.

Benefit: Reduced labour time.

Problem 2: Application forms were completed with errors and missing information.

Solution: Introduced autofill functionality on all forms to increase and automated mistake proofing of forms with incomplete forms returned to the branch.

Benefit: Increased right first time, reduced delays and reduced labour time required to process.

Problem 3: Excessive time to find documents on systems, held on local PC, on desks or in filing cabinets.

Solution: Introduced shared drive for documents.

Benefit: Reduced delays and labour time required to process.

Problem 4: Excessive time to switch between systems and tasks.

Solution: Introduced twin screen workstations to make tasks easier and faster to complete.

Benefit: Reduced delays and labour time required to process.

Problem 5: Administrator data input timings impacted by Branch support calls and emails.

Solution: Process reactive support activities and planned data input activities separately. Assign Administrators for data input and regular processing activities and Supervisors to act as the point of contact for all customers, clients and branches.

Benefit: Reduced administrator frustration, reduced time to process paperwork, improved response time and branch service quality.

Problem 6: Staff development and retention concerns due to mundane, repetitive activity.

Solution: Upskilling and developing staff capabilities and a scheduled rotation of activities to keep work interesting.

Benefit: Increased job satisfaction and improved retention rates. Flexibility to peaks in demand increased enabling service quality levels to be maintained at peak times.

Lean process analysis and tools application made many of these opportunities easy to identify and with team based problem solving simple solutions we’re implemented for maximum near and long term gain. And on their own wouldn't have made a significant overall improvement. It’s when you look at the impact of all of these improvements combined that they make a notable impact.

Outcome

By taking a ‘ground up’ detailed view of the current state processes, we were able to identify a number of wasteful activities, simplify and standardise processing activities and greater streamlining of processes to enable continuous flow.

Using a Lean approach we were able to;

  • Save the company £590k
  • Increase customer satisfaction
  • Reduce application processing times
  • Increase flexibility to maintain service quality
  • Improve teamwork
  • Increase staff retention
  • Show how Lean can be used to create true value.

It's worth noting that none of this could have been achieved without the support, knowledge and innovation of the local teams. By pausing and using experts to assess the current state and the design of the proposed TOM, a number of opportunities for process improvement were revealed.

Implementing these changes resulted in significant benefits for the company, and ultimately, improved the quality and speed of the service they provide to their customers, leading to more referrals and revenue growth.

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Topics: service industry

Colin McArdle

Written by Colin McArdle

Colin McArdle, the Founder and Managing Director of Kaizen Kulture is a Lean and Six Sigma Master Black Belt who has over 30 years industry experience. Kaizen Kulture's mission is to be true to the ethos of continuous improvement.