The Continuous Improvement Blog

What is lean and how does it apply to the service industry?

Written by Colin McArdle on 27 Feb 2018


For any business in the service industry, delivering excellent customer service is the priority. The success of your business is dependent on your ability to deliver your service on time, to a high quality, and as per customer requirements.

However, too often service companies find themselves buckling under the strain of too much demand, not enough capacity to deliver, and errors due to a lack of standardised ways of working. But what if you could handle the same amount of business without needing to increase your capacity? What if you could adapt your internal processes to make your service flow more smoothly and deliver greater value to your customers?

This is where Lean comes in. Despite some perceptions, Lean is not just for manufacturing. It can benefit any organisation in any industry. But it transfers particularly well to the service industry which, like manufacturing, is characterised by complex processes and a customer-centric focus.

What is Lean?

The concept of Lean is to help businesses determine what customers value, and to optimise their processes by cutting out ‘waste’ - activities that absorb time and resources but add no value to the customer, so that the service flows smoothly. The aim is to achieve maximum productivity and performance with the fewest resources.

There are five key principles behind Lean. At the centre of each is a focus on meeting customer needs and promoting customer satisfaction;

  • Specify value in the eyes of the customer (determining what customers value)
  • Identify the value stream (the activities needed to deliver a product or service)
  • Make value flow (so that all activities that make up the end-to-end process move in smooth sequence)
  • Activate the process at the pull of the customer (so customers get what they want, when they want it)
  • Pursue perfection (by continuously removing waste)

Lean grew out of a long tradition of quality and process improvement efforts in manufacturing. It was Taiichi Ohno at Toyota who identified seven types of waste in manufacturing; defects/errors, over-production, waiting, inventory, transportation, motion, and over-processing. And by eliminating these activities that create no value for the customer, manufacturers could free themselves up to create more products, and to a better quality.

But Lean isn’t just for manufacturing. The service industry in particular have experienced the benefits of removing wasteful activities to improve productivity and profitability, increase employee engagement and reduce costs.

Lean in the service industry

Companies in the service industry are under constant pressure to deliver exceptional customer service. Particularly today when there is more competition and greater customer demand than ever.

Although very different from manufacturers, service companies - whether a healthcare provider, IT company, marketing service - still have wasteful processes that could be removed or reduced.

These are some of the types of waste that could exist in an insurance company, for example:

  • Transportation - movement of files, information or documents
  • Inventory - queues of orders or renewals waiting to be processed
  • Motion - unnecessary movement of people e.g. to locate office equipment or a result of poor workplace layout
  • Waiting - time delays caused by unavailability of equipment, lack of information, knowledge of people, or waiting for senior approval
  • Over-production - ‘reply to all’ emails, creating multiple copies of the same document or information
  • Over-processing - unnecessary approval routes for documents, duplicated process steps, collecting data when it is not needed
  • Defects - not getting things right first time, cancelling meetings, missing information, pricing errors

Through the application of lean tools, these wasteful activities can be identified and eliminated or reduced. Whilst also providing solutions to reduce errors, maximise employee engagement and become more cost-effective.

Wasteful activities in the service industry tend to be more intangible than in the manufacturing industry, as they are not always physically observable. This is where lean tools like Visual Management are especially useful, as they help bring ‘hidden’ waste into focus. Companies employing a Lean methodology can then pull on other Lean tools to remove waste and solve problems.

The 5s tool (Sort, Set in Order, Shine, Standardise, Sustain), for example, can be used to organise the workplace to reduce time spent looking for things, minimise risk of equipment stopping or breaking down, and stop people carrying out tasks in non-standardised ways.

But Lean is not simply a set of tools. It’s about building and developing effective teams who are able to identify waste and remove it, to solve problems, and to strive for continuous improvement. It creates a culture of discipline, of pride in work, and of striving to deliver greater value for customers.

Lean can benefit organisations in a diverse range of service sectors. In the healthcare sector lean tools and techniques can be used to increase the amount of time caregivers are able to spend with patients, reduce time spent on paperwork, and reduce patient waiting time. In retail and hospitality Lean can help streamline order processes and improve management of facilities and stock/inventory. Lean helps financial services companies meet customer requirements faster and with greater accuracy. And it’s becoming increasingly valued in the education sector for driving greater efficiency and costs reductions.

Think about the waste that exists in your organisation. Perhaps you waste time waiting for approval from senior management or by creating multiple copies of documents unnecessarily. Or maybe you’re constantly battling with missing information that prevents you from delivering to the standard your customers expect. Applying a Lean methodology can help you to eliminate this ‘waste’ and solve problems in your organisation so you can create more value for your customers.

The Operations directors guide to improving performance eBook

Topics: lean, 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.