Why Transactional Lean?
Lean is about meeting customer requirements efficiently and effectively. Managers have realized that they need to cut costs in all areas of their business. Typically, more than 60% of the cost of a product or service can be attributed to administrative or transactional processes such as entering a customer order, generating an invoice, submitting an insurance claim, ordering an item via the Internet, and others not. They are very different from manufacturing processes when it comes to cost management. These transactions represent how we interact with customers to ensure that products and services are provided at an acceptable level of profit. It is imperative that these processes are effective and efficient. This can be achieved by applying transactional lean.
No industry is immune from meeting customer requirements better, faster and at an acceptable price. Industries as diverse as retail, telecommunications, airlines, services, banking and insurance have embraced Lean tools and concepts to achieve quality and efficiency improvements of 40 to 70 percent. Healthcare, financial services, construction, the military, local and federal government can apply the same Lean concepts and tools that Toyota practices and achieve the same success: doing more with less. Starting your Lean transactional journey is made up of four activities:
- Foster a culture of teamwork
- Develop a snapshot of the current state
- Identification and mapping of the value chain
- Analyze and solve problems
Foster a culture of teamwork
Lean is a team sport and, as with any team initiative, it is important that everyone involved in the change contributes their ideas. Assemble a process improvement team to manage the improvements. The team should follow basic team building guidelines:
- Identify team roles, such as leader, timekeeper, scribe, facilitator
- Establish team rules
- Prepare a team letter
Make sure team members understand the overall goals of the project. Teach the team some of the lean tools and concepts. As they learn these skills, have them creatively adapt them and apply them to their transactional processes.
Develop a snapshot of the current state
Developing a picture of your current state is about collecting information and data to analyze, redefine, or modify your current processes. This will help you identify critical (value-added) processes, those that directly impact the customer or have a direct financial impact on your organization. Some examples of critical value-added processes could be:
- Entering a sales order
- Complete an invoice
- Treat a patient
- Provide information to a customer
By developing this picture of your current state, you will also identify some of the non-critical processes, those that are necessary but do not add value to the customer. Examples of necessary transactional processes include:
- Preparing a budget
- Generating a quote
- Prepare an end-of-month report
- Market research
Once we are clear about what our current state looks like, we are ready to select a value stream to map and improve.
Identification and mapping of a value stream
A value stream is defined as anything that includes the non-value-added activities that are required to deliver a product or service to a customer. A value chain can include a single process or a series of connected processes. It is a visual representation of the workflows and information flows required to meet customer demand.
We define value as something the customer is willing to pay for. No added value is what the customer is not willing to pay for. Both types of activities are identified on the value chain map. Our goal is to eliminate all non-value-added activities. We can achieve this goal by using Lean tools. How do we choose a value stream to improve?
There are a variety of methods for selecting a value stream for improvement. Some of the most common are:
- Identify any immediate customer concerns
- Perform a workflow analysis
- Prioritize target value streams
- Business conditions
Customer concerns
Many times, a customer will demand improvements in a product or service. This type of request takes precedence over all other methods for selecting a value stream. We would look for opportunities for improvement in the processes that make up the value stream in question.
Workflow analysis
If the customer doesn’t immediately identify a target value stream for you, you can use workflow analysis. This is accomplished by creating a simple matrix of units of work that share common processes to identify a stream of value. To perform a workflow analysis, follow these steps:
- List customers on the left
- Next to customers, list the volume, total sales, number of patients, number of loan applications, number of insurance claims, and so on. for a specified period of time. At a minimum, at least three months of data should be analyzed.
- At the top of the table, list the processes in sequence that involve all the clients listed above.
- Indicate which processes or activities apply to each customer by marking an X on the grid
- Group customers or families that have the same process paths and classify them by volume.
Prioritize target value streams
You may want to target a value stream from a priority listDprocesses that you have identified that the organization needs to improve in the future. When working from a value stream priority list, it is important that the value stream “touches” or engages with the end customer.
Business conditions
The challenges an organization faces in today’s business climate require continuous improvement to remain competitive. Constant attention must be paid to your competitors. If your competition creates a new product or service that diminishes your market share, then you need to identify a new value stream in which to compete.
After selecting the value stream and gaining a good understanding of Lean, the next step is to map the current state to get a high-level visual representation of the specific transactional processes under review.
Value stream mapping
To improve a value chain, you must first observe and understand it. Process mapping gives you a clear picture of value-added and non-value-added (waste) activities. Eliminating waste helps reduce transaction processing time, helping your organization consistently meet customer demand. When creating your map, focus on collecting accurate, real-time data related to the product or customer families that you develop during your initial analysis. Use this information to identify all the specific activities that occur along each value stream.
Value stream mapping begins with creating the current state map. Once you have collected the data, you are ready to map the current state. Always start with a clean sheet of paper and use a pencil (“the best thing about a pencil is the eraser”). A generic current state mapping procedure is as follows:
- Draw the external (or internal) customer and supplier (if the supplier is different from the customer) and list your requirements. Many times, in transactional or administrative processes, the client and the provider are one in the same.
- Draw the input and output processes to the value stream.
- Draw all processes between the furthest inbound and outbound processes or from the beginning to the customer
- List all attributes of the process
- Draw queue times between processes
- Draw all the communications that occur within the value stream.
- Draw push or pull icons to identify the type of workflow
- Complete the map with any other information.
After completing the current state map, review it for wasteful or non-value-added activities and brainstorm how to eliminate these activities using Lean tools and concepts. After the brainstorming session, it is time to begin developing the future state map.
The future state map is a current state map with all non-value-added steps or activities removed. The mapping of the future state takes into consideration three conditions:
- Understand customer demand for your services and work units, including quality characteristics and delivery time.
- Implement the continuous flow so that internal and external customers receive the right unit of work, at the right time and with the right quality.
- Level or distribute work evenly by volume, variety to reduce wait times and allow smaller work units to move through the process if practical.
Once you have completed the value stream maps, there will be many problems and issues that need resolution. This means that your value stream team must be able to analyze and solve problems.
Analyze and solve problems
When Lean tools are used within a problem-solving methodology, further improvements can be made. There are many systematic troubleshooting methodologies that work well, but they all focus on determining the root cause. We often instruct teams to use the “5 Whys” to find out at the root of a problem. Most troubleshooting methodologies consist of the following steps:
- Define the problem
- Implement temporary countermeasures to contain the problem.
- Analyze the problem and generate possible solutions.
- Determine root causes and select solutions
- Implement the solutions
- Verify the effectiveness of the solutions
- Take steps to resolve the difference between actual and expected results.
This seven-step methodology has several advantages:
- Simplicity
- It can be used by individuals or teams.
- It can be used at all levels of the organization.
- Provides a common language and approach
Getting started with Lean in transactional processes takes time: four to six months in functional or departmental units and two to three years at the organizational level. It takes a new mindset and new skills like teamwork, identifying and mapping value streams, and problem solving. The effort will not be universally appreciated, at least at first.
Ultimately, more agile transactional processes will lower costs, increase quality, and better align corporate responsibilities within and between functions and create a healthy waste reduction cycle.
