The Complexity of the Service Industry - Case Study Example

Lecturer: Introduction Lean manufacturing is a business approach that aims at removing wasteful activities in the production process for cost reduction and increased efficiency while maintaining high product quality. It is a strategy that is increasingly being adopted in the contemporary industries. The model has been found to be significant in increasing the competitive advantage of organizations in the services sector even though it has largely been successful in the manufacturing sector. This paper discusses the influence of lean manufacturing in the service industry. It highlights the wastes that occur in the creation of service utility and strategies to get rid of them to increase efficiency and competitiveness. Some applications of lean manufacturing have also been highlighted and their benefits to service organizations. Lean Manufacturing in Service Industries The complexity of service industry lowers the opportunity to identify the non-value added activities since some of these occur inconspicuously. It is therefore necessary to apply value stream mapping that illuminates the inherent wasteful activities in the production process. According to Holweg (2007), resolute judgement is necessary in analysing the change agents that are expected to facilitate the lean transformation process. Lean manufacturing in the service industry focuses on increasing customer value thereby giving an organization competitive advantage over rivals through greater customer loyalty. It leads to satisfaction of customer needs including high quality services at reduced cost and in the desired time. All these aspects enhance service utility to the customer and promote business sustainability (Hill & Hill, 2011). Wastage through overproduction may not be identified a waste as it is associated with production efficiency and hence greater output. It is disregarded quite often in the service industry yet it affects the overall efficiency of an organization. Overproduction may be characterised by processing sooner than a product is required. This may result from automation of activities such as automatic transmission of information when it may not be obligatory. The technology used to automatically send such information may be applied in a more productive way that adds value to the company. On the other hand, different production sections that are inter-dependent such that one department’s output is the input for the next may become inefficient as a result of overproduction in one of them (Benchino, 2004). For example, information overload on the second department may lower its efficiency while the energy of overproduction in the other department may be used in other activities. Wastes associated with mistakes can be avoided through lean manufacturing. The service industry is prone to numerous errors in the production process that lead to revisions and amendments. Such wasteful occurrences have a negative influence on the organization’s overall productivity since double time is spent on a single activity meaning the profitability of the output is halved. Service organizations need to emphasize doing the right thing in the first time, which is a strong aspect in lean manufacturing (Jones & Robinson, 2012). For example, network problems in mobile telephone communication can be avoided but are a major cause of loss in revenues as customers fail to make calls when they need. Some customers may try several times until the call goes through while others seek alternative means leading top losses. Data entry problems also cause customer dissatisfaction and time wastage as the company tries to locate the problem. A typing error of a customer’s name on the credit card may lead to time wastage and repetition of the entire process of producing another credit card for the same customer. Surgical errors in healthcare may lead to the collapse of an organization due to legal suits and loss of reputation among customers. Lean manufacturing practices may help a service organization to avoid such calamities (Swank, 2003). Inventory in service industry can be described in terms of data for which wastage may result from unnecessary retention or taking longer than required to convey it to the required destination. Data processing needs to be done in a particular time frame for the organization to maintain efficiency. Service organizations deal with intangible commodities and information flow is one of the key aspects determining their profitability. Hindrances to effective communication occur such as through delay in information transmission, which is equivalent to excessive inventory storage. On the other hand, releasing excess advertising material in the market, affects the organization’s efficiency since there is a cost attached to each material released, yet it does not add value to the marketing strategy. If one server is sufficient for a service organization, increasing the number of servers does not increase efficiency but rather leads to wastage since there is no value that can be attached to them (Bowen & Youngdahl, 2003). Wastage through excessive processing can be minimized through lean manufacturing strategy. Financial services are significantly affected by unwarranted processing before a service such as a loan application is completed. Time is wasted while many workers are engaged in an activity that can be accomplished by one person. The organization loses man-hours in an activity that does not add value to the service rendered. Instead, it leads to customer dissatisfaction as a result of waiting too long. Instead of customers being asked for the same information in different places within the organization, lean manufacturing seeks to establish a strategy that allows consumers to deal with a one-stop-shop that eliminates long bureaucratic processes (Bonaccorsi et al. 2011). An example of excessive processing is a situation whereby the front office can be charged with the responsibility of guiding the customer through the loan application form that will be taken directly to the credit manager for approval instead of customer collecting the form from the credit section, filling it and returning it to the front office after which credit officers verify the information and pass it to their supervisor who scrutinizes it and if he/she is not satisfied sends it back to the credit officers who pass it to the customer through the front office. The process is repeated until the form reaches the credit manager whose work is to approve. In such an instance, lean manufacturing strategies can be applied by removing the credit officers and their supervisor since they add no value, yet the credit manager is underworked (Maleyeff, 2006). Waste of motion is considered a significant cause of inefficiency in lean manufacturing. Service industries need to organize their information systems to facilitate data retrieval. It is important to classify information in to various categories such as urgent, most frequently sought and also in terms of customer categories. This strategy minimizes the time used to serve one customer thereby saving time for more customers and also increasing customer satisfaction (Tapping, 2005). Computer programs are significant in developing lean strategies for service organizations whereby tedious tasks that may take long for employees to perform can be scheduled through assigning commands such as e-mail filters, auto forward options for new e-mails as well as auto-generation of information and sending to the targeted people. This strategy is significant in avoiding the necessity of a person to do such work. Lean strategies in administrative upgrading lowers the staffing requirements for the organization and also enhances completion of a greater amount of tasks by the same number of employees. An organization can outsource the non-core activities so as to maximize concentration on activities that enhance customer satisfaction (Abdi et al. 2006). Movement of documents from one office to the other also causes time wastage and documents can also get lost in the process. For example, many law suits have failed because of attorneys failing to organize information for easy retrieval. Files are misplaced leading to prolonged court processes and eventual dismissal. Excessive e-mail attachments may lead to some of them being overlooked thereby causing vital information not to serve the intended purpose. Lean manufacturing requires a succinct communication strategy whereby unnecessary information is avoided to minimize the bulkiness of important documents. In the service industry, advertisements are supposed to be concise and to the point to motivate the intended audience to read. These also help to save the time and cost of printing (Shah & Ward, 2007). Lean manufacturing was founded on the bases of standardization whereby standards are established to enhance stability of the process of creating service utility. Workplace organization ensures that roles are shared effectively without duplication with clear guidelines of information flow and reporting systems. It helps to eliminate confusion and maintain a high turnaround time for activities. It is important to leverage on the employees and utilize their skills to increase productivity rather than limiting their power and responsibility due to management structures. Service organizations significantly depend on innovations and must create a favourable atmosphere for innovation through eliminating numerous obligatory points of passage (Ahlstrom, 2004). For example, a software company requires the inputs of employees at all levels since it is their unique competences that add value to the overall goal and not their position in the management hierarchy. If the organizational structure supersedes individual talents, the lower cadre staff will have no opportunity to contribute to innovations. Lean manufacturing considers such a situation as wastage through unutilized human resources. It encourages regular consultations to nurture continuous improvements (Bonaccorsi et al. 2011). Creation of service utility for customers requires flexibility so as to effectively respond to changes in customer tastes and preferences. It would be unnecessary to engage in expensive innovations that do not satisfy consumer demands. On the other hand, it is important to promote preparedness of employees to adapt to innovations as fast as possible. Resistance to change may slow the rate of adoption of innovations and hence the need to ensure that employees understand the need for change. This is important as lean manufacturing may not be popular among employees who are likely to be opposed to a highly standardized work environment where all tasks are scheduled to take specific time leaving no time for personal activities such as making private calls and accessing social media in the workplace (Bowen & Youngdahl, 2003). Application of lean manufacturing requires constant learning whereby development of service utility involves consulting between consumers and the service developer to avoid unnecessary components. The feedback of consumers is important because they present their needs which are featured in the development process. Customers can also offer solutions with regards to how their needs can effectively be satisfied. This strategy is mainly applicable in software development. Uncertainties in the service industry also require decisions to be delayed to ensure that factual data is available to support their implementation. Ambiguous hypotheses and predictions should not form the basis of projects that might be expensive to correct in future (Maleyeff, 2006). Conclusion Value stream mapping is necessary to help in the identification of wasteful activities that need to be eliminated. Overproduction is a wasteful activity that is not easily noticeable in the service industry since the commodities are intangible. Mistakes in the production process lead to revisions and amendments that add to the overall cost of the service and delays in delivery and can be avoided through lean manufacturing. Information retention can lead to inventory wastage since it is not provided where it is needed on time. Information processing is supposed to be accomplished in a specified time for it to add value to the organization. Excessive processing minimizes service utility and leads to decreased customer satisfaction. Standardization is necessary to ensure that stability is maintained in the process of utility generation. Continuous learning is important to enhance customer focused strategies in service development. References Abdi, F., Shavarini, S., & Hoseini, S. 2006. “Glean lean: how to use lean approach in services industries?”, Journal of Services Research, special issue, Vol. 6, pp.191-206. Ahlstrom, P. (2004) “Lean service operations: translating lean production principles to service operations”, International Journal of Services Technology and Management, Vol 5, 56 pp. 545-564 Benchino, J. 2004. The New Lean Toolbox: Towards Fast, Flexible Flow, Buckingham, England, PISCIE Books. Bonaccorsi, A., Carmignani, G. & Zammori, F. 2011. “Service Value Stream Management (SVSM): Developing Lean Thinking in the Service Industry,” Journal of Service Science and Management, Vol. 4, 4, pp. 428-439. Bowen, D. & Youngdahl, W. 2003. “Lean” service: in defense of a production-line approach”, International Journal of Service Industry Management, Vol. 9, 3, pp.207 – 225 Hill, A. & Hill, T., 2011. 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