Power of Value Stream Mapping and Improvement Opportunities.

Power of Value Stream Mapping and Improvement Opportunities.

Importance of value stream mapping can never be underestimated in any scenario or any business value chain, be it service or manufacturing. Service sector is still evolving to gain the benefits of value stream map and associated concepts. Value stream mapping is a best approach to understand the business and customer centric improvement opportunities and reap the benefit to stay ahead of competition and customer satisfaction in delivering value.  

In this post I wanted to share my experience with a banking company. 

 Background:

 I met the Senior Management Team of one of the largest banks to hear what is bothering their business and its sustenance currently. Usual challenges like customer retention, competition and so on are the issues highlighted by the Management. They were contemplating an expensive ERP to streamline the processes.

As a Lean professional I always see Process first and then IT enabled process. Not the other way round. Not putting the kart before the horse.

Banking industry is primarily a transactional processing sector by nature and always there is a possibility to find lot of hidden wastes despite all the systems and software etc.,

I shared some of the success stories from different industries in terms of adopting Lean as a culture and driving Waste reduction. As usual the typical question “whether Lean is applicable in Banking Industry? and whether it is applicable to my bank”? if yes, please demonstrate. This is a typical hurdle I face with every industry.

 I agreed to do a simple study in one of their processes and apply lean principle to show the power of Lean.

I picked up the savings account opening process to apply lean concepts and find improvement opportunities. Branch Management was quite surprised that I have chosen a simple process and that too account opening gets done in 20 to 30 minutes with a welcome kit issue to the customer. When I investigated further, I could sense the process doesn’t end with welcome kit.

The unanswered area is “what happens to the document collected and back end process for complete account creation”? Surprisingly branch management could perceive the value chain till the welcome kit only.

The following are the steps I applied to unearth the inefficiencies in the value chain.

Step 1: Scope of the study: “Customer walk-in to Customer account with welcome kit”.

Step 2: Voice of Customer: Had a chat with the walk-in customers and captured the following broadly.

·       No information on transactions via SMS due to Account Incomplete

·       Customer not able to withdraw money

·       Signature not updated

·       Incomplete Data Entry Even After Complaint

·       Customer Visiting the branch and comes to know Account Incomplete

·       Accounts Still Under Welcome Kit

·       Account Frozen

After completing the Voice of Customer step, I could sense very strongly that the value stream must be having:

a.       Lot of wasteful activities

b.       Inefficiencies hidden in the processes

c.       Front end resources / processes not having clear sense of connectivity with the back-end processes or resources and inefficiencies.

d.       Perception of Branch Management, Employees and customer about the value stream not at all aligned neither their requirements 

Step 3:

I divided the value stream in to two as follows:

• Customer walk into welcome kit handover.
• Complete set of documents verification, data entry and full account creation at the back end.

1.        Value Stream Mapping: from Customer walk-in to Welcome Kit. 

•       Time taken by each process is captured and classified as value add (27 minutes) and Lead time 55 minutes

•       Process cycle efficiency is 49% (27 minutes / 55 minutes) * 100

•       Insight to the bank is to know the efficiency is only 49% Which means 51% of the time being spent on non-value adding activities.

2.   Value Stream Map - from Back end process to complete the verification and complete account creation and data entry etc.,   

•       The above map shows processes from Branch sends the applications and back office does the data entry and account creation

•       Process cycle efficiency is 7% which means 93% of the time being spent on non-value adding activities and managing the inefficiencies of the upstream value chain.

·       Resources spend lot of time to get the right documents from the customer

·       Data entry error done by the front office

·       Follow up with the customer or branch to get the documents

·       Maintaining reports to track the pending issues/tasks

This is an important insight to the bank that their resources spending time or working on inefficient processes, defective applications, lot of wasteful activities and unproductive tasks etc.,

 For branch management, their concern and visibility is only with respect to first value stream only (Exhibit 3.1).

·       Process cycle efficiency of value chain (Exhibit 3.1) is 49%

·       Process cycle efficiency of (Exhibit 3.2) is 7%.

·       Overall cycle efficiency for this process has been reduced from 49% to 7% in the downstream value chain.

VSM analysis was a good eye opener to the branch management since his perception of “only 20 to 30 minutes “was challenged. It gave an opportunity for him to understand the value chain doesn’t end after 30^th minutes but when the documents are processed / data entry done without any error in completing the account creation.

I am not here sharing the root cause and the solutions offered to fix the problem since I chose to demonstrate the power of Value Stream Mapping in finding improvement opportunities.

 

Key areas to focus: 

Summary:

•       Value stream mapping helps to identify the customer value creation and efficiency of the process which creates value
•        The paradigm and assumption of “process seems to be working” is challenged
•        Brings lot of insights into customer perception and customer touch point issues
•        Helps to identify the high-level improvement areas
•        Helps to identify the weak links in the value chain 

End of Blog