Services Can Improve By Taking Lead from Manufacturing

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y Sharad Sharma

Many have thought the traditional definition of quality – meeting the desired specifications of the product’s fitness for use – does not apply in the same sense in the service sector as in manufacturing. But a closer look reveals that today’s services, with a little help from technology, are similar to products in the manufacturing industry. Service companies often have products that are sold over the counter without any customization. Assembly line processes, with one person specializing in a particular area of work, are common. The loan application is now processed in the similar manner as a car is manufactured – each person completing a designated set of activities.

With so much similarity, the concept of quality can be incorporated in the services “factory” along the same lines as in a manufacturing setup.

Building Specification and Design

The first thing that a person needs in order to manufacture any product is a design blueprint. No automobile part can be produced without detailed design and specifications. Similar emphasis needs to be given to service specifications.

Clear specifications assume further significance when a process or part is outsourced to a third party. Without clear specifications, the process is left open to interpretations. For example, a bank needs to decide what the average wait time at the teller counter should be at a new branch and then plan to meet these specifications. An outsourced call center needs to be told that average hold time per customer should be less than x minutes at the start of the contract, rather than at a later stage when the contract is already in force.

Service specifications should be communicated clearly to the customer to avoid gaps in customer expectation. A mobile handset carries all the technical specifications in the brochure enclosed with the product, but rarely does documentation include information on turnaround time (TAT) for settlement of insurance claims. In most cases products come with very little information except that which is mandatory by law.

If organizations invest time in laying out the detailed service specifications for the customer, it will help them to design the operations for these specifications.

Taking Measurements

Process monitoring is an integral part of any manufacturing setup. Measurements are taken, samples are collected and tests are conducted on the product at every stage to ensure conformity. Services also need to take measurements, such as percentage of transactions within TAT, rejection rate, and first-time right.
 
Most service organizations do not measure internal performance measures such as TAT from Activity A to Activity B or the internal rejection rate between departments. For example, a leading bank was not aware of the rejection rate of account opening forms sent from branches across the country to a centralized processing center. The bank started measuring only when the account opening TAT reached months instead of days and customers started complaining. Such a measurement, however, should have been in place since the inception of the process.

Determining what parameters to measure can be confusing, but as a rule of thumb, two parameters for every process should be measured: accuracy and efficiency. Rejection rate, first-time-right rate and number of errors can be measured for accuracy, whereas TAT, wait time and average handle time can be measured for efficiency.

Getting Control

Process control tools have evolved with time. From statistical process control to ultra-modern monitoring instruments, manufacturing has used them all.

Measuring the key parameters and taking action if required is equally essential for services. Various tools, such as audits and dashboards, can be employed to track processes. Deploying an effective review and control mechanism will save service organizations from extensive firefighting when things go bad.

Service organizations need two approaches for process control:

1. Regular audits to ensure process deployment as designed
2. Constant review of key process measures

Anything that is not going well as per the measurements needs to be analyzed and acted on. The key here is that organizations appreciate the importance of every process parameter and its impact on the customer. For example, a hotel should measure on-time grocery delivery and appreciate that a delay would impact ultimate service delivery.

The objective of deploying process control mechanisms is to ensure that deviations are identified long before they turn into snags and jeopardize the entire service delivery experience. A bank should be able to identify that statements are not getting delivered on time and take appropriate action before the customer starts noticing it. This assumes further significance because unlike a manufactured product, bad service cannot be corrected at a later stage.

Improving Processes

Process improvement methods, such as Lean, Six Sigma, waste elimination and re-engineering, are great for attacking specific issues and resolving chronic problems, but they are not a replacement for the basic tools described above. Facing an operational crisis, a lot of service organizations jump to one or more of the process improvement tools without bothering to put the basics in place. The result is failed or unsustained improvement efforts, and constant firefighting.

Improvement areas need to be chosen by the top management and based on organizational priorities. They must be focused, requirement driven initiatives to resolve the issue at hand.

Lessons from Manufacturing

Manufacturing has come a long way since the start of mass production. Quality initiatives along with technological developments have played a large role in this transformation. Service companies who have yet to adopt quality initiatives can learn a lot about process improvement from taking their lead.

About the Author: Sharad Sharma is employed with Reliance Money Ltd. in New Delhi, India. He is an engineering graduate with a master’s in business administration from the National Institute of Industrial Engineering, Mumbai. He has experience in deploying quality initiatives across the manufacturing, business process outsourcing and financial services sectors. He can be reached at sharad.sharma1@yahoo.com.

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