Picture a several packs of loan applications forms entering the consumer loans department of a commercial bank. Then, imagine the trail it goes through – every step passing through a few officers’ desks, floors it goes up or down the elevator to the relevant department for approval and finally to the front office before it is handed over to the client or a potential one. This at time astonishingly, could be a few kilometers when physically traced through the value stream. And yes, it’s hard to believe!

“Everyone, in all departments is working hard but it still takes too long to process application.” Everyone but the client see it as real work. “What’s the value to me?”, asks a client.

Today most, financial institution are turning to methodologies such as Lean, Six Sigma or Lean 6 Sigma to improve the speed of operations. The aim is to identify the value-adding steps in the processes, i.e activities that a customer’s willing to pay for when identified and everything else is recognized as waste. This waste is the loss of time, resources and costs that can’t be recovered in the financial industry.

What is Waste?

Lean 6 Sigma, the combination that you could call as the next generation of Six Sigma, teaches the practitioners to develop a “waste” sensing ability. These practitioners are trained to recognize wastes, that are frequently observed physically and virtually, in any process driven organization, categorize them as Transportation, Inventory, Motion, Waiting, Overprocessing, Over-production and Defects.

Any unnecessary movement of material, products, documents or information can be described as waste. This reflects on activities moving from one individual to another, within departments or between departments, which adds time to the overall process. In the service environment, this manifests itself as tasks to be collected and delivered, physically or virtually.

Eliminating transportation can at one extreme mean the combination of tasks or another extreme mean
relocating workspace to minimize the movement physically.

The goal is to have the sufficient inventory for immediate and short-term needs. Ignoring process inventory drives cost up – investing into additional resources, larger virtual storage capacities or investment into establishing a larger queue space are some examples of effects when inventory is not truly considered.

It is the unnecessary movement of people or resources. The physical movement of personnel from a station to another to continue a process is an example of motion. Others include the switching between computer terminals or databases, is a form of motion, which requires additional steps to be executed before a truly value-adding step can be carried out.

It is the elapsed time between the end of a process step or activity to the beginning of another. Waiting may have a direct or indirect impact to the customer. The time spent waiting between processes results in customers having to wait for the delivery of a product or service. This is one of the deadly waste in processes as there is always the possible existence of a competitor who could deliver products and services quicker to the expectation of customers.

Techniques such as process swim-lane diagram and value stream maps are potent in identifying the wastes such as Motion and Waiting, which are typical causes of delays.

Generically, Over-Processing means adding more work to a product or a service then necessary, trying to exceed the customers’ requirement. This in-fact translates to adding more value to a product or the service then what a customer is willing to pay for. Examples of over-processing are the posting of a hard copy financial transaction when transactions were conducted virtually or duplication in processes due to the requirement of several managers to sign-off on standardized virtual transaction.

These are typically caused by not clearly understanding the customer’s requirement or having to manage redundancy in process.

Over-Production is the use of capacity and capability beyond the mean of the present service or product requirement, resulting in outputs that are not delivered to customers. An example of over-production in the financial services is when a procurement department is processing material requests for several front line service centers at a given time. When the existing process do not allow the flexibility of stratifying requests and demands based on the front line service center’s needs, then all requests would

The waste of defect is always seen when nonconformity exists. When products or services do not conform to a customer’s demand, then it’s a defect, and all effort in time, resources, materials and cost are wasted. There is a price to pay for non-conformity.

For an organization, it has produced work or service that a customer in not willing to pay for – and ultimately driving the customer to see an alternate provider for the products and services.

The wastes, that are described here, has a name, an acronym, TIMWOOD. The Lean 6 Sigma methodology trains its practitioners to recognize TIMWOOD and eliminate it. Having TIMWOOD eliminated from the processes, products and services would have extended their value-added components that meet the customers’ requirements and demand.
Eliminating TIMWOOD does not only improve operational performance but also drives the cost of time and resources down – an important value that can be passed over to the customers.