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Application of Lean Six Sigma to by liaoqinmei


									                           Application of Lean Six-Sigma to
                              Service Industry Settings

Lean Six-Sigma applications are traditionally rooted in manufacturing production settings. Lean
methodologies were designed to eliminate waste from process. Perhaps the simplest illustration
of lean principles in practice is found in the TIM WOODS acronym.

Transportation        Transport of materials, product, information, or persons
Inventory             Storing excess inventory or information
Motion                Unnecessary or excessive movement during production processes

Waiting               Production stops and slowdowns caused by production process bottlenecks
Over Production       Producing too much product which leads to excess inventory waste
Over Processing       Excessive quality standards in relation to the products Marketing Mix
Defect                Scrap or rework of product components (errors)
Skills                Underutilizing worker skills or insufficient training of staff for a process

The areas shown in the TIM WOODS acronym are common contributors to waste in processes.
Lean seeks to eliminate waste from process and streamline operations.

Six-Sigma, in comparison, focuses on reducing the defect rate(s) within a process and provides
for an additional focus on customer satisfaction. Six-sigma is characterized by the DMAIC

    Voice of the Customer                         Define the Processes to be Improved
    Critical to Quality Customer
    Measure Current Process                       Identify the Process Variation(s)
       Performance                                 Measure Systems
    Interpretation of the Measure Data
    Categorize Solutions to Processes Errors
    Recommend the Best Solution
    Determine control methods to ensure the Recommended Improvement Solution is fully
       integrated into processes

Together, Lean Six-Sigma creates a powerful approach to maximizing production efficiency by
focusing on customer satisfaction, eliminating process waste and reducing process errors.

Production manufacturing settings lend themselves relatively easily to Lean Six-Sigma
methodologies because of the “quantifiable” aspects in manufacturing processes. For example,
                        Application of Lean Six-Sigma to Service Industry Settings
                                             Jeffrey Quintal

                                               Page 1 of 7
the rate to produce a product can be measured in time. Defect errors are measurable in scrap and
rework numbers. Process defects can be measured through statistical analysis.

Service Industry customer satisfaction, unlike manufacturing, is often defined as the “Customer
Experience.1“ How then, can Lean Six-Sigma methodologies be applied to the “Customer
Experience?” For illustration purposes, this paper will use Starbucks as an example to show how
these methodologies can be applied in the service industry.

Service Model
Starbucks primary product is coffee. Although coffee can be purchased in thousands of locations
for, usually, almost half the prices of Starbucks coffee, customers consistently demonstrate brand
loyalty for Starbucks products regardless of the nearly 100% markup as compared to its
competitors. Starbucks CEO Howard Shultz has described Starbucks products as an “affordable
luxury.2” What keeps Starbucks customers loyal to the high-end brand? It can be argued that
Starbucks customer satisfaction comes through the “customer experience.” And Starbucks
customer experience can be described through a set of consistent and reproducible processes.

Starbucks, like most successful service organizations, must create and maintain a consistent
customer experience. Applying the DMAIC model, six-sigma Voice of the Customer and Critical
to Quality tools are helpful in identifying those key elements of customer satisfaction that
produces the customer experience.

Voice of the Customer
   1. Fast reliable service                                                          3. Good quality food
   2. Friendly Service                                                               4. Comfortable atmosphere

                                                                Critical to Quality
                                                               Service Consistency

                                                     Store Smell                            Product          Product
               Customer Experience

                                     Taste & Smell   (Coffee)             Product Flavors   Freshness        Quality

                                                     Line Order Wait      Product Time      Managed
                                     Queuing Time    Time                 Preparation       Volume

                                     Seating &       Comfortable          Comfortable       Pleasing Color   Comfortable
                                     Space           Spacing              Seating           & Patterns       Atmosphere

                                     Store Noise/    Music Volume &       Kitchen Noise     Other            Room
                                     Sound           Mood                                   Customers        Acoustics

                                     Temperature     Room & Space         Food Products

                                     Colors &
                                     Patterns        Store Colors         Lighting Level    Brand Colors

    Colin Shaw and, John Ivens; Building Great Customer Experiences (Palgrave Macmillian 2002), 8-13
                                Application of Lean Six-Sigma to Service Industry Settings
                                                     Jeffrey Quintal

                                                                       Page 2 of 7
The measure phase in production manufacturing is extremely effective because production
efficiency, speed, and quality posses, mostly straightforward, quantifiable characteristics.

In service organizations, the customer experience may be viewed as less quantifiable because the
“customer experience” is considered more subjective. However, aspects of the “customer
experience” have measurable characteristics for preferences.

I. Line Queuing: (Fast Reliable Service)
Elements of line queuing, perhaps obviously, are in a sense a production manufacturing
assembly line. Lean six-sigma methodologies are applicable to line queues processes.

                   Customer Ordering Process

           Food Order
                             Order                  Order
                             Preparation            Delivery

                        Process Time 

The customer experience can be increased (or decreased) by the efficient, quality, customer
ordering processes. Queuing lines should move quickly but without sacrificing quality; that is,
fast order preparation and delivery with friendly service and a correct customer order.

II. Product Quality: (Good Quality Food)
Product quality is measurable in several aspects: product temperature, product freshness, product

Product Temperature:
Simply: hot coffee is hot; cold drinks are cold, and perishable products meet safe storage
temperature requirements. Product temperatures in service organizations can use Six-sigma
methodologies to set to acceptable upper and lower control limit temperature ranges.
Temperature ranges may be determined either by the corporation’s product quality standards to
meet Critical to Quality standards or as determined by local Health & Safety regulations.

Product Freshness:
Product freshness is measurable in terms of product shelf-life. Bread, for example, may be kept
for two days. Although the bread products may still be edible after two days, the commitment to
CTQ customer satisfaction preferences may dictate shorter storage limits to ensure the “customer
                         Application of Lean Six-Sigma to Service Industry Settings
                                              Jeffrey Quintal

                                                Page 3 of 7
experience” for taste and freshness is met and consistent. Customer satisfaction may be measured
using marketing focus groups though “Voice of the Customer” surveys to determine the best
shelf-life duration that becomes the Critical to Quality standard.

Product Consistency:
Product consistency is measurable and maintainable through formulation. Quality standards
elements can be set to determined levels: food ingredients mix, serving temperature; food
texture, preparation method, and product presentation enable product consistency. Lean Six-
sigma methodologies can be applied to set acceptable range variations to the quality standard
elements that ensure product consistency.

III. Elements of Atmosphere (Comfortable Atmosphere)
Although less straightforward, the elements of atmosphere posses some measurable
characteristics. Elements of Atmosphere can include color, lighting, seating, individual space,
and other elements. The key to using Lean Six-sigma to measure elements of atmosphere is to
determine creative methods for measuring the customer experience. Creative methods may
include Marketing Focus Groups and Psychology Studies.

Marketing Focus Groups
Marketing focus groups are useful for determining an optimal mix of the elements of
atmosphere. For example: music volume and kitchen noise levels as applied to room acoustics;
or for setting parameters that define an average size of a “comfortable space.”

A key aspect to Marketing Focus Groups is defining the primary customer demographics. For
instance, if the customer demographic is first (25 to 45 year old professionals) and second (18 to
24 year old college students), the marketing focus group should consist of both demographic
groups. Further, the focus group can be weighted based on larger versus smaller portions of the
demographic population. Lastly, the focus group should represent an adequate population size to
best represent the total demographic.

Although less clear cut than a production-line setting, preferences and, perhaps more important,
dislikes of the demographic can be identified. Does the demographic visit Starbucks to read, to
socialize, or to simply relax? What elements of atmosphere do the demographics find conducive
to these activities? What elements distract or diminish these activities? At what average volume
does music interrupt socialization or reading?

Psychology Studies
Psychology studies provide an element of empirical standard for measurement. A service
provider may select store color, décor, and lighting based on Color & Mood studies.

Studies have shown the following effects for the color green:

                         Application of Lean Six-Sigma to Service Industry Settings
                                              Jeffrey Quintal

                                                Page 4 of 7
           Psychology of Green 3
            Perceived as symbolizing nature / environment
            Researchers have found that green can improve reading ability
                     Some researchers found that laying a transparent sheet of green paper over
                         reading material increases reading speed and comprehension
            Green is often used in decorating for its calming effect
            Green is thought to relieve stress
                     Green work environments are shown to reduce stomachaches

In the analysis phase, Lean Six-sigma methodologies can help define Measurement data into
product quality standard elements and the optimal elements of atmosphere.

Quality Standard Elements
Line Queuing
   1. What is the maximum Critical to Quality line queuing time?
   2. How many Baristas are needed to ensure line queuing meets customer satisfaction control
       limit metrics?
   3. What is the average service time per customer that does not sacrifice friendly service and
       does not detract from the customer experience?

Product Quality
   1. When is hot coffee, too hot? What LCL and UCL temperature limits need to be set?
   2. How long is food kept on-shelf / storage to meet service consistency and the customer
       experience CTQs?
   3. What ingredient mix produces the best widget drink?

Elements of Atmosphere
Lean Six-sigma can be used to analyze the elements of atmosphere that optimize the customer
experience. Some examples include:
   1. What wattage outputs for lighting and décor are most conducive to reading/ studying and
        50 watt / 100 watt / 150 watt
        Florescent lighting versus bulb lighting

       2. What shade of Green color code [RGB: Red/ Green/ Blue code] most enhances the
          customer experience? What are the acceptable RGB LCL and UCL ranges?

                          Color Code          Shade                              Color Code   Shade
             Red              61                                  Red               128
            Green            122                                  Green             255
            Blue              0                                   Blue               1

       3. Analysis of Color & Mood indicates Psychology of Brown may apply to the Starbucks
          demographics. 3
                                 Application of Lean Six-Sigma to Service Industry Settings
                                                      Jeffrey Quintal

                                                        Page 5 of 7
           Color Psychology - Reactions to Brown 3
            A natural color that evokes a sense of strength and reliability
            Brings feelings of warmth, comfort, and security
            Often described as natural, down-to-earth, and conventional

                              Color Code          Shade                          Color Code           Shade
                 Red             146                             Red                184
                Green             44                             Green               18
                Blue              12                             Blue                 0

As in production manufacturing, the improve phase of the Lean Six-sigma model provides a
Service industry company’s with recommendations to improve processes. The objective is to
provide recommendations that integrate Voice of the Customer and Critical to Quality
requirements with findings from the Analysis phase.

Using our Starbucks example, a condensed version of our Recommendation could consist of the

           Quality Standard Elements
           Line Queuing
               To maximize the customer experience, the line queue should not exceed 2
                  minutes +/- 20 seconds
           Product Quality
               Coffee should average 180 F +/- 10 F to ensure customer satisfaction and preserve
                  the customer experience
               Lemon Bread shelf-life should not exceed 5 days to ensure moistness and texture.

           Elements of Atmosphere
               Lighting should average 500 lumens +/- 50 lumens to preserve reading settings 4
               Focus groups VOC surveys indicate a 3 ft x 2.5 ft seating space per customer
                 provides the optimal customer experience while balancing conservation of space
               Store colors shall fall within the following color code range limits to provide a
                 consistent customer experience

                         Green Color Code Range                                     Brown Color Code Range
                        LCL      Average       UCL                                LCL       Average       UCL
             Red        50           61          29                      Red       146        122         184
           Green        100         122          58                    Green       44         30          18
            Blue         0           0            0                      Blue      12          6              0

Note that methods can be devised to measure and maintain traditionally subjective issues such as
color shade and depth.

                               Application of Lean Six-Sigma to Service Industry Settings
                                                    Jeffrey Quintal

                                                       Page 6 of 7
The Control phase places mechanisms into the recommended Improvement processes to ensure
quality standards are met and maintained. For our service industry example, the Control
mechanism would address methods for certifying process improvement, such as:

       Quality Standard Elements
       Line Queuing
           To maintain the line queue 2 minutes +/- 20 seconds standard, a minimum of
              three Barista will provide counter service and four Baristas during peak periods
       Product Quality
           The Bunn-o-Matic: Model 021-209000008 is recommended to ensure the 180 F
              +/- 10 F standard
           Lemon Bread will be marked and rotated using the First-In-First-Out (FIFO)
              accounting method to guarantee the 5 day standard

       Elements of Atmosphere
           Store design and layout will be managed and reviewed by the regional Quality
           Store Design Procedural Manuals will be updated to communicate lighting
             standards, store seating layouts (based on store size), and color composition.
           Sample accepted color code ranges will be incorporated into the Store Design
             Procedural Manuals to explain color ranges.

Although less traditional and less straightforward than production manufacturing settings, the
service industry and the “customer experience” can benefit from Lean Six-Sigma applications.
Understanding and breaking down the set of consistent process that create the customer
experience is an essential part of applying Lean Six-sigma to the “customer experience.”
Developing creative methods for measuring data and analyzing information within these
processes will allow Lean Six-sigma methodologies to provide useful improvements and process

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