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In this session, you're going to see an implementation of Lean in a very different

environment than manufacturing.

So this is the services environment and this is a company, JPF,

Jefferson Pilot Financial,

that has since been merged with the Lincoln Financial Group.

In 2006, this company was merged with the Lincoln Financial Group.

But in this article on the basis of which you're going to see this example,

the author talks about why the company adopted Lean,

why did they adopt this idea from manufacturing into a services environment,

and how they went about implementing it.

So it's a great example for you to read about, to think about when you're saying,

well how do we even get started with this.

So just to give you some background at that point in time, we're talking about

the late 1990s that Jefferson Pilot Financial was facing a lot of competition.

There was a lot of change in the insurance industry.

This particular adoption of Lean is focused on the insurance industry,

so there was a lot of change in the insurance industry at that point in time.

And JPF was finding it difficult to compete with the new products and

the new kinds of innovations that were coming out in the insurance market.

At the same time they were wanting to start this premiere partners program.

Which is getting some agents to have some kinda relationship with the agents so

that they can work with them and gain efficiencies in the process.

As well as give them some preferences in terms of allocating policies to them and

getting something in return from them.

So, the reason why that is important in the context of

trying to implement a process improvement initiative is a lot of times when you

think about implementing a process improvement initiative right from scratch.

If you don't have a process improvement initiative in place In a company, and

you want to get it started,

it helps to start with some kind of a crisis that you're trying to solve.

And it doesn't mean you go and invent a crisis, but the idea is that if you

have some kind of a rallying point that says this is what were trying to achieve.

And if we don't do this, it's gonna be bad news for us as a company.

Then, that becomes a good starting point for

the company to get involved in a process improvement initiative.

So, that's the context with which JPF was coming at it, in the year 2000,

when they started looking at the total production system.

And said what are the things the we can learn from there and

implement into the idea of insurance policies.

So what they did was they looked at different aspects of their business,

and they decided to start with the new business process and

underwriting process as a value stream.

So they said this is the value stream we're going to start with first.

And if you look at that value stream of new business process, what you have is,

it can be broken down, or it is broken down into applications,

underwriting issue, and payment of commission.

So those are the big process boxes,

those are the large process boxes that you can see.

And then within those large process boxes, you can see there are different steps.

For example, application has the steps of sorting the forms, system entry,

order requirements, and then underwriting has a certain set of steps.

So you can think of these as cascading levels of value streams,

one underneath the other.

Getting more and more granular as you get down to the task level of

what is being studied and what can be improved.

Now the same idea of cascading value streams is what they used later to

talk about incentives.

So they used the idea of there being this idea of what is done at the front line

has an impact on the top line and the bottom line for the company itself.

So what is being done at the Input Clerk level has

an impact on the company's profits.

And therefore, there should be incentives that should be going from all the way

from the front line, which is the Input Clerk, to the Input Supervisor,

the Underwriting Vice President, the Underwriting Senior Vice President,

and then the CEO.

And you can see as an example here,

what are the different metrics that were being tracked?

So here you get the idea of policy deployment becoming very real.

You're talking about policy deployment from the point of view of metrics that

are connected going all the way from the frontline to the top level, the CEO.

And this is what JPF ended up using as part of their Lean implementation.

So let's see the problems that they started off with.

We said that they, every company that wants to implement process improvement,

should have some kind of a rallying point.

So what were some of the problems that they were starting off with?

They had their new policy applications that were requiring physician statements.

So there were some policies that required physician statements and

some that did not.

So the one that needed physician statements were taking one to two months

to go through the whole process of getting the application to giving a response

to the applicant about whether that policy is being approved or not.

And what was happening was that these two kinds of policies,

the ones that would require physician statements, and the ones that did not

were being mixed into the same value stream, the same process.

And not a surprise that what you can find is that even for

policies that did not require statements,

there was a lot of variation in the time in which they were being turned around.

So the turn around time for the policies was varying a lot.

Sometimes it was done very quickly and sometimes it was taking a long time.

So there was a greater than 35% standard deviation, SD stands for

standard deviation here.

So there was a greater than 35% standard deviation in terms of the times that

were being taken for the policies to be turned around.

So that was an issue that they were facing.

The other issues that they were facing were there was rework and

errors of 10%, so 90% first pass yield.

And 10% errors and rework that that had to be rework.

And so capacity was being used for rework as well as there would be more time

being added in terms of the turn around time for the customers.

So in both instances the error in rework was an issue.

And finally what they found was JPF was company that

had grown through acquisitions in the past.

In the 1990's they had done some acquisitions.

And what they found was that across their different locations,

there was a differential in the cost per applications.

So there was a noticeable difference in the cost of

processing applications when they compared different locations.

In which they were doing the same exact work,

but there was a huge difference in the cost.

So these were exact same locations in the United States that were having

different costs.

So these were the problems that they started off with,

in terms of, as rallying points, in terms of,

these are the things we need to focus on in order to make an improvement.

So the improvement objectives when they started off with were turnaround time,

make it quick, make it predictable, make it less variation and

make it faster and those are related to each other.

Enhance customer focus, what is it that the customer requires?

Reduce the complexity of the process and

you'll see later how they reduce the complexity of the process.

Reduce errors, increase the quality, increase the first pass yield.

Eliminate the cost differentiation.

Why should there be cost differentiation for

doing the same thing in multiple locations?

Eliminate that cost differentiation.

And the whole idea of doing all of this is not just to reduce cost, but

they were seeing this as being ways in which they could get

better annual premiums, increase their sales.

So its not just about reducing costs for this company,

they were also thinking about getting higher annual premiums.

And in conjunction with the premier partners program trying to make this a way

of increasing their sales and getting higher annual premiums from customers.

So what are some of the things that we see normally from a manufacturing

perspective very easily but how did they apply these in an insurance context?

So what did they do?

Well if you think about the different steps in underwriting an insurance policy.

The fact that they received forms and then they have to go through underwriting and

finally get it to the customer as being approved or not.

What they found was that, if they focus on flow, if they focused on removing

any kinda stoppages or if they focused on one particular area they saw

there was a loop-back, something was being sent back to the team.

So when you saw the process flow, the policies went up to a certain stage and

then depending on what they found there, they came back and

then they had to be re-routed again through there.

So the simple solution to that in terms of increasing the flow of the process was

they split that team that was doing that task and

they said half of you sit there and half of you sit at the other end.

And then you don't have to send back the policy and

make it go through the same process.

So in that sense they improved the flow and made.

Policies flow in a continuous fashion rather than being stoppages or

there being any kind of a loop back and going back.

They took the idea of load balancing, which is that you have different cycle

times, different processing times at each task, and how can we balance that.

So they took those ideas of balancing of work from manufacturing and

implemented it for the insurance environment.

And they tied that into this idea of tact time.

So level the work and then tie it into

what is the rate at which the customer expects this work to be delivered.

So they tied the cycle time to the tack time,

so it was flowing according to the customer demand rate.

So those are some of the things they implemented straight from

manufacturing into the service environment.

They established best practices, and they did this in a pilot cell kinda format.

So they situated it in a pilot cell.

They tried out things in the pilot cell.

And when they were able to figure out what works and what doesn't work,

they took that and they rolled it out across the organization.

So it became an organization-wide rollout only after they

tried out things in a pilot cell.

And again, you can think about this from a manufacturing perspective very easily.

But they did this in an area that they thought was

not very risky to try out things.

So they tried it out over there before they implemented it through out

the whole organization.

And how did they even take care of separating out the complexity.

Well, what they did was, again, a very simple idea at the end of the day.

They said well, these are two different types of product families.

We have multiple product families that are going to the same value stream,

let's think of them differently.

So again, the idea of taking different product families from this idea that you

can get from manufacturing, and looking at products that go through the similar

set of steps, or take similar amounts of time to set the steps.

They say well we should be thinking about these products in a different way and

going through the process in a different way.

So they separated out that complexity and

then they started thinking about making improvements to them separately.

So just to make this practical for us.

What are we talking about here?

It's policies that require physician statements versus policies that did not

require physician statements.

If we separate those out and take them through two dedicated

processes that are focusing on each one of those, maybe there's some benefit there.

So that's what they found and that's what they went with.

So here you can see a nice example, and I would recommend reading this

article to get a sense of what can be done in a service environment when you're

trying to implement a Lean and taking concepts from manufacturing and

implementing them in a service environment.

4-2.3 Illustration of Lean Implementation

Amélioration de processus

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