Lean Sigma Methods and Tools for Service Organizations

Lean Sigma Methods and Tools for Service Organizations

The Story of a Cruise Line Transformation
Jaideep Motwani, Rob Ptacek, and Richard Fleming

Lean Sigma Methods and Tools for Service Organizations: The Story of a Cruise Line Transformation Copyright Business Expert Press, 2012. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any meanselectronic, mechanical, photocopy, recording, or any other except for brief quotations, not to exceed 400 words, without the prior permission of the publisher. First published in 2012 by Business Expert Press, LLC 222 East 46th Street, New York, NY 10017 www.businessexpertpress.com ISBN-13: 978-1-60649-407-3 (paperback) ISBN-13: 978-1-60649-408-0 (e-book) DOI 10.4128/9781606494080 Business Expert Press Service Systems and Innovations in Business and Society collection Collection ISSN: forthcoming (print) Collection ISSN: forthcoming (electronic) Cover design by Jonathan Pennell Interior design by Exeter Premedia Services Private Ltd., Chennai, India First edition: 2012 10 9 8 7 6 5 4 3 2 1 Printed in the United States of America.

Abstract
Every business aspires to be competitive and profitable in their markets. To do this, an organization needs to offer customers value propositions, whether it is manifest in the product they produce or in the service they provide. This in turn will create customer loyalty and growth. There are a number of organizational philosophies and strategies used by businesses to help accomplish this goal, among which are the concepts of Six-Sigma and Lean. Both are widely recognized and implemented, and both have been successful in improving value propositions of a variety of organizations, mostly in manufacturing concerns. Lean Sigma Methods and Tools for Service Organizations proposes to integrate the best practices from each of these philosophies and apply them to a customerfocused organizationa cruise shipwhose overriding mission is to deliver superior service to its customers. The authors demonstrate in this book how key components of both Six-Sigma and Lean, such as identifying and removing defects, elimination of waste, metrics, speed of delivery, and the seamless integration of these concepts and practices throughout the operation, serve to enhance the kind of value propositions that customers recognize and which allows the organization to be successful. This book illustrates Lean Sigma on a full range of service offerings: a cruise ship offers whole service to their guests including gaming, entertainment, food and medical services, retail sales, security, events and adventure planning, operations and maintenance, purchasing and logistics, human resources and training, and administration of payroll and accounting. By covering Lean Sigma applications in each of these areas in a story book format, service providers can begin to understand how Lean Sigma methods and tools can be applied in their service organizations. Through a unique and captivating story of two competitive brothers, one (Joe) who has had phenomenal success with Lean Sigma methods and tools in a manufacturing business, and the other (Larry), the manager of a cruise line desperately in need of improvement in all performance areas, this story illustrates the discovery, application, and transformation of a variety of service organizations supporting the cruise line operations.

Keywords
lean, lean sigma, service, waste elimination, continuous improvement, service excellence

Contents
Chapter 1 The Lean Sigma for Service Challenge ..............................1 Chapter 2 Identification and Understanding of Lean Sigma Implementation ................................................................5 Chapter 3 Lean Sigma Methods and ToolsBasic Concepts ............13 Chapter 4 Comparing Manufacturing and Service Environments ..................................................................37 Chapter 5 Key EnablersPolicy Deployment, Accountability Sessions, Employee Training and Involvement, and Lean Sigma Tool Selection and Application ......................................................................45 Chapter 6 Analysis of the Current State............................................53 Chapter 7 Application of Lean Sigma Tools and Results ...................73 Chapter 8 Making Cultural Transitions ..........................................107 Chapter 9 Achieving, Sustaining, and Celebrating Success .............115 References ..........................................................................................121 Index .................................................................................................123

CHAPTER 1

The Lean Sigma for Service Challenge

Shut up Joe! Everyones tired of your bragging, Larry said as he slammed his chicken bone down on his plate and stood up from the picnic table. Joe shouted back, Its not bragging, its just the truth, and youre the only one tired of it cause youre such a miserable loser and your so-called cruise line is about to sink! Joe and Larry have been fighting in some way since the day Larry was born. Their fierce sibling rivalry had overshadowed other family outings in the past. There was the time Larry challenged Joe to a foot race around the house, which ended up in a wrestling match, and the time Joe beat Larry at darts, and Larry tore the dart board off the wall. Their competitive nature seemed to know no end. This time things seemed different though. Joe was right that Larrys cruise line was in terrible trouble. While other cruise lines were enjoying banner years, Larrys was barely breaking even, and the booking rate was declining. Larry had already cut many expenses but this only seemed to make things worse. Joe always said You cant cut your way to prosperity. Joe, on the other hand, was enjoying great success in his manufacturing company. He was leading his organizations continuous improvement (CI) program and had received several promotions over the past few years as a result of the improvements. The local newspaper had even written a nice article about Joe and his companys improvement efforts. The article titled DR Products (DRP) Wins Prestigious Continuous Improvement Award, had several quotes from Joe regarding his role in the effort. Joe was telling his cousins about the article when Larry blew up at the picnictable.

LEAN SIGMA METHODS AND TOOLS FOR SERVICE ORGANIZATIONS

Larry had always thought CI was easier for a manufacturer as compared to a service organization and that Joe had practically had the CI process given to him by his companys leadership. Most of the CI books and methods were for manufacturers, not cruise lines. All Joe did was to follow the plan in the books to get the CI award. For the past 3 years DRP had been credited with establishing best practices in CI. Many of the best practices were credited to Joe and his production teams. Larry, on the other hand, was in trouble. Not only was his cruise line barely breaking even and losing customers, the employees werent happy either. Just last week two more key people had quit. Larry was spending so much time trying to replace these people that he didnt have time for CI. It was time for Larry to swallow his pride and talk to Joe about business. As Joe came into the kitchen, Larry mustered up a meek apology. Sorry I blew up out there Joe, Ive been under a lot of stress lately. Nothing you didnt bring on yourself. Joe shot back. Seriously Joe, how do you do it at DRP? asked Larry. Do what? replied Joe. You know, that CI thing. What do you call itLean Sigma? said Larry. Yeah thats the name. Im surprised you remembered. Yeah, I remembered. But it seems like a manufacturing thing. Would it work for a cruise line? asked Larry. Im certain it would. Its just a systematic approach to seeing and reducing the waste in a process. Your cruise line operation is just a bunch of processes. Sure the customers may want and expect different things, but the delivery of the services is simply a series of processes. Joe replied. But we are so different than a manufacturer. said Larry. Thats what they all say. commented Joe. They do? Who? And what else do they say? Larry quickly replied. They say Were different. Lean Sigma wont work here. Even manufacturers say that, but theyre all wrong. Lean Sigma CI methods

THE LEAN SIGMA FOR SERVICE CHALLENGE

are just a scientific or data-driven way to systematically and continually improve a process. Everything an organization does, whether theyre a service organization or manufacturer, can be defined as a process. Lean Sigma methods and tools describe a standardized way to address waste reduction in a process. Im certain it will work for you, but Im not sure youre bright enough to lead it! Yeah right! responded Larry. If you can do it, anybody can do it! Anything you can do, I can do better. boasted Larry. Care to make a wager on that? asked Joe. Sure, what are you thinking? added Larry. Well, if it works, you give my family and me a free 7-day cruise. If it doesnt work, Ill give you a job at DRP when you go bankrupt! They both laughed, and then Larry groaned. Im even willing to help you, added Joe. One concept of Lean Sigma is to share the knowledge freely. Why dont you come to the factory tomorrow and Ill give you a tour and show you some of the Lean Sigma activities were doing. I could even have you attend a current Lean Sigma work session, and maybe a team huddle. offered Joe. Without hesitation, Larry said What time?, and the plan was set. Tomorrow, Larry would arrive bright and early at DRP for a full day of Lean Sigma learning.

Larrys perspective that his organization is different and Lean Sigma may not apply is very common. In fact, no two organizations are exactly alike; therefore, Lean Sigma methods and tools may work differently for different organizations. Yet, Lean Sigma philosophy, principles, and concepts of waste elimination (conservation of resources) and improving flow are universal. Lean Sigma is a never-ending, systematic/scientific approach to identify and eliminate or reduce waste for any organization that delivers any product or service. By viewing a business as a series of processes with Suppliers, Inputs, a Process, Outputs, and Customers (the Six-Sigma acronym is SIPOC), any organization can employ Lean Sigma methods and tools to improve their quality, productivity, customer satisfaction, and financial performance.

LEAN SIGMA METHODS AND TOOLS FOR SERVICE ORGANIZATIONS

Chapter 1Discussion Questions

1. Why did Larry seek help from Joe? Do you think the two bitter rival siblings could work together? 2. Do you think it is a good idea for Larry to benchmark Joes organization? What are some of the challenges that Larry may encounter? 3. Discuss Joes success with continuous improvement and Lean Sigma initiatives in his organization. What lessons can Larry learn from DRPs approach? 4. Do you think Lean Sigma can be successfully implemented in Larrys company? How would you address Larrys skepticism that But we are so different from a manufacturer. 5. What is Lean Sigma? Do you think Lean Sigma can be applied to any business? Why or why not? 6. Why do you think Joe is willing to help Larry? 7. Larry has been spending a lot of time replacing people. Do you think he has the time to devote to continuous improvement and Lean Sigma initiatives?