White Paper
Extending Lean Labor
to the Back Office
How Workforce Management Technology Applies
Lean Principles to Improve the Productivity of
Back-Office Processes
How Workforce Management Technology Applies Lean Principles
to Improve the Productivity of Back-Office Processes
Executive Summary
If you’re like many manufacturers, you’ve already implemented Lean
principles in your manufacturing operations. Now that you’ve seen the benefits
of Lean within your manufacturing operations, you may be looking to implement
Lean techniques in your “back office.” These processes include administrative
tasks, sales and marketing, information technology, engineering, product
development, and other “white collar” operations. By expanding proven Lean
methods from your manufacturing operations to your back-office processes,
your organization can continue to extend the benefits of Lean across the
entire organization.
A Lean workforce is essential when applying Lean principles to your manufacturing
operations. After all, labor comprises more than 50 percent of a typical operating
budget, and an idle or underutilized worker creates labor expense without
adding value.1 Lean labor is even more important for back-office operations
because labor is the single most important input in back-office processes.
This white paper explores how workforce management technology enables your
organization to apply Lean principles to your back office by automating manual
activities to reduce waste and by giving you visibility into labor productivity
so you can remove inefficiencies from your labor utilization. As a result, your
organization can improve productivity and control labor costs throughout your
back-office operations.
Lean Beyond the Shop Floor
In a competitive market, you must continually find ways to improve your opera-
tions to heighten productivity, increase quality, enhance responsiveness, and
reduce costs. Many organizations have long achieved this goal by applying
Lean principles to their manufacturing operations. Yet 60 to 80 percent of all
costs related to meeting customer demand are administrative or office-related
functions.2 As a result, many organizations are looking to significantly improve
their bottom line by extending Lean initiatives beyond the plant floor3 by applying
Lean concepts to back-office processes long ignored in process improvement
efforts.
Implementing Lean Principles in the Back Office
Lean is based on two principles: eliminating “waste” — any step in a process
that adds no value as defined by customers — and smoothing workflow. Seventy-
five to ninety percent of the steps in service and administrative processes, such
Manufacturer
Extends Lean to Its
IT Organization
One aerospace component
supplier with a long history
of following Lean principles
in manufacturing found
that information technology
projects were late and over
budget. As a result, the line-
of-business units were hiring
their own IT resources.
After new IT leadership
came in and applied Lean
principles to IT processes,
projects were delivered on
time and on budget and
business sponsors aban-
doned their IT efforts. When
new demand for IT services
started to strain resources,
Lean approaches enabled
the organization to match
IT resources to demand.4
1 “Salaries as a Percentage of Operating Expense,” Society for Human Resource Management, November 1, 2008,
http://www.shrm.org/Research/Articles/Articles/Pages/MetricoftheMonthSalariesasPercentageofOperatingExpense.aspx.
2 Willie L. Carter, “Lean Office Eliminates Waste and Saves Time,” Quality Digest, June 23, 2010,
http://www.qualitydigest.com/inside/twitter-ed/lean-office-eliminates-waste-and-saves-time.html.
3 “Rethinking Lean: Beyond the Shop Floor,” Boston Consulting Group and Wharton, 2,
http://knowledge.wharton.upenn.edu/papers/download/101109_SS_Rethinking_Lean.pdf.
4 Robert Parker, “Lean Techniques Pervade the Organization,” IDC Manufacturing Insights, October 2011.
How Workforce Management Technology Applies Lean Principles
to Improve the Productivity of Back-Office Processes
as order entry, quoting, and purchasing, add no value.5 Lean analysis identifies
wasted processing and manpower. It is also designed to smooth out the volume
of work so that it can be performed continuously regardless of variations in
demand, eliminating rush periods and fire drills that drive excess staffing and
negatively impact quality.
Implementing a Lean initiative involves defining important business processes
from beginning to end and then identifying bottlenecks, defects, and mistakes
in these processes. Organizations then look for ways to eliminate waste and
unnecessary steps that do not add value. The goal is to reduce processing
times, improve flexibility and responsiveness, and ensure continuous flow
through each process. Organizations also typically define performance metrics
for staff and processes to create a closed-loop methodology that helps improve
the effectiveness of people and processes.
Tools and concepts that Lean methodologies provide to eliminate waste include:
• Prioritization — In the back office, it’s easy for staff to concentrate on the
projects they enjoy rather than on those most important to customers. Or
staff may be unaware of the tasks that add value for customers, because
workflows span multiple departments. Lean initiatives establish clear
priorities and instill the discipline to drop one work process to immediately
process another of greater importance. For example, priorities might include
due date, value of order, or customer type.
• Performance measurement with KPIs — Key performance indicators (KPIs)
enable organizations to “close the loop” on process improvements. They are
used to determine how well current performance measures up to company
or industry standards so management can evaluate the progress of Lean
and process improvement efforts toward organizational goals. Two KPIs often
applied to Lean manufacturing efforts include “pitch” and “takt time.” Pitch
measures how much work can be completed during a given amount of time;
Lean efforts look for ways to do more work in the same amount of time. Takt
time is the rate of customer demand, and Lean manufacturers aim to turn
out products at the appropriate rate to meet customer demand.
In back-office processes, the KPIs you choose to employ depend on the
questions you want to answer about your value stream and how you define
the product or service produced by these processes. For example, if your goal
is to reduce the number of engineering change orders (ECOs), you can define
ECOs as the product and identify the total number of ECOs issued, cycle
time, and queue time for processing. This information can help you pinpoint
bottlenecks and eliminate waste in your process.
Lean Methodology
Eliminates Waste
By applying Lean principles,
organizations aim to remove
a number of types of waste
from their back-office
processes. These wastes
include:6
OvErPrOducTIOn — the
unnecessary production
of more service than is
demanded. Examples include
using “reply all” or sending
multiple copies of reports,
forms, or other information to
several people for review and
comments, which in turn must
be consolidated.
WaITIng — the time that
workers are idle due to bottle-
necks or processing delays,
which increases labor costs.
In the back office, staff often
wait while other people or
processes finish work before
they can do their work.
(continued on next page)
5 Carter, “A Lean Office.”
6 Alan Nicol, “Lean in the Digital Office,” Manufacturing.net, January 19, 2012,
http://www.manufacturing.net/articles/2012/01/lean-in-the-digital-office.
How Workforce Management Technology Applies Lean Principles
to Improve the Productivity of Back-Office Processes
• Eliminate non-value-added activities — Lean initiatives strive to include
activities and processes that add value for the customer and eliminate
non-value-added steps that lengthen process cycles/times or result in any
type of waiting.
• address unpredictable and highly variable workloads — One of the key
reasons for waste in work processes is unpredictable workloads, which can
be caused by unbalanced workloads and fluctuations in customer demand.
Uneven workloads lead to bottlenecks and often mean that considerable
work must be done at once, followed by periods without enough work.
• avoid overburdening people — During peak workflows, manufacturers need
to avoid pushing people beyond their natural limits. Overburdening people
results in low engagement, fatigue, turnover, and quality problems.
• Leveling volume — While Lean manufacturers practice “pull” demand where
they produce products based on customer demand, they also want to ensure
continuous flow. By studying the amount of time each task takes, you can
ensure that each step has a similar cycle time to level the operation. The
same concept can be applied to the back office, where Lean practitioners try
to level the tasks workers perform, to avoid rush periods and fire drills.
• capacity flexing — Capacity flexing enables organizations to find the right
number of workers with the right skill sets to meet expected seasonal surges
in demand, such as when accountants must prepare tax returns in March
and April.
• change management — In changing from a traditional to a Lean environ-
ment, your organization must change its corporate culture. Without employee
support for Lean efforts, no organization can make major changes. Change
management will need to encompass updating management skills, training
workers, and revising reward systems. For example, the Lean principle of
engaging employees in problem-solving means that instead of dictating new
workflows from above, management must ask workers involved in a process
how that process can be simplified or improved. Managing change and
people’s behaviors is a continuous process that must be addressed from
day one.
challenges of Bringing Lean to the Back Office
In the past, organizations have hesitated to apply Lean techniques to the
back office because of significant differences between back-office processes
and standard manufacturing. While manufacturing operations typically follow
set processes, the back office has highly unorganized workflows. Rather than
following standard operating procedures, staff may employ different ways to
POOr LOgISTIcS — includes
any movement of materials
that does not add value to the
product. Examples include
back-and-forth transfers of
information, such as getting
approvals and sending them
back to the original person
or the need to obtain too
many approvals.
InvEnTOry — in a back-office
context, inventory is work wait-
ing to be processed, such as
tasks in inboxes and on to-do
lists.
rEWOrK — is necessary when
something isn’t done right
the first time. For example,
when workers input erroneous
information into a report, it will
be caught later and will have to
be re-entered.
MOvEMEnT — is the exertion
of effort without producing
meaningful output. Examples
include meetings that do not
result in a decision or
produce information through
collaborative discussion
through the work of a team.
How Workforce Management Technology Applies Lean Principles
to Improve the Productivity of Back-Office Processes
accomplish the same task, depending on personal relationships and experience.
Back-office work also typically flows across multiple departments and functions;
for example, the order-to-cash process encompasses order entry, distribution,
invoicing, and collections processes. These diverse and multi-departmental
workflows make it challenging to map out, measure, and improve processes.
Because projects are often small and ad hoc, output is not always standardized,
and individuals may have multiple responsibilities, it can be difficult to determine
who is responsible for what and to measure productivity and quality. To further
complicate matters, priorities for projects are constantly changing.
Finally, back-office employees are typically salaried. Organizations feel they can
do little to control labor costs when wages are fixed. Even if organizations can
control employee activities, salaried employees resist being measured, as they
feel it is demeaning or unfair because their priorities are constantly changing.
Even when organizations have applied Lean techniques to the back office,
these attempts have seen limited success. For example, many organizations
successfully improve specific functional areas, such as accounting, but see
limited improvement overall because they fail to target workflows that extend
across departments.
Many organizations also fail to apply Lean initiatives consistently. When
organizations have instituted quality and process improvement initiatives, they
have been “flavor of the week.” Employees have gotten used to change for
change’s sake and learn to appear to address this week’s management priorities
knowing that next week they will be asked to focus on another “hot issue.”
The role of Workforce Management Technology
in Leaning Out the Back Office
While efforts to apply Lean methodologies to a manufacturing organization
concentrate on a combination of labor and other resources, labor is the most
important input in back-office processes. Thus, any attempt to bring Lean to
the back office must start with improving the efficiency of labor utilization.
Workforce management technology plays a critical role in recalibrating
processes and ensuring that Lean efforts are applied consistently. Workforce
management technology is a key enabler for Lean because it delivers
automation and visibility.
Workforce management
technology is a key
enabler for Lean
because it delivers
automation and visibility.
How Workforce Management Technology Applies Lean Principles
to Improve the Productivity of Back-Office Processes
automation Eliminates Waste
Workforce management solutions automate wasteful manual processes to
improve productivity and accuracy and eliminate waste. For example, absence
management capabilities automate the application of your attendance and
leave policies. This eliminates manual processes for your human resources staff
while making it easier for your organization to enforce your absence and leave
rules consistently as well as improve compliance with FMLA and other federal,
state, and local leave laws.
Establish consistent Workforce visibility
Visibility allows organizations to see where labor is, what labor is doing, and how
it relates to productivity goals. Thus workforce management makes it easy to
allocate the right labor to the right place at the right time to further streamline
back-office processes. Key capabilities that workforce management technology
delivers include the ability to:
• Track workforce activity — Workforce management solutions provide detailed,
up-to-the-minute activity tracking data. Activity tracking capabilities allow
you to collect and analyze data about labor according to a wide range of
criteria — by employee, task, department, project, or customer. You also gain
complete visibility into the status of work in progress. The resulting insight
helps you find hidden productivity drains so you can take steps to eliminate
wasteful activities.
• Identify potential shortfalls — On-demand dashboards make it easy to see if
you’re approaching trouble in critical areas like cost or impending due dates
so you can take proactive steps to avoid bottlenecks.
• Match the right person with the right skills to the right task — Workforce
management helps keep workflows balanced by allowing managers to make
sure people with the right skills and certifications perform the right tasks.
Scheduling capabilities allow managers to view worker profiles (skills,
availability, etc.) as they set up schedules — for example, to ensure they have
the right workers with the right skills to meet seasonal peaks in demand. Time-
off management and vacation planning tools enable you to reduce unplanned
leave and make sure the right people are covering for absent workers to avoid
work spikes that can lead to burnout or delays in work.
• Measure performance — KPIs enable you to see how the entire workforce
is performing, with the ability to drill down to an individual or project to
diagnose the problem. By identifying trends and distinguishing one-time
occurrences from recurring events, you can better schedule and plan for
situations such as increased volume or sporadic holiday attendance. With KPIs
and analytics capabilities, your managers can make quick adjustments and
continuous improvements.
How Workforce Management Technology Applies Lean Principles
to Improve the Productivity of Back-Office Processes
Benefits of using Workforce Management
to Bring Lean to the Back Office
Workforce management software uses these capabilities to enable organizations
to reduce costs and improve productivity.
Reduce Costs
Organizations using workforce management gain visibility into real-time
information about labor that is accurate and actionable. They use this visibility
to match labor capacity and skill sets to demand, reallocating labor resources
as necessary to meet deadlines and maintain customer satisfaction. They can
even pinpoint problem areas and take appropriate action before service levels
are compromised. As a result, they can have the right person at the right place
at the right time to meet customer expectations — often using less labor than
they would have needed otherwise.
For example, as one company reviewed its order entry processes for a Lean
initiative, it found that it was using a significant amount of time to acknowledge
orders. Whenever the company entered an order, it automatically printed an
acknowledgment and manually sorted and mailed it to each customer. However,
it turned out that few customers wanted an acknowledgment — and those who
did were willing to accept an email response — which meant that this process
added little customer value. By coding orders to acknowledge via email only
customers who wanted such notifications, the company was able to free over-
worked staff to spend more time on value-added activities.7
Improve Productivity
Your organization can use automated workforce management to improve
productivity by eliminating manual processes. In addition, workforce
management provides detailed labor activity and performance information that
organizations can use to improve processes.
For example, one large multinational company was able to improve cash
flow by reducing the amount of time from when work was performed
in the field to when it was able to send invoices. Rather than using paper
documentation, the organization was able to enter data about the activities
performed into the workforce management solution. Not only did the workforce
management solution allow the organization to measure performance, it also
interfaced directly to the ERP invoicing system, eliminating the need to rekey
information in multiple systems.
7 Carter, “A Lean Office.”
As one company reviewed
its order entry processes
for a Lean initiative, it
found it was able to free
overworked staff to
spend more time
on value-added
activities.
How Workforce Management Technology Applies Lean Principles
to Improve the Productivity of Back-Office Processes
Bringing Lean to the Back Office: How to get Started
While workforce management technology is a critical enabler, you also need to
learn new Lean methodologies. The following are steps your organization should
take to bring Lean practices to your back office:
• Define “value” by identifying your internal and external customers and
defining what these customers want
• Identify and document your current workflows
• Look at workflows from an enterprisewide, system, or business process
perspective
• Determine value-added/non-value-added elements of workflows
• Eliminate waste by weeding out any activities that don’t meet real demand
• Use metrics and rapid performance feedback to improve real-time
decision making
• Implement a rapid plan>do>check>act improvement framework to
achieve results quickly and build momentum
• Pursue perfection by involving employees in efforts to continually identify
and eliminate non-value-added activity from all processes
• Emphasize learning at an organizational level through sharing of best
practices from one project to another
conclusion
Lean provides the foundation for more efficient and profitable operations —
not only in manufacturing, distribution, and supply chain operations, but
throughout the back office.
Bringing Lean to both the shop floor and the back office requires a holistic
effort that encompasses new methodologies and new technology to ensure that
labor embraces new concepts that can seem foreign to back-office operations.
With labor as the critical input for most business processes — particularly
those in the back office — workforce management solutions are clearly a key
enabler for Lean initiatives throughout the organization. Workforce management
solutions automate critical manual processes to improve productivity and
drive out errors and waste. These solutions also furnish visibility into labor
productivity that allows you to assign the right workers to the right tasks at
the right time to streamline processes and smooth workflows. As a result,
workforce management helps deliver on important Lean promises of improving
productivity and reducing labor costs.
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Extending Lean Labor to the Back Office
If you're like many other manufacturing organizations, you have already reaped the benefits of Lean production practices in your manufacturing operations. Wouldn't it make sense to apply the same Lean techniques to your back office, too? Download this whitepaper to learn the challenges of extending Lean to the back office - and how to overcome them.