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 Inventory Motion Transport of materials, product, information, or persons Storing excess inventory or information Unnecessary or excessive movement during production processes Waiting Over Production Over Processing Defect Skills Production stops and slowdowns caused by production process bottlenecks Producing too much product which leads to excess inventory waste Excessive quality standards in relation to the products Marketing Mix Scrap or rework of product components (errors) 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 model. Define Voice of the Customer Define the Processes to be Improved Critical to Quality Customer Requirements Measure Measure Current Process Identify the Process Variation(s) Performance Measure Systems Analyze Interpretation of the Measure Data Improve Categorize Solutions to Processes Errors Recommend the Best Solution Control 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. Define 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 2. Friendly Service 3. Good quality food 4. Comfortable atmosphere Critical to Quality Customer Experience Service Consistency Taste & Smell Store Smell (Coffee) Product Flavors Product Freshness Queuing Time Line Order Wait Time Product Time Preparation Managed Volume Seating & Space Comfortable Spacing Comfortable Seating Pleasing Color & Patterns Comfortable Atmosphere Store Noise/ Sound Music Volume & Mood Kitchen Noise Other Customers Room Acoustics Temperature Room & Space Food Products Colors & Patterns Store Colors Lighting Level Brand Colors 1 Colin Shaw and, John Ivens; Building Great Customer Experiences (Palgrave Macmillian 2002), 8-13 2 http://www.businessweek.com/magazine/content/08_16/b4080000943927.htm Application of Lean Six-Sigma to Service Industry Settings Jeffrey Quintal Page 2 of 7 Product Quality Measure 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 Payment Food Order Order Delivery Order Preparation 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 consistency. 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 Sixsigma 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 Analysis 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 atmosphere? 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? Red Green Blue Color Code 61 122 0 Shade Red Green Blue Color Code 128 255 1 Shade 3. Analysis of Color & Mood indicates Psychology of Brown may apply to the Starbucks demographics. 3 3 http://psychology.about.com/od/sensationandperception/a/colorpsych.htm 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 146 44 12 Red Green Blue Shade Color Code 184 18 0 Red Green Blue Shade Improve 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 following: 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 LCL Average UCL Red 50 61 UCL 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. 3 http://psychology.about.com/od/sensationandperception/a/colorpsych.htm 4 http://www.energybooks.com/pdf/D1150.pdf Application of Lean Six-Sigma to Service Industry Settings Jeffrey Quintal Page 6 of 7 Control 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 management. 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 controls. Page 7 of 7