Lean
Financial Services
June, 2010
Page 1
Chris Vogel
- founder Compass Affiliates,
providing management consulting
for Lean leadership and design.
Former Senior Vice President of Wells Fargo, Chris
conducts Lean readiness assessments & action planning,
provides Lean implementation consulting, works with
leaders to develop Lean cultural systems, standardized
Gemba walks, and leader development planning.
Page 2
Discussion Overview
• Lean
• Lean Leadership
• Policy Deployment Planning
• Wells Fargo Case Study
• Motivations and opportunities for change
• Changing the Document Management culture
• Where Wells started
• An example of the first major transformation
• What was learned and what was done next
• Results
• Myths, Achievements and Challenges
• Where to start
• Questions
Page 3
Lean
• What is it not?
– It is not tools, projects, cost cutting or people
reductions
– It is not a way to make people work harder
– It is not a passive activity practiced by one group and
not another
– It is not a transition to the next “method”
• What is it?
– It is a total company system connecting Purpose,
People, Process and all departments to increase
Customer value, profitability and growth
Page 4
Wells Fargo Case Study
Who is Document Management?
Document Management is an operations team providing paper
imaging, electronic document routing, data lifting and document storage
services to the Home and Consumer Finance division of Wells Fargo.
Services provided were integrated with back-end and front-end
transactional processing. The Home and Consumer Finance division
included the following groups; Home Mortgage, Financial, Insurance,
Home Equity Lending, Credit Cards, Student Loans, Trust Services.
To serve our internal Business Partners we had operations in NC, MN
and Iowa. We had 1,200 team members providing services over two
shifts, six days a week.
Processes were continuously improved in partnership with business
partners to provide the most quality centric, secure and cost effective
value, meeting the needs of Customers.
Page 5
Conditions Motivating Change
• Organic growth of imaging and data lifting across unconnected
groups
• Technical infrastructure was becoming highly variable in design
increasing cost
• Operations disciplines were defined by each separate process
and department
• Volume nearly tripled to a record high following the Federal
Reserve’s response to the 911 attacks
Page 6
Opportunities for Lean
• Departments were merged into a single division allowing a
central vision to develop
• The value of work effort was not clearly identifiable
• Many, many handoffs
• Processes were designed around batching work
• Work inventory was stored in rooms out of the way and out of
site until it was processed
• Defect rates and service performance were hard to measure
• Without adequate processes, management was required to
respond to the “loudest” priority
Page 7
Where Did We Start?
• Began value stream mapping our process
• Made our processes obvious; and started changing them
• Built our Operational Excellence (Lean) Model
Page 8
Began Value Stream Mapping Our Process
• We engaged external vsm expertise to help us get started and to
teach us the discipline
• Began conducting Kaizen events, created change proposals began
30-60 day implementations (short cycles of improvement)
Made Our Processes Obvious
• Started to create flow and began shrinking batch sizes
• Began physically connecting processes and making operations visible
• Began to exchange post process auditing for a balance of in-process
quality
• Began to explore work standardization through 5S
• Created initial baseline reporting for similar functions
Page 9
Built Our Operational Excellence (Lean)
Model
• Created our Operational Excellence (Lean) visual model for reference,
training, and communication
• We started experimenting with different training exercises to
discourage batching and show the benefits of standardization
• We began creating production teams and breaking down the
independent contributor system
Page 10
Continuous Improvement Process
We followed the typical high-level Continuous Improvement Process
Identified Goals
Mapped Current State
Identified Waste
Mapped Future State
Implemented
Page 11
Present State Value Stream Map
VALUE STREAM MAPPING TOOL
Current State Map 6/30/03
SMS
Funding Systems
LPS
LIS
Image Capture
Inventory Control
FileNet
Arrow
Open Mail, Notes and
Checks
Mail In
I
I
I
I
2250
2250
2250
4500
0
100
UT
FPY
I
I
3000
9000
450
CT
48
CT
55
CT
55
CT
28
CT
20
CT
C/O
0
C/O
0
C/O
0
C/O
0
C/O
0
C/O
UT
95
UT
95
UT
90
UT
95
UT
99
UT
?
FPY
high
FPY
high
FPY
high
I
277
0
100
I
I
100
900
I
I
4500
3000
Ship Off-Site
Check for Requests
Move to Cart-CF
Fileroom match
Reconstruction
I
I
200
200
I
55
CT
45
CT
65
CT
42
CT
5
CT
5
CT
C/O
0
C/O
0
C/O
0
C/O
0
C/O
0
C/O
0
C/O
0
UT
65
UT
90
UT
99
UT
90
UT
90
UT
90
UT
90
?
FPY
?
high
FPY
?
FPY
?
FPY
35600
5
High
FPY
low
FPY
Total Inventory WIP
3000
CT
FPY
?
FPY
?
FPY
?
FPY
Validation
Scanning
Prepping
Scan Pack Creation
Trident Headers
I
CT
C/O
Receiving
Label Creation
Kofax
Throughput Time =
4 hr
1.5 hr.
1.5 hr.
1.5 hr
Lead Time
0 hr
8 hr.
12 hr.
.35 hr
69.1 hrs or 4.31 days
2 hrs
.25 hrs.
2 hr.
24 hr.
12 hr
Value Added Time =
Process Time
sec
48
sec
55
sec
55
sec
28
sec
20
sec
277
sec
55
sec
45
sec
65
sec
42
sec
5
sec
5
sec
5
sec
Legend
CT = Cycle Time
C0 = change over time
UT = uptime
FPY = first pass yield
Page 12
705 sec
Future State Value Stream Map
VALUE MAPPING
STREAM MAPPING
TOOL TOOL
VALUE STREAM
Future State Map
Funding Systems
LIS
SMS
LPS
WF Inventory Control
Inventory Control
Image Capture
FileNet
Arrow
Mail In
Notes and Checks
Open Mail
I
I
CT
C/O
0
UT
FPY
100
high
10 Key Receiving
Labels and Headers
I
I
1000
ICS
2
I
2
Pss Pull - Checks
I
2
3000
200
10
10
I
I
I
I
10
14
65
120
Ship Off-Site
Reconstruct
Validate
I
I
I
I
2
Scan
Prep QC
Prepping
Milk Run
I
2
Kofax
CT
48
CT
55
CT
55
CT
28
CT
20
CT
55
CT
45
CT
65
CT
42
CT
5
CT
5
CT
C/O
0
C/O
0
C/O
0
C/O
0
C/O
0
C/O
0
C/O
0
C/O
0
C/O
0
C/O
0
C/O
0
C/O
0
UT
95
UT
95
UT
90
UT
95
UT
99
UT
65
UT
90
UT
99
UT
90
UT
90
UT
90
UT
90
FPY
high
FPY
high
FPY
?
FPY
?
FPY
?
?
FPY
?
FPY
?
FPY
?
FPY
4449
5
High
FPY
low
FPY
high
FPY
Total Inventory WIP
Throughput Time =
Lead Time
3 hrs
40 sec
40 sec
40 sec
40 sec
40 sec 20 min
10 min
14 min
4.33 hours
days
.69 days
11.1 hrs or 4.31
2 hrs
10 min
10 min
Value Added Time =
Process Time
sec
10
sec
10
sec
10
sec
10
sec
10
sec
10
sec
275
sec
55
sec
55
sec
55
sec
55
sec
5
sec
570 sec
Legend
CT = Cycle Time
C0 = change over time
UT = uptime
FPY = first pass yield
Page 13
Operational Flow – Before
9
9
1200 ft. File Travel
8 Back Flows
9 Intersections
9
10
9
Validation
6
7
8
8
PSS
12
1
8
13
8
11
3
2
4 4
5
5
5
3
5
5 5
Page 14
Operational Flow – After
Design Objectives:
1. Critical path is consolidated into
main production space.
2. Elimination of backflows and
intersections.
3. Circular flow from monument
(freight elevator).
4. 75% reduction in travel.
Page 15
Transformational Timeline
Analysis & Design
Layout
Prototype
Full Volume
Add Capacity
Transition and Stabilize Environment
Timing:
8 week
Key Themes: • Physical Layout
• Cost Projections
• Current flow
analysis
6 weeks
• Purchase
equipment
• Setup physical
Space
• Recruit team
• Train operators
8 weeks
4 weeks
• Test receiving
• Convert all
and imaging line
MPLS
• Document results
volume to
• Go/NoGo
new flow
Decision
design
12 weeks
• Build out space
on lines to
handle the colocation volume
and timeline.
Page 16
Initial State
17
First Generation Flow
Lean Imaging Flow (Scanning, QC and Reconstruct)
Load to cart for
off-site
Packages In
Preppers 13 loans/hour, aggregate cycle time = 55 seconds
Cycle time
Throughput Time
Direct Labor
Module Capacity
One Shift Capacity
Scanning
55 seconds
Validation
55 seconds
Reconstruction
55 seconds
= 55 seconds
= 14.8 minutes
= 7.4 minutes
= 9750 loans / month
= 126,750 loans / month
Page 18
Year 1 – First Imaging Line
19
Imaging Lines – Year 2
Better
20
Second Generation Flow
Imaging Flow (Scanning, QC and Reconstruct)
Scanner
Scan
120 sec
Review
120 sec
Prep / Disposition
120 sec
Work Queue
Imaged Files
Page 21
Imaging Cells – Year 4
22
Andon shows normal vs. abnormal for administrative work
23
What Did We Learn?
• People need to envision their efforts fitting into an overall vision or
Lean operational model
• Staff have kaizen knowledge and are very willing to contribute
• In order to be successful, all team members must contribute as a
learning organization therefore a learning strategy was required
• Batching work is a natural tendency for people and requires a
conscious choice to overcome
• Leadership at all levels needed to spend dedicated time on the floor
to understand and respond to the needs of the system
• If you cannot differentiate abnormal from normal operating
conditions, you don’t have standardized work and cannot kaizen
• Check / Adjust is just as important as Plan / Do
Page 24
How Did We Adjust?
• We developed a training strategy for all team member levels, clearly
showing expected skills and development timelines
• We did training at all levels showing the pitfalls of batching and benefits
of flow
• We required managers to spend dedicated time on the production floor
every day and IT support in operations
• We realized our weakness in standardized work, trained leadership to
recognize, trained staff on the value and took it to the next level
• We clarified the relationship of team members and their accountabilities
concerning Kaizen, variation, overburden, change approval, etc…
• We evolved the Operational Excellence (Lean) model and stated the
cultural norms
Page 25
DocDocument
Mgmt Lean
System Excellence System
Mgmt Operational
Customer
Customer
Audit
vs. vs.
Audit
Trends
Trending
ion
Quality
Assurance
Custome
Customer
Experienc
r
Experience
e
Ex
ec
ut
Voice of Customer
(Feedback?)
Data
al
Op
er
ati
on
Peopl
People
e
(Consistent Data?)
Quality Audit
Financial
Tracking &
Results
Production Control
Knowledge
Utilization
Machines
&
Quality Control
Cost Control
Scheduling
(Standards Met?)
Technology
Proces
Process
s
Machines
& Tech
Inputs &
Suppliers
-
Environment
Operational
Operational
Metrics
Metric
(Process
in Control?)
Tools
Managerial Culture
Metrics And
Reporting
Change Control
Control
Change
Change Control & Prioritization
Continuous Improvement
Philosophical Underpinnings
Page 26
Philosophical Underpinnings
• Focus on business partner / customer value
• People are the most critical element
• A commitment to continuous improvement
Page 27
Managerial Culture
• Generosity of spirit and sustained sense of trust
• Accountability at all levels of the organization to improve their
work
• Fact based decision making
• Commitment to creation of sustained learning
• Problems are considered good things because they help direct
us to our improvement opportunities
• All support functions, technology development and projects
focus on direct operational value stream improvement
Page 28
Tools
Standard Operational & Lean Tools
–
–
–
–
–
–
–
–
–
A3 Format
Value Stream Mapping
Small lot processing
Just in time
Quality in process (jidoka)
5S
Production Boards
Andons
Standardized Work Charts
–
–
–
–
–
–
–
–
–
Flow
Pull
Gemba walks
Action Boards
Kanban
Pareto Charts
Mistake Proof (poka yoke)
PDCA discipline
Many others…..
Product Development Tools
– Agile Processes
– Burn Down Charts
– Agile activity tracking
software
Page 29
Results
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Overall
Improvement
Operations
Cost per Image
(decrease)
13%
24%
25%
25%
34%
28%
76%
Images per
FTE (increase)
(21%)
27%
30%
40%
21%
17%
168%
Image
Availability
Lead time
(decrease)
45%
17%
20%
25%
28%
31%
92%
Space
Consumption
(decrease)
33%
26%
0%
0%
0%
0%
50%
First Pass Yield
64.0%
78%
99.5%
99.8%
99.9%
99.9%
35.9 pct pts
Business
Partner Service
Level
Compliance
50%
75%
99%
99%
99.5%
99.7%
49.7 pct pts
Transactional
Volume
12%
(10%)
0%
100%
111%
50%
371%
Page 30
What happened after that?
• Creating Level Pull
• Improving the connection between leadership objectives and
production staff (A3 and Catch ball)
• Improving synergies between operations and project
management / software development initiatives
• Further ingrain the cultural norm that leaders are teachers and
give everyone the skills to grow knowledge
• Infect others
Page 31
What we might have changed?
• Spend more time communicating the cultural vision and the
mechanisms of our Lean model
• Lead with the A3 Hoshin Kanri process
• Involve staff earlier in the process (training, work flow design,
production boards)
• Train, educate, and emphasize standardized work
What Strategies Worked Well?
• Start with focus on value definition
• Begin value stream mapping
• Focus on making work visible and connected
• Continue to favor action over analysis
Page 32
Hoshin Kanri – True North
Performance, gaps, and targets
This year's action plan
SLA
Last Year Targets:
Last Year Actual:
CPL
CPI
CPK
$ 0.121
Goals
Activities
?
A. Strengthen strategic planning
1. Teach Management Hoshin Kanri
?
and policy deployment process
2. Require mgmt to build Mother A3s and
DM
98%
na
WFHM
98%
$ 22.69
WFF
98%
?
$ 0.076
?
CCG
?
?
?
na
3. Communicate goal / strategies to staff
CS
na
na
na
na
through catch ball
DM
99.70%
?
$ 0.121
?
B. Deliver cost reduction 25%
1. Standardize work at all sites
WFHM
99.64%
$19.03
$ 0.085
?
greater than budget
2. Kaizen not Kaikaku
WFF
99.8%
?
$ 0.063
?
CCG
?
?
?
na
CS
na
na
na
na
$ 0.082
F
M
A
M
J
J
A
S
O
N
baby A3s within departments
3. Empower staff to manage muda
C. Institutionalize OE culture
1. Execute training program focus on
at all levels
OE & Muda for staff, A3 & Stan Wk for mgr
Reflection on last year's activities
Activity
J
2. All non-staff spends 2 days in cell
Rating
Key Results / Issues
Meet Financial Obj
G
Goals met
Stabilize ops & tech
Y
Cannot easily move work between sites
Support CORE
G
Dates made, resource split effective
Engage staff in process
Y
Idea boards put in place, don’t own muda
Pass Audit
G
Flying colors
Advance Ops Excellence
Y
Training prgm stalled, mgrs cant do work
D. Institutionalize effective BCP
1. Operationalize new Des Moines site
and rate rally redundancies
2. Common capture platform all sites
E. Institutionalize effective
1. Mature Lean/Agile project practices
project execution
2. Align team with function (create zones)
3. Measure and forecast velocity
4. Create effective tracking & comm
Analysis / Justification to this year's activities
F. Instantiate financial allocations
1. Deliver high level KPIs
and metrics
2. Roll out allocation method for all BPs
3. Standard reporting formats / goals
Cost burden to business partners limits process improvement opportunities.
Follow-up / Unresolved issues
Operations are unstable and improvements are not sustainable.
1. Catch ball
may not be
well
understood
by staff by
end of 2007
We are unable to forecast project execution and deliver expected results on schedule.
2. Training program will not be well integrated with Corporate L&D team
Inconsistent communication of financial allocations, metrics, and SLAs confuse business
3. Long term second site will still need to be identified
partners and erode confidence in the corporate business model.
4. High level KPIs and operational reporting may not be synchronous
5. Intense focus on our operational needs is often an obstacle for BPs.
Signatures:
Author:
Chris Vogel
Version and date:
Page 33
V2
4/2/2007
D
Hoshin On Production Floor
Page 34
Production support responds real-time to
andons for administrative work
35
Employee Engagement
Page 36
Common Myths
• Operation discipline doesn’t allow for good customer
service
• Standardized work is an insult to personal creativity
• Lean tools are designed to get rid of people
• Leaders can deploy the OE system from their office
Challenges
• Underestimating the criticality of standardized work
• Overcoming staff perception of Lean being a people cutting
method
• Creating discipline for management time spent on the floor
Questions
Page 38