LEAN Goes to the Back Office – Seven Ways to Materially Cut Back-Office Costs - VeBridge

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LEAN Goes to the Back Office – Seven Ways to Materially Cut Back-Office Costs

For years now, manufacturing operations have enjoyed tremendous financial gains by improving the manufacturing process. Whether it be Six Sigma, Kaizen, Lean or other popular techniques, the focus has been on squeezing the fat out of the process, removing all non-value added activities.

It is time now to apply the same thinking to back office operations, in all industries, and in a radical way. Incremental improvements in document management and storage to eliminate a file cabinet here, and a copying expense there will not achieve today’s goals. Addressing the entire business process is essential to achieving game-changing results.

Seven Ways to improve back office performance, and thereby make more money, include:

  • Identify process bottlenecks and eliminate them
  • Apply automated rules to processes in order to eliminate human touches
  • Increase the speed of processes and the retrieval of vital information
  • Establish a single source of the truth for business records
  • Replace back-end quality assurance with processes designed to eliminate the root cause of errors
  • Make sure customer needs are clearly understood and optimized in the business process to deliver a better customer experience
  • Tie appropriate business processes to aggressive time-to-market goals and strategies

Your goals should not be for 1% improvement, or even 5% improvement, but 20%, 30%, even 80% improvement in these areas.

Your first step in achieving these goals is process re-engineering. Start by understanding the true “as is” state of the process. This can’t be done in a conference room. The discovery process must be conducted where the work is being done. Follow transactions through the process. Discard your preconceptions. Ask “why” even if you think you know the answer. Define your work objectives. Draw your current processes out. Create flowcharts. Record times: transaction, waiting, etc. Once you know your true work objectives and your “as is” state, it becomes clear what your “to be” state must be. This is where you can eliminate any steps in the process that do not add value. You MUST fix your processes before automating them. If you start with a mess and automate it, you will end up with an automated mess!

Next, think about the automation tools in place to support the re-engineered processes. What would it do? How would it allow you to improve the speed, eliminate the waste and drive down manual processing costs? A good starting point is to evaluate the time required to complete each task. The longer a task takes to perform, the more likely it could respond well to the use of technology. Also look at those steps in the process where the flow of the work is waiting on action. Is there a way to reduce or completely eliminate the wait, reroute the process if the wait exceeds a limit, or improve the likelihood that the action will occur?

Now, let’s focus on quality. Where are errors occurring in the process? Are your employees hijacking a standard process, implementing their own approach, which leads to errors down the line? Are your processes documented so that your entire quality control process is not walking out the door every night? Is your entire quality control process in place because errors are not being caught at the source? Are your processes enforced through the use of rule-based technology? Are your processes subject to routine audits to ensure constant improvement? Current technology should enable a rules-driven process where up to 80% of your transactions are handled instantaneously without a human touch.

Connect everything you do with the Customer. Examine every business process and ask, “How does this help our Customers? Would they pay for this if they knew we were doing it? How does this help increase revenue or reduce costs?” Improvement must increase revenue, decrease cost, reduce risk or improve customer satisfaction.

Improving internal customer satisfaction is key as well. Most departments are interdependent. A change in one department may shift costs to another department. Lean in the back office applies to all of the back office functions (and the front office ones as well) that interconnect. For example, think about the A/R process. It is not a standalone process within accounting. It must also interact with Sales (from order origination to customer interaction), Shipping and Receiving, Logistics, Manufacturing, Human Resources, IT, ERP systems and potentially other parts of the organization. For this reason, any lean activity must examine the implications for all of the interconnected parts of the organization.

Look at the resulting vision. Does it allow the organization to respond quickly and cost effectively to its customers? Does it allow the organization to rapidly adapt to changing circumstances, rolling out new products, new sales campaigns and new organizational structure quickly? If so, you’ve done it right.

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