Three Sources of Loss
Three sources of loss
The overriding purpose of a lean system is to configure assets, material resources, and workers in a way that improves the process flow to the customer’s benefit while minimizing losses caused by waste, variability, and inflexibility. These forms of loss are apparent in the public sector, where the consumer must often wait in lines, whether to receive health care, obtain a visa, or pass through security checks to board an airplane.
Toyota identified seven types of waste that inhibit a system’s flows: overproduction, waiting, transportation, overprocessing, inventory, motion, and rework. Nearly all are relevant in the public sector. Take transportation. Is any movement of materials or people unnecessary? Does the movement of files needlessly lengthen an application process? In a prison system, is poor case management causing unnecessary and duplicative trips between prisons and courts?
Similarly, consider waiting times. Do any idle periods result from poor coordination between activities? Are expensive CT (computerized tomography) scanners, say, idle because of the booking system, and do hospital operating rooms start work late because of staff shortages? Likewise, is work or inventory being stockpiled? In a back-office process, for example, employees may be either overworked or idle because work often accumulates before moving to the next stage.
In the context of a lean system, variability is any deviation, in a service or product, that creates unnecessary costs. In manufacturing, production variability might lead to the extensive reworking or scrapping of parts. In the public sector, variations in the way investigators gather evidence for a trial can lead to unnecessary acquittals. Often, managers use the inherent complexity of a process to justify a refusal to standardize any aspect of it. However, defining and sharing best practices can bring considerable benefits in quality and productivity.
Finally, inflexibility refers to any systemic rigidity that prevents a supplier from meeting the customer’s requirements at reasonable cost. In manufacturing, inflexibility could mean forcing customers to purchase a package of extras when they actually want only one. In the public sector, staffing levels are often inflexible: the same number of police might work a shift on Monday night as one on a busy Saturday night. Too often, governments design public services on the one-size-fits-all model in the mistaken belief that a standard service necessarily offers economies of scale. In reality, different customer segments require different levels and types of service.
These sources of loss are strongly linked to the overall objectives of a lean organization: reduced costs, higher quality, and better customer service. In the lean approach, managers and staff tackle all three simultaneously to create a consistent flow.