As market volatility drives up service volumes and costs at financial institutions, operations executives are struggling to reduce costs and improve service quality. Traditional cost-cutting strategies are failing—they more often lead to poor quality and (counter intuitively) higher costs.
Leading financial services firms are breaking this cost–service compromise by applying "Lean" manufacturing principles to identify and eliminate waste in their processes. Three simple questions can help pinpoint wasteful activities:
Will a customer pay for this activity? Will my service fail without this activity? Will I go to jail if I eliminate this activity?
Answer "no" to all three, and the activity can essentially be defined as waste.
Current research from the Operations Council at the Corporate Executive Board finds that institutions that implement Lean are able to double the amount of cost-reduction opportunities they identify and operate more efficiently than their peers. Lean manufacturing concepts are relatively inexpensive to implement, are easy to understand, and often generate quick cost reductions.
Financial institutions applying Lean techniques to their operations have reported 20-40% cost reductions in as little time as 12 to 18 months. In addition, many Lean adopters are able to realize employee productivity gains of more than 30%. In the current environment, Lean represents a powerful tool for reducing expenses while also strengthening customer relationships.