Lean Management and JIT in banking industry

Presented by- GROUP 1

Sumit bhatia 8Swati Gupta 26

Anirban Mazumdar 40

FLOWWhat is Lean Management and JIT?

5 Principles of Lean Management Types of Waste

Lean Management in Financial InstitutionsAdapting Lean for Customised Banking

ProcessesLean Service Machine

JIT and Lean ManagementJIT- Minimize wastes and inventory by producing, processing, or purchasing only can be consumed and used by the next process

Lean Management identifies the real worth from the client‘s perspective. It deals with arranging the value adding activities and processing them without breaks to increase the companies effectiveness, efficiency and competitiveness

Value is the Opposite of waste

• Ways to reduce waste• Kaizen• Poka Yoke• 5 Whys

Lean management in financial institutionsTake out a lot of the hand-offs and simplify processes to reduce errors.

Danger- Service might suffer.With Lean, you're reducing cost by helping to smooth your processes

IT people at banks need to be involved in streamlining processes. "Most IT folks like this concept because they often struggle when developing a new platform. They don't always know all the processes involved or even where the problem is in the first place.”

Examine processes and the intellectual property that exist in the company rather than always trying to solve something with a new tool. "Get the process down first,"

Discipline in place to create a culture of continuous improvement rather than blindly cutting costs and making service suffer

Need for lean banking Challenges faced by the banking sector

Wastage of paper Wastage of labour Drive through, doing transactions requiring a lot of movement Reccessionary times

Solutions Lean management-end to end solution to make the workflow smoothly,

eliminate waste and engage the workforce eg:mortgage loan request Use of electronic signature. No paperwork until the end . Better planning and layout Prepare a value stream map

On site Underwriter Customer Check

Sign of customer

Faxing back

Adapting lean for Customized bank processes

Many of an institution’s most valuable activities involve dozens or even hundreds of steps that may require sophisticated customization and expert judgment from numerous sources—and thus resist standardization.

This was the problem facing a specialized commercial lender that had expanded its sales force to fuel rising levels of business from several industries but couldn’t keep pace with demand for new loans.

Constraints- Number of new hiresSolution- Investigate ways of making its processes less

complex.https://www.mckinseyquarterly.com/Adapting_lean_for_customized_bank_processes_2181

Adapting lean for Customized Bank processes ( contd. )

CHALLENGES

The silo mentality of the bank’s functional advisory & underwriting experts

High degree of independenceResponsibility for loans changed hands as work moved

from one function to anotherLittle accountability to ensure that work was completed on

time

Adapting lean for Customized Bank processes ( contd. )

RESPONSEFirst, it established multifunctional loan teams for its major clients

and a leader was appointed. The leader reported to a new-deal committee comprising senior

executives from the various functions.The committee streamlined loan processes by assigning loans to

one of four standard tracks based on a combination of risk and regulatory factors

The bank then kept the momentum going through a combination of clear milestones and deadlines, as well as the use of tools such as real or electronic whiteboards to identify bottlenecks and areas for improvement at the team’s regular meetings

Adapting lean for Customized Bank processes ( contd. )

TRACK DECISION EXAMPLES PROCESS TIME

FAST PROCEED- No

issues identified

Loan to repeat

borrower

20 days, end to

end

FORWARD PROCEED- No

fatal flaws, but

must satisfy

certain

conditions.

Loan to repeat

borrower but

with questions

about deal

structure

35 days, end to

end

PENDING REVIEW-

Examine

potential flaws;

return to new

deal committee.

Significant credit

issues

Reputation Issues

e.g. potential

corruption

5 days, until

return to new

deal committee

DENIED CEASE-Fatal

flaws identified

Precedents

showing similar

deals were

rejected

N/A

Adapting lean for Customized Bank processes ( contd. )

BENEFITSTime required to complete a transaction dropped

by 70%Improved productivity by 30%Collaboration, accountability, and a sense of

common purpose among teamsIntegrated ApproachHappier employees & Satisfied customers

Lean Service Machine By Cynthia Karen Swank

Situation Rising customer expectations to reduce costs and improve

service quality Emergence of new complex product Specialised niche players Errors and increasing cost per application

Why Lean Management JPF operations involved processing of almost tangible

productThe insurance policies also followed a series of

processes like Automobile Building the model cell

No significant disruptions in existing operations A fully functional micrcosm in a part of the organisation to check for

errors for optimal designing

7 practices of lean Manufacturing Applied to Service Industry• Placing linked processes near one another

– Place application receivers next to sorters– Loan Processing : Initial Application Verification Risk

Assessment• Standardizing procedure

– Streamlined loan processes by assigning loans to one of four standard tracks based on a combination of risk and regulatory factors

• Eliminating loopbacks– Reduces delays and wastes

Continued……….• Setting a common tempo

– Pace of working to satisfy customer demand– Reduce non value adding tasks and people

• Balancing loads– Sequential allocation to avoid delay and smooth

flow of operations– 2 teams in Banks handling loan applications for

names A to J and from K to Z• Segregating complexities

– Different tellers handling cash and cheque’s and also differentiation based on amounts

• Posting performance results

Other aspectsSetting Performance Goals

– Customer focused metrics of processing time– Shop floor goals be linked to CEO’s

performanceRolling out a new system

– Documenting procedures at model cell– Transfer them to new work cells

Convincing the Skeptics– “Why” its necessary

REFERENCES https://www.mckinseyquarterly.com/Adapting_lean_for_customized

_bank_processes_2181 http://www.modernghana.com/blogs/232173/31/application-of-lean

-management-in-the-banking-indu.html http://ezinearticles.com/?Lean-Manufacturing-in-Banking&id=300

0875 Lean Service Machine by Cynthia Caren Swank

THANK YOU!!