Earlier this week I was "enjoying" paying some bills for a side business of mine. For some reason it is much more of a chore than paying the home bills, where Quicken and Bill Pay make it an easy (too easy?) experience. But that’s beside the point.
For the last few months I’ve noticed that when I put the return part of a certain credit card statement into the envelope provided by the card company the address sits too high to be seen through the window. This has concerned me as I obviously don’t want want the payment returned for this problem; I’m guessing card companies aren’t exactly compassionate. After the fifth or sixth month of dutifully folding over an eighth of an inch at the bottom of the statement so the address shows correctly, I decided to call customer service.
The customer service person, probably (but I can’t say for sure and didn’t feel it was appropriate to ask) at a call center on the other side of the world, was very helpful and knowledgeable (on second thought that probably confirms she was a long ways away…). She immediately knew what I was talking about, and said that it has been a problem for about six months. The margin at the bottom of the statement is about an eighth to a quarter inch too wide, thereby pushing the address upwards. Unfortunately she didn’t know if and when it was going to be resolved, but after some friendly prodding she gave me a number at their corporate customer service center in the United States.
So I called, and believe it or not I got yet another friendly person who even passed me on to her friendly supervisor when she couldn’t answer my question. Amazing. This was my first experience with customer service at this card company, and it is enough to keep me loyal for a while. Quite unlike the nightmare I went through two years ago while refinancing my mortgage using the heavily promoted "quick refi" program at my lender… which took six months and over 50 calls.
Ok, how in the world does this tale relate to Lean? According the customer service manager, who appeared knowledgeable, they have known about this problem for six months. An unknown glitch in the printing program basically added a blank line of text at the bottom of the statement, thereby creating a wider margin. However the engineers at the bill printing operation didn’t think it was that big of a deal, so nothing was done about it for almost five months. The person I talked to had heard (hearsay again, but it makes a good story if true) that it took about ten minutes of programming time to fix once they got around to it.
But payments are processed in a separate location… outsourced of course. That facility had two problems: hundreds of thousands of payments were arriving with the bottom eighth of the bill folded like did, and the extra space also pushed the account number upwards… and out of view of the automatic readers. So after a couple months of frustration, what did they do? They bought some monster pieces of equipment to straighten and flatten bills at high speed, then set up a separate bank of automatic readers with the camera offset from normal.
This outsourced operation processes bills for many companies, so in effect they had to create, procure equipment, and set up a separate processing line. So much for flexibility. And I’m betting the company did a great job of adding up the extra cost and passing it on to the credit card company… who then feels the need to raise my assorted fees or find something more to outsource overseas.
Outsourcing may cut some direct costs, but there is also great danger. Communication becomes more difficult and more formal. In this case I’m guessing the formal inter-company channels kept an engineer at the bill processing facility from calling someone at the printing facility to say "hey dude whassup with that extra margin?" (assuming it’s a California engineer…!). Outsourcing can create costs that are not accounted for properly… such as inventory. You’ve seen Bill’s posts on inventory accounting lately… now think about inventory as waste when you have shiploads of product in transit on the high seas. How does that inventory cost (not inventory asset!) slow down your operation, tie up cash that could be better used elsewhere, and reduce the visibility and increase the lag time of problem identification?
Being Lean vs looking Lean requires a global application of waste reduction and a culture of continuous improvement across the entire supply chain… unlike the sporadic (but sometimes impressive) Lean attempts that doomed Delphi. Don’t spend millions to flatten paper when ten minutes of engineer time can solve the root cause.