Performance Improvement | Lean Sigma Design in Lockbox Operations

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Enterprise Risk Management: Proof or Promise?

There is overwhelming consensus among financial services executives that the current risk environment has become significantly more complex, dynamic, and difficult to navigate. Some new mandates are expensive and cut into margins and profitability, so there is a real motivation to not only comply but to more effectively manage the response and cost.

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AMN Healthcare: Providers Re-engineering Healthcare for Greater Efficiency

With healthcare reimbursement becoming tighter and patients expecting more from their providers, hospitals and other health systems are seeking ways to change processes and become more efficient.

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Meeting Tax Return Processing Requirements with a Lean Lockbox Process

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Client: A top three U.S. bank holding company with over 80 operations centers in North America
Industry: Financial Services
Service: 3P (Product, Process, Preparation), Design for LeanSigma

Challenge:

Meet higher quality requirements
Reduce operating costs by 20% in order to maintain profitability

Solutions:

Gain a better understanding of the customers’ requirements and key performance metrics
Design a new workflow based on what is important to the customer
Create key performance indicators (metrics) and monitoring systems to ensure customer requirements are met

Results:

Improved processes saved $500,000 in variable labor costs
Productivity improvements from 20% to 40%
Employee surveys showed an improvement in employee morale
Visual tools eliminated processing errors

The lockbox operation is one of over 80 North American operations centers for a top three U.S. bank holding company. The site processes over 1.6 million tax returns annually, with 80% of its volume falling during a peak three-month period. The number of employees at the location fluctuates from 15 to over 300 people. Mailed to a lockbox, the income tax returns are opened, the forms are checked to make sure everything is in order, the data is entered into a database, checks are forwarded for processing, and the returns are put back together in a specific configuration before being sent to the State Treasury.

The site had been operating effectively, but quality and production disputes had strained its relationship with the State, which contributed to doubts over whether it would retain its contract. The State, which monitored quality by sampling the forms it received and checking 16 key data fields, had also increased its quality requirements by 10%.

Applying Guidon’s 3P (Product, Process, and Preparation) methodology to address these challenges, the first task of a 15-member, cross-functional team was to understand the customer’s key requirements and metrics, which in this case were quality and productivity. Guidon then led the team through a number of working sessions that looked at the current process and documented key metrics. The team then designed a new workflow based on what was most important to the customer. Some of the tools used during this stage included value-stream mapping, process mapping, data collection and statistical analysis, time studies, load and capacity analysis, work routing and error-proofing techniques. Spaghetti maps had shown the long distances that returns had to travel in order to be processed. It helped team members to become aware of the amount of waste in the current setup.

As part of the 3P process Guidon then led the team through a number of simulations. One simulation tested large batch versus small batch processing. It documented the quality advantage from catching errors immediately in a small batch rather than repeating an error multiple times in a large batch before it was caught. After the conceptual process redesign, the team simulated the new process with real work to test, refine and enhance the design. This was followed by a detailed implementation plan, which started with a pilot to gather more data to determine if the productivity and quality requirements would be met.

The pilot ran live tax forms for almost four weeks in order to prove the efficacy of the new modular process, which segregated work by complexity and could easily be scaled up to meet peak volume requirements. After a tollgate review with managers and the team, they created detailed deployment plans and implemented the new process across the site in two weeks.

The new process achieved productivity improvements from 20% to 40%, reducing the number of full-time employees required by over 20% and saving almost $500,000 per year. By incorporating quality at the source and visual tools for indicating what type of work went where, the new design was able to eliminate a large number of processing errors and easily meet the higher quality requirements.