Harvard Case - Anna Pessah: Lean Thinking at Summit Funding (A)
"Anna Pessah: Lean Thinking at Summit Funding (A)" Harvard business case study is written by Elliott N. Weiss, Rebecca Goldberg. It deals with the challenges in the field of Operations Management. The case study is 16 page(s) long and it was first published on : May 12, 2017
At Fern Fort University, we recommend Anna Pessah implement a comprehensive Lean transformation strategy at Summit Funding. This strategy will focus on eliminating waste, improving efficiency, and enhancing customer satisfaction. By embracing Lean principles, Summit Funding can streamline its operations, reduce costs, and gain a competitive advantage in the mortgage industry.
2. Background
Summit Funding, a mortgage lender, is facing challenges related to inefficiencies in its operations. Anna Pessah, a new employee, has been tasked with implementing Lean principles to improve the company's performance. The case study highlights several operational issues, including:
- High processing times: Loan applications take an average of 45 days to process, significantly longer than competitors.
- Excessive paperwork: The process involves numerous manual steps and paperwork, creating delays and errors.
- Lack of communication: Poor communication between departments leads to misunderstandings and delays.
- Limited visibility: The company lacks a clear understanding of its processes and bottlenecks.
The main protagonists of the case study are Anna Pessah, the new employee tasked with implementing Lean, and the existing management team, who may be resistant to change.
3. Analysis of the Case Study
To analyze the situation, we can utilize the Lean Five S's framework:
- Sort: Identify and eliminate unnecessary items and processes from the workflow.
- Set in order: Organize remaining items and processes for easy access and efficiency.
- Shine: Clean and maintain the work area to prevent errors and improve morale.
- Standardize: Develop standard operating procedures for all processes to ensure consistency and quality.
- Sustain: Continuously monitor and improve the system to maintain efficiency and effectiveness.
Key Operational Issues:
- High cycle time: The lengthy loan processing time is a major bottleneck, impacting customer satisfaction and competitive advantage.
- Wasteful processes: Excessive paperwork, manual steps, and redundant tasks create unnecessary waste and inefficiencies.
- Lack of process visibility: The absence of clear process mapping and performance metrics hinders identification and elimination of bottlenecks.
- Ineffective communication: Poor communication between departments leads to delays, errors, and rework.
Opportunities for Improvement:
- Process mapping and analysis: Identify and eliminate unnecessary steps, streamline workflows, and reduce cycle time.
- Technology implementation: Leverage technology, such as digital document management and automated workflows, to reduce manual processes and enhance efficiency.
- Employee training: Train employees on Lean principles, process improvement techniques, and the use of new technology.
- Communication and collaboration: Foster open communication and collaboration between departments to improve information flow and reduce errors.
- Data analysis and performance monitoring: Track key performance indicators (KPIs) to monitor progress, identify areas for improvement, and ensure continuous improvement.
4. Recommendations
Phase 1: Quick Wins (First 3 Months)
- Implement a Value Stream Mapping (VSM) exercise: Map the entire loan processing process to identify bottlenecks, waste, and areas for immediate improvement.
- Focus on process simplification: Eliminate unnecessary steps, paperwork, and redundant tasks.
- Pilot a digital document management system: Reduce paper-based processes and improve information sharing.
- Train employees on Lean principles and basic process improvement techniques.
- Establish a communication framework: Implement regular meetings, communication channels, and clear responsibilities to improve information flow.
Phase 2: Strategic Transformation (Months 4-12)
- Develop a comprehensive Lean transformation strategy: Define clear goals, objectives, and a roadmap for implementation.
- Invest in technology: Implement a robust Enterprise Resource Planning (ERP) system to streamline operations, track data, and improve decision-making.
- Develop standard operating procedures (SOPs): Document all processes to ensure consistency, quality, and training effectiveness.
- Implement a Kaizen program: Encourage continuous improvement through employee-led initiatives and problem-solving workshops.
- Establish a Lean culture: Promote a culture of continuous improvement, teamwork, and customer focus.
Phase 3: Sustained Improvement (Ongoing)
- Monitor and track key performance indicators (KPIs): Measure progress, identify areas for improvement, and ensure sustained efficiency.
- Conduct regular process reviews and audits: Identify and address any emerging bottlenecks or inefficiencies.
- Invest in employee training and development: Ensure employees have the skills and knowledge to support continuous improvement.
- Foster a culture of innovation and experimentation: Encourage employees to identify and implement new ideas for process improvement.
- Continuously adapt and refine the Lean transformation strategy: Adjust the strategy based on feedback, changing market conditions, and emerging technologies.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: The Lean transformation aligns with Summit Funding's core mission of providing efficient and high-quality mortgage services.
- External customers and internal clients: The recommendations aim to improve customer satisfaction by reducing processing times and enhancing communication. They also benefit internal clients by streamlining workflows and reducing workload.
- Competitors: By implementing Lean, Summit Funding can achieve operational efficiencies and cost reductions, allowing them to compete effectively in the mortgage industry.
- Attractiveness ' quantitative measures: The implementation of Lean principles is expected to result in significant cost savings, increased efficiency, and improved customer satisfaction. These benefits can be quantified through metrics such as cycle time reduction, cost per loan, and customer satisfaction scores.
6. Conclusion
By embracing Lean principles, Summit Funding can significantly improve its operational efficiency, reduce costs, and enhance customer satisfaction. The recommended approach, focusing on quick wins, strategic transformation, and sustained improvement, will enable the company to achieve a sustainable competitive advantage in the mortgage industry.
7. Discussion
Other Alternatives:
- Status quo: Continuing with current practices would lead to continued inefficiencies, lower customer satisfaction, and potential loss of market share.
- Partial implementation: Implementing only a few Lean principles may not yield significant results and could lead to resistance from employees who see it as a half-hearted effort.
- Outsourcing: Outsourcing certain processes, like loan processing, could offer efficiency gains but may compromise control and data security.
Risks and Key Assumptions:
- Resistance to change: Employees may resist changes to established processes and procedures.
- Technology implementation challenges: Implementing new technology can be complex and require significant investment.
- Data accuracy and availability: Accurate data is crucial for effective process analysis and improvement.
- Sustained commitment: The success of the Lean transformation depends on sustained commitment from management and employees.
8. Next Steps
Timeline:
- Month 1-3: Implement Phase 1 recommendations.
- Month 4-6: Develop and implement Phase 2 recommendations.
- Month 7-12: Continue Phase 2 implementation and begin monitoring KPIs.
- Month 13 onwards: Maintain continuous improvement through Phase 3 initiatives.
Key Milestones:
- Complete VSM analysis and identify initial improvement opportunities.
- Pilot digital document management system and evaluate results.
- Develop and implement a comprehensive Lean transformation strategy.
- Establish a Kaizen program and encourage employee participation.
- Implement an ERP system and integrate it with existing systems.
- Track KPIs and monitor progress towards goals.
By following these recommendations and implementing the Lean transformation strategy, Summit Funding can achieve significant improvements in its operations, enhance customer satisfaction, and gain a competitive edge in the mortgage industry.
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Case Description
This case was a runner-up in the Decision Sciences Institute (DSI) 2017 case competition. Anna Pessah, process engineer at Summit Funding (Summit), a mortgage-loan-processing company, is reflecting back on her year at the company. Pessah had been hired to improve operations at the firm-to make the core operations cheaper, faster, and of a higher quality. She had addressed two key operations: loan closings and verifications of employment (VOE). Her next tasks involved improvements at the 28 branches and reaction to a corporate-wide improvement program entitled "Project Ninja." Pessah had implemented a system called "pods," similar to manufacturing cells, in order to address loan closings. Data is given for the student to analyze the implications of this approach and suggest alternatives. Data is also given for analyzing the VOE process and deriving an approach to the branch productivity problem. Finally, the Project Ninja memo is given, and students are asked to evaluate this initiative.
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