Updated: March 25, 2010 15:57 IST

Seven deadly wastes in financial services

D. Murali 
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Changing with Lean Six Sigma by A Aruleswaran.
The Hindu
Changing with Lean Six Sigma by A Aruleswaran.

What should you do when you have TIMWOOD around? But first, what ‘wood’ is that? It is the acronym for the ‘seven deadly wastes,’ viz. transportation, inventory, motion, waiting, over-processing, over-production, and defects, explains A. Aruleswaran in ‘Changing with Lean Six Sigma’ (

Alarmingly, these wastes can be evident not only in manufacturing but in financial services, too. The author, for instance, paints the scenario of a customer walking into a bank and making a complaint to the front desk officer.

In an effort to resolve this fresh complaint and then attend to a queue of outstanding complaints (inventory), the officer leaves midway the task of logging the new complaint into an information system; and, due to the nature of the complaint, the officer escalates the same to the supervising officers located in a different level of the building (transportation).

“Subsequently, when the customer makes a status check at a different time, the new front desk officer attending the customer would end up spending unwarranted time searching and sorting (motion) through for information regarding the complaint.”

Waiting in vain

A typical example of ‘waiting’ in a financial institution is the time taken to return an approved document or requisition, notes Arul. Multiple approvals are common in financial processes, be they about purchase requisitions or loan disbursements. He instructs that techniques such as handover analysis, functional deployment maps and value stream maps are potent in identifying the wastes due to motion and waiting, which are the main causes of delays.

Over-processing, the book defines, as adding more work to a product or a service than necessary and trying to exceed the customer’s requirement. “This translates to adding more perceived ‘value’ to a product or the service. ‘Value’ that a customer is not willing to pay for.”

Arul cites, as example of over-processing, the service charges levied in financial services, for sending routinely a hard copy financial statement, even when customers may be utilising the Internet banking facility, reviewing the financial transactions on the Net, and therefore considering the service charge non-value add.

Over-production is the creating of outputs that are not delivered to customers. Over-production hides the effectiveness of true productivity, the author rues. “It creates the ‘just-in-case’ behaviour which causes costs to be incurred unnecessarily.”

Loan defaulters, the defects

Defect, the seventh waste, is when there is non-conformity with customer’s demand. To Arul, loan defaulters are examples of defects in financial institutions. Institutions that issue loans without adhering to a standardised applicant assessment process such as credit checks are often exposed to the risk of having to manage defaulters, he reasons.

“The balance between resources to manage defaulters and the risk of defaulters is not thoroughly established. This is the failure to understand the voice of business and the cost of poor quality.”

The voice of the business, sadly, is heard only when a defect occurs, in the form of increased cost of recovery. The resulting effect, Arul cautions, can be the institution engaging reactively to improve the debt recovery process, rather than focusing on the process value stream to identify where the defect originally occurred, i.e. the approval process.

So, what should you do when you have TIMWOOD around? Eliminate TIMWOOD – the only one you need to fire – urges the author. For, this not only improves operational performance, but also drives the cost of time, resources, and productivity down – an important value that can be passed over to the customers, he argues.

Imperative read.


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