During the week of July 25, 2011, six members of the VTLeanTeam teamed-up with LPL Financial (LPL) to conduct a Kaizen event in their retirement investment management department. LPL, the largest independent broker/dealer and the leading national distributor of financial products with net revenue of $3.1 billion (2010) is a publicly traded company (LPLA), headquartered in Boston with locations in San Diego and Charlotte and is in a phase of rapid expansion. LPL focuses on serving over 12,600 independent financial advisors, and approximately 750 financial institutions by providing an integrated platform of proprietary technology, brokerage and investment advisory services. An area of high growth for LPL is the area of retirement investment management, where the Kaizen event in which the VTLeanTeam participated was focused. Picture 1 shows the VTLeanTeam members working on LPL’s value stream map (VSM) of the retirement money management department in the evening in their hotel room.
Urs Buehlmann
Picture 1: VTLeanTeam members working on their swim lane VSM (from left to right: Adrienn Andersch, Shawn Crawford, Michael Sperber, Angela Zhou, Ana Serrano). Team member Mathias Schmitt, who stayed behind in Blacksburg, joined the evening session by VOIP.
The Kaizen event focused on reviewing LPL retirement funds transaction processes. In particular, the process of keeping records of all transactions demanded by the customer or the customer’s financial advisor while, at the same time, ensuring legal compliance with all applicable Federal, State, and local laws and ordinances – a gigantic task for a company doing business in all 50 States and managing assets of $315.6 billion.
On Monday, July 25, 2011, the VTLeanTeam joined 15 LPL team members to participate in some basic lean training. Then, the team established, based on their memories, a first current state value stream map (VSM) of the retirement account transaction recording process. By Tuesday, the team members could be seen all over LPL’s Charlotte building observing, measuring, and verifying processes and data. By Wednesday, team members realized that the value stream they created, based on their memories, was not an accurate reflection of reality and many processes and data points had to be changed to create a realistic current state VSM. To create a record of a typical retirement account transaction, the transaction is processed for 150 seconds, yet spends 18 hours (more than 2 days) in queues awaiting the different processing steps necessary. A large part of the delay stems from problems in the processes, such as, for example, missing information, illegible forms, inefficient data entry interfaces, doubling of processes, waiting for approvals, or lost data. Thus, the team identified some of the existing problems using the current state VSM. A detail of the problems identified in one process is shown in Picture 2.
After having created an accurate representation of the current state of LPL’s retirement transaction processes value stream, and a listing of existing problems, the Kaizen team spent Thursday and Friday creating a future state VSM and to identify the action items necessary to execute the transformation from current to future state. By simplifying processes, eliminating unnecessary work and approvals, leveraging the power of IT, and applying lean principles to every aspect of the process, the resulting future state VSM resulted in a processing time of 29 seconds (a 87% improvement compared to the current state) and a lead time of 2.5 hours (improvement of 86%), while work in process inventory (WIP) was reduced by 90%. Picture 3 show Kaizen team members discussing their work in front of the future state VSM.
Urs Buehlmann
Picture 3: Kaizen team members discussing solutions in front of the future state VSM. (from left to right: Ana Serrano, Tim Graham, Shawn Crawford, Angela Zhou, Michael Sperber).
The unique opportunity for Lean@VirginiaTech to collaborate with a financial services company in a Lean transformation event was made possible by Cindy Swank, Executive Vice President of Service Value Commitment at LPL Financial. Cindy is an acknowledged Lean expert, having published in Harvard Business Review and other quality outlets, and is a frequent presenter about Lean (among other venues, Cindy was the guest speaker at the highly acclaimed Lean@VirginiaTech Lean Administration workshop in Spring 2011). Cindy and her three Lean transformation specialist team members at LPL Financial, Vinny Yakoobian, Eugene Shapiro and Eris Allen, proved to be a deep pool of knowledge and experience to all team members of the VTLeanTeam. Together with all the other team members from LPL Financial (pictured in Picture 4), a truly unique and highly efficient Kaizen event did happen over this week. John Childress, Assistant VP Customer Services, stated his impressions by saying “Thank you and your team for the education! I admit that I had initial doubts about the effectiveness of applying Lean concepts to the service environment. The experience was definitely eye opening and helped eliminate these concerns,” while Garrett Beam, VP of Strategic Planning, added that “Using … University labor for Kaizen events should be part of LPL’s best Lean practices.” In any case, the VTLeanTeam had a tremendous week in Charlotte with first-class, hands-on education, and an opportunity to learn from experts. To the VTLeanTeam, an interesting challenge was to work with digital processes in an electronic financial services environment where no physical objects are visible. A highly positive experience that will, hopefully, be repeated.
