Across Europe, utilities are struggling with increasing customer and regulatory pressure to improve their quality of customer service.  Conventional solutions such as major capital investments to improve the robustness of grid infrastructure or significant increases in service workforce,  are usually extremely costly and very time-consuming.  In the search for a quicker, cheaper, solution, several major utilities have turned to an approach made famous by Toyota and other leading Japanese manufacturers.

Companies in a wide variety of industries have implemented the so-called “lean” approaches to improve quality while cutting costs. Utilities have also begun to implement lean approaches to their distribution network operations, and their efforts have yielded significant savings and quality improvements. Error rates in utility processes can be cut by 80%, and some activity costs can be cut by as much as 50%, while actually increasing customer satisfaction.

But most utilities are a long way from achieving excellence in service quality and cost. Connecting new customers takes some distributors a month when it should take no more than a week. Outages are still too frequent and, when they occur, last too long leading to fines and increases customer claims, especially from businesses that have lost opportunities.

On the cost front, utilities lose out because of low utilisation of their workforces. A significant amount of the time wasted relates to lack of preparation and poor time management. For example, dispatchers frequently assign employees to jobs situated at great distance from one another, requiring field workers to spend an inordinate amount of time traveling. Or employees fail to bring the necessary equipment or parts to a job and have to make a return trip to finish their work.

Finally, lack of standardisation is a significant problem. Few distribution companies make it a priority to identify the lowest-cost, most efficient ways of doing business, nor do they require employees to use best practices.

So what is lean?  Toyota developed the “lean production system” in the 1960s to eliminate waste from the manufacturing process by empowering front line staff to resolve problems with a set of simple yet powerful tools and techniques. As a result, Toyota propelled itself from dire financial straits to become one of the most profitable and respected car makers in the world. The lean approach has since been adapted for use in a wide variety of industries, including financial services, aerospace, and pulp and paper. Although companies in the electric power and natural gas industries have only just begun to implement lean transformations of their businesses, the few that have done so have captured significant value as a result.

Fault identification and repair in a distribution infrastructure is very different from an automotive production line: the workload is extremely unpredictable in both frequency and complexity, but the overall objective is identical. As lean car makers seek to take a vehicle from one end of the production line to the other in the minimum possible time, so utilities aim to restore service to customers in the shortest possible time after the identification of a fault.

In our experience, the single most important factor in the success of a lean transformation is the change of employee mindsets and behaviors. Lean leverages the full potential of each individual in the organisation, from top management to frontline employees.

Whereas traditional benchmarking efforts aim to raise performance to an above-average level, the lean approach aims for perfection in quality, efficiency, and customer satisfaction. It emphasises not only process optimisation but also aligned performance management systems, effective capability building, clear communication, and coaching and development programs.

Utilities that have implemented lean reported a 20% reduction in the cost of new connections, up to a 50% reduction in labour costs on back office processes, up to a 30% reduction in interruption time, and more than a 50% reduction in process errors and time to activate a new contract.
To implement lean, companies must focus on three key areas: operating systems, management infrastructure, and mindsets and behaviors.

* Operating systems
First, utilities must know where to apply lean. This means understanding the critical factors that drive customers’ perceptions of service quality and costs. In most distribution situations, user perception of quality is closely correlated with the frequency and duration of service outages. Regulatory quality targets are usually designed to reflect this fact. For utilities seeking a rapid improvement in the targets, a reduction in the number of outages may be difficult or impossible to control. Reducing the time to identify, diagnose and repair a fault, on the other hand, is quite possible using lean techniques.

Many operating system issues are caused by the fact that different parts of the organisation do not communicate well with one another or do not have a stake in improving performance. Each group focuses on its own part of the process, but few make the effort to support other groups. In addition, groups often fail to develop standards or to require members to adhere to standard ways of addressing problems.
The first step in restoring power after an interruption, for example, is detecting when an outage has occurred. Utilities must ensure that all their remote control detectors are working properly and that they have placed enough devices in the field to detect an outage anywhere in their network as soon as it occurs. At one major European electricity distributor, service teams could be dispatched by any of a number of parts of the organisation, depending on whether a fault was identified internally or reported by a customer. This sometimes resulted in multiple teams being called out to a single fault. By centralising dispatch and introducing a triage process, such repeated calls were eliminated.

Of course, the dispatching center must be equipped and staffed to handle high request volumes in cases when multiple outages occur simultaneously. It must also be able to track field workers accurately so they can assign jobs to teams that are best qualified for and closest to the work at any given time. To increase the availability of resources, one operator looked at historical fault frequency data and adjusted shift patterns to match typical demand profiles. A system of overlapping shift patterns meant that availability of two crews was maximised during the daytime hours when outages were most frequent. It also developed a training program to ensure that its workforce was as flexible as possible, capable of responding to the highest number of incidents. By using weather forecast information, additional crews could be made availability at times when there was a high likelihood for weather-related outages.

Information flow is as important as the flow of materials and people in a lean environment. The service and maintenance environment is no exception. A simple communication system using SMS text messaging to allow crews to indicate their current status and position has provided a dramatic improvement in visibility and efficiency.

Another critical process is meeting customer requests (e.g., activating new connections, deactivating meters). Companies must ensure that representatives who take requests from customers gather all the relevant information field crews will need to complete the job the first time they visit the work site. Field crews must also have clear information about how to get to the work site. They must understand what tools and parts they should bring to complete their work. Moreover, they must be held accountable for showing up on time for appointments. Companies can also increase the likelihood that customers will show up for appointments by having a representative call to confirm the date and time a day or so before the crew is scheduled to arrive.

While lean processes are driven by the optimum utilisation of resources. This does not necessarily mean the deployment of a minimum number of personnel at any one time. In fact, for medium voltage outages, where the number of affected customers was high. one power distribution company adopted a system of dispatching two crews simultaneously. By working together to localise the source of the fault the two crew approach was able to reduce the duration of the outage by 31% compared to a single crew.

* Management infrastructure
To ensure that they are making progress, companies must develop performance management systems that measure productivity and response times. It is critical to develop indicators to monitor both individuals and teams. The results can be impressive. After only six months, for example, one European utility that implemented a performance management system for its field force organisation realised a productivity increase of 20%.
In the case of the power restoration process, response time – calculated across every phase of the process, and for each function involved – is an excellent KPI. Field workers can be measured according to the number of jobs they perform each day. Back-office employees can be measured according to the number of orders they process and the number of errors they make.

Utilities must make a person or group responsible for every activity along the value chain, and they must hold individuals and teams accountable for reaching targets. They should also develop structured performance-review processes that will enable them to evaluate performance systematically. At one electricity distributor, for example, while repair crews did complete report forms on every incident they attended, these forms did not always obtain critical data. By redesigning the incident report forms to include simple check boxes for essential data, reporting accuracy was improved while the time taken to document each repair was actually reduced.

The success of such processes involves not only developing performance reports but also setting up daily, weekly, and monthly meetings where managers and employees can discuss performance and identify improvement opportunities. Many companies would benefit if they included external contractors in the performance-review cycle to ensure that they, too, provide input and adhere to best practices.

* Mindsets and behaviours
To succeed in changing mindsets and establishing new behaviors, a company must involve all players in their organisation. The best way to do this is to encourage all to participate in the process of identifying challenges and developing solutions.

Lean emphasises four levers for driving individuals to contribute to improving performance: role modeling, capability building, communication, and formal mechanisms.

Role modeling is particularly important. Frontline employees are more likely to change how they work if they see their leaders modeling change. District managers should spend time talking to and coaching crew operators in the field and soliciting their input on key issues. They should work with crews to develop improvements on the job, and they should involve crews in meetings where their input could drive improvements.

To build capabilities, companies should identify and develop “change agents” throughout the organisation. Change agents should be high potential individuals who are willing to teach and persuade the rest of organisation (particularly at the field level) to adopt the lean approach in their daily work life. Their training in lean should be rigorous. A possible approach would involve a one-week introductory training course, followed by on-the-job coaching from experienced change leaders. Throughout the remainder of the year, trainees should be required to attend 20 to 30 half-day workshops on specific themes.

Managers must communicate goals clearly to everyone in the organisation and ensure that employees are able to share information across hierarchies and geographies. Field technicians, for example, might hold meetings in which they review the previous week’s work and identify the issues that arose during that time. Those issues should be catalogued, and technicians and managers should come together to analyse them at a monthly meeting. It is critical that people at all levels talk to one another regularly.

Companies should also develop formal mechanisms to ensure that they continue to improve. They should establish regular reviews to assess each employee’s performance. They should also create incentives that are tied to performance measures and that reward individuals and teams for success. Everyone in the organisation should be held accountable for one or more performance measure. By implementing these measures, companies can bring individuals and teams into alignment and can establish a single mindset of continuous improvement across the entire organisation.

It is our opinion that lean transformation is the best way for power and gas distributors and retailers to reduce costs and improve quality in today’s increasingly challenging environment. Companies should concentrate on small areas where it is possible to demonstrate success quickly, rather than trying to roll out the program to their entire organisation at once. The benefits of this approach will multiply as the company achieves end-to-end transformation – and they will continue to accrue as the programme becomes part of the fabric of the organisation.