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What financial services can learn from manufacturing: part 2

06 October 2010  |  2774 views  |  0

In my last blog I looked at different revolutions that have impacted the manufacturing industry in the past, and what the payments industry can learn from them, specifically the use of interchangeable parts and mass production. In this piece I want to look at two more manufacturing trends, starting with Just-In-Time (JIT) manufacturing. 

The basic principle of JIT is to get what is needed, when it is needed. This resulted in less defects and no excess inventory.  Since software is less tangible than most manufacturing processes it hasn’t been viewed as something that can benefit from JIT, however, if we can relate the end business service to the elements that deliver that service, there is ample opportunity to improve payment solutions. For example, by defining the business services and mapping all of the hardware and software components it requires, we can prioritize issues better, purchase capacity as needed (on demand), and track quality from the end users point of view.

The evolution beyond JIT is Lean Manufacturing, in which the basic principle is to lower cost and improve quality through continual process improvement and collaboration. Taiichi Ohno, who developed the concept, created Kanban cards which describe the components in a particular assembly task and tell the assembler what to do next. Similarly, electronic payment services must be composed of sub-services that need to be developed, catalogued, and tagged with service level and processing instructions. Service Oriented Architecture (SOA) which utilizes Web Services Description Language (WSDL) to describe the services and Universal Data Dictionary and Integration (UDDI) to catalog and organize the services is the Kanban of IT. 

Today, neither our IT teams nor business groups collaborate tightly enough. In the spirit of Lean Manufacturing everyone was encouraged to wear the same uniform. Today IT and business executives don’t wear the same uniforms either literally and metaphorically. But I truly believe that if we can get the business and IT to collaborate, together they would be able to define a set of business services comprised of lower level IT services that seamlessly integrate – delivering true efficiency and agility in their payment systems.

In my next blog I will pick up this topic once more, to see what we in the payments industry can learn from Supply Chain Theory and the factory model.

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