Steve Downton, Downton Service Management Consultants Ltd, Noventum Group
This article considers the challenges to businesses managing their service operations in the complex environment that is customer service today. Highlighting the need for effective tools and applications to provide informed management decisions to deliver top class customer service.
The basic business requirements of an after-sales service operation are to raise efficiency and effectiveness, and deliver the cost-effective performance required to maintain satisfied customers. As the performance bar continues to be raised by ever more demanding customers, achieving this level of strategic performance and value creation requires companies to transform their “service-to-profit” supply chain into a comparatively complex “customer-centric service business” network. Taking advantage of the software applications available, and viewing the after sales operation as both revenue generator and competitive differentiator will also be significant contributing factors.
Figure 1 below illustrates the complexity of the network and the challenge that it represents: most service operations will probably be using a legacy tool or something even more basic, to cope with a significantly more complex environment than, for example manufacturing departments have to cope with.
Managing the service environment has required a focus on cost containment in an attempt to maintain high margins, and the tools described above were once considered sufficiently capable, however with the growing pressure on margins, these tools are failing to provide the necessary capability, and in most cases service levels are falling. Figure 2 below illustrates why companies struggle to manage their operation with disconnected, homegrown tools that limit the ability to make sound decisions and restrict the visibility required for future planning.
Today’s challenge is no longer simply cost containment as tightening margins, experienced across the industry, have created the need to significantly reduce costs and improve service performance.
A good example of how seriously some leading edge service operations are taking this challenge, is highlighted in recent research1 in the service industry on reverse logistics, showing that ten years ago the average return loop time was 13.5 weeks whereas today that figure is less than 8 days providing both drastically reduced costs and the ability to provide improved service performance.
Even a mere three years ago, it was considered sufficient for a service management operation to manage reactively to be considered capable: as long as the problem was solved, sometimes irrespective of cost – because the measure of performance was speed and accuracy of response, measured by first-time-fix, and fix-within-agreedtime, rather than on a cost-effective optimal solution. Service operations also struggle with having to operate using measurements that are inappropriate for a profit centre.
In a number of cases, measurements comprise what is easy to measure, not necessarily what should be measured. The danger of this type of invalid or inappropriate measure is that the processes in place are not effectively managed or monitored, providing inconsistent data leading to poor decision-making. Having systems in place to use information correctly, and applying them to control processes, provides results that are repeatable, consistent and dependable.
Response times, coupled to Service Level Agreements (SLAs) are usually in hours for mission-critical events. Although only a relatively small number of events will require this level of response, being able to recognise when they are required responding cost effectively to avoid penalty clauses is the only way to establish an overall service management capability. Enabling the balance of the operation to deal with non-critical visits handled next day while providing capacity for the critical visits defines the overall performance and success of the service operation.
More often than not, a service contract will include a service level agreement that will be based on availability of equipment over a year. As a result, the measures are based on overall reliability of the equipment, not just failure response. This is driving the need for very different behaviour: leading-edge service organisations have recognised that reducing both the number of calls and visits through better planning and forecasting of problems through improved visibility and control, will both reduce costs and improve performance. The concept of availability and uptime has moved the customer away from measuring visits and rapid response, towards measuring equipment utilisation and availability, and the overall value of the solution provided to the customer operation.
To achieve the levels of performance described above requires a significant rethink about how to provide support, including the need for total visibility and effective deployment of inventory, either close to the customer or on the customer’s premises, to satisfy required performance levels. The management control required can only be achieved through accurate and reliable feedback of data into a system which, in turn, is capable of effectively utilising such data to provide the information for effective decision making.
Managing the service operation through planned and proactive processes to provide accurate and reliable information will facilitate effective decision-making. Modern applications provide this ability in a number of ways to raise the performance and productivity of service organisations.
The business environment has changed beyond all recognition in the last 5 years and drives the reasons for significant shifts in mindset. The ever growing demands from customers for continuing improved performance has also changed market-place requirements. Products are changing during their lifetime, even within the first six months; the sales price can fall by as much as 45% and have at least 30% altered components within a period of 12 months. A service agreement set up with an agreed asset base of product could see a 50% churn in one year with the associated partrequirement changes and issues involved.
This environment produces erratic volumes of parts and a huge variety of parts associated with a broad range of products. To manage this complex environment effectively, requires application tools that can deal with the volume and sporadic demand in wide networks, and provide the necessary control and visibility, utilising information to provide fully informed management decisions.
To deal with this fluid network environment; to provide the capability of planning and forecasting; to minimise excess or obsolescence, all have become complex tasks that can no longer be done even on a sophisticated spread sheet, but have to be managed in real time across country and customer boundaries.
The key result of creating a world-class operation is the control of the operation it provides. The basic measures must be perfected, such as inventory levels and logistics costs at a minimum, as well as optimal service levels. Ultimately a World- Class service operation is not just about cost, but capability. A service operation cannot be considered as simply a tactical weapon, but must also be considered for its strategic potential. The key to profitability and a demonstrably winning strategy is to differentiate the business through its service performance, delivering consistent, highvalue- added service through world-class service management.
A World Class effective operation will be obvious by the aspects of its operation that sets it apart from the competition, that allows the operation to differentiate itself to achieve a cost-effective service parts logistics operation. These attributes include: a clear understanding of the impact of high service levels for the customer; the ability to be able to release capital from Inventory; a recognition of the need to change competitive position by regularly changing the rules of the game, i.e. change the basis upon which you compete; and finally the ability to take actions that positively impact share value.
A business considering the need for change generally focuses on developing and changing mindsets and culture, to encourage the staff to think and act differently. It is also important to recognise the effect measures have on behaviour and be prepared to adjust them.
Let us consider measurement of the quality of engineers. Most businesses have a number of productivity measures in place, however in any successful measurement strategy, the first consideration must be the overall objective of the business. To ensure that the measurement is balanced across the business, this objective has to be translated into operational and customer objectives, and from these, appropriate measures can be derived so that a measurement at the operational level feeds back within the overall objective as a basic financial measure of the business. In addition, the measure has to be considered from a number of aspects, designed to consider the customer, the processes and the skills of the staff, as well as the financial impact. In this way a single measure and its impact on the business, will be carefully balanced.
A business trying to manage its service operation in the complex environment that is customer service today, as well as aiming to develop their engineers and change mind sets, is going to continue to struggle until it has the right tools and applications at its disposal. Providing the appropriate applications will help remove constraints from processes and free people to make informed effective management decisions to deliver top class customer service in all its facets.
