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Demand management is a critical aspect of
service management. Poorly managed demand is a source of risk for
service providers because of uncertainty in demand. Excess
capacity generates
cost without creating value that provides a basis for cost recovery.
Customers are reluctant to pay for idle capacity unless it has value for them.
There are instances in which a certain amount of unused capacity is necessary to deliver service levels. Such capacity is creating value through the higher level of assurance made possible with higher capacity. Such capacity cannot be considered idle capacity because it is in active use for a purpose.
Insufficient capacity has impact on the quality of services delivered and limits the growth of the service. Service level agreements, forecasting, planning, and tight coordination with the customer can reduce the uncertainty in demand but cannot entirely eliminate it.
Service management faces the additional problem of synchronous production and consumption. Service production cannot occur without the concurrent presence of demand that consumes the output. It is a pull-system in which consumption cycles stimulate production cycles.
Demand management techniques such as off-peak pricing, volume discounts and differentiated service levels can influence the arrival of demand in specific patterns. However, demand still pulls capacity. Demand cannot exist simply because capacity exists.
Consumption produces demand and production consumes demand in a highly synchronized pattern (Figure 5.22). Unlike goods, services cannot be manufactured in advance and stocked in a finished goods inventory in anticipation of demand. Demand and capacity are far more tightly coupled in service systems even when compared with just-in-time (JIT) manufacturing.
Figure 5.22Tight coupling between demand and capacity
The productive capacity of resources available to a service is adjusted according to demand forecasts and patterns. Some types of capacity can be quickly increased as required and released when not in use. The arrival of demand can be influenced using pricing incentives. However, it is not possible to produce and stock service output before demand actually materializes.
5.5.2 Activity-based Demand Management
Business processes are the primary source of demand for services. Patterns of business activity (PBA) influence the demand patterns seen by the service providers (Figure 5.23). It is very important to study the customer’s business to identify, analyse and codify such patterns to provide sufficient basis for Capacity Management. Visualize the customer’s business activity and plans in terms of the demand for supporting services.
Figure 5.23 Business activity influences patterns of demand for services
For example, the fulfilment of a purchase order (business activity) may result in a set of requests (demand) generated by the order-to-cash process (business process of customer). Analysing and tracking the activity patterns of the business process makes it possible to predict demand for services in the catalogue that support the process. It is also possible to predict demand for underlying service assets that support those services. Every additional unit of demand generated by business activity is allocated to a unit of service capacity. Demand patterns occur at multiple levels. Activity-based Demand Management can daisy-chain demand patterns to ensure that the business plans of customers are synchronized with the service management plans of the service provider (Figure 5.24).
Figure 5.24 Example of activity-based Demand Management
If a business plan calls for the allocation of human resources, the addition of an employee can be translated into additional demand for the Service Deskfunction in terms of service requests and service incidents. Similarly, new instances of business processes can be used as predictors of demand for the Service Demand in terms of incidents and requests. After validating the activity/demand model it is possible to make adjustments to account for variations such as new employees, changes to business processes, and technology upgrades on the customer’s side.
Some of the benefits for analysing PBA are in the form of inputs to service management functions and processes such as the following:
Service Design can then optimize designs to suit demand patterns
Service catalogue can map demand patterns to appropriate services
Service portfolio management can approve investments in additional capacity, new services, or changes to services
Service Operation can adjust allocation of resources and scheduling
Service Operation can identify opportunities to consolidate demand by grouping closely matching demand patterns
Financial Management can approve suitable incentives to influence demand
5.5.3 Business activity patterns and user profiles
Business activities drive demand for services. Customer assets such as People, Processes, and Applications generate patterns of business activity (PBA). PBA define dynamics of a business and include interactions with customers, suppliers, partners and other stakeholders. Services often directly support PBA. Since PBA generate revenue, income and costs they account for a large proportion of business outcomes.
Patterns of business activity (PBA) are identified, codified, and shared across process for clarity and completeness of detail. One or more attributes such as frequency, volume, location and duration describe business activity. They are associated with requirements such as security, privacy and latency or tolerance for delays (Table 5.8). This profile of business activity can change over time with changes and improvements in business processes, people, organization, applications and infrastructure. PBA are placed under changecontrol.
PBA No. 45F
Activities
Activity Levels
Hi
3
2
1
Lo
NA
Interact with customers remotely (frequency)
x
Interact with customers on-site (frequency)
x
Archive or handle customer information
x
Process sensitive information (privacy)
x
Generate confidential information
x
Provide technical support (frequency)
x
Seek technical assistance
x
Network bandwidth requirements
x