From Industrial Engineering to Services Engineering

From Industrial From Industrial Engineering to Services Engineering to Services

EngineeringEngineering


EngineeringEngineeringProductivity and Growth in the 21Productivity and Growth in the 21stst Century Century

Brett Champlin, President ABPMPBrett Champlin, President ABPMP

© Brett Champlin, 2006 BPM Conference, Washington DC, September 2006 2

CHANGECHANGEPercent US Labor Force

2

3

20

45

75

10

22

60

45

20

88

75

20

10

5

0 20 40 60 80 100

2010

2000

1950

1900

1800

Agriculture Manufacturing Services


US & WORLD GDPUS & WORLD GDPUS GDP % by Sector

0.9 19.7

79.4

AgricultureManufacturingServices

World GDP % by Sector

56.6 25.6

16.6 AgricultureMaufacturingServices


INDUSTRIAL ERAINDUSTRIAL ERA• ~250 Years

– Smith - Taylor – Shewhart – Deming – Juran

• Growth Factors– Paradigm changes

• Productivity, Cost, Quality

– General Purpose Technology– Education

• IE, OR, MS


INDUSTRIAL ENGINEERINGINDUSTRIAL ENGINEERING

• Plant Floor

• Machinery

• Materials Handling

• Inventory

• Supply Chain


ASSESSMENTASSESSMENT

• Opportunity for growth shrinking

• Value of improvement shrinking

• Trying to solve new problems with old tools


OpportunityOpportunity• Cost of Services inflated by

30-80% waste!• 50% of service cost is work that

adds no value!• 90% of process time is work waiting

to be performed!• 5X theoretical limit• 40-80% productivity opportunity


WHAT IS A SERVICE PROCESS?WHAT IS A SERVICE PROCESS?

• “Activities that usually have intangible outputs”• “A service process is a series of states involving

the decision making process and experiences of the customers”

• “A service is a provider/client interaction that creates and captures value. “

• “All economic activity whose output is not physical product or construction”

• A time-perishable, intangible experience performed for a customer acting in the role of co-producer


Process Classification FrameworkProcess Classification Framework

APQC.ORG


SERVICE TYPESSERVICE TYPES• Professional Services

• Service Shops

• Mass Services

Low High

Low High

Low High

People vs. Equipment FocusFront vs. Back OfficeAmount of Customer ContactDiscretion of Front Office PersonnelLevel of customization

Process vs. Product Focus


PROCESS ANALYSISPROCESS ANALYSIS• More difficult to apply in a service

environment• Process may vary from customer to

customer• Definition of “good service” may be

different for each customer• Process is less likely to be defined• A single service may require multiple

processes


DIFFICULT TO MEASUREDIFFICULT TO MEASURE

Characteristics of Service Processes

1. Intangibility

2. Heterogeneity

3. Simultaneity

4. Perishability


INTANGIBILITYINTANGIBILITY• The process and the results may vary

from completely intangible to tangible• May be some combination of both

intangible and tangible results or processes

• Quality and performance measurement is difficult to determine

Low High


HETEROGENEITYHETEROGENEITY• Knowledge workers• Outcomes vary from one performance to

another• Outcomes vary from one performer to

another • Difficult to compare one person to

another

Low High


SIMULTANEITYSIMULTANEITY• Production and consumption may

coincide• Conversely it could be repeated multiple

times• Can be completely separated• Inconsistent and difficult to measure

Low High


PERISHABILITYPERISHABILITY

• May be consumed immediately

• Can’t be stored

• Once the event or time has passed, the opportunity is gone forever

Low High


DIMENSIONS OF PERFORMANCEDIMENSIONS OF PERFORMANCE

• Completeness

• Financial

• Quality of Service

• Flexibility

• Resource Utilization

• Innovation


CHALLENGESCHALLENGES

• Less visible

• More difficult to track flow

• Tradition of individuality

• Lack of meaningful data

• People based work and people can’t be controlled like machines


FREQUENT PROBLEMSFREQUENT PROBLEMS

• Unnecessary Hand-offs• Constant Switching• Too much Work in Process• Too much Waiting Time• Excessive Defects• Over Production• Difference in how people “think” the

process works


IBM’S SSMEIBM’S SSME

• Services Science

• Services Management

• Services Engineering


RESEARCH THEMESRESEARCH THEMES• Business Strategy Models• Business Standards for the

Extended Enterprise• Continual Business Optimization• Human Capital Mgt & Optimization• Information Integration• Service-Oriented Architecture• Security-Privacy


TransformationTransformation

• Strategy

• Processes

• People

• Technology


A Set of Contracts?A Set of Contracts?• Among many individuals

– Shareholders– Customers– Employees – Managers– Suppliers – Government – Community, etc.

Shyam Sunder, Yale


Complex Adaptive System?Complex Adaptive System?

• Complex • Adaptive• Non-linear• Dynamic• Multi-objective• Synergistic• Feedback systems• Emergent behavior


EXTENDED ENTERPRISEEXTENDED ENTERPRISE

Value Support Processes

Enabling Processes

Value Added Processes

Vendors

Customers

Big Firm

Mid-size Firms

Small Firms

Nirmal Pal, Penn State


What is a Service Process?What is a Service Process?

• "Service processes present unique challenges. They are complex … each transaction is in itself a new 'product.' Services also contain both usability and emotional components.”

When we plan a service process, we tend to look at things in terms of what the provider must do to complete the service process. We tend to think in a logic that is provider-oriented.

The result is a process that is inconvenient and frustrating to the customers, a service transaction that failed to complete, and defection of once willing customers."

- Glenn Mazur, executive director of QFD Institute


SERVICE VALUE CHAIN?SERVICE VALUE CHAIN?

InvestigateInvestigateInvestigateInvestigate ReceiveReceive ReceiveReceive PurchasePurchase PurchasePurchase

EngageEngageEngageEngage FulfillFulfill FulfillFulfill TransactTransact TransactTransact


“The best kind of investment to make is one in which a huge return results from a very small increment of invested capital”

- Warren Buffet


EngineeringEngineering


EngineeringEngineeringProductivity and Growth in the 21Productivity and Growth in the 21stst Century Century

Brett Champlin, President ABPMPBrett Champlin, President ABPMP

[email protected]@abpmp.org

From Industrial Engineering to Services Engineering

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