From Industrial Engineering to Services Engineering Productivity and Growth in the 21 st Century Brett Champlin, President ABPMP

CHANGE

US & WORLD GDP

INDUSTRIAL ERA ~250 Years Smith - Taylor – Shewhart Deming – Juran Growth Factors Paradigm changes Productivity, Cost, Quality General Purpose Technology Education IE, OR, MS

~250 Years

Smith - Taylor – Shewhart

Deming – Juran

Growth Factors

Paradigm changes

Productivity, Cost, Quality

General Purpose Technology

Education

IE, OR, MS

INDUSTRIAL ENGINEERING Plant Floor Machinery Materials Handling Inventory Supply Chain

Plant Floor

Machinery

Materials Handling

Inventory

Supply Chain

ASSESSMENT Opportunity for growth shrinking Value of improvement shrinking Trying to solve new problems with old tools

Opportunity for growth shrinking

Value of improvement shrinking

Trying to solve new problems with old tools

Opportunity 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

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? “ 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

“ 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 Framework APQC.ORG

SERVICE TYPES Professional Services Service Shops Mass Services Low High Low High Low High People vs. Equipment Focus Front vs. Back Office Amount of Customer Contact Discretion of Front Office Personnel Level of customization Process vs. Product Focus

Professional Services

Service Shops

Mass Services

PROCESS 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

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 MEASURE Characteristics of Service Processes Intangibility Heterogeneity Simultaneity Perishability

Characteristics of Service Processes

Intangibility

Heterogeneity

Simultaneity

Perishability

INTANGIBILITY 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

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

HETEROGENEITY 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

Knowledge workers

Outcomes vary from one performance to another

Outcomes vary from one performer to another

Difficult to compare one person to another

SIMULTANEITY Production and consumption may coincide Conversely it could be repeated multiple times Can be completely separated Inconsistent and difficult to measure Low High

Production and consumption may coincide

Conversely it could be repeated multiple times

Can be completely separated

Inconsistent and difficult to measure

PERISHABILITY May be consumed immediately Can’t be stored Once the event or time has passed, the opportunity is gone forever Low High

May be consumed immediately

Can’t be stored

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

DIMENSIONS OF PERFORMANCE Completeness Financial Quality of Service Flexibility Resource Utilization Innovation

Completeness

Financial

Quality of Service

Flexibility

Resource Utilization

Innovation

CHALLENGES 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

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 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

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 SSME Services Science Services Management Services Engineering

Services Science

Services Management

Services Engineering

RESEARCH THEMES Business Strategy Models Business Standards for the Extended Enterprise Continual Business Optimization Human Capital Mgt & Optimization Information Integration Service-Oriented Architecture Security-Privacy

Business Strategy Models

Business Standards for the Extended Enterprise

Continual Business Optimization

Human Capital Mgt & Optimization

Information Integration

Service-Oriented Architecture

Security-Privacy

Transformation Strategy Processes People Technology

Strategy

Processes

People

Technology

A Set of Contracts? Among many individuals Shareholders Customers Employees Managers Suppliers Government Community, etc. Shyam Sunder, Yale

Among many individuals

Shareholders

Customers

Employees

Managers

Suppliers

Government

Community, etc.

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

Complex

Adaptive

Non-linear

Dynamic

Multi-objective

Synergistic

Feedback systems

Emergent behavior

EXTENDED ENTERPRISE Big Firm Mid-size Firms Small Firms Nirmal Pal, Penn State

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 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? Investigate Receive Purchase Engage Fulfill Transact

“ 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

“ 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

From Industrial Engineering to Services Engineering Productivity and Growth in the 21 st Century Brett Champlin, President ABPMP [email_address]