In Australia, the services sector makes up almost 70% of GDP, which in 2015-16 was $1.66 trillion, and employs around 78% of the workforce. The largest components of the sector are tourism, education, healthcare and financial services. As such a significant portion of our economy, it is important to understand what a service, service chain and service chain management is. This presentation defines the service sector in the context of the Australian marketplace and looks at current levels of supply chain maturity. It explains the properties of services and why service organisations today must plan, forecast and optimise their service chain to enable consistency in decision-making and to ensure availability of the provision of services.

1. The Emergence of the Demand-driven Service Chain

2. In Australia, the services sector makes up almost 70% of GDP, which
in 2015-16 was $1.66 trillion, and employs around 78% of the
workforce. The largest components of the sector are tourism,
education, healthcare and financial services.
As such a significant portion of our economy, it is important to
understand what a service, service chain and service chain
management is.
The Emergence of the Demand-driven Service Chain
The Service sector defines the Australian economy…
Services now represent almost 70% of
Australia's gross domestic product (GDP)
This is almost double what Services
represented 50 years ago as a percentage of
GDP
Services now employ four out of five
Australians
Services represent 18% of Australia’s
exports
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3. What is a service?
Before we delve into service chains, we must first consider, what is
a service? The Economist magazine has wryly defined services as
‘things you can not drop on your foot’. Less tongue-in-cheek, the
Australian Services Roundtable states that, ‘services deliver help,
utility or care, an experience, information or other intellectual
content’.
Examples of industries that provide services include hospitality,
health care, professional services and utilities.
The Service Chain and Service Chain Management
The “service chain” describes the process by which a service is
provided by an organisation to deliver value to a customer, while
“service chain management” refers to the end-to-end planning and
management activities involved in providing the service to the
customer.
The Emergence of the Demand-driven Service Chain
Properties of Services
Unlike goods produced in a supply chain, services are:
Intangible – they can’t
be manufactured,
touched or picked up
Perishable – they can’t
be stored away or
returned
Heterogeneous – human
interaction means each
service is unique
Simultaneously
produced & consumed –
use of the service
generally occurs at the
time of delivery
Non-transportable – the
customer and service
delivery system must
come together at a point
in time
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4. The Emergence of the Demand-driven Service Chain
Service Chains, as supply chains did in the 90s and 00s, are transitioning from being recognised by executive teams as a cost centre to now being
recognised as a source for competitive advantage for businesses. Service organisations today must plan, forecast and optimise their service chain to
enable consistency in decision-making and to ensure availability of the provision of services.
Service chains, in terms of maturity have historically tended to lag supply chain maturity. For example, the investment of forecasting and planning
capability for supply chains was a game-changer and this capability is only now emerging in service chains. Such recognition by executives within
services organisations is generating a new wave of investment in service chain capability.
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5. The Emergence of the Demand-driven Service Chain
Why getting it right is important?
Service level
Service chain
efficiency (e.g. KMs
travelled, time sheets,
etc.)
Labour Force
Composition (Full time
vs. Casuals)
Cash to cash cycle
Availability &
responsiveness
Worksites, Labour
Force Distribution &
Utilisation
Sales revenue
Operating Cost
Cash
Accounts receivable /
payable
Labour Force &
Equipment
Fixed assets
Capital employed
Profit
Return on investment
Ensuring
Availability
Capacity Planning &
Scheduling
Workforce
Optimisation
Balancing
Trade-offs
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6. The Emergence of the Demand-driven Service Chain
The Service Chain Excellence Framework
GRA views service chain management as an integrated system that
must be considered holistically and be supported by a dedicated
function within an organisation.
The Service Chain Excellence framework enables service
organisations to approach the service chain management task in an
integrated manner. There are 3 key sections:
Business Strategy
Customer Value Proposition Employee Value Proposition
Target Operating Model
Operational Structures
Operational
Planning Processes
Operational
Execution Capabilities
Organisational
Design
KPI’s & Reporting
Policies &
Procedures
Demand
Planning
Target & Constraint
Optimisation
Capacity
Planning
People Process Systems Data
- Business Strategy - At the core of service chain
management, there needs to be a clear and
concise business strategy
- Target Operating Model – the Customer Value
Proposition (CVP) and Employee Value
Proposition (EVP) make up the Target Operating
Model – the core service chain elements that
leadership have influence over to realise the
business strategy
- Service Chain Operations – includes the
operational structures, capacity planning &
scheduling processes and operational
capabilities used to execute and deliver services
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7. The Emergence of the Demand-driven Service Chain
Business Strategy
The Business Strategy defines where and how a service organisation is
going to compete in the marketplace and how it is to align resources to
compete.
The Target Operating Model
Together, the CVP and EVP make up the Target Operating Model – the
reason for existence, this is a businesses ‘why’ and should dictate the
trade-off decisions the organisation is willing to make and not make.
A CVP describes the benefits that customers receive when they choose to
engage with an organisation; this looks to answer the ‘what’ (range),
‘how/where’ (channel) and ‘when’ (responsiveness) questions, which
subsequently are impacted by answering ‘who is the customer?’
(segmentation).
An EVP describes the mix of characteristics, benefits and ways of working
in an organisation; this determines how the CVP is operationalised.
The establishment of these three core elements forms the foundations of
service chain management, and from there, an organisation can align its
structure, capabilities and processes to bring value to the business.
These questions are important as you cannot be everything for everybody;
trade off decisions must be made. For example, our CVP should govern:
Segmentation: What level of service will we provide to what
services and which customers?
Responsiveness: Within what timeframe will the service be
provided?
Channel: How and where will we provide the service?
Range: What services will we provide?
Our Customers
(CVP)
Our Employees
(EVP)
Target
Operating
Model
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8. The Emergence of the Demand-driven Service Chain
Service Chain Operations
The set of structures, processes and capabilities of a service chain business are known as service chain operations. Together, these operations
drive and orchestrate the core activities of a service chain business, delivering on the CVP and EVP set out in the Target Operating Model.
Operational Structures include the organisational design (roles and responsibilities), KPIs, policies and procedures which align the organisation
and drive the right behaviours.
Operational Planning Processes are the core high level processes undertaken to deliver a bottom-up, integrated, forward-looking plan, from
both a service demand and resource capacity perspective.
Operational Execution Capabilities are the people, processes, systems, and data which enable and support the operational planning processes.
Operational
Structures
Operational
Planning Processes
Operational
Execution
Capabilities
Organisational
Design
KPIs & Reporting Policies &
Procedures
Demand
Planning
Target & Constraint
Optimisation
Capacity
Planning
People Process Systems Data
Service Chain
Operations
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9. The Emergence of the Demand-driven Service Chain
Common Symptoms of a Low Maturity Service Chain:
• Forecasting not done at required level of granularity
• CVP/EVP not defined or communicated through organisation
• Typically higher employee turnover and customer churn rates
• IT systems do not support optimisation requirements
• No forward visibility of expected demand
• Unable to roster effectively
• Daily execution very reactive
• Lagging recruitment: for current needs, not future needs
The diagrams below are a high-level representation of the various elements and tools involved in a service chain system.
Service Chain Operating Model – Low Maturity Service Chain Operating Model – High Maturity
Route Optimisation
Taking the next step
4 questions to assess the operational maturity of your service chain organisation
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Have we defined and
communicated our
CVP and EVP?
How well have we
aligned our CVP/EVP
and Service Chain
Operations to our
Business Strategy?
Do we have
appropriate and
integrated IT systems
and tools in place to
support our planning
processes?
Do we provide a
forecast at a required
level of granularity to
support our upstream
planning processes?

10. The Emergence of the Demand-driven Service Chain
In a service chain with high maturity, an organisation will have pipeline visibility on service requests (demand) as well as recruitment (supply). This
is what we call a Demand Driven Service Chain (DDSC). A DDSC has IT tools in place that enable the following:
This provides a forecast over an extended
time horizon, based on historical customer
data (bottom up build) and market
intelligence (top down build). The forecast is
calculated at the most granular level (service
demand by service type, service level,
location and time) so that workforce
planning can be accurately matched to
forecasted service demand.
Ensures the organisation has the right
workforce composition (in terms of
employee type, full-time vs part-time vs
casual, level, location etc) and that
recruitment of new employees targets
portions of the supply pool that do not
currently align with forecasted demand
requirements.
This tool generates a schedule, based on
pre-determined constraints (using the CVP
and EVP), that matches employees (supply)
with customers (demand) to achieve
operational outcomes (reducing overtime,
idle time, mismatched services etc).
Demand Driven Forecasting1. Workforce Planning2.
Optimised Rostering
& Scheduling
3.
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11. The Emergence of the Demand-driven Service Chain
GRA was founded in 1997 and is Australia’s premier specialist supply chain consulting firm. Our team has extensive commercial & government supply
chain and logistics experience across a broad range of industries and at all levels of the process, both strategic and operational.
At GRA we understand the complex challenges service organisations are facing. We can help you with not only designing an optimal service chain, but
also ensuring that your services are optimised to ensure that the highest possible service levels can be achieved at the lowest possible cost.
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Authors & Contributors
Mathew Tolley Anita Crowley Shanaka Jayasinghe James Allt-Graham Carter McNabb
Manager, Melbourne Consultant, Sydney Senior Manager, Sydney Partner, Sydney Partner, Melbourne