Operations Management
Applying operations management in the services sector
services sector
Executive summary
In today’s service sector marketplace, it is vital to make the processes that deal with the oper-ation of business not only effective and efficient in terms of customer, supplier and employee use, but also compliant with regulations, both statutory and organisational. In addition, these processes have to support the implemented business strategy of the organisation. Opera-tions management is about measuring and managing effectively; this includes leveraging management techniques such as Six Sigma to determine the criteria for measuring the proc-ess and the ability to manage the resource, employees or 3rd parties to deliver the required
services in the desired timeframe.
IT can support these management processes in a number of ways. The first is based around business intelligence and involves significant effort to tailor an appropriate solution. The second approach involves the use of special-ised applications consisting of a variety of automated components including workforce management, capacity management, cus-tomer management, process management, quality management and price management. These latter solutions are being supplied from two different sources: in-built as part of ERP packages or by niche application vendors. In both cases, the solution is a mix of software and services.
These specialised applications can be col-lectively called Operations Management Platforms. The business components of the platforms sit on top of an infrastructure plat-form that consists of an integration bus, a process engine, a rules engine, and master data management capability. To be able to extract information there is a need to support a Web 2.0 dashboard and a reporting facility. There are a number of potential solutions on the market; however, none at present com-pletely provide the environment Bloor sees as necessary to get to grips with all aspects of op-erations management.
Why should you be interested? Well, opera-tions management pulls together all the infor-mation required by management and staff to effectively and efficiently do their job. This has to be provided in a collaborative environment in which not only internal staff can work to-gether but also externals, including both sup-pliers and customers. A good check on your capabilities is to look at how easy is it to pull together information from HR, ERP, CRM and other key applications into a meaningful way that you can allocate and prioritise work, or understand where bottlenecks are occurring in your processes. Organisations need more than “just good enough” for this critical area of their business, therefore they will have to look outside of ERP and CRM applications. Op-erations management is a composite applica-tion, in that the solutions require configuration to an organisation’s environment so that the right information can be pulled from the rel-evant applications installed already in an or-ganisation. It is vital to the successful running of service organisations.
The issue
The need to streamline and adapt to reduce time to market, eliminate waste and meet customer demand has quickened as a result of expanding global competition and uncertain economic times. Organisations need to criti-cally evaluate the performance and agility of their operations. The manufacturing sector has gained benefits from adopting a number of methods such as lean manufacturing and Six Sigma to take control of operations manage-ment and make it leaner and meaner. What has become clear over the last few years is that these techniques can be applied to the services sector as well.
The services sector is very diverse and in-cludes financial services, local and central government, professional services (estate agents, lawyers) and many others. However at the core of each of these businesses there are the same management issues:
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Relationship management of both custom-ers and supplicustom-ers: operations management plays an important part in the development and maintenance of relationships with both customers and suppliers. The importance of quality in services received or delivered and the management of agreed quality standards is a key part of operations man-agement. With current technology, organi-sations must also be aware of supporting customer and supplier self service.•
Business strategy definition and manage-ment: this deals with the development and implementation of a strategy for a business, including the review processes. The success of a strategy is influenced by the culture of an organisation. Operations management has the ability to influence the culture by changing processes, organisational struc-ture and altering performance measures.•
Measurement of the performance of the busi-ness against the strategy: this covers not only the collection and analysis of performance measures, but their definition and also the task of driving change through performance.•
Effective and efficient management of re-sources and people, whether they are in-house, or external: this is an important part of service delivery as it is vital to understand the current capabilities of staff, suppliers and contractors as well as their aspirations for the future. The capacity of the organisa-tion to handle workloads at different times is key to being able to deliver the required service to customers and to suppliers.•
Effectiveness and efficiency of the business process(es): The business processes used by the organisation have to be right to meet the demands of customers and suppliers, and aid the staff in providing good service. Self-service means that customers and sup-pliers will act like staff, so the process had better be right!So, what do we mean by the term operations in the services sector? In manufacturing this is much clearer as it is the part of the busi-ness that is at the sharp end of producing the goods from the raw materials and then getting the finished goods to the customer. Operations management in the services sector is less clear; with a diversity of front line tele-sales, call centres, branch operations, service cen-tres and back offices where high volume re-petitive tasks or long cycle complex tasks are performed on behalf of customers.
Definition of operations management for the services sector
Operations management involves the mainte-nance, control and improvement of organisa-tional activities that convert the resources of a service organisation into the desired services whilst implementing its business strategy. The measurement and evaluation of the operation is undertaken through a process of business appraisal. Efficiency and effectiveness of serv-ice delivery are monitored by the application of quality management techniques. These can be delivered in 3 ways;
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Services: use skilled people to deliver the re-quired outcome based upon their knowledge.•
Platforms: here technology is used to auto-mate a required outcome based upon per-ceived best practice.•
Solutions: this involves a combination of people with business knowledge and tech-nology to provide a purpose built, or config-ured, required outcome.Operational intelligence has recently seemed to come to the fore on the conference circuit. However, when you start to look at who is speaking then it is not clear how it differs from business intelligence (BI). BI platforms have to go through a time-consuming extract, trans-form and load process to turn ERP data into intelligence1. However, what is needed is
real-time visibility of performance with real-real-time data being put into many different contexts to support the roles in the organisation that are contributing to the optimal performance of the real-time enterprise; this is what gives you real operational intelligence. Operational in-telligence must be able to detect events across multiple processes and non-linear workflows in a single process so as to enable correlation of activities to changes in business perform-ance. If you like, operational intelligence is BI on steroids but it is not an operational man-agement platform.
1
Operations Intelligence Augments Business Intelligence, AMR Research Inc.,Components
Operations management consists of the following business components:
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Workforce management allows managers to effectively balance work with resources, such as optimal staff levels, anticipated workloads, resource availability and technological capability; all the while con-sidering elements such as employee preferences and unexpected absences.•
Capacity management involves a planning stage and then measure-ment of actual capacity of all resources that are used within an or-ganisation to meet business demands. Resources include not only all internal resources, such as staff and equipment, but also all external resources used in the processes of the organisation; these include contract staff, customers for self-service, and suppliers.•
Customer management is more than just customer relationship man-agement (CRM). It is also the way customers are involved with the business processes and how these processes are developed and im-proved to make it easier for customer participation.•
Process management is a holistic management practice that models an enterprise’s human and machine tasks and the interactions be-tween them as processes with the view of improving agility and per-formance. It is a structured approach employing methods, policies, metrics, management practices and software tools to manage and continuously optimise an organisation’s activities and processes.•
Quality management is concerned with the application of quality prin-ciples by all staff, contractors and suppliers, to identify and remove the causes of defects and errors in the business processes in order to gain customer satisfaction and reduce costs. Quality management takes many different aspects: regulatory checks, quality checking prior to fulfilment, quality sampling and customer experience.•
Price management is the end-to-end process of optimising, commu-nicating, and enforcing prices and discounts. The benefits of improved price management are undeniable. Deregulation has created a com-petitive market place in which successful providers are becoming in-creasingly customer-centric. Pricing is becoming a major strategic issue, but the majority of providers still use out-dated risk and cost-based pricing methods, and have yet to develop a centre of excellence around their pricing processes.Components
Underpinning these business components are a set of infrastructure components that include:
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An integration bus with a broad spectrum of adapters to support ac-cess to applications, databases, web services, network protocols and system logs.•
A process/workflow engine that can handle multiple, complex proc-esses simultaneously and is able to be used collaboratively by both business users and IT staff.•
A rules engine that allows the business rules to be defined and man-aged dynamically and is able to be used collaboratively by both busi-ness users and IT staff.•
A dashboard, form and report design environment that allows for the production of these user interfaces where needed.•
A master data management repository that allows for associa-tions between data, processes, people and systems to be recorded and managed.Operations management in the service sector requires a composite col-laborative application that acts as a hub to support shop-floor staff by providing them with automated support for the tasks they need to per-form, in the order that they need to perform them, whilst at same time it provides operational management with both the capabilities to measure performance and also be able to react quickly to exceptions so they do not turn into crises.
Figure 1: Bloor Research’s operational management component architecture
Operations Management Architecture
Collaboration Platform
Integration Bus (XML) Data Layer Data & Process
Mgmt Repository Database
Data
Warehouse WarehouseData Business Modules Operational
Intelligence ProcessMgmt Development / Configuration Environment Form and Report Writer Activity Monitor Process Engine Rules
Engine StudioVisual
Eclipse Mash-upWeb 2.0
Reports Simulator Dash-boards What-If? Cubes Capacity Mgmt MgmtPrice QualityMgmt Fore-casting Planning Scheduler Resource Management Customer Assets People
Potential solutions
Figure 2: The Bloor market positioning diagram for solutions for operations management
There are a number of different ICT solutions in the market available to support operations man-agement. These range from intellectual support through use of specialist consultants to SaaS solutions to ERP packages to specialist applications.
Specialist consultants
These organisations are specialists in the area of operations management. They have devel-oped and honed their skills to often become the thought leaders in the field. What they of-fer are highly skilled people.
Global systems integrators (SI)
These international large players often have practices in a vertical in which operation man-agement is a sub-domain. In particular cir-cumstances they may have built a specialist practice which provides skilled people with some technology capability.
IT Automation
Business V
alue
Service
Solution
Niche
Platform
Commodity
OM Consultants CPM Consultants BI Vendors BPMS ERP Vendors CRM Vendors Corporate Portfolio ManagementGlobal SIs
Operations
Management
Potential solutions
Business applications
Often referred to as enterprise resource plan-ning systems (ERP), they provide a complete suite of applications to automate the busi-ness processes of an organisation based on best practice. Operations management tends to be part of a number of different application modules rather than a single module. The ex-ception is that, recently, performance man-agement has become a specialist sub domain of the data warehouse/business intelligence part of the offerings. The vendors offer just the software and this is then implemented by a SI partner. The package can be implemented as-is (very rare), through a template of the SI (a certain amount of specialist knowledge is used to customise the package to a particu-lar vertical) or the package is customised with the assistance of an SI to fit the organisation. A number of these vendors are following the lead of the “leader of the pack”—SAP—and offering SaaS offerings that include perform-ance management as a key offering.
Customer relationship management (CRM)
CRM is a subset of business applications which concentrates on the support of the customer relationship processes. From an operations management viewpoint, this tends to be ge-neric support for the capture of customer in-formation and the display of that inin-formation back to personnel at the appropriate time to make informed decisions.
(Operational) business intelligence (BI)
BI is another subset of business applications which provides analysis and reporting capabil-ity to people to make informed decisions. They require a high degree of people involvement to define what information is to be collected, to be stored and analysed, as well as the defini-tion of the collecdefini-tion and display processes. The market here has recently gone through a series of acquisitions and mergers consoli-dating the number of players. This has led to a need to reposition these tools and the trend seems to be to include the word “Operational” in front. Bloor has not really seen that these applications are offering anything more than they have done before.
Business process management systems (BPMS)
These products vary from a platform to be able to define operational tasks and their as-sociated management tasks and then man-age the runtime environment; to business frameworks; and even specialist applications for certain sectors. These tools have a heavy penetration in the services sector, particular-ly in financial services and government. This market still has a relatively large number of vendors operating in it.
Corporate portfolio management solutions and services
These solutions have grown from organisa-tions that have supplied project management software. Corporate portfolio management (CPM) moves project and programme man-agement to the enterprise level. It is the on-going and proactive planning, execution, and control of the future of an enterprise. CPM has three components: leadership accountability, project accountability, and the infrastructure required to support the portfolio.
Operational management solutions
These solutions are specialist niche applica-tions that support the key areas defined in the component section. These vendors tend to offer more than just a platform solution and are more services-oriented, incorporating in their sales mix both technology and specialist consultancy.
Home grown
Organisations are still making their own so-lutions rather than buying them. In the main these solutions tend to be relatively simple and often built up on the top of productivity suites such as Microsoft Office suite, particu-larly Microsoft Project or collaboration tools such as Lotus Notes or Microsoft SharePoint.
Why should you care?
At the beginning of this paper, Bloor defined operations management as the maintenance, control and improvement of organisational activities that convert its resources into the desired services whilst implementing its business strategy. Thus Operations man-agement pulls together all the information needed by management and staff to be able to effectively and efficiently do their job. This has to be provided in a collaborative environ-ment in which not only internal staff can work together but also externals, including both suppliers and customers. Here is a good test to see if you have collaborative operations management capabilities in house currently; can you, in real time, pull together and inte-grate the information you need to manage op-erations effectively and in real-time from the following applications?
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Your HR systems for skills, holidays, avail-ability and workforce management.•
Your ERP systems (plus CRM and SCM) for orders, customer and supplier details.•
Your BI systems with its data warehouse(s) for statistics used to make business decisions.•
Your BPMS/BRMS system for the business process, business rules and the activity monitoring information for the process. If you answered no or are not sure of the an-swer to any of the above questions, then it would make sense for you to evaluate an op-erations management solution.To implement operational management, com-panies need to realise that their current BI systems are more than likely not going to be adequate. There is a need for real manage-ment of operational business processes and this requires new technology components to help integrate BI with operational business processes information (this is very similar to the current trend in the BPMS market where business activity monitoring functionality is being integrated with BI data). These compo-nents can be used to automatically guide peo-ple and optimise operations. To understand
whether you need Operational Management, Bloor concurs with AMR Research, who put forward this checklist:
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Is critical business and operational data available to all rather than a select few?•
Do you know with certainty which custom-ers/products/channels are most profitable?•
Do you know which suppliers have the best on-time delivery performance?•
Does your firm have complete visibility of key performance indicators across the full enterprise?•
Can you effectively sense and respond to dynamic changes in demand and/or supply?•
Is there a definitive source of business and operational data that everyone uses?•
Can you use information today to predict performance tomorrow?•
Is the right data available at the right place at the right time?•
Are your real-time data needs being met today?Organisations need more than “just good enough” for this critical area of their business. Therefore they will have to look outside of ERP and CRM applications. Operations manage-ment uses existing applications as composite modules to the operation business process; because of this operations management solu-tions require configuration to an organisation’s environment so that the right information can be pulled from the relevant installed applica-tions. It is vital to the successful running of service organisations.
Further Information
Further information is available from http://www.BloorResearch.com/update/1059
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