Determining Quantity of Services

Determining Quantity of Services

  • Aggregating Demand – Forecasting demand for products is unreliable, and forecasting for service is even more unreliable.  Collaborative planning works better with a supplier of services to not over or under forecast service needs.
  • Managing Consumption – managing consumption of service is very challenging for an organization.  In this case, it is very important to leverage spend for the entire organization to get the best value.  While still difficult, there are cost benefits when negotiating service in aggregate terms for services.
  • Dimensions of Services and Quantity Decisions
    • Degree of Tangibility – Decisions about how much to order and when to order are influenced by the degree of tangibility.  Again, it important to determine need, process map what is needed, and determine the time frame needed.  One again should leverage in an aggregate sense to get the best value of service.
    • Direction of the Service – When services are directed at people, the quantity of services rendered is most heavily influenced by the people most affected by the service.
    • Production of the Service – Services can be rendered by people or machines, or both.  For service with a high capital or asset component, potential suppliers can be assessed on asset capability, availability, as well as the state of their technology.
    • Nature of the Demand – The demand for a particular service may be:
      • Continuous service – Insurance or a 365/24/7 around-the-clock security service or technical support.
      • Discrete or one shot service – an example of one shot service would be an interior decorator suggesting a new color scheme for an office complex.
      • Periodic service – May be regular, such as once a week or once a month, as with regular inspections, or it may vary with need as in repair services.

 

The quantity of each type of service purchased impacts the price per service transaction and the total cost of ownership for the service.

 

    • Degree of Standardization and Skills Required – Some organizations have categories of services placed along a continuum from commodity type standardized services to highly customized services.  This approach allows the buying organization to streamline the acquisition process for commoditized services and focus more on the customized services.