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Service Operations Management

COVERAGE

Module Coverage

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We will firstly examine the systems approach toyour service business.

We will then explore the managementtools/techniques to be used in managing andimproving service operations.

OBJECTIVES

Objectives/Outcomes

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AppreciateAppreciateAppreciateAppreciate howhowhowhow youryouryouryour serviceserviceserviceservice businessbusinessbusinessbusinessisisisis anananan interactiveinteractiveinteractiveinteractive systemsystemsystemsystem thatthatthatthat affects,affects,affects,affects,andandandand isisisis affectedaffectedaffectedaffected bybybyby thethethethe environmentenvironmentenvironmentenvironmentandandandand aaaa systemsystemsystemsystem thatthatthatthat reliesreliesreliesrelies onononon feedbackfeedbackfeedbackfeedbacktotototo bebebebe effectiveeffectiveeffectiveeffective....

ObjectivesObjectivesObjectivesObjectives

BeBeBeBe ableableableable totototo useuseuseuse thethethethe PDCAPDCAPDCAPDCA CycleCycleCycleCycle totototomanagemanagemanagemanage andandandand improveimproveimproveimprove thethethethe businessbusinessbusinessbusiness....

BeBeBeBe ableableableable totototo formulateformulateformulateformulate anananan effectiveeffectiveeffectiveeffectiveSWOTSWOTSWOTSWOT AnalysisAnalysisAnalysisAnalysis totototo evaluateevaluateevaluateevaluate anyanyanyanysituationsituationsituationsituation andandandand decidedecidedecidedecide thethethethe mainmainmainmain ideasideasideasideasforforforfor actionactionactionaction....

BeBeBeBe ableableableable totototo setsetsetset SMARTSMARTSMARTSMART standardsstandardsstandardsstandards....DDDD

OBJECTIVES

Objectives/Outcomes

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BeBeBeBe ableableableable totototo useuseuseuse thethethethe PACTPACTPACTPACT coachingcoachingcoachingcoachingmodelmodelmodelmodel totototo coachcoachcoachcoach andandandand developdevelopdevelopdevelop youryouryouryourpeoplepeoplepeoplepeople....

BeBeBeBe ableableableable totototo designdesigndesigndesign andandandand useuseuseuse DOCDOCDOCDOC totototomeasure,measure,measure,measure, monitormonitormonitormonitor andandandand evaluateevaluateevaluateevaluateserviceserviceserviceservice departmentdepartmentdepartmentdepartment performanceperformanceperformanceperformance....

ObjectivesObjectivesObjectivesObjectives

SYSTEMS

APPROACH

The Systems Approach to Business

EFFECTIVEEFFECTIVEEFFECTIVEEFFECTIVE EFFICIENTEFFICIENTEFFICIENTEFFICIENT

DOING THE DOING THE DOING THE DOING THE RIGHT THINGSRIGHT THINGSRIGHT THINGSRIGHT THINGS

DOING THINGS DOING THINGS DOING THINGS DOING THINGS RIGHTRIGHTRIGHTRIGHT

It is extremely useful to appreciatethat a business is an interactivesystem that is affected by, andaffects the environment and that ittransforms inputs into outputsthrough effective processes.

Also, that the inputs andprocesses rely on constant andup-to-date feedback in order toadapt and change to be moreeffective and efficient.

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CONTENTS

Management Tools

We We We We will explore these concepts in will explore these concepts in will explore these concepts in will explore these concepts in this ethis ethis ethis e----learning module.learning module.learning module.learning module.

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The PDCA cycle

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SWOT analysis

SMART standards

PACT coaching model

Daily operating controls

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The Management Tools The Management Tools The Management Tools The Management Tools are:are:are:are:

PDCA CYCLE

PDCA – A Proven Approach to Continuous Improvement

TheTheTheThe PDCAPDCAPDCAPDCA CycleCycleCycleCycle (Also

called the Deming Cycle after Edward

Deming the pioneer of Total Quality

Management) is a proven approach to

continuous improvement. It is a

structured way to manage and improve

all aspects of a business unit.

ACTION

CHECK

DO

PLAN

PDCA

Understanding ‘Continuous Improvement’

Delivery (customer valued) processes are constantly evaluated and improved in the

light of their efficiency, effectiveness and flexibility.

It is defined as an ongoing effort to improve products, services, or processes. These

efforts can seek "incremental" improvement over time or "breakthrough"

improvement all at once.

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CONTINUOUS

IMPROVEMENT

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PDCA CYCLE

STEPSUnderstanding Continuous Improvement Cycle

SWOTSWOTSWOTSWOT

SMARTSMARTSMARTSMART

DOC DOC DOC DOC

DMAICDMAICDMAICDMAIC

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Visualize the ideal situation: Objectives

Evaluate the situation

3333 Decide ideas for action

4444 Set standards

PACTPACTPACTPACT

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What, Who, How, When?

Policies & SOP’s

7777 Training of the implementers

8888 Coaching & On-goingDevelopment

Control: Evaluate/Standardise

Improve Processes

Analyse: Root Causes

Measure: Gaps

Define: Gaps

Evaluate vs. Standards

9999 Measure & Monitor Outputs

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The Suzuki Service Process:

Customer relationship building and servicereminder process.

Appointment booking process.

Reception and greeting process.

Service consultancy process.

Work allocation process.

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VISUALISE

PDCA CYCLE

STEP 1

ChooseChooseChooseChoose oneoneoneone ofofofof thethethethe aboveaboveaboveabove stepsstepsstepssteps inininin thethethethe SuzukiSuzukiSuzukiSuzuki ServiceServiceServiceService ProcessProcessProcessProcess andandandand visualisevisualisevisualisevisualisethethethethe improvementsimprovementsimprovementsimprovements youyouyouyou cancancancan implementimplementimplementimplement inininin youryouryouryour dealershipdealershipdealershipdealership....

Visualise the Ideal Situation:

VISUALISE

VISUALISE

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Parts supply process.

In-service customer contact process.

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Quality assurance process.

Vehicle handover process.

Customer follow-up and complaint handling process.

PDCA CYCLE

STEP 1

ChooseChooseChooseChoose oneoneoneone ofofofof thethethethe aboveaboveaboveabove stepsstepsstepssteps inininin thethethethe SuzukiSuzukiSuzukiSuzuki ServiceServiceServiceService ProcessProcessProcessProcess andandandand visualisevisualisevisualisevisualisethethethethe improvementsimprovementsimprovementsimprovements youyouyouyou cancancancan implementimplementimplementimplement inininin youryouryouryour dealershipdealershipdealershipdealership....

Evaluating the Situation (SWOT)

Evaluate Evaluate Evaluate Evaluate

Once Once Once Once you have you have you have you have visualized the visualized the visualized the visualized the ideal, ideal, ideal, ideal, it is it is it is it is critical that you critical that you critical that you critical that you can can can can evaluate evaluate evaluate evaluate the situation the situation the situation the situation as it currently exists.as it currently exists.as it currently exists.as it currently exists.

What is the What is the What is the What is the current reality? current reality? current reality? current reality?

A very useful tool to do A very useful tool to do A very useful tool to do A very useful tool to do this is the SWOT this is the SWOT this is the SWOT this is the SWOT Analysis. Analysis. Analysis. Analysis. The The The The SWOT is a useful tool SWOT is a useful tool SWOT is a useful tool SWOT is a useful tool to bring together all the to bring together all the to bring together all the to bring together all the

factors affecting a factors affecting a factors affecting a factors affecting a situation.situation.situation.situation.

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PDCA CYCLE

STEP 2

Evaluate the Situation (SWOT)

WWWWeaknesseseaknesseseaknesseseaknesses

The cost of labour is too high.

OOOOpportunitiespportunitiespportunitiespportunities

Vehicle replacementcycles are moving outfrom 3 years to 5 years.

TTTThreatshreatshreatshreats

Customer affordability is being drastically reduced by the current economic

conditions.

SSSStrengthstrengthstrengthstrengths

Up-to-date &accurate databaseof service customer.

External Uncontrollable

Internal Controllable

Internal variables the dealer can control

External variables the dealer hasno control over

PDCA CYCLE

STEP 2

Evaluate the Situation

Examples of The Internal Examples of The Internal Examples of The Internal Examples of The Internal Controllables in a Service Controllables in a Service Controllables in a Service Controllables in a Service DepartmentDepartmentDepartmentDepartment

Service Advisors & Technicians

Hours available

Facilities – work bays

Liquidity/Cash flow/Profitability

Equipment/Tools, computers, desks, phone lines, etc

Management and motivation

Methods and Processes

Service Advisors and Technicians.

PDCA CYCLE

STEP 2

Evaluate the Situation

Examples of The External Examples of The External Examples of The External Examples of The External Uncontrollables in a Service Uncontrollables in a Service Uncontrollables in a Service Uncontrollables in a Service DepartmentDepartmentDepartmentDepartment

Service Advisors & Technicians

Interest rates

Inflation

Currency exchange rates

Fuel prices

E-commerce

Vehicle technology

Legislation/Compliance

Social/Values/Life style changes

Customer preferences

Competitors/Specials/Promotions/Advertising

Climate & Infrastructure changes

PDCA CYCLE

STEP 2

Decide on Ideas for Action

Implement a daily Productivity and Efficiency Management processto bring costs down and be able to offer Service Specials.

Implement an active programme to use the database toproactively contact lapsed service customers.

Conduct 3-4 Service Special Campaigns per annum.

1 Specifically target the 4 to 7 year old out of warranty vehicles.

Decide on Ideas Decide on Ideas Decide on Ideas Decide on Ideas for for for for Action from your SWOT Analysis, for example:Action from your SWOT Analysis, for example:Action from your SWOT Analysis, for example:Action from your SWOT Analysis, for example:

PDCA CYCLE

STEP 3

The SMART concept is a useful way to think about the structuring of standards.

Set SMART Standards

Business standards structuring process is an activity or set of activities that will accomplish a

specific organizational goal.

SMARTSMARTSMARTSMART

STANDARDSTANDARDSTANDARDSTANDARD

SpecificS

Measurable

Actionable

Realistic

Time-bound

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PDCA CYCLE

STEP 4

Importance of SMART StandardsPDCA CYCLE

STEP 4

Smart Standards Example:

In this Service Department,the workshop will be loadedaccording to 90% of thesaleable hours availableeach day with 10% beingreserved for walk-inbusiness. How would youwrite a standard for thisprocess?

PDCA CYCLE

STEP 4

What, How, When ?

What needs to be done; by whom; how and when

WhatWhatWhatWhat WhoWhoWhoWho HowHowHowHow WhenWhenWhenWhen

Consider the actions necessary to implement the standard.

PDCA CYCLE

STEP 5

Policies & Standard Operating Procedures (SOP)

Check Points (Key points to Check Points (Key points to Check Points (Key points to Check Points (Key points to check SOP is in place)check SOP is in place)check SOP is in place)check SOP is in place)

TitleTitleTitleTitle

DateDateDateDate

PurposePurposePurposePurpose

Process StepsProcess StepsProcess StepsProcess Steps

Reference documentsReference documentsReference documentsReference documents

PDCA CYCLE

STEP 6

Write necessary Standards, Policies and Procedures

Train the Implementers

DateDateDateDate

PDCA CYCLE

STEP 7

What training will be needed?What training will be needed?What training will be needed?What training will be needed?

Arrange training to ensure the staffare given the skills to ensureimprovement in the service orprocess identified.

Coaching Standards of Performance

PREPARE TO COACH –Prepare for the session

P A

CT

ASSESS THE SITUATION –What is the real situation?

TAKE ACTIONS Agree and document the way forward

CREATE OPTIONS

Explore the options

PDCA CYCLE

STEP 8

To coach Standards of Performance, follow the PACT model.

The PACT model can beused to assist withCoaching and On-goingDevelopment of staffduring the ContinuousImprovement Cycle.

Coaching the Standards of Performance -PREPARE

Q

• What is you strategy for dealing with this situation? (E.G. Work alongside a successful sales person for a week)

• What are the consequences of non-performance?

• What do you appreciate about the employee’s performance?• Describe the performance issue you want to discuss with the employee?

• When does this situation occur?Q

Q

Q

• What is the purpose of the session?• Why are you planning this coaching session?

• What can you do to assist the employee?

• When should actions begin?

• What results do you expect?

PreparingPreparingPreparingPreparing for the session – consider the following questions ahead ofcoaching session:

PDCA CYCLE

STEP 8

1STEPSTEPSTEPSTEP

PACT Model Process Flow

2.1 Listen

Others Perceptions

• How do you feel…?

• What is working…?

• Where do you need help…?

• What obstacles have you come

across…?

2.2 Speak

Your Perceptions

• I’m pleased with…

• I appreciate your efforts to…

• It appears to me…

• I’m concerned about…

2.3 Share

Goal Clarification

• Let’s review our specific

objectives…

• Yours..

• Mine..

2.4 Outcome

Check

• Did we…Clarify each other’s

perception?

• Share and arrive at mutual

goals2STEPSTEPSTEPSTEP

ASSESS REALITY

PDCA CYCLE

STEP 8

PACT Model Process Flow

3.1 Listen

Others Perceptions

• What needs to happen…?

• What could you do differently…?

• What would remove the

obstacles…?

• What could I do to support you…?

3.2 Speak

Your Perceptions

• What I hear you saying is…

• What you want from me is…

• Something I think would be

helpful is…

• From where I sit I can…

3.3 Share

Goal Clarification

• How will doing this help us to…?

• What are the consequences of

not…?

3.4 Outcome

Check – Did we…

• Identify options for

improvement?

• Did we remove all the obstacles?

3STEPSTEPSTEPSTEP

CREATE OPTIONS

PDCA CYCLE

STEP 8

PACT Model Process Flow

4.1 Listen

Others Perceptions

• Let’s agree on what needs to

be done and write it down.

• What specific steps will you

take to get there?

• What results could we expect?

• When would you like to meet

with me next to review

progress?

4.2 Speak

Your Perceptions

• What I’ll do to support you

is…I’ll be monitoring your

progress by…

• I agree, we should plan to

review again…(days/weeks)

4.3 Share

Goal Clarification

• How will achieving this higher

level of performance impact

on you personally?

• How will you achieving this

higher level of performance

impact on the dealership?

4.4 Outcome

Check – Did we…

• Write out an action plan?

• Set a timetable?

4STEPSTEPSTEPSTEP

TAKE ACTION

PDCA CYCLE

STEP 8

Measure & Monitor Outputs

FeedbackFeedbackFeedbackFeedback is vital to the effective and efficient operation of any system. In the service

business, feedback can be organised as a Daily Operating Control (DOC). A useful way tothink about a DOC is to organise the data within key outputs and associated key measures.You can use the sample below in your workplace.

Key OutputsKey OutputsKey OutputsKey Outputs Key Performance MeasuresKey Performance MeasuresKey Performance MeasuresKey Performance Measures

PDCA CYCLE

STEP 9

Measure & Monitor Outputs

Sales/ Revenues

Gross Profit

CSI/Customer Complaints

Warranty

Cash Flow –WIP/Debtors

Service Throughput

Effectiveness (Sold/

Available)

KEY OUTPUTS

PDCA CYCLE

STEP 9

Evaluate Versus Standards

Performance Performance Performance Performance MeasureMeasureMeasureMeasure StandardStandardStandardStandard EvaluationEvaluationEvaluationEvaluation

Service Sales

Service Retention % of Seven-year Parc >60%

Service Reminders % of Daily Appointments >90%

Appointments % of Total Repair Orders >60%

Bay Utilisation % >70%

Hours per Repair Order >2.20

Service Gross Profit

Service Gross Profit % of Total Service Sales >65%

Labour Gross Profit % of Labour Sales >80%

Average Technician Salary per Hour % Labour Rate <25%

Average Recovered Labour Rate % of Retail Labour Rate >90%

Consider your performance against the following standardscontained in a typical DOC. You can use this check sheet in yourworkplace.

Measure&

Monitor Outputs

PDCA CYCLE

STEP 10

Performance Performance Performance Performance MeasureMeasureMeasureMeasure StandardStandardStandardStandard EvaluationEvaluationEvaluationEvaluation

Cost of Labour/Hour % of Average Recovered

Labour Rate<20%

Hours Worked % of Hours Available >90%

Hours Sold % of Hours Worked >120%

Hours Sold % of Hours Available >108%

Expenses % of Total Service Gross Profit <75%

Profit before Tax

Profit before Tax % of Total Service Sales >15%

Work-in-progress (Days) <3 Days

Service Debtors (Days) <15 Days

Parts Sales % of Labour Sales >120%

Fixed-Right-First-Time % of Total Repair Orders >90%

Measure&

Monitor Outputs

Consider your performance against the followingstandards contained in a typical DOC. You can use thischeck sheet in your workplace.

PDCA CYCLE

STEP 10

Evaluate Versus Standards Continued…

Measure&

Monitor Outputs

Parts Fill Rate to the Workshop >85%

Parts Pre-picked RO’s % of Total RO’s >80%

Vehicle Ready on Time % of Repair Orders >85%

Follow-up Calls Contacted % of Total RO’s >85%

CSI Score >75%

Customer Concerns Outstanding (Over 48 hours) <15%

Performance Performance Performance Performance MeasureMeasureMeasureMeasure StandardStandardStandardStandard EvaluationEvaluationEvaluationEvaluation

Consider your performance against the followingstandards contained in a typical DOC. You can use thischeck sheet in your workplace.

Evaluate Versus Standards Continued…PDCA CYCLE

STEP 10

The DMAIC Model

D

M

A

IImprove the current situation/process by developing, validating & implementing improvement alternatives that will achieve desired performance.

CControl the process in future activities by implementing process improvements and monitoring on-going performance.

Analyse the situation with a root cause analysis or 5 Why’s.

Measure the extent of the problem using metrics and targeted improvements

DefineDefineDefineDefine the Problem or concern.

PDCA CYCLE

STEP 11

The DMAICDMAICDMAICDMAIC ModelModelModelModel is an ideal approach to problem solving. The DMAIC Model is part of thewidely used and accepted Six-Sigma quality management discipline. Using this model willbring about a well structured approach to correcting performance & achieving higher standardsin all aspects of the service business.

Defining the Problem or Concern

A problem well stated is half solved.““““ ””””

The secret to solving problems is to find the bridge between theway things are and the way you want them to become. Thatbridge is your definition; the link between the situation asalready solved and its resolution as you envision it to be.

Dave KolbergDave KolbergDave KolbergDave Kolberg

John John John John DeweyDeweyDeweyDewey

““““

””””

PROBLEM OR

CONCERN

The DMAIC Model - DEFINE

A useful technique to define a problem is to choose the right entry level and write aproblem statement using the Why and IWWMWIWWMWIWWMWIWWMW (In What Way Might We) technique. You canuse the following example below in your workplace.

R

Why do we want all our cars to be clean?

A To improve customer satisfaction.

IWWMW improve customer satisfaction?

QQUESTIONQUESTIONQUESTIONQUESTION

ANSWERANSWERANSWERANSWER

REDEFINEREDEFINEREDEFINEREDEFINE

PDCA CYCLE

STEP 11

D

Another example of IWWMW (In What Way Might We) technique. You can use the examplebelow in your workplace.

Q

R

Why do we want to improve customer satisfaction?

A To improve customer retention.

IWWMW improve customer retention?

QUESTIONQUESTIONQUESTIONQUESTION

ANSWERANSWERANSWERANSWER

REDEFINEREDEFINEREDEFINEREDEFINE

PDCA CYCLE

STEP 11

The DMAIC Model - DEFINED

PDCA CYCLE

STEP 11

The DMAIC Model - MEASUREM

Measure the extent of the problem byusing benchmarks or dealership targetsto get to the extent of the problem.

ExampleExampleExampleExample::::Your service department’s customerretention rate is 45% of a seven yearvehicle parc compared to the requireddealership target of 60%.

What is the Root Cause?What is the Root Cause?What is the Root Cause?What is the Root Cause?

TheTheTheThe 5555 Why’sWhy’sWhy’sWhy’s isisisis aaaa usefulusefulusefuluseful tooltooltooltool totototo helphelphelphelpidentifyidentifyidentifyidentify thethethethe rootrootrootroot causecausecausecause ofofofof problemsproblemsproblemsproblemsanywhereanywhereanywhereanywhere inininin thethethethe serviceserviceserviceservice departmentdepartmentdepartmentdepartment....

1111stststst WhyWhyWhyWhy are vehicles not cleaned prior to delivery tocustomers?

Service Department does not prepare thevehicles for delivery to the customers…WHY?WHY?WHY?WHY?

Service Department does not know vehicles arescheduled for delivery…WHY?WHY?WHY?WHY?

Sales consultants do not notify the Service Dept.of the dates & times the customers will arrive topick up their vehicles…WHY?WHY?WHY?WHY?

There is no process for Sales Consultants toinform the Service Dept. of the dates & timescustomers will pick up their vehicles…WHY?WHY?WHY?WHY?

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ANALYSE THE SITUATIONANALYSE THE SITUATIONANALYSE THE SITUATIONANALYSE THE SITUATION

5 WHY’S 5 WHY’S 5 WHY’S 5 WHY’S

PDCA CYCLE

STEP 11

The DMAIC Model - ANALYSEA

PDCA CYCLE

STEP 11

The DMAIC Model - IMPROVEI

Develop, validate and implement improvementalternatives that will achieve desired performanceresults.

• You can develop alternatives by brainstorming ideaswith your team.

• Validate which alternatives would be most effective,most cost-effective and easiest to implement.

• Implement by assigning action items to specificpeople with a deadline attached thereto.

PDCA CYCLE

STEP 11

The DMAIC Model - CONTROLC

Control these future activities by monitoringon-going performance regularly.

ENDEnd

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