Service Demand Management (SDM)

For years, support employees have been criticized for lack of business knowledge. Perhaps all that is needed is a little refresher in the fundamentals. The Law of Supply and Demand states:

The price of an item will go down if the supply of an item increases or if demand for the item decreases. The price of an item will go up if the supply of an item decreases or if the demand of the item increases. In general, the price of an item is pushed toward the level at which the quantity supplied will equal the quantity demanded.

So what does this mean for you? How do we manage demand? What’s wrong with this picture? Well, the glaring problem for most internal service and support organizations (HR, IT, Finance, Legal, Shared Services, Facilities, etc.) is that there is no price for services offered. If the customers (those who create demand) are not charged a price, then this messes up the law of supply and demand. If you try to circumvent a law of economics or nature, generally speaking, you will be creating whole new set of problems. When things are considered free (no price), there’s generally a free-for-all which unleashes unconstrained demand for the product or service. Unconstrained demand typically has undesirable consequences such as resource overrun and unnecessarily consumed resources.

So, step 1 in rectifying the above situation is to incorporate price into every service and product offered. Sounds simple, right? Well, of course not. Internal services are not a free marketplace full of competitors and alternatives. You serve a generally captive audience; the employees and customers of your organization. Determining price under these circumstances is not so easy but need not be difficult.

There are two general approaches to pricing services:

  • Cost Plus, meaning, using best efforts and available information, assemble all of the cost inputs of a product or service, then add a margin (or fudge factor) to determine price

  • Estimation, meaning using a reasonable guess based on similar services and products provided in the public or based on available information

Either method is OK, but of course, accuracy has tremendous value at some point. This said, using any method to put price in front of your customers will be a step toward aligning your organization with the Law of Supply and Demand and therefore your necessary first step toward Demand Management.

An Actionable Service Catalog like PMG SCS is the place where the prices of your services can be published, configured, and understood by your clients. Just like we as consumers shop online and make purchase (or not to purchase) decisions, price is a clear determining factor.

Several other important concepts are at work once price enters the picture. For example, buyers (demanders, requesters, clients, customers) might want to know or do several things:

  1. How do I get a better price? (discount)

  2. How soon can I get the product or service? (Service Level)

  3. If I pay a premium can I get some premium features or service? (i.e., next business day)

  4. Can I change features or options? (Can I configure/customize the price?)

  5. How do I “pay for” the service? (Credit card, interdepartmental chargeback, etc.?)

Again, this is where an actionable service catalog like PMG SCS comes in and can provide you with the technological means to handle all of these concepts, just like you would find in any online shopping site. These are standards that we have all come to expect. To achieve true Demand Management, you must implement a capable Service Catalog.

 

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