Failure Demand

The Loss Function tells us that Service operations, when fully optimised, will deliver only the customer’s ‘nominal value’, i.e. at the point where the losses of the system are minimised.

System Losses often manifest themselves as Failure Demand. This is demand placed on the system, not as a result of delivering the nominal value to the customer (the Value Demand), but due to failings within the system, i.e. a “failure to do something or do something right for the customer.”

Failure Demand can be a good (proxy) measure of the overall optimisation of the system, although the actual failure may be far removed from the point at which it becomes apparent; and the cause/s somewhere else again!

Contact Centres are a frequent point in the system where failings within the system manifest themselves as Failure Demand. Sometimes also referred to as “Avoidable Contact”, contact relating to undelivered goods, wrong goods, faulty goods, unpaid bills, or uncollected refuse are all examples of Failure Demand. If you work within a Contact Centre, then you will not be alone if you find that a very high percentage of the contact falls within this category!

The concept is particularly useful when applied to complex service operations, involving multiple interrelated services and delivery agencies, such as the health service. In the UK, Accident and Emergency (A&E) services suffer from major demand pressures due to people being unable to get a GP appointment and due to failings in Adult Social care. Looked at as a system involving Primary Care, A&E and Social Services, the resulting A&E demand can all be considered failure demand.

The above example illustrates that where you place your system boundary can have a major impact when considering failure demand. Staying with healthcare, Type 2 Diabetes is placing an ever increasing demand on health services worldwide. But the risk of developing type 2 diabetes can be significantly reduced through lifestyle choices, so it can be argued that much of this demand is failure demand. It is increasingly being recognised in healthcare that doing something right for the customer here is to move away from a delivery model largely based on treatment, to one based on prevention.

The Theory of Variation tells us that, as with any behavioural characteristic of the system, the first step in working with Failure Demand is to establish whether it is predictable, i.e. the type and frequency of demand. If predictable, then we can act on the system to remove the Failure Demand and improve the optimisation of the system. Definitely the wrong thing to do is simply throw more resources at the point at which the increased demand is occurring, be it a Contact Centre or A&E.

Further Reading…..