Typically, the two types of demand are Value Demand and Failure Demand.
When I was in college, I worked in a pub that served food. Whenever the pub got busy, the quality coming from the kitchen took a steep nosedive; food being overcooked, undercooked, the wrong food being sent and so on, and as a result, many of the customers rejected what they were given. Conservatively, I would say that at peak times as many as half of the dishes that left the kitchen were sent back for one reason or another.
Think about that for a moment: to feed 100 customers, the kitchen might need to produce upwards of 150 plates of food!
This obviously made for some fairly unhappy customers, and it put even more strain on an already stretched kitchen. In this instance, Supply was unable to meet Demand…
Demand, in general, can be split into 2 categories; Value Demand: “I would like the Chicken Goujons”, and Failure Demand: “My Chicken Goujons appear to be Fish Fingers”.
Author John Seddon coined these terms and defines Failure Demand as “demand caused by a failure to do something or do something right for the customer”. When describing this concept to people, I find that it helps their understanding to consider if an interaction with the customer could have been avoided.
As I have learnt more about Lean and Continuous Improvement, I see that Failure Demand is everywhere. You might think that the equivalent of the above example could not possibly exist in your organisation (and you would be forgiven for that) however, take a moment to think about your recent interactions as a customer and consider how many of them were avoidable. A few of my recent interactions with companies were:
- I contacted a home furniture retailer following receipt of a bed we ordered as there were no slats included
- I contacted a bank after opening a new current account as the switch from the old account had not been processed
- I contacted an online retailer as I was charged for, and asked for feedback on, an order which was never received
I imagine you experience similar situations from time to time. These are all examples of Failure Demand.
Nobody wins in these situations – it significantly increases customer effort, negatively impacts their perception of the organisation and drives up operating costs. So why then does Failure Demand often make up over half of the overall demand in service-based organisations?
Generally, business leaders who are in a position to positively impact these issues do not see them. They are reliant on the service delivery metrics that are in place to understand the work and to determine things like resource requirements. Consider the pub kitchen, the available data here comes from the POS system and tells us things like how many dishes were sold, but it does not show how many were sent back.
It’s often even more abstract than that – the metrics in place for the distribution operation in the home furniture retailer that sold me half a bed, almost certainly do not include ‘volume of calls relating to slats not being included’.
How then, can we possibly hope to combat this issue?
The answer can be quite simple: leaders need to observe the work where it happens; they need to rely less on the standard (and often arbitrary) metrics that are in place and ‘look with their feet’ to determine what is actually happening in the organisation. When this is done, not only does it become obvious to the individual that their metrics are not capable of highlighting Failure Demand, it also becomes apparent that the corresponding targets can be CONTRIBUTE to the existence of Failure Demand… wait, what?
Let’s take our pub example again. Let’s say they were measuring the time from the order to the time the food was served. Let’s also say they placed a target on that measure too. So, 98% of orders to be fulfilled within 25 minutes. The kitchen is constrained by how much it can produce due to space, equipment and staff etc. When demand increases i.e. the pub gets busy, then the pressure to meet a metric becomes the root cause of the errors described above, which in turn drives up Failure Demand. The Failure Demand contributes to the root cause issue – Demand – and therefore the problem perpetuates.
Start by asking Why…
Most systems are set up to measure the ‘What’s’ and the ‘How Many’s’; for instance, a Bank may measure the types of calls received (the ‘What’) and the volume of calls per type (the ‘How Many’). But the ‘What’s’ can only be typified to a point, therefore the metrics are often not indicative of the ‘Why’.
If they were to investigate the ‘Why’ behind the calls they may find that of the calls that were classified as relating to opening a new account:
- 59% of calls were a request for an Account Opening (VALUE DEMAND!)
- 23% of calls were chasing an update for their Account Opening (FAILURE DEMAND!)
- 18% of calls were because of missing Direct Debits from the Switch process (FAILURE DEMAND!)
I’ve over-simplified that example, but you get the point.
Take a look at demand in your organisation – you might be surprised at what you find.