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© SOLYSTIC SAS 2011 - Confidentiel - Communication, reproduction et utilisation interdites.

Service Level Agreement: focus on productivity

A few ways to ensure continuous improvement and sustainability

MAY 2011

Maurizio Puppo

Area Sales Manager for domestic market and French-speaking countries

2 © SOLYSTIC SAS 2011 - Confidentiel - Communication, reproduction et utilisation interdites.


Managers must often make technological investment decisions

(As you probably already know, it’s a dirty job… but someone gotta do it)


Managers must often make technological investment decisionsin order to have high-functional materials at the lowest cost for the organization (nothing simpler than this!)

But what do we actually talk about… When talk about cost?

Much more than narrowly the purchasing investment should be considered

The “total cost of ownership” (TCO) should always be used to support decisions for all the assets bringing meaningful maintenance and operating costs across an expected long life-cycle




Total Cost of Ownership (TCO) concept was pioneered in the late 1980s by Bill Kirwin of Gartner, and used to initially compare the costs of mainframe / minicomputers with PCs and networks

But already in Late 1700’s Napoleon’s engineers paid attention to issues like effectiveness, movement, repair and longevity of cannons

And in 1929 the Manual of American Railway Engineering Association said :“in the event there is a surplus of power, then the total cost of ownership (TCO) should be multiplied by the ratio of the cost of repairs to the total.”


Even the TCO approach may seem self-evident…Many organizations still use separate budgets for system development and system life-cycle support.


This usage can sometime lead to underestimate the importance of operational costs in the initial, decision phase


Operational Costs

Purchasing Investment

According to the Gartner Group (2005), sometimes operational expenses can dominate total cost of ownershipE.g., in network business, operational expenses can account even for 80% of the TCO (on a 10-years period)

This does not seem surprising, if you only bear in mind how many factors influence the Total Cost of Ownership.



unexpected breakdown

losses

Missed or delayed

business opportunities

due to unavailable

technologies

Troubleshooting

Maintenance

Facilities

downtime associated

with poor performance,

injury risk due to an

increased need for

technicians to intervene,

According to the Gartner Group (2005) sometimes, operational expenses can dominate total cost of ownership

Some costs are obvious (operations, maintenance…), others are “hidden” (as missed or delayed business opportunities due to lack of performance or unavailable technologies)



Optimizing the operational costs does not mean blindly cutting costs and resources (or, what is even worse, underestimate them)


The real coming battle for reducing TCO should be about focusing on productivity, eliminating process waste and falls in performance


5 Improve continouously

The SLA (Service Level Agreement , i.e. a service contract where the level of service is formally defined) : the Solystic roadmap to lower TCO


2 Focus on Service Level with dashboards capturing performance

3 Leverage resources, balancing efforts

4 Mitigate risks with redundancy/pre-production policies

1 Integrate people, processes, and technology


Solystic SLA roadmap to lower TCO: integrate people, processes and technologies

SLA allows final user fixing the cost of on-going maintenance and support activities using a well-formulated and enforceable Service Level Agreement,Transferring its focus from technology to service delivery Dramatically simplifying ownership’s phase management





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Integrate people, processes, and technology

Focus on Service Level with dashboards capturing performances

Solystic SLA roadmap to lower TCO: Focus on Service Level with dashboards capturing performances

Focus on “what” is the expected result, stipulating the final level of service, not on on “how” to do the work but

Defining the set of KPI (Key Performance Indexes), i.e. the criteria for a continouous benchmarking

Tracking performance and immediately locate any deviance

Generate alerts and escalations to take immediate corrective action for addressing operational issues



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Leverage resources, balancing efforts

Solystic SLA roadmap to lower TCO: Leverage resources, balancing efforts

Minimize service visits, e.g. avoiding useless interventions for lack of information about the issue or the correct spare parts to use, remotely accessing online equipment data

Detecting any deviance in consumables or spare parts consumptionProven multi-skills resource profiles



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Focus on Service Level with dashboards capturing performance

Mitigate risks with redundancy/pre-production policies


Solystic SLA roadmap to lower TCO: Mitigate risks with redundancy/pre-production policies

Avoid any loss of performances, due for instance to the evolution of environment parameters, using “pre-production” environments exactly reproducing the actual production environment

Avoid any « single point of failure » using redundancy of « strategical » applicative servers (image, tags servers..)



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Mitigate risks with redundanc/pre-production policies

Solystic SLA roadmap to lower TCO: Improve continouously

A systematic and continuous benchmarking process against expected and historical service levels,

This allows the organisation taking action (at any level) to improve its performance and to get new business opportunities

“TMA” modes can be included in SLA in order to fix the budget for evolutions


Solystic SLA success’ story in Belgium

Solystic Belgium in charge of Service Level Agreement since 2005

Both for buildings and sorting infrastructure of bpost


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Integrate people, process and technologies

A single service contract providing all labor and materials for preventative maintenance and shceduled or un-scheduled repair

The whole sorting infrastructure is covered,including buildings as well as multi-vendors equipment and IT system



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Focus on Service Level

Monitoring of Service Level based on Key Performance Indexes

Systems Availability

Sorting Throughput

Sorting Quality

Coding accuracy

IT system and network performances and availabilty



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Mutualization of resources and skill

On-line data Remote access via tablet or smart-phone



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Mitigate risks with redundancy/pre-production policies



Mitigate risks

Redundancy of any potential “points of failure”

Pre-prodution environment to validate new releases and new operational data without perturbing operations



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Improve continouously

The monitoring of service level provide the necessary information to gain insights and rapidly take the appropriate corrective or evolutive actions to increase and ensure the performance level

Evolutions are immediately covered byan extension of SLA Scope


Solystic SLA success’ story in Belgium Seen from the customer's point of view Situation before SLA contract:- mixed maintenance with own Solystic & AEG personel: - difficulties to attract qualified technicians, - difficulties to organise training & spare parts mgt- low availabilities, despite rather ‘uncomplicated machines & software- no clear view on real costs

Installation of new sorting centers also meant drastic increase of complexity of hard- & software of sorting installations: urgent decision was needed for either professionalize own mainteannce service or outsourcing to third party.



Solystic SLA success’ story in Belgium Seen from the customer’s point of view

SLA contract was afterwards negotiated together with contract award of sorting machines.

Solystic maintenance also for machines from other suppliers: NEC, Vanderlande.

SLA experience:- good prices, known costs- low costs for additional machines, relation total purchase price – maintenance cost still improving- comparison with other postal organizations positive



Solystic SLA success’ story in Belgium Seen from the customer’s point of view

- KPI’s on availability, throughput, OCR readrates etc.. linked to penalties (daily & monthly): very high performances on all KPI’s.

- Continuous improvement included in contract.

- Maintenance teams involved in new upgrades and installations.

- Introduction of OEE, productive maintenance



Organizations with a large investment in industrial infrastructure are especially sensitive to the total cost of ownership of their technology;

Yet, the real coming battle for reducing this cost should be about focusing on productivity and eliminating process waste and falls in performance, rather than blindly cutting costs and resources.

Solystic SLA Roadmap, a way to do it


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© SOLYSTIC SAS 2011 - Confidentiel - Communication, reproduction et utilisation interdites.

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