Question: Keaston-Trenton Service (KTS) was a domestic
Keaston-Trenton Service (KTS) was a domestic heating boiler maintenance company, based in the East of England. Founded in the 1960s by plumber Christopher Trenton, it had grown substantially and was now run jointly by Christopher’s two children, Ros, who looked after all marketing, sales and finance, and Mark, who looked after operations and supply issues. The company initially offered maintenance and repair services to domestic (household) customers with gas or oil-burning boilers and had expanded into offering similar services to business customers. Within the last two years KTS had also moved beyond simply servicing systems, to designing and installing HVAC (heating, ventilating and air conditioning) systems for business customers. ‘Expanding into the design and installation business was something of a gamble’, according to Ros. ‘At the time, the B2B [business-to-business] part of our work was clearly showing more growth potential than our traditional domestic business, and servicing business customers was also more profitable. 5o far, the installation venture has had mixed success. The jobs that we have done have been successful and our new customers very satisfied, but so far we have lost money on them. Partly, this is because we have had to invest in extra workshop space at our headquarters and employ a system designer, who is relatively expensive (but good) and only partly utilized at the moment. Hopefully, profitability will improve as the volume of installation jobs increases.
Table 1.3 shows the number of contracts and the revenue from domestic servicing, business servicing and the design and installation businesses, both for the previous year and the forecast for the current year of operation (all figures as of end Qtr 3). The profitability of the three offerings was difficult to determine exactly, but Ros and Mark were satisfied with the contribution of domestic boiler servicing, and especially of the business boiler servicing activities.
![Keaston-Trenton Service (KTS) was a domestic heating boiler maintenance company, based in the East of England. Founded in the 1960s by plumber Christopher Trenton, it had grown substantially and was now run jointly by Christopher’s two children, Ros, who looked after all marketing, sales and finance, and Mark, who looked after operations and supply issues. The company initially offered maintenance and repair services to domestic (household) customers with gas or oil-burning boilers and had expanded into offering similar services to business customers. Within the last two years KTS had also moved beyond simply servicing systems, to designing and installing HVAC (heating, ventilating and air conditioning) systems for business customers. ‘Expanding into the design and installation business was something of a gamble’, according to Ros. ‘At the time, the B2B [business-to-business] part of our work was clearly showing more growth potential than our traditional domestic business, and servicing business customers was also more profitable. 5o far, the installation venture has had mixed success. The jobs that we have done have been successful and our new customers very satisfied, but so far we have lost money on them. Partly, this is because we have had to invest in extra workshop space at our headquarters and employ a system designer, who is relatively expensive (but good) and only partly utilized at the moment. Hopefully, profitability will improve as the volume of installation jobs increases.
Table 1.3 shows the number of contracts and the revenue from domestic servicing, business servicing and the design and installation businesses, both for the previous year and the forecast for the current year of operation (all figures as of end Qtr 3). The profitability of the three offerings was difficult to determine exactly, but Ros and Mark were satisfied with the contribution of domestic boiler servicing, and especially of the business boiler servicing activities.
KTS services
Domestic boiler servicing was seen by Ros and Mark as a ‘cash cow’, generating revenues at a fairly steady rate. There were many different makes of boiler installed, but KTS only contracted to service the most common, which accounted for about 60 per cent of the installed base.
Less-common boilers were often serviced by the manufacturers that supplied them. Domestic servicing accounted for by far the most individual contracts for KTS, with customers spread over most of the East of England. Around 95 per cent of customers renewed their contracts each year, which was seen as a testament both to their quality of service and the company’s keen pricing. ‘It’s a price-sensitive market’, said Ros. ‘We have to be competitive, but that’s not all that counts. Most visits by our technicians are routine yearly services, but about 20 per cent of visits are ‘call-outs’ with varying degrees of urgency. If a home boiler stops working on a winter weekend, the householder obviously expects us to respond quickly, and we try our best to get a technician to them within four or five hours. If it’s simply a non-urgent controller fault in summer, we would probably agree a mutually convenient time to visit within a couple of days. Actually, the idea of a ‘mutually convenient time’ is important in this market. Householders often have to make special arrangements to be in, so we have to be flexible in arranging appointments and absolutely reliable in being there on time. Although call-outs are only 20 per cent of visits, they cause the majority of problems because both their timing and duration are unpredictable. Also,
customers are sensitized to boiler performance following an emergency call-out. What we call the ‘robustness of the repair’ has to be high. Once it’s fixed, it should stay fixed, at least for a reasonable length of time’.
Business boiler servicing was different. Most customers’ systems had been, to some extent, customized, so thevariety of technical faults that the technicians had to cope with was higher. Also, a somewhat higher proportion of visits were call-outs (between 25 and 30 per cent) so demand was slightly less predictable. The real difference between domestic and business customers, according to Mark, was the nature of the contact between KTS technicians and customers. ‘Business customers want to be involved in knowing the best way to use their systems. They want advice, and they want to know what you are doing. 5o, for example, if you install an update to the system control software, they usually want to be informed. They also either keep a servicing log themselves, or ask us to report on measures such as boiler efficiency, time between repairs, downtime due to failure or servicing (particularly important), and so on. Call-out response time is particularly important for them, but because there is usually someone always on their premises, it is easier to arrange a time to call for regular servicing.’
Both Ros and Mark were disappointed that the design and installation business had been slow to take off. The one system designer that they had hired was proving an asset, and two of their technicians from the business servicing side of the operation had been moved over to installation work and were proving successful. ‘It’s a tight team of three at the moment’, said Mark, ‘and that should give us enough capacity for the remainder of the year. But we will eventually need to recruit more technicians as business (hopefully) builds up.’ The extra workshop space that the firm had rented (on the same site) and some new equipment had allowed the design and installation team to adapt and customize boiler and control systems to suit individual customers’ requirements. ‘Many installers are owned by boiler manufacturers and can be guilty of pushing a standard solution on customers. With us, every system is customized to each customer’s needs.’ (Mark Trenton)
KTS organization
A small administrative office of four people reported directly to Ros and Mark, and helped manage accounting, HR, invoicing, contract maintenance and purchasing activities. The office was adjacent to a workshop space shared by the domestic and business boiler technicians. KTS
employed 42 technicians in total. Nominally 26 of these worked on domestic boiler servicing and repair, and 16 on business boiler servicing and repair, yet there was some flexibility between the two groups. ‘We are lucky that our technicians are usually reasonable about helping each
other out’, said Mark. ‘It is generally easier for the technicians used to serving business customers to serve domestic ones. They are not always as efficient as those used to domestic customers, but their customer-facing skills are usually better. Domestic boiler technicians do not always appreciate that business customers want more reassurance and information generally. Also, it is important for business customers to receive a full technical report within
a couple of days of a visit. Domestic technicians are not used to doing that.’
Improving service efficiency
Although both Ros and Mark were broadly happy with the way the business was developing, Mark in particular felt that they could be more efficient in how they organized themselves. ‘Our costs have been increasing more or less in line with revenue growth, but we should really be starting to get some economies of scale. We need to improve our productivity, and I think we can achieve this by reducing waste. For example, we have found that our technicians can waste up to 30 per cent of their time on non-value-adding activities, such as form-filling or retrieving technical information.’
Mark’s solution was to tackle waste in a number of ways:
• Establish key performance indicators (KPIs) and simple metrics – performance measures must be clearly explained so that technicians understand the objectives that underlie their targets in terms of availability, utilization and efficiency.
• Better forecasting – demand was forecast only in the simplest terms. Historical data to account for seasonality had not been used, nor had obvious factors, such as weather, been monitored.
• Slicker processes – administrative and other processes had been developed ‘organically’ with little consideration of efficiency.
• Better dispatching – dispatching (the allocation of jobs to individual technicians) was usually done on a simple ‘first come, first served’ basis without taking the efficient use of technicians’ time into account. It was believed that both travel time and ‘time to uptime’ could be improved
by better allocation of jobs.
• Better training – in the previous two years, three technicians had retired, one had been dismissed and two left for other jobs. Mark had found difficulty in replacing them with experienced people. It had become clear that it would become more important to hire inexperienced people and train them. In Mark’s words, ‘to get smart people with the right attitude and problem-solving skills, who don’t mind getting their hands dirty, and give
them the technical skills’. In addition to thinking about how best to improve efficiency,
future market growth was also a concern. Two developments were occupying Ros and Mark’s thoughts, one in the short to medium term, the other in the longer term.
Future growth – short to medium term Demand had been growing steadily, largely by KTS winning business from smaller competitors. But Mark wondered whether the nature of what customers would want was changing. An opportunity had been suggested by one of KTS’s oldest business customers. They had been approached by another HVAC company who had asked if they would be interested in a ‘total’ service where the company would both supply and operate a new heating system. In effect they were asking if KTS’s customer would totally outsource their heating to them. It was an idea that Mark was intrigued by.
‘I have heard about this type of deal before, but mainly for large businesses and offered by facilities management companies. It can involve companies like ours actually buying the heating system, installing it and taking responsibility for managing, not just the system itself, but actually how much energy is used. Exactly how it might work will, I guess, depend on the terms of the contract. Does the customer pay an amount per unit of energy used (perhaps linked to the wholesale price of energy)? Or does the customer simply pay a fixed amount for agreed operating characteristics, such as maintaining a particular temperature range? We would have to think carefully about the implications for us before offering such a service. The customer who told us about the approach does not want to desert us, but who
knows what they might do in the future?’
The future – longer term
According to the Committee on Climate Change (CCC), an independent advisory body that assisted the UK government in reaching required carbon levels, meeting the UK’s target to reduce emissions would require reducing domestic emissions by at least 3 per cent per year – a challenging target. This would mean that within a few years it could become illegal to install gas boilers in new-build homes. One possible future that was discussed in the industry was a general move towards a hydrogen network (burning hydrogen produces no emissions and creates only water vapors and heat). However, a more likely future would probably involve combining different renewable technologies to provide low-carbon heat. The lowest-cost longterm solution could be to replace gas and oil boilers with hydrogen alternatives alongside electric heating generated from renewable sources such as air source or ground source heat pumps, which use small amounts of electricity to draw natural heat from either the air or ground. To make heat
pumps effective, all existing and new-build homes would need to be made energy efficient by using far better levels of insulation.
Ros thought that these developments could prove far more challenging for KTS. ‘Both Mark and I had assumed that we would be in this business for at least another 20 to 30 years. We both have families, so the long-term future of the business is obviously important to us. New heating technologies and fuels pose both opportunities and threats (yes, I’ve done an MBA) for us. Reducing fossil fuel consumption will definitely mean that we have to change what we do. And some aspects of demand may reduce. For example, ground source systems require little maintenance. But if there is going to be an upswing in the installation market, we need to be on top of it.’
Questions
1. How would you position each of KTS’s services on the ‘four V’ dimensions of volume, variety, variation and visibility?
2. What aspects of performance are important for KTS to win more servicing business?
3. How would you evaluate the potential of offering a ‘total’ service like the one the KTS customer had been offered?
4. What should KTS be doing to prepare for possible longer-term changes in the industry?](../images/keaston-trenton-service-kts-was-a-domestic-heating-boiler-255547-1.jpg)
KTS services
Domestic boiler servicing was seen by Ros and Mark as a ‘cash cow’, generating revenues at a fairly steady rate. There were many different makes of boiler installed, but KTS only contracted to service the most common, which accounted for about 60 per cent of the installed base.
Less-common boilers were often serviced by the manufacturers that supplied them. Domestic servicing accounted for by far the most individual contracts for KTS, with customers spread over most of the East of England. Around 95 per cent of customers renewed their contracts each year, which was seen as a testament both to their quality of service and the company’s keen pricing. ‘It’s a price-sensitive market’, said Ros. ‘We have to be competitive, but that’s not all that counts. Most visits by our technicians are routine yearly services, but about 20 per cent of visits are ‘call-outs’ with varying degrees of urgency. If a home boiler stops working on a winter weekend, the householder obviously expects us to respond quickly, and we try our best to get a technician to them within four or five hours. If it’s simply a non-urgent controller fault in summer, we would probably agree a mutually convenient time to visit within a couple of days. Actually, the idea of a ‘mutually convenient time’ is important in this market. Householders often have to make special arrangements to be in, so we have to be flexible in arranging appointments and absolutely reliable in being there on time. Although call-outs are only 20 per cent of visits, they cause the majority of problems because both their timing and duration are unpredictable. Also,
customers are sensitized to boiler performance following an emergency call-out. What we call the ‘robustness of the repair’ has to be high. Once it’s fixed, it should stay fixed, at least for a reasonable length of time’.
Business boiler servicing was different. Most customers’ systems had been, to some extent, customized, so thevariety of technical faults that the technicians had to cope with was higher. Also, a somewhat higher proportion of visits were call-outs (between 25 and 30 per cent) so demand was slightly less predictable. The real difference between domestic and business customers, according to Mark, was the nature of the contact between KTS technicians and customers. ‘Business customers want to be involved in knowing the best way to use their systems. They want advice, and they want to know what you are doing. 5o, for example, if you install an update to the system control software, they usually want to be informed. They also either keep a servicing log themselves, or ask us to report on measures such as boiler efficiency, time between repairs, downtime due to failure or servicing (particularly important), and so on. Call-out response time is particularly important for them, but because there is usually someone always on their premises, it is easier to arrange a time to call for regular servicing.’
Both Ros and Mark were disappointed that the design and installation business had been slow to take off. The one system designer that they had hired was proving an asset, and two of their technicians from the business servicing side of the operation had been moved over to installation work and were proving successful. ‘It’s a tight team of three at the moment’, said Mark, ‘and that should give us enough capacity for the remainder of the year. But we will eventually need to recruit more technicians as business (hopefully) builds up.’ The extra workshop space that the firm had rented (on the same site) and some new equipment had allowed the design and installation team to adapt and customize boiler and control systems to suit individual customers’ requirements. ‘Many installers are owned by boiler manufacturers and can be guilty of pushing a standard solution on customers. With us, every system is customized to each customer’s needs.’ (Mark Trenton)
KTS organization
A small administrative office of four people reported directly to Ros and Mark, and helped manage accounting, HR, invoicing, contract maintenance and purchasing activities. The office was adjacent to a workshop space shared by the domestic and business boiler technicians. KTS
employed 42 technicians in total. Nominally 26 of these worked on domestic boiler servicing and repair, and 16 on business boiler servicing and repair, yet there was some flexibility between the two groups. ‘We are lucky that our technicians are usually reasonable about helping each
other out’, said Mark. ‘It is generally easier for the technicians used to serving business customers to serve domestic ones. They are not always as efficient as those used to domestic customers, but their customer-facing skills are usually better. Domestic boiler technicians do not always appreciate that business customers want more reassurance and information generally. Also, it is important for business customers to receive a full technical report within
a couple of days of a visit. Domestic technicians are not used to doing that.’
Improving service efficiency
Although both Ros and Mark were broadly happy with the way the business was developing, Mark in particular felt that they could be more efficient in how they organized themselves. ‘Our costs have been increasing more or less in line with revenue growth, but we should really be starting to get some economies of scale. We need to improve our productivity, and I think we can achieve this by reducing waste. For example, we have found that our technicians can waste up to 30 per cent of their time on non-value-adding activities, such as form-filling or retrieving technical information.’
Mark’s solution was to tackle waste in a number of ways:
• Establish key performance indicators (KPIs) and simple metrics – performance measures must be clearly explained so that technicians understand the objectives that underlie their targets in terms of availability, utilization and efficiency.
• Better forecasting – demand was forecast only in the simplest terms. Historical data to account for seasonality had not been used, nor had obvious factors, such as weather, been monitored.
• Slicker processes – administrative and other processes had been developed ‘organically’ with little consideration of efficiency.
• Better dispatching – dispatching (the allocation of jobs to individual technicians) was usually done on a simple ‘first come, first served’ basis without taking the efficient use of technicians’ time into account. It was believed that both travel time and ‘time to uptime’ could be improved
by better allocation of jobs.
• Better training – in the previous two years, three technicians had retired, one had been dismissed and two left for other jobs. Mark had found difficulty in replacing them with experienced people. It had become clear that it would become more important to hire inexperienced people and train them. In Mark’s words, ‘to get smart people with the right attitude and problem-solving skills, who don’t mind getting their hands dirty, and give
them the technical skills’. In addition to thinking about how best to improve efficiency,
future market growth was also a concern. Two developments were occupying Ros and Mark’s thoughts, one in the short to medium term, the other in the longer term.
Future growth – short to medium term Demand had been growing steadily, largely by KTS winning business from smaller competitors. But Mark wondered whether the nature of what customers would want was changing. An opportunity had been suggested by one of KTS’s oldest business customers. They had been approached by another HVAC company who had asked if they would be interested in a ‘total’ service where the company would both supply and operate a new heating system. In effect they were asking if KTS’s customer would totally outsource their heating to them. It was an idea that Mark was intrigued by.
‘I have heard about this type of deal before, but mainly for large businesses and offered by facilities management companies. It can involve companies like ours actually buying the heating system, installing it and taking responsibility for managing, not just the system itself, but actually how much energy is used. Exactly how it might work will, I guess, depend on the terms of the contract. Does the customer pay an amount per unit of energy used (perhaps linked to the wholesale price of energy)? Or does the customer simply pay a fixed amount for agreed operating characteristics, such as maintaining a particular temperature range? We would have to think carefully about the implications for us before offering such a service. The customer who told us about the approach does not want to desert us, but who
knows what they might do in the future?’
The future – longer term
According to the Committee on Climate Change (CCC), an independent advisory body that assisted the UK government in reaching required carbon levels, meeting the UK’s target to reduce emissions would require reducing domestic emissions by at least 3 per cent per year – a challenging target. This would mean that within a few years it could become illegal to install gas boilers in new-build homes. One possible future that was discussed in the industry was a general move towards a hydrogen network (burning hydrogen produces no emissions and creates only water vapors and heat). However, a more likely future would probably involve combining different renewable technologies to provide low-carbon heat. The lowest-cost longterm solution could be to replace gas and oil boilers with hydrogen alternatives alongside electric heating generated from renewable sources such as air source or ground source heat pumps, which use small amounts of electricity to draw natural heat from either the air or ground. To make heat
pumps effective, all existing and new-build homes would need to be made energy efficient by using far better levels of insulation.
![Keaston-Trenton Service (KTS) was a domestic heating boiler maintenance company, based in the East of England. Founded in the 1960s by plumber Christopher Trenton, it had grown substantially and was now run jointly by Christopher’s two children, Ros, who looked after all marketing, sales and finance, and Mark, who looked after operations and supply issues. The company initially offered maintenance and repair services to domestic (household) customers with gas or oil-burning boilers and had expanded into offering similar services to business customers. Within the last two years KTS had also moved beyond simply servicing systems, to designing and installing HVAC (heating, ventilating and air conditioning) systems for business customers. ‘Expanding into the design and installation business was something of a gamble’, according to Ros. ‘At the time, the B2B [business-to-business] part of our work was clearly showing more growth potential than our traditional domestic business, and servicing business customers was also more profitable. 5o far, the installation venture has had mixed success. The jobs that we have done have been successful and our new customers very satisfied, but so far we have lost money on them. Partly, this is because we have had to invest in extra workshop space at our headquarters and employ a system designer, who is relatively expensive (but good) and only partly utilized at the moment. Hopefully, profitability will improve as the volume of installation jobs increases.
Table 1.3 shows the number of contracts and the revenue from domestic servicing, business servicing and the design and installation businesses, both for the previous year and the forecast for the current year of operation (all figures as of end Qtr 3). The profitability of the three offerings was difficult to determine exactly, but Ros and Mark were satisfied with the contribution of domestic boiler servicing, and especially of the business boiler servicing activities.
KTS services
Domestic boiler servicing was seen by Ros and Mark as a ‘cash cow’, generating revenues at a fairly steady rate. There were many different makes of boiler installed, but KTS only contracted to service the most common, which accounted for about 60 per cent of the installed base.
Less-common boilers were often serviced by the manufacturers that supplied them. Domestic servicing accounted for by far the most individual contracts for KTS, with customers spread over most of the East of England. Around 95 per cent of customers renewed their contracts each year, which was seen as a testament both to their quality of service and the company’s keen pricing. ‘It’s a price-sensitive market’, said Ros. ‘We have to be competitive, but that’s not all that counts. Most visits by our technicians are routine yearly services, but about 20 per cent of visits are ‘call-outs’ with varying degrees of urgency. If a home boiler stops working on a winter weekend, the householder obviously expects us to respond quickly, and we try our best to get a technician to them within four or five hours. If it’s simply a non-urgent controller fault in summer, we would probably agree a mutually convenient time to visit within a couple of days. Actually, the idea of a ‘mutually convenient time’ is important in this market. Householders often have to make special arrangements to be in, so we have to be flexible in arranging appointments and absolutely reliable in being there on time. Although call-outs are only 20 per cent of visits, they cause the majority of problems because both their timing and duration are unpredictable. Also,
customers are sensitized to boiler performance following an emergency call-out. What we call the ‘robustness of the repair’ has to be high. Once it’s fixed, it should stay fixed, at least for a reasonable length of time’.
Business boiler servicing was different. Most customers’ systems had been, to some extent, customized, so thevariety of technical faults that the technicians had to cope with was higher. Also, a somewhat higher proportion of visits were call-outs (between 25 and 30 per cent) so demand was slightly less predictable. The real difference between domestic and business customers, according to Mark, was the nature of the contact between KTS technicians and customers. ‘Business customers want to be involved in knowing the best way to use their systems. They want advice, and they want to know what you are doing. 5o, for example, if you install an update to the system control software, they usually want to be informed. They also either keep a servicing log themselves, or ask us to report on measures such as boiler efficiency, time between repairs, downtime due to failure or servicing (particularly important), and so on. Call-out response time is particularly important for them, but because there is usually someone always on their premises, it is easier to arrange a time to call for regular servicing.’
Both Ros and Mark were disappointed that the design and installation business had been slow to take off. The one system designer that they had hired was proving an asset, and two of their technicians from the business servicing side of the operation had been moved over to installation work and were proving successful. ‘It’s a tight team of three at the moment’, said Mark, ‘and that should give us enough capacity for the remainder of the year. But we will eventually need to recruit more technicians as business (hopefully) builds up.’ The extra workshop space that the firm had rented (on the same site) and some new equipment had allowed the design and installation team to adapt and customize boiler and control systems to suit individual customers’ requirements. ‘Many installers are owned by boiler manufacturers and can be guilty of pushing a standard solution on customers. With us, every system is customized to each customer’s needs.’ (Mark Trenton)
KTS organization
A small administrative office of four people reported directly to Ros and Mark, and helped manage accounting, HR, invoicing, contract maintenance and purchasing activities. The office was adjacent to a workshop space shared by the domestic and business boiler technicians. KTS
employed 42 technicians in total. Nominally 26 of these worked on domestic boiler servicing and repair, and 16 on business boiler servicing and repair, yet there was some flexibility between the two groups. ‘We are lucky that our technicians are usually reasonable about helping each
other out’, said Mark. ‘It is generally easier for the technicians used to serving business customers to serve domestic ones. They are not always as efficient as those used to domestic customers, but their customer-facing skills are usually better. Domestic boiler technicians do not always appreciate that business customers want more reassurance and information generally. Also, it is important for business customers to receive a full technical report within
a couple of days of a visit. Domestic technicians are not used to doing that.’
Improving service efficiency
Although both Ros and Mark were broadly happy with the way the business was developing, Mark in particular felt that they could be more efficient in how they organized themselves. ‘Our costs have been increasing more or less in line with revenue growth, but we should really be starting to get some economies of scale. We need to improve our productivity, and I think we can achieve this by reducing waste. For example, we have found that our technicians can waste up to 30 per cent of their time on non-value-adding activities, such as form-filling or retrieving technical information.’
Mark’s solution was to tackle waste in a number of ways:
• Establish key performance indicators (KPIs) and simple metrics – performance measures must be clearly explained so that technicians understand the objectives that underlie their targets in terms of availability, utilization and efficiency.
• Better forecasting – demand was forecast only in the simplest terms. Historical data to account for seasonality had not been used, nor had obvious factors, such as weather, been monitored.
• Slicker processes – administrative and other processes had been developed ‘organically’ with little consideration of efficiency.
• Better dispatching – dispatching (the allocation of jobs to individual technicians) was usually done on a simple ‘first come, first served’ basis without taking the efficient use of technicians’ time into account. It was believed that both travel time and ‘time to uptime’ could be improved
by better allocation of jobs.
• Better training – in the previous two years, three technicians had retired, one had been dismissed and two left for other jobs. Mark had found difficulty in replacing them with experienced people. It had become clear that it would become more important to hire inexperienced people and train them. In Mark’s words, ‘to get smart people with the right attitude and problem-solving skills, who don’t mind getting their hands dirty, and give
them the technical skills’. In addition to thinking about how best to improve efficiency,
future market growth was also a concern. Two developments were occupying Ros and Mark’s thoughts, one in the short to medium term, the other in the longer term.
Future growth – short to medium term Demand had been growing steadily, largely by KTS winning business from smaller competitors. But Mark wondered whether the nature of what customers would want was changing. An opportunity had been suggested by one of KTS’s oldest business customers. They had been approached by another HVAC company who had asked if they would be interested in a ‘total’ service where the company would both supply and operate a new heating system. In effect they were asking if KTS’s customer would totally outsource their heating to them. It was an idea that Mark was intrigued by.
‘I have heard about this type of deal before, but mainly for large businesses and offered by facilities management companies. It can involve companies like ours actually buying the heating system, installing it and taking responsibility for managing, not just the system itself, but actually how much energy is used. Exactly how it might work will, I guess, depend on the terms of the contract. Does the customer pay an amount per unit of energy used (perhaps linked to the wholesale price of energy)? Or does the customer simply pay a fixed amount for agreed operating characteristics, such as maintaining a particular temperature range? We would have to think carefully about the implications for us before offering such a service. The customer who told us about the approach does not want to desert us, but who
knows what they might do in the future?’
The future – longer term
According to the Committee on Climate Change (CCC), an independent advisory body that assisted the UK government in reaching required carbon levels, meeting the UK’s target to reduce emissions would require reducing domestic emissions by at least 3 per cent per year – a challenging target. This would mean that within a few years it could become illegal to install gas boilers in new-build homes. One possible future that was discussed in the industry was a general move towards a hydrogen network (burning hydrogen produces no emissions and creates only water vapors and heat). However, a more likely future would probably involve combining different renewable technologies to provide low-carbon heat. The lowest-cost longterm solution could be to replace gas and oil boilers with hydrogen alternatives alongside electric heating generated from renewable sources such as air source or ground source heat pumps, which use small amounts of electricity to draw natural heat from either the air or ground. To make heat
pumps effective, all existing and new-build homes would need to be made energy efficient by using far better levels of insulation.
Ros thought that these developments could prove far more challenging for KTS. ‘Both Mark and I had assumed that we would be in this business for at least another 20 to 30 years. We both have families, so the long-term future of the business is obviously important to us. New heating technologies and fuels pose both opportunities and threats (yes, I’ve done an MBA) for us. Reducing fossil fuel consumption will definitely mean that we have to change what we do. And some aspects of demand may reduce. For example, ground source systems require little maintenance. But if there is going to be an upswing in the installation market, we need to be on top of it.’
Questions
1. How would you position each of KTS’s services on the ‘four V’ dimensions of volume, variety, variation and visibility?
2. What aspects of performance are important for KTS to win more servicing business?
3. How would you evaluate the potential of offering a ‘total’ service like the one the KTS customer had been offered?
4. What should KTS be doing to prepare for possible longer-term changes in the industry?](../images/keaston-trenton-service-kts-was-a-domestic-heating-boiler-255547-2.jpg)
Ros thought that these developments could prove far more challenging for KTS. ‘Both Mark and I had assumed that we would be in this business for at least another 20 to 30 years. We both have families, so the long-term future of the business is obviously important to us. New heating technologies and fuels pose both opportunities and threats (yes, I’ve done an MBA) for us. Reducing fossil fuel consumption will definitely mean that we have to change what we do. And some aspects of demand may reduce. For example, ground source systems require little maintenance. But if there is going to be an upswing in the installation market, we need to be on top of it.’
Questions
1. How would you position each of KTS’s services on the ‘four V’ dimensions of volume, variety, variation and visibility?
2. What aspects of performance are important for KTS to win more servicing business?
3. How would you evaluate the potential of offering a ‘total’ service like the one the KTS customer had been offered?
4. What should KTS be doing to prepare for possible longer-term changes in the industry?
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> How Can I Show My Professionalism?
> Discuss learning theories and their relevance in shaping behavior.
> Describe perception and the factors that influence it.
> Describe different personality theories.
> Explain the role that attitudes play in job performance.
> Identify the focus and goals of organizational behavior (OB).
> Discuss contemporary issues in managing teams.
> Discuss how groups are turned into effective teams.
> Describe the major concepts of group behavior.
> Define group and describe the stages of group development.
> Explain what workforce diversity and inclusion are and how they affect the HRM process.
> What is a Decision Trees?
> Discuss contemporary issues in managing human resources.
> Describe strategies for retaining competent, high-performing employees.
> Explain how employees are provided with needed skills and knowledge.
> Discuss the tasks associated with identifying and selecting competent employees.
> Describe the key components of the human resource management process and the important influences on that process.
> Discuss the design challenges faced by today’s organizations.
> Compare and contrast traditional and contemporary organizational designs.
> Identify the contingency factors that favor either the mechanistic model or the organic model of organizational design.
> Describe six key elements in organizational design.
> Explain how entrepreneurs control organizations for growth, downturns, and exiting the venture.
> Define Payoff Matrices
> Define Early Management
> Tea and Sympathy is a British restaurant and café in the heart of New York’s West Village. It is tiny, with around a dozen tables packed into an area little bigger than the average British sitting room. Expatriate Brits, native New Yorkers and celebritie
> (a) As a group, identify a ‘high-visibility’ operation that you all are familiar with. This could be a type of quick-service restaurant, clothing store, public transport system, library, etc. (b) Once you have identified the broad class of operation, vis
> Consider this record of an ordinary flight. Breakfast was a little rushed but left the house at 6.15. Had to return a few minutes later, forgot my passport. Managed to find it and leave (again) by 6.30. Arrived at the airport 7.00, dropped Angela off wit
> Most countries have blood collection and distribution services that collect from donors, process the blood by either breaking the blood down into its constituent parts or keeping it whole, and transport the blood from collection centers to hospitals in r
> Pantone is the Italian Christmas cake, traditionally made in Milan. Then it became popular outside its traditional Italian markets. Now more than 40 million of them are consumed throughout Italy and all over the world during the holiday period. This boos
> Airline catering is a tough business. Meals must be of a quality that is appropriate for the class and type of flight, yet the airlines who are their customers are always looking to keep costs as low as possible, menus must change frequently and respond
> Grace Whelan, Managing Partner of McPherson Charles, welcomed the three solicitors into the meeting room. She outlined the agenda, essentially their thoughts and input into the rolling three-year plan. McPherson Charles, based in Bristol in the West of E
> Most of us are familiar with ‘drive-through’ fast-food operations. Think about (or better still, visit) a drive-through service and try mapping what you can see (or remember) of the process (plus what you can infer from what may be happening ‘behind the
> Just outside Rotterdam in the Netherlands, Francine Jansen, the Chief Operating Officer of Aarons Electronic (AE) was justifiably proud of what she described as ‘the most advanced machine of its type in the world, which will enable us to achieve new stan
> Anyone who has been involved with designing and constructing video games will tell you that game development never goes as planned. I sometimes think that it is a miracle that any game gets developed. Technical glitches, bottlenecks in production, confli
> For decades, IKEA has been one of the most successful retail operations in the world, with much of its success founded on how it organizes its design, supply and retail service operations. With over 400 giant stores in 49 countries, IKEA has managed to d
> Well that’s the bad news!’, said Tao, the Managing Director of Kloud BV, a consulting and executive development firm headquartered in Amsterdam, specializing in operations and supply chain improvement. â€
> Slaveless Industrial Services (SIS) had become one of Europe’s most respected suppliers of die-cast zinc, aluminum and magnesium parts to hundreds of companies in many industries, especially automotive and defense. The company cast and engineered precisi
> There is no doubt that it was a disaster for the laboratory. It was the first time that a client had withdrawn from a contract so soon, and it was our fault entirely. It was also a disaster for Vincent. I feel sorry for him. I had known him for years. He
> Mario Romano, the owner and General Manager of Ferndale Sands Conference Centre, had just seen an article in The Conference Centre Journal, and he was furious. The excellent reputation that he had worked so hard to build up over the last ten years was be
> led to an understanding of all the processes that affected quality indicators. It was a shift to seeing the hospital as a whole set of processes that governed a set of flows – flows of patients through their treatment stages, flows of c
> It had been ten years since Dan Audial founded Audial Auto Servicing as an independent vehicle-servicing and repair business. Previously he had been the manager of the servicing department of a ‘premium’ car dealership
> Focus plastics (see the previous question) moved into what it called ‘design house partnerships’ – design collaboration between their internal designers and Italian design houses, creative product designers who rarely manufacture or distribute their own
> Founded more than 20 years ago, supplies4medics.com has become one of Europe’s most successful direct-mail suppliers of medical hardware and consumables to hospitals, doctors’ and dentists’ surgeries,
> Carlos, are you ready to head out then?’, Antonia called across the office. ‘Too right! After the morning I’ve had, I could do with the break!’ Carlos laughed, as he grabbed his wall
> It was a warm afternoon as Stefano Moretto, Commercial Director of Hinkley Point C (HPC), and Eva Glens, Senior Supply Chain Engagement Manager, stood looking out of their office. Stefano, having recently joined EDF, had been tasked with establishing a
> Action Response is a London-based charity dedicated to providing fast responses to critical situations throughout the world. It was founded by Susan Nutini, its Chief Executive, to provide relatively short-term aid for small projects until they could obt
> Revisit the case example that examines legal and general’s modular housing venture. Does their use of a factory to ‘build’ houses invalidate the idea that volume and variety govern the nature of operations processes?
> Visit a supermarket and observe people’s behavior. You may have to exercise some discretion when doing this; people generally don’t like to be stalked around the supermarket too obviously. (a) What layout type is a conventional supermarket and how does i
> The table below shows the planned time and budget for a legal consulting project being developed for a client in Copenhagen, Denmark. Complete an earned value analysis (EVA) for the project based at the end of month 4, given that only activities A, B and
> The table below shows the activities, their durations and predecessors for designing, writing and installing a bespoke computer database for a commercial bank headquartered in Singapore. Draw a network diagram (activity-on-node) for the project and calcu
> Revisit the Vasa project example in this chapter. (a) Who should be held responsible for this disaster? (b) What can be learnt from the Vasa story for the management of different kinds of modern-day projects?
> Four Seasons Hotels is a chain of very ‘upmarket’ hotels famed for its quality of service. From its inception the group has had the same guiding principle, to make the quality of our service our competitive advantage. The company has what it calls its Go
> Focus plastics originally made precision plastic components for the Aerospace sector, together with some basic (cheap) ‘homeware’ items such as buckets and dustpans. However, competition became intense in this market, so they decided to specialize in hom
> Consider a country operating under fixed exchange rates. The IS curve is given by equation (20.1) a. Explain the term (i* - πe). Why does the foreign nominal interest rate appear in the relation? b. Explain why when πe increases, t
> Human error is a significant source of quality problems. Think through the times that you have (with hindsight) made an error and answer the following questions. (a) How do you think that human error causes quality problems? (b) What could one do to mini
> Step 1 – As a group, identify a ‘high visibility’ operation that you all are familiar with. This could be a type of quick service restaurant, record stores, public transport systems, libraries, etc. Step 2 – Once you have identified the broad class of op
> A transport services company provides a whole range of services to railway operators. Its reputation for quality was a valuable asset in its increasingly competitive market. ‘We are continually looking for innovation in the way we deliver our services be
> For over 10 years, a hotel group, had been developing self-managed improvement groups within its hotels. At one hotel reception desk, staff were concerned about the amount of time the reception desk was left unattended. To investigate this, the staff beg
> Develop cause–effect diagrams for the following types of problem: • staff waiting too long for their calls to be answered at their IT helpdesk; • poor food in the company restaurant; • poor lecturing from teaching staff at a university; • customer compla
> Everything we do can be broken down into a process’ said Lucile, COO of an outsourcing business for the ‘back office’ functions of a range of companies. ‘It may be more straightforward in a manufacturing business, but the concept of process improvement i
> Sophie was sick of her daily commute. ‘Why’, she thought ‘should I have to spend so much time in a morning stuck in traffic listening to some babbling halfwit on the radio? We can work flexi- time after all. Perhaps I should leave the apartment at some o
> A production process is required to produce 980 of product X, 560 of product Y and 280 of product Z in a 4-week period. If the process works 7 hours per day and 5 days per week, devise a mixed model schedule per hour that would meet this demand.
> Examine the marking process of an assignment you are currently working on. What is the typical elapsed time between handing the assignment in and receiving it back with comments? How much of this elapsed time do you think is value added time?
> An insurance underwriting process consists of the following separate stages. What is the value-added percentage for the process? (Hint – use Little’s law to work out how long applications have to wait at each stage bef
> The health clinic described in the worked example earlier in the chapter has expanded by hiring one extra employee and now has six employees. It has also leased some new health monitoring equipment which allows patients to be processed faster. This means
> Consider this record of an ordinary flight. ‘Breakfast was a little rushed but left the house at 6.15. Had to return a few minutes later, forgot my passport. Managed to find it and leave (again) by 6.30. Arrived at the airport 7.00, dropped Angela off wi
> The Zucchero mail-order clothing company in Milan receives order forms, types in the customer details, checks the information provided from the customers and that the products are in stock, confirms payment and processes the order. During an average eigh
> What elements of lean are described in the Toyota Production System (TPS)?
> A lunch kiosk serves two meals every day: Veggie Fritters and Mushroom Stroganoff, the recipes for which are as follows. Veggie Fritters (serves 10) – Prepair the ‘veggie mix’ by grating 500 g of carrots, 500 g of courgettes (zucchini), and chopping 300
> Your company has developed a simple, but amazingly effective mango peeler. It is constructed from a blade and a supergrip handle that has a top piece and a bottom piece. The assembled mango peeler is packed in a simple recycled card pack. All the parts s
> Re-read the ‘Operations in practice’ example, ‘‘What a waste!’. Why did things go wrong with the relationship between SAP and Waste Management?
> Re-read the ‘Operations in practice’ example, ‘The life and times of a chicken salad sandwich Part 2’. Why do you think that integrating an ERP system with those of suppliers and customers is so difficult?
> Re-read the ‘Operations in practice’ example, ‘SAP and its partners’. If you were managing SAP’s strategic partner programme, how would you ensure their long-term collaboration?
> Rolls-Royce is one of the world’s largest manufacturers of gas turbines. They are exceptionally complex products, typically with around 25,000 parts, and hundreds of sub-assemblies, and their production is equally complex with over 600 external suppliers
> Re-read the ‘Operations in practice’ example on ‘An inventory of energy’. It mentions the potential of battery storage of energy, but stresses the cost of this method. What do you think would be the implications for energy distribution if batteries becom
> Xexon7 is a specialist artificial intelligence (AI) development firm that develops algorithms for various on-line services. As part of its client service it has a small (10-person) help-desk call centre to answer client queries. Clients could contact the
> Revisit the ‘Operations in practice’ example on the Blood and Transplant service at the beginning of the chapter. (a) What are the factors which constitute inventory holding costs, order costs, and stock-out costs in a National Blood Service? (b) What ma
> Our suppliers often offer better prices if we are willing to buy in larger quantities. This creates a pressure on us to hold higher levels of stock. Therefore, to find the best quantity to order we must compare the advantages of lower prices for purchase
> A fruit canning plant has a single line for three different fruit types. Demand for each type of tin is reasonably constant at 50,000 per month (a month has 160 production hours). The tinning process rate is 1,200 per hour, but it takes 2 hours to clean
> A local shop has a relatively stable demand for tins of sweetcorn throughout the year, with an annual total of 1400 tins. The cost of placing an order is estimated at £15 and the annual cost of holding inventory is estimated at 25 per cent of the product
> A supplier makes monthly shipments to ‘House & Garden Stores, in average lot sizes of 200 coffee tables. The average demand for these items is 50 tables per week, and the lead time from the supplier 3 weeks. ‘House & Garden Stores’ must pay for inventory
> Airline catering is a tough business. Meals must be of a quality that is appropriate for the class and type of flight, yet the Airlines who are their customers are always looking to keep costs as low as possible, menus must change frequently and respond
> Many companies devise a policy on ethical sourcing covering such things as workplace standards and business practices, Health and Safety conditions, human rights, legal systems, child labour, disciplinary practices, wages and benefits, etc. (a) What do y
> If you were the owner of a small local retail shop, what criteria would you use to select suppliers for the goods that you wish to stock in your shop? Visit two or three shops that are local to you and ask the owners how they select their suppliers. In w
> The example of the bull-whip effect shown in Table 12.2 shows how a simple 5 per cent reduction in demand at the end of supply chain causes fluctuations that increase in severity the further back an operations is placed in the chain. a) Using the same lo
> A chain of women’s apparel retailers had all their products made by Lopez Industries, a small but high-quality garment manufacturer. They worked on the basis of two seasons; Spring/Summer season and Autumn/Winter. ‘Sometimes we are left with surplus item
