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Relevant Training Course / In-house Workshop Highlights:

P03 Service Level Agreements

C01 Focused Improvement Systems

Expert Systems / Tools:

Achievable benchmarks

Diagnosing Manufacturing Control Problems

Relevant Further Reading: The following further articles were mentioned in this paper:

a. Permanently Maintained Website Articles:

Focused Improvement Systems

Negotiating Software Contracts

Customer Relationship Management (CRM)

b. Previously Featured Articles from our Archives (Up to 2 per organisation available on request):

Previous Best Practices:

Previous Techniques:

T007 CARAP Analysis (Defining & Measuring Required / Employed Resources for a Process or Service to drive performance improvement (or why OME / OEE is for the birds)

Previous Questions:

Previous Malpractices:

Guide to Service Level Agreements (SLA's)

The following article describes the essential features of a Service Level Agreement (SLA). It also describes methods of managing service providers (from the point of view of the customer) and managing service provision (from the point of view of the service provider).

Links to related training and further reading on left

These agreements are becoming quite common in many industries now & principally (but not exclusively) represent an unambiguous statement of the level of service required by the customer and to be provided by the supplier.

If you are providing a service or are being provided with a service it is vital to set what are considered to be:

• Normal Service
• Normal Usage

The agreement must include:

Scope

• Everything you are buying or selling (covered by the agreement).
• Volume assumptions for the service (particularly if there are large variable costs involved).
• Capability, Availability, Reliability, Availability and Performance (CARAP) requirements, (see Previous Technique T007 CARAP Analysis (Defining & Measuring Required / Employed Resources for a Process or Service to drive performance improvement (or why OME / OEE is for the birds)), based on some Achievable benchmarks.
• Methods of dealing with operational problems (escalation, help desk, hot line, agreed severity levels). (See Customer Relationship Management (CRM)).
• Conditions of use or change of use conditions / restrictions.
• Any dates/deadlines where specific deliverables are due at initial switch on, ramp up, ramp down, or upgrade of service. E.g. year end, implementation dates, delivery of upgrades, legislation changes.
• The method of delivery (E.g. Paper/fax/personal delivery/electronic means/source or object code).
• Time after which the deliverables must be consumed or tested and still supported (obsolescence limits).
• Documentation/manuals and standards.
• Definition of what is considered a service failure and what is considered an enhancement to the service. (E.g. what is a software bug and what is an enhancement.)

Operation

• Published measures of performance and review mechanism (See Focused Improvement Systems).
• A management process to provide ongoing management of the service including trigger levels for action & a proper diagnosis of the problems. (See Diagnosing Manufacturing Control Problems.)

Commercial Arrangements

• A duration and notice period.
• Contingencies in the event of failure or potential failure to supply (includes bankruptcy provisions).
• Charges and inflation restrictions (one off, variable, fixed charges).
• Payment methods/timing of payments.
• Management charges levels.
• Warranty conditions and periods.
• Review / Notice periods.
• Also see "Negotiating Software Contracts"

It may include:

• Penalties / bonus / cancellation fees.
• Arbitration arrangements.
• Escrow agents.
• Anti staff poaching agreements.
• Discounts on future purchases.
• Minimum staffing levels or other minimum resource levels such as computer sizes, bandwidth.
• Permission to use the client as a reference site / case study.

Internal agreements

In many circumstances it is advantageous to provide service level agreements for internal as well as external services. This has two advantages:

1. From the point of view of the service provider it establishes norms and expectations, and can indeed justify the existence of the service, or the enhancement of the service (particularly if measures of performance are maintained).
2. From the point of view of the service consumer it also establishes agreed needs, norms, and expectations.

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