Definition

Within a Strategic Asset Management framework, Demand Management is defined as the active
intervention in the service delivery cycle for the purpose of influencing the demand for the service
within resource, social and political constraints.

Objectives
The objectives of Demand Management are to:
identify strategies to align demand for a service with an agency’s capacity to service the
demand
enable the staged development of resources to meet future projections (forecasts) in service
demand over time
optimise the utilisation of resources used in providing a service

stabilise variations in service demand.

Asset managers have a particular interest in the management of demand, which includes:
optimising the utilisation of existing assets

controlling the demand for new, refurbished and replacement assets

effectively planning and developing assets to meet projected future demand.

Asset managers have a particular contribution to make to the Demand Management process. This
contribution includes:
active participation in the Strategic Service Planning stage to provide essential information on
service capacity
active involvement in the identification of strategies to influence the demand for service, and
thus the demand for supporting infrastructure
provision of advice on the asset implications of various Demand Management strategies.

Strategic service delivery planners contribute to the objectives by:

actively applying Demand Management techniques at the source of community demand for
service
informing the consumers of services of the real costs of services through community
consultation processes
interacting with asset managers to optimise the standard of service delivered and value derived
from all assets by:

- validating service needs and distinguishing them from unrealistic expectations

- satisfying defined demand for and/or justifiable increase in the need for services

- identifying non-asset service solutions, where appropriate, and outsourcing those services

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 to a private sector provider

Benefits and risks

Benefits
service delivery objectives of the agency are efficiently supported by the agency’s asset
portfolio
utilisation and performance of portfolio assets are optimised

planning for investment, maintenance, management-in-use and disposal is coordinated, thus

avoiding duplicated effort.
The conduct of a comprehensive asset review and analysis is a requirement under the Financial
Management Standard 1997 Part 2, Division 4, Strategic Planning for Assets. It should be carried out
annually. In addition, best practice would indicate that a rolling review of the service delivery plan and
asset plan will provide the closest link between asset and service delivery objectives.

Risks
failure to cater for emerging service trends

failure to substantiate adequately a case for necessary funds

over-maintenance of a building scheduled for disposal or demolition

inappropriate or inefficient use of existing assets

failure to maximise return on the asset portfolio

The demand management process

Demand Management is an integral part of the Strategic Asset Management cycle.
There are three broad aspects to Demand Management:
the planning aspect, which occurs at the strategic planning stage and which involves strategic
service planners, strategic asset planners, community representation, etc
the implementation aspect, which involves strategic asset planners

the monitoring, evaluating and reporting aspect, which involves asset managers

The process commences with a series of steps undertaken at the Strategic Service Planning stage.
This is best done using a facilitated workshop approach involving such key stakeholders as user
representatives, service planners, asset planners, service providers and appropriate technical
experts.
The process should take into account the political and social context, balanced with the need to
achieve cost-effective service delivery and an efficient asset portfolio. As well as infrastructure
resource issues, the impact on other resources such as human resources (e.g. specialists), physical
hardware and information systems should be taken into account.
An effective Demand Management strategy will have implications at the Services and Asset Planning,
Asset Design and operational (service delivery) stages. It may also require a targeted education
campaign encouraging the community to utilise alternative options as a means to achieve a controlled
level of demand. During its implementation phase, the performance of the Demand Management
strategy should be monitored against appropriate indicators.

Demand management processes, tools and techniques

A number of processes, tools and techniques assist planners in influencing demand for services.
(Asset managers may also find some of these of value in managing supporting physical
infrastructure.) They include:

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 legislation

forecasting

market segmentation

price differentiation

product/service differentiation

education

review of existing service provision

These are explained in more detail at the end of the document. (Note that the list is not exhaustive.
Agencies will identify other techniques of value in their particular service areas.) Click here to view.
The processes involved in Demand Management are listed below:
Quantify current and future service demand

Quantify current and future service provision capacity

Quantify the gap between projected demand and capacity

Identify strategies for influencing demand

Perform a risk analysis

Select a Demand Management strategy

Implement the strategy

Monitor impact of the strategy

Review the strategy

Quantify current and future service demand

While this is a fundamental step in the service planning process, the detailed data obtained is also
essential to establishing an effective Demand Management strategy.
It is important that needs are identified and quantified using measures appropriate for the service
being provided. This requires consideration and agreement on the choice of appropriate indicators.
It is also important that needs are quantified in geographic and demographic terms. The nature and
quantum of demand for service, both current and future, are established. In predicting future demand,
consideration must be given to the likely impact of changes to policies, or to policy settings.
A number of modelling techniques, covering the range from pessimistic to optimistic and including
consideration of regional and State development plans should be employed.

Quantify current and future service provision capacity

A review of current and estimated future service capacity should then be undertaken using the same
geographic and demographic benchmarks as are used in determining the current and forecast service
demand figures.
The role of the asset manager is fundamental to the success of this step in the Demand Management
process. The asset manager is able to provide accurate estimates of the capacity of existing
infrastructure to provide the specified levels of service. The asset manager can also provide
information both on the standards of service achievable using existing infrastructure and on
infrastructure which may be coming on line (and the impact of this in meeting projected demand).

Quantify the gap between projected demand and capacity

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A gap analysis provides a summary of capacity (both excess as well as shortfall) compared with
projected demand by the community for a service or range of services. The analysis will also provide
summarised information correlating demand and capacity against demographic and geographic
parameters. This is important to enable appropriate Demand Management strategies to be identified
and targeted.

Identify strategies for influencing demand

There may be more than one way of managing the demand to ensure a best fit with the agency’s
capacity to service the need. Part of the asset strategic planning process, which follows strategic
service planning, includes the identification of alternative service delivery strategies. These strategies
may include options such as outsourcing or moving the responsibility to the private sector. Such
solutions fall under the category of non-asset solutions.
Having done all of the above, and facing the prospect of managing the demand in order to match the
agency’s capacity to provide the service, the need to consider suitable strategies is then identified. In
broad terms, the strategies are geared to encouraging the community to utilise alternative options.
They may involve controlling access to the service, charging a fee, process of education, or some
other Demand Management technique.

Example
One of the strategies for reducing the length of waiting lists for elective surgery in Queensland
hospitals (i.e. for influencing the demand) is to identify those individuals and procedures suited to day
surgery rather than overnight care. The consequent reduced length of stay of day-surgery patients
and the freeing up of a corresponding number of hospital beds have an immediate and significant
impact on the length of waiting lists and facility utilisation rates.
The development and promotion of an effective mediation service may lead to more out-of-court
settlements and a consequent reduction in the demand for the more expensive court resources.
In the first instance, it may be necessary to identify alternative Demand Management strategies and
to evaluate each option. Unless the agency has had previous experience with Demand Management,
the complexities of the situation (involving as it does the community, government agencies and
regulatory authorities), would suggest that more than one option should be explored.
For each of the options, it is necessary to identify and evaluate the full resource implications: human,
physical, financial, social, political and any others. When considering costs, it is necessary to consider
total costs including capital, management-in-use and maintenance.

Perform a risk analysis

The risk associated with each Demand Management option must be identified, together with the
likelihood, impact and consequence of each risk. This assessment of risk would contribute in a large
measure to the information from which the preferred Demand Management option would be selected.
Examples of risk factors to be considered include:
community reaction

negative impact on special groups

political impact

unpredictable shift in demand price differentiation

competition from other agencies or private providers

technological changes, and

mismatch with other resources

Select a demand management strategy

All identified Demand Management options would be evaluated against an agreed set of criteria,

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which may include items such as:
level of risk

ease of application

potential to achieve desired objectives

community acceptance

cost

As part of the selection process, it is necessary to identify key performance targets and, within each,
key performance indicators. This is necessary not only to provide an agreed benchmark against which
to gauge the success of the strategy but also to provide data from which assessments can be made
(if necessary) to enhance the effectiveness of the strategy. Also, as part of this exercise, it is important
to identify and allocate roles and responsibilities to key players. For the strategy to succeed, each part
of the process must be implemented effectively. It is therefore necessary to view the selected strategy
as a dynamic process that requires ongoing management and monitoring.

Implement the strategy

During this phase, the preferred Demand Management strategy is identified, key stakeholders are
advised and the various aspects of the strategy are initiated. Depending on the strategy, this might
involve a community education campaign, or a series of community meetings. It might involve
planning for a particular type of facility, or it may mean closing down existing facilities and opening
new ones. Whatever the actions required, they must be implemented in a coordinated manner.
The service planner will have an ongoing interest in the effectiveness of the strategy. The asset
planner will need to know that the impact on demand has been sufficient to enable the infrastructure
to cope. The asset manager will be in a position to gauge the effectiveness of the asset base and
provide key information to the planners. During implementation, the Demand Management strategy
may require modifications, if the projected results fall outside an identified range.

Monitor impact of the strategy

It is not always possible to predict and plan accurately the impact of a Demand Management strategy.
This is because of the range and complexity of variables involved, which include political, social and
economic factors. Thus, a process for monitoring the impact of the strategy is essential. The
performance indicators, identified as part of the option selection process, provide data which would
enable the Demand Management strategy to be fine-tuned to achieve the projected outcomes.

Review the strategy

Based upon data gathered from the monitoring process, a review of the Demand Management
strategy at a global level would include a review of:
the level of service provided

asset utilisation rates

any negative impacts of the strategy

the unit cost of service delivery, and

any other aspects relevant to the situation.

Routine reviews are an essential part of Demand Management, as the environment within which
service needs of a community evolve and are satisfied is constantly changing. The timing of reviews
should coincide with the regular review of the Capital Investment Strategic Planning process.

Performance Measurement
For asset managers, the measures of performance include:

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 the extent to which variations in the level of demand are levelled out

the extent to which demand is controlled within the capacity of the physical asset base

the utilisation rate of physical assets

the quality of asset information provided by asset managers (i.e. that it is accurate and timely
and assists service planners in effective decision-making and resource allocation)
the number of service briefs received by asset managers in generic terms rather than inclusive
of predetermined asset solutions
improved utilisation rates of physical asset stock compared with the agency’s own historical
data and service industry benchmarks.
A key issue in establishing performance measures and comparing asset performance is consistency
of units. Throughputs is an appropriate generic measure; however, because of the variety of services
provided, it is frequently not appropriate to use a single measurement unit throughout.
Appropriate ‘throughput’ units are best selected by agencies by grouping assets where similar
services are delivered. The best measure of the successful application of Demand Management is the
level of community satisfaction with the service delivered.
For service delivery planners, a relevant performance indicator is the degree to which services
provided match the originally identified demand for those services.
The application of Demand Management ought to result in reduced unit cost of service delivery.
Another performance indicator, therefore, is a reduction in the unit cost of service delivered.

Reference Material
All Queensland Government Legislation

Australian/New Zealand Risk Management Standard

The Building Act and Regulations

Building Division

Department of Public Works

Glossary of Terms

Heritage legislation

Native Title Act

Queensland Treasury

Various Planning Acts

Workplace Health and Safety Act

Case Study
A Queensland State high school was experiencing rapid growth in enrolments, which seemed to
indicate the need for capital investment in additional accommodation. This led to a proposal for a new
school. First-level analysis supported the case for a new facility. This conclusion was backed by a
considerable residential development in the immediate vicinity, fuelling an increase in the school-age
population.
The relevant department conducted an investigation to explore options to relieve the growth pressure.
The question of location arose. As part of the investigation, a survey was conducted of final year
students at the feeder primary school. This indicated a potential pattern of enrolment at the ‘case
study’ school from a wide geographic catchment, even though there were State high schools located

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closer to their residential address. It was evident that two established State high schools were losing
enrolments to the new school. As it happened, each of the established schools had excess capacity
and could therefore accept increased enrolments to take up the emerging demand, at least for the
foreseeable future.
A recommendation was made to refer students whose addresses fell within the specified catchment
areas to the high school servicing that area. In other words, the access to a proposed service was
restricted to people living within a prescribed area. This meant that the demand at the time (and for
the next five years) was not sufficient to justify the provision of new facilities at the ‘case study’ school.
As a result, the established schools were upgraded to enable them to accept additional enrolments.
More detailed investigations indicated that the perceived growth in demand was not substantiated.
Owing to the community perception that a new school would provide superior services and facilities,
the demand appeared to justify the proposed new development. Active intervention in the market
enabled the demand to be managed within existing resources.
As a result, the need for a new school to service the area was deferred for an estimated five years,
resulting in savings of millions of dollars.

Comment
This case study illustrates application of the following Demand Management techniques:
Market segmentation:

The investigation revealed the pattern of enrolments for the geographic catchments of two other
schools. The targeting of each region with a different (but appropriate) policy decision is an
example of this principle.
Product/service differentiation:

In this instance, the community had a perception of a differentiation in the service (i.e. that the
new school had more modern facilities and thus provided the more attractive service). The
lesson here is that these principles can, in some instances, be applied in reverse. Service
planners need to be aware of this phenomenon, and develop marketing strategies to counter
such service differentiation being applied by the community.
System generated demand:

A proportion of the enrolment at the `case study’ school arose from the simple fact that a new
school was available and there was therefore an increase in the choices from which an
enrolment selection could be made. While the total demand did not change, the level of demand
on one resource was increased at the expense of another. This created pressures of different
forms, particularly on the efficient utilisation of assets to satisfy the overall demand.

Processes, tools and techniques

Legislation and requirements
The quantum and standard of service provision by agencies are often specified by legislation
requirements or government policy. Any attempt by agencies to influence the demand for a service
must take such requirements into account.

Forecasting
The use of forecasting to determine future service demand is a useful tool in Demand Management. It
serves to reduce uncertainties in the emerging requirements for services, allows for effective planning
and provision of infrastructure, and ensures the timely provision of resources to support the demand.
It is important to achieve an acceptable level of accuracy in forecasting to ensure confidence in the
predictions and effective planning. This usually requires some skill and expert input. Ideally, service
demand forecasting should be established as a routine process within the planning cycle, with
forecasts being updated whenever relevant data become available.
Forecasting model include time-series and regression models.

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Each type comprises a number of elements including:
demand averaging over a fixed period

trend analysis

seasonal influence estimate

cyclic variation

auto correlation estimate

irregular variations

The use of computer packages permits more statistically based forecasting. Packages include auto
regressive and moving average processes. The application of these processes requires particular
expertise.
In general, forecasting techniques may be categorised as either:
quantitative: an approach which utilises statistical and other mathematically based techniques
which operate on accumulated data and extrapolated patterns of demand into the future;
subjective: used when no reliable data exist and when forecasts are made based on
experience, intuition, judgement etc.
In reality, quantitative forecasts will also involve a level of subjective assessment, supported by
rational argument.

Market segmentation
The concept of market segmentation is based on a recognition that not all members of the community
have identical needs. The development of user profiles can be of indispensable value in the
application of this technique.
The user profiles might typically include information such as:
geographic location

demographic data

psychographic (psychological and sociological) data, and

user characteristics

Utilising such data, the specific needs of the clients in different areas can be identified and targeted
(rather than the market as a whole). This puts an obligation on the agency to undertake the necessary
research to secure accurate data on which to segment the market.

Price differentiation
Public Finance Standard 320 encourages rational economic choice in the allocation of resources (i.e.
users are to become more economic in their demand and suppliers are to become more efficient).
This standard encourages the use of price differentiation as a means of influencing demand. The
ability to levy charges is an effective measure for controlling demand. It also paves the way (in some
situations) for other suppliers, including non-government organisations, to provide the service in a
competitive environment.
The use of charges or levies may be considered in implementing ‘user-pays’ cost-recovery
techniques.

Product/service differentiation
The rate of consumption of services can be influenced by the manner in which the service is designed
and packaged to meet the market needs. This technique is termed product/service differentiation and

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is frequently applied in conjunction with market segmentation. It involves the service provider tailoring
its products and services to the needs of a particular segment of the market.
Factors influencing the demand for services are many and varied. Individual agencies are best
positioned to know what these are.
They include such factors as:
level of service provided, including the number and attitude of staff, waiting time, etc.; and

access to service. This includes such items as:

- geographic location (e.g. proximity to public transport, proximity to other community and
commercial activities)

- hours of service

- accessibility (e.g. floor on which service points are located, ease of telephone/fax access,
physical access provisions such as the standard of access provided for disabled people,
aged people and for parents with small children)

- atmosphere of service facility (e.g. whether the premises are welcoming, and what sort of
impressions they are likely to make).
Agencies are obliged to provide an ‘appropriate’ level of service, and to be in a position to validate
that services offered are in compliance with agreed standards.

Education of the community

One of the most powerful and least used methods of influencing community expectation for a service
is through a program of education, in which details of the real costs (human, social, economic and
environmental) of the intended service are provided. When coming from an informed position, a
community is more likely to reassess its perception of need. Of its own volition, it may conclude that a
service, or the manner in which a service is provided, is not appropriate or economically tolerable. It
may thereby moderate its demand for that service.
Similarly, demonstration that a need may be satisfied in a different way can produce significant effects
on demand for existing or proposed services.
However, it must be recognised that the lead time required for public relations/education programs
may be considerable and should not be underestimated if the full potential benefits of such an
approach are to be realised.

Review of existing service provision

To a certain extent, the very existence of a service generates demand for that service. Agencies must
therefore ensure regular reviews are conducted of their services to confirm the demand for the
service, and to justify action taken to discontinue outdated services.