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Service OperationsService Operations
Prof. Gautam Sinha
VGSOM, IIT Kharagpur
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Service OperationsService Operations
In this module on Service Operations, we will discuss:
Service & its characteristics
Service operations
Service Product
Service Quality & Propositions
Model for Service Quality
Waiting lines
Location & Layout
Manufacturing & Operation Scheduling
Service Blueprinting
Manpower
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Service OperationsService Operations
What is a Service?
Services are deeds, processes and performances
-Zeithaml & Bitner
Services are basically intangible. They are
performances and experiences rather than
objects Parasuraman, Zeithaml & Berry
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Service OperationsService Operations
Service characteristics
Intangible
Cannot be inventoried
Cannot be patented
Cannot be displayed
Production & consumption are simultaneous
Customers participate in service delivery
Customers affect service delivery
Employees affect service delivery
Mass production may be difficult
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Service OperationsService Operations
Service characteristics (continued)
Heterogeneous-
often idiosyncratic: no common rules
Delivery & customer satisfaction depend upon
employee action Service quality depends upon uncontrollable
factors
Perishable
Difficult to synchronize supply & demand Cannot be returned or resold
Universal- everybody is an expert in service
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Service OperationsService OperationsChanges in Economy: Rise of Services [Pine & Gilmore,1999]
Pre-industrial/
AgrarianCommodities
Extract
Tangible/ natural
Characteristics
Against nature
Agriculture/mining
Market
Trader
Muscle power
Simple handtools
Subsistence
Stored in bulk
Industrial
Goods
Produce goods
Tangible
Features
User
Utilize nature
Manufacturers
Machine power
Quality of goods
Standardized
Inventory
Post-industrial
Services
Deliver Services
Intangible
Benefits
Among people
People power
Client
Service provider
Brain power/ creativity/innovation
Quality of life
Information
Deliver/ no storage
On demand
Experience
Experiences
Stage
Memorable
Sensations
Guest
Stager
Personalised
Revealed overtime
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Service OperationsService Operations
Why are services growing? Push theory of innovation- technology driven
IT-www- creates new demand
Web booking of airlines, rail tickets; Web banking
ATMs
Mobile phone technology- MMS
Pull theory of innovation- customers demand new services Wealth management services by banks- demanded by HNI
Event management of marriages
Service battery provided by dealer
Demographic/ social changes Home delivery from restaurants
Car pick up/drop after servicing/repair Special services for retired people in US & Europe
New technology creates need for new services VCR/DVD- cassette/ DVD rental
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Service OperationsService Operations
Services Types: Interaction/Customization Vs Labour Intensity
Service FactoryAirlines
Truck transportHotelResorts
Mass ServiceRetailingSchool
HotelBanking
Professional ServiceDoctorDentist
LawyerAccountant
Service ShopHospital
Car repairTailoringBeauty parlour
Low High
Interaction & Customization
Low
High
Labou
r
Inten
sity
Adapted from Schmenner, MIT Sloane Mgt Review,27/3, 1986
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Characteristics ofServices Factory
Limited features
Competition on price/speed/warmth/excitement
Low extent of changes possible
High capital investment
Rigid process and integral equipment
Capacity is clear cut: No scope for excess capacity
Peaks difficult to handle Line flow preferred in layout
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Service OperationsService Operations
Characteristics ofService Shop
Diverse features
Employee competence
Routine jobs
High capital investment
Adaptable process and equipment important for high quality
service
Capacity is function of demand-mix; fuzzy capacity
Scheduling easier
Job shop/ fixed position layout
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Service OperationsService Operations
Characteristics ofMass Service
Limited features
Price/choice/ perceived warmth
Limited experimentation
Low capital investment
Rigid processes and limited link to equipment
Capacity is limited by ????, not processing time
Scheduling easier Customer flow through fixed position layout
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Service OperationsService Operations
Characteristics ofProfessional Service
Very diverse features
Competence of main provider & range of expertise
Routine tasks
Low capital investment
Loose processes and low link to equipment
Fuzzy capacity; tough to schedule peaks
Scheduling easier Job shop layout
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Service OperationsService Operations
Challenges for managers
Low labour intensity [service factory + service shop] Managing demand to avoid peaks
Scheduling service delivery
Capital investment & technology advancements
High labour intensity [mass service+professionalservices]
Hiring & training
Scheduling workforce Development of methods
Control
Growth & nurturing new units
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Service OperationsService Operations
Challenges for managers- continued
Low interaction & low customization [service factory + massservice ]
Marketing
Conveying warmth
Designing & managing servicescape
Standard Operating Procedures Rigid hierarchy
High interaction & high customization [professional services]
Cost increase
Maintaining quality
Reacting to customer intervention in process
Loyalty of employees
Managing flat hierarchy/ loose superior-subordinate relationship
Career growth of employees
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Service OperationsService Operations
Recipient of service
Bodies
Health care
TransportGym & salon
Restaurant
Minds
Education
Theatre
Movie hallMuseum
Broadcasting
Intangibles
Banking
Legal
AccountingInsurance
Security
Goods
Freight
Car repairLaundry
People Things
Recipient ofService
Tangible
Intangible
N
a
t
u
r
e
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Service OperationsService Operations
Customization & Judgment in Service
Surgery
Taxi serviceGourmet restaurant
Telephone
Hotel
Retail bank
Cafeteria
Public transport
Movie theatre
Sports
Company canteen
Education
Preventive health programFamily restaurant
High Low
Customization
High
Low
Extent
Of
judgement
used by
Service
Personnel
tomeet
individual
needs
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Service OperationsService Operations
Nature of recipient
Bodies
Health care
TransportGym & salon
Restaurant
Minds
Education
Theatre
Movie hallMuseum
Broadcasting
Intangibles
Banking
Legal
AccountingInsurance
Security
Goods
Freight
Car repairLaundry
People Things
Recipient ofService
Tangible
Intangible
N
a
t
u
r
e
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Service OperationsService Operations
Nature of Demand Fluctuation
Electricity
Telephone
Maternity wardPolice emergency
Tax preparation
Passenger transport
Hotel & motel
Fastfood
Movie theatre
Petrol pump
Insurance
Legal service
BankingLaundry/ drycleaner
Wide Narrow
Extent ofdemand fluctuation
Peakmet,
Nomajor
delay
Peak
regularly
Exceeds
capacity
Extent to
which
Supply is
constrained
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Service OperationsService Operations
Service Product Continuum (Shostack, 1977)
Tangibledominant
Intangible
dominant
Fast foodAirline
Consulting
Teaching
Automobile
FMCG
Consumer
durables
Healthcare
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Service OperationsService Operations
Service as part of product:
Maintenance, spare parts Automobile,Aquaguard,
Quick/ home delivery- fast food
Product as a part of service
Technical report- Tech. Consulting
Class notes Teaching
Medicines, linen, diet-Healthcare
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Service OperationsService Operations
Service product consists of
Tangible product
Physical product
Service environment (Servicescape)
Physical facilities Package that conveys an image to customer
about what is inside
People
Service delivery How the service is delivered, the process
Interaction
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Service OperationsService Operations
Service Product
Tangible product
Servicescape
Service
Delivery
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Service OperationsService Operations
Service Encounter
Interaction between customer & service provider
Occurs above line of visibility
Defines quality in the mind of customer
moments of truth- Jan Carlzon, CEO ScandinavianAirlines
Every moment of truth must be managed for superior service
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Service Quality (Adapted from Parasuraman, Zeithaml & Berry, 1985)
Expected
Service
Perceived Service
Quality
Perceived
Service
Delight +++Surprise++
Satisfaction+
Dissatisfaction-
Anger - -
Disgust - - -
WOM Personal Needs Past Experience
ServiceDimensions
Tangibles
Empathy
Responsiveness
Assurance
Reliability
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Service Quality: Gap Model [ ProfU Bagchi, U Texas]
Gap 5: Customer Satisfaction
Gap 4: Communication
Gap 3: Conformance
Gap 2: Design
Gap 1: Market Research
Customer Perception Customer Expectation
Service Delivery
Service vs Standards
Management Perception of
Customer Expectation
Service DesignConformance
Manage Evidence Understand Customer
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Service Expectation
Desired service
Adequate Service
Zone ofTolerance
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Service OperationsService Operations
Service Expectation
Desired service
Adequate Service
Zone ofTolerance
What service can be, should be
Customer will
accept variability
From supplier
Minimum tolerable
expectation
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Service OperationsService Operations
Service Expectation
Desired service
Adequate Service
Zone ofTolerance
Expectations influenced by:Explicit communication
Implicit communication
Word ofmouth
Past experience
Personal needs
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Service OperationsService Operations
Service Expectation
Desired service
Adequate Service
Zone ofTolerance
Attribute A
Desired service
Adequate Service
Zone ofTolerance
Attribute B
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Service OperationsService Operations
Service Design Elements (Heskett, 1987)
Who is the customer? (Target market)
How do we differentiate our product?
(Service concept) What is our service package and operating
focus? (Service strategy)
What are the actual processes, personnel and
facilities? (Service delivery)
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Problems with Service Design:
Intangibles
Difficult to specify & agree upon
Varies from person to person
Understanding customer needs intimately
Continuous customer feedback
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Service OperationsService Operations
Service: Chain of Events from Quality to Profits
[Rust, Zahorik & Keiningham,1994]
Service Performance
Customer Satisfaction
Customer Retention
Market Share
Profit
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Service OperationsService Operations
Service Design Principles (Lyth & Johnson, 1988)
Top management commitment to quality
Define the service concept clearly, in detail
Be clear about the service image projected/
communicated to prospective customers Study the operation from the customers
viewpoint
Define the service delivery clearly & in detailDefine functional & technical quality standards
Try to define (describe) intangibles
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Service OperationsService Operations
Service Design Principles(continued):
Service Environment Physical environment & ambience
Manner & appearance of staff
Waiting & service times
Existing systems & procedures to enable standardslaid down
Standards for known, predictable events
Empowerment & high level of staff training to take
care of unpredictable eventsMulti-skilled employees
Monitoring of standards
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Service OperationsService Operations
Layout & Facilities Planning
1.Layout planning is concerned with placement ofdepartments, working groups, machines, andstockholding points within a production facility.The objective is to arrange the elements in a way
that facilitates smooth work flow ( inmanufacturing) or a particular traffic pattern ( inservice).
2.Layout planning is the integral part of design of the
productive system. It is a physical expression oftechnological choices, capacity decisions, process& job design, material handling andcommunication system that joins the processes.
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Service OperationsService Operations
Inputs to layout decisions:
Estimates for product/service demand
Space required for layout elements
Distance travelled by product & amount offlow between elements in layout
Processing requirements
Space available within & outside facility
Building configuration
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Service OperationsService Operations
Service Facility Layout
Service Types-Fixed Services
Fixed- Consumption at delivery point
E.g. restaurant, bank, health care & hospital
Layout is crucial for fast service
In direct customer contact service- analyze
waiting line structure
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Service OperationsService Operations
Service Facility Layout (cont..)
Entry flow & Exit flow should planned
Exit flow should not clash with waiting line
Fast-food: standardized, high volume office
work- production line layout
Banks, general offices-functional layout
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Service OperationsService Operations
Service Manufacturing: Process Design
Mass production- McDonald, Modern Bakery
Functional Layout- Restaurant, hospital
Plant-within-Plant (PWP) or focused factory-
hospitals with separate units for cardiac unit,
oncology unit, pediatric unit which are self-
sufficient
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Service OperationsService Operations
Service Capacity Planning
Trade-off between
too high- low utilization
Too low- waiting lines, lost sales
Demand for service & service time highly
variable
Dependent on time & location
Utilization impacts on quality
Matching Arrival Rates with Service Times
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1. Unoccupied time feels longer than occupied time.
2. Pre-process waits feel longer than in-process waits.
3. Anxiety makes waits seem longer.
4. Uncertain waits are longer than known, finite waits.
5. Unexplained waits are longer than explained waits.
6. Unfair waits are longer than equitable waits.
7. More valuable the service, longer the customer will wait8. Solo waiting feels longer than group waiting
Six Principles of WaitingSix Principles of WaitingMaister,The Psychology of Waiting lines,Harvard Business Review, May , 1984 & 1985
Service OperationsService Operations
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Components of the Queuing SystemComponents of the Queuing System
Customer
Arrivals
Servers
Waiting Line
Service System
Exit
Queue or
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Degree ofPatienceDegree ofPatience
No Way!
BALK
No Way!
RENEG
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S i O iS i O i
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Service
Pattern
Constant Variable
Example: people
using a limitedfunction ATMor
vending machine.
Example: Customer
processing time at acash register
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S i O iS i O i
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The Queuing System
The Queuing System
Queue Discipline
Length
Number ofLines &
Line Structures
Service Time
Distribution
Queuing
System
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S i O tiS i O ti
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Customer Service Population SourcesCustomer Service Population Sources
Population Source
Finite Infinite
Example: Number of
lab PCs needingrepair out of48 PCs.
Example: The
number ofpeoplewho could wait in a
line for gasoline.
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Service
Pattern
Constant Variable
Example: people
using a limitedfunction ATMor
vending machine.
Example: Customer
processing time at acash register
i ii i
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The Queuing SystemThe Queuing System
Queue Discipline
Length
Number ofLines &
Line Structures
Service Time
Distribution
Queuing
System
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Examples ofLine StructuresExamples ofLine Structures
Single Channel
Multichannel
Single
PhaseMultiphase
One-person
barber shopCar wash
Hospital
admissions
Bank tellers
windows
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Waiting Line ModelsWaiting Line Models
Model Layout
Source
Population Service Pattern
1 Single channel Infinite Exponential
2 Single channel Infinite Constant
3 Multichannel Infinite Exponential
4 Single orMulti Finite Exponential
These four models s
hare t
he following c
haracteristics:
y Single phase
y Poisson arrival
y FCFS yUnlimited queue length
No balking or renegingy
Steady statey
Exponential timey
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63%
37%
Exponential DistributionExponential Distribution
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Notation: Infinite Queuing: ModelsNotation: Infinite Queuing: Models
lineintingnumber waiAverage
serversingleafor
rateservicetoratearrivaltotalofRatio==
time)val(InterarriarrivalsbetweentimeAverage
timeserviceAverage
rateService=rateArrival=
1
1
!
!
!
qL
Q
P
V
P
Q
QP
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Infinite Queuing ModelsInfinite Queuing Models
lineinaitingoyrobabilit
systeminunitsexactlyoyrobabilit
channelsserviceidenticaloumber
systemin theunitsoumber
served)betotime(including
systemintimetotalverage
lineinaitingtimeverageserved)beingthose(including
systeminnumberverage
q
s
!
!
!
!
w
n
s
n
S
n
W
W
L
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Example: Model 1Example: Model 1
Assume a drive-window at a fast food restaurant.
Customers arrive up at the rate of25 per hour.
The employee can serve one customer every twominutes.Assume Poisson arrival and exponential service rates.
Determine:
A) What is the average utilization of the employee?
B) What is the average number ofcustomers in line?C) What is the average number ofcustomers in the system?
D) What is the average waiting time in line?
E) What is the average waiting time in the system?
F) What is the probability that exactly two cars will be
in the system?
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P
Q
VP
Q
25 cust / hr
1 customer
2 mins (1hr / 60 mins)30 cust / hr
25 cust / hr
30 cust / hr .8333
Example: Model 1Example: Model 1
A) What is the average utilization of the employee?
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Example: Model 1Example: Model 1
B) What is the average number ofcustomers in line?
4.16725)-30(30
(25)
)-(
22
PQQ
Pq
L
C) What is the average number ofcustomers in the system?
525)-(30
25
-
PQ
PsL
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Example: Model 1Example: Model 1
D) What is the average waiting time in line?
mins10hrs.1667P
qq
LW
E) What is the average waiting time in the system?
mins12=hrs.2==P
ss
LW
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Example: Model 1Example: Model 1
F) What is the probability that exactly two cars will be in the
system (one being served and the other waiting in line)?
p = (1 -n
nPQ
PQ
)( )
p = (1- =2
22530
2530
)( ) .1157
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Example: Model 2Example: Model 2
An automated pizza vending machine heats and
dispenses a slice ofpizza in 4 minutes.
Customers arrive at a rate ofone every 6 minutes with the arrival rate
exhibiting a Poisson distribution.
Determine:
A) The average number ofcustomers in line.
B) The average total
waiting ti
me in the syste
m.
pp
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Example: Model 2Example: Model 2
A) The average number ofcustomers in line.
.6667=
10)-(2)(15)(15
(10)=
)-(2
=22
PQQ
PqL
B) The average total waiting time in the system.
mins4hrs.0666710)-51)(15(2
10
)-(2
PQQ
PqW
mi s8=hrs.1333=15/hr
1hrs.06667=
1=Q
qs WW
pp
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Example:Example:
Model 3Model 3
Recall the Model 1 example:Drive-up window at a fast food restaurant.
Customers arrive at the rate of 25 perhour.
The employee can serve one customer every two minutes.
Assume Poisson arrival and exponential service rates.
Suppose an identical window (and an identically trained server)
were added. Also assume the cars wait in one line and then
proceed to the next available window.
pp
S i O tiS i O ti
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Example: Model 3Example: Model 3
Average number ofcars in the system
1760= .qL
1.009=30
25+.176=+=
Q
Pqs LL
To
tal tim
e custom
ersw
ait befo
re being served
)(=hourpercustomers25
customers.176== Wait!No
LW
qq mins.007
P
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Ser ice OperationsSer ice Operations
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Service OperationsService Operations
Service Capacity Planning (continued)
Mean Service Rate( Q)
Mean
Arrival
Rate (P)
Zone of non-service
=P/Q > 1
Zone of Service0.7
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Service OperationsService Operations
Operations Scheduling
Schedule decided by customer
Schedule = Capacity for service
Examine: Time- Demand pattern, allocate
resources
Schedule on the basis of priority
Waiting Lines
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Service Blueprinting- is the flow process chart
of a service operation with demarcation
between high-customer contact- what
activities/processes are visible to the
customer and what are not. The demarcation
is called the Line of Visibility. It is a
standard tool for service process design.
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Service Blueprinting (Tele-banking)
Line ofVisibility
Withdrawal
request
Check name,
address, balance
Approve
payment
Withdraw cash
Update balance
Deliver cash
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Manpower Issues:
Trained staff to take care of unexpectedevents and flexibility
Empowerment
Internal consistency among staff
Focus on customers problems and not
internal difficulties
Internal customer concept
top related