service management – supporting...

Service Management –

Supporting Facility

Univ.-Prof. Dr.-Ing. Wolfgang Maass

Chair in Economics – Information and Service Systems (ISS)

Saarland University, Saarbrücken, Germany

WS 2011/2012

Thursdays, 8:00 – 9:30 a.m.

Room HS 024, B4 1

General Agenda

1. Introduction

2. Service Strategy

3. New Service Development (NSD)

4. Service Quality

5.5.5.5. Supporting FacilitySupporting FacilitySupporting FacilitySupporting Facility

6. Forecasting Demand for Services (Part A)


8. Managing Capacity and Demand

Univ.-Prof. Dr.-Ing. Wolfgang Maass23.11.2011 Slide 2


9. Managing Waiting Lines

10. Capacity Planning and Queuing Models

11. Services and Information Systems

12. ITIL Service Design

13. IT Service Infrastructures

14. Guest Lecture – Dr. Roehn, Deutsche Telekom

15. Summary and Outlook

Agenda Lecture 5

• Servicescape

• Definition

• Importance of Servicescape Design

• Framework

• Facility Layout Process Analysis

• Facility Location

• Strategic Location Considerations



• Modeling Considerations

• Huff Model

Servicescape: Definition

People need orientation to feel comfortable: Design of service facilities important

• Hotels: Entrance atrium for better orientation

• Maps: „You are here‰ in shopping malls

• Discounter: Same product arrangement in each store

ServicescapeServicescapeServicescapeServicescape: : : : „[⁄] the manmade, physical surroundings as opposed to the natural

or social environment [⁄]‰ (Bitner, 1992).


• Customer & employee behavior are influenced by the servicescape

• E.g., expensive versus standard restaurant

(Bitner, 1992)

Servicescape: Importance of

Servicescape Design

„[⁄] variables such as pricing, advertising [⁄] and special promotions are given „[⁄] variables such as pricing, advertising [⁄] and special promotions are given „[⁄] variables such as pricing, advertising [⁄] and special promotions are given „[⁄] variables such as pricing, advertising [⁄] and special promotions are given

much more attention than the physical setting as ways in which customers can be much more attention than the physical setting as ways in which customers can be much more attention than the physical setting as ways in which customers can be much more attention than the physical setting as ways in which customers can be

[⁄] satisfied by a firm's services.‰ ([⁄] satisfied by a firm's services.‰ ([⁄] satisfied by a firm's services.‰ ([⁄] satisfied by a firm's services.‰ (BitnerBitnerBitnerBitner 1992)1992)1992)1992)

Services are produced and consumed at the same time: Service is provided at

companyÊs facilities:

• Servicescape influences customerÊs perception of service quality


• Servicescape influences customerÊs perception of service quality

• Servicescape offers hints regarding competences of company (Berry & Clark, 1986; Shostack,

1977; Rapoport, 1982)

• Servicescape influences ⁄

• companyÊs image

• customerÊs satisfaction with service quality (Bitner, 1990; Harrell, Hutt & Anderson,1980).

• satisfaction, productivity and motivation of employees (e.g., Becker ,1981; Davis,1984; Steele,1986).

Servicescape: Framework

(1) Environmental

Dimensions

(2) Holistic

Environment(3) Moderators

(4) Internal

Responses(5) Behavior

Ambient ConditionsEmployee Response

Moderators

Employee

Responses

Approach/Avoid

Cognitive/Emotional/

Physiological


(Bitner, 1992)

Space/Function

Signs, Symbols &

Artifacts

Perceived

Servicescape

Customer Response

Moderators

Responses

Customer

Responses

Social Interactions

Approach/Avoid

Cognitive/Emotional/

Physiological

No direct link between environmental dimensions/perceived servicescape and behavior

Servicescape: Framework:

Environmental Dimensions

(1)(1)(1)(1) Environmental dimensions: Environmental dimensions: Environmental dimensions: Environmental dimensions: Physical environment that can be influenced by the company (= servicescape)

• Ambient conditions: Ambient conditions: Ambient conditions: Ambient conditions: Background, can attract the desired clientele (music, temperature, illumination, colors, e.g., top charts music in a store for teenagers)

• Space/function: Space/function: Space/function: Space/function: Organization of furnishings, layout and functionality (e.g., order or chaos, convenient or glamorous)

• Signs, symbols & artifacts: Signs, symbols & artifacts: Signs, symbols & artifacts: Signs, symbols & artifacts: Signals for appropriate behavior and „rules‰

(1) Environmental

Dimensions

Ambient

Conditions


„rules‰

• Furniture: simple or elegant atmosphere

• Pictures & decoration: competence, price range

• E.g., quality of dishes, cutlery and servicing in a restaurant

Combination of environmental dimensions influences the perceived servicescape

Measuring servicescape: Method consisting of 3 dimensions of Bitner (Pantouvakis, 2010)

(Bitner, 1992)

Space/

Function

Signs, Symbols

& Artifacts

Perceived

Servicescape

Servicescape: Framework:

Environmental Dimensions

Environmental dimensions: Design components of servicescape

• Company can change them to influence the customers

Examples:

Ambient conditions:Ambient conditions:Ambient conditions:Ambient conditions:

MusicMusicMusicMusic is played in the background to influence behavior of customers: E.g., in-store music and also music tempo variations influence the in-store traffic flow & sales volume (Milliman,


and also music tempo variations influence the in-store traffic flow & sales volume (Milliman, 1982)

Space/function: Space/function: Space/function: Space/function:

Layout and organization of merchandize Layout and organization of merchandize Layout and organization of merchandize Layout and organization of merchandize influence customerÊs willingness to pay: E.g., in high design store (open layout, neat organization of merchandise) price acceptability of customers is higher than in other stores (Grewal & Baker, 1994)

Signs, symbols & artifacts:Signs, symbols & artifacts:Signs, symbols & artifacts:Signs, symbols & artifacts:

DecorDecorDecorDecor influences consumerÊs expected price level: E.g., chic objects in the restaurant environment, compared to casual ones, positively affect price expectations (Verhoeven et al., 2009)

Agenda Lecture 5

• Servicescape

• Definition


• Framework

• Facility Layout Process AnalysisFacility Layout Process AnalysisFacility Layout Process AnalysisFacility Layout Process Analysis

• Facility Location





• Huff Model

Facility Layout Process Analysis

Example of a process: License renewal processExample of a process: License renewal processExample of a process: License renewal processExample of a process: License renewal process

Step 1: Step 1: Step 1: Step 1:

Review

application for

correctness Out


Process and

record

payment

Step 3:Step 3:Step 3:Step 3:

Check for

violations and

restrictions


Conduct eye

test


Photograph

applicant


Issue

temporary

licenseIn


Management task: Capacity planning

• How many employees are needed to serve a certain amount of customers?

• How can the process be improved to increase the number of customers being

served?


Layout of service delivery system important: Reduction of costs

Some Processes of service delivery: Divided into sequence of steps, all

customers must complete all of these (e.g., license renewal process)

Terminology:Terminology:Terminology:Terminology:

• Cycle time (CT) Cycle time (CT) Cycle time (CT) Cycle time (CT) = Average time of completion of one step (e.g., number of seconds needed for

reviewing application for correctness)

• BottleneckBottleneckBottleneckBottleneck = Step with longest CT of a whole process (e.g., step which takes longest for


completion)

• Limits whole process of service delivery

• Defines maximum flow rate for whole process

• Reasons for bottleneck: Lack of personnel, number of customers arriving at the same time, slow

information processing

• CapacityCapacityCapacityCapacity = Measure of output per unit of time if fully busy• Maximum performance of one step or the whole system

• Capacity of one step: 1/CT

• Capacity of whole system: Determined by bottleneck capacity, 1/longest CT

• Capacity per day: 1/longest CT * 8 hours

• Capacity utilization Capacity utilization Capacity utilization Capacity utilization = Actual output compared to maximum output

(actual output/capacity)

Number of

step

CT in

seconds

Capacity

per hour

(Fitzsimmons & Fitzsimmons, 2011)


Example: License renewal process: Example: License renewal process: Example: License renewal process: Example: License renewal process: The activities of this process are shown in the

table. The current process steps are demonstrated in the process flow chart below.

Step 3 represents the bottleneck.

ActivityActivityActivityActivity DescriptionDescriptionDescriptionDescription CT (in sec.)CT (in sec.)CT (in sec.)CT (in sec.)

1

2

3

Review application for correctness

Process and record payment

Check for violations and restrictions

15

30

60

Number of

step

CT in

Capacity

per hour


3

4

5

6

Check for violations and restrictions

Conduct eye test

Photograph applicant

Issue temporary license

60

40

20

30

1

15

240

2

30

120

3

60

60

4

40

90

CT in

seconds

OutIn

Bottleneck

6

30

120

5

20

180


Facility Layout Process Analysis:

Brainteaser

• Have a look at the slide before. What is the current

capacity of the whole system?

• The capacity of the whole system is supposed to be

increased to 120 by employing just one new clerk. How

could this be done?

10 10 10 10

MinutesMinutesMinutesMinutes


could this be done?

• Please draw a process flow chart showing the improved

process.


Brainteaser: Solution

• Current capacity of the system: 60 (capacity of bottleneck step)

• To increase the capacity to 120, steps 1 and 4 need to be combined and both

operated by one clerk. They need to be trained to be able to operate both tasks.

• A new clerk for activity 3 is employed: 2 clerks working in parallel.Number of

step

CT in

seconds

Capacity

per hour

1 & 4 3In


1 & 4

55

65

3

60

60

2

30

120

5

20

180

seconds

Out

In

1 & 4

55

65

3

60

60In

6

30

120

New capacity: 120New capacity: 130



Brainteaser: Solution

• Why is it not possible to just employ a new clerk for step 3?

Bottleneck would slip to step 4 (capacity: 90)

• Calculation:

New CT for step 1 & 4: CT 1 + CT 4 = 55 sec. per person

New capacity for step 1 & 4: 60 sec./55 sec. = 1,09 persons per min.


1,09 * 60 min. = 65 persons per hour

• New capacity for whole system: 120 (capacity of bottleneck step 2)


Agenda Lecture 5

• Servicescape

• Definition


• Framework

• Facility Layout Process Analysis

• Facility LocationFacility LocationFacility LocationFacility Location





• Huff Model

Facility Location:

Strategic Location Considerations

Several strategic location dimensions were identified in a study regarding hotel sites:

• Flexibility: Flexibility: Flexibility: Flexibility: Ability to react to a changing economic, demographic or competitive situations

• Location decisions: long-term, high employment of capital

• Ability to adapt to changes and to compensate crisis is important

• E.g., building of a hotel near a convention center

• Competitive positioning: Competitive positioning: Competitive positioning: Competitive positioning: Ability to reduce threat from competitors

• Establish several branches at different locations: Increase „visibility‰ at the market

• Fast occupation of prime locations


• Fast occupation of prime locations

• E.g., building a hotel next to the beach promenade

• Demand management: Demand management: Demand management: Demand management: Ability to manage demand regarding time and quantity

• Demand fluctuates due to economic situation, season or day of the week

• Measures are needed to create a stable demand or to adopt quickly

• E.g. hotel: different prices for summer and winter

• Focus: Focus: Focus: Focus: Ability to offer the identical service at different locations

• Standard service defined for all branches of a company

• Expansion is easier due to transferability of service standards

• E.g., hotel: chain has a certain manner of addressing the customers, making the beds and offering of extra services

(Kimes et al., 1990)

Facility Location: Modeling Considerations

Geographic RepresentationGeographic RepresentationGeographic RepresentationGeographic Representation

• Traditional resolution of location problems: Geographical conditions

• Location on network: Restricted possibilities of locating & linking two locations (only on network

nodes)

E.g., highway system as network, intersections are nodes: Only routes can be used for travelling,

calculating the shortest distance

• Location on flat surface (plane): Infinite possibilities of locating & linking two locations: Latitudes

& longitudes used for locating. Distance between locations measured at the extremes


• Euclidian metric methodEuclidian metric methodEuclidian metric methodEuclidian metric method

• Metropolitan metric methodMetropolitan metric methodMetropolitan metric methodMetropolitan metric method


Geographic Representation Number of Facilities Optimization Criteria

Modeling Considerations

Network Plane

Euclidian Metric Metropolitan Metric

Facility Location: Modeling Considerations

(1.a) Euclidian metric method(1.a) Euclidian metric method(1.a) Euclidian metric method(1.a) Euclidian metric method

• Vector (compare to Pythagorean theorem)• dji = Distance between points i and j

• xi, yi = Coordinates of ith point

• xj, yj = Coordinates of jth point

Example euclidian metric: • Origin: xi, yi = 2; 2


• Origin: xi, yi = 2; 2

• Destination: xj, yj = 4; 4

(1.b) Metropolitan metric method(1.b) Metropolitan metric method(1.b) Metropolitan metric method(1.b) Metropolitan metric method

• Rectangular displacement (i.e., north-south or east-west directions)

Example metropolitan metric: • Origin: xi, yi = 2; 2

• Destination: xj, yj = 4; 4


Facility Location: Huff Model

Huff modelHuff modelHuff modelHuff model: Model used for locating a retail outlet (e.g., locating a new

„Globus‰ supermarket in the Saarland)

Objective: Finding the optimal location

Steps:Steps:Steps:Steps:

• 1) Calculation of attraction attraction attraction attraction AAAAijijijij of a facility to consumers

• A = Attraction fo facility j for consumer i


• Aij = Attraction fo facility j for consumer i

• Sj = Size of the facility j

• Tij = Travel time from consumer iÊs location to facility j

• = Parameter estimated empirically to reflect the effect of travel time on different

kinds of shopping (large shopping mall vs. small convenience store)

• 2) Calculation of probabilityprobabilityprobabilityprobability PPPPij ij ij ij of consumer to travel to certain facility

• Pij = Probability of consumer from statistical area i to travel to shopping facility j

(Fitzsimmons & Fitzsimmons, 2011; Huff 1966)

Facility Location: Huff Model

• 3) Calculation of estimated annual consumer expendituresexpendituresexpendituresexpenditures EEEEjkjkjkjk

• Ejk = Estimate of total annual consumer expenditures for product class k at a shopping facility j

• Ci = Number of consumers at area i

• Bik = Average annual shopping budget of a consumer at area i for product class k

• m = Number of areas


• 4) Calculation of estimated market share market share market share market share MMMMjkjkjkjk

• Mjk = Estimate of market share captured by facility j of sales of product class k


Facility Location: Huff Model:

Example

Example: Calculation of expenditure & market share of an existing and a new Example: Calculation of expenditure & market share of an existing and a new Example: Calculation of expenditure & market share of an existing and a new Example: Calculation of expenditure & market share of an existing and a new

supermarketsupermarketsupermarketsupermarket

• Existing size of the facility S: 1, new size S: 3

• = 2

• Monthly expenditure Bik per person: 100 €

• Number of possible customers Ci in community A: 2000, community B: 1000


Travel time Tij :

Is it reasonable to build a new supermarket according to these data?

Community (=customers) i

Facility j A B

New 8 6

Existing 5 7



Example: Solution

Attraction Aij :

Probability Pij :


Facility j A B

New 0,0469 0,0833

Existing 0,0400 0,0204


Facility j A B


Expenditure Ejk & Market share Mjk

According to these data, a new supermarket should be built.

Facility j A B

New 0,54 0,80

Existing 0,46 0,20


Facility j A B Total Exp. Market share

New 108.000 80.000 188.000 0,63

Existing 92.000 20.000 112.000 0,37



Actual: 4 Retailers (800-3.200 qm), Planned: 1 new retailer (800 qm), = 1.2


(Spiekermann & Wegener, 2009)

Outlook

1. Introduction

2. Service Strategy

3. New Service Development (NSD)

4. Service Quality

5. Supporting Facility

6.6.6.6. Forecasting Demand for Services (Part A)Forecasting Demand for Services (Part A)Forecasting Demand for Services (Part A)Forecasting Demand for Services (Part A)





9. Managing Waiting Lines

10. Capacity Planning and Queuing Models

11. Services and Information Systems

12. ITIL Service Design

13. IT Service Infrastructures

14. Guest Lecture – Dr. Roehn, Deutsche Telekom

15. Summary and Outlook

Literature

Books:• Becker, F.D. (1981), Workspace, Praeger Publishers New York.

• Fitzsimmons, J. A. & Fitzsimmons, M. J. (2011), Service Management - Operations, Strategy, Information Technology, McGraw –

Hill.

• Rapoport, A. (1982), The Meaning of the Built Environment, Sage Publications, Inc. Beverly Hills.

• Steele, F. (1986), Making and Managing High-Quality Workplaces, Teachers College Press New York.

Papers: • Bitner, M.J. (1990), "Evaluating Service Encounters: The Effects of Physical Surroundings and Employee Responses‰, Journal

of Marketing, 54 (April), 69-82.


of Marketing, 54 (April), 69-82.

• Bitner, M.J. (1992), „The impact of Physical surroundings on customers and employees‰, Journal of Marketing, 56(2), pp. 57-71.

• Davis, T.R.V. (1984), „The influence of the physical environment in offices‰, Academy of Management Review, 9(2), pp. 271-283.

• Berry, L.L. & Clark,T. (1986), "Four Ways to Make Services More Tangible‰, Business (October-December), pp. 53-4.

• Grewal, D. & Baker, J. (1994), „Do retail store environmental factors affect consumersÊ price acceptability? An empirical

examination‰, International Journal of Research in Marketing, 11, pp. 107-115.

• Pantouvakis, A. (2010), „The relative importance of service features in explaining customer satisfaction‰, Managing Service Quality, 20(4), pp. 366-387.

• Harrell, G.D. , Hutt, M.D. & Anderson, J.C. (1980), "Path Analysis of Buyer Behavior Under Conditions of Crowding„, Journal of Marketing Research, 17 (February), pp. 45- 51.

• Kimes, S.E. & Fitzsimmons, J.A. (1990), „Selecting Profitable Hotel Sites at La Quinta Motor Inns‰, Interfaces, 20(2), pp. 12-20.

• Kotler, P. (1973), „Atmospherics as a marketing tool‰, Journal of Retailing, 49(4), pp. 48-64.

• Milliman, R.E. (1992), „Using background music to affect the behavior of supermarket shoppers‰, Journal of Marketing, 46(3),

pp. 86-91.

• Shostack, G. L. (1977), "Breaking Free From Product Marketing„, Journal of Marketing, 41(April), pp. 73-80.

• Verhoeven, J.W.M., van Rompay, T.J.L. & Pruyn, A.T.H. (2009), „The price facade: Symbolic and behavioral price cues in service

environments‰, International Journal of Hospitality Management, 28, pp. 604-611.

Others:• Spiekermann, K. & Wegener, M. (2009), „Standortwahl des Einzelhandels‰, Lehrveranstaltung "Modelle in der Raumplanung„,

http://spiekermann-wegener.de/mir/pdf/MIR2_5_120509.pdf.




Chair in Information and Service Systems

Saarland University, Germany

service management – supporting...

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