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SERVICE OPERATIONS

MANAGEMENT

IAV200

Perspectives On Services ..

“There are no such things as service industries.

There are only industries whose service components are greater or less than other industries.

Everybody is in service.”

Theodore Levitt, Marketing Guru

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Perspectives On Services

“You can duplicate the airplanes.

You can duplicate the gate facilities.

You can duplicate all the hard things, the tangible things you can put you hands on.

But it’s the intangibles that determine success.

They’re the hardest to duplicate, if you can do it at all.”

Herb Kelleher, Airline Executive

The Nature of Services

� Societal evolution:

Pre-Industrial – Industrial – Post-Industrial

� Large and increasing sector of organised economy

� A definition of Service Package:

“ A bundle of explicit and implicit benefits provided using facilitating goods and with a supporting facility.”

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The Service – Manufacturing

Pure Product Pure Service

Spiritual (Ayurvedic) Healing/ Treatment

Legal/Tax Consulting

Cyber Café –Telephone Booths

Emergency Maintenance Services

Facilities Maintenance

High quality restaurant meal

Fast food in a eat out joint

Customised durable goods

Fast moving commodities

Vending Machines

Based on Text Fig. 1.1 (Adapted from Operations Management by Hill, T., 2005)

The Service Operations Challenge

� Intangibility

� Non-inventoriability/ Perishability (output/capacity)

� Simultaneous Production and Consumption

� Customer Presence/ Participation

� Heterogeneity/ Variability

� Service Worker Capabilities

� Everybody’s an Expert

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A Couple of Service Operations

Classifications

1. Customer Contact Based

Low

Contact

Medium

Contact

High

Contact

Buffered

Core

Permeable

System

Reactive

System

Sales Opportunity

Production Efficiency

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1. Contact-Based Classification

Service-systemDesign Matrix

Mail contact

Face-to-faceloose specs

Face-to-facetight specs

PhoneContact

Face-to-facetotal

customization

Buffered

core (none)

Permeable

system (some)

Reactive

system (much)

High

LowHigh

Low

Degree of customer/server contact

Internet & on-site

technology

SalesOpportunity

ProductionEfficiency

2. The Service Process Matrix

Quasi-Manufacturing

MassService

Service/Custom Shop

ProfessionalService

Location of Main Value Addition

Back Room Front Office

Custo

miz

ed

Sta

ndard

ized

De

gre

e o

f S

tan

da

rdiz

atio

n

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SERVICE DESIGN

Basic Choices & Approaches

(not mutually exclusive)

Design Issues in Services

� Value apportionment between Explicit/ Implicit benefits provided by service itself and by facilitating goods/ supporting facilities

� Design Considerations:

Function/ Form/ Production

� Product/ Process Design not separable

� Design of procedures for creation/ exchange of materials, information, advice, money etc.

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Service Design Choices

� Degree of Standardization/ Customization

� Degree/ Stages of Customer Involvement

� Work partitioning between Back Room and Front Room

� Balance sought between Efficiency, Flexibility & Sales Opportunity

Production Line Approach

� Service Standardization

� Division of Labour

� Limited Discretionary Action of Personnel

� Substitution of Technology/ Systems for People

(The “Technocratic Hamburger” - Theodore Levitt)

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Customer As Co-producer/

Participant Approach

� Substitution of Customer Effort for Provider’s

� May be at one or more stages of the value chain, e.g. Design, Delivery, or both

� Involving Customers in Smoothing Service Demand

� also a supply/ demand matching approach

Either way, customer must be willing to participate in creation/ delivery of the service, or in determination of its timing

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Information Technology Based

Approach

� Information Empowerment:

� Employee

� Customer

� Deployment of Information Technology for:

� Productivity Enhancement, e,g., Inventory Status

� Revenue Generation, e.g., Yield Management

� Customer Lock-in/ Barriers to entry, e.g., Club/ Reservation systems

� Database Asset,e.g., Micro-marketing

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The USA Principle

UNDERSTAND SIMPLIFY AUTOMATE

Existing processes Processes by

eliminating waste

Simplified

processes

through by using

Process Mapping

Diagramming

Brainstorming

Eliminating

Combining

Rearranging

Operations

Technologies, EDI/

Internet etc.

“Simplify before Automating, otherwise you Simply Automate Waste.”

- Shigeo Shingo, Japanese Manufacturing Guru

Designing Services With Queues

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Murphy On Queues

“The other lines move faster.”

“The longer you wait in line, the greater the likelihood that you are standing in the wrong line.”

“If you change lines, the one you just left will start to move faster than the one you are now in.”

“Switching back screws up both lines and makes everybody angry.”

Designing Services With QueuesThe Psychology of Waiting Lines …

� Unoccupied time feels longer than occupied time.

(That Old Empty Feeling)

� Pre-process waits feel longer than in-process waits.

(A Foot in the Door)

� Anxiety makes waits seem longer.

� Uncertain waits seem longer than known, finite waits.

(The Light at the End of the Tunnel)

(Lovelock, “Services Marketing”; Larson, “The Waiting Line Blues”)

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Designing Services With Queues

… The Psychology of Waiting Lines

� Unexplained waits seem longer than explained waits.

(Just What Is Going On?)

� Unfair waits feel longer than equitable waits.

(Excuse Me, But I Was First)

� Solo waits feel longer than group waits.(We’re All In It Together)

� The more valuable the service, the longer the customer will wait.

(Lovelock, “Services Marketing”; Larson, “The Waiting Line Blues”)