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Chapter 9Chapter 9Chapter 9Chapter 9

Service OperationsService Operations

Planning and SchedulingPlanning and Scheduling

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OverviewOverviewOverviewOverview

IntroductionIntroduction Scheduling Quasi-Manufacturing OperationsScheduling Quasi-Manufacturing Operations Scheduling Customer-as-Participant OperationsScheduling Customer-as-Participant Operations Scheduling Customer-as-Product OperationsScheduling Customer-as-Product Operations

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IntroductionIntroductionIntroductionIntroduction

ServicesServices are operations with: are operations with: Intangible outputs that ordinarily cannot be Intangible outputs that ordinarily cannot be

inventoriedinventoried Close customer contactClose customer contact Short lead timesShort lead times High labor costs relative to capital costsHigh labor costs relative to capital costs Subjectively determined qualitySubjectively determined quality

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IntroductionIntroductionIntroductionIntroduction

Facts about service businesses:Facts about service businesses: Enormous diversityEnormous diversity Service businesses can be any sizeService businesses can be any size Twice as many non-retail service businesses as Twice as many non-retail service businesses as

retailretail Technical training important due to significant Technical training important due to significant

dependence on computers, automation and dependence on computers, automation and technologytechnology

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IntroductionIntroductionIntroductionIntroduction

Other Facts about service businesses:Other Facts about service businesses: Service workers well paid relative to Service workers well paid relative to

manufacturingmanufacturing Need better planning, controlling, and Need better planning, controlling, and

management to stay competitivemanagement to stay competitive

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Some of the Largest Service BusinessesSome of the Largest Service BusinessesSome of the Largest Service BusinessesSome of the Largest Service Businesses

Rank in the top 20 US Corporations:Rank in the top 20 US Corporations: AT&TAT&T Wal-MartWal-Mart CitigroupCitigroup State FarmState Farm SBC CommunicationsSBC Communications Sear, Roebuck & CompanySear, Roebuck & Company

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Spectrum of Service IndustriesSpectrum of Service IndustriesSpectrum of Service IndustriesSpectrum of Service Industries

TransportationTransportation BankingBanking RetailingRetailing Health CareHealth Care EntertainmentEntertainment

InsuranceInsurance Real EstateReal Estate CommunicationsCommunications UtilitiesUtilities … … and moreand more

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No Clear Line BetweenNo Clear Line BetweenManufacturing and Service FirmsManufacturing and Service Firms

No Clear Line BetweenNo Clear Line BetweenManufacturing and Service FirmsManufacturing and Service Firms

EveryEvery business, whether manufacturing or service, business, whether manufacturing or service, has a mix of customer service aspects and production has a mix of customer service aspects and production aspects in its operationsaspects in its operations

Manufacturing has much to learn from services that Manufacturing has much to learn from services that excelexcel

Services have much to learn from manufacturers that Services have much to learn from manufacturers that excelexcel

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Manufacturing and Service JobsManufacturing and Service JobsManufacturing and Service JobsManufacturing and Service Jobs

Percentage of US JobsPercentage of US Jobs

19881988 1998 1998 2008* 2008*

Manufacturing JobsManufacturing Jobs 16.1% 16.1% 13.4% 13.4% 11.6% 11.6%

Service JobsService Jobs 66.2 66.2 70.870.8 73.973.9

* Projected* Projected

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Operations StrategiesOperations StrategiesOperations StrategiesOperations Strategies

Positioning strategiesPositioning strategies contain two elements: contain two elements: Type of service designType of service design

Standard or customStandard or custom Amount of customer contactAmount of customer contact Mix of physical goods and intangible servicesMix of physical goods and intangible services

Type of production processType of production process Quasi-manufacturingQuasi-manufacturing Customer-as-participantCustomer-as-participant Customer-as-productCustomer-as-product

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Types of Service OperationsTypes of Service OperationsTypes of Service OperationsTypes of Service Operations

Quasi-manufacturingQuasi-manufacturing Production occurs much as manufacturingProduction occurs much as manufacturing Physical goods dominant over intangible servicesPhysical goods dominant over intangible services

Customer-as-participantCustomer-as-participant High degree of customer involvementHigh degree of customer involvement Physical goods may or may not be significantPhysical goods may or may not be significant Service either standard or customService either standard or custom

Customer-as-productCustomer-as-product Service performed on customer... usually customService performed on customer... usually custom

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Non-Uniform DemandNon-Uniform DemandNon-Uniform DemandNon-Uniform Demand

Cannot inventory servicesCannot inventory services in advance of high-demand in advance of high-demand periods, so businesses use following tactics:periods, so businesses use following tactics: Preemptive actionsPreemptive actions to make demand more uniform to make demand more uniform

Off-peak incentives/discounts (telephone)Off-peak incentives/discounts (telephone) Appointment schedules (dentist)Appointment schedules (dentist) Fixed schedules (airline)Fixed schedules (airline)

Make operations more flexibleMake operations more flexible so it is easier to so it is easier to vary capacityvary capacity

Part-time personnel (supermarket)Part-time personnel (supermarket) Subcontractors (postal service)Subcontractors (postal service) In-house standby resources (fire department)In-house standby resources (fire department)

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Non-Uniform DemandNon-Uniform DemandNon-Uniform DemandNon-Uniform Demand

Additional tactics used by businesses:Additional tactics used by businesses: Anticipate demand and schedule employees during Anticipate demand and schedule employees during

each time period to meet demandeach time period to meet demand Allow waiting lines to formAllow waiting lines to form

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Scheduling Quasi-Manufacturing ServicesScheduling Quasi-Manufacturing ServicesScheduling Quasi-Manufacturing ServicesScheduling Quasi-Manufacturing Services

Product-Focused OperationsProduct-Focused Operations Resemble product-focused production linesResemble product-focused production lines Customer demand is forecast and capacity Customer demand is forecast and capacity

decisions made just as in manufacturingdecisions made just as in manufacturing High volumes of standardized productsHigh volumes of standardized products Management focused on controlling production Management focused on controlling production

costs, product quality, and delivery of physical costs, product quality, and delivery of physical goodsgoods

Example... Example... McDonald’s back-room operationMcDonald’s back-room operation

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Scheduling Quasi-Manufacturing ServicesScheduling Quasi-Manufacturing ServicesScheduling Quasi-Manufacturing ServicesScheduling Quasi-Manufacturing Services

Process-Focused OperationsProcess-Focused Operations Managed like job shops in manufacturingManaged like job shops in manufacturing Input-output control important to balance capacity Input-output control important to balance capacity

between operationsbetween operations Gantt charts used to coordinate flows between Gantt charts used to coordinate flows between

departmentsdepartments Sequence of jobs consider sequencing rules, Sequence of jobs consider sequencing rules,

changeover costs, and flow timeschangeover costs, and flow times

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Scheduling Customer-as-Participant ServicesScheduling Customer-as-Participant ServicesScheduling Customer-as-Participant ServicesScheduling Customer-as-Participant Services

Must provide customer ease of use/access features.... Must provide customer ease of use/access features.... lighting, walkways, etc.lighting, walkways, etc.

Layouts must focus on merchandising and attractive Layouts must focus on merchandising and attractive display of productsdisplay of products

Employee performance crucial to customer Employee performance crucial to customer satisfactionsatisfaction

Waiting lines used extensively to level demandWaiting lines used extensively to level demand

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Waiting Lines in Service OperationsWaiting Lines in Service OperationsWaiting Lines in Service OperationsWaiting Lines in Service Operations

Waiting lines form because:Waiting lines form because: Demand patterns are irregular or random.Demand patterns are irregular or random. Service times vary among “customers”. Service times vary among “customers”. Managers try to strike a balance between Managers try to strike a balance between

efficiently utilizing resources and keeping efficiently utilizing resources and keeping customer satisfaction high.customer satisfaction high.

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End of Chapter 9End of Chapter 9End of Chapter 9End of Chapter 9