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9/21/2013
1
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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2
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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3
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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11
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”)