SERVICE SUPPLY CHAIN: AN INTEGRATED CONCEPTUAL FRAMEWORK

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SUMIT SAKHUJA AND VIPUL JAIN

DEPARTMENT OF MECHANICAL ENGINEERING INDIAN INSTITUTE OF TECHNOLOGY, DELHI, INDIA

MOTIVATION

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SERVICES ALL AROUND US

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Services contribution in US

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GDP – USD 590 billion

GDP growth rate – 9 %

Services contribution – 54 %

20062006

GDP – USD 750 billion

GDP growth rate – 9.5%

Services contribution – 60 %

20082008

GDP – USD 900 billion

GDP growth rate – 9%

Services contribution – 60-65 %

20102010

Services contribution in India

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REASON FOR SUCCESS

OF

MANUFACTURING COMPANIES

IS

SUPPLY CHAIN NETWORK MANAGEMENT

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Research in SCM

Research in SSCM

CAN SERVICES BE VIEWED AS NETWORK/CHAIN OF ACTIVITIES?

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SERVICES

SCM

LE

NS

INTRODUCTION

• A Service Supply Chain (SSC) is a network of service provider facilities (in-house or outsourced), each of which is able to process one or more service tasks on an as needed basis.

• Two key characteristics of a SSC are

(i) the business service is decomposable into several sequential tasks that can be processed by different service providers, and

(ii) the primary capacity resource is skilled labor.

• SSCs are increasingly being developed by companies that experience a high variability in the demand for their services (e.g., loan processing, analytical consulting services, emergency repair crews, claims processing, etc.).

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CUSTOMER TASK 1 TASK 2

TASK 3

TASK 5TASK 4

SERVICE PRODUCT REQUEST

SERVICE PROD

UCT

DELIVERY

PROVIDER A

PROVIDER B

PROVIDER C

Service Product Delivered by a Service Supply ChainSERVICE JOB

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LITERATURE REVIEW

• Services

• Service Operations Management

• Service Supply Chain Management

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SERVICES

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Service DefinitionsAuthor (year) Definition

Levitt, 1972 A service is a personal performance.

Hill, 1977 A service may be defined as a change in the conditions of a person or a good belonging to some economic unit, which is brought about as a result of the activity of some other economic unit with the prior agreement of the former person or economic unit.

Chase, 1978 Services are processes involving customer contact.

Berry, 1980 A service is a deed, act or performance.

Murdick et al., 1990 Define services as "economic activities that produce time, place, form, or psychological utilities”.

Fitzsimmons and Fitzsimmons, 2004

Define services as a time-perishable, intangible experience performed for a customer acting in the role of co-producer.

Spohrer et al., 2007 Service is typically considered as an application of specialized knowledge, skills, and experiences, performed for the benefit of another.

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The main source of the uniqueness is the customer involvement in the process. Unique characteristics of services include:

– Customer-supplier duality

– Perishable

– Heterogeneity

– Labour intensive

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Several characteristics that have been identified in the literature include:

– the degree of labour intensity;

– the degree of interaction;

– the degree of customisation;

– the volume of the output;

– variety and flexibility of services offered;

– the length of customer contact time

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Service Typology

SERVICE FACTORYEx: Transportation,

Airline, Hotel, Resort, Recreation

MASS SERVICESEx: Retailing, Schools.

SERVICE SHOPEx: Hospitals, Banks,

Auto Repairs

PROFESSIONAL SERVICES

Ex: Law firms, Doctors, Accountants

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EXTENT OF CUSTOMER CONTACT AND LABOR INTENSITY

Service Concept

Elements Examples

Core Services

Supporting Facilities Facilities layout, décor, support technology and equipment, branch network, kiosks, roller coasters

Facilitating goods (physical items) Food, ATM cards, forms, receipts, check-book, golf clubs

Facilitating Information Schedules, fee structures, data, medical records, web page design, diagnostics

Explicit Services (experimental/sensual)

Satisfy hunger, transportation, surgery, transactions, and entertainment.

Implicit Services (psychological benefits)

Comfort, status, convenience, well being, delight

Peripheral Services

Services/facilities that supplement or “surround” the core service (e.g. valet parking for hospital services, shopping at terminals for air transportation services)

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SERVICES OPERATIONS MANAGEMENT

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Service provider selection & Outsourcing

Service performance measurement

Service quality measurement

Customer related issues

Application of manufacturing principles

Coordination & Collaboration

Capacity management

Demand management

Service forecasting

Service Operations/

Activities

SERVICE SUPPLY CHAIN MANAGEMENT

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Reasons why services can be viewed as a part of supply chains (Giannakis 2011)

• Coordination of processes

For the design and delivery of services a large number of independent stakeholders may be involved, whose processes need to be coordinated.

• Improved performance through process integration

Considering services as part of supply chains offers a holistic perspective of the processes involved for their creation and provision and the weaknesses that need to be addressed.

• Improvement of the customer interface

The high level of customer contact in services stresses the importance for an organisation to react swiftly to customer feedback 23

Service Supply Chain DefinitionsAuthor Definition

Kathawala & Abdou (2003) The supply chain management for the service industry is the ability of the company/firm to get closer to the customer by improving its supply chain channels. The service supply chains will include responsiveness, efficiency, and controlling

Ellram, Tate and Billington (2004) Supply chain management is the management of information, processes, capacity, service performance and funds from the earliest supplier to the ultimate customer.

Baltacioglu et al. (2007) The service supply chain is the network of suppliers, service providers, consumers and other supporting units that performs the functions of transaction of resources required to produce services; transformation of these resources into supporting and core services; and the delivery of these services to customers.

Baltacioglu et al. (2007) Service supply chain management is the management of information, processes, resources and service performances from the earliest supplier to the ultimate customer.

Li, Liu and Cheng (2008) Service Supply Chain (SSC) is a service-network that reorganizes different service entities in order to satisfy customers' require by using modem management technology to break down and rebuild a system which considers customers' demands as starting point and takes a complex service or an Integrated Service Package as a series of process in service when the service-industries are developed to some extent.

Wu and Yang (2009) SSC can be defined as follows: an integration of a series of entities (individual person, organization, enterprise) to provide personalized service directly or indirectly.

He, Ho and Xu (2010) SSC refers to the supply and demand chain of service which integrates the service resources using new technologies and management models. Its basic structure is an integrated value chain / network whose members are the service providers, service integrators, and customers.

Song and Xu (2011) The PSSC management is an integrated management mode of service information, service processes, service capacity, service performance and service funds from the initial service supplier to the ultimate customer in the process of producer service outsourcing.

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Structure of Service Supply Chain

Three key elements of a service supply chain are

Service Providers

• provide standardized, single-service types,

• have a strong ability to cooperate and collaborate,

• according to the service integrator’s special requirement on service capabilities and process, service providers can make appropriate adjustments.

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Service Integrators

• core enterprise in a service supply chain,

• have a highly efficient information-processing,

• powerful service design ability to integrate services,

• coordinate service provider to provide customized services on consumer’s demand,

• through customer demand forecasting and customer relationship management service integrators can keep up with changes of customer demand so as to create and seek the value of new growth points,

• and service integrators can integrate the resources and capabilities of service providers, improve the integration of service.

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Customers

• customer can be an organization or an individual,

• depending upon the type of customer the operations of SSC are initiated,

• performance of the SSC can be measured from the customer perspective,

• customers are the initial suppliers in a SSC (Sampson 2000).

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Service Supply Chain (Source: Baltacioglu et al. 2007).

Decision Levels in a Service Supply Chain

Level-one decisions

• these decisions are in the area of service business planning,

• have a long term effect on the service supply chain,

• senior management is frequently the decision maker and user of this information,

• quick response is not the requirement at this level since these decisions are not made or revisited every day,

• examples of level-one decisions are dynamic sourcing, service provider selection, capacity planning, service delivery, service quality, service productivity etc.

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Level-two decisions

• these decisions are in the area of tactical planning, and they have a shorter life than level-one decisions,

• detailed information is available, and the data probably are very reliable,

• these decisions are constrained by level-one decisions with some leeway to account for sudden change in data,

• at this level, quick response is nice to have, and occasionally a requirement,

• an example of level-two decision is one that needs to commit priority orders and obey commitments made in level one, like capacity planning, effectiveness in scheduling, supplier cost and pricing issues, forecasting accuracy etc.

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Level-three decisions

• these decisions are in the area of operational planning and scheduling,

• the effect of these decisions is short term and they are constrained by level-one and level-two decisions,

• quick response is an absolutely necessity,

• examples are staff scheduling, short term forecasting, resource allocation, the service order entry method, the customer service order path, capacity utilization, operating ratio of actual to planned working hours, etc.

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Year wise Publications on Service Supply Chains.

Application Area of Service Supply Chain

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Examples of SSC

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35(Sampson, 2000)

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LOGISTICS SERVICE SUPPLY CHAIN

(Du and Rong, 2010)

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(Hu and Xianlong, 2011)(Song and Xu, 2011)

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TOURISM SUPPLY CHAIN

(Zhang et al. 2009)

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SUPPLY CHAIN OF PROPERTY PURCHASE

(Giannikis, 2011)

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EDUCATION SUPPLY CHAIN

(Habib and Jungthirapanich, 2010)

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PORT SERVICE SUPPLY CHAIN

(Zhang et al. 2009)

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HOTEL SUPPLY CHAIN

• Financial Service Supply chains, Legal Service Supply Chains, Healthcare Service Supply Chains, Telecommunication Service Supply Chains and more……….

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LEARNING FROM THE LITERATURE

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SERVICE OUTSOURCING

SERVICE PROVIDER

SERVICE PROVIDER

SERVICE PROVIDER

SERVICE PROVIDER

SERVICE CAPACITY

MANAGEMENT

SERVICE PROVIDER SELECTION

SERVICE INTEGRATION

SERVICE INTEGRATOR

CUSTOMER CUSTOMER CUSTOMER CUSTOMER

SERVICE DEMAND

MANAGEMENT

SERVICE DELIVERY

COLLABORATION

SERVICE CUSTOMIZATION

INFO

RM

AT

I ON

MA

NA

GE

ME

NT

Conceptual Framework of Service Supply Chain 45

• The proposed framework highlights the structure of the SSC with three basic elements that are customers, service integrator as a core and service providers.

• The framework explains the flow of key activities that are carried out in a typical SSC.

• It shows that in a SSC, there can be a number of customers, each of their individual service demands are forwarded to the service integrator.

• The service integrator here is considered as the core element of the SSC.

• Service integrator is responsible for managing customer demand, through its demand management capability.

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AN INTEGRATED CONCEPTUAL FRAMEWORK

• Capacity management is done by selecting service providers who are capable of performing the required service tasks.

• These service operations can also be outsourced to different service provider using various service outsourcing strategies.

• After the service providers perform their operations and come up with service solutions, these services need to be integrated and customized depending upon the customer requirements.

• Finally, the customised service package is delivered to the final customer through a well managed service delivery system, which is again the core activity of the service integrator.

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CONCLUSIONS

• The framework provides insights into the conceptualization of the service supply chain management (SSCM) field.

• The work enables us to briefly describe SSCM, suggest how it should be described and structured and also highlights the various decisions that are needed to produce and deliver the services to the customer through a SSC network.

• This generic model can fit to different service industries, and also provides the vision to the service operation managers to carry out their service activities in a systematic and planned manner to achieve organizational objectives.

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KEY REFERENCES

• Baltacioglu, T., E. Ada, M.D. Kaplan, O. Yurt and Y.C. Kaplan. ‘A New Framework for Service Supply Chains’, The Service Industries Journal, (27:2), 2007, pp.105–124.

• Ellram, L.M, W.L. Tate and C. Billington, “Understanding and Managing the Services Supply Chain’, The Journal of Supply Chain Management A Global Review of Purchasing and Supply, (40:4), 2004, pp 17-32.

• Ellram, L.M, W.L. Tate and C. Billington, “Services Supply Management: the next frontier for improved organizational performance”, California Management Review, (49:4), 2007, pp. 44-66.

• Giannakis. M. ‘Conceptualizing and managing service supply chains’, The Service Industries Journal, (31:11), 2011, pp. 1809–1823.

• Cho, D.W., Y.H. Lee, S.H. Ahn and M.K. Hwang. ‘A framework for measuring the performance of service supply chain management, International Conference on Computers and Industrial engineering, 2011.

• Sampson, S.E. ‘Customer-supplier duality and bidirectional supply chains in service organizations’, International Journal of Service Industry Management, (11:4), 2000, pp. 348-364.

• Sengupta. K, D.R. Heiser and L.S. Cook. ‘Manufacturing and Service Supply Chain Performance: A Comparative Analysis’, The Journal of Supply Chain Management, (42:4), 2006, pp. 4-15.

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THANK YOU

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