|
 


Prof. Gautam Sinha

VGSOM, IIT Kharagpur
 Service Operations

In this module on Service Operations, we will discuss:

ï Service & its characteristics
ï Service operations
± Service Product
± Service Quality & Propositions
± Model for Service Quality
± Waiting lines
± Location & Layout
± Manufacturing & Operation Scheduling
± Service Blueprinting
± Manpower
 Service Operations

h

 

³Services are deeds, processes and performances´

-º




Services are basically intangible. They are

performances and experiences rather than
objects´ ± 
º
 
 Service Operations

Service characteristics
ï Intangible
± Cannot be inventoried
± Cannot be patented
± Cannot be displayed
ï Production & consumption are simultaneous
± Customers participate in service delivery
± Customers affect service delivery
± Employees affect service delivery
± Mass production may be difficult
 Service Operations

Service characteristics (continued)

ï Heterogeneous-
± often idiosyncratic: no common rules
± Delivery & customer satisfaction depend upon
employee action
± Service quality depends upon uncontrollable
factors
ï Perishable
± Difficult to synchronize supply & demand
± Cannot be returned or resold
ï Universal- everybody is an expert in service
 Service Operations
Changes in Economy: Rise of Services [Pine & Gilmore,1999]

O 
  
 O  
 




‡Goods ‡Services ‡Experiences
‡Commodities ‡Produce goods ‡Deliver Services ‡Stage
‡Extract ‡Tangible ‡Intangible ‡Memorable
‡Tangible/ natural ‡Features ‡Benefits ‡Sensations
‡Characteristics ‡User ‡Among people ‡Guest
‡Against nature ‡Utilize nature ‡People power ‡Stager
‡Agriculture/ ‡Manufacturers ‡Client ‡Personalised
mining
‡Machine power ‡Service provider ‡Revealed over
‡Market time
‡Quality of goods ‡Brain power/ creativity/
‡Trader innovation
‡Standardized
‡Muscle power ‡Quality of life
‡Inventory
‡Simple hand ‡Information
tools
‡Deliver/ no storage
‡Subsistence
‡On demand
‡Stored in bulk
 Service Operations

Why are services growing?

ï Push theory of innovation- technology driven
± IT-www- creates new demand
ï Web booking of airlines, rail tickets; Web banking

ï ATMs

± Mobile phone technology- MMS

ï Pull theory of innovation- customers demand new services
ï Wealth management services by banks- demanded by HNI
ï Event management of marriages
ï Service battery provided by dealer
ï Demographic/ social changes
ï Home delivery from restaurants
ï Car pick up/drop after servicing/repair
ï Special services for retired people in US & Europe
ï New technology creates need for new services
ï VCR/DVD- cassette/ DVD rental
 Service Operations

 
 

 

 
   

   


  


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Adapted from Schmenner, MIT Sloane Mgt Review,27/3, 1986

 Service Operations

Characteristics of  


 
ï Limited features
ï Competition on price/speed/warmth/excitement
ï Low extent of changes possible
ï High capital investment
ï Rigid process and integral equipment
ï Capacity is clear cut: No scope for excess capacity
ï Peaks difficult to handle
ï Line flow preferred in layout
 Service Operations

Characteristics of  
 
ï Diverse features
ï Employee competence
ï Routine jobs
ï High capital investment
ï Adaptable process and equipment important for high quality
service
ï Capacity is function of demand-mix; fuzzy capacity
ï Scheduling easier
ï Job shop/ fixed position layout
 Service Operations

Characteristics of

 

ï Limited features
ï Price/choice/ perceived warmth
ï Limited experimentation
ï Low capital investment
ï Rigid processes and limited link to equipment
ï Capacity is limited by ????, not processing time
ï Scheduling easier
ï Customer flow through fixed position layout
 Service Operations

Characteristics of O 
 


ï Very diverse features
ï Competence of main provider & range of expertise
ï Routine tasks
ï Low capital investment
ï Loose processes and low link to equipment
ï Fuzzy capacity; tough to schedule peaks
ï Scheduling easier
ï Job shop layout
 Service Operations

Challenges for managers

ï Low labour intensity [service factory + service shop]
± Managing demand to avoid peaks
± Scheduling service delivery
± Capital investment & technology advancements

ï High labour intensity [mass service+professional

services]
± Hiring & training
± Scheduling workforce
± Development of methods
± Control
± Growth & nurturing new units
 Service Operations

Challenges for managers- continued

ï   

 ! 


 " 


 #


 
$
± Marketing
± Conveying ³warmth´
± Designing & managing servicescape
± Standard Operating Procedures
± Rigid hierarchy
ï r  

 !  


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$
± Cost increase
± Maintaining quality
± Reacting to customer intervention in process
± Loyalty of employees
± Managing flat hierarchy/ loose superior-subordinate relationship
± Career growth of employees
 Service Operations

Recipient of service
&
   


O    

4  % 
‡Health care ‡Freight
'
‡Transport ‡Car repair


 ‡Gym & salon ‡Laundry
 ‡Restaurant


   

‡Education ‡Banking
  
 ‡Theatre ‡Legal
‡Movie hall ‡Accounting
‡Museum ‡Insurance
‡Broadcasting ‡Security
 Service Operations

Customization & Judgment in Service





r  
 
( ‡Surgery ‡Education
r ‡Taxi service ‡Preventive health program
)
 
‡Gourmet restaurant ‡Family restaurant

 

O  ‡Telephone ‡Public transport
 
   ‡Hotel ‡Movie theatre
  
 ‡Retail bank ‡Sports
 ‡Cafeteria ‡Company canteen
 Service Operations

Nature of recipient
&
   


O    

4  % 
‡Health care ‡Freight
'
‡Transport ‡Car repair


 ‡Gym & salon ‡Laundry
 ‡Restaurant


   

‡Education ‡Banking
  
 ‡Theatre ‡Legal
‡Movie hall ‡Accounting
‡Museum ‡Insurance
‡Broadcasting ‡Security
 Service Operations

Nature of Demand Fluctuation

  





h '
 

O
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+ ‡Electricity ‡Insurance

   ' 

)  ‡Telephone ‡Legal service

 ‡Maternity ward ‡Banking
 
‡Police emergency ‡Laundry/ drycleaner


O
*
‡Tax preparation ‡Fastfood




  ‡Passenger transport ‡Movie theatre







 ‡Hotel & motel ‡Petrol pump
 Service Operations

 
, O 
  
(|)
FMCG
Consumer
durables  

Automobile 




 Fast food



 Airline
Consulting
r



Teaching
 Service Operations

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  :
ï Maintenance, spare parts ± Automobile,
Aquaguard,
ï Quick/ home delivery- fast food

O

  



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ï 
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 Service Operations

Service product consists of

ï Tangible product
± Physical product
ï Service environment (Servicescape)
± Physical facilities
± Package that conveys an image to customer
about what is µinside¶
± People
ï Service delivery
± How the service is delivered, the µprocess¶
± Interaction
 Service Operations

Service Product

 


 

. 

 



 Service Operations

Service Encounter
ï Interaction between customer & service provider

ï Occurs above µline of visibility¶

ï Defines quality in the mind of customer

ï ³moments of truth´- Jan Carlzon, CEO ScandinavianAirlines

ï Every µmoment of truth¶ must be managed for superior service

Service Quality (Adapted from Parasuraman, Zeithaml & Berry, 1985)
WOM Personal Needs Past Experience



 

 
 ‡Delight +++
.
  
‡Tangibles
‡Surprise++
O
  
 ‡Satisfaction+
‡Empathy
/
 ‡Dissatisfaction-
‡Responsiveness
‡Assurance ‡Anger - -
‡Reliability ‡Disgust - - -

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/
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Customer Perception Customer Expectation

Gap 4: Communication Gap 1: Market Research

Management Perception of
Service Delivery
Customer Expectation

Gap 3: Conformance

 
 

 Gap 2: Design

  


  
.
 Service Operations
Service Expectation

. 


3   



2
 

 Service Operations
Service Expectation
What service ³can be´, ³should be´

. 


Customer will
3   

 accept variability
From supplier

Minimum tolerable
2
 
 expectation
 Service Operations
Service Expectation

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 Service Operations
Service Expectation

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 Service Operations

Service Design Elements (r  )

ï Who is the customer? (j  )
ï How do we differentiate our product?
(| 
 
 )
ï What is our service package and operating
focus? (| 
  )
ï What are the actual processes, personnel and
facilities? (| 
  
 )
 Service Operations

Problems with Service Design:

ï Intangibles

ï Difficult to specify & agree upon

ï Varies from person to person
ï Understanding customer needs intimately
ï Continuous customer feedback
 Service Operations

Service: Chain of Events from Quality to Profits

[Rust, Zahorik & Keiningham,1994]

Service Performance

Customer Satisfaction

Customer Retention

Market Share

Profit
 Service Operations

Service Design Principles D 



ë Top management commitment to quality
ë Define the service concept clearly, in detail
ë Be clear about the service image projected/
communicated to prospective customers
ë Study the operation from the customers¶
viewpoint
ë Define the service delivery clearly & in detail
ë Define functional & technical quality standards
ë Try to define (describe) intangibles
 Service Operations

Service Design Principles(continued):

ë Service Environment
ë Physical environment & ambience
ë Manner & appearance of staff
ë Waiting & service times
ë Existing systems & procedures to enable standards
laid down
ë Standards for known, predictable events
ë Empowerment & high level of staff training to take
care of unpredictable events
ë Multi-skilled employees
ë Monitoring of standards
 Service Operations

Layout & Facilities Planning

1.Layout planning is concerned with placement of
departments, working groups, machines, and
stockholding points within a production facility.
The objective is to arrange the elements in a way
that facilitates smooth work flow ( in
manufacturing) or a particular traffic pattern ( in
service).
2.Layout planning is the integral part of design of the
productive system. It is a physical expression of
technological choices, capacity decisions, process
& job design, material handling and
communication system that joins the processes.
 Service Operations

Inputs to layout decisions:

ï Estimates for product/service demand
ï Space required for layout elements
ï Distance travelled by product & amount of
flow between elements in layout
ï Processing requirements
ï Space available within & outside facility
ï Building configuration
 Service Operations

Service Facility Layout

ï Service Types-Fixed Services
ï Fixed- Consumption at delivery point
ï E.g. restaurant, bank, health care & hospital
ï Layout is crucial for fast service
ï In direct customer contact service- analyze
waiting line structure
 Service Operations

Service Facility Layout (cont..)

ï Entry flow & Exit flow should planned

ï Exit flow should not clash with waiting line

ï Fast-food: standardized, high volume office

work- production line layout

ï Banks, general offices-functional layout

 Service Operations

Service Manufacturing: Process Design

ï Mass production- McDonald, Modern Bakery

ï Functional Layout- Restaurant, hospital

ï Plant-within-Plant (PWP) or focused factory-

hospitals with separate units for cardiac unit,
oncology unit, pediatric unit which are self-
sufficient
 Service Operations

Service Capacity Planning

ï Trade-off between
± too high- low utilization
± Too low- waiting lines, lost sales
ï Demand for service & service time highly
variable
ï Dependent on time & location
ï Utilization impacts on quality
ï Matching Arrival Rates with Service Times
 Service Operations

Six Principles of Waiting

Maister,The Psychology of Waiting linesr 

 
!"#

1. Unoccupied time feels longer than occupied time.

2. Pre-process waits feel longer than in-process waits.
3. Anxiety makes waits seem longer.
4. Uncertain waits are longer than known, finite waits.
5. Unexplained waits are longer than explained waits.
6. Unfair waits are longer than equitable waits.
7. More valuable the service, longer the customer will wait
8. Solo waiting feels longer than group waiting
 Service Operations


    / 

Service System
Servers
/ 
Customer Waiting Line
Arrivals Exit
 Service Operations

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 Service Operations

Service
Pattern

Constant Variable


  



 

 
 




 
 

 
  


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 Service Operations

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 Service Operations


 
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Population Source

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 Service Operations

Service
Pattern

Constant Variable


  



 

 
 




 
 

 
  


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 Service Operations

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 Service Operations



  



 



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 Service Operations

Exponential Distribution

63%

37%
 Service Operations

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= Arrival rate
= Service rate
1
 Average service time
1
 Average time between arrivals (Interarrival time)




= = Ratio of total arrival rate to service rate

for a single server

   Average number waiting in line
 Service Operations

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¢
 


&s verage number in system
(including those being served)
$q verage time aiting in line
$  verage total time in system
(including time to be served)

 umber o units in the system

| umber o identical service channels

 robabilit y o exactly
units in system
  robabilit y o aiting in line
 Service Operations
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 Service Operations

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O 25 cust / hr
1 customer
30 cust / hr
2 mins (1hr / 60 mins)

O 25 cust / hr

-8;;;
30 cust / hr
 Service Operations

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O2 (25) 2
&  7-9=>
( - O) 30(30 - 25)

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O 25
& 1
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 Service Operations

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$  .1667 hrs 9?
 
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 Service Operations

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p n = (1 - )( )

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p 2 = (1- )( ) = -991>
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 Service Operations

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 Service Operations

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 = = = -===>
2 ( -
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2 ( - O) 2(15)(15 - 10)

1 1
$ V $  V .06667 hrs V .1333 hrs V8
 
15/hr
 Service Operations
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 Service Operations
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25
 =   + = .176 + = 9-??A
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  .176 customers
$  = = = -??>
  ( â$
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25 customers per hour
 Service Operations

Service Capacity Planning (continued)

Mean Zone of non-service

Arrival ° O¢ B9
Rate (O<

Zone of Service
?->C O ¢ °

Mean Service Rate( ¢<

 Service Operations

Operations Scheduling
ï Schedule decided by customer
ï Schedule = µCapacity for service¶
ï Examine: Time- Demand pattern, allocate
resources
ï Schedule on the basis of priority
ï Waiting Lines
 Service Operations

Service Blueprinting- is the flow process chart

of a service operation with demarcation
between µhigh-customer contact¶- what
activities/processes are visible to the
customer and what are not. The demarcation
is called the µÄ 
 . It is a
standard tool for service process design.
 Service Operations

Service Blueprinting (Tele-banking)

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 Service Operations

Manpower Issues:
ï Trained staff to take care of unexpected
events and flexibility
ï Empowerment
ï Internal consistency among staff
ï Focus on customer¶s problems and not
internal difficulties
ï Internal customer concept