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Schroeder_CH05_Accessible.pptxOperations Management in the Supply Chain Decisions and Cases
Seventh Edition
Chapter 5
Service Process Design
© McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education.
Learning Objectives
5.1 Differentiate the characteristics of a service organization from a manufacturing organization.
5.2 Explain the elements of a service-product bundle.
5.3 Organize a variety of service offerings into the service delivery system matrix.
5.5 Explain service recovery and service guarantees.
5.6 Evaluate the role of technology and globalization in service management.
5.7 Define the attributes of the service profit chain
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The Service Economy
Largest 15 U.S. employers
1960
12 manufacturers
3 services
2010
3 manufacturers
12 services
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Defining Service
Intangibility of the offering
Simultaneous production and consumption
No finished goods inventory
Front office vs. back office
Cannot be stored/resold
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Service-Product Bundle
Service - explicit service
what the provider does for customer
Psychological benefits - implicit service
how customer feels after service
Physical goods - facilitating goods
used during service or received by customer
Pizza delivery
Enjoyment
Pizza
Delivery vehicle
Speed/ convenience
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Goods and Services Packages (Figure 5.1)
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Service Delivery System Matrix (Figure 5.2)
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Customer Contact
Definition: Extent of interaction between service provider and customer
Lower contact = provider routed (standardized)
Higher contact = customer routed (customized)
Potential inefficiency = f (degree of customer contact)
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Customer Contact (see Fig. 5.3) (1 of 2)
Low customer contact
Higher production efficiency
Lower sales opportunity
Workers with technical skills
Focus on paper handling
Office automation
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Customer Contact (see Fig. 5.3) (2 of 2)
High customer contact
Lower production efficiency
Higher sales opportunity
Workers with diagnostic skills, more flexible and personable
Focus on client mix
Client/worker teams
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Customer-Introduced Variability (1 of 2)
Arrival
Uncertainty in when customers will arrive to consume a service
Request
Uncertainty in what customers ask for in the service-product bundle
Capability
Uncertainty in the ability of customers to participate in a service
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Customer-Introduced Variability (2 of 2)
Effort
Uncertainty in the willingness of customers to perform appropriate actions
Subjective preference
Uncertainty in the intangible preferences of customers in how service is carried out
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Service Failure / Service Recovery
Failing right before the customer’s eyes!
Taking swift and appropriate action to compensate customer for a failed service.
Fly in customer’s soup New bowl of soup plus free dessert!
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Manager’s Tool: Service Guarantee
Benefits to the customer
Promise of service to be delivered
Payout to customer if promise not delivered
FedEx package delivery On time, or it is free!
Benefits to the organization
Focuses on customer (service promise)
Clearly defines payout
Improves customer loyalty
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Technology and Globalization (1 of 2)
Production-line approach (Levitt, 1972)
Standardize to minimize errors or deviations from standards
Automate to keep costs low
Example: McDonald’s
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Technology and Globalization (2 of 2)
Employees are the center of service delivery (Schlesinger & Heskett, 1991)
Use technology to support front-line employees
Value investments in both employees & technology
Focus on recruiting and training front-line employees
Example: Ritz-Carlton Hotel
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Outsourcing & Offshoring Services
Outsourcing:
An outside firm performs service activities such as workforce recruiting, payroll management, accounting services, and call center functions.
Offshoring:
Export of these service activities to other countries.
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Study of Offshoring (Duke and Booz & Co. 2008)
Transaction-intensive services (simple, standard, limited differentiation) are becoming commoditized (call centers, etc.) – competing on cost.
Professional services (engineering, data analysis, legal work) are more commonly offshored.
Firms are moving fast to scoop up global talent.
Collaboration and maintaining quality are challenging with globally dispersed providers.
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Service Profit Chain (Figure 5.4)
Internal service quality, leads to…
Employee satisfaction, leads to…
Employee retention & productivity, lead to…
External service value (to customer), leads to…
Customer satisfaction, leads to…
Customer loyalty, leads to…
Revenue growth & profitability (the goal)
feed investment back into internal service quality
The process is repeated from the beginning (Internal service quality, leads to…)
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Summary
5.1 Differentiate the characteristics of a service organization from a manufacturing organization.
5.2 Explain the elements of a service-product bundle.
5.3 Organize a variety of service offerings into the service delivery system matrix.
5.5 Explain service recovery and service guarantees.
5.6 Evaluate the role of technology and globalization in service management.
5.7 Define the attributes of the service profit chain
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© McGraw-Hill Education.
End of Presentation
© McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education.
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