INTRODUCTION
to
Operations Management
Chapter 5, Service Process Design
5e, Schroeder
McGraw-Hill/Irwin
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter Outline
Defining Service
Service-Product Bundle
Service Matrix
Customer Contact
Service Recovery and Guarantees
Globalization of Services
Employees and Service
5-2
The Shift
to Services
5-3
Services in Europe
“The Service Sector accounts for about
70 percent of the European economy.”
Source: Wall Street Journal, 4 March 2005, p. A13
5-4
Defining Service
Key Concepts
Intangibility of the offering
Simultaneous production and consumption
No finished goods inventory
Front office vs. back office
Difficulty in defining and measuring quality
and productivity
Other differences between manufacturing and
service (See Table 5.1)
5-5
Service-Product Bundles
Tangible service (explicit service)—what
the seller does for you.
Psychological benefits (implicit service)—
how you feel about it.
Physical goods (facilitating goods)—what
you can carry away.
5-6
Comparison of Goods and Services (Figure 5.1)
Services
Goods
100%
75%
50%
25%
0%
25%
50%
75%
100%
Self-service groceries
Automobile
Installed carpeting
Fast-food restaurant
Gourmet restaurant
Auto maintenance
Haircut
Consulting services
5-7
SERVICE MATRIX (Figure 5.2)
Customer Wants and Needs in the Service Package
Operations Service System/Process Design
Highly customized with unique
process sequence.
Many process
pathways,
jumbled
flows,
complex work
with many
exceptions
Moderate number of
process pathways.
Flexible flows with
some dominant
paths, moderate
work complexity.
Limited number of
process
pathways. Line
flows, low
complexity work.
Standard with options, using
Moderately repeatable
Sequence.
Standardized with highly
repeatable process
sequence.
Customer Routed
•Estate planning
Co-routed
•Stock brokerage
Provider Routed
•ATM
5-8
Customer Contact
Definition of “contact”—interaction
between service provider and the customer.
5-9
Customer Contact Matrix
(see Fig. 5.3)
Low customer contact
–
–
–
–
–
High production efficiency
Low sales opportunity
Workers with clerical skills
Focus on paper handling
Office automation
High customer contact
–
–
–
–
–
Low production efficiency
High sales opportunity
Workers with diagnostic skills
Focus on client mix
Client/worker teams
5-10
Customer Contact Inefficiency
Potential inefficiency in services is a function
of the amount of customer contact
Why? Customer must be managed
– Customer determines the time in service system
– Customer determines the sequence of service
– Customer influences what happens during the
service and may require support services such as
food and bathrooms
5-11
Customer Contact Variability
Types of Variability induced by customers in
service delivery:
arrival – when they arrive to consume a service
request – what they ask for in the bundle
capability – ability of customers to participate
effort – willingness of customers to participate
subjective preference – preferences of customers in
how service is carried out
5-12
Customer Contact Directness
High contact (front office) services
– Direct customer contact
– Customer has control of process
Low-contact (back office) services
– Out of sight of customer
– Provider has control of process
Goal: move non-value-added activities to
back office—why?
5-13
Related Concepts
Service Recovery
– What you do to compensate the customer for bad
service.
– Fly in your soup: new bowl of soup plus free dessert
Service Guarantee
– Analogous to a guarantee for a product
– Requires specific criteria and responses
– Pizza delivery: 30 minutes or it is free!
5-14
Technology in Services
Contrasting Views:
Production-line approach to service
– Standardization
– Automation
Employees are the center of service delivery
– Technology to support front-line employees
– Value investments in employees
– Place importance on recruiting front-line employees
5-15
Outsourcing & Offshoring of
Services
Outsourcing: having an organization outside your
own firm perform service activities such as
workforce recruiting, payroll management,
accounting services, and call center functions.
Offshoring: the export of these service activities
to other countries.
5-16
Employees and Service
Links in the service-profit chain
(See Figure 5.4)
Internal service quality, leads to…
Employee satisfaction, leads to…
Employee retention & productivity, lead to…
External service value, leads to…
Customer satisfaction, leads to…
Customer loyalty, leads to…
Revenue growth & profitability (the goal)
5-17
Summary
Defining Service
Service-Product Bundle
Service Matrix
Customer Contact
Service Recovery and Guarantees
Globalization of Services
Employees and Service
5-18
End of Chapter Five
5-19