University of Delaware
Lerner College of Business & Economics
OperationsManagement
BUAD 467/667: Service Management
Spring 2008
Instructor:
Teaching Assistant:
Professor Patrick T. Harker
104 Hullihen Hall
831-2111; email: harker@udel.edu
Dan Brown
333G Purnell Hall
831-6506; email: brownman@udel.edu
Office Hours:
By appointment only
Office Hours:
Wednesdays 1:30-3:00 and 5:30-7:00pm
Class Schedule:
Tuesdays 6:00-8:45 p.m.
Room: Rm. 231 Lerner Hall
Description of the Course
The service sector is the largest component of all developed countries (in the U.S., it accounts
for 70% of GNP and 80% of employment). In addition, some evidence suggests that productivity
in services has substantially lagged that of manufacturing. Given the sheer size of this sector of
the economy and the lack of large productivity improvements, it is imperative that attention be
given to improving the operations of service delivery systems. Technology alone will not solve
this problem. Over the past decade, service industry investments in technology totaled more than
$180 billion; 85% of all technology investments in the U.S. are made by organizations in the
service sector. Thus, management and engineering talent must be focused on improving the
operation processes in services if individual organizations and the economy as a whole are to
prosper.
This course will focus on the various aspects involved in the management of services within the
“pure” service sector (banking, transportation, travel and tourism, government, etc.) and within
the service functions of manufacturing (after-sales support, financing, etc.). After an introductory
section to provide an overview of the role of services in the economy and within the functioning
of various enterprises (manufacturing, government, not-for-profits, etc.), the following topics
will be explored: design and delivery of services, the measurement of productivity and quality,
managing capacity and demand, quality management, redesign of service delivery processes,
management of technology, and managing human resources.
The design of the course involves lectures and case discussions as the primary vehicle for
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Prof. Patrick T. Harker
learning. It is important that students have exposure to Management Science/ Operations
Research techniques; in particular, linear programming and basic probability modeling will be
used in the course.
Grading Policy & Class Design:
The grade in this course will be based on the following criteria with their associated weights:
Case assignments & homework
Midterm examination
Final examination/ project
Class participation
25%
25%
30%
20%
There are three individual homework assignments that you must complete. In addition, there are
four group case assignments. You need to form a group of five students and submit a group
report; I’ll provide the details on the write-up before the first case is due. You must complete
three of the four possible cases. In the event you do all four, you will receive extra credit.
With respect to class participation, I will call on students at random to discuss the case and their
individual or group analyses. You will be assigned a grade at the end of the class based on how
prepared you were and the quality of your answer.
A final examination will be held for the course in the regularly scheduled slot at the end of the
semester. In lieu of the final examination, groups of students can select to analyze a service
delivery process in an organization and apply the techniques discussed herein to improve the
performance of this operation (see below for details). By so doing, you will not need to take the
examination. This option will be discussed further in the semester.
Finally, guest lecturers may appear from time to time to discuss a certain topic. Thus, the
scheduled contained on the following pages is only meant to be a guide and is subject to change
based on the speakers’ availability.
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Prof. Patrick T. Harker
Final Projects
The purpose of this final project is to allow you to apply the ideas you have learned in an area of
special interest to you. It is intended as a form of co-production, where you now serve as the
teachers! Groups are to consist of 4-5 people; exceptions must be approved. Here are some
examples of the types of projects that are acceptable:
•
Service Improvement - This type of project involves a specific application the class
concepts to solve (or at least understand) a service operations problem. Past reports included:
• Analysis of the service delivery at a major New York hospital
• Analysis of an emergency room in Delaware
• Analysis of "Blue Dog Bagels", a bagel restaurant in Canada
• Performance measurement of service delivery in a set of regional banks
• Operational analysis of a local travel agency
• Investigation of alternative technologies for the Wharton admissions office
• Analysis of a new concept to provide a single reservation number for tee times at golf
courses.
Don’t forget to look at not-for-profit organizations; they are a source of great ideas and will
make you feel good at the end!
•
.
•
New Service Business Operations Plan - For the entrepreneurs in the class, this is your
opportunity to lay out an operations plan with supporting analysis for a new service business.
Past reports have included a plan for a home appliance repair business, a medical software
company, and engineering consulting firm, and a musical instrument rental business.
Service Audit - The last type of project is the Service Audit. In this case, one chooses an
organization or a service delivery system within the organization that delivers high-quality
service, and studies this organization (through publicly available data and interviews and
data collection within the firm) to uncover "what makes them tick". The broad categories that
should make up such an audit include a combination of the basic principles learned in class,
the Balridge Quality criteria, and other idea that you generate in the course of the project.
Required Books:
•
•
J.A. Fitzsimmons and M.J. Fitzsimmons, Service Management: Operations, Strategy, and
Information Technology, 6th edition (New York, McGraw-Hill, 2007).
Course Pack
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BUAD 467/667 Schedule - Spring 2008
Class 1
February 12
Introduction
This class provides an overview of the semester as well as defining the challenges facing service
firms.
Readings:
1. Chapters 1 and 2 in Service Management
Class2a
February 19
Service Strategy I
Building a great service business starts with a good strategy; service strategy will be discussed in
the context of retail banking.
Case: Commerce Bank (HBS #9-603-080)
In your groups of five, answers to the following questions:
1. what was the initial strategy for this company?
2. how has the service value chain concept apply to Commerce? Be sure to comment on the
blending of strategy, location, IT and human resources.
3. is this strategy sustainable? What threats are on the horizon for Commerce?
Guest Speaker: Mr. Vernon Hill, Founder and former CEO, Commerce Bank
Class 2b
February 19
Service Strategy II
The service-value chain is introduced as an important concept in designing service delivery
systems.
Readings:
1. Chapters 3 in Service Management
2. J.L. Heskett, T.O. Jones, G.W. Loveman, W.E. Sasser, Jr., and L.A. Schlesinger, “Putting the
service-profit chain to work,” Harvard Business Review (March-April 1994). HBS #94204
Case: Southwest Airlines (Darden #UVA-OM-0743)
http://www.southwest.com/
In reading over the case, consider the following questions:
1. What are the key elements of Southwest’s success?
2. What are the key success factors in implementing the service value chain at Southwest?
3. What happens when Kelleher retires?
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Class 3a
February 26
Designing the Delivery Process: Basics
The notion of focus in the design of service delivery systems is explored both empirically and
through the case, Shouldice Hospital.
Readings:
1. Chapter 4 in Service Management
Case: Shouldice Hospital Limited (HBS #9-683-068)
www.shouldice.com
In reading over the case, consider the following questions:
1. What is the external service vision at Shouldice Hospital? The internal vision?
2. How do you account for its performance to date? Do these factors lead to a sustainable
competitive advantage? Why or why not.
3. What are the key threats facing Shouldice? Should they expand?
4. How would you implement the changes you propose?
Submit:
A five to eight page writeup of the Shouldice Hospital case, including answers to the questions
to the above questions.
This case is mandatory for all groups.
Class 3b
February 26
Designing the Delivery Process: Location
Geographic location remains a vital aspect of the design of service delivery systems; various
approaches for location decisions are discussed in this class.
Readings:
1. Chapter 10 in Service Management
2. T. Spencer III, A.J. Brigandi, D.R. Dargon and M.J. Sheehan, “AT&T’s telemarketing site
selection system offers customer support,” Interfaces 20 (1990), 83-96.
Class 4a
March 4
Capacity Design I
Once the overall service delivery system is designed, one needs to turn to decisions concerning
capacity investments and the management of capacity. This class introduces the issues involved
in capacity design and management.
Readings:
1. Chapter 11 in Service Management
2. K.L. Katz, B.M. Larson and R.C. Larson, “Prescription for the waiting-in-line blues:
entertain, enlighten, and engage,” Sloan Management Review (Winter 1991), 44-53.
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Prof. Patrick T. Harker
Class 4b
March 4
Capacity Design II
Basic queuing models are used to introduce the tradeoffs involved in capacity decisions between
cost and level of service.
Readings:
1. Chapters 12 and 16 in Service Management
2. “Variability and queueing” Teaching Note (The Wharton School, University of
Pennsylvania).
Submit:
• Homework 1: “Athol Furniture” case on pp. 251-253 in Service Management.
Class 5a
March 11
Design in Action: Call Centers
Call centers are the fastest growing delivery channel in a variety of industries. This class will
discuss call center operations from a queuing perspective as well as from the point of view of
human resources and technology.
Readings:
1. B. Andrews and H. Parsons, “L.L. Bean chooses a telephone agent scheduling system,”
Interfaces 19, (1989), 1-9.
2. B. Andrews and H. Parsons, “Establishing telephone-agent staffing levels through economic
optimization,” Interfaces 23 (1993), 14-20.
3. B. Andrews, and S. Cunningham, “L.L. Bean improves call-center forecasting,” Interfaces
25 (1995), 1-13.
4. A. Evensen, P.T. Harker, and F.X. Frei, “Effective call center management: evidence from
financial services,” Working Paper 98-25, Wharton Financial Institutions Center. Can be
downloaded from: http://fic.wharton.upenn.edu/fic/papers/98/9825.pdf
Case: O.Z. Aksin and P.T. Harker, “NationsBank reinvents the phone channel (A): the design
decision,” Case, INSEAD, 1998.
In reading over the case, consider the following questions:
1. What are the key advantages of moving toward the new call center at Nations?
2. What are the key disadvantages?
3. How would you put together a business case to justify the investment in the new call center
design?
4. What problems do you foresee in the implementation of this new design? How can these
problems be dealt with?
Guest Speaker:
Joseph Claricurzio, Senior VP, Bank of America
Class 5b
March 11
Capacity Design III
The analytics of queuing are explored using the case Pronto Pizza.
Readings:
Pronto Pizza in Chapter 16 in Service Management.
Submit:
1. One page project proposal.
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Class 6a
March 18
Capacity Design IV
The application of queuing thinking and models is used to analyze the situation at Manzana
Insurance.
Cases: Manzana Insurance (HBS 9-692-015)
In your groups of five, use queuing models to discuss the answers to the following questions:
1. What is the current turnaround time for Manzana? Are they as bad as they think?
2. What operational changes can be made to reduce the turnaround time? Be specific and show
your estimates the new times for each proposed change.
3. Given the answer to (2) and your understanding of service processes, what recommendations
would you give to Manzana’s management?
Submit:
• A five to eight page writeup of the Manzana case, including answers to the above
questions.This case is mandatory for all groups.
Class 6b
March 18
Customer Efficiency Management
The key to efficiency and quality in services is the effective involvement of customers in the
production process. This concept is discussed using ebay as an example.
Readings:
1. F.X. Frei, “Breaking the tradeoff between efficiency and service,” Harvard Business
Review Repring R0611E
Case: ebay (A): The Customer Marketplace (Harvard #09-602-071) www.ebay.com
In reading over the case, consider the following questions:
1. What are the various means that ebay uses to involve customers in the production process?
2. What risks are involved with this co-production model? How does ebay mitigate these risks?
3. How does ebay continue to grow without losing their unique co-production approach?
Submit:
A five to eight page writeup of the ebay (A) case, including answers to the above questions.
This case is optional; you can do either this case or the case on Class 9a.
Class 7
March 25
Midterm
An in-class midterm will be held that covers all of the material in the first half of the class. The
exam is open-book and open notes.
Submit:
Homework 2: “Renaissance Clinic (B)” problem on p. 474 in Service Management.
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Prof. Patrick T. Harker
Class 8a
April 8
Service Quality I
The SERVQUAL model is introduced as a basic tool for measuring service quality.
Readings:
1. Chapter 6 in Service Management
2. A. Parasuraman, V.A. Zeithaml and L.L. Berry, Delivering Quality Service (Free Press, New
York, 1990), pp 15-49; appendix.
3. D.D. Wyckoff, “New tools for achieving service quality,” in C.H. Lovelock (ed.), Managing
Services, Second Edition (Prentice-Hall, Englewood Cliffs, NJ, 1992), 226-239.
Class 8b
April 8
Service Quality II
OK, so you can measure service quality. So what’s it have to do with the bottom line?
Readings:
1. P.R. Nayyar, “Stock market reactions to customer service changes,” Strategic Management
Journal 16 (1995), 39-53.
2. R.T. Rust, A.J. Zahorik, and T.L. Keiningham, “Return on quality (ROQ): making service
quality financially accountable,” Journal of Marketing 59 (1995), 58-70.
3. R.T. Rust and A.J. Zahorik, “Customer satisfaction, customer retention, and market share,”
Journal of Retailing 69 (1993), 193-215.
Case: Starbucks: Delivering Customer Service (Harvard #9-504-016)
In your groups of five, discuss the answers to the following questions:
1. Can Starbucks quality keep up with their growth?
2. How can they justify the investment in service quality improvements? What metrics can you
use to tie customer satisfaction to the bottom line?
3. Would you make the investment? Why or why not?
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Prof. Patrick T. Harker
Class 9a
April 15
Service Quality III
How do you compete on the basis of service quality? This class introduces the notion of a
service guarantee and explores the use of this concept at Delta Dental.
Readings:
1. C.W.L. Hart, “The power of unconditional service guarantees,” Harvard Business Review
(July-August 1988).
Case: Delta Dental Plan of Massachusetts (Darden Case UVA-OM-0762)
www.deltadental.com
In your groups of five, discuss the answers to the following questions:
4. what are the success factors of GSOE?
5. how did Delta Dental make sure that the guarantee was linked to operations changes?
6. is the process/ guarantee at Delta Dental sustainable? Can they keep it up? What must they
do to insure that this process is sustainable?
7. is the guarantee competitively sustainable? Why don’t others simply copy the idea?
Submit:
A five-eight page writeup of the case, including answers to the questions to the above questions.
This case is optional; you can do either this case or the case on Class 4b.
Guest Speaker:
Stephen T. Lawless, MD, MBA; Vice-President Quality and Safety, Nemours
Class 9b
April 15
Performance Measurement I
A key management control in a variety of service organizations is the ability to measure
performance; this is especially true where the outcomes of the service cannot easily be quantified
as dollars (e.g., health care). This class introduces the challenges facing service organizations as
they implement performance measurement systems. A useful site for information on
performance measurement is the American Productivity and Quality Center at
http://www.apqc.org/.
Readings:
1. Chapter 7 in Service Management
2. C.P. McLaughlin and S. Coffey, “Measuring productivity in services,” International Journal
of Service Industries Management 1 (1990), 46-64.
Cases: Fairfield Inn (A) (HBS #9-689-092)
www.fairfieldinn.com
In your groups of five, discuss the answers to the following questions:
1. what is Scorecard?
2. what are it’s strengths and weaknesses?
3. is the idea of tying rewards/ compensation to Scorecard useful?
4. what are the advantages and problems associated with this strategy?
5. where is a Scorecard-like efficiency measurement system useful? Harmful?
Class 10a April 22
Performance Measurement II
A powerful analytical tool for the measurement of performance called Data Envelopment
Analysis (DEA) is introduced. Information on DEA and software that implements this approach
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Prof. Patrick T. Harker
can be found at the following sites: http://www.deazone.com/software/,
http://www.deafrontier.com/software.html, and http://www.banxia.com/frontier/index.html.
Readings:
1. Chapter 7-Supplement in Service Management
Class 10b April 22
Performance Measurement III
A guest speaker will describe performance measurement in his or her organization.
Guest Speaker:
Michael Middaugh, University of Delaware.
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Prof. Patrick T. Harker
Class 11a April 29
Performance Measurement IV
A simple case will be used to illustrate the details of implementing a DEA study as well as its
use in financial services.
Readings:
1. H.D. Sherman and G. Ladino, “Managing bank productivity using data envelopment analysis
(DEA)”, Interfaces 25 (1995), 60-73.
Cases: Nashville National Bank (Owen Graduate School Case)
In your groups of five, discuss the answers to the following questions:
1. Fortunately, Aleda has her laptop computer out in the lobby of Clay’s office and is capable of
running a new DEA analysis. If you were Aleda, what new analysis would you do? Why?
What would the new analysis imply about branch productivity (i.e., be sure to show the
results of the new DEA analysis).
2. If you had this analysis to do all over “from scratch”, would you use the same inputs and
outputs? Why or why not?
3. What are the limitation and strengths of DEA for branch productivity analysis?
Submit:
A five to eight page write-up of the Nashville National Bank case, including answers above
questions and an appendix containing your DEA analysis.
This case is mandatory for all groups.
Class 11b April 29
IT in Services I: Basics
The service sector is the largest consumer of information technology (IT) in the economy. What
are the strategic and managerial challenges facing managers as they integrate IT even further into
their service delivery systems?
Readings:
1. Chapter 5 in Service Management
2. O. O’Sullivan, “Technology spending’s uncertain payback,” USBanker (September 1998),
32-40.
3. P.T. Harker, L.M. Hitt, and F.X. Frei, “How financial service firms decide on technology,” in
R.E. Litan and A.M. Santomero (eds.), Brookings-Wharton Papers on Financial Services
1999, (The Brookings Institution, Washington, DC, 1999) 93-146.
Case: State Street Bank and Trust Company: New Product Development (HBS 9-696-087)
www.statestreet.com
In your groups of five, discuss the answers to the following questions:
1. what are the technological limits that distort the new product development process at State
Street?
2. how should the development effort be organized?
3. what are the proper expectations for the type of risk assessment systems described herein? Is
a company-wide application possible?
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Prof. Patrick T. Harker
Class 12
May 6
IT and Services II: Investment Decisions
IT in services generally leads to the ability to better serve specific customer’s needs (i.e., mass
customization). That is, IT often leads to greater flexibility in the service organization. How
should such investment decision be made? This class introduces the Analytic Hierarchy Process
(AHP), a powerful technique for decision making; details on the method and its implementation
in Decision Lens can be found at: http://www.decisionlens.com/.
Readings:
1. P. Harker, “The art and science of decision making: the Analytic Hierarchy Process,” in B.L.
Golden, E.A. Wasil, and P.T. Harker (eds.), The Analytic Hierarchy Process: Applications
and Studies (Berlin: Springer-Verlag), 3-36.
Guest Speaker:
Daniel Saaty, Decision Lens Inc.
Submit:
Homework 3: Mid-Atlantic Bus Lines problem on pp. 71-72 in Service Management.
Class 13
May 13
Projects
You have a choice between submitting a group project (see the second page of the syllabus) or a
take-home final examination to fulfill the final requirement. The final exam will be a 24 hour
take home covering all the material in the course. Presentations will be scheduled in class on this
day and May 20th
Class 14
May 20
Final Exams and Projects
Continuation of Class 13 and the project presentations.
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Prof. Patrick T. Harker
BUAD 467/667 Spring 2008 At-A-Glance
Session Date
1
2a
2b
2/12
2/19
2/19
Topic
I. The Service Management Challenge
Introduction
The Service Challenge I
The Service Challenge II
3a
3b
4a
4b
5a
5b
6a
6b
7
2/26
2/26
3/4
3/4
3/11
3/11
3/18
3/18
3/25
II. Designing Service Delivery Systems
Designing the delivery process I: basics
Designing the delivery process II: location
Capacity design I: basics
Capacity design II: queuing models
Design in action: call centers
Capacity design III: queuing models (con't.)
Capacity design IV: application
Customer efficiency management
MIDTERM EXAMINATION
8a
8b
9a
9b
10a
10b
11a
4/8
4/8
4/15
4/15
4/22
4/22
4/29
III. Measuring Service Operations
Measuring quality I: basics
Measuring quality II: links to profitability
Measuring quality III: service guarantees
Delta Dental Case*
Measuring performance I: basics
Measuring performance II: analytical tools (DEA)
Measuring performance III: measurement in practice
Measuring performance IV: banking applications
Nashville National Bank Case
11b
12
13
14
4/29
5/6
5/13
5/20
IV. Putting the Pieces Together
IT & services: basics
IT & services II: investment decisions
Homework 3
PROJECT PRESENTATIONS
PROJECT PRESENTATIONS or FINAL EXAMINATION (if no project selected)
* only one of these cases must be submitted.
Assignment Due
Shouldice Hospital
Homework 1
Project Proposal
Manzana Insurance Case
ebay (A)*
Homework 2