MGT 563
OPERATIONS STRATEGIES
Dr. Aneel SALMAN
Department of Management Sciences
COMSATS Institute of Information Technology,
Islamabad
Recap Lecture 09
• Concept of Quality
• Importance of Quality
• Quality Gurus
• The elements of TQM
• European Foundation for Quality Management
(EFQM) Model
• Deming 14 Points
Characteristics of Service
• Intangible
• No finished goods (cannot be “inventorized”)
• Simultaneous production and consumption
• Difficulty in defining and measuring quality and
productivity
• Perishability
3
The
Shift to
Services
4
Example: Services in Europe
“The Service Sector accounts for about 70
percent of the European economy.”
Source: Wall Street Journal, 4 March 2005, p. A13
Differences Between
Manufacturing and Service (Table 5.1)
6
Comparison of Goods and Services
(Figure 5.1)
Services
Goods
100%
75%
50%
25%
0%
25%
50%
75%
100%
Automobile
Installed carpeting
Fast-food restaurant
Gourmet restaurant
Auto maintenance
Haircut
Consulting services
7
Service-Product Bundles
The Service-Product Bundles has three parts:
• tangible service (explicit service)—what the seller
does for you.
• psychological benefits (implicit service)—how you
feel about it.
• physical goods (facilitating goods & facilities)
Production of Services versus Goods
• Services are heterogeneous.
• Customers served as first come, first served.
• Labor is scheduled but may idle.
• Location often near customers.
• Result: service production tends to be _______
efficient than production of goods.
How would you measure Efficiency
or Inefficiency
in services?
Customer Contact Model
• Potential inefficiency in services is a function of the
amount of customer contact
• Customer Contact
• Definition of “contact”—interaction between service provider
and the customer.
• Why so?
• Variability
• Customer determines the time
• Customer determines the order of service
• Customer influences what happens during the service
Service Matrix
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.
Standardized with options;
Using moderately
repeatable sequence.
Standardized with highly
repeatable process
sequence.
Customer Routed
Estate planning,
personal trainer
Co-Routed
Stock brokerage,
medical practice
Provider Routed
ATM
Service Operations II
(Service Design)
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Technology in Service Design
• Production-line approach to service
• Services should be standardized and delivered in an
efficient manner
• Service facility designed to minimize mistakes
• As much automation as possible
• Service is provider routed with low customization
Technology in Service Design
(2nd view/approach)
• Employees as the Center of Service Delivery
• Technology should support, not replace workers
• Train front-line workers as much as managers
• Value investment in employees as much as in technology
• Link compensation to performance at all levels
Customer Contact Design
• High contact (front room) services
• Direct customer contact
• Customer has more control of process
• Low-contact (back room) services
• Out of sight of customer
• Provider has more control of process
• Goal: move as much activity as possible to the
back room—why?
16
Service Blueprint of Luxury Hotel
17
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
Capacity Management Strategies
Two key strategic issues
• How can we manage the capacity?
• How can we manage the demand?
19
Managing Capacity
• Part-time workers
• Shift scheduling
• Co-production -- get the customer involved
• Cross-trained workers
• Information technologies
• Focus factory -- reduce complexity
20
Managing Demand
• Forecasting
• Advertising
• Reservation systems
• Yield management
Pricing
Market segmentation
21
Customer Interface Strategies
1.
Get the customer OUT of the process
2.
Get the customer IN the process
3.
Understand that your employees make the
difference
22
Approaches to Service Design
• Production-line
• Customer as co-producer
• Customer contact
• Information empowerment
23
Service Operations III
(Service Quality)
24
Service Quality Attributes
• Search -- attributes customers can evaluate before
purchase.
• Experience -- attributes that customers can
evaluate only during consumption.
• Credence -- attributes difficult to evaluate even
after consumption.
25
Service Quality Strategies
1.
Understand the service gaps model
2.
Design and implement a formal service recovery
system
3.
Institute service guaranties where appropriate
4.
Conduct appropriate customer satisfaction
surveys
5.
People make the difference
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Service Quality Strategies
Understanding the gaps
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Service Quality Strategies
Understanding the gaps
Experience - us
Experience - others
Intrinsic needs
Expected Service
Gap 1 Service Quality Gap
Customer
Provider
Gap 2
Service
Design
Gap
Perceived Service
Service Delivered
Gap 4
Production Gap
Systems, Standards
Gap 3
Process Design
Gap
Conceptual Model
of the Customers’
Expectations
Communications
Gap 5
Perjury Gap
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Service Quality Strategies
1.
Understand the service gaps model
2.
Design and implement a formal service
recovery system
29
Service Quality Strategies
1.
Understand the service gaps model
2.
Design and implement a formal service recovery
system
• Listen
• Apologize and show empathy
• Ask the “recovery” question …
“What can we do to satisfy you completely?”
• Fix the problem quickly - prioritize customers and escalate if needed
• Follow-up -- is the problem fixed … is the relationship fixed?
30
Service Quality Strategies
1.
Understand the service gaps model
2.
Design and implement a formal service
recovery system
3.
Institute service guaranties where appropriate
31
What is a Good Service Guarantee?
•
•
Unconditional
Meaningful
•
•
Easy to understand and communicate
•
•
•
The payout fully covers customer dissatisfaction
For customers
For employees
Painless to invoke