Operations Management II (ORM2BJ[D]22-3)
Session 14 → Waiting Line Management (Cost
Calculation) + Service Process + Performance
Cost Optimization in Waiting Line
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Infinite population
◼ Total cost = Ls × Cost of waiting per customer + S ×
Cost of each server
Finite population
◼ Total cost = N − J × Cost of waiting per customer +
S × Cost of each server
Textbook – Example 6 (Page 800)
Textbook – Example 11 (Page 810)
Textbook – Problem 10.e (Page 817)
Textbook – Problem 11.b (Page 818)
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Average Number Down – Concept –
Not for Quiz/End-term
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Average number down = N – J = N – NF(1 – X)
= N[1 – F + XF]
Average Downtime per customer
= T(1 – F)/XF + T = T[1 – F + XF]/XF
T/X = T + U
Total Cycle Time= T + U + T(1 – F)/XF = [1/F]T/X = T/XF
Total downtime per time unit
= (Average downtime per customer × N)/Total Cycle Time
= Average Number Down
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Topic: Service Process
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Types of Services – Chase (1978)
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Pure service – High contact
◼ Health centers/ Hotels/ Public transports/ Restaurants/
Schools/ Personal services
Mixed service
◼ Branch offices of banks, computer companies, post
offices
Quasi-manufacturing – Low contact
◼ Head offices of banks, computer companies, post offices
Service ≠ Service Industries – Bitner et al (2000)
◼ Customer service/ Service as value added/ Service
offerings as the product
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Service Sector – Common
Characteristics
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Inseparability
◼ Services are created and consumed at the same time
◼ Services cannot be “fully” inventoried
◼ Exception → knowledge services
◼ Demand fluctuations cannot be solved by inventory
◼ Quality control cannot be achieved before consumption
Heterogeneity
◼ From the client’s perspective
◼ There is a wide variation in service offerings
◼ Personalization of services
◼ Increases their heterogeneous nature
◼ Perceived service quality varies from one client to next
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Service Sector – Common
Characteristics – Continued
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Intangibility
◼ Services are ideas/concepts that are part of a process
◼ The client typically relies on the service providers’
reputation
◼ Regulations and governance are means to assuring
some acceptable level of quality-of-service
Perishability
◼ Any service capacity that goes unused is perished
◼ Services cannot be stored → When not used to
maximum capacity service provider lose opportunities
◼ Service capability estimation and planning are key
aspects for service management
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Service Process Matrix – Schmenner
(1986)
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Service Design – Service Blueprint
Customer Arrive and
actions
Fill out
deposit
ticket.
Line of information
Contact
person(s)
Wait in line if
necessary
Hand teller
cash or check
and deposit
ticket
Receive receipt
Teller greets
customer.
Teller checks
cash or check
and enters
amount.
Teller prints out
receipt and
hands to
customer
Line of visibility
Backstage
contacts
Line of internal interaction
Support
Lunch and rest
breaks are
managed based
on waiting lines.
Leave
Account is
automatically
updated.
Cash is counted
and reconciled
with
transactions
Schedules Employees
are set
are paid
weekly
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Issues with Service Operations – Sasser
(1976) – NOT for Quiz/End-term
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Increasing wrong kind of capacity
Not increasing all around capacity
Not considering competitive reaction
Undercutting one’s own service
How to manage demand in service
◼ Pricing/ Developing non-peak demand/ Developing
complementary services/ Creating reservation system
How to control supply in service
◼ Use part time employees/ Maximize efficiency/
Increase consumer participation/ Share capacity/
Invest in expansion ante
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Service Operations – History – NOT
for Quiz/End-term
Time Period
Big ideas: Theory and Practice
Application of scientific management to services – Leffingwell, Gilbreth, Barnes
1900–1950s Walt Disney: industrialized fantasy
Holiday Inns: consistency in multi-site services – Kemmons Wilson
McDonald’s: production-line approach to services – Standard, simple, automated
1960s
Service economy and operations in health care – Layout, location, capacity
Industrialization of services – Shostack/ Match supply and demand in services
1970s
The customer contact model – Chase/ Data envelopment analysis – Charnes et al
Classify services to gain marketing and operational insights – Schmenner
Gap model of service quality and SERVQUAL – Parasuraman et al
1980s
Strategic service vision – Heskett/ Unconditional service guarantee
Psychology of queues – Maister, Larson/ Yield management
Service profit chain – Service recovery
Using poka-yoke, or fail-safe, methods to prevent human errors in service systems
1990s
Globalization of information-intensive services
Emergence of experience economy
Using behavioral science in service operations
Managing operations in information-intensive services
2000s
Information technology in services and e-services
Global business process outsourcing/ Service design
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Topic: Performance Measurement –
Overall Equipment Effectiveness
(OEE)
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Overall Equipment Effectiveness (OEE)
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OEE = Availability x Performance x Quality
Total Effective Equipment Performance (TEEP)
= Loading x OEE
◼ Loading = Loading Time / Total Time
Six Big Losses
◼ Breakdowns
◼ Setup and Adjustments
◼ Small Stops
◼ Reduced Speed
◼ Startup Rejects
◼ Production Rejects
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Overall Equipment Effectiveness (OEE)
– Calculations – Internet Resource
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Overall Equipment Effectiveness (OEE)
– Example
Item
Data
Shift Length
8 hours = 480 min.
Short Breaks
2 @ 15 min. = 30 min.
Meal Break
1 @ 30 min. = 30 min.
Preventive Maintenance 25 minutes
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Downtime
35 minutes
Ideal Run Rate
60 pieces per minute
Total Pieces
15,000 pieces
Reject Pieces
500 pieces
Calculate OEE and TEEP
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Internet Resource – OEE Calculator
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ORM2BJ[D]22-3 – Quiz 4 Details
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Syllabus (Sessions 12-14)
◼ Comment type (5-10 marks)
◼ Numerical (10-15 marks)
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Date – March 06, 2023
Time– 1 hour 15 minutes (9:15 AM to 10:30 AM)
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Important instructions
◼ Mode – Pen and Paper
◼ Notes/Photocopies/Print outs allowed
◼ Calculator allowed
◼ Laptop NOT allowed
◼ Textbook MUST (Stevenson)
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