ISM 270
Service Engineering and
Management
ISM 270: Service Engineering and
Management
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Focus on Operations Decisions in the Service
Industry
Open to students with an undergraduate
engineering/science degree
Learn analytical tools and software for decision
making
Featuring guest lectures from industry
practitioners
Text: Fitzsimmons & Fitzsimmons
‘Service Management’
Operations, Strategy, Information Technology
Topics covered
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The nature of service enterprises
Strategy for new service development
Technology in services
Quality in service encounters
Forecasting demand
Managing service capacity
Supply chains in services
Globalization and outsourcing
ISM 270: Details
– 9pm, Tuesday evenings
 January 9 – March 13 (Winter) 2007
 UCSC Silicon Valley Center
 Instructor: Kevin Ross
6
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kross@soe.ucsc.edu
 Teaching Assistant:

gryder@gmail.com
Geoff Ryder
Who is here?
 My
background
 Brief introductions, student survey
Logistics
 Class
website
 Readings
 Text book
 Office hours

5-6pm before class, or by appointment
Class Plan
 Allotted
class time = 3 hours
 Average adult attention span = 20 minutes
…
 Lecture
/ visitor / lab / split
Computer issues
 Who
has a laptop?
 Web access
 Finding research papers
 Excel, solver, …
Please…
 Bring:
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Paper, pen, laptop, …
Opinions
Questions
Interesting articles, stories, anecdotes
 Provide
feedback!!!
 Make every effort to keep up with readings
etc.
Schedule
Date
CH
Topic
Lab
Guest
1
Jan9
1, 2, 3
Introduction
The nature of
service
enterprises
Metrics used
in
services
2
Jan 16
3, 4
Strategy for new
service
development
Simulation
project
Paul Maglio
IBM Research
3
Jan 23
5
Technology in
services
Web
program
ming
Alan Karp
HP Labs
4
Jan 30
6, 7, 8,
9
Quality in service Service
encounters
process
control
Michael (Max)
Maximilien,
IBM Almaden
Research
Center
Schedule
Date
CH
Topic
Lab
Guest
5
Feb 6
10
Project
Management
Statistics
homework
Michael (Max)
Maximilien,
IBM Almaden
Research
Center
(part 2)
6
Feb 13
11
Forecasting
demand
Vijay Mehrotra
San Francisco
State
Univesity
7
Feb 20
12, 13,
14
Managing service
capacity
Dave Nielson
StrikeIron.com
Schedule
Date
CH
8
Feb 27
Littlefield Service
Technolo Management
gies
Game Challenge
9
March 6 15, 16
Supply chains in
services
10
March
13
Globalization and Project
outsourcing
presentations
17
Topic
Lab
Guest
Simulation
Challenge
Littlefield
Technologies
Nick Bambos
Stanford
University
Assessment
Assessment
Value
Due Date
Homework
30%
Weekly
Project 1
20%
Feb 5
Littlefield
Project
Final Project
10%
Feb 26
40%
March 13
Text Chapter 1:
Role of Services in an
Economy
Service Management
Professor James Fitzsimmons
University of Texas at Austin
Chapter 1 Learning Objectives
 Describe
the central role of services in an
economy.
 Discuss the evolution of an economy from
an agrarian society to a service society.
 Describe the features of preindustrial,
industrial, and postindustrial societies.
 Describe the features of the new service
economy
Definitions
 What
are services?
 Service
enterprises?
Service Definitions
Services are deeds, processes, and
performances.
Valarie Zeithaml & Mary Jo Bitner
A service is a time-perishable, intangible
experience performed for a customer
acting in the role of a co-producer.
James Fitzsimmons
Definition of Service Firms
Service enterprises are organizations that
facilitate the production and distribution of
goods, support other firms in meeting their
goals, and add value to our personal lives.
James Fitzsimmons
Role of Services in an
Economy
Percent Service Employment for Selected
Nations
Country
1980
1987
United States
Canada
Israel
Japan
France
Italy
Brazil
China
67.1
67.2
63.3
54.5
56.9
48.7
46.2
13.1
71.0
70.8
66.0
58.8
63.6
57.7
50.0
17.8
1993
74.3
74.8
68.0
59.9
66.4
60.2
51.9
21.2
2000
74.2
74.1
73.9
72.7
70.8
62.8
56.5
40.6
Trends in U.S. Employment by Sector
80
70
60
50
40
30
20
10
Year
19
90
19
70
19
50
19
30
19
10
18
90
18
70
0
18
50
Proportation of total employement
90
Service
Manufacturing
Agriculture
Stages of Economic Development
Society
Game
PreIndustrial
Industrial
PostIndustrial
Predominant
activity
Use of
human
labor
Standard
Unit of
of living
social life measure
Structure
Technology
Stages of Economic Development
Society
Game
PreAgainst
Industrial Nature
Predominant
activity
Use of
human
labor
Agriculture
Mining
Standard
Unit of
of living
social life measure
Raw
Extended
muscle household
power
Subsistence
Structure
Routine
Simple hand
Traditional
tools
Authoritative
Industrial Against Goods
Machine Individual Quantity Bureaucratic
fabricated production tending
of goods Hierarchical
nature
Postindustrial
Among
Persons
Services
Technology
Artistic Community Quality of InterCreative
life in terms dependent
Intellectual
of health, Global
education,
recreation
Machines
Information
The New Experience Economy
Economy
Agrarian
Industrial
Service
Experience
Function
Extract
Make
Deliver
Stage
Nature
Fungible
Tangible
Intangible
Memorable
Attribute
Natural
Standardized Customized Personal
Method of
supply
Stored in
bulk
Inventoried
Seller
Trader
Manufacturer Provider
Stager
Buyer
Market
User
Guest
Delivered
on demand
Client
Revealed
over time
The Four Realms of an Experience
Customer Participation
Passive
Active
Absorption Entertainment Education
(Movie)
(Language)
Environmental
Relationship
Immersion Esthetic
(Tourist)
Escapist
(ScubaDiving)
Experience Design Principles
 Theme
the Experience (Forum shops)
 Harmonize Impressions with Positive Cues
(O’Hare airport parking garage)
 Eliminate Negative Cues
(Cinemark talking trash containers)
 Mix in Memorabilia (Hard Rock T-shirts)
 Engage all Five Senses (Mist in
Rainforest)
Source of Service Sector
Growth
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Innovation
Push theory (e.g. Post-it)
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Pull theory (e.g. Cash Management)
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Product looking for a problem
Need drives innovation
Services derived from products (Video Rental)
Information driven services
Difficulty of testing service prototypes
Social Trends
Aging of the population
Two-income families
Growth in number of single people
Home as sanctuary
Discussion Topics
 Describe
the work that you do from a
service perspective
 Illustrate how the type of work you do
influences a person’s lifestyle.
Quiz Question
 Name
the top 10 USA companies by
revenue in 2006
 How many would you describe as service
companies?
Example Service Innovation:
Disney World
 Link
Data Envelopment Analysis (DEA)
 Method
for evaluating efficiency of similar
venues/products
 Incorporates inputs and outputs – not just
one dimensional
 Uses LINEAR PROGRAMMING (LP)
Sample LP: Product Mix Problem
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How much beer and ale to produce from three
scarce resources:
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480 pounds of corn
160 ounces of hops
1190 pounds of malt
A barrel of ale consumes 5 pounds of corn, 4
ounces of hops, 35 pounds of malt
 A barrel of beer consumes 15 pounds of corn, 4
ounces of hops and 20 pounds of malt
 Profits are $13 per barrel of ale, $23 for beer
Key terms of LP
 Variables
 Parameters
 Objective
function
 Constraints
DEA summary of terms
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Define variables
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E_k = efficiency of unit k
u_j= coefficient for output j (relative decrease in efficiency per
unit reduction of output value)
v_i = coefficient for input i (relative increase in efficiency per unit
decrease of input value)
O_jk = observed ouput j units generated by service unit k during
one time period
I_ik = no. units input used by service unit k during one period
Note:
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k=1..K = service unit counter
j=1..M = output counter
i=1..N = input counter
DEA Objective and constraints
max Ee 
u1O1e  u2O2e  ...  u M OMe
v1 I1e  v2 I 2 e  ...  v N I Ne
s.t.
u1O1k  u2O2 k  ...  u M OMk
 1, k  1,..., K
v1 I1k  v2 I 2 k  ...  v N I Nk
u j  0, j  1,2,..., M
vi  0, i  1,2,..., N
Evaluating unit e
Trick = Rescaling to get linear equations
v1 I1e  v2 I 2e  ...  vN I Ne  1
s.t.
u1O1k  u2O2 k  ...  u M OMk  (v1 I1k  v2 I 2 k  ...  vN I Nk )  0, k  1,..., K
Example from Text: Burger Palace
 Small,
artificial example for illustration!
 Page 68
 Excel formulation
Service Portal: Strikeiron
 Link
to website
Homework: Week 1
 Link