Service Supply Relationships
Value chain coordination
For balanced supplies & demands
Ch. 9, 第八章
• Hewlett-Packard Deskjet printers
– Traditional
• Made for all nations
– Taiwan, Hong Kong, …
– If the sales in Taiwan is slow, inventory build up
– Supply chain approach
• One generic Deskjet
• Option to localize
– Manuals and power cords
– Eliminate the need for separate inventory
• Supply chain management
– A total systems approach
• From product design to after sale customer service
• To deliver manufactured products efficiently
– Poor planning
• Lost sale opportunity
• Expensive end-of-life inventory write-offs
– Greatest customer satisfaction at reasonable cost
• Asset cost
– Inventory
– Capital equipment
• Time domain characteristics of customer service
– Responsiveness
– Reliability in customer delivery
– Bullwhip effect
• Uncoordinated supply chain
– Small change in retail orders
– Magnified as we move back up the supply chain
» Distributors
» Manufacturers
– Delays in orders being filled
» Create the oscillation in inventory
– Simultaneously overstocking systemwide
– Network model
• Physical goods supply chain
– Network of value adding material processing stages
» Supply input
» Material transformation
» Demand output
• Figure 9.1
Retailing
mfg
mfg
Distributor
Distributor
Distributor
Distributor
Retailing
Retailing
Retailing
Retailing
Retailing
• Material flow downstream
– Responsiveness, delivery reliability
• Information flow upstream
– Utilization of information
» Automobile manufacturer
• After sale service
» POS data
• Facilitate planning production schedule
– Managing uncertainty
• Sources of uncertainty
– Supplier delivery performance
– Manufacturing reliability
– Customer demand
» Inventory is used as insurance to cope with uncertainty
• Variation in delivery
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Storm delay
Quality problems
Machine failure
Late arrival of raw materials
• Manufacturing reliability
– Internal scheduling delays
» Several products competing for shared resources
• Overhead crane
• Raw materials
• Customer demands
– Short product life cycle
– Competition
– General economy conditions
– Strategic initiatives to smooth uncertainty
• Total quality management
– Improvement of manufacturing reliability
• Dependable transportation modes
– Third party logistics contracts
• Supply chain collaboration
– P&G and Walmart
» Efficient customer response (ECR)
Service supply relationship
• Customer-supplier duality
– Manufacturing goods
• Pass from one entity to another
– Service objects
• Minds
– Education, entertainment, religion
• Bodies
– Transportation, lodging, healthcare
• Information
– Tax preparation, insurance, legal defense
– Services act on something provided by the
customers
• Bidirectional relationship
– Figure 9.2
– Single level service supply chains
• Table 9.2
– Two-level service supply chains
– Table 9.3
• Service supply relationships are hubs, not
chains
– Service providers act as agent for the customer
– Dentist
• Dentures
• Dental procedures
• Service capacity is analogous to inventory
– Goods supply chains
• Inventory is used to buffer customer demands
– Service
• Excess capacity is held in reserve
– Seasonal workers for high season
– Part time employees for rush hours
• Reservation
– To smooth the demand
• Customers supplied inputs can vary in quality
• Incomplete
– Tax documents
• Unprepared
– Naïve backpacker
• Unrealistic expectation
– Cancer patients
– Effective communication
• To avoid misunderstanding
Managing service relationship
• Home health care
– Healthy enough
• No need for
hospitalization or nursing
home care
– Not mobile enough
• To visit a healthcare
provider
– Nurse, dietitians,
therapists
• Visit patients at home
• Bidirectional optimization
– Patients
• Highly individualized service
– Organization
• Very cost effective operations
– “Time windows” reservation
• Between noon and 5pm
– Route, customers sequencing, language, worker skills, worker
licenses, supplies on the vehicle
• No information available
– Optimization is impossible
– Better information for optimization
• Productive capacity
• Value
– Time at customer site
• Lost productive capacity
– Time spent traveling
– Transfer
• Make knowledge available to customers
– For self service
– Web-based frequent asked questions
» Side effects of medicine, explanation of symptoms,
procedure to follow
– Replacement
• Substituting technology human resources
– Blood pressure measurement
– Embellishment customer skills to enable self
service
• Teach patient or patient’s family to change a surgical
dressing
• Perishability
– Minimize the negative impact of idle productive
capacity
• Dynamic job allocation
– Schedules are constructed and revised up until the very last
possible moment
» Before dispatch a worker
– Mobile data communication required
• Potential idle time
– Training, refining, extending skills and capability of worker
Social media in service
• Social media enable the co-creation of value
– Building customer relationship
– A wide reach
• Decentralized, less hierarchical
– Easy access
– Ease of use
– Immediacy
– Flexibility that allow information to be altered
– Top 5 industry groups
• Customers use social media for customer service
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Retail
Telephone
Travel and hospitality
Cable
Bank
• Social media as a competitive strategy
– Tune-up reminders
• First day of tickets on sale
– Cookie-cutter presence in cyberspace
• Identify where customer go online
• When they have feedback and questions
– Lead generation
• Develop relationship lead to referral
– Customer education
• Educate customer a lifestyle
– Align with its service offerings
• Insurance company
– Promote safe driving practices
– Start online, finish offline
• Information gathering online
• Purchase offline
• Social media and customer convenience
– Innovative use of technology
• Check deposit with smartphone photo
• Boarding pass on smartphone
– Insurance data mine customers information in
social media
• Identify a link between consumers’ payment history
and risky driving behavior
• Privacy issues
– Social media “netiquettes” for service providers
• “Three D’s” to avoid
– Disclosure,
– Defamation, and
– Discrimination
• “Three R’s” to promote
– Reciprocation
– Respect
– Reliability
• Social media for organizing and co-creation of
value
– Red Robin
• Launch Tavern Double burger
– Internal social network
– Not spiral-bound books
• Reduce time for idea-to-counter process
– Dell computers
• IdeaStorm site
– Product improvement idea
– Social media for service
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Branding
Recruiting
Building awareness
Information sharing
Networking
Listen to customers
Professional service firms
• Professional services
are attractive
– Intellectual challenge
– Potential for job growth
– High income
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Architects
Lawyers
Consultants
Accountants
Contracting engineers
• Attributes of professional services
– Knowledge workers
• Work involves high level of specialization and
customization
– Different from mass-market standardized approach
– Ability to manage activities and information without proven
routines
• Face-to-face interaction with customer
– Quality are perceived and measured
• Service are delivered by highly educated
• Command a body of knowledge
– Cognitive knowledge (know-what)
» Basic mastery of a discipline
» Extensive training and certification
– Advanced skills (know-how)
» Ability to apply “book learning” into effective execution
– Systems understanding (know-why)
» Anticipate subtle interaction and unintended
consequences
– Self-motivated creativity (care-why)
» Will, motivation, and adaptability for success
• Service consulting
– Firms face challenges or opportunity
• Can not handle with its internal capabilities
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Health care
Financial service
Hospitality
Staffing
Billing
Office automation
– Major service firm
• Accenture, Bain, Deloitte, IBM global services
– Strategy components of consulting business
• People
– Workforce management, productivity improvement
• Processes
– Process improvement, office automation
• Programs
– Quality program, lean/kaizen projects
• Plant
– Facility and layout
• Planning and control systems
– Dispatching, close-loop systems
– Tips for success consulting
• McKinsey model
– Under-promise and over-deliver
– 80-20 rules
» 80% problems come from 20% issues
– “Don’t boil the ocean”
– Use the “elevator rule”
» Explain to your client in 30 seconds
– Pluck the low-hanging fruit
– Hit singles
– Engage your client
– Operational characteristics
 Pr ofit  Fees  Staff 
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Pr ofit  per  Partner  
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
Fees
Staff
Partner

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• Match skill level with project requirements
– Brain Project
» Ability to create, innovate, and pioneer new approaches
» “hire us because we are smart”
– Grey-hair project
» Standardized and repeated with discretion
» Implement ERP systems
» “hire us because we have done this before”
– Procedure projects
» Well recognized and standardized
» Conducting an audit
» Complete the work quickly and inexpensively
» “hire us because we know how to do this and we can
deliver it effectively”
Outsourcing services
– Transaction cost for outsourcing
• Search cost
• Bargaining cost
• Enforcement cost
– Stick to the term of the contract
• Benefits and risks of outsourcing services
– Reasons for outsourcing
• Focus on its core competence
• Decreases costs by purchasing
• Access to latest technology without investment
– Risks of outsourcing
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Loss of direct control over quality
Jeopardizes employee loyalty because of job-loss fears
Exposure to data security
Dependence on suppliers
Additional coordination expense and delay
Decline of in-house capability
• Fig 9.4
– Supplier selection and performance evaluation
• Multinational retailer
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» Target, Walmart
Experience
Reputation
Geographical proximity
Cost parameters
Communication ability
Dependability
Flexibility
On-time delivery
– Supplier relationship structure
• Arm’s-length relationship
– No need for closely control
– Outsourcing candidates
– Highly codified and standardized information
» Price, quantity, and delivery schedule
• Vertical integration
– Strategic control desired
– Intellectual property
• Multinational apparel
» Sport Obermeyer
– Head quarter, Cororado
» Monitor fashion trend
» Consumer preference
» Retailer management
– Manufacturing unit, Hong Kong
» Fabric selection
» Printing options
» Managing suppliers
– Classification of business services
• Table 9.6
• Managerial considerations with service
outsourcing
– Facility support service (property/ low importance)
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Commodity service
Tight specification
Vendor selection based on low bid
Evaluation of service delivered
– Quality and timeliness
– Equipment support service (property/high
importance)
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Locate close enough to provide emergency service
Reputation and references
Communication
Dependability
– Employee support service (people/low
importance)
• Temporary personnel
• Specification
• Periodically review
– Employee development (people/high importance)
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•
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•
Health care
Important investment in the firm’s human capital
Outside expertise often is sought
Vendor reputation and expertise
– Facilitator service (process/low importance)
• Bookkeeping/travel booking
– Information processing
– Detail specifications
– Final selection might based on ancillary service
» Travel agency
• Delivery of tickets
• Monthly billing
– Professional service (process/high importance)
• Significant impact on the strategic future
• Need specification
• Trust in the supplier
– Reputation
– Experience
• Mini case
– 9.1 Boomer consulting, Inc.
– 9.2 Evaluation of B2C E-Commerce in Japan