Post on 15-May-2020
Team Name: 20-09-2015
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Week 1
Vinay Kumar Kalakbandi
Assistant Professor
Operations & Systems Area
Indian Institute of Management Raipur
Service Operations (SO) Post Graduate Program for Working Executives 2015-16
This week on Service Operations…
• Introductions
• Course overview
• Service definitions, characteristics, classifications
• Service economy
Team Name: 20-09-2015
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Introductions
• Introduction
• Work ex, internship
• Motivation to take this course
• One thing that’s not on your CV
Course Objective
To enable participants understand, appreciate and
successfully incorporate operations management
principles and insights into the management of
services
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Teaching philosophy
This course is not a spa, this is a Gym
Warm-up, Lift weights, do cardio
Read, Analyse, Participate
Course management
• Course website where details of all readings,
PPTs could be accessed anytime.
– http://vkteaching.weebly.com/
• Piazza Page
– For group/individual assignments
• Textbook and Course pack
– Shall be provided by the PGPWE office shortly
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Evaluation
• 25% Mid Term; 25% End Term
• 30% In-course activities
– Class participation – Online and Offline
– Team/Individual assignments
– In-class team/individual activities
• 20% Team Project
– Design a new service
– Analyse an existing service: with field inputs
– Compare two existing services
Flow of the course
• Service definitions, classification, importance to economy
• Service Strategy, Design – Strategic Service Vision, customer value equation
– Service Blueprinting, Servicescape design
• Managing Capacity and Demand – Queuing theory
– Revenue Management
• Managing Service quality – Statistical Quality Control
– SERVQUAL
• Managing Employee and Customer behavior
• Services in the social sector
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Team formation
• Form teams
– 5 teams
• 3 three member teams
• 2 four member teams
• Name your teams
• Always sit as teams
Our First team activity
• Consider the given list of companies
• Which of these are service firms and which of
them are product firms?
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Service product continuum
Team activity
• Order the firms you have been provided them in
a service product continuum
• As a class, merge all your lists.
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Point to ponder…
What are the key characteristics of services that
make them different from goods?
Distinctive Characteristics of Service
Operations
• Intangibility
• Perishability
• Heterogeneity
• Simultaneity
• Transferability
• Cultural Specificity
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Distinctive Characteristics of Service
Operations
• Overflowing french fries; Elevator music
• Hum hain na!; Delivering value!
• Services can deal with psychology of consumers – More degrees of freedom to create desirable services
• Appropriability: Patents not easy
• High Customer Loyalty; Exit Barriers
• Services are Intangible – Need for development of capable infrastructure
– Materialization of the service necessary • Services can be conspicuous by their absence
Distinctive Characteristics of Service
Operations
• Off-season; weekday discount?
• Usage of inventory to hedge uncertainty not possible
• Usage of excess capacity is the usual practice
• Airline with empty seats; vacant hotel room
• Sometimes too busy/sometimes too idle!
• Services are Perishable – Necessary to smoothen the demand
• Schedule preventive maintenance in slack time
• Special tariffs for slack times
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Distinctive Characteristics of Service
Operations
• Mobile phone service centres
• Human involvement leads to high amount of
randomness
• Services are characterized by Heterogeneity
– Maintenance of consistency important
Distinctive Characteristics of Service
Operations
• What’s common between McDonald’s, ICICI
bank and railway reservation counter?
• Token system; Snake queues; tellers with computer
terminals
• Diverse services tend to have more in common
with each other than diverse goods
• Services are Transferable
– Managers can utilize insights from one service to the
other!
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Distinctive Characteristics of Service
Operations • More than 19000 Starbucks in USA
• SBI has 14816 branches in India
• 16000 IOCL petrol pumps
• Serviced are produced and consumed at the same time
• Error corrections might be difficult
• Need for physical presence of the customer/assets – Loss of economies of scale
• Difficulty of testing service prototypes
• Product substitutions
• Services are characterized by simultaneity – Franchise models; consistency of approach
Service definitions
• A service is an activity or series of activities of more or less intangible nature that normally, but not necessarily, take place in interactions between customer and service employees and/or physical resources or goods and/or systems of the service provider, which are provided as solutions to customer problems
– Christian Gronroos, Service Mangement and Marketing, Lexington, Mass: Lexington Books, 1990, p. 27)
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Service definitions
• Most authorities consider the services sector to
include all economic activities whose output is
not a physical product or constriction, is
generally consumed at the time it is produced
and provides added value in forms (such as
convenience, amusement, timeliness, comfort, or
health) that are essentially intangible concerns
of the first purchaser.
– Quinn et al 1987
Point to Ponder…
Not all services are created equal!
Different services have different challenges
Different services have different ways to face
different challenges
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Classifying by configuration
• B2C services
• B2B services
• Government services
• Not for profit services
• Internal services
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Nature of the service act
Who or what is the direct recipient of the
service?
What is the nature of
the service act?
People Things
Tangible Actions Services directed at
people’s bodies
-restaurants,
haircutting, beauty
salons
Services directed at
goods and other
physical possessions
-freight transport,
laundry/dry cleaning
Intangible Actions Services directed at
people’s mind
-education, theatres
Services direct at
intangible assets
-banking, legal
services
Lovelock 1983
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Managerial implications
• Does the customer need to be physically present?
– 1) Throughout the service delivery?
– 2) Only to initiate / terminate the service transaction?
– 3) Not at all
– Customer satisfaction will be influenced by interactions they have with personnel, nature of facilities, characteristic of other customers, questions of location and schedule convenience
• Managers of service organizations may be able to identify opportunities for alternative, more convenient forms of service delivery- MOOCs!
Relationship with customers
Lovelock 1983
Type of relationship between the
service organization and the customer
Nature of service
delivery
“Membership”
relationship
No formal
relationship
Continuous
delivery system
Eg) college
enrollment,
insurance, banking
Eg) police
protection, radio
station, public
highway
Discrete
Transactions
Eg) transit pass,
long-distance phone
calls
Eg) pay phone, car
rental, restaurant,
movie theater
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Managerial implications
• Company knows who its current customers are, their addresses, their preferences, their opinions on the service provided,
• Valuable for segmentation purposes & targeted marketing
• May be offered discount rates in return for continuous patronage
• Usually result in customer loyalty to a particular provider. Ex) Rewards cards, Costco membership
• Helps ensure repeat business
• Task = build sales and revenues through membership but avoid required membership and freezing out customers. Ex) Best Buy w/ Reward Zone
• Allows for better decisions in regard to pricing
Customization and Judgment
Lovelock 1983
Extent to which service characteristics
are customized
Extent to which customer
contact personnel exercise
judgment in meeting
individual customer needs
High Low
High Eg) legal services,
taxi service, real
estate agents,
plumber
Eg) preventative
health programs,
education (large
class)
Low Eg) hotel service,
telephone service
Eg) public
transportation, fast
food restaurants,
movie theaters
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Managerial implications
• Customization is not necessarily important for success – sometimes the image of customization is enough. – Many people share the same experience. – People share the same service facility but still have some
custom treatment. Ex) airlines use your name
• Customers like to know in advance what they are buying – Professional services the professional diagnosis the
nature of the situation- can divide into two segments (diagnosis and implementation) to easy customer worries • Marketing focus on process of client-provider interactions. Ex)
statement of qualifications
Nature of Demand and Supply
Lovelock 1983
Extent of demand fluctuations over time
Extent to which
supply is
constrained
Wide Narrow
Peak demand
can usually be
met without a
major delay
Could use increases in demand
outside of peak periods
Ex) electricity, telephone, natural
gas
Must decide whether to seek
cont. growth in demand &
capacity or maintain status quo
Ex) banking, insurance, legal
services
Peak demand
regularly
exceeds
capacity
Must try to smooth demand to
match capacity- must both
stimulate and discourage
demand
Ex) theatres, hotels/motels,
restaurants
A growing organization that may
need temporary demarketing
until capacity can be reach to
meet current needs
Ex) services similar to those in
above field but with insufficient
capacity
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Managerial implications
• Managing demand in services because fluctuations can be sharp and there is no buffer of inventory between supply and demand
• What is the typical cycle period for these demand fluctuations? – Predictable- demand varies by hour of the day, day of
week/month, season of year – Random- no apparent pattern to demand fluctuations
• What are the underlying causes of these demand fluctuations? – Customer habits or preferences- could marketing change these? – Actions by third parties- employers set working hrs. hence
marking efforts might be directed at those employers – Nonforcestable events- weather conditions, health symptoms
Managerial implications
• Smooth out ups and downs of demand:
– Decrease demand: • Encourage customers to change their plans voluntarily- Offer
discounts or added product value during times of low demand
• Ration demand through reservations or a queuing system
– Increase demand: • New business development efforts should be targeted at
prospective customers with a counter cyclical demand pattern. Ex) accounting firm has lots of business at the end of the year may find new business for the bulk of the year when it has relatively no business
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Method of Service Delivery
Lovelock 1983
Availability of service outlets
Nature of interaction
between customer and
service organization
Single Site Multiple Site
Customer goes to
service organization
Ex) theatre, barbershop Ex) bus service, fast food
chain
Service organization
comes to customer
Ex) lawn care service,
pest control service, taxi
Ex) mail deliver, AAA
emergency repairs
Customer and service
organization transact at
arms length (mail or e-
communications)
Ex) credit card company,
local t.v. station
Ex) broadcast network,
telephone company
Service Process classification
Degree of interaction and customization
Degree of labour
intensity
Low High
Low Service Factory
Airlines
Trucking
Hotels
Resorts & recreation
Service Shop
Hospitals
Auto repair
High Mass Service
Retailing
Wholesaling
Schools
Retail banking
Professional service
Doctors
Lawyers
Accountants
Architects
Schmenner 1986
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Managerial implications
• Low labor intensity – Capital decisions
– Technological advances
– Managing demand to avoid peaks and to promote off peaks
– Scheduling service delivery
• High labor intensity – Hiring, training, developing methods and controls
– Employee welfare
– Scheduling the workforce
– Controlling of far-flung geographic locations
– Managing growth
Managerial Implications
• Low interaction and customization – faces a stiff marketing challenge
– Making the service warm
– Attention to physical surroundings
– Managing fairly rigid hierarchy with need for standard operations procedures
• Higher degree of interaction and customization – Fighting costs increases
– Maintaining quality
– Responding to consumer intervention
– Managing advancement of people delivering service
– Managing flat hierarchy with loose subordinate – superior relationship
– Gaining employee loyalty