1. Service Operations Management BY PROF. R.SHARMA Of BIRLA
INSTITUTE OF MANAGEMENT TECHNOLOGY Knowledge Park-II , Greater
Noida (U.P) 2323001-11(extn.217) e-mail :[email protected]
BIMECH,Greater Noida (U.P)
2. GHAIL BIMECH,Greater Noida (U.P)
3. Objective of session 1 To make you understand What's the
importance of services in Economy. Whats the importance of service
sector in Economic Growth. How economy has changed its orientation
towards services (information age) Why to study Service operations.
How services are characterized. How to classify Services.
BIMECH,Greater Noida (U.P)
4. Session I Why Services Operation BIMECH,Greater Noida
(U.P)
5. The Term Service Is defined not by what it is, but by what
it is not Historically , economic reports identify activities as
service producing that are not goods producing, which includes
manufacturing, and construction and are not extraction such as
agriculutre,foresrtry, fishing and mining. So service producing
encompasses a wide variety of industries, including retailing,
wholesaling, transportation ,banking, lodging, education ,
government, entertainment etc. BIMECH,Greater Noida (U.P)
6. Definition of services: 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 BIMECH,Greater Noida (U.P)
7. No finished goods inventory Intangibility of the product
Simultaneous production and consumption Difficulty in defining and
measuring quality and productivity Other Differences between
Manufacturing and Service (See figure 1.1) Definition of Service
Characteristics BIMECH,Greater Noida (U.P)
8. Production of Services vs. Goods Typical Differences
Services are process focused. Customers served as first come, first
served. Labor is scheduled, not the customer. Location often near
customers. Product could be transported, in services producer is
transported than servies. Result: service production tends to be
less efficient than production of goods. BIMECH,Greater Noida
(U.P)
9. The Service/Product Continuum Pure Service No product with
intrinsic value involved. e.g. lawyer Service/Product bundle
Combination of product with service (most common) Pure Product Very
rare. Yard sale. Blacksmith. BIMECH,Greater Noida (U.P)
11. Service-Product Bundles The Service-Product Bundles has
three parts: physical goods (facilitating goods)what you can carry
away tangible service (explicit service)what the seller does for
you. psychological service (implicit service)how you feel about it.
BIMECH,Greater Noida (U.P)
12. Cycle of Service for an Airline (Figure 1.2) Leaves Airport
Receive Baggage Arrives at airport Customer requests schedule
information Makes reservation Checks baggage and checks in for
flight Proceeds to gate and security check Receives boarding pass
Boards aircraft Receives in-flight service Departs Plane
BIMECH,Greater Noida (U.P)
13. Related Concepts Service guarantee Analogous to a guarantee
for a product Requires specific criteria and responses Service
Recovery What you do to compensate the customer for bad service.
BIMECH,Greater Noida (U.P)
14. Importance of Studying operations in services 1. To start
this part of study let us understand the definition of Operations
i.e. transformation process That converts the group of inputs into
outputs That is Act of combining people, raw material, technology
into useable services & products If you just think of
definition it is clear it is just people who does all makes product
& perform services Operation function typically employs by far
more personal than any other function BIMECH,Greater Noida
(U.P)
15. 2. A large firm may need marketing department of 50 and a
treasury department i.e. A/C & Finance of 5 at the same time it
may need an operational force of 5000 to deliver its services. E.g.
Professors in university, agents in insurance, pilots in airlines,
bank branch managers , brokers in BSE or NSE, police force, players
in cricket. Consequently the mere reason to study operation is its
sheer size. HUL Annual Turnover Rs. 15000 Crores It has over 20
Consumer Products and almost 35 Brands Kissan, Bru, Taj Mahal, Red
Label,Knnor, Surf, Rin, Kotex, Huggies, Dove, Sunsilk, clinic plus,
Vim, Lux etc.. Customer 700 million Retail outlets 1 million
covered directly, product found over 6.3 million outlets. Factories
39 number BIMECH,Greater Noida (U.P)
16. Its employments hierarchy REMEMBER BIMECH,Greater Noida
(U.P) HUL Model
17. 3. It is the most revenue producing activity in any economy
a. Employment effects b. Out put effects c. Money effects (
inflation) BIMECH,Greater Noida (U.P)
18. So to understand the importance of service We have to
understand the importance of service in economics of a nation or
has to understand present economic structure BIMECH,Greater Noida
(U.P)
19. According to OECD-forecast for the year 2050 , India will
be the worlds third largest economy after china & USA. Indian
economy set to grow at 10-11 percent. According to India Economic
survey 2007-08 the size of Indian economy set to cross $1 trillion.
Contribution of Services to GDP is 9.9% were that of agriculture
& Industry is 4.1% & 10.5%. Since 2002-03 Services &
Industry with annual growth of 7% had been propelling growth of the
Indian economy. Service Sector accounts 54% of the GDP and has been
growing at the rate of 9%. Since 1990. Growth of financial services
comprising Banking, Insurance and business services in the year
2006-07 is 13.9% Service Export has grown at a Average growth rate
of 28% since last decade. BIMECH,Greater Noida (U.P)
20. India has about 65% of Global offshore market and about 46%
share of global business off shoring industry. NASSCOM study
Software & Service export grew by 29% and crossed $40 billion
mark and domestic market grew at 26% crossed $11.6 billion mark. In
FY10. Up till now 10% of the global potential has been tabbed , the
future is very promising. BIMECH,Greater Noida (U.P)
21. To understand economic structure you have to understand the
changes this economic structure had under gone over the last
century : Let's understand the economic stages described by Bell
(1973) . He had described the three stages of economic growth as
Pre-Industrial Industrial Post industrial BIMECH,Greater Noida
(U.P)
22. Pre-Industrial Stage Society Pre industrial Society Game
Against nature Pre-dominant activity Agriculture, mining Use of
human labour Raw muscle power Unit of social life Extended house
hold (social ramification) Standard of Subsistence Living measure
Structure Routine, traditional , authoritative Technology Sheer
brawn BIMECH,Greater Noida (U.P)
23. Industrial Stage Society Industrial Society Game Against
fabricated nature Pre-dominant activity Goods Production Use of
human labour Machine tending Unit of social life Individual (like a
cog in machine) Standard of Accumulation of Goods living He who
dies with the most toys Structure Bureaucratic Technology Machine
BIMECH,Greater Noida (U.P)
24. Post-Industrial Stage Society Post industrial Society Game
Among Persons Pre-dominant activity Services Use of human labour
Artistic, Creative & Intellectual Unit of social life Community
Standard of Quality in terms of health, education Living measure
recreation etc.. Structure Interdependent , Global Technology
Information BIMECH,Greater Noida (U.P)
25. 4. Cost Disease in services is another factor which has to
be understood when in contrast to agriculture & manufacturing .
As Goods & food, service are also not less consumed but low
productivity in this foray makes it appear ,as they are.
BIMECH,Greater Noida (U.P)
26. Contd. That is why even the consumption of the services
remains same its low productivity has hasnt allowed it to lower its
cost e.g. Rs. 3 for food Rs. 3 for goods Rs. 3 for services So it
represents 33% of the expenditure Higher productivity in first two
over last 4-5 decades Has shown following Re. 1 for Food Re. 1 for
Goods Rs. 3 for services Now it represents 60% of the expenditure
BIMECH,Greater Noida (U.P)
27. 1950 1960 1970 1980 1990 2000 beyond 10% 20% 40% 60% 80%
100% ServicesAgricultureWork Force (%) Manufacturing Economic
survey of India Report 1971-2007-08 BIMECH,Greater Noida (U.P)
Figure 1.3
28. So we have two models to understand the service
classifications 1. Customer Contact model (Chase & Tansik) 2.
Service Process Matrix (Roger schmenner) BIMECH,Greater Noida
(U.P)
29. CUSTOMER CONTACT MODEL ( Figure 1.4) High Contact Low
Contact Pure Mixed Quasi Manufacture Service Service Mgf. -ing
BIMECH,Greater Noida (U.P)
30. CUSTOMER CONTACT MODEL In this model services are
classified according to the amount of customer contact High contact
services are pure Services firm Includes Hospital, Hotels,
Restaurant, Aviations were majority of their services take place in
presence of customers Low contact services are quasi manufacturing
firm includes retailers ,Wholesalers, Back office facilities where
presence of customer needs to a very low extent Where elements of
both are called as Mixed services firm Like banks, insurance,
entertainment, media etc.. BIMECH,Greater Noida (U.P)
31. Customer Contact (1) Definition of contactinteraction
between service provider and the customer. Each moment of truth is
a contact. BIMECH,Greater Noida (U.P)
32. Moments of Truth Moment of Truth = customer contact with a
service system. Service is defined as the cumulative effect of all
the moments of truth. One failed moment of truth can cause failure
of the entire service. Therefore, service systems must be designed
as a whole, not in parts. BIMECH,Greater Noida (U.P)
33. Moments of Truth Examples from book: King fisher airlines
has 50,000 moments of truth per day. Resort Kingfisher has
6,000,000 moments of truth per day. (At Ambala) BIMECH,Greater
Noida (U.P)
34. For designing a good service operation process we should
remember Perceived Service = f(all previous moments of truth)
BIMECH,Greater Noida (U.P)
35. Customer Contact (2) Potential inefficiency in services is
a function of the amount of customer contact Why? Customer
determines the time Customer determines the order of service
Customer influences what happens during the service BIMECH,Greater
Noida (U.P)
36. Customers are considered as dominant force in designing
service systems Thus considered as a guiding principle this simple
yet powerful idea can be formulated as: Potential Efficiency= f
(1-Customer contact time/Service creation time) This equation
indicates that potential efficiency of a service is limited by the
amount of time the customer is involved in the system But Remember
that is not necessarily desirable to maximize efficiency
BIMECH,Greater Noida (U.P)
37. This idea state that the 1. Firms having similar business
must share their best practices 2. High contact and low contact
areas with in the industries should be managed differently e.g. A.
Contact enhancing strategies Hiring people oriented workers
Partitioning back office , non contact activities away from the
customer views and should be employed in high contact areas Bill
collection center of telecom cos., bill served by waiter and not at
the collection center or accounting clerk, enquired at the
reception of the cos. Office rather than direct contact with the
department. B. Contact reduction strategies Such as appointment
systems Drop boxes, ATMs, Online booking of resorts, buses, trains
etc.. BIMECH,Greater Noida (U.P)
38. Customer Contact (3) High contact (front room) services
Direct customer contact Customer has control of process Low-contact
(back room) services Out of sight of customer Provider has control
of process Goal: move as much activity as possible to the back
roomwhy? BIMECH,Greater Noida (U.P)
39. Again for Designing a good service operation concept We
must consider the Degree of Decoupling of Service i.e. to define
proportion of Front & Back office BIMECH,Greater Noida
(U.P)
40. Service Matrix 2nd Model (Figure 1.5) Low High Low High
Service factory Airlines (traditional) Interstate Bus Services
Hotels Resort , Degree of Interaction and Customization Mass
services Wholesaling, Retailing Schools Retail aspects of
commercial banking Hospitals Police Services Professional Services
Lawyers Doctors Accountants Architects Service shop Specialty
Hospitals Auto repair Shops Financial Services Companies Art
Gallery DegreeofLaborintensity BIMECH,Greater Noida (U.P)
41. Service Matrix 2nd Model (Figure 1.6) Low High Low High
Service factory Airlines (traditional) Aviation Hotels, Resort ,
1PL (Truckers) Degree of Interaction and Customization Mass
services Wholesaling, Retailing Schools Retail aspects of
commercial banking Hospitals Police Services Professional Services
Lawyers Doctors Accountants Architects Service shop Specialty
Hospitals Auto repair Shops Financial Services Companies Art
Gallery DegreeofLaborintensity BIMECH,Greater Noida (U.P)
42. This matrix is based on the type of service process firm
follows e.g. a highly customized service process or highly labour
intensive services process i.e. if customization is high we have
service shop or professional service (having capital intensive
service) providers, if labour intensity is high Mass services
otherwise just a service factory . So if you see Each quadrant
faces managerial challenges unique to the process within that
quadrant . That is how we will going to develop homogeneity in
service operation practices BIMECH,Greater Noida (U.P)
43. Low interaction & customization Marketing Making
service warm Attention to physical surroundings Managing a fairly
rigid hierarchy Standardized procedure Low labour Intensity Capital
decision Technology Advancement managing demand to avoid peaks
Scheduling service delivery High Labour Intensity hiring training
employee welfare schedule workforce managing growth High
interaction & customization fighting cost increase maintaining
quality Reacting to consumer intervention in process Managing flat
hierarchy with loose subordinate superior relation gaining employee
loyalty BIMECH,Greater Noida (U.P)
44. Assignment: 01 . Presentation on Models for understanding
the relationship between Operational Driver & Business
Performance. 1. Balance Business Scorecard ( Kaplan & Norton
1996) 2. Service Profit Chain (Heskett et al. 1997) 3. The result
Determinant Framework ( Fitzgerald et al. 1991) 4. The performance
pyramid ( Lynch & Cross 1991) 5. Return on Quality ( Rust et al
1995) 6. The business Excellence Model ( EFQM 1999) 7. Data envelop
analysis ( DEA) (A. Charnes, W.W. Cooper, E Rohdes) (Banker&
Morey study) BIMECH,Greater Noida (U.P)
45. Abhi Class Chalega.. BIMECH,Greater Noida (U.P)