Service Operation New

8/8/2019 Service Operation New

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Service OperationsService Operations

Prof. Gautam Sinha

VGSOM, IIT Kharagpur


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In this module on Service Operations, we will discuss:

Service & its characteristics

Service operations

Service Product

Service Quality & Propositions

Model for Service Quality

Waiting lines

Location & Layout

Manufacturing & Operation Scheduling

Service Blueprinting

Manpower


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What is a Service?

Services are deeds, processes and performances

-Zeithaml & Bitner

Services are basically intangible. They are

performances and experiences rather than

objects Parasuraman, Zeithaml & Berry


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Service characteristics

Intangible

Cannot be inventoried

Cannot be patented

Cannot be displayed

Production & consumption are simultaneous

Customers participate in service delivery

Customers affect service delivery

Employees affect service delivery

Mass production may be difficult


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Service characteristics (continued)

Heterogeneous-

often idiosyncratic: no common rules

Delivery & customer satisfaction depend upon

employee action Service quality depends upon uncontrollable

factors

Perishable

Difficult to synchronize supply & demand Cannot be returned or resold

Universal- everybody is an expert in service


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Service OperationsService OperationsChanges in Economy: Rise of Services [Pine & Gilmore,1999]

Pre-industrial/

AgrarianCommodities

Extract

Tangible/ natural

Characteristics

Against nature

Agriculture/mining

Market

Trader

Muscle power

Simple handtools

Subsistence

Stored in bulk

Industrial

Goods

Produce goods

Tangible

Features

User

Utilize nature

Manufacturers

Machine power

Quality of goods

Standardized

Inventory

Post-industrial

Services

Deliver Services

Intangible

Benefits

Among people

People power

Client

Service provider

Brain power/ creativity/innovation

Quality of life

Information

Deliver/ no storage

On demand

Experience

Experiences

Stage

Memorable

Sensations

Guest

Stager

Personalised

Revealed overtime


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Why are services growing? Push theory of innovation- technology driven

IT-www- creates new demand

Web booking of airlines, rail tickets; Web banking

ATMs

Mobile phone technology- MMS

Pull theory of innovation- customers demand new services Wealth management services by banks- demanded by HNI

Event management of marriages

Service battery provided by dealer

Demographic/ social changes Home delivery from restaurants

Car pick up/drop after servicing/repair Special services for retired people in US & Europe

New technology creates need for new services VCR/DVD- cassette/ DVD rental


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Services Types: Interaction/Customization Vs Labour Intensity

Service FactoryAirlines

Truck transportHotelResorts

Mass ServiceRetailingSchool

HotelBanking

Professional ServiceDoctorDentist

LawyerAccountant

Service ShopHospital

Car repairTailoringBeauty parlour

Low High

Interaction & Customization

Low

High

Labou

r

Inten

sity

Adapted from Schmenner, MIT Sloane Mgt Review,27/3, 1986


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Characteristics ofServices Factory

Limited features

Competition on price/speed/warmth/excitement

Low extent of changes possible

High capital investment

Rigid process and integral equipment

Capacity is clear cut: No scope for excess capacity

Peaks difficult to handle Line flow preferred in layout


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Characteristics ofService Shop

Diverse features

Employee competence

Routine jobs

High capital investment

Adaptable process and equipment important for high quality

service

Capacity is function of demand-mix; fuzzy capacity

Scheduling easier

Job shop/ fixed position layout


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Characteristics ofMass Service

Limited features

Price/choice/ perceived warmth

Limited experimentation

Low capital investment

Rigid processes and limited link to equipment

Capacity is limited by ????, not processing time

Scheduling easier Customer flow through fixed position layout


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Characteristics ofProfessional Service

Very diverse features

Competence of main provider & range of expertise

Routine tasks

Low capital investment

Loose processes and low link to equipment

Fuzzy capacity; tough to schedule peaks

Scheduling easier Job shop layout


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Challenges for managers

Low labour intensity [service factory + service shop] Managing demand to avoid peaks

Scheduling service delivery

Capital investment & technology advancements

High labour intensity [mass service+professionalservices]

Hiring & training

Scheduling workforce Development of methods

Control

Growth & nurturing new units


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Challenges for managers- continued

Low interaction & low customization [service factory + massservice ]

Marketing

Conveying warmth

Designing & managing servicescape

Standard Operating Procedures Rigid hierarchy

High interaction & high customization [professional services]

Cost increase

Maintaining quality

Reacting to customer intervention in process

Loyalty of employees

Managing flat hierarchy/ loose superior-subordinate relationship

Career growth of employees


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Recipient of service

Bodies

Health care

TransportGym & salon

Restaurant

Minds

Education

Theatre

Movie hallMuseum

Broadcasting

Intangibles

Banking

Legal

AccountingInsurance

Security

Goods

Freight

Car repairLaundry

People Things

Recipient ofService

Tangible

Intangible

N

a

t

u

r

e


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Customization & Judgment in Service

Surgery

Taxi serviceGourmet restaurant

Telephone

Hotel

Retail bank

Cafeteria

Public transport

Movie theatre

Sports

Company canteen

Education

Preventive health programFamily restaurant

High Low

Customization

High

Low

Extent

Of

judgement

used by

Service

Personnel

tomeet

individual

needs


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Nature of recipient

Bodies

Health care

TransportGym & salon

Restaurant

Minds

Education

Theatre

Movie hallMuseum

Broadcasting

Intangibles

Banking

Legal

AccountingInsurance

Security

Goods

Freight

Car repairLaundry

People Things

Recipient ofService

Tangible

Intangible

N

a

t

u

r

e


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Nature of Demand Fluctuation

Electricity

Telephone

Maternity wardPolice emergency

Tax preparation

Passenger transport

Hotel & motel

Fastfood

Movie theatre

Petrol pump

Insurance

Legal service

BankingLaundry/ drycleaner

Wide Narrow

Extent ofdemand fluctuation

Peakmet,

Nomajor

delay

Peak

regularly

Exceeds

capacity

Extent to

which

Supply is

constrained


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Service Product Continuum (Shostack, 1977)

Tangibledominant

Intangible

dominant

Fast foodAirline

Consulting

Teaching

Automobile

FMCG

Consumer

durables

Healthcare


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Service as part of product:

Maintenance, spare parts Automobile,Aquaguard,

Quick/ home delivery- fast food

Product as a part of service

Technical report- Tech. Consulting

Class notes Teaching

Medicines, linen, diet-Healthcare


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Service product consists of

Tangible product

Physical product

Service environment (Servicescape)

Physical facilities Package that conveys an image to customer

about what is inside

People

Service delivery How the service is delivered, the process

Interaction


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Service Product

Tangible product

Servicescape

Service

Delivery


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Service Encounter

Interaction between customer & service provider

Occurs above line of visibility

Defines quality in the mind of customer

moments of truth- Jan Carlzon, CEO ScandinavianAirlines

Every moment of truth must be managed for superior service


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Service Quality (Adapted from Parasuraman, Zeithaml & Berry, 1985)

Expected

Service

Perceived Service

Quality

Perceived

Service

Delight +++Surprise++

Satisfaction+

Dissatisfaction-

Anger - -

Disgust - - -

WOM Personal Needs Past Experience

ServiceDimensions

Tangibles

Empathy

Responsiveness

Assurance

Reliability


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Service Quality: Gap Model [ ProfU Bagchi, U Texas]

Gap 5: Customer Satisfaction

Gap 4: Communication

Gap 3: Conformance

Gap 2: Design

Gap 1: Market Research

Customer Perception Customer Expectation

Service Delivery

Service vs Standards

Management Perception of

Customer Expectation

Service DesignConformance

Manage Evidence Understand Customer


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Service Expectation

Desired service

Adequate Service

Zone ofTolerance


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Service Expectation

Desired service

Adequate Service

Zone ofTolerance

What service can be, should be

Customer will

accept variability

From supplier

Minimum tolerable

expectation


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Service Expectation

Desired service

Adequate Service

Zone ofTolerance

Expectations influenced by:Explicit communication

Implicit communication

Word ofmouth

Past experience

Personal needs


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Service Expectation

Desired service

Adequate Service

Zone ofTolerance

Attribute A

Desired service

Adequate Service

Zone ofTolerance

Attribute B


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Service Design Elements (Heskett, 1987)

Who is the customer? (Target market)

How do we differentiate our product?

(Service concept) What is our service package and operating

focus? (Service strategy)

What are the actual processes, personnel and

facilities? (Service delivery)


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Problems with Service Design:

Intangibles

Difficult to specify & agree upon

Varies from person to person

Understanding customer needs intimately

Continuous customer feedback


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Service: Chain of Events from Quality to Profits

[Rust, Zahorik & Keiningham,1994]

Service Performance

Customer Satisfaction

Customer Retention

Market Share

Profit


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Service Design Principles (Lyth & Johnson, 1988)

Top management commitment to quality

Define the service concept clearly, in detail

Be clear about the service image projected/

communicated to prospective customers Study the operation from the customers

viewpoint

Define the service delivery clearly & in detailDefine functional & technical quality standards

Try to define (describe) intangibles


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Service Design Principles(continued):

Service Environment Physical environment & ambience

Manner & appearance of staff

Waiting & service times

Existing systems & procedures to enable standardslaid down

Standards for known, predictable events

Empowerment & high level of staff training to take

care of unpredictable eventsMulti-skilled employees

Monitoring of standards


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Layout & Facilities Planning

1.Layout planning is concerned with placement ofdepartments, working groups, machines, andstockholding points within a production facility.The objective is to arrange the elements in a way

that facilitates smooth work flow ( inmanufacturing) or a particular traffic pattern ( inservice).

2.Layout planning is the integral part of design of the

productive system. It is a physical expression oftechnological choices, capacity decisions, process& job design, material handling andcommunication system that joins the processes.


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Inputs to layout decisions:

Estimates for product/service demand

Space required for layout elements

Distance travelled by product & amount offlow between elements in layout

Processing requirements

Space available within & outside facility

Building configuration


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Service Facility Layout

Service Types-Fixed Services

Fixed- Consumption at delivery point

E.g. restaurant, bank, health care & hospital

Layout is crucial for fast service

In direct customer contact service- analyze

waiting line structure


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Service Facility Layout (cont..)

Entry flow & Exit flow should planned

Exit flow should not clash with waiting line

Fast-food: standardized, high volume office

work- production line layout

Banks, general offices-functional layout


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Service Manufacturing: Process Design

Mass production- McDonald, Modern Bakery

Functional Layout- Restaurant, hospital

Plant-within-Plant (PWP) or focused factory-

hospitals with separate units for cardiac unit,

oncology unit, pediatric unit which are self-

sufficient


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Service Capacity Planning

Trade-off between

too high- low utilization

Too low- waiting lines, lost sales

Demand for service & service time highly

variable

Dependent on time & location

Utilization impacts on quality

Matching Arrival Rates with Service Times


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1. Unoccupied time feels longer than occupied time.

2. Pre-process waits feel longer than in-process waits.

3. Anxiety makes waits seem longer.

4. Uncertain waits are longer than known, finite waits.

5. Unexplained waits are longer than explained waits.

6. Unfair waits are longer than equitable waits.

7. More valuable the service, longer the customer will wait8. Solo waiting feels longer than group waiting

Six Principles of WaitingSix Principles of WaitingMaister,The Psychology of Waiting lines,Harvard Business Review, May , 1984 & 1985



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Components of the Queuing SystemComponents of the Queuing System

Customer

Arrivals

Servers

Waiting Line

Service System

Exit

Queue or



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Degree ofPatienceDegree ofPatience

No Way!

BALK

No Way!

RENEG


S i O iS i O i


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Service

Pattern

Constant Variable

Example: people

using a limitedfunction ATMor

vending machine.

Example: Customer

processing time at acash register


S i O iS i O i


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The Queuing System

The Queuing System

Queue Discipline

Length

Number ofLines &

Line Structures

Service Time

Distribution

Queuing

System


S i O tiS i O ti


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Customer Service Population SourcesCustomer Service Population Sources

Population Source

Finite Infinite

Example: Number of

lab PCs needingrepair out of48 PCs.

Example: The

number ofpeoplewho could wait in a

line for gasoline.




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Service

Pattern

Constant Variable

Example: people

using a limitedfunction ATMor

vending machine.

Example: Customer

processing time at acash register

i ii i


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The Queuing SystemThe Queuing System

Queue Discipline

Length

Number ofLines &

Line Structures

Service Time

Distribution

Queuing

System




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Examples ofLine StructuresExamples ofLine Structures

Single Channel

Multichannel

Single

PhaseMultiphase

One-person

barber shopCar wash

Hospital

admissions

Bank tellers

windows




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Waiting Line ModelsWaiting Line Models

Model Layout

Source

Population Service Pattern

1 Single channel Infinite Exponential

2 Single channel Infinite Constant

3 Multichannel Infinite Exponential

4 Single orMulti Finite Exponential

These four models s

hare t

he following c

haracteristics:

y Single phase

y Poisson arrival

y FCFS yUnlimited queue length

No balking or renegingy

Steady statey

Exponential timey




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63%

37%

Exponential DistributionExponential Distribution




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Notation: Infinite Queuing: ModelsNotation: Infinite Queuing: Models

lineintingnumber waiAverage

serversingleafor

rateservicetoratearrivaltotalofRatio==

time)val(InterarriarrivalsbetweentimeAverage

timeserviceAverage

rateService=rateArrival=

1

1

!

!

!

qL

Q

P

V

P

Q

QP




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Infinite Queuing ModelsInfinite Queuing Models

lineinaitingoyrobabilit

systeminunitsexactlyoyrobabilit

channelsserviceidenticaloumber

systemin theunitsoumber

served)betotime(including

systemintimetotalverage

lineinaitingtimeverageserved)beingthose(including

systeminnumberverage

q

s

!

!

!

!

w

n

s

n

S

n

W

W

L




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Example: Model 1Example: Model 1

Assume a drive-window at a fast food restaurant.

Customers arrive up at the rate of25 per hour.

The employee can serve one customer every twominutes.Assume Poisson arrival and exponential service rates.

Determine:

A) What is the average utilization of the employee?

B) What is the average number ofcustomers in line?C) What is the average number ofcustomers in the system?

D) What is the average waiting time in line?

E) What is the average waiting time in the system?

F) What is the probability that exactly two cars will be

in the system?




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P

Q

VP

Q

25 cust / hr

1 customer

2 mins (1hr / 60 mins)30 cust / hr

25 cust / hr

30 cust / hr .8333


A) What is the average utilization of the employee?




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B) What is the average number ofcustomers in line?

4.16725)-30(30

(25)

)-(

22

PQQ

Pq

L

C) What is the average number ofcustomers in the system?

525)-(30

25

-

PQ

PsL




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D) What is the average waiting time in line?

mins10hrs.1667P

qq

LW

E) What is the average waiting time in the system?

mins12=hrs.2==P

ss

LW




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F) What is the probability that exactly two cars will be in the

system (one being served and the other waiting in line)?

p = (1 -n

nPQ

PQ

)( )

p = (1- =2

22530

2530

)( ) .1157




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An automated pizza vending machine heats and

dispenses a slice ofpizza in 4 minutes.

Customers arrive at a rate ofone every 6 minutes with the arrival rate

exhibiting a Poisson distribution.

Determine:

A) The average number ofcustomers in line.

B) The average total

waiting ti

me in the syste

m.

pp



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A) The average number ofcustomers in line.

.6667=

10)-(2)(15)(15

(10)=

)-(2

=22

PQQ

PqL

B) The average total waiting time in the system.

mins4hrs.0666710)-51)(15(2

10

)-(2

PQQ

PqW

mi s8=hrs.1333=15/hr

1hrs.06667=

1=Q

qs WW

pp



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Example:Example:

Model 3Model 3

Recall the Model 1 example:Drive-up window at a fast food restaurant.

Customers arrive at the rate of 25 perhour.

The employee can serve one customer every two minutes.

Assume Poisson arrival and exponential service rates.

Suppose an identical window (and an identically trained server)

were added. Also assume the cars wait in one line and then

proceed to the next available window.

pp

S i O tiS i O ti


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Average number ofcars in the system

1760= .qL

1.009=30

25+.176=+=

Q

Pqs LL

To

tal tim

e custom

ersw

ait befo

re being served

)(=hourpercustomers25

customers.176== Wait!No

LW

qq mins.007

P


Ser ice OperationsSer ice Operations


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Service Capacity Planning (continued)

Mean Service Rate( Q)

Mean

Arrival

Rate (P)

Zone of non-service

=P/Q > 1

Zone of Service0.7


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Operations Scheduling

Schedule decided by customer

Schedule = Capacity for service

Examine: Time- Demand pattern, allocate

resources

Schedule on the basis of priority

Waiting Lines



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Service Blueprinting- is the flow process chart

of a service operation with demarcation

between high-customer contact- what

activities/processes are visible to the

customer and what are not. The demarcation

is called the Line of Visibility. It is a

standard tool for service process design.



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Service Blueprinting (Tele-banking)

Line ofVisibility

Withdrawal

request

Check name,

address, balance

Approve

payment

Withdraw cash

Update balance

Deliver cash



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Manpower Issues:

Trained staff to take care of unexpectedevents and flexibility

Empowerment

Internal consistency among staff

Focus on customers problems and not

internal difficulties

Internal customer concept

Service Operation New

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