Chapter 12: Supply Chain Management in the Service Industry
How does supply chain management in the service industry differ from supply chain management in manufacturing?
- The tangibility of the end product. Services are generally not tangible - The involvement of the customer in the service process. Customers are much more directly involved in the service industry - The assessment of quality. Quality is assessed differently in the service industry - The labor content. There is a much higher ratio of labor to materials in the service industry - The facility location considerations. Services are heavily impacted by location decisions
Demand Exceeds Capacity
1. Turn customers away and not service them 2. Make them wait until service is available for them 3. Increase service capacity
Balking
When a customer refuses to join the queue
Reneging
When customers decide to leave the queue
Unstructured Queues:
When people form queues somewhat informally in various directions and locations
Chase Demand Strategy
- Capacity varies with demand. So you can handle fluctuations but must take appropriate actions prior. Need to have options.
Strategies to deal with periods of high demand
- Cross-training and sharing employee so that they can help on the task that is busy at the moment. - Using part-time employees - Using customers - Using technology - Using employee scheduling policies
Service Capacity Planning Challenges:
- Customers arrivals fluctuate and service demands also vary - Customers are participants in the service and the level of congestion impacts on perceived quality - Idle capacity is a reality for services - Inability to control demand results in capacity measured in terms of inputs
Improving service productivity is challenging due to:
- High labor content - Individual customized services - Difficulty of automating services - Problem of assessing service quality
Waiting Time Management Techniques
- Keep customers occupied - Start the service quickly - Relieve customer anxiety - Keep customers informed - Group customers together - Design a fair waiting system
Layout Strategy
- Layouts designed to reduce distance traveled within the store - Departmental layouts to maximize closeness desirability
Location Strategy
- Make it easy for customers to find the facility / store - Once they arrive, make it easy to find what they want, or to find what you want them to find
Queue System Characteristics
- Queue discipline describes the order in which customers are served - Queuing can be comprised of single or multiple lines - Queue lines can be serviced by either a single server or multiple servers. Multiple servers can also act in series or in parallel.
The four primary activities of Service Response Logistics:
- Service capacity - Waiting times - Distribution channels - Service quality
Differences Between Goods and Services
- Services cannot be inventoried - Services are often unique to the customer - Services have high customer interaction - Services are decentralized. Due to the inability to inventory or transport most services, they must be located near to the customer base
Types of Services
1. Pure Services 2. End Products 3. State Utility
Five Dimensions of Service Quality
1. Reliability 2. Responsiveness 3. Assurance 4. Empathy 5. Tangibles
Demand management tactics
As services cannot be inventoried and customer demand must be met
Service Capacity
Can be expressed as the number of customers per day, per shift, per hour, per moth, or per year, that the company's service system is designed to serve
Level Demand Strategy
Capacity remains constant regardless of demand. When demand exceeds capacity, queue management tactics deal with excess customers
Edutainment (Infotainment)
Combines learning with entertainment to appeal to customers looking for substance along with play
Eatertainment
Combines restaurant and entertainment elements
Entertailing
Combines retail with entertainment elements
Managing Distribution Channels
Eatertainment Entertailing Edutainment
Service Strategies: Focus
Serve a narrow niche better than other firms.
A Queue Management System
Is used to help control the flow and prioritization of people expecting to receive a service
Service Strategies: Cost Leadership
Lowest cost service provider. Requires large capital investment in state-of-the art equipment and significant efforts to control and reduce costs
Queue System Assumptions
Most queuing models assume that customers enter the queue, and stay in the queue until served - Balking - Reneging
Mobile Queues:
Queues formed virtually with technology.
Pure Services
Services offering very few or no tangible products to customers
State Utility
Services which directly involve things owned by the customer
End Products
Services which offer tangible components along with the service component
Facilitating Goods
Tangible elements that are used or consumed by the customer or the service provider along with the service provided
Service Delivery System
The delivery of services can be expressed as a continuum with mass produced, low-customer contact systems at one end, and highly customized, high-customer-contact systems at the other end
Service Response Logistics
The primary concern is the management and coordination of the organization's service activities
Structured Queues:
These queues are set in a fixed position such as a super market checkout line, airport or bank.
Service Strategies: Differentiation
Unique service created based on customer input and feedback