SCM Chapter 12

Level Demand Strategy

Capacity remains constant regardless of demand. When demand exceeds capacity, queue management tactics deal with excess customers - Consists of the management of actual waiting time & perceived waiting time - Need to be perceived as "fair" to waiting customers

Chase Demand Strategy

Capacity varies with demand. Need to prepare options. Open up additional line(s) Call in additional off-shift workers to meet increased demand.

Managing Perceived Waiting Times

Customer perception of time spent waiting is often much different then actual time. Therefore companies must manage the perception as well.

Managing Service Quality

Customer satisfaction with the service depends not only on the ability of the firm to deliver what customers want, but on the customers' perceptions of the quality of the service received Service quality depends on the firm's employees to satisfy customers varying expectations The key is to exceed the customers expectations . . . so you also need to help form their expectations

End Products:

Services which offer tangible components along with the service component (e.g., restaurants; food along with the dining service)

Service Response Logistics

Service response logistics is the management and coordination of the organization's service activities that occur while the service is being performed.

Pure Services:

Services offering very few or no tangible products to customers (e.g., consulting, banking, training / education, etc.)

SCM in Services

Services often require the use of facilitating goods which are tangible elements that are used or consumed while providing the service (repair parts, food, tools, equipment, etc.) * These items need to be purchased, transported and warehoused in order to provide the service activity. * Generally these SCM activities occur behind the but are crucial to customer satisfaction * Customers expect the facilitating goods to be readily available as part of the service purchase!

State Utility

Services which directly involve things owned by the customer (e.g., car repair, dry cleaning, haircut, and healthcare).

If capacity exceeds demand:

Dispose of excess capacity (reduce service hours, reduce employees) Find other uses for service capacity (restaurant cooking for banquets) Increase Demand - Pricing / Promotion - Advertising - New use for service - Change location

Labor content ratio

There is a much higher ratio of labor to materials in the service industry

Single channel single phase

single phase (single server). Single counter retail store.

Facilitating Goods

tangible elements that are used or consumed by the customer or the service provider along with the service provided. (e.g., deposit forms, statements, etc.)

Multiple channel, single phase,

(Many single servers). Grocery store

Multiple channel, multiple phase,

(many lines with multiple servers acting in parallel) Car inspection

Location Strategy: - Make it easy for customers to find the facility.

- Make it easy for customers to find the facility. - Once they arrive, make it easy to start the service process * Drive through, car wash queueing * Location is a Long term decision - consider relevant factors -Drive customer visits / cost vs. revenue

The Five Dimensions of Service Quality

- Reliability * consistently performing the service correctly and dependably Responsiveness * promptly and timely service Assurance * ability to convey trust and confidence to customers Empathy * providing caring attention to customers Tangibles * the physical characteristics of the service including, facilities, servers, equipment, associated goods, and other customers

Service Strategies

1. Cost Leadership - Requires large capital investment in state-of-the art equipment and significant efforts to control and reduce costs. - Examples: Auto diagnostics software, route planning to reduce windshield time, UPS optimization, McDonalds restaurant 2. Differentiation - Unique service created. Customer feedback and response is critical. - Examples: Sunday car servicing at Hyundai, Ford, etc. Being different from another local dealer. Ruth Chris restaurant 3. Focus - Serve a narrow niche better than other firms. Examples: Personalized Grocery shopping, Mechanic specializing in Volvo or Porsche repair, Vegan restaurant

List global services

1. Global services are increasing all over the world and managing them involves a number of issues: 2. Identifying global customers - Follow customers globally and support them locally 3. Labor, facilities, and infrastructure support vary by country. - Cultural differences, education, expertise 4. Legal and political issues: - Laws may restrict foreign competitors. 5. Domestic competitors and the economic climate: - Domestic competitors and the economic climate: 3.

Queue System Assumptions:

1. Most queuing models assume that customers enter the queue, and stay in the queue until served: - Balking is when a customer refuses to join the queue. - Reneging is when customers decide to leave the queue. - Queuing models assume infinite length of a queue

Differences Between Goods and Services

1. Services cannot be inventoried (in most cases). Normally, services are produced and consumed simultaneously. * Capacity planning is key * Services are often unique to the customer (e.g., insurance policies, legal services, tax preparation, etc.) * 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.

Type of Queue Types:

1. Structured queues: 2. Unstructured queues: 3. Mobile queues:

Bundle of Service Attributes

1. Supporting Facility: 2. Facilitating Goods: 3. Explicit Services: 4. Implicit Services:

Structured queues:

1. These queues are clearly marked and set in a fixed position such as a super market checkout line or airport security. This also includes "take-a-ticket number" system which allows a person to walk around and wait for their number to be called.

Tangibility

1. of the end product. Services are generally not tangible and cannot be inventoried.

Queuing Systems

A queue management system is used to help control the flow and prioritization of people expecting to receive a service. Queues can be utilized for almost any situation where large numbers of persons are gathering and waiting to be serviced. Queues are very common in airports, amusement parks and retail stores.

Service Productivity

High labor content Individual customized services Automating services is difficult Service quality assessment process

Rule 2

It is hard to make-up for poor perception. You get one chance to get it right.

Waiting Time Management Techniques

Keep customers occupied Start the service quickly Relieve customer anxiety Keep customers informed Group customers together (they often talk to pass the time) Design a fair waiting system

Layout Strategy:

Layouts designed to reduce distance traveled within the store by employees performing the service - Ease of service - Clear lines of visibility for the customer to observe * Departmental layouts are set to maximize closeness desirability - Supporting departments are located in proximity to the groups supported (parts room, nurses stations)

Managing Waiting Time

Managing waiting time involves managing both the actual waiting time and the perceived waiting time.

Managing Distribution Channels

Multiple methods to deliver service Self Service Internet - Expands Franchising - expand quickly in dispersed geographic markets - build market share & when have limited financial resources. Partnership

Improving service productivity

Productivity = Outputs Produced / (Inputs used)

Queue System Characteristics:

Queue discipline is the order in which customers are served (FIFO, Triage, Status). 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.

Mobile queues:

Queues formed virtually with technology. Customers use technology to place their name in a real-time electronic queue (restaurant, self check in).

First and Second Rules of Service:

Rule 1: Satisfaction = customer perception - customer expectation

Rule 1

Satisfaction = customer perception - customer expectation

Assessment of quality.

Service Quality is assessed differently than product quality.

Customers expect the facilitating goods to be readily available as part of the service purchase!

Service capacity Waiting times Distribution channels Service quality

Service Delivery System

Some service offerings blend these delivery systems together Example: Restaurant - Front of the house staff tend to be customer centric - Back of the house staff generally do not have contact with customers Service delivery systems may be designed to keep these separate in order to use various and different management techniques to maximize performance in each area.

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. - Ticket Kiosk - Vending Machine - Automated Teller Machine (ATM) - Personal Shopper - Hair Stylist - Financial Manager

If the demand exceeds capacity, there are three basic alternatives:

Turn customers away and not service them Make them wait until service is available for them Increase service capacity

Unstructured queues:

When people form queues somewhat informally in various directions and locations. These types of queues are often seen in outside large venues, trains, ATM machines, elevators, etc.

Demand management tactics

are important, as services cannot be inventoried and customer demand must be met

Implicit Services:

attitude of the servers, atmosphere, waiting time, status, privacy and security, and convenience (e.g., security, atmosphere, privacy, convenience, etc.).

Explicit Services:

availability and access to the service, consistency of service performance, comprehensiveness of the service, and training of service personnel (e.g., vault, safe deposit boxes, loans, etc.).

Facility location

considerations. Location decisions are often critical to success in the service industry.

Involvement of the customer

in the production process. Customers are more directly involved in the service industry

Service capacity

is the # of customers per period the firm's service system is designed to serve - If demand exceeds capacity, firms have to invoke strategies to expand capacity or manage demand - If capacity exceeds demand, firms have to invoke strategies to increase demand or utilize capacity - Hiring, training, supervising, & equipping personnel is costly (≈ 75% of ops. costs) - Long term demand forecasting is key to provide needed capacity to meet the forecast demand

Supporting Facility

location, decoration, layout, architectural appropriateness, equipment. (e.g., drive-up tellers, ATM's, etc.)

Single channel multiple phase

multiple servers acting in a series). Starbucks (order, make, pickup)