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