SCM: Chapter 12 - Supply Chain Management in the Service Industry

Level Demand Strategy

Capacity remains constant regardless of demand. When demand exceeds capacity, queue management tactics deal with excess customers Ex: one line at a bank (first come, first serve) Ex: ticket number system at a deli

Chase Demand Strategy

Capacity varies with demand. So you can handle fluctuations but must take appropriate actions prior. Need to have options Ex: Open up additional line(s) Ex: Call in additional off-shift workers to meet increased demand

Reliability

Consistently performing the service correctly and dependably

Service Strategies

Cost leadership, differentiation, focus

Service Capacity Planning Challenges

Customer 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 (e.g. number of hotel rooms rather than guest nights).

Involvement of the customer in the production process

Customers are more directly involved in the service industry

Pure Services

Services offering very few or no tangible products to customers Ex: consulting, storage facilities, training / education, etc

State Utility

Services which directly involve things owned by the customer Ex: car repair, dry cleaning, haircut, and healthcare

End Products

Services which offer tangible components along with the service component Ex: restaurants; food along with the dining service

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 *e.g., Was the car fixed properly? *e.g., Was the client properly defended? *e.g., Was the hired comedian funny? -_____________ 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 *e.g., You promise 4 hour service, knowing that you can do it in 3.5 hours

Global Services/issues managing them

-Identifying global customers. *Follow customers globally and support them locally -Labor, facilities, and infrastructure support vary by country. *Cultural differences, education, expertise -Legal and political issues: *Laws may restrict foreign competitors. -Domestic competitors and the economic climate:

Waiting Time Management Techniques

-Keep customers occupied -Start the service quickly -Relieve customer anxiety -Keep customers informed Ex: "The wait time from this point is...", "The ride is stopped but will resume in 4 minutes" -Group customers together (they often talk to pass the time) -Design a fair waiting system

Queue System Assumptions

-Most queuing models assume that customers enter the queue, and stay in the queue until served: *Balking *Reneging -Queuing models assume infinite length of a queue

Managing Distribution Channels

-Multiple methods to deliver service 1. Self Service 2. Internet 3. Franchising 4. Partnership

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.

Differences Between Goods and Services

-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.

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!

demand exceeds capacity, alternaties

-Turn customers away and not service them -Make them wait until service is available for them -Increase service capacity, i.e., the number of service personnel and the associated infrastructure to provide the service.

Managing Waiting Time

-________________________ involves managing both the actual waiting time and the perceived waiting time. -Key questions to ask to determine waiting time strategy: *What is the average arrival rate of the customers? *In what order will customers be serviced? *What is the average service rate of providers? *How are customer arrival and service times distributed? *How long will customers wait before they either leave or lower their perceptions of service quality? *How can the wait be longer without customers lowering their perceptions of service quality?

Assurance

Ability to convey trust and confidence to customers

Franchising

Allows business to expand quickly in dispersed geographic markets, protects existing markets, builds market share and facilitates business when owners have limited financial resources Ex: fast food restaurants, temp agencies, tax businesses, etc.

Implicit Services

Attitude of the servers, atmosphere, waiting time, status, privacy and security, and convenience Ex: 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 Ex: vault, safe deposit boxes, loans, etc.

Bundle of Service Attributes

Can deliver more than expected and enhance customer satisfaction Ex: Banking Industry

Capacity Exceeds Demand, alternatives

Do other jobs when it's not busy. Example: in a restaurant you might have workers clean the bathrooms, prep for the dinner rush, etc. Do training or cross training Use demand management techniques to shift demand from peak demand periods into non-peak periods by offing incentives like discounts and special sales Example: early bird specials, 20% off from 9am to noon, etc.

Internet

Expands reach and markets served

Types of Services

Pure services, end products, state utility

Service Productivity

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

Unstructured queues

Informally lines in various directions and locations. Ex: retail stores, at an airport waiting for a taxi, people waiting for an ATM machine, etc.

Layout Strategy

Layouts designed to reduce distance traveled within the store Departmental layouts to maximize closeness desirability Ex: Doctors office waiting room Ex: Service center at the car dealership, pet grooming, car wash, etc. (i.e., Watch them working on your prized possession)

Facility location considerations

Location decisions are often critical to success in the service industry

Supporting Facility

Location, decoration, layout, architectural appropriateness, equipment Ex: drive-up tellers, ATM's, etc.

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. Ex: Drop off / pick up your clothes at dry cleaners on the way to work.

Partnership

Operate/partner with firms familiar with the region's markets, suppliers, infrastructure, government regulations, customers, language & cultural barriers

Improving service productivity

Productivity=(Outputs produced/inputs used)

Responsiveness

Promptly and timely service

Empathy

Providing caring attention to customers

The Five Dimensions of Service Quality

Reliability, responsiveness, assurance, empathy, tangibles

Cost Leadership

Requires large capital investment in state-of-the art equipment and significant efforts to control and reduce costs Ex: Auto diagnostics software, route planning to reduce windshield time, UPS optimization, etc.

First & Second Rules of Service

Rule 1: Satisfaction = customer perception - customer expectation Rule 2: It is hard to play catch-up, you may only get one chance to get it right

Focus

Serve a narrow niche better than other firms. Ex: Grocery shopping for you, Mechanic specializing in Volvo or Porsche repair, Custom stereo in your house or car

Assessment of quality

Service Quality is assessed differently than product quality.

The four primary activities of Service Response Logistics

Service capacity Waiting times Distribution channels Service quality

Tangibility of the end product

Services are generally not tangible and cannot be inventoried

Structured queues

Set in a fixed position, may use with or without numbers to allow people to walk around while they wait for their turn Ex: super market checkout line, airport or bank

Facilitating Goods

Tangible elements that are used or consumed by the customer or the service provider along with the service provided Ex: deposit forms, statements, etc.

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.

Tangibles

The physical characteristics of the service including, facilities, servers, equipment, associated goods, and other customers

Service Response Logistics

The primary concern of _____________________ is the management and coordination of the organization's service activities

Labor content ratio

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

Differentiation

Unique service created based on customer input and feedback Ex: Sunday car servicing at Hyundai, Ford, etc. Being different from another local dealer. This may be helpful in selling a car to someone who can't take off work on a Monday-thru-Friday when their car needs repair.

Queuing Systems

Used to help control the flow and prioritization of people expecting to receive a service Ex: Common in airports, amusement parks and retail stores.

Mobile queues

Virtual or with technology to place their name in a real-time system, flexible and reduces stress for customer Ex: Electronic notifiers at a restaurant

Balking

When a customer refuses to join the queue

Reneging

When customers decide to leave the queue

Service Capacity

can be expressed as the number of customers per day, per shift, per hour, per month, or per year, that the company's service system is designed to serve.

Multiple channel, multiple phase

many lines with multiple servers acting in parallel Ex: Car inspection

Multiple channel, single phase

many single servers Ex: Grocery store

Single channel, multiple phase

multiple servers acting in series Ex: Starbucks (order, make, pickup)

Queuing System Design

single channel, single phase; single channel, multiple phase; multiple channel, single phase; multiple channel, multiple phase

Single channel, single phase

single server Example: Single counter retail store.

Queue Types

structured, unstructured, mobile