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

Responsiveness

Promptly and timely service

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

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.

Assurance

Ability to convey trust and confidence to customers

Capacity Utilization =

Actual customers served per period/Capacity Ex: A hotel has 80 rooms booked out of a total of 100 rooms available. Utilization = 80%.

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

Long-Range

Capacity can be used as a preemptive strike where the market is too small for two competitors to co-exist (e.g., the first to build a luxury hotel in a mid-sized city may capture all the business) A strategy of building ahead of demand is often taken to avoid losing customers.

Balance

Capacity decisions must be balanced against the costs of lost sales if capacity is inadequate . . . or against operating losses if demand does not reach expectations.

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

Edutainment (infotainment)

Combines learning with entertainment to appeal to customers looking for substance along with play Ex: Liberty Science Center, etc.

Eatertainment

Combines restaurant and entertainment elements Ex: Medieval Times, Rainforest Café, Epcot Center, etc.

Entertailing

Combines retail with entertainment elements Ex: Mall of America has a ferrous wheel, rock climbing wall, etc.

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).

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.

Managing Distribution Channels

Eatertainment, Entertailing, Edutainment (infotainment) Franchising, International expansion, Internet Distribution Strategies

Multiple channel, single phase, single server

Ex: customer, to one of multiple available service representatives.

Multiple channel, multiple phase, multiple servers acting in parallel

Ex: customer, to one of multiple fast food order takers, to fast food cook.

Single channel, single phase, single server

Example: customer, to service representative.

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.

International Expansion

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

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)

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.

Pure Strategy

Many retailers today sell products exclusively over the Internet Ex: Amazon

Empathy

Providing caring attention to customers

Internet Distribution Strategies

Pure Strategy, Mixed Strategy

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

The four primary activities of Service Response Logistics

Service capacity Waiting times Distribution channels Service quality

Managing Service Capacity

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.

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

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.

Short-Range

The lack of short-term capacity planning can generate customers for the competition (e.g., if restaurant staffing is inadequate to handle the volume of customers arriving at the restaurant, customer will likely go elsewhere)

Tangibles

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

Service Response Logistics

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

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

Mixed Strategy

While others use it as a supplemental distribution channel Ex: Walmart

Single channel, multiple phase, multiple servers

acting in series Ex: customer, to hostess, to wait staff, to chef.

Service Capacity

airline capacity, restaurant capacity, hotel capacity

Service Capacity Decisions

long-range, short-range, balance

Hotel Capacity

number of rooms How many people will I need to : -Check-in / Check-out the customers -Tend the bar -Clean the rooms -Handle the luggage -Provide room service

Airline Capacity

number of seats and number of planes

Restaurant Capacity

number of tables -How many servers will I need? -Maître d's / Hostesses? -Chefs / Kitchen staff? -"Bus-boys" / Dish-washers?

Queuing System Design

single channel, single phase, single server single channel, multiple phase, multiple servers multiple channel, single phase, single server multiple channel, multiple phase, multiple servers

Queue Types

structured, unstructured, mobile