Chapter 12 Supply Chain Management in the Service Industry
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.)
Tangibles -
the physical characteristics of the service including, facilities, servers, equipment, associated goods, and other customers
State Utility:
Services which directly involve things owned by the customer (e.g., car repair, dry cleaning, haircut, and healthcare).
End Products:
Services which offer tangible components along with the service component (e.g., restaurants; food along with the dining service)
Single channel, single phase (single server).
Single counter retail store.
Blending both High and Low Customer Contact Systems
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
Single channel, multiple phase, (multiple servers acting in a series).
Starbucks (order, make, pickup)
Demand Exceeds Capacity
Turn customers away and not service them Make them wait until service is available for them Increase service capacity
Differentiation (Service Strategy)
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
Wait Time Questions
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?
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.
Assurance -
ability to convey trust and confidence to customers
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.).
Reliability -
consistently performing the service correctly and dependably
Service capacity
is the # of customers per period the firm's service system is designed to serve
Service response logistics
is the management and coordination of the organization's service activities that occur while the service is being performed.
Balking
is when a customer refuses to join the queue.
Reneging
is when customers decide to leave the queue.
Supporting Facility:
location, decoration, layout, architectural appropriateness, equipment. (e.g., drive-up tellers, ATM's, etc.)
Responsiveness -
promptly and timely service
Empathy -
providing caring attention to customers
Queuing Systems
A queue management system is used to help control the flow and prioritization of people expecting to receive a service.
Facility location considerations.
Location decisions are often critical to success in the service industry.
Level Demand Strategy
Capacity remains constant regardless of demand. When demand exceeds capacity, queue management tactics deal with excess customers
Chase Demand Strategy
Capacity varies with demand. Need to prepare options. Open up additional line(s)
Multiple channel, multiple phase, (many lines with multiple servers acting in parallel)
Car inspection
Customer perception of time
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
Involvement of the customer in the production process.
Customers are more directly involved in the service industry
Departmental Layouts
Departmental layouts are set to maximize closeness desirability Supporting departments are located in proximity to the groups supported (parts room, nurses stations)
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
Global Services
Global services are increasing all over the world and managing them involves a number of issues:
Multiple channel, single phase, (Many single servers).
Grocery store
High Customer Contact Systems
Highly Customized Personal Shopper Hair Stylist Financial Manager
Global Services Issues
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:
Service
Improving Service Productivity is difficult High labor content Individual customized services Automating services is difficult Service quality assessment process
Rule 2 of Satisfaction
It is hard to make-up for poor perception. You get one chance to get it right.
Waiting Time 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
Service Location Strategy
Make it easy for customers to find the facility. Convenience 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
Managing Wait Time
Managing waiting time involves managing both the actual waiting time and the perceived waiting time.
Low Customer Contact Systems
Mass Produced Ticket Kiosk Vending Machine Automated Teller Machine (ATM)
Queueing Models Assumptions
Most queuing models assume that customers enter the queue, and stay in the queue until served:
Managing Distribution Channels
Multiple methods to deliver service Self Service Internet Expands reach and markets served Franchising expand quickly in dispersed geographic markets build market share & when have limited financial resources. Partnership Operate/partner with firms familiar with the region's markets, suppliers, infrastructure, government regulations, customers, language & cultural barriers
Productivity Equation
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.
When Queues are used and where to find them
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.
Mobile queues:
Queues formed virtually with technology. Customers use technology to place their name in a real-time electronic queue (restaurant, self check in).
Cost Leadership (Service Strategy)
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
Rule 1 of Satisfaction
Satisfaction = customer perception - customer expectation
Focus (Service Strategy)
Serve a narrow niche better than other firms. Examples: Personalized Grocery shopping, Mechanic specializing in Volvo or Porsche repair, Vegan restaurant
Assessment of quality.
Service Quality is assessed differently than product quality.
four primary activities of Service Response Logistics:
Service capacity Waiting times Distribution channels Service quality
Service quality depends on
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
Differences Between Goods and Services (4)
Services are decentralized. Due to the inability to inventory or transport most services, they must be located near to the customer base.
Tangibility of the end product.
Services are generally not tangible and cannot be inventoried.
Differences Between Goods and Services (2)
Services are often unique to the customer
Differences Between Goods and Services (1)
Services cannot be inventoried
Differences Between Goods and Services (3)
Services have high customer interaction
Pure Services:
Services offering very few or no tangible products to customers (e.g., consulting, banking, training / education, etc.)
Facilitating goods
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.)
Delivery of Services
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.
Labor content ratio.
There is a much higher ratio of labor to materials in the service industry
Structured queues:
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.