Exam 3: Chapter 12 - Supply Chain Management in the Service Industry

Explicit Services:

Availability and access to the service, consistency of service performance, comprehensiveness of the service, and training of service personnel.

Managing Waiting Time

Involves managing both the actual waiting time and the perceived waiting time.

Recovering from poor service quality

Keeping customers loyal and coming back serves as good word of mouth advertising

Service Capacity Utilization

actual customers served per period / capacity

Edutainment (infotainment)

combines learning with entertainment to appeal to customers look for substance along with play (e.g., Epcot Center, Liberty Science Center. etc.)

Entertailing

combines retail with entertainment elements. (e.g., Mall of America has a ferris wheel, rock climbing, play areas, etc.)

Franchising

(e.g., fast food restaurants, temp agencies, tax businesses, etc.) - Allows business to expand quickly in dispersed geographic markets. - Protects existing markets. - Builds market share and facilitates business when owners have limited financial resources.

Queuing System Input

- Customers are the demand source for services and their arrival triggers the start of the service experience. - Customers generally appear in predictable arrival patterns (e.g., the dinner rush at a restaurant). - There are models used to predict customer arrivals such as a Poisson distribution

Service recovery systems require:

- Developing recovery procedures that are thought out prior to the bad event happening. - Training employees in these procedures prior to the event - Empowering employees to remedy customer problems and recognizing them when they do. (e.g., employee who rented a U-Haul to deliver a part to a customer on a weekend)

If capacity exceeds demand, find other uses for the available capacity.

- Do other jobs when it's not busy. - 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.

Internet Distribution Strategies

- Internet retailing is growing faster than traditional retailing. - Primary advantages of the Internet include the ability to offer convenient sources of real - time information, integration, feedback, and comparison shopping.

Waiting Time Management Techniques

- Keep customers occupied. - Start the service quickly. - Relieve customer anxiety. - Keep customers informed (e.g: "The wait time from this point is ...") - Group customers together (they often to to pass the time). - Design a fair waiting system.

Layout Strategy

- Layouts designed to reduce distance traveled within the store. - Departmental layouts to maximize closeness desirability.

Managing Service Capacity

- Level demand strategy - Chase demand strategy

International Expansion

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

Queuing System Design

- Single Channel, Single Phase, Single Server. (e.g: Customer, to service representative.) - Single Channel, Multiple Phase, Multiple Servers acting in series. (e.g: Customer, to hostess, to wait staff, to chef.) - Multiple Channel, Single Phase, Single Server. (e.g: Customer, to one of multiple available service representatives.) - Multiple Channel, Multiple Phase, Multiple Servers acting in parallel. (e.g: customers, to one of multiple fast food order takers, to fast food cook.)

How does supply chain management in the service industry differ from supply chain management in manufacturing?

- The tangibility of the product. Services are generally not tangible. - The involvement of the customers 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 largely provided very near where customers are located and heavily impacted by location decisions.

Properties of Facilitating Goods

- These items need to be purchased, transported, received, and warehoused in order to provide the service activity. - Generally these supply chain activities occur behind the scenes (i.e., out of view of the service customer). - Customers have no idea how these facilitating goods actually get to the destination but they sure notice if they are not available as expected.

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 customers wait even longer without lowering their perceptions of service quality?

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.

Implicit Services

Attitude of the servers, atmosphere, waiting time, status, privacy, security, and convenience.

Differences Between Goods and Services

-Services cannot be inventoried. -Services are often unique (e.g., Insurance policies & legal services. -Services have high customer-service interaction. -Services are decentralized due to inability to inventory & transport service products.

Types of Services:

1.) Pure Services 2.) End Products 3.) State Utility

The five Dimensions of Service QUality

1.) Reliability 2.) Responsiveness 3.) Assurance 4.) Empathy 5.) Tangibles

The four primary activities of Service Response Logistics:

1.) Service Capacity 2.) Waiting Times 3.) Distribution Channels 3.) Service Quality

Queuing Systems

A queue management system is used to help control the flow and prioritization of people expecting to receive a service.

Assurance

Ability to convey trust and confidence to customers

Service Capacity - Examples

Airline Capacity- number of seats and number of planes. Restaurant Capacity- number of tables. Hotel Capacity - number of rooms.

Bundle of Service Attributes

Bundling services can deliver more than expected and enhance customer satisfaction.

Long-Range Capacity Decision

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.)

Balance Service Capacity Decision

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.

Chase Demand Strategy

Capacity varies with demand. So you can handle fluctuations but must take appropriate actions prior. Need to have options.

Eatertainment:

Combination of restaurant & entertainment elements. (e.g: Medieval Times, Rainforest Cafe, Dave & Busters, etc.)

Reliability

Consistently performing the service correctly and dependably.

Service Strategies

Cost leadership strategy Differentiation strategy Focus strategy

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.

State Utility

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

Managing Distribution Channels

Distribution channels involve traditional methods and new channels that incorporate new Internet technologies: - Eatertainment. - Entertailing. - Edutainment.

Some service offerings blend 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.

Examples of Facilitating Goods

For Banks: Cash & Coins Office Supplies Computers Records

Global Services

Global services are increasing all over the world and managing them involves a number of issues: - Identifying global customers. - Labor, facilities, and infrastructure support vary by country. - Legal and political issues: Laws may restrict foreign competitors. - Domestic competitors and the economic climate: Managers must be aware of local competition and their environment.

Service Productivity

Improving Service productivity is challenging due to: 1.) High labor content 2.) Individual customized services. 3.) Difficulty of automating services. 4.) Problem of assessing service quality.

Supporting Facility

Location, layout, architectural appropriateness, equipment, decoration.

Service Capacity Decisions

Long-Range Short-Range Balance

Cost Leadership

Lowest cost service provider. Requires large capital investment in state-of-the art equipment and significant efforts to control and reduce costs.

Queuing System Assumptions:

Most queuing models assume that customers enter the queue, and stay in the queue until served. That may not be true: - Balking is when a customer refuses to join the queue. - Reneging is when customers decide to leave the queue. Queuing models assume there is an infinite length of a queue.

Pure Services

Offer few or no tangible products to customers e.g., consulting, storage facilities, training/education, etc.

End Products

Offering tangible components along with the service component (e.g., restaurants)

Managing Perceived Waiting Times

Often, demand exceeds expectations & capacity 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.

Responsiveness

Promptly and timely service

Empathy

Providing caring attention to customers

Mobile Queues

Queues formed virtually with technology. Customers can use technology such as a smartphone to place their name in a real-time electronic queue such as at a restaurant. This type of queuing has provided a great deal of flexibility and allows for reduced stress level on the part of the customer.

Focus

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

Service Capacity Planning Challenges

Service Providers are 100% reliant on customers to create the flow of demand. Some challenges are: - 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.

Types of Queuing systems

Structured queues Unstructured queues Mobile queues

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.

Short-Range Capacity Decision

The lack of short-term capacity planning can generate customers for the competition. Example:If restaurant staffing is inadequate to handle the volume of customers arriving at the restaurant, customers will likely go elsewhere.

Service Capacity

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. - Regardless of the specific breakdown, it's the number of customers that the service provider can service at any one time.

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.

Demand Exceeds Capacity

The providers has three basic alternatives when 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, i.e, the number of service personnel and the associated infrastructure to provide the service.

Structured Queues:

These queues are set in a fixed position such as a super market checkout line, airport or bank. In some cases queue management systems can be structure with or without numbers such as "take-a-ticket number" allowing a person to walk around and wait for their number to be called.

Differentiation

Unique service created based on customer input and feedback - Example: Sunday car servicing at Hyundai, Ford, etc. Being different from another local dealer. This may by helpful in selling a car to someone who cant' take off work on a Monday-thru-Friday when their car needs repair.

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.

Strategies to deal with periods of high demand:

~ Cross-training and sharing employees so that they can help on the task that is busy at the moment. ~ Using part-time employees. ~Using customers - "hidden employees" ~Using technology ~ Using employee scheduling policies.