Chapter 12 - Supply chain management in the service industry

edutainment

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

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

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 -- pure strategy - Many retailers today sell products exclusively over the internet (e.g., amazon) -- mixed strategy - while others use it as a supplemental distribution channel (e.g., walmart)

service layout strategy

-layouts designed to reduce distance traveled within the store -departmental layouts to maximize closeness desirability -- e.g., doctors office waiting room -- e.g., service center at the car dealership, pet grooming, car wash, etc. (i.e., watch them working on your prized possession)

managing service capacity

-level demand strategy -chase demand strategy

service location strategy

-make it easy for customer 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 -- e.g., drop off, pick up your clothes at dry cleaners on the way to work

types of services

1. pure services: which offer very few or no tangible products to customers (e.g., consulting, storage facilities, training/education, etc) 2. end product services: which offer tangible component along with the service component (e.g., restaurants; food along with the dining service) 3. state utility services: which directly involve things owned by the customer (e.g., car repair, dry cleaning, haircut, and healthcare)

service capacity - examples

Airline Capacity- number of seats and number of planes Restaurant Capacity- number of tables -how many servers will I need -maitre d's/hostesses? -chefs/kitchen staff? -bus boys/dish washers? 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

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

level demand strategy

Capacity remains constant regardless of demand. When demand exceeds capacity, queue management tactics deal with excess customers -one line instead of many lines at a bank or at McDonald's so its 1st come 1st serve -numbers at the deli in the grocery store. Note: this technique does not work well in a hospital emergency room

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

recovering from poor service quality

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

Managing waiting time

Managing waiting time involves managing both the actual waiting time and the perceived waiting time.

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 restaurants staffing is inadequate to handle the volume of customers arriving at the restaurant, customer will likely go elsewhere)

structured queues

These queues are clearly marked and set in a fixed position such as a super market checkout line or airport or bank. in some cases queue management systems can be structured with numbers such as "take a ticket number" allowing a person to walk around and wait for their number to be called

queuing systems

a queue management system is used to help control the flow and prioritization of people expecting to receive a service -queues can be utilized for almost any situation where large numbers of persons are gathering, or waiting in line to purchase tickets, enter a facility, etc -queues are common in airports, amusement parks and retail stores

service productivity

improving service productivity is challenging due to: -high labor content -individual customized services -difficulty of automating services -problem of assessing service quality

facilitating goods

services may require the use of facilitating goods which are tangible elements that are used or consumed by the customer or the service provider along with the service provided -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!

queuing system design

single channel, single phase, single server ex: customer, to service rep single channel, multiple phase, multiple servers acting in series ex: customer, to hostess, to wait staff, to chef multiple channel, single phase, single server ex: customer, to one of multiple available service reps multiple channel, multiple phase, multiple servers acting in parallel ex: customer, to one of multiple fast food order takers, to fast food cook

there are a variety of queue types

structured unstructured mobile

facilitating goods

tangible elements that are used or consumed by the customer or the service provider along with the service provided

tangibles

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

reliability

consistently performing the service correctly and dependably

service strategies

cost leadership, differentiation, and focus

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 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

blended delivery example

restaurant

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. service quality may vary from person to person even within the same organization -the key is to exceed the customers expectations... so you also need to help form their expectations

service recovery systems require

-Developing recovery procedures -Training employees in these procedures -Empowering employees to remedy customer problems

queue system assumptions

-Most queuing models assume that customers enter the queue, and stay in the queue until served: - Balking is when a customer refuses to join the queue. - Reneging is when customers decide to leave the queue. -Queuing models assume infinite length of a queue

international expansion

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

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. die to the inability to inventory or transport most services, they must be located near to the customer base

some challenges of service capacity planning challenges

-customer arrivals fluctuate and service demands 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 available rather than the number of guest nights)

queue system characteristics

-queuing 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

supply chain management in the service industry

-the tangibility of the end product. services are generally not tangible (i.e., you cant touch or hold them in your hands) -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 largely provided very near where customers are located and heavily impacted by location decisions

no one likes to wait in line, however it is a reality, and even a necessary evil, for many service offerings

-there are mathematical formulas used to help predict wait times. these formulas are based on certain predetermined assumptions and probabilities -there are also techniques for reducing the time spent waiting, and/or the perception of the time waiting, for the service to be delivered -- disney and other theme parks use these techniques -- the answer is to try and keep the customers' mind of off waiting

to minimize the cost of hiring and laying off employees, the following strategies deal with periods of high demand

-using cross trained employees so that they can help on the task that is bust at the moment -using part time employees (e.g., during the holiday season) -using customers, "hidden employees" (e.g., self check out) -using technology (e.g., scanning documents in insurance industry for use in multiple departments as necessary) -using employee scheduling policies e.g., nurses have to work alternating holidays

entertaining

combines retail with entertainment elements

assurance

ability to convey trust and confidence to customers

Service capacity utilization

actual customers served per period / capacity

implicit services

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

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.).

examples of facilitating goods

banks: cash and coins hospitals: pharmaceuticals restaurants: food

Bundle of Service Attributes (Example: Banking Industry)

bundling services can deliver more than expected and enhance customer satisfaction -explicit services -implicit services supported by: -facilities and equipment -facilitating goods

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

chase demand strategy

capacity varies with demand, so you can handle fluctuations but must take appropriate actions prior. need to have options. -open up additional line(s) -call in additional off-shift workers to meet increased demand

eatertainment

combines restaurant and entertainment elements

managing distribution channels

distribution channels involve traditional methods and new channels that incorporate new internet technologies -eatertainment -enterailing -edutainment

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 facilities business when owners have limited financial resources

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 service delivery systems may be designated to keep these separate in order to use various and different management techniques to maximize performance in each area **any service system should be audited often to assess performance

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

the five dimensions of service quality

good quality services should involve reliability responsiveness assurance empathy tangibles

Capacity exceeds demand (too much capacity)

if capacity exceeds demand, instead of disposing of excess capacity (e.g., laying off personnel), find other uses for the available capacity -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 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

demand exceed capacity (not enough capacity)

if the demand exceeds capacity, and the provider does not currently have the capacity to serve all of the customers, there are three basic alternatives: 1. turn customers away and not service them, i.e., lose business 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 hiring, training, supervising, and equipping personnel is costly (about 75% of operating costs) -this situation makes forecasting service demand critically important, particularly because services cannot be inventories or carried out in advance

facilties and equipment

location, layout, architectural appropriateness, equipment, decoration (e.g., drive up tellers, ATMs)

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. -examples: auto diagnostics software, route planning to reduce windshield time, UPS optimization, etc

managing perceived waiting times

often, demand exceeds expectations and capacity first and second rules of service 1. satisfaction = customer perception is greater than or equal to customer expectation 2. it is hard to play catch up you may only get one chance to get it right

high customer contact systems example

personal shopper

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

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 systems 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 - the planned capacity for the service environment

service capacity planning challenges

service providers are 100% reliant on the customer to create the flow of demand, which has a direct impact on their ability to fully utilize capacity

service response logistics

the primary concern of service response logistics is the management and coordination of the organization's service activities -the four primary activities of service response logistics are managing: 1. service capacity 2. waiting times 3. distribution channels 4. service quality -since services cannot be inventoried and customer demand must be met, demand management tactics are also important

low customer contact systems exampels

ticket kiosks

differentiation

unique service created based on customer input and feedback -examples: Sunday car servicing at Hyundai, ford, etc. being different from another local dealer. this may be helpful in selling a car to someone who cant take off work on a Monday-thur-friday when their car needs repair

unstructured queues

when people form queues somewhat informally in various directions and locations. these types of queues are seen in retail stores, at an airport waiting for a taxi, people waiting for an ATM machine, etc