Service Response Logistics (Chapter 12)

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.

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 ---Many retailers today sell products exclusively over the Internet (a pure strategy), e.g., Amazon ---While others use it as a supplemental distribution channel(a mixed strategy), e.g., Walmart

International Expansion

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

Five Dimension of Service Quality

1. Reliability - consistently performing the service correctly and dependably 2. Responsiveness - promptly and timely service 3. Assurance - ability to convey trust and confidence to customers Empathy - providing caring attention to customers 4. Tangibles - the physical characteristics of the service including, facilities, servers, equipment, associated goods, and other customers

Capacity Utilization = actual customers served per period / capacity

A hotel has 80 rooms booked out of a total of 100 rooms available. They are at 80% utilization. ---This is straight forward in that you have a fixed number of rooms and they are either booked or not booked. A doctor, on average, can see X patients per hour. But, if the doctor takes longer with each patient than the average, the patients start to get backed-up and some patients wait longer. ---The doctors office is not going to call in a temporary doctor for the rest of the day to catch up.

Service Capacity Examples

Airline Capacity = number of seats and number of planes Restaurant Capacity = number of tables Hotel Capacity = number of rooms How many people will I need to : -Change the sheets -Clean the rooms -Handle the luggage -Wash the dishes -Check-in / Check-out the customers -Tend the bar

Managing Queue Times

Consists of the management of actual waiting time and perceived waiting time ---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?

Service Strategies

Cost leadership, Differentiation, Focus

Queuing System Design - The Input Process

Customer arrivals are referred to as demand source Customers appear in arrival patterns Poisson distribution is often used to model customer arrival Most queuing models assume customers stay in line: --Customers do not exhibit Balking (refusing to join the queue) --Customers do not exhibit Reneging (leaving the line)

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? Service quality depends on the firm's employees to satisfy customers varying expectations The key is to exceed the customers expectation. So you also need to help form their expectations e.g., If you promise 4 hour service, maybe you know you can do it in 3.5 hours

Capacity Management when capacity exceeds demand

Instead of disposing of excess capacity, find other uses for available capacity --Do other jobs when its not busy (e.g., in restaurant might have to clean the bathrooms, prep for the dinner rush, etc.) --Do training or cross training Use demand management techniques --Shift demand from peak demand periods into non-peak periods by offing incentives like discounts and special sales (e.g., early bird specials, 20% off from 9am to noon, etc.)

Service recovery system 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)

Managing Distribution Channels

Distribution channels involve traditional methods and new channels that incorporate new Internet technologies ---Eatertainment combines restaurant and entertainment elements (e.g., Rainforest Café, Epcot Center, Medieval Times, etc.) ---Entertailing combines retail with entertainment elements (e.g., Mall of America in Minn. has a ferrous wheel, rock climbing wall, etc.) ---Edutainment (infotainment) combines learning with entertainment to appeal to customers looking for substance along with play (e.g., Sesame Street, Liberty Science Center. etc.)

Service Delivery System: Bundle of Attributes (Example = Banking):

Explicit services (storage, use of your money) Supporting facility (bank with drive-up tellers) Facilitating goods (deposit forms, monthly statements) Implicit services (security, atmosphere, privacy, convenience)

Improving service productivity is challenging due to:

High labor content Individual customized services Difficulty of automating services Problem of assessing service quality

Waiting Time Management Techniques

Keep customers occupied Start the service quickly Relieve customer anxiety Keep customers informed Examples: --"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

Recovering from poor service quality

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

Global services are increasing all over the world and managing them involves a number of issues:

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. Identifying global customers.

Layout Strategies

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

Location Strategies

Make it easy for your customer to find your store. Once they arrive, make it easy to find what they want to buy or what you want them to consider buying. Drop off / pick up your clothes at dry cleaners on the way to work.

Pure Service

Offering few or no tangible products to customers (e.g., consulting, storage facility, training / education) EX: School

End Products

Offering tangible components (e.g., restaurants)

Perceived Waiting Times

Often, demand exceeds expectations and capacity First and Second Laws of Service Rule 1: Satisfaction = perception - expectation Rule 2: It is hard to play catch-up

Service Characteristics

Provided either by single server or by multiple servers who act in series or in parallel --The single server, single channel, single phase configuration is the most basic --Multiple servers acting in series is referred to as a multiple phase queuing system (e.g. Hostess, to waiter, or multiple hostess) --Multiple servers acting in parallel is referred to as a multiple channel queuing system --Another characteristic of service is the time required to complete each of the services provided

Queue Characteristics

Queuing models assume infinite length of a queue Queuing configuration can contain single or multiple lines Queue discipline describes the order in which customers are served

Cost leadership

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. ^^ trucks avoid routes with making lefts because they know it takes a long time and all that time added is a waste

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

Four primary activities of Service Response Logistics:

Service capacity Waiting times Distribution channels Service quality Demand management tactics are also important, as services cannot be inventoried and customer demand must be met

Service Delivery System

Service delivery systems are along a continuum with mass produced, low-customer contact systems at one end and highly customized, high-customer-contact systems at the other end. Some operations 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 contact customers --Service delivery systems may be designed to keep these separate in order to use various management techniques to maximize performance in each area. Any service system should be audited often to assess performance

Supply Chain Management in Services

Services also require use of facilitating products (e.g., computers, furniture, office supplies) that are not part of the services sold Customers have no idea how things actually get to the destination. --But they sure notice when the shipment is late! Transportation and Warehousing activities in services - behind the scenes (see chart on next slide)

Differences Between Goods and Services

Services cannot be inventoried (in most cases). Typically, services are produced and consumed simultaneously. Services are often unique to the customer (e.g., Insurance policies, legal services, etc.) Services have high customer interaction Services are decentralized due to the inability to inventory and transport most service products

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

The tangibility of the end product The involvement of the customer in the service process The assessment of quality The labor content The facility location considerations

State Utility

They do something to things owned by the customer (e.g., healthcare, cut your hair, repair your car, dry clean your clothes).

Capacity Management when demand exceeds capacity

To minimize the cost of hiring and laying off employees, the following strategies 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 (e.g., holiday season) Using customers - "hidden employees" (e.g., self check out) Using technology (e.g., Scan documents in insurance industry for multiple depts. To use as necessary) Using employee scheduling policies (e.g., nurses have to work alternating holidays)

Service Characteristics

Understand that there are mathematical formulas that can predict wait times and deal with them. These are based on certain predetermined assumptions and probabilities. ---Disney and other theme parks use these techniques. EX: Single channel, single phase (Demand source --> server) Single channel, multiple phase (Demand source --> server-->server) Multiple channel, single phase (server<--Demand source-->server) Multiple channel, multiple phase (server<--server<--demand source-->server-->server)

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 can't take off work on a Monday-thru-Friday when their car needs repair.

Service capacity

is the number of customers per day the company's service system is designed to serve Exceeding capacity means that you turn customers away, make the customers wait, or you have to hire more people to provide the service. Hiring, training, supervising, and equipping personnel is costly (≈ 75% of operating costs) **ON EXAM** Therefore, service managers must forecast demand and provide capacity to meet the forecast demand

The primary concern of service response logistics is...

the management and coordination of the organization's service activities