supply chain ch 12

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 instead of many lines at a bank so its 1st come 1st serve *this technique does NOT work well in an emergency room at a hospital

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 lines. call in additional off-shift workers to meet increased demand.

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. Key is to exceed the customer expectations... so you also need help to form their expectations (you promise 4 hour service, knowing you can do it in 3.5 hours)

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

Pure Services

Services offering very few or no tangible products to customers (ex. consulting, storage facilities, training/education)

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)

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

Improving service productivity is challenging due to:

-High Labor Content -Individual Customized Services -Difficulty of Automating Services -Problem of assessing service quality

Managing Global Services involves...

-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

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.

4 Main Differences Between Goods and Services

-Services cannot be inventoried. Typically services are produced and consumer simultaneously -Services are often unique (ex. insurance policies, legal services) -Services have high customer-service interaction -Services are decentralized. Due to the inability to inventory or transport most services, they must be located near to the customer base.

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

-The tangibility of the end product. Services are generally not tangible. -The customer involvement in the service process. Customers are much more directly involved in the service industry. -The assessment of quality -The labor content. There is a higher ratio of labor to materials in the service industry -Location considerations.

Types of Services

Pure Services End Products State Utility

5 Strategies for if demand exceeds capacity

1. Cross-training and sharing employees so that they can help on the task that is busy at the moment 2. Using part-time employees 3. Using customers ("hidden employees") 4. Using technology 5. Using employee scheduling policies

Waiting Time Management Techniques

1. Keep Customers Occupied 2. Start the Service Quickly 3. Relieve Customer Anxiety 4. Keep Customers Informed 5. Group Customers Together 6. Design a Fair Waiting System

If demand exceeds capacity... (three alternatives)

1. Turn customers away 2. Customers wait until a service is available for them 3. Increase service capacity *This situation makes forecasting service demand critically important, particularly because services cannot be inventoried or carried out in advance.

Queing 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. Common in airports, amusement parks and retail stores

Examples of Service Capacity

Airline Capacity= number of seats and number of planes Restaurant Capacity= number of tables, number of servers 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.).

Some service offerings ________ these delivery systems together

Blended. Ex. Restaurant (front staff has contact with the customers but the back staff does not) Systems may be designed like this to use various and different management techniques to maximize performance in each area. *Any service system should be audited often to assess performance

Service Capacity Utilization

Capacity Utilization = (actual customers served per period) / (capacity)

Long-Range

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

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 offering incentives like discounts / sales

Managing Distribution Channels (cont.)

Franchising: allows businesses to expand quickly in dispersed geographic markets. protects existing markets. builds market share and facilitates business Partnership: operate /partner with firms familiar with the regions markets, suppliers, infrastructure, government regulations and customers. must address language and cultural barriers. Internet: internet retailing is growing faster than traditional retailing. primary advantage includes the ability to offer convenient sources of real-time info, integration, feedback and comparison shopping

Managing Wait time

Involves managing both the actual waiting time and the perceived waiting time. Key Questions to ask to determine waiting time strategy: What is the avg arrival rate of customers? In what order will customers be serviced? What is the avg 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?

Service Layout Strategy

Layouts designed to reduce distance traveled within the store. Departmental layouts to increase desirability ex. Doctors office waiting room, service center at the car dealership, pet grooming, car wash etc.

Service Strategies

Leadership strategy Differentiation strategy Niche strategy

Supporting Infrastructure

Location, layout, architectural appropriateness, equipment, decoration (ex. drive up tellers, ATM)

Leadership Strategy

Lowest cost service provider. Requires large capital investment in state-of-the art equipment and significant efforts to control & reduce costs. Ex. auto diagnostics software, route planning to reduce windshield time, UPS optimization

Service Location Strategy

Make it easy for customers to find the facility. Once they arrive, make it easy to find what they need or to find what you want them to find. Ex. drop off/pick up your clothes at dry cleaners on the way to work

4 primary activities of Service Response Logistics

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

Pure Strategy

Many retailers today sell products exclusively over the internet (ex. amazon)

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.

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.

Niche Strategy

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

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. Regardless of the specific breakdown, its 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 Some 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 reality for services -Inability to adequately measure results in capacity measured in terms of inputs

Facilitating Goods

Services may require the use of facilitating goods. These items need to be transported and warehoused in order to provide the service activity Generally they occur behind the scenes. 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 representative) ex. museum, kiosk, atm Single Channel, Multiple Phase, multiple servers acting in series (ex. customer, to hostess, to wait staff, to chef) ex. restaurant Multiple Channel, single phase, single server (ex. customer, to one of multiple available service representatives ex. bank teller Multiple channel, multiple phase, multiple servers acting in parallel (ex. customer, to one of multiple fast food order takers, to fast food cook) ex. fast food restaurant

Bundle of Service Attributes (Ex: Banking Industry)

Supporting Infrastructure Facilitating Goods Explicit Services Implicit Services

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)

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. Low customer contact systems (ticket kiosk, vending machine) ----- blended delivery (restaurant) ---- high customer contact systems (personal shopper, hair stylist)

Short-Range

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

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 Strategy

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-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.

Mixed Strategy

While others use it as a supplemental distribution channel (e.g., Walmart)

Implicit Services

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

Managing Distribution Channels

distribution channels involve traditional methods and new channels that incorporate new internet technologies Eatertainment = combines restaurant and entertainment elements (medieval times, rainforest cafe) Entertailing = combines retail with entertainment (mall of america) Edutainment = combines learning with entertainment (epcot center, liberty science center)

Service Capacity Decisions

long-range short-range balance

5 dimensions of Service Quality

reliability, tangibility, responsiveness, assurance, empathy

Queue Types

structured, unstructured, mobile