SCM in the Service Industry

Service Delivery System

- Expressed as continuum: with mass produced, low customer contact systems at one end -Highly customized, high-customer-contact systems at the other end

Service Response Logistics

- Primary Concern of SRL is management and coordination of the organization's service activities - Four Primary Activities: 1. Service capacity 2. waiting times 3. Distribution Channels 4. Service quality - Demand management Tactics: Important, as services cannot be inventoried and customer demand must be met

Managing service Capacity

- Service capacity expressed as number of customers per day, per shift, per hour, per month, or per year, the company's service system is designed for - regardless of the breakdown, the number of customers the service provider can service at any one time - the planned capacity for the service environment

Differences Between Goods and Services

- Services cannot be inventoried - services are often unique to the customer - services have high customer interaction - services are decentralized. due inability to inventory or transport services must be located near the customer

How does SCM in the Service industry differ from SC in manufacturing

- Tangibility of the end product. Services are generally not trangible - Involvement of the customer in the service process. customers are more directly involved in the service industry - Quality is assessed differently in the service industry - the labor content. Higher ratio of labor to materials in the service industry - services are largely provide and heavily impacted by location decision

Service Capacity Planning Challenges

- customer arrivals fluctuate and service demands also vary - customers are participants in the service and the level of congestion impacts quality - idle capacity is a reality for services - inability to control demand results in capacity measured in terms of inputs (ex: hotel rooms rather than guest nights)

Service Productivity

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

Queuing system continued

Types of queues: 1. structured queues: queues are set in a fixed position. can be structure with or without numbers such as take a ticket number 2. Unstructured queues: people form queues somewhat informally in various directions and locations 3. mobile queues: queues formed virtually with technology. customers use technology such as a smartphone to place their name in a real time electronic queue such as at a restaurant

Managing service quality

- customer satisfaction depends on the ability of the firm to deliver what customers want, and 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 so you also need to help form their expectations

Queuing system input

- customers are the demand source for services - their arrival triggers the start of the service experience - customers generally appear in predictable arrival patterns - there are models used to predict customer arrivals such as a Poisson distribution

Demand Exceeds Capacity (Not enough capacity)

- if demand exceeds capacity there are 3 basic alternatives: 1. turn customers away and not service them 2. make them wait until service is available 3. Increase service capacity - hiring, training, supervising, and equipping personnel is costly, which makes forecasting service demand important. - services cannot be inventoried or carried out in advance

demand exceeds demand (Too much Capacity

- instead of disposing of excess capacity (laying off personnel), 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 periods into non-peak periods - offer incentives, discounts and special sales

Managing Waiting Time

- involves managing both actual waiting time and perceived waiting time. questions to ask to determine strategy: - what is the avg arrival rate of the customers - in what order will customers be serviced? - what is the avg service rate of providers - how are customer arrival and service times distributed

waiting time management techniques

- keep customers occupied - start the service quickly - relieve customer anxiety - keep customers informed - group customers together

Managing perceived waiting times continued

- keep the customers' mind off of waiting

managing perceived waiting times

- often, demand exceeds expectations and capacity - Rule 1: satisfaction = customer perception + customer expectations - Rule 2: It is hard to play catch-up: you only get once chance to get it right

Managing service quality cont

- service recovery systems require: 1. developing recovery procedures that are thought out prior to bad event happening 2. training employees in procedures prior to the event 3. empowering employees to remedy customer problems and recognizing them when they do

Transportation and Warehousing in Services

- services may require facilitating goods which are tangible and used by customers or service provider - these items need to be transported and warehoused to provide the service activity - transportation and warehousing activities occur behind the scenes - customer have no idea how they actually get to the destination but notice if they are not available as expected

Service Capacity - Examples

1. Airline capacity = number of seats and number of planes 2. Restaurant capacity = number of tables - how many servers, kitchen staff, etc 3. hotel capacity = number of rooms - employees to handle luggage, clean the rooms, etc

Service Strategies

1. Cost leadership: requires large capital investment in state of the art equipment and efforts to control and reduce costs 2. Differentiation: unique service created based on customer input and feedback 3. focus: serve a narrow niche better than other firms

Managing Service Capacity

1. Level Demand Strategy: capacity remains constant regardless of demand. when demand exceeds capacity, queue management tactics deal with excess customers 2. Chase Demand Strategy: capacity varies with demand. Handle fluctuations, must take appropriate actions prior. need to have options

Service Capacity Decisions

1. Long-range: a strategy of building ahead of demand is often taken to avoid losing customers 2. Short-range: the lack of short term capacity planning can generate customers for the competition 3. Balance: capacity decisions must be balanced against the costs of lost sales if capacity is inadequate

Types of Services

1. Pure Services: offering very few or no tangible products to customers (consulting, storage facilities, training/education) 2. End Products: Services offering tangible components along with service component (restaurants, food along with dining service) 3. State utility: Services directly involve things owned by the customer (car repair, dry cleaning, haircut, healthcare

Five dimensions 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 4. Empathy: provide caring attention to customers 5. Tangibles: physical characteristics of the service including facilities, servers, equipment, associated goods, and other customers

Service Location Strategy and Layout Strategy

1. location Strategy: - easy for customers to find the facility/store - make it easy to find what they want, or what you want them to find 2. Layout strategy: - layouts designed to reduce distance traveled within the store - departmental layouts to maximize closeness desirability

queueing system

1. queue system assumptions: - assume customers enter the queue, and stay until served: - Balking: customer refuses to join the queue - reneging: customer decide to leave the queue - queuing models assume infinite length of a queue 2. queue system characteristics: - queue discipline, the order in which customers are served - queuing can be single or multiple lines - queue lines can be serviced by a single or multiple server

queuing system design

1. single channel, single phase, single server. Ex: customer to service representative 2. Single Channel, Multiple phase, multiple servers acting in series. Ex: customer to hostess to wait staff to chef 3. multiple channel, single phase, single server. Ex: customer to one of multiple available service representatives 4. Multiple channel, multiple phase, multiple servers acting in parallel. ex: customer to one of multiple fast food order takers, to fast food cook. see slide 28 for pics

Queuing systems

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

Bundle of Service Attributes

Bundling services can deliver more than expected and enhance customer satisfaction: - supporting Facility: location, decoration, layout, equipment - Facilitating Goods: elements that are used or consumed by the customer or service provider - Explicit Services: access to a service, consistency of service performance, comprehensiveness, training of service personnel - Implicit Services: attitude of the servers, atmosphere, waiting time, security, and convenience

Global Services

Managing them involves issues: - Identifying global customers - labor, facilities, and infrastructure vary by country - legal and political issues - domestic competitors and the economic climate

Demand Exceeds Capacity (Not enough Capacity)

To minimize hiring and laying off, employees consider: - cross training and sharing employees so they they can help on the task that is busy at the moment - using part time employees - using customers - hidden employees self check out - using technology - using employee scheduling policies