SERVICE OPERATIONS MANAGEMENT • Recognize the service component in an organization • Understand the service encounter • Understand the customer factor in service success • Understand how to formulate a service strategy • Understand how to plan/design a service organization • Understand how to operate/manage a service organization • Learn OM tools and techniques useful in service operations management
SERVICES IN THE U.S. ECONOMY • Difference between goods and services • Intangible; Contact level; Subjectivity of customer • Dependency of manufacturing on services • Growth of service sector • % of total employment: 1940: 45%; 2000: 75% • Reasons for growth • Evolution after industrial growth; IT innovations; social trends • Movement towards an “experience economy” • Economy: From Agrarian to Industrial to Service to Experience • Examples - Shopping: Stand alone store vs. Mall vs. Forum Shops • What makes up “experience” ?
THE NATURE OF SERVICES • Service classifications; why classify services ? • Degree of interaction • Degree of customization • Service process matrix: Service factory, Service shop, Mass service, Professional service • Service process affects many decisions: marketing, worker related factors, cost, quality, technology, policies.
UNDERSTANDING THE SERVICE ENCOUNTER • The Service encounter triad • Service organization; Contact personnel; Customer • Classifying encounters by dominating component • Roles and issues of the three components • Characteristics of service operations • Customer participation, Simultaneity, Perishability, Intangibility, Variation from one customer/server to another customer/server
UNDERSTANDING THE SERVICE ENCOUNTER • Understanding/classifying the service encounter • Directed at customer (body/mind), possessions, assets • Membership v. no relationship • Degree of customization • Servers use of individual judgment • Demand-supply variations • Customer-service outlet relationships What is in a service package ? • Supporting facility, Facilitating goods, Information, Explicit services, Implicit services
GLOBALIZATION OF SERVICES • Global expansion of services. Reasons for growth, advantages. • Typical domestic growth strategies • Generic international strategies • Factors affecting globalizing decisions • Host govt. policies, Market segments, Labor markets, Worker norms, Management practices, Customer factors, Cultural transferability, • Global service strategies • Multi country expansion, importing customers, following customers, service off-shoring, • Journal article readings
CUSTOMER AS FOCUS OF THE SERVICE • The service encounter triad - again • Recognition of customer satisfaction as quality • Baldrige, ASCI, TQM • Customer role in the “service profit chain” • Customer expectations/attitudes and perceptions • Dimensions of service quality • Reliability, Responsiveness, Assurance, Empathy, Tangibles • Trends/other factors
CUSTOMER AS FOCUS OF THE SERVICE • The Gap Model • Measuring service quality - SERVQUAL, Other. • Implications for designing facilities, facilitating goods, explicit-implicit services and information. • Design tools: QFD ; Benchmarking , • Journal article readings
FORMULATING A SERVICE STRATEGY • Strategy Formulation Process • Environment analysis – SWOT • Analyzing the competition • Corporate level strategy • Business level strategy = Competitive service strategies • Cost Leadership • Differentiation • Focus • Cost Leadership • Focus on customers seeking low cost version of the service • Standardize a customized services • Technology use – automation • Network logistics • Off line services
FORMULATING A SERVICE STRATEGY • Differentiation • Higher quality services; What is higher quality ? • Increase availability – access, hours, on-line access, multiple locations, speed, increase service staff, convenience, dependability, security and safety • Provide variety; Customization • Focus • Goes with Cost Leadership or Differentiation • Role of information in service strategy • Influence expectations and perceptions • Making the intangible more tangible • Reducing uncertainty and perceived risk • Service strategy and Service process – Volume/Variety considerations • Implementing service strategy – policies, programs and budgets
SERVICE DESIGN • Three areas designed together – Service, Marketing and HR • Service package to design • Explicit services, implicit services, facilities, facilitating goods, information • Design process • Explicit services • Contact level, Capacity planning and management, Demand management, Equipment – staff balance (automation; front-office office balance), Customer participation, Technology/self-services • Implicit services • Information planning, Waiting times/appointment systems, Complaints management, Call center design, Service recovery, CLAS, Service standards, Supplier management
SERVICE DESIGN • Facilities • Locating service facilities • Commercial service facilities; public facilities • Layout; work/people flow. Balancing flow. Minimizing distances • Physical surroundings; Servicescapes • Facilitating goods • Documentation. Process charts, Cause-effect diagrams • Designing e-services
Service Marketing • Marketing designed with operations (and human resources) • Consumer decision process in services • Pre-purchase stage considerations – Perception of risk: Uncertainty • Risk and information • Search attributes: can be determined prior to purchase • Experience attributes: during and after purchase • Credence attributes: uncertainty even after purchase • Sources of information - Consumption stage considerations: Dimensions of service quality • Post service considerations: SERVQUAL model • Retention of service customers • Switching: Reasons for switching v. Costs of switching • Frequency marketing; Relationship marketing
Service Marketing • Service communication strategies • Company service strategy: cost leadership, differentiation, focus • Communication v. type of service (service process matrix) • Problems created by intangibility: tangiblization • Managing expectations: promise what is possible • Word of mouth communication networks • Reduce fears about service and its variations • Focus on service quality dimensions • Other considerations in communications about services • Physical facilities and facilitating goods • Location, layout and waiting times/facilities
Service Marketing • Pricing services • Customer perception of value of a service: value v. cost • Customer perception of price as an indicator of quality • Demand for services is less price elastic • Service price: difficulties for customer to understand, uncertainty of, relationship to trust • Comparing prices between competitors is more difficult in services (for customers) • Cost plus method of pricing is difficult in services • Satisfaction based pricing – service guarantees • Relationship pricing in services • Price bundling is more effective in services • Pricing and capacity planning (yield management for identifiable and sizable segments) • Legal considerations in service pricing
HRM in Services • Service encounter triad: Contact personnel is a component • Service process matrix: employee contact level, customization and discretion according to service process. • Service profit chain: links service value, customer satisfaction with employee satisfaction, loyalty and retention. • TQM: HRM is one of the seven categories of measurement in Baldrige Award.
HRM in Services • The cycle of capability • Careful selection • Characteristics required of service employees • Selection methods • Training and developing service employees • Training content and methods • Work and systems design • Work facilitation • Work design principles • Information systems design • Management coordination of supporting services
HRM in Services • The cycle of capability • Empowerment • Principles of service employee empowerment • Evaluation of service employees • Rewards and benefits • Participation and involvement • Employee satisfaction measurement • Organization structure for services • Corporate culture for excellent services