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Week-2

Chapter Nine

Service Processes
I E 2 5 5 7 3 4 : OP E R AT I ON S M A N A GE M E N T [ 1 /2 0 1 5 ]
I N D U S T R I A L E N G I N E E R I N G D E PA RT M E N T
CHI ANG MAI UNI VE RS I T Y

DR. POTI CHAO

Learning Objectives
LO91: Understand the characteristics of service processes.
LO92: Explain how service systems are organized.
LO93: Analyze simple service systems.
LO94: Contrast different service designs.

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The Nature of Services


The customer is the focal point of all decisions and actions.
The organization exists to serve the customer.
Operations is responsible for service systems.
Operations is also responsible for managing the work of the service
workforce.

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The Service Triangle

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Characteristics of Services
Service are inseparable from delivery
Services tend to be decentralized and dispersed
Services are consumed more often than products
Services can be easily emulated
Services are intangible
Service output is variable
Services have higher customer contact
Services are perishable

Continuum From Goods to Services

Source: Adapted from Earl W. Sasser, R.P. Olsen, and D. Daryl Wyckoff, Management of
Service Operations (Boston: Allyn Bacon, 1978), p.11.

Service Package
1.
2.
3.
4.
5.

Supporting facility

The physical resources that must be in place before a service can be


offered

Facilitating goods

The material purchased by the buyer or the items provided to the


customer

Information

Data provided by the customer

Explicit services

Benefits that are observable by the senses

Implicit services

Psychological benefits the customer may sense only vaguely

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An Operational Classification of Services


Customer contact: the physical presence of the customer in
the system
Extent of contact: the percentage of time the customer must be in the
system relative to service time
Services with a high degree of customer contact are more difficult to
control

Creation of the service: the work process involved in


providing the service itself

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High vs. Low Contact Services


Design
Decision

High-Contact Service

Low-Contact Service

Facility
Location

Convenient to customer

Near labour or transportation source

Facility Layout

Must look presentable


accommodate customer needs and
facilitate interaction with customer

Designed for efficiency

Quality Control

More variable since customer is


involved in process; customer
expectations and perceptions of
quality may differ; customer
present when defects occur

Measured against established standards;


testing and rework possible to correct
defects

Capacity

Excess capacity required to handle


peaks in demand

Planned for average demand

High vs. Low Contact Services


Design
Decision

High-Contact Service

Low-Contact Service

Worker Skills

Must be able to interact well with


customers and use judgment in
decision making

Technical skills

Scheduling

Must accommodate customer


schedule

Customer concerned only with


completion date

Service Process

Mostly front-room activities;


service may change during delivery
in response to customer

Mostly back-room activities; planned and


executed with minimal interference

Service Package

Varies with customer; includes


environment as well as actual
service

Fixed, less extensive

Major Differences between High- and LowContact Systems in a Bank

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Designing Service Organisations


Cannot inventory services.
Must meet demand as it arises.

Service capacity is a dominant issue.


What capacity should I aim for?

Marketing can adjust demand.


Cannot separate the operations management function from
marketing in services.
Waiting lines can also help with capacity.

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How Service Design Is Different from


Product Design?
1.

The process and the product must be developed


simultaneously.
The process is the product.

2.

A service operation lacks the legal protection commonly


available to products.

3.

The service package constitutes the major output of the


development process.

4.

Many parts of the service package are defined by the


training individuals receive.

5.

Many service organizations can change their service


offerings virtually overnight.

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Structuring the Service Encounter:


Service-System Design Matrix
Service encounters can be configured in a number of
different ways.
1.
2.
3.
4.
5.
6.

Mail contact
Internet and on-site technology
Phone contact
Face-to-face tight specs
Face-to-face loose specs
Face-to-face total customization

Production efficiency decreases with more customer


contact.
Low contact allows the system to work more efficiently.

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Service-System Design Matrix

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Characteristics Relative to the Degree of


Customer/Service Contact

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Strategic Uses of the Matrix


1.

Enabling systematic integration of operations and marketing strategy

2.

Clarifying exactly which combination of service delivery the firm is


providing

3.

Permitting comparison of how other firms deliver specific services

4.

Indicating life cycle changes as the firm grows

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Virtual Service:
The New Role of the Customer
Customers no longer just interact with the
business.
Pure virtual customer contact: customers
interact in an open environment.
eBay
SecondLife

Mixed virtual and actual customer


contact: customers interact with one
another in a server-moderated environment.
YouTube
Wikipedia

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Service Fail-Safing Poka-Yokes


(A Proactive Approach)

Poka-yokes: procedures that block a mistake from


becoming a service defect
Common in factories

Many applications in services


Warning methods
Physical or visual contact methods
Three Ts
1.
2.
3.

Task to be done
Treatment accorded to the customer
Tangible features of the service

Must often fail-safe actions of the customer as well as the


service workers

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Three Contrasting Service Designs


1.

The production line approach (McDonalds)

2.

The self-service approach (ATM machines)

3.

Service delivery is treated much like manufacturing.


Customer takes a greater role in the production of the service.

The personal attention approach (Ritz-Carlton Hotel Company)

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Managing Customer-Introduced Variability


How should services accommodate the variation introduced by the
customer?
Standard approach is to treat this as a trade-off between cost and quality.
More accommodation more cost
Less accommodation less satisfaction

Standard approach may overlook ways to accommodate customer.

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Five Types of Variability


1.
2.
3.
4.
5.

Arrival variability
Customers arriving at times when there are not enough service
providers

Request variability
Travelers requesting a room with a view

Capability variability
A patient being unable to explain symptoms to doctor

Effort variability
Shoppers not putting up carts

Subjective preference variability


Interpreting service action differently

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Strategies for Managing CustomerIntroduced Variability

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Applying Behavioural Science to


Service Encounters
1.

The front-end and back-end of the encounter are not created equal.

2.

Segment the pleasure, combine the pain.

3.

Let the customer control the process.

4.

Pay attention to norms and rituals.

5.

People are easier to blame than systems.

6.

Let the punishment fit the crime in service recovery.

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Service Guarantees as Design Drivers


1.

Any guarantee is better than no guarantee.

2.

Involve the customer as well as employees in the design.

3.

Avoid complexity or legalistic language.

4.

Do not quibble or wriggle when a customer invokes a guarantee.

5.

Make it clear that you are happy for customers to invoke the
guarantee.

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Service Blueprinting and Fail-Safing


The standard tool for service process design is the
flowchart.
May be called a service blueprint

A unique feature is the distinction between high


customer contact aspects of the service and those
activities the customer does not see.
Made by a line of visibility

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Example: Blueprint of a Typical


Automobile Service Operations

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Service Blueprinting: Bank

Seven Characteristics of a WellDesigned Service System


Consistent

1. Each element of the service system is consistent with


the operating focus of the firm.

User-friendly

2. It is user-friendly.

Robust

3. It is robust.

Structured

4. It is structured so that consistent performance by its


people and systems is easily maintained.

Effective

5. It provides effective links between the back office


and the front office.

Value

6. It manages evidence of service quality so that


customers see the value of service provided.

Cost-effective

7. It is cost-effective.

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See you next week


Waiting Line and Simulations

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