Service Management Operations, Strategy, and Information Technology Fifth Edition James A. Fitzsimmons Wiliam H. Seay Centennial Professor of Business University of Texas ot Austin Mona J. Fitzsimmons a Boston Bur Ridge, IL Dubucue, IA Madison, WI NewYork Sanfrancisco St. Lovie angkok eget Caracas Kuale Lumpur ‘Lisbon London Madiid Mexico City Mian Monreal New Delhi Sansago Seou Sogepcra Syorey Tipe! TorontoTo Our Farnily Michael, Kate, and Colleen Gary ‘Samantha, Darwin, and Jordan ‘Melba Jett In Memory of William H. Seay i tt SERVICE MANAGEMENT, FIFTH EDITION Inertial Eton 2006 ‘Biclusive sighs ty MeGrnw-Al Eaneton (Asa), for mamsfactue and export. Tie bok aot be sported om th cous o whieh iol by MoCo il Tos Iateratoea! Elton ao svalblein Noch Ames, Pobisos by MoGray-HVirr, a bsiness unit of The McCraw ill Compan ne. 122 ‘Avenue ofthe Amuries New You NY 1002. Copyright © 06,2008, 201, 198,199 by ‘The MeGraw-iil Compares, le All rights ered Nop of hs pttaton may be ‘eprodoed a sted in any fam or by any meas, ore na dtabass ore) sys, without the pcr writen consent f Te Metrao-Hl Compaen, sling, but Sot limite, in any network or ther elacveie storage o transmission, bende for ‘Sans leasing. Some sti cluding eecwonic and pix componos, sy et be avsiale to curse uid the Unie Sas, 10 08 08 07 06 0 29 09 08 OT OS cr Bre Liaty of Gongs Coatl Number: 2005055002 ‘When ordering thsi, wee ISBN 0071244409 Priced ia Singapore svat som‘The McGraw-Hill/Irwin Series LOPPRATIONS MANAGMENT Bowie Con aret Sepiy Chain Logue Nanapoat hse, sod Ate ‘eran Mazen Cpe jane ‘Opertne Mangement: grag Msacrng a Series ih Ean Manin Seies Dirt Fecha Sop Manage! Sisson Operon Fateny {hoa peraies Maran Fie Son Serie sean Pit een et persons Manatee Cases ey mL Pret Maeroene Flatsanon ‘etela Magee Fable ma Danvtaarng Seat? Tst eeu Been tise Soe bdte ‘aad be ‘yoy ener Kaedan Steet ‘peresansaet Lemberg tick Sts ag Wane Prschsog aut Sept Cala Manson Se oe “ec vic Opens Masogemest avs Sats, nde "nt Operon Management Stree a Prodan ant Operation Ansys Fis Eon Competitve Mansnetres Manageme PrarBlor cen Theda te Ifermnes Systems je Mangement SinProje: A Proje Managenent Simson or Coro lreton Opantnee Managemen: Contemporary iene Cs Seppe Kaas od Chis ‘Proce Anata and Improvement Sen Le Kai, nd Sc Lat Dakin Mend Srey Serena Cperaee management bia Bann ‘anaes Bary Whyte a she DanstartriogPansag& Cons} Pi Bdioe Zia oendnns orton MansgsnestAbout the Authors lames A, Fuzsinmons received a B.S.B. in industial engineering from the Univesity ‘of Michigan, an MBA from Western Michigan University and 2 PhD. with distinction ‘Rom the University of California at Los Angeles. His research in the area of emer- ‘gency ambulance location won the Stan Hardy Avard in 1983 fo the best peper pub- lished in the field of operations management. A computer program, referred to a8, ‘CALL, hes been used by major cities worldwice to plan emergency ambulance sys- ‘ems. Consulting assignment include the RAND Corperstion; the US. Ai Fore; the cities of Los Angeles, Denver, Austin, Mefbouree, and Auckland; the Texas compical= Jar, General Motors; La Quinta Motor Inas; Greyhound; TRICON Restaurants Inter. ational; and MeDaailes, Teaching experience includes faulty sppoiniments at the University of California at Los Angeles, California State University #t Note, the ‘University of New Mexico, Boston Univesity Overseas Graduate Program, California. Polytectnie State University at San Luis Obispo, and the Helsinki School of Eeoeomics and Business, Ho isa registered professional engineerin te sate of Michigan and bas Deld industrial engineering postions at Corning Glass Works and Hughes Aircraft Com- ‘pany He served ia the US, Air Force as an officer in charge of base construction peaj- fects. He eld the position of PhD. graduate adviser for eight year in the Department of ‘Management at the University of Texas and was nominated for six teaching awards. ‘Wit Mona Fitzsimmons e edited New Service Development: Creating Memorable Ex. _perienose published in 2000 by Sege Publications. He curently eerves at tervice oper- ‘tions area editor for Production and Operations Management and member of the ‘editorial review board ofthe Journal of Service Research Mona J. Fitzsimmons, a gradusto ofthe University of Michigan, received her under. ‘raduate degres in journalism sith major supporting workin chemisiy end psycho! gy, Her graduate work was in geology and she las taught in public and private schools, ‘and athe university level. She has done waiting and editing forthe Encyclopaedia Bri= tannica Education Corporation and for various professional journals and organizations ‘With James Fitzsimmons she edited Now Service Development: Creating Memorable ‘Experiences published in 2000 by Sage Publications. Her nonprofessional activites, Ihave included volunteer wosk forthe Red Cross aquatics program and in wildlife re- ‘habitation. She has particular interests in the areas of envizonmestal issues and the responsibilities of patents and plysicins in halts car,Table of Contents Preface xii Overview of the Book xiv PART ONE UNDERSTANDING SERVICES 1 Chapter 1 ‘The Role of Services in an Economy 3 Learning Objectives 3 Chapter Preview 4 Service Definitions 4 ‘Dependency of Manufacturing on Services 4 Economic Evolution 5 Stages of Feonomie Development 7 Preindutia! Society 7 Indust Soiesy 8 Postnducriel Sociey 8 [Nature ofthe Service Sector 9 New Experience Eoonomry 11 Sources of Service Sector Growth 12 Inaoseion 12 ‘Social Trends 13 Serviee Benchmark: Wal-Mart is Number ‘One.0a the Fortune SOO List 14 Summary Id Key Terms and Definitions 15 ‘Topics for Discussion 15 Interactive Exercise 15 Selected Biliogrephy 15, Endnotes 15 Chapter 2 ‘The Nature of Services 17 Learning Objectives 17 Chapter Preview 18 tion 18 The Service Package 19 Distinctive Characteristics of Service Operations 21 Customer Parpaton inthe Service Process. 21 Simadeanciy 23 Pevihabliy 24 Inara 24 Heserogenci 25 CCassifying Services for Static Insights 25 Mane ofthe Serie et 26 Relationship with Customers 27 Curtomiation and Judgment 27 Nase of Demand and Supply 28 Maho of Service Debvery 29 Aa Open-Systems View of Services 28 Service Benchmark: Outside the Box 31 Summary 31 Key Tes and Definitions 32 ‘Topics for Discussion 32 Interactive Exercise 32 Case: Village Volo 33, Case: Xpresso Lube 34 Seleced Bibliography 35 Endaotes 35 Chapter 3 Service Strategy 37 Learning Objectives. 37 Chapter Preview 38 The Strategic Service Vision 38 ‘Understanding the Campedive Environment of Services 40 Competitive Service Suatogios 41 Overall Cost Leaderstlp 40 Digerentaon #2 Fons 8 Winning Customer ia the Marketplace 44 Qualifiers 4 Senice Viners 46 Senice Lovers 46 ‘The Competitive Role of Information in Services 46 Crsation of Baris 0 Briry 46 Revenue Generation 47 Database set 48 Produtiey Enhancement ‘The Vireal Value Chain St Fort Sage (Vbily) 51 Second Suge Mimoring Capebiliy) 3} Third Sage (New Customer Reladonhipd) 52 Limits in the Use of Information 52 ‘Anicompetve 52 Reims 52 Iwasion of Privacy 52 Dats Security $3 Reliiliy 53 sing Information 20 Categorize Customers 53 Stages in Service Fim Competitiveness 53 silable for Service 35 ®Tale of Contents douneman 55 Dissnsve Competence dehieved 55 World-Class Service Dalvry 56 ‘Service Benchmark: Cental Market Stuns Conventional Wisdom and Big-Name Products $7 Suumary 58 Key Terms and Definitions 58 Interactive Exercise 59 ‘Topies for Discussion 59 (Case: America West Aiines 59 Case: The Best Litle Cookie Howse Around 60 Case: The Alamo Drafthouse 62 Chapter 3 Supplement Data Envelopment Analysis (DEA) 64 Measuring Service Productivity 64 The DEA Modelo DEA and Soategic Planning 70 Exereises 71 (Case: Mid-Atlantic Bus Lines 71 Selected Bibiograpty 72 Endnotes 73, PART TWO DESIGNING THE SERVICE ENTERPRISE 75 Chapter 4 New Service Development 77 Learning Objectives 77 Chapter Preview 78 New Service Development 78 Service Design Elements 80 Service Bluoprinting 82 Strategic Positioning Through Process Structure $4 Taxonomy for Service Process Design 86, Degree of Dnergence 85 Objectof he Service Process 87 ‘pe of Customer Contact 87 Generic Approaches i Servio Sysiom Desig 88 Prodecton-Line Approach 88 Customer as Cooder 96 Customer Concer pproach 92 Information Empowerment 93 Castomes Value Equation 95 eoults Produced jor the Customise 95 Process Quality 95 Price tothe Cstoner 95 Cast fAcpring the Service 95 Service Benchmark: A Betee Mousetp 96 Summary 96 Key Terms and Definitions 96 ‘Topies for Discussion 97 Interactive Exercise 97 Case: 100 Yen Sushi House 98 Case: Comvaater Cleaning-A New Veoture Proposal 98 Case: Golfsmith 101 Selected Bibliogrphy 102 Endnotes 104 Chapter 5 ‘Technology in Services 105 Learning Objectives 105, Chapter Preview 106 ‘Technology inthe Service Encoweser ‘The Emergence of Self-Service 107 ‘Avtomation in Services 108 Internet Services 110 Comming of ge for che Incermet and Web tes Insornes Models 113 Btecronic and Traditional Services 114 Busines Models 11 Sonioe Produt Dimensions IS ‘Sense Prosss Dimensions 115 [Bconomics of Scalability 116 Technological Imovation in Services 117 Challenges of Adopting New Tecnology in Soroes 17 Managing th New Tecnology Adoption Process 117 Service Benchmeric Mirosoft, Ford Drive Web Deal 119 ‘Summary 120 key Terms ane Definitions ‘pies for Discussion 120 Intoractive Exercise 120, Case: Amazon.com 120) (Case: Evolution of B2C E-Commerce in Japan Selected Bibliograpay 125 Endnotes 125 106 uo 120 122 Chapter 6 Service Quality 127 Learning Objecdves 127 Chapter Preview 128 Defining Service Quality 128 Dimension of Service Quay Gaps Serie Quality 129. Measuring Service Quality 131 SERVQUAL 132 Scape of Service Quality 133 Quality Service by Design. 136 “Incorporation of Qual in he Service Package 136 28‘Taguchi Methods 138 PotaYole Fallefirg) 138 Quay Function Deplemt Banchmertng 142 ‘WalkcThrough Audit 143 Devigning 0 Wak-Through Audie 146 Inplications fer Managoman!_ 144 ‘The Walk-Tarough Audit asa Diagnostic Tastrument 146 Achieving Service Quality Cont of Qulity 168 Senize Process Conval 140 Stacol Process Como! 150 Unconditional Service Guarantee 154 Service Recovery 135 “Approcoheso Service Recovery 157 Stages in Quality Development 157 Service Beachmar: Service, Baueation, and Health CCace Winners ofthe Malcolm Baldrige National Quality Award 159 Summary 160 Key Terms and Definitions ‘Topies for Discussion 161 Interactive Exercise 161 Solved Probleass 161 Exercises 163 Case: Clean Sweep, ine. 167 Caso: The Complaint Leter 169 Case: The Museum of Art and Design Chapter 6 Supplement 173 Continuous Improvement 173, Quality and Productivity improvement Process Foundation of Continuous Improvenext 173 Plan-Do-Checksder (PDCA) Cycle 173 Probie Solving 174 (Quality Tools for Avalyss and Problers Solving 174 (Check Sheet 174 Ban Chart 176 Hisgran 176 Peto Char 177 Flowchart 177 Cause ond Bfoct Diagram 177 Seater Diograr 179 Cont Chart 172 Programs for Organizational Quality Improvement 180 ‘Perconnel Prograns fr Quai Azswrance 180 ‘Quali: Imarvemant Program to Acie Zero Defecs 81 Deming’ H-Potnt Program 182 “0 18 160 un iB Teble of Contents Malcolm Baldrige National uakioyAverd 183 4380 9000 184 ‘SteSigma 185 (Case: Moga Bytes Restaurant Selected Bibliograpty 192 Endrowes 195 188 Chapter 7 ‘The Service Encounter Learning Objectives 197 Caapter Preview 197 ‘The Service Encounter Triad 198 “Encounter Dominated by the Service Organization 199 Conte: Persome!-Dontnated Encounier 199 GurtomerDominated Brounter 199 ‘The Service Organization 200 197 Gre 200 Empowerment 202 Cone Sens 201 Contac Personnel 202 Selection 202 Training 204 ‘The Customer 205 spectrin and Atiudes 205 The Customer os Coproducer 208, Summary of Service Encounters 207 (Creating a Customer Service Orientation 207 Service Profit Chain 209 Sommary 211 Service Beoshmark: Miss Manners oa Complaint Handling 212 ‘Key Terms and Definitions 213 ‘Topics for Discussion 213 Iteractve Exercise 213, ‘Case: Amy's Iee Cream 214 Case: Enterprise ReairA-Car 215, Selesed Bibliography 217 Endnotes 220 Chapter & ‘The Supporting Facility 223 Learning Objectives 223, Chapter Preview 226 Servicoscapes 224 ‘Behaviors in Servicscapes 225 Enironmenal Dinersions of Sericescapes 226 Facility Design 227 ‘Natie and Objectives of Service Organizations 228 Land Availabilty and Space Rsqiromenss 228 Flexibility 229Secsriyy 229 esthetic Factors 230 The Conpunity and Emironment 230 Process Analysis 231 Process Terminology 251 Facility Leyout 233 Product Layout en the Mork Aloction Proslam 233 Prooes Layout end the Blane Location Probl 235 Environmental Psychology and Orientation 239 Service Benchmark: Waere, Ob Where Shall We Go? 240 ‘Summary 240 Key Terms and Defiitions 241 ‘Topics for Discusion 241 Interactive Exercise 241 Solved Problems 242 Exoreises 243 (Case: Health Maintenance Organization (A) 247 (Case; Health Maintenance Organization B) 247 Case: Esquire Department Store 248 (Case: Central Market 249 Selected Bibiograpby 250 Endnotes 251 Chapter 9 Service Facility Location 283 Lesmning Objectives 253, Chapter Preview 254 Location Considerations 258 Gecgraphic Representation 255 Manber of Facilites 256 Optiization Creria 256 Estimation of Geographic Demand 257 Define te Terges Population 258 Selecta Uniteférea 238 Estimate Geographic Demand 258 Map Geographis Demand 258 Facility Location Techniques 259 Single Fastiy 260 Centr of Gravy 263 Locating @ Revi! Oulet 266 Muliple Facies 265, Site Considerations 267 Breaking the Rules 267 CCompective Clustering 2658 Sanuation Marketing 258 ‘Mrkeng inermediores 268 Geographic Information Systems 271 Summary 272 Service Benchmark: Here a Bun, There a Bua, Everywhere a Bur-Bun 273 Key Terms and Definitions 273, ‘Topies for Discussion 274 Interactive Exercise 274 Solved Problems 274 Exercises 275, (Case: Health Maintenance Organization (A). 279 Case: Athol Furniture, Inc. 280 ‘Selected Bibliograpiy 282 Endaotes 282 Chapter 10 Managing Projects 283 Learning Objectives 283, Chapter Preview 283 ‘The Nature of Project Management 284 Chareteistis of Projects 284 Project Management Process 254 Seleing the Project Manager 285 ‘Butldng the Project Team 286 Principles of Efeeive Projet Menagenent 287 Techniques for Project Management 287 Gant Project Charts 28? A Griique of Gont Charts 289 Consrusing a Projet Nework 289 Criica! Pak Method 290 Mra Proje for Windows Analysis 202 Resource Constraints 295, Activity Crashing 299 Incorporating Uncertaintyin Activity Times 302 vimaing Activity, Duration Disrtons 302 Projet Completion Time Distribution 303 A Griigu ofthe Project Completion Tne Anais 306 Problemos with Implementing Critical Path Analysis 305 Monitoring Projects 306 Eomed Yue Chart 307 Projo Termination 307 Project History Report 308 Summary 308 Service Beuchmarkc The House That Warren Built 308 Key Terms and Definitions 209 ‘Topics for Discussion 309 ‘Subtituion of Conmnication fer Transportation 269 Interactive Exercise 310 “Impact of te Ieerntom Service Location 270 ‘Separation of Frnt ftom Back Office 270 Solved Problems Exercises 312 310Case: lofo-Systems, Inc. 317 Case: Whittiee County Hospital Selected Bibliography 319 Endnotes 320 318 PART THREE MANAGING SERVICE OPERATIONS 321 Chapter 11 Forecasting Demand for Services 323 Learning Objectives 323 Chapter Preview 323 Subjective Models. 324 Delphi Method 324 CGrosminpact Arable 326 Flssorical Analogy 326 Causal Models 327 ‘Regression Mode’ 327 Ezonomovi Models 329 ‘Time Series Models 329 ‘N-Parod Moving Average 329 ‘Simple Exponential Smoothing 331 Relationship beeen and 333 Forecast Error 336 Exponential Smoothing wie Trond djusinont 334 Exponential Smoothing with Seasonal Adjurment 338 Exponential Smoothing with Trend and Seasonal Adjustments 538 ‘Smmary af Exponential Smoothing 540 Summey 340 Service Benchmark: LL, Bean Improves Call Center Forecasting 341 Key Terms and Definitions 344 “Topics for Discussion 344 Interacve Exercise 344 Solved Problems 344 Exercises 346 (Case: Oak Hollow Medical Bvaluation Center. 348 ase: Gromial Functions, In. 349 Selected Bittiogrepby 350 Endnotes 350 Chapter 12 ‘Managing Capacity and Demand 351 ‘Learning Objectives 351 Chapter Preview 352 Strategies for Managing Demand 352 Segrowing Donand 353 (Offering Price Icemies 354 “Rete of Conarts Promoting Of-Peak Domand 335 ‘Developing Complementary Senices 385 Reser Sytens and Overbcoking 356 Strategies for Managing Capacity 358 ‘Daily Bolo Sckodutng 358 Welly Works Scheduling with Deys-OF Consaint 361 Increasing Customer Porcipaion 382 Creating Ausable Capacity 362 Shoring Capeciy 368 (Crase-Traning Empleyess 368 rng Pare Tome Empagces 303, Scheduling Par Tine Taller a2 Drive In Bank 363, Yield Management 3 eld Managemen: Appictions 308 Summary 370 Service Benchmark: Yield Management stAmerican Airlines 371 Key Terms and Definitions 373 ‘Topics for Discussion 373 Interacve Exercise 393, Solved Problems 373 Exercises 375 Case: River City National Bank 379 (Case: Gateway Intemational Airport 380 (Case: The Yield Management Analyst 382 Case: Sequoia Airlines 385 Selested Bibliograpty 386 Endnotss 388 Chapter 13, ‘Managing Waiting Lines 389 Leaming Objectives 389 Chapter Proview 392 Queuing Systems 392 ‘The leviablty of Waiting 392 The Peychology of Waiting 393 That Oa Empty Feeling 39% A Foot in the Doar 336 Tha Light ofthe End of he Tunnel 395 Browse Me but ls Noa 395 They Also Sarve, Who Stand Beis 395 ‘The Economics of Waiting 396 ‘Essential Features of Queuing Systems 397 ‘Calling Population 398 Arroal Preeass 398 ‘Quen Configsration, 402 ‘Quowe Discipline 496 Serce Process $05 Sommary 407x Tibet Contents Service Benchmark: Five Minutes in Line is Longer Than Five Minutes at Hard Labor 408 Key Terms and Definitions 408, ‘Topics for Discussion 408 Interactive Exercise 408, Case: Teifty Car Rental 409 Case: Eye'll Be Seeing You 410 Chapter 13 Supplement Computer Simlation 412 Systems Simulation 413 ‘Simulation Methodology 413 ‘Morte Caro Siration 414 Genorcng Random Vericbles 415 Discretes Sinaation 418, ServiceModel Simulation Sofware 419 Demonstration: Customer Service Call Center 422 Process Analysis: Manufacturing Cell 423, Build a Model: Order Processing Sym Tuorial 425 Case: Pronto Pizza 432 Case: Renaissance Clinic (A) 422 Solved Problems 433 Bxercios 436 Selected Bibliography 440 Ensnores 441 Chapter 14 Capacity Planning and Queuing Models 443 Learning Objectives 443, Chapter Preview 444 Capacity Planing 445 Sratape Roe of Capacity Decisions 445 ‘Avalytical Queuing Models 445 ‘Standard MIMI Model 448, Standard Mile Mode! 450 MOGI Medel 454 Gonerel SepSenice MIGIeo Model 454 Fonte Quese WAM! Medel 455 Finte-Queve Wile Mods! 456 General Relationships Between System Chaecterisics 457 Capacity Planning Ctieria_ 457 “Avoge Customer Weng Time 58 Probability of Excessive Walting 459 Minimizing the Seon of Cartomar ting Cote tn Serie Cats 4650 Probability of Soler Loet Because of Inadeuate Wing Area 461 Requirement That Sepeced Profit on Last Unit of Cepaciy Should Jus Bezced Pspected Lats 462 Summary 463 Service Benchmark: Simulation Modeling for Process Reengineering inthe Telecomuuniations Industry 464 ‘Key Terms and Definitions ‘Topies for Discussion 467 Interactive Exercise 467 Solved Problems 467 Excrcises 469 (Case: Houston Por Authority 473 (Case: Freedom Express 473, (Case: Renaissance Clinic (B) 474 Selected Bibliograpiy 475 Endnotes 475 Chapter 15 Service Supply Relationships Learing Objectives 477 Chapter Preview 478, Supply Coain Management 478, Denson Model 478 Managing Uncerainyy $79 Sipply Chin Sratsic Planing 480 Service Supply Relationships 482 ‘Cutiomer Suter Duality 482 ‘Managerial implications of Bidirectional Relationships | 483 ‘Sonice Surely Reletonsipe Ar Hus, Not Chine “a Serice Capac Is Analgons to lmentory 83 Customer Supplied inputs Can ary in Quality 483 Sourees of Value in Service Supply Relationships 484 Bigieconal Optimization 48¢ Management of Producing Capacity 434 Management of Perthabilisy #85, Outsourcing Services 486 Benfis and Rsk of Ousourcng Sevces 487 Clesfcation of Busines Servicer 485. Managerial Considerstions with Service Ousoureing 488 ‘cli Sport Service Propery.ow Importancs) 490 Equipmen Support Savice (Properpigh importance) 190 Enplayce Suppor Service PeopleLow Jimporance) 90 Employee Development (Peopefigh Inparans) 480 Facliatr Service Procee/Low Importerce) #99 Professional Service Preeasilgh mporiance) 491 Secviee Bonsbmack: Citizens Come Fist inkynchburg 491 467 4Summary 491 KeyTerms and Definitions 492 ‘Topics for Discussion 492 Interactive Exercise 492 Case: Peapod-—Smart Shopping for Busy People 493 Case: Mertgage Service Game 495 Chapter 15 Supplement Vehicle Routing 498 Field Service 498 A Manual Routing System 505 Solved Problems 506 Exercises 508 (Case: The Daley Monthly Car Pool su (Case: Aiport Services nc. 51 Selected Bibliography 512 Endaotes 513, Chapter 16 Managing Facilitating Goods S15 Learning Objectives S15 Chapter Preview ventory Theory 517 “Role of menory i Sersces 317 CharacteisisofIventary Stems 519 elevans Cate of an ientory Stem 520 Order Quantity Models 520 Economie Order Quantity $21 Imencory Mode with Quantiy Discounes 524 Inventory Model with Flamed Shorts 327 Inventory Management under Uncertainty 529 Inventory Consol Systems 531 Continuous Review Sten $31 Periodic Review Sytem 533 TheABCe of Ivetory Control 334 ‘Single-Period Model for Perishable Goods 535 ExpecedVelue Anais S36 Marginal Analysis 537 Retail Discounting Model 538 Service Beuchmark: & Chip in Time Isn't Ste 539 Summary $0 Key Terms and Definitions 540, ‘Topies for Discussion $41 Interactive Exercise 541 Solved Problems 541 Exercises 543 Case: A.D. Small Consulting $49 (Case: Last Retort Restaurant 549 (Case: Elysian Cycles 350 “lle of Carts x Selected Bibtiograpty 551 Endnotes $51 Chapter 17 Growth and Globalization of Services Learning Objectives 553, Chapter Preview 554 Domestic Growth and Expansion Suategics 554 Foowed Sevice 555 Focused Network 335 (Chstred Service 556 Diversified Nemork $57 Franchising $57 The Nan of Franchising $37 Bunfits 10 the Pronckzee 338 ‘sues forthe Pranchser 538 Globalization of Services 360 Generic nerationalSoatgles 560 The Nanwe ofthe Bordericss Word $61 Planing Transnational Operations 563 Global Service Strategies 565 Mulicounty Rspansion 565 importing Cstomare 557 ‘alloing Your Cattomer 567 Service Ofsharing 58 Beating the Clock S66 Service Benchmark: Small Woeld and Other Myths 569 Summary $70 Key Terms and Definitions 570 ‘Topics for Discussion 571 Interactive Exercise 371 (Case: Goodwill Industries International, nc (Case: Federal Express: Tiger Intemational Acquistion 574 Selesed Bibliography $77 Endnotes 578 553 2 Appendix A: Areas of Standard Normal Distribution 579 Appendix B: Uniformly Distributed Random Nambers 0,1] 580 Appendix C: Values of L forthe MMe Queving Model 581 Appendiy D: Equations for Selected Queuing, Models 583 Namelndex 586 Subject Index 590Preface Services touch the lives of every pertan inthis coun lay every day: food services, communication serv- fees, and emergency services, to name only 2 few. (Our welfare and the weifae of our economy are now based on services. The activities of manufacturing and sqriculture will always be necessary But we can ext only so much food and we can use only so many goods. Services, however, are largely experiential, and we wil always havea limitless appetite for them, ‘Service operations management is firmly estab- lished as fleld of stad that embraces al ervice in ddstres, For example, under the leadership of the senior author of this tent, the discipline was recog nized as an academic field and designated a a sepu- rate track by the Decision Sciences Institute (DSI) at its 1987 Boston meeting, In 1989 the Intemational Journal of Service Industry Management Was ina: ‘ted, Finally, the First International Service Re search Seminar in Service Management was held in France in 1990, drawing participants for the fields ‘of operations management, marketing, and organiza- tional behavior. This eonfetence recognized the mul: tidisiplinary nature of services and dropped the adjective “operations” in order to emphasize the inte~ agrative nature of service management. Following the 1996 Orlando DSI service mini-conference, 2 Web site (tpsampson.byu.edu} was established to sup- port faculty and students who are interested i the Feld of service management. Inthe second edicon of this text, chapters on prol- ect management and managing service inventories ‘yore added to make the te appropriate for use in ia ‘rodectory courses in operations managemens. The text afforded all students of business the opportunity to study operations from the prospective of thei far ‘ue employment ina service economy: ‘The thee edition recognized the emergence of a new experience esonomy that takes us beyond the transaction-based service toa slaged and memorable ‘experience. Delivery of serves via the Interaet was also an emerging phenomenon creating considerable ‘excitement as a new channel witha global reach. A ‘ew supplemeat on compete simolation was added to ‘the waitingline chapter, and a popular computer simulation software package called ServiceMode! was provided on a CD-ROM supplicd withthe text. ‘Tae fourth edition recognized the impact of the Intemet on service delivery with @ new chapter on E-Service that explored the concept of scalability. A new chapter on service supply telationships re= ‘ognized the unique customer-supplier duality thet tite in servoe iterations. Anew feature wes the inchsion ofthe Mortgage Secvice Gans, an interac tive computer simulation that models service supply relationships. “his edition continue to acknowledge and eragha- ‘Sze the esoential uniqueness of service manageret ‘These ar some kay feases: + The book is writen in an engaging literary style, makes extensive use of examples, and is based on the research and consulting experience of the authors. + The theme of managing services for competitive advantage is emphasized in cach chapter and pro- vides 2 fecus for each management topic. +The integration of marketing, operations, and ‘man behavior is recognized as central to effective service management + To displ the common belief that manufacturing ‘management principles can be applied to services without recognition ofthe diffrent operating exe ronments, the role af services in. sosiery and the uniqueness of service delivery ystems ae stressed. + ‘Thc information technologies of yield management, daa evelopment analysand computer sim tion ar inciuded as ilasravions of three of the strategie roles of information in managing services. + Emphasis is placed on the need for continuous im- provement in quality and productivity in onder to compere effectively na global environmen, + Tomotivate the reader, a vignete of «well-known, ‘company starts each chapter, illustrating the strate- gic nature ofthe topic to be covered + Bash chapter as a previow, closing uramary, key terms and definitions, service benchmark, topics for discussion, an interactive exercise, solved prob Jems and exercises when appropriate, and one or + Pectaged with the text is a CD-ROM containing PowecPoint leenze ides, Service-Modelsimlationsoftware, Mortgage Service Game, a fect location Excel spreadsheet, chapter quizes, and Web sits, + The instructors manual contains ease analyses, ex reise solutions yield manegement game, obostve test banks, and liss of supplementary materials. “This edition includes the following pedagogical fea. tures im each chapter earning Objectives beip students focus on the key concepts inthe chapter. Inveracitve Exercises for clas participation. Service Bonchonarks illustrate outstanding exam- ples of excellence in service, Key Terms end Defotions at the conclusion of ‘each chapter serves asa quick reference and reminder ofthe new vocabulary just presented. Solved Problems before the enerises(n selected ‘chapters lstrat in deal tbe steps taken to revolve a quantitative problem, ‘We wero very fortunate to have the first edition re= viewed by several colleagues—all people of intogrisy, ‘wig and vision. Their detailed comments, insights, and thought-proveking suggestions were gratefully re- ceived and incorporated in the text in any places ‘Special hanks and ackowledgment go t0 the fe lewing people for thei valuable reviews ofthe fs edition: Mohammad Ala, California State Universit ‘Los Angeles; Joanna R. Baker, Virginia Polytech Institute and State Universi; Mark Davis, Bentley College; Maling Ebrahimpavt, University of Rhode Ibland; Micsas! Gloosom, Indiana University; Ray Haynes, California Polytechnic State University at Sea Luis Obispo, Art Rill, the University of Min~ nesote: Sheryl Kimes, Comell Univesity; and Richard Reid the University of New Mexico “The second edition benefited from the constructive comments of te folowing roviewers: Kimberly Bates, New York University; Avi Dechtr, California Stats University, Nordidge; Scott Delana, East Cacia University, Shery| Kime, Cornell University; Lary LeBlanc, Vandetbil University; Robert Lucas, Mezo- politan State Collegeof Denver; Barbara Osyk, Uni- ‘yersty of Alzon; Michael Showalter, Florida State ‘Uaiversiey; and W Sridbaran, Clemson Universi. The following reviewers contbuted their exper- ‘ence and wisdom f0 te third edition: Sidhartha Das, George Mason University; Avi Dechter, California State University at Northridge; Byron Finch, Miami Fretace a University of Ohio; Rdward M. Huff Je, Metropoli- tan State College of Denver; Ken Klassen, California State University at Northridge; Richard Reid, Univer- sity of New Mexico, Albuquerque; Ishpal Reki, California State University at San Marcos; and Ronald Satterfield, University of South Flarids ‘We wish to acknowledge two students who assisted us, ang Wa, PhD. student at the University of Texas at Austin, assisted in the development of some exe cies and preparation of the PowerPoint lecture pre= sentation forthe sevond edition. Edmond Gonzales, aa MBA student at Texas, prepared the chapter (quizzes forthe third edition CD-ROM. A special ‘hanes is extended to Rob Bateman of the FoModel ‘Corporation forthe preparation of the Pronto Pizza simulation case and asistance in our adoption of the ServiceModel software “The fourth edition reflects the insights and sugges tions ofthe following reviewers: Sajeev Bordotoi, College of William and Mary; Sid Das, George Ma ton University; John Goodale, Ball Stat: University, Ken Klasson, California State University, Northridge; Pegay Lee, Penn State University; Matthew Muter, California Stats University, Noridge;Jadesp Mot- wani, Grand Valley State University, Blabieta Trybs, California Stato University, Northridge; Rohit Verma, University of Uta; and Janet Sayers, Massey Univer- sity, New Zealand. A spocal thanks to colleagues Bd ‘Anderson and Dosg Mortice for permissioa to in- Clude their Morigage Service Game and to Mark [Linford an MBA student tthe University of Texas at Austin, for preparing the computer software ‘The fifth edition benefited from insighs gathered st a focus group session in Washington, DC, atthe 2003 Decisioa Sciences instiute annual mecting We are grateful fr the many suggestions provided bythe following percipants: Uday Apte, Southern Methodist University; Sanjety Bordaioi, College of ‘William and Mary, Joe Felan, University of Arkansas a Little Rock; Richard Franze, Kennesaw State Unk verity; Craig Froele, Univesity of Cincinnati; Ying She Lee, St. Mary's College of California; Katherine ‘MeFadden, Norther Ilnois University; Mary Meix- cll, George Mason University; Eliot (Chip) Minor, ‘Virginia Commonwealth University, and Jake Simons, Georgia Southern University. We are also indebied 1 ‘Mos. Margaret Seay who continues her generous spor. ‘We expross special appreciation to all our frends ‘who encouraged us and tolerated our sovial lapses