Services Operations Management

Session 6
 Recap
Executive Shirt Case
Kristen’s Cookie Case
a. Impact of Batching on Cycle
a. Identification of Bottleneck
Time Calculation
b. Calculation of Capacity
b. Difference between Direct
c. Calculation of Throughput
and Indirect Labor
time and Cycle time
c. Direct labor content and
d. Preparation of Gantt Chart
labor utilization calculation
Fit between
Operations and Strategy
Shouldice Hospital Manzana Insurance
a. Implementation of a. Application of
Operations principles in Little’s law in Services
Services b. Impact of Processing Time
b. Focused Factory principle Variability
c. Plant within a Plant c. Impact of Product Time
d. Capacity Expansion Variability
Decision making
 Salient features of Services
• Tangibility: Services are performances and actions rather than
objects, therefore have poor tangibility
• Simultaneous Production & Consumption: Because of which
degree of customer contact is relatively high (compared to
manufactured products)
• Perishability: Services cannot be inventoried
(well almost!) as in the case of manufactured products
• Heterogeneity: High variability in the operating system’s
performance
 Product-Service Continuum
Product Domination Service Domination

Materials, Assets, Products… Services, People, Interactions…

Passenger Cars, Machine Tools

Facilities Maintenance, Turnkey Project Execution …

Logistics, Tourism, Travel and Entertainment Sectors

Health Care System (Hospitals)

Restaurants, Fitness Centers

Professional Consulting, Legal Services

 Why do queues form?
• Deterministic case (Seasonal demand spike)
– Example: Queue after flight boarding is announced
• Stochastic case - Variability
– Example: Manzana Insurance
• Where does variability come from?
– Demand side: Random arrivals, Product Mix, Quality of Mix
– Supply side: Random processing times, Scrap/Rework, Setup times,
Machine Breakdown/maintenance, Operator absence
Components of Queuing System

Calling
Population
Arrivals
Waiting Line Server Served
customers

Source: Operations Management: Theory and Practice, 3e; B Mahadevan

 Characteristics of Queuing Systems
Infinite
Calling Population
Finite
Rate Markovian, General, Deterministic
Arrival Parameters
Pattern Single, Batches
Queue Parameters
FCFS, LCFS, Random, Balk, Renege

Servers Single, Multiple

System Structure & Stages Single, Multiple

Parameters Routing Single, Serial, Network
Capacity Finite, Infinite
Service Parameters
Markovian, General, Deterministic

Performance Queue length, Waiting time, Utilization, Cost

Metrics based
Source: Operations Management: Theory and Practice, 3e; B Mahadevan
 Behavior of Arrivals
• Join the queue and wait until served
…

• Balking – Refusing to join the line

No way I
am joining
this line! …

• Reneging – Leaving the line after some time

That’s it!
I’m
leaving!
…
 Single-Channel Structures

Single-server, single-stage

Waiting line Server

Single-server, multiple stages

Waiting line Servers

Source: Operations Management: Theory and Practice, 3e; B Mahadevan

 Multi-Channel Structures

Multiple-servers, single stage

Servers

Multiple-servers, multiple-stages

Waiting line
Servers

Source: Operations Management: Theory and Practice, 3e; B Mahadevan

Examples of Channel Structures
Single Stage Multi Stage

Single Chair
Single Server Car Wash
Barber Shop

Multiple Bank Teller’s Hospital

Server Window Admissions
 Queuing Terminology
Ls Average number of customers in the system (waiting to be
served)
Lq Average number of customers in the waiting line
Ws Average time a customer spends in the system (waiting and
being served)
Wq Average time a customer spends waiting in line
 Mean arrival rate
 Mean service rate
S Number of servers in a multi-server queue
 Performance Metrics
Server utilization
 Approximate Formula for
In the case of single server: 
 Single server Queue
 (Exponential service time)
In the case of multiple servers: 
S
Little’s Law 𝜌2
Lq =
1−𝜌
Average time customer Ls
Ws = Probability that the system is empty
spends in system 
(P0)= (1-𝜌)
Lq
Average time customer Wq =
spends in queue  In steady state, Probability that
there are exactly n customers
 in the system is
Average number of
Ls = Lq + (Pn)= (1 − 𝜌) ∗ 𝜌𝑛
customers in system 
 Single Server Formulae
• Start with Lq calculation and then calculate rest based on it

Single server Queue 

Lq =
Exponential service time 

Single server Queue 

General service time Lq =
2

𝜎 𝑖𝑠 𝑡ℎ𝑒 𝑣𝑎𝑟𝑖𝑎𝑛𝑐𝑒 𝑜𝑓 𝑠𝑒𝑟𝑣𝑖𝑐𝑒 𝑟𝑎𝑡𝑒

Single server Queue Lq =
Deterministic service time 

 
= =
 
 Multi-server queues
• Length of the queue

2( S 1)
 Ca2  Cs2 

Lq  * 
Where, (1   )  2 

• ρ = utilization
• S = Number of servers
• Ca = Coefficient of Variation of arrival times
• Cs = Coefficient of Variation of service times (service times, not rates!)

• Check if the length of the queue formula is same for a Poisson process!
What is the optimal level of service?

Expected costs

Total cost

Service
cost

Waiting Costs

Level of service
Source: Operations Management: Theory and Practice, 3e; B Mahadevan
 How do you provide better service?
• Decrease capacity utilization (or increase safety capacity) either by
– Decreasing arrival rate or increasing the unit processing rate (or)
– Increase the number of servers
• Decrease variability in customer inter-arrival and processing times
• Synchronize the available processing time with demand (Difficult!)
• Pool capacity across homogenous arrivals and separate
heterogeneous arrivals
 Managing Arrival and Service rates
• Advance Reservations
• Encourage customers by giving them DIY guides
• Exclusive access
– Amazon Prime advantage
• Differential pricing (peak vs non-peak hours)
• Using technology to process faster (Bar code scanners)
• Parallel processing/Pre-proccessing of non-overlapping tasks or
customers
 Variability reduction levers
• Provide standard services in peak hours vs wide variety in non-
peak hours
– Restaurants provide buffet only in lunch and A la carte during dinners
• Lack of process standardization
• Learning curve effects (Sufficient Training during non-peak
hours)

• It is hard to eliminate variability completely. Change is the only

constant thing in world!
 Examples (From Textbook)
• There is a repair shop in a residential locality attending to TV
repairs. Failed TVs arrive at the repair shop in a Poisson fashion
at the rate of 7.5 per day. It take on average 45 minutes to
restore the TVs. Service times are exponentially distributed.
The TV shop is open daily between 10:30 am and 6 pm
– What is the utilization of the TV repair shop?
– What is the expected waiting time in TV shop before a TV is taken up
for servicing?
– If the arrival rate of failed TVs at the repair shop increases to 8 per
day, by how much will the waiting time increase?
 Examples (From Textbook)
• A university campus has a students’ coffee shop which the students
normally visit during their short breaks to have coffee and other
beverages. Arrivals at the coffee shop follow a Poisson distribution
on an average at the rate of 3 per minute. The service counter takes
about 18 seconds on average to attend to a student. The service
times are found to be exponentially distributed
– What is expected idle time of the service counter?
– The students complain that often they need to wait an excess of 5 minutes
to get their turn for service. Do you agree with their claim?
– What is the probability that not more than 3 students will be in coffee
counter?
 Examples
• Customers send e-mails to a help desk of a large online
securities broker every 2 minutes, on average, and the
standard deviation of inter-arrival times is also 2 minutes. The
broker has three employees answering these e-mails. It takes
an average 4 minutes to respond to these e-mails. The
standard deviation of service times is 2 minutes.
– Estimate the average customer wait before being served
– How many e-mails would there be at any point in time, on average,
that have been submitted to the broker which are yet to answered?
 Service Quality Management
• Cannot be measured, counted, tested or verified (like for
products) in advance to assure quality
– Quality is realized during service delivery
• Difficult to evaluate how consumers perceive and evaluate
their services
• Performance might vary from one service agent to another and
from customer to customer
– Consumers’ input may be critical to quality
 Service Quality-Five Gaps Model
Expected Service
Gap 5
Perceived Service
Consumer

Firm Service Delivery External Communications

Gap 4 to Consumers
Gap 3
Translation of perceptions
Gap 1
into Service Qlty. Specs.
Gap 2
Management perceptions of
Consumer Expectations
Source: Parasuraman, A., Zeithhaml, V.A. and Berry, L.L., (1985), “A conceptual model of service quality & its implications for future
research”, Journal of Marketing, 49 (4), 41 – 50.
 Why do Gaps in Service Quality Occur?
• Gap 1: Service firm executives may not always understand
– What does the consumer want?
– What features must a service have?
– What levels of performance should the service have?
• Gap 2: Means to meet the expectations absent
– Knowledge of consumer expectations exist but not the perceived means to deliver expected service
– Absence of management commitment to quality of service
• Gap 3: Variability in employee performance
– Standard Operating Procedures don’t exist
– Inconsistent Employee training
• Gap 4: Problems arising out of communication
– Firms tend to promise more in communications than what they deliver in reality
– Firms tend to neglect to inform consumers of special efforts to assure quality that are not visible to
consumers
• Gap 5 = f (Gap 1, Gap 2, Gap 3, Gap 4)
 Service Positioning & Delivery System Design

• Service positioning is “the strategic choice a firm makes on the above

three parameters”
• Service blue printing helps firms build a step-by-step mapping of
various processes in conjunction with the customer touch-points
– Line of Interaction – Everything below this is where customer is not directly
involved in service creation
– Line of visibility – Everything above this is the front-office in a service setup
• What are the capabilities of resources above and below Line of
interaction and visibility?
 Services Blueprint (Detailed)
Service Blueprint Components
Physical Evidence
Customer Actions

Line of Interaction
Onstage/Visible
Contact Employee
actions
Line of Visibility
Backstage/Invisible
Contact Employee
Actions Line of Internal Interaction
Support Processes
Service Blueprint Example - Hotels

Source: Bitner, M. J., Ostrom, A. L., & Morgan, F. N. (2008). Service blueprinting: a practical technique for service innovation.
California management review, 50(3), 66-94.
THANK YOU