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Bill of Services (BOS): A Managing Tool for Service Organizations

Article  in  International Journal of Information Systems in the Service Sector · April 2015

DOI: 10.4018/ijisss.2015040102

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18 International Journal of Information Systems in the Service Sector, 7(2), 18-36, April-June 2015

Bill of Services (BOS):

A Managing Tool for Service Organizations
Gad Vitner, Industrial Engineering and Management Department Ruppin Academic Center,
Emek-Hefer, Israel

ABSTRACT
Bill of Services (BOS) is a novel management tool designed to support service organizations in developing
their services and planning resources to satisfy management’s target service level. This paper presents a
methodology for configuration of the BOS in a manner similar to configuration of the Bill of Materials (BOM)
in a manufacturing organization. Definition of the BOS enables management to calculate the capacity of the
resources needed to satisfy service demand and support the cost process of any service category in the orga-
nization. The BOS may also support management during the phase of negotiations with potential customers
by testing various service alternatives. The BOS assists management in the day-to-day planning and control
of activities, and facilitates a professional management infrastructure in service organizations. The paper
presents a detailed example of a hotel BOS and elaborates the advantages of using this management tool.

Keywords: Bill of Services (BOS), Service Costing, Service Level, Service Organizations, Service
Specifications

INTRODUCTION Organizations must develop services that will

The service industry has grown to form the
largest employment sector and share of gross
domestic product for all major industrialized
countries (Spohrer & Maglio, 2008).
Service science is the study of value co-
creation and of entities seeking value co-creation
outcomes from interactions among entities that
co-create value. In order to achieve valuable
service delivery, service organizations must
develop supportive infrastructure so that the
process of creating and delivering the service
will be accomplished efficiently and effectively.
Thus, the discipline of service design becomes
a basic element in the development of services.
meet customers’ expectations, requirements,
and demands, to be delivered when needed, to
the complete satisfaction of the customer. In or-
der to preserve customer loyalty, organizations
must consider the costs related to the service
delivery process. Salvendy and Karwowski
(2010) discuss the issue of service capac-
ity while providing services. Excess capacity
causes extra costs for workers that are not
utilized effectively, while insufficient capacity
can cause long customer waiting times. Thus,
effective management of resource capacity in
service delivery is a major issue that manage-
ment must address.

DOI: 10.4018/ijisss.2015040102

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 International Journal of Information Systems in the Service Sector, 7(2), 18-36, April-June 2015 19
The purpose of the paper is to design a
management support tool for capacity and cost
planning for service organizations. The paper
attempts to adapt the Bill of Material (BOM)
from the field of engineering design to service
development and management. This cross-
fertilization between disciplines is important
for developing of service science solutions and
for fostering service innovation. The integration
of engineering and management is particularly
relevant for the development of new services.
The paper presents the Bill of Services (BOS),
a tool for assisting service organizations in
developing their services by identifying the
resources needed to provide the service and the
capacity of each resource. BOS is borrowed and
adopted from the manufacturing field, enabling
organizations to calculate quantities of the
resource capacities needed in order to deliver
the service elements emphasized by the service
concept (Goldstein et al., 2002). Zeltin and
Mandelbaum (2008) have developed a service
operations management planning model to assist
managers of service organizations in efficient
allocation of their resources in order to meet
customer demand. Their study is based on the
authors’ professional background and experi-
ence in engineering and manufacturing. They
call for a multi-disciplinary approach in order
to balance service quality, efficiency and profit-
ability from the likely conflicting perspectives
of customers, service providers, managers and
society. Dietrich (2006) reveals that the lack of
a standard method for representing resource
requirements for business services and resource
capabilities used for delivering business services
makes it difficult to directly apply the analytic
tools developed for manufacturing and supply
chains to business services. For conventional
goods, each unit of production is typically
associated with a well-defined set of resource
requirements: a BOM, processing time on a
sequence of machines, and labor hours. In
business services, the “unit of sales” is typi-
cally a contract describing business functions
(e.g. hotel services) that will be performed by
a provider for a client over a specified period
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of time; a payment structure; and related obli-
gations of the client and the provider. Exactly
how the business functions will be provided, or
what resources will be used and when they will
be used, should be characterized by the service
provider in order to satisfy customer demand
on time and in an efficient manner (Dietrich,
2006). Sampson (2012) introduces the Process
Chain Network (PCN) Analysis framework for
service operations management (SOM). PCN
analyzes the complexities of service operations
in a systematic way, by depicting services as a
specific type of resource/process configuration.
The Bill of Materials (BOM) is a well-
known and widely-used entity in manufacturing.
It is constructed during the engineering design
process for any new product. The BOM provides
a detailed data base of all components and
operations needed to manufacture the product.
Other data that may be included in the BOM are
the type of machines to be used, quantities, the
expected operation times and other pertinent in-
formation that enables proper capacity planning,
ordering of materials, preparation of budgets,
and implementation of schedules. The BOM is
the cornerstone that supports the processes of
purchasing and production planning and control.
Essentially a structured part list, the BOM is
usually employed in production management to
separate the Master Production Schedule (MPS)
into both gross and net component requirements.
Guoli et al. (2003) proposed a tree-structure
storage model to define the BOM. It uses two
tables to record the parent components and the
child component.
The BOM is a structured management
mechanism that contains all the elements of
the product. Product elements should support
the product concept. When designing services
based on the organization’s strategy, the concept
developed defines the service categories and
characteristics and the service level for each
service characteristic. Similar to the BOM,
the BOS is a structured management tool that
contains all the service elements. Based on the
BOS, the necessary resource capacities can be
planned and service costing can be performed
20 International Journal of Information Systems in the Service Sector, 7(2), 18-36, April-June 2015
according to predefined service levels for each
service characteristic. The novelty of the ap-
proach is by enabling service organizations to
design a detailed structure of the various services
delivered to the customer and derivate the re-
spective resources capacities needed to satisfy
customers’ needs and expectations. The BOS is
a managing tool that allows the service designer
to define for each service characteristics vari-
ous service levels and make the respective cost
effective computations in order to verify what
should be the appropriate resource capacities.
IBM has introduced the term “Service Science,
Management and Engineering” (SSME) to
describe an interdisciplinary approach to the
study, design, and implementation of service
systems to provide value for others by suitable
arrangements of people and technologies (IBM,
2008; Hefley & Murphy, 2008; Spohrer &
Maglio, 2008. Service science aims to explain
and improve interactions in which multiple enti-
ties work together to achieve win-win outcomes
or mutual benefits (Spohrer & Maglio, 2008).
Service science is the study of value co-
creation, of entities seeking value co-creation
outcomes from interaction among entities that
co-create value. Vargo and Lusch (2004) pro-
posed a service-dominant logic for marketing,
which considers service production – rather
than goods production – as a primary economic
activity.
In this article, the focus is on service
design with the BOS as a supportive manage-
ment mechanism to conduct service resources
capacity planning and to verify service costing.
We continue with a literature review of
recent literature on services, service design and
service-dominant logic. Below we will present
the general concept of the BOS with a detailed
real-life example (hotel BOS), explaining the
advantages of implementing the BOS manage-
ment mechanism. The paper concludes with a
discussion chapter highlighting issues related
to the implementation phase of the BOS in
service organizations.
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LITERATURE REVIEW
Service Science
Service science (Maglio & Spohrer, 2008) is the
study of service systems, which are dynamic
value co-creation configurations of resources
(people, technology, organizations, and shared
information). These four categories of resources
include resources with rights (people and organi-
zations), resources as property (technology and
shared information), physical entities (people
and technology), and socially constructed enti-
ties (organizations and shared information).
A service system comprises people and
technologies that adaptively compute and adjust
to a system’s changing value of knowledge. A
science of service systems could provide theory
and practice for service innovation (Spohrer
et al., 2007). Spohrer’s study emphasizes that
service science aims to understand and catalog
service systems and to apply that understanding
to advancing our ability to design, improve, and
scale service systems for practical business and
societal purposes. The study of service science
is an integrative undertaking, and benefits
from contributions of knowledge and methods
from other disciplines. Maguire et al., (2012)
highlight the impact of Service Science as a
co-producer of service productivity. They found
that human factors play an extremely important
role in improving service productivity. Maglio
et al. (2009) are concerned with the nature of
“service,” business arrangements in which
one party performs an activity for another that
benefits both. Further, they discuss the scientific
understanding, management principles and
engineering discipline needed for effective
service innovation (Spohrer & Maglio, 2008).
They identify an emerging revolution in busi-
ness and economic thinking in the twenty-first
century, based on a new worldview of service-
dominant logic (S-D logic), and a new abstract
entity, the service system. They define service
as the application of resources for the benefit
of another (Vargo & Lusch, 2006). Productivity
and innovation in services still depend heavily
on intuition and the experience of employees.
 International Journal of Information Systems in the Service Sector, 7(2), 18-36, April-June 2015 21
The current development of service science,
which integrates information technology based
modeling with management and behavioral
science, now offers the opportunity to analyze
existing deficiencies and promote innovation
more systematically (Tadahiko, 2005). In recent
years, service science, has been developed as
an academic discipline in business schools.
Glushko (2008) describes the formation of
service science discipline at the School of
Information of the University of California,
Berkeley. The program designers began by
asking, “What questions would a service sci-
ence have to answer?” Out of this, the designers
developed a new framework for understanding
service science. Larson (2008) reveals that
newly emerging service systems require a
three-way integrated analysis, of management,
social and engineering management. Bitner
and Brown (2006) address the need to create
comprehensive interdisciplinary curricula for
service science. While dominated by the market-
ing discipline, service research and courses also
exist within the human resource and operations
management areas. Within the field of service
operations, topics include: service productiv-
ity, managing capacity (the BOS supports this
area), time management, and service experi-
ence design. Rust and Miu (2006) discuss the
evolution of service science research themes
over the time. In the 1970s, the emphasis was
on the differences between goods and services,
while services had limited characteristics. In the
1980s, following the quality revolution, research
emphasized service quality measurement, cus-
tomer satisfaction management, and complaint
management systems. In the 1990s, research
evolved into models for making service finan-
cially accountable. In the twenty-first century,
following the development of IT (information
technology), research has moved to using cus-
tomer relationships as a foundation for a new
strategy based on “customer equity,” requiring
the management of customer lifetime values.
The rise of information and communication
technologies (ICT) that improve automation
and connect us to global labor markets has
resulted in a shift of people out of manufactur-
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ing into knowledge-intensive service industries
that support manufacturing and innovation
(Chesbrough & Spohrer, 2006). Maglio et al.
(2006) document the efforts to establish a new
academic discipline and profession, illustrating
with four examples of service systems: educa-
tion; IT service delivery centers; call centers,
and patents. They conclude that researchers,
educators and practitioners show tremendous
interest in understanding service systems, and
in the potential for the new academic discipline,
Service Science Management and Engineer-
ing (SSME). Wei-Fung & Soe-Tsyr, (2010)
presented in their paper the notion of service
machine. It is defined as a socio-technical
system with the shared reality of customer
and provider aiming for joint optimization of
productivity and satisfaction.
Service Design
Service design is concerned with systematically
applying design methods and principles to the
design of services. It assumes the customer/
user as the starting point or lens into a specific
service, and considers how the service can be
performed through the use of creative, human-
centered and user-participatory methods models
(Holmid & Evenson, 2008). Service design in-
tegrates the economic and strategic intent of an
organization with the possibilities and means of
performing a service with the desired qualities.
They explore the human-centered approach to
design for service innovation, aiming to create
services that are useful, usable, desirable, ef-
ficient and effective (Holmid & Evenson, 2008).
Service encounters can be designed to enhance
the customer’s experience during the process
and their recollection of the process after it is
completed (Cook, et al., 2002). The authors
presented the human issues from the customer
and the service provider vantage.
Every day, the media feature stories of
customers experiencing how organizations, both
private and public, fail to live up to their service
promises (Dahl et al., 2012). To suggest a way
of overcoming this common phenomenon of
service delivery failure, their study introduces
22 International Journal of Information Systems in the Service Sector, 7(2), 18-36, April-June 2015
the concept of the Service Delivery System.
The goal of the Service Delivery System is to
understand how to produce efficient service
delivery while still being attractive to custom-
ers. It seeks to provide the user with tools to
ensure attractiveness of service design balanced
with efficiently operating front and back of-
fices. With this in mind, the field of service
engineering should focus on designing systems
that involve customer inputs and interactions.
Since customer inputs and interaction implies
variation, service engineering should work
toward designing robust systems that can func-
tion efficiently and effectively despite customer
intensity and customer-induced variation (Sal-
vendy & Karwowski, 2010).The objective of
service design is to add value by enhancing the
efficiency, effectiveness and efficacy of older
service systems and to create newer ones with
requisite attributes (Katzan, 2011). The author
defines service design as a discipline that seeks
to facilitate the operation of the modern global
economy that is now based on service. The
necessary elements of service design are intro-
duced and important concepts are identified. In
services, the work often needs to be performed at
the exact moment that the customer demands it.
Therefore, a service business must have optimal
resources available in terms of skill, skill level
and experience, at the right time and at the right
place (Salvendy & Karwowski, 2010). Furrer
(2005) states that in order to ensure service
quality, the service delivery process should be
well-designed and well-organized. To some
extent, a well-designed process is a vital com-
ponent of service delivery innovation, which
will surpass customer expectation and increase
customer satisfaction. The design of a service
can have significant impact on an organiza-
tion’s key metrics, including costs, revenue,
brand perceptions, customer satisfaction and
loyalty, and employee satisfaction and loyalty
(Ostrom et al., 2010). The inherent nature of
services makes consistent service delivery dif-
ficult across employees in the same firm, and
even by the same service employee from day
to day. The extent to which the customers are
willing to accept this variation is the zone of
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tolerance (Lovelock and Wright, 1999). Nadiri
and Hussain (2005) addressed the concept of
zone of tolerance in judgment of hotel service
quality. Their study describes the zone of toler-
ance for customers’ service expectations and
determines the customer satisfaction level.
Their findings show that the customers visiting
Northern Cyprus hotels have a narrow zone of
tolerance in services provided by the hotels.
Sangiorgi (2009) has suggested a distinction
between three different perspectives on service
design: the service interface, the co-creation of
value between complex systems, and platforms
for action. In service design, services are also
often thought and talked about as journeys
(Blomkvist, 2011). In most cases, this journey
is comprised of many stops along the way, at
which the customer interacts with the service
provider. These steps are called service mo-
ments. The journey can span from a couple
of seconds/minutes to an entire lifetime. The
interaction at each service moment can look
very different. It can be a conversation, an
interaction with a web page, a phone call, and
much more. These interactions are part of the
production of a service, and without them, the
service would not exist. Services take place all
the time, and as co-creators, by purchasing or us-
ing services, we participate in different services
simultaneously. Most people are not aware of
this, because services are intangible. Service
designers and researchers call the interactions
with services “touchpoints,” as they represent
the point at which the customer “touches” the
service. While most design disciplines work
with tangible design objects and projects of
well-defined scope, service design aims to
improve complete service experiences, across
touchpoints and service moments, physical
spaces, virtual places, graphical objects and
social interactions (Blomkvist, 2011). A com-
monly mentioned technique in service design is
service blueprinting (Bitner et al., 2008). A typi-
cal service blueprint has five components: “Cus-
tomer actions” include the steps that customers
take as part of the service delivery process.
“Onstage/visible contact employee actions”
are actions of front-line contact employees that
 International Journal of Information Systems in the Service Sector, 7(2), 18-36, April-June 2015 23
occur each time they cross the line of interaction
with the customer. “Backstage/invisible contact
employee actions” are non-visible interactions
with customers (e.g. telephone calls) and any
other activities that contact employees do in
order to prepare to serve customers. “Support
processes” refer to activities carried out by in-
dividuals and units within the company who are
not contact employees and that need to happen
in order for the service to be delivered. “Physical
evidence” means the tangibles that customers
are exposed to that can influence their quality
perception. In the physical surroundings of a
service (“servicescapes”), customer cognition,
behavior and experiences are influenced by
the following dimensions: ambient conditions;
spatial layout and functionality; signs, symbols
and artifacts; and service typology and envi-
ronmental dimensions (Bitner, 1992). Another
technique supporting an efficient and effective
service design is service prototyping (Miettinen,
2009; Blomkvist, 2011). Voss & Hsuan (2009)
developed a service modularity function (SMF),
a mathematical model indicating the degree of
modularity deriving from unique services and
the degree to which the modules can be repli-
cated across a variety of services. They argue that
service architecture is most easily considered
as a system at various levels of decomposi-
tion. Kankainen et al., (2012) introduced a
co-design method called Storytelling Group
that has been developed and tested in three
service design cases. It combines collaborative
scenario building and focus group discussions.
It inspires. service design by providing different
types of user information: a fictive story of a
customer journey is created to illustrate a “what
if” world, users tell real-life stories about their
service experiences, users come up with new
service ideas, and they are also asked about their
opinions and attitudes in a focus-group type of
discussion. Perrott, (2013) explores the concept
and meaning of co-design as it applies to the
delivery of health services. Research findings
could lead to building more robust knowledge
of how the consumers of health services may
be more effectively involved in the process of
developing and delivering the type of services
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that are in the line expectations of the various
stakeholder groups. Lin & Pekkarinen (2011),
developed a framework of QFD (Quality Func-
tion Deployment)- based logistics service design
to integrate the HOQ (House of Quality) to
help in designing logistics services with high
quality and large service variety. Thurston &
Cawood, (2011) present The Service Design
Program which was funded by the Welsh Gov-
ernment aiming to support Welsh industry in
its understanding and use of service innovation,
as well as creating a sustainable hub of service
design expertise in Wales by 2013. DeVine,
et al., (2012) discuss how a cable-television-
service provider, automobile-rental company,
and technology firm improved the quality of
their customer service while reducing its costs
by incorporating a better understanding of
behavioral science into their service.
Service-Dominant
Logic (S-D Logic)
Service-dominant logic is a service-centered
alternative to the traditional goods-centered
paradigm for describing economic exchange and
value creation. The central idea is that service
is the fundamental basis of value creation when
defined as the application of competencies for
the benefit of another through exchange. As a
component of the service package, facilitating
goods may be involved in the exchange, but
value-in-use (value as realized and determined
by the customer) is the important feature (Vargo
& Lusch, 2008).
The authors believe that S-D logic is not
a theory; rather, it is a mindset, a lens through
which to observe social and economic exchange
phenomena. In a recent publication Vargo (2011)
states that although S-D logic is not a theory
per se, they (Vargo & Lusch) believe that the
ultimate goal of service science is to build theory
from an S-D logic foundation. S-D logic focuses
on the interaction among service systems. The
significance of that interaction is not found
in the transfer of ownership of output (as in
goods-dominant logic), but in the interaction
itself (Vargo et al., 2010). Dobrzykowski et
24 International Journal of Information Systems in the Service Sector, 7(2), 18-36, April-June 2015
al. (2012) use the lens of S-D logic to explore
collaborative approaches employed by firms
in dealing with customers and suppliers in the
context of procurement. Specifically, how do
collaborative practices influence the develop-
ment of the procurement capability of the firm?
Bill of Materials
In its simplest form, the BOM defines “items
or raw materials that go into the product”
(Garwood, 1988; Chang, et al., 1997). Cox et
al. (1992) define the BOM as a “list of all the
subassemblies, intermediate parts, and raw
materials that go into a parent assembly show-
ing the quantity of each required to make an
assembly.” Essentially a structured part list,
the BOM is usually employed in production
management to deconstruct the Master Produc-
tion Schedule (MPS) into both gross and net
component requirements. Guoli et al. (2003)
proposed a tree-structure storage model to define
the BOM, using two tables to record the parent
and child components.
In general, a BOM should involve three
aspects: A. Items - The way in which a
product is built from purchased parts and/or
semi-finished products is called the product
structure of that product. As a component of a
product structure, an item might be a purchased
part, an intermediate part or subassembly, or
a final product (Hegge, 1992); B. Goes-into
relationships- This is the relationship between
a particular parent and a particular component.
The number of units of components required
for one unit of parent is called “quantity per”
of the relationship (Van Veen & Wortmann,
1992). C. Employment – Resources capacity
needed to assemble the product. . The content
and construction of BOM will vary based on
the perspective of different business functions.
Wu & Hsu (2008) propose an approach to
reducing the total operational cost of a spare
parts logistic system by appropriately designing
the BOM configuration. A spare part may have
several vendors. Parts supplied by different
vendors may vary in failure rates and prices.
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Thus the optimal management of the related
BOMs is essential.
A production data model can be typically
viewed as a logical representation of two key
production data structures: bill of material
(BOM) and routing. Its function is to provide
a logical way to support the information needs
of a production planning and control system for
performing functions such as material require-
ments planning (MRP), capacity requirements
planning (CRP), operations scheduling and
shop floor control.
We suggest that service organizations, in
analogy to manufacturing organizations, can
use a structure similar to the BOM but based
on service components instead of material com-
ponents. This service structure may be defined
as the Bill of Services (BOS).
The literature review of the management of
service organizations shows that a comparison
between manufacturing and service organiza-
tions is both useful and valid, despite their differ-
ences. Wilderom (1991) defines service sector
organizations as work units with a production
process involving direct interaction between
clients or customers and service providers, in
which the output is intangible, almost impos-
sible to store and has a considerable degree of
variety. Gronroos (2000) notes that many of
the characteristics applied to services also can
be applied to manufactured goods. Johnston
(1994) discusses the issue of “servicization” of
operations management, claiming that service
organizations may be viewed as the manufactur-
ers of service products. Roth & Menor (2003)
discuss the total service concept. Like manufac-
turing, this is a multidimensional construct that
embodies the totality of the service elements
that are either important to target customers or
are purchased by them.
Hollins (1993) researches the subject of
design in the service sector. He states that to
be efficient and effective, services must be
developed using processes that are similar to
those used in the development of internation-
ally competitive manufacturing products. His
study demonstrates that failure to understand
customer requirements is the overwhelming
 International Journal of Information Systems in the Service Sector, 7(2), 18-36, April-June 2015 25
cause of product failure. This also appears to
be the main cause of failure in services. Hollins
finds that the most important elements in service
design specifications are very similar to those
of manufactured products. Reliability is shown
to be the most important. Ettlie & Kubarek
(2008) address the subject of design reuse in
manufacturing and services. They expect that
design reuse will be used to reduce cost and
to shrink time-to-market, and will impact the
innovativeness of new products and services.
Buzacott & Mandelbaum (2008) find consid-
erable variation in the design and operation
of service systems. Some of these differences
relate to the flow of customers through the
system, while others relate to how the workers
are used. As with manufacturing, most of the
alternatives developed in service delivery aim
to enhance the productivity and performance
of the system for the given degree of variation
that customers require.
A manufacturer develops a product accord-
ing to customer or market requirements. The
product’s BOM represents the product structure
and components. The product’s components
give answers to the product’s functions. In a
similar thought, a service organization designs
services according to customer expectations,
needs and requirements. The BOS represents
the specifications for these services. Thus,
the BOS components provide answers to the
specifications of service.
During the process of product design, the
manufacturer considers and defines dimensions
like material type (plastics, metals, wood), level
of required functional accuracy, measurements
(weight, volume), and production processes
(casting, milling, grinding). By analogy, service
planning should involve similar steps, but it
must also consider customer characteristics, as
the customer is the “material” processed during
the service operation. More importantly, during
product design the engineer can run various
computer simulations to verify that the design
complies with the requirements. The BOS en-
ables similar simulations for services.
This paper proposes the BOS as the means
for estimating both the capacity requirements
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and costs of these services. Section 2 pres-
ents our methodology, elaborating on service
concept, service specifications, the general
structure of the BOS, capacity plans and costs
involved. Section 3 includes a detailed illustra-
tion of a BOS application. Section 4 discusses
general applications, while Section 5 explains
the conclusions.
METHODOLOGY
Service Concept
The goal of the service concept is to capture
the nature of a service, so that customers know
what they are getting and staff understands what
they are providing. The need for generating a
service concept is rationalized by research-
based arguments of Zeithmal & Bitner (2003)
suggesting that an idea describes only general
provisions of a new service which, if made more
accurate, can even lead to some fundamental
changes aimed at better satisfaction of certain
segment consumers.
Service organizations place high impor-
tance on their service concept but often they
cannot articulate, share or understand it. More
emotional than a business model, ideally
the service concept should be a shared and
articulated understanding of the nature of the
service provided and received. It should capture
information about:
The organizing idea the essence of the
service bought or used by the customer.
The service provided the service process
and its outputs, which have been designed,
created and enacted by the operation of many
input resources, including the customer.
The service concept is the starting point
for the development of an operating strategy
(Johnston et al., 2012).The service concept
defines and characterizes the “skeleton” of the
BOS. Drejeris & Zinkeviciute (2010) proposed
a model for one stage of the development of
a service concept feasibility assessment and
designing of a service system. Every idea can
be developed by several concepts. The applica-
26 International Journal of Information Systems in the Service Sector, 7(2), 18-36, April-June 2015
Figure 1. Hotel BOS
tion of the suggested model allows choosing
the best concept of a new service.
Service Specifications
A service specification is an extension of the
service concept. The service concept provides
a broad description about the service provided,
the customer experience and its outcomes. This
in turn should either be based on the needs,
requirements and expectations of customers,
or a perceived future need or desire for it. The
service specification takes the elements of the
concept and identifies the quality factors as-
sociated with each. It details the standards to
be achieved and the necessary procedures to
ensure conformance to this standard (Johnston
et al., 2012).
Service specifications are designed using
two dimensions: A. Service characteristics
define the various service components (e.g.
time waiting to sight the host in a restaurant).
They may be defined by time units, tolerance
on the time axis, and yield of a service activ-
ity (e.g. yield of the admission process in a
hospital department). B. Service level is the
second dimension of service specifications
(e.g. a 2-minute waiting time in a bank versus
a 6-minute waiting time). Different service
levels require varying resource capacity in order
to comply with a given service characteristic.
Service specifications are defined to comply
with customer expectations, but should satisfy
management ability to allocate the needed re-
source capacities, or in other words, the budget
needed to satisfy the service characteristics.
In addition, most business services involve a
significant labor component. Effective labor re-
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source planning requires defining the attributes
used to categorize human capital, modeling the
role of social capital, and analyzing the value of
flexibility within organizations and workforces
(Dietrich, 2006).
The General Structure of the BOS
With the BOM, the final product is the basic
starting point which occupies level “0.” For
services, level “0” is the organization itself –
although it could also be the department/service
category under consideration. This is explained
below. As our example, let us consider a hotel
(any service organization would do). The hotel’s
level 1 BOS is presented in Figure 1.
Figure 1 shows the hotel at level 0 (the
service organization). Level 1 (service category)
includes the service categories provided by
the hotel: reception, housekeeping, food and
beverages, leisure activities, security, laundry
services. If we so desire, we could assign each
of these service categories their own BOS with
Level “0,” as in Figure 2. In such a case, capac-
ity requirements and costs would be assessed
for each service category separately.
Let us assume we use the style shown in
Figure 1 for housekeeping (level 0). In level
“1,” we classify the various types of services
provided (e.g. room cleaning, mini-bar main-
tenance, telecommunications services, general
maintenance) Then in level 2 we define the ser-
vice characteristics and the service level for each
service type. For example, for the room cleaning
service, the service characteristics might be
defined as: make the bed, clean the bathroom,
change the towels, vacuum the carpets, and
dust the furniture. The service characteristics
 International Journal of Information Systems in the Service Sector, 7(2), 18-36, April-June 2015 27
Figure 2. Housekeeping services BOS structure
may take the form of a check list detailing the
services to be provided. Then the service level
may be defined as: clean the room once a day
and prepare the bed before nighttime. Similar
definitions should be defined for all service
types in level 1, with the goal of constructing
a service tree containing all the characteristics
and their corresponding service levels.
Resources Capacity Planning
Resources are the capabilities (tangible and
intangible) of the service provider that must be
in place in order to provide a service. Service
provision is usually the availability, on a limited
time basis, exclusively or shared, to the con-
sumer of a resource belonging to the provider.
Sometimes, offering a service mainly involves
combining the supplier’s own resources with
those of third parties (Karakostas & Zorgios,
2008).
Capacity is the ability to deliver services
over a particular time period. Capacity is de-
termined by the resources available to the or-
ganization in the form of facilities, equipment,
and labor. Strategic capacity planning is the
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process of determining the types and amounts
of resources that are required to implement
an organization’s strategic business plan. The
objective of strategic capacity planning is
to determine the appropriate level of service
capacity by specifying the proper mix of fa-
cilities, equipment and labor required to meet
anticipated demand. For service systems, idle
capacity (e.g. service providers are waiting for
customers) is always a reality (Fitzsimmons
& Fitzsimmons, 2011). A major target of any
business organization is to create an optimal
resource capacity, such that the derivative costs
are minimal but the customer receives the ex-
pected service level. Implementing the BOS as
a regular management mechanism may support
the achievement of optimal resource capacity.
After all service specifications are defined
and the service tree is formulated, we may derive
the resources capacity needed for complying
with the BOS. For a given service specification
(a given checklist), we may run simulations with
different service levels as independent variables
and resource capacity as dependent variables.
28 International Journal of Information Systems in the Service Sector, 7(2), 18-36, April-June 2015
Thus, the BOS supports the management in the
decision related to capacity planning.
We will illustrate this with a simple exam-
ple. When we observe the housekeeping BOS in
figure 2 and focus on mini-bar maintenance, we
may calculate the capacity needed to maintain
a given service level. For a 100-room hotel and
a policy of daily maintenance (service level) at
ten minutes per room, we would need to allocate
1,000 minutes or about 16 hours of labor. This
means that we need to allocate two employees
per day. If the hotel policy is to maintain the
mini-bar twice daily, we will have to allocate
four employees for this service characteristic.
The same procedure is repeated in order to
verify the necessary capacity of all the resources
associated with all the service characteristics
defined in the BOS. Finally, the BOS summa-
rizes the total capacity of all resource types,
thus supporting hotel management in the deci-
sion regarding total capacity of employees and
facilities/equipment needed for a given BOS.
Services Costing
For a given BOS, we may calculate the service
cost based on the resources allocated to fulfill
the service characteristics and the related service
levels. To do so, we multiply the working hours
of the various employee types by the hourly
rate. Thus, the BOS supports management by
aiding the costing process. Using the example of
maintaining the mini-bars in the rooms, we may
calculate the respective costs of maintaining a
service level of daily maintenance or a service
level of twice-daily maintenance.
A DETAILED ILLUSTRATION
OF A BOS APPLICATION
Figure 3 presents a detailed BOS for a hotel,
showing four sub-levels based on the one-level
BOS of Figure 1. In level 0, we define the hotel
services as a whole (service organization). Level
1 presents the service categories: housekeeping,
food and beverages, laundry services, business
center, security services, leisure activities and
reception. In theory, level 1 has an unlimited
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number of service categories. It should contain
all relevant service categories available to the
hotel guests. We may then develop each cat-
egory further, adding more levels as needed
according to the service characteristics. Figure
3 complements Table 1 by elaborating on each
element of the BOS. It details the service char-
acteristics for each service category, defines the
service level with the relevant responsiveness
and calculates the total capacity needed for
each service characteristic. For example, the
service category “food and beverages” in level
1 is further developed to the level 2 service
characteristics of room service; dining room ‒
breakfast; restaurants and coffee shops serving
lunch; and dinner and lobby services. Then, the
data presented in level 3 details what should be
accomplished for each service characteristic.
We show that breakfast is served in the dining
room and lunch and dinner is served in the
restaurants and coffee shops. Also, the BOS
shows that the lobby offers two service charac-
teristics: food and bar. At this point, we define
the service level/responsiveness and the total
capacity needed for each service characteristic,
for each item positioned at the BOS roots (see
Table 1 for a detailed example). Taking room
service (level 2-service characteristics) as an
example, we should define the service level
and the capacity needed. The example in Table
1 defines room service as provided 24 hours
daily, and the responsiveness as within the time
tolerance of ten to forty minutes. The service
level/responsiveness should be a derivative
of guest’s expectations and the hotel’s service
strategy. Once the service level is defined, we
may calculate the number of employees needed
to satisfy this definition. We should note that
the frequency of service calls varies throughout
the day. It is higher during the day as opposed
to night, and it varies for different time periods
throughout the day. Similarly, we must define
the service level for all services and calculate
the number of employees needed to satisfy the
service level definition.
This detailed example illustrates four steps
of a generic methodology for defining the ca-
 International Journal of Information Systems in the Service Sector, 7(2), 18-36, April-June 2015 29

Figure 3. Detailed hotel BOS

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30 International Journal of Information Systems in the Service Sector, 7(2), 18-36, April-June 2015

Table 1. BOS definitions table

Remarks Capacity Service Level Service Category / Characteristics

Needed
Responsiveness Service Service Service Category
Level Characteristics
w.m. = 10 w.m. Daily Room cleaning: Housekeeping
Worker 4 w.m. Daily Morning:
minutes Clean bath
Make beds
Vacuum carpets
Dust
Replace toiletries,
towels.
Evening:
Replace toiletries
Make beds
Upon request 5-30 min. 24/7 Room supply:
Towels, pillows,
etc.
Before check 7 w.m. 15-30 min. 24/7 General
in / maintenance
Upon request.
4 w.m. 10-40 min. Daily / Minibar
Upon maintenance
request 24/7
Upon request 10-40 min. 24/7 Room service Food & beverages
10 workers 6:00-11:00 Dining room:
Breakfast
8 workers 12:00-21:00 Restaurants &
coffee shops:
Launch/Dinner
2 workers 8:00-24:00 Lobby:
Food / Bar.
30 w.m. Until 9:30: Guest Laundry
returning at
16:00.
After 9:30:
returning
next
morning
Upon request 5 office spaces 24/7 Office services Business Center
Service is 4 workers per 10-15 min. 24/7 General: Security
provided by shift 24/7. Parking,
one of the Upon Front door,
4 security request. Patrol.
guards. Escorting
customers

continued on following page

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 International Journal of Information Systems in the Service Sector, 7(2), 18-36, April-June 2015 31

Table 1. Continued

Remarks Capacity Service Level Service Category / Characteristics

Needed
Responsiveness Service Service Service Category
Level Characteristics
Outsourcing 8:00 – Babysitting Leisure
via reception. 22:00. activities
Upon
request.
w.h. = 14 w.h. 7:00 - 20:00. Pool:
Worker hours. 14 w.h. 7:00 - 20:00. Lifeguard,
Including 14 w.h. 7:00 - 20:00. Food bar,
towel supply. Maintenance.
14 w.h. 7:00 – 20:00 Retail store
4 workers per 7:00 – 20:00 SPA:
shift. Mineral pool,
Massage,
Cosmetics.
4 workers per 0-5 min. 24/7 Front desk: Reception
shift. Tourist information
Luggage store
Check in/out
Tel. assistance
One worker 24/7 Door man
per shift.
One worker 24/7 Bellboy
per shift.
E.g. outsource One worker 0-1 min. 24/7 Tel. response
babysitting, per shift.
secretary
service.

pacity of the various resources utilized when
providing services:
1. Define the service categories that the or-
ganization supplies (level 1).
2. For each category define the detailed char-
acteristics of the services (levels 2, 3….).
3. For each service characteristic, define the
service level/responsiveness (considering
varying demand levels depending on time
of the day, day of the week, or season).
4. For each service type, calculate the re-
source capacity (work force, equipment
and technology) based on the service
characteristics, the required service level
and the demand.
Once management constructs a BOS, they
may use it to run simulations to verify the qual-
ity of services delivered for a given resources
capacity or the resource capacity needed to
achieve a given service strategy.
GENERAL BOS APPLICATIONS:
DISCUSSION
The number of organizations that provide ser-
vices is rapidly expanding. Examples include
call centers, importers/exporters, law firms,
clinics, health centers, fire departments, police
stations, government services, restaurants,
universities, schools, and hotels. Today’s
manufacturing organizations are also heavily

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32 International Journal of Information Systems in the Service Sector, 7(2), 18-36, April-June 2015

Figure 4. General methodology of the service industry

involved in providing services. These include Finally, we may check whether the con-
quality assurance, inventory, production plan- structed BOS complies with customer needs
ning and control, costing, purchasing, inventory and expectations by conducting a survey to
control, human resources, and warehousing. verify customer satisfaction.
Figure 4 illustrates a general methodology of
the service industry.
The service process initiates with the BOS IMPLEMENTATION IN
customer who creates needs and expectations, SERVICE ORGANIZATIONS
and continues with the service provider that
We chose to use a hotel as our example, but
defines related service specifications based
any type of service organization can implement
on company strategy and the service concept.
the BOS management tool. These may include
For each service specification, we must define
health services such as clinics, hospitals, labo-
service characteristics, and for each set of ser-
ratories, pharmacies; educational institutions
vice characteristics, we must assign the service
and libraries; police departments; supermarkets;
level. Now we are at the stage where we can
restaurants; transportation companies: airlines,
construct the BOS, enabling us to calculate
trains, buses; law firms; banks; government
resource capacity and the related costing.

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 International Journal of Information Systems in the Service Sector, 7(2), 18-36, April-June 2015 33
services; municipal organizations; volunteer
organizations; and charities.
As stated earlier, implementing the BOS
method may support management in creating
a service delivery infrastructure that ensures
the customer gets what he needs, according to
his expectations, at the right time and intensity,
assuring effective usage of resource capacities
(minimum idle resources).
Based on the organization’s service strat-
egy, management defines the service concept,
and then develops the respective BOS as a
step-by-step technical procedure. The strict
analogy to a BOM is again relevant here. In
manufacturing organizations, a product cannot
be assembled without a reliable and accurate
BOM. It assures that all the needed components
are available at the right time and in the right
amount, ensuring delivery to the customer of
a specific order characterized by product type,
quantity and delivery date. Service organiza-
tions benefit similarly through implementation
of the BOS, which defines the right capacity
for all resources in order to respond effectively
to customers demand. As in manufacturing, the
service organization may use subcontractors
to deliver any or all of the services defined in
the BOS.
SUMMARY AND CONCLUSION
The major purpose of a service provider is to
satisfy customer needs and expectations. Cus-
tomer needs should create service specifications
and characteristics, and customer expectations
must be fulfilled by the service level assigned.
Each of the service organizations listed
above may create its own BOS that will sup-
port management decisions regarding capac-
ity planning and costing for a given service
specification.
We note that for any service characteristic,
the related service level must have a quantita-
tive figure. We cannot define service in relative
terms such as “good” or “bad”. Rather, service
must be defined in terms of compliance (or
non-compliance) with service specifications
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(both service characteristics and related service
levels).
To the best of our knowledge, most service
organizations do not specify or define written
service specifications, related characteristics
and the assigned service level for each service
characteristic. Without defined service speci-
fications and corresponding service levels, the
organization has no professional way to plan or
control the services provided to the customer.
The result is that the organization must address
customer complaints and service recovery
activities.
The BOS is a valuable management tool
for supporting the development of a reliable and
appropriate infrastructure to deliver the right
response at the right time to the customer. It
is a planning and control mechanism enabling
management to run simulations that will produce
accurate answers to vital what/if questions. The
managerial implications of implementing the
BOS are very important for service organiza-
tions. It is a methodological and consistent
managing tool enabling a professional design
of the related services without missing any issue
that may damage the service delivery process.
IN MEMORIAM
This article is in memory of the late Prof.
Ezey Dar-El, my honored teacher, colleague
and friend.
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76578-5_47

Gad Vitner obtained a Ph.D. in Industrial and Systems Engineering from University of Southern California
in Los-Angeles in 1981. He received both his B.Sc. and M.Sc. in Industrial Engineering and Management at
the Technion in Haifa. He started his professional career as a lecturer at Ben-Gurion University and after
3 years joined industry where he served for 15 years in various managing positions in several organiza-
tions. During these years he was in charge of many projects in the areas of: Shop Floor Control, Robotics
Applications, CIM, Design Methodologies, Strategic Planning, ERP Systems, Production Planning and
Control, Quality Management, TQM and Call Centers Management. In 1999 joined the School of Engi-
neering at Ruppin Academic Center as head of Industrial Engineering and Management Department and
since 2005 serves as Dean. His research areas are: Health Care Management, Operations Management,
Service Management,Project Management, Productivity of for profit and none profit organizations, Quality
Management, Production Planning and Control and PhotoVoltaic Energy.

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