Service Operation Management

Service
In economics, a service is a transaction in which no physical goods are transferred from the seller to the buyer.
The benefits of such a service are held to be demonstrated by the buyer's willingness to make the exchange.
Public services are those that society as a whole pays for.

Characteristic of a service which is different from tangible of product

 Intangibly ( it cannot be touch, seen )
 Perish ability (it cannot be stored )
 Heterogeneity ( it cannot be same every time )
 Ownership ( Ownership cannot be transferred )
 Insepability (it cannot separate from service provider and consumer)

Use of technology

 Use of automatic machine

 Use of robots
 Use of software
 Use of camera

Service sector provides finance, marketing, transport, insurance for the development of the agriculture sector.
The expansion of service sector activities boosts the secondary sector activities as well. ... Service sector can
play a major role in reducing inequalities in the distribution of income in the economy

The most important role of technology in customer service is that it helps to increase the speed of customer
interactions. ... Instead, live chat on company websites enables organizations to help customers as soon as they
show interest. Many companies also provide customers the option to text them using their cellphones

Service Design
Service design is a process in which the designer focuses on creating optimal service experiences. ...
Sequencing, by partitioning a complex service into separate processes. Evidencing, by
visualizing service experiences and making them tangible. Holistic, by considering touchpoints in a network of
interactions and users.

Process Design Principles for Service Design

Any activity that fails to add value for the customer should be eliminated or minimized. Work is always
structured around processes and not around internal constructs such as functions, geography, product, etc. Work
shall not be fragmented unless absolutely necessary

Franchising

A franchise, in its simplest definition, is a business opportunity that allows the franchisee (possibly you) to start
a business by legally using someone else's (the franchisor's) expertise, ideas, and processes

A franchise business is a business in which the owners, or "franchisors", sell the rights to their business logo,
name, and model to third party retail outlets, owned by independent, third party operators, called
"franchisees". Franchises are an extremely common way of doing business.

The primary reason most entrepreneurs turn to franchising is that it allows them to expand without the risk of
debt or the cost of equity. First, since the franchisee provides all the capital required to open and operate a unit,
it allows companies to grow using the resources of others

Service Mix

Services marketing are dominated by the 7 Ps of marketing namely

1. Product,
2. Price,
3. Place,
4. Promotion,
5. People,
6. Process and
7. Physical evidence

Role of service sector

The development of service sector promotes and adds value to the agricultural sector. Service sector provides
finance, marketing, transport, insurance for the development of the agriculture sector. ... Service sector can play
a major role in reducing inequalities in the distribution of income in the economy

The contribution of services to development: The role of regulation and trade liberalisation. The service

sector makes a key contribution to gross domestic product (GDP) and employment in most developing
countries. It also provides essential inputs and public services for the economy

Scope of POM / Responsibility of a Production / Operation Manager.

 Product Design and Development (modify existing or launching new product)

 Production process selection (techniques of converting input into output)
 Planning facility location (place where plant will start functioning )
 Planning facility layout (physical arrangement of activities )
 Capacity planning (maximum production at particular period of time)
 Work Study (study of all activity in a plant with work method & work measurement)
 Inventory Management (stock of items required for manufacturing)
 Purchase Management( buying right product at right price, right quality, right time )
 Store Management (place where items are kept)
 Quality Control( attributes of a product expecting by a customer )
 Maintenance Management (to keep assets in working condition)
 Waste Management (reduce, recycle and reuse of wastage )
 Safety Management (use camera, special dress, emergency exit, first aids boxes )

Human Resource Management(structure, hierarchy, departments

Capacity planning
The term capacity means the amount of a system is capable of achieving over a specific period of time.
Maximum output that can be produced on a particular period of time. Use of factory upto full potential or
capability.

Objective
To achieve maximum production in a given period of time.
Need for capacity planning
Demand is not fixed for any business. Some time demand is very high or some time demand is very low. So
capacity planning is necessary for smooth production.
Strategies for increasing capacity

 Over time
 Increasing number of working hours
 Increasing number of labour
 Latest machines
 Outsourcing
 Use of technology
 Use of automation
 Qualified and skilled resource
 Minimize the wastage
Strategies in case of less demand / lean period

 Maintenance
 Training
 Layoff temporally labour
 Research and development
 Test marketing
 Some production for peak demand
 Recreation activity
 Try to get order from big company
 Conduct meeting to improve system.
Factor effecting capacity

 Nature of product (type and number )

 Process analysis (labour/ more machine )
 Supply factor
 Human factor (skilled / experienced )
 Availability of facility (input )
 External factor (govt regulation )
Quality

Generally, it can be said that a product is of satisfactory quality, if it satisfies the customer. The customer will
buy product a product or service, only if it meets his or her minimum needs. Thus customer satisfaction is the
main criteria for determining whether a product possesses the required quality or not. Therefore customer wants
are first assessed by marketing people and then quality decision is taken on the basis of such information. In
order to define quality, therefore, we have to think of it in term of some use. The term quality can be defined as
the sum totals of feature of a product which influences its ability to satisfy a given demand. It is also known as
“fitness for use”. It is decided by customer. It is also considered as the sum total of the attributes or properties
that describe a product. A product quality should control at every stage of transformation like input (material,
machine), transformation (process) and output.
Benefits of Quality

 Customer satisfaction will increased

 Profit will increased
 Sales will increases
 Goodwill and image of company will increased
 Resources will be fully utilised
 Company will be able to survive in the market
 It will help company to grow in other market.
 It will easy to face competition in the market.
 Scrap and wastage will be reduced
 There will be reduction in complements.
 A mirror for a manufacturer.

Design Quality

The design of a product or service must incorporate that feature and attributes that would satisfy the customer
need. While designing product or service, there are various characteristic should be considered. The
characteristics for product or service may be different.

Component of Product quality Component of Service quality

 Performance (function) reliability(trustworthy)

 Features (various nature) responsiveness(discipline)
 Reliability (life of product) competence(perfection)
 Serviceability (ease in service) access(convenient)
 Appearance (looks) courtesy (behaviour)
 Safety (less breakdown) communication(understanding)

Demand Forecasting
Demand: - A desire backed by ability and willingness to pay is Demand. The term demand for a commodity
always has a reference to a place, a period of time and a place.
Type of Demand: -
1.) Individual Demand: - It refers to the demand for a product by a single consumer.
2.) Market Demand: - Market demand is aggregate of individual demand.
3.) Autonomous Demand / Individual Demand: - When the demand for an output of goods and service is
independent of the demand for the product.
4.) Derived Demand / Department Demand: - When the demand for an output is associated with the demand
for another output.
5.) Industry Demand: - It refers to the total demand for the product of a particular industry.
Determinants of Demand: -

 Price of the product

 Consumer Income

 Tasks and Hobbits

 Advertising Expenditure

 Population

 Relative price of other goods, substitute and

complementary goods

 Consumer credit facility

 Climate end seasons

Demand Forecasting: -
Demand Forecasting refers to estimations of most likely future demand for product under given conditions.
Importance of Demand forecasting: -

 Help to formulate purchase policy

 Sales forecasting

 Help to evolve a suitable labour policy

 To determine how much production capacity to be builds up.

 Helpful in deciding the number of sales man required to scheme the sales objective

 Helpful in the product mix decision

 Reduce the dependence on chances

Method of Demand Forecasting: -
 a.) Non – Statistical Method : -

 Survey of buyers intension

 Expert opinion method

 Sales for composite method

 Test market method

b.) Statistical Method: -

 Time series analysis

 Regression analysis

 Trend projection method

 Moving average method

 Exponential smoothing

Service gap

A customer service gap is the difference between what customers expect from your company or product, and
the actual service they get.

For example, a company promises fast delivery but cannot manage the flow of orders, and some customers don't
get their orders in the expected time. The combination of these gaps leads to a global customer service gap.
Even one of the mentioned gaps can lead to customer dissatisfaction and reduced income levels

Type of service gaps

GAP 1: The listening gap. GAP 2: The service design and standards gap. GAP 3: The service performance gap.
GAP4: The communication gap.

Generic strategy

Porter's generic strategies describe how a company pursues competitive advantage across its chosen market
scope. There are three/four generic strategies, either lower cost, differentiated, or focus. 
Generic strategy refers to three alternative methods for a firm to position itself competitively within an industry:
cost leadership, differentiation and focus. The concept of generic strategy is first defined by Michael Porter in
his book Competitive Advantage (
For example, a company may look for ways to increase efficiency by scaling up production. The company's
objective is to increase profitability by producing less expensive goods than its competitors.

Six Sigma

Six Sigma is a set of methodologies and tools used to improve business processes by reducing defects and
errors, minimizing variation, and increasing quality and efficiency. The goal of Six Sigma is to achieve a level
of quality that is nearly perfect, with only 3.4 defects per million opportunities.

Six Sigma is a business methodology for quality improvement that measures how many defects there are in a
current process and seeks to systematically eliminate them.

The Six Sigma Methodology comprises five data-driven stages — Define, Measure, Analyze, Improve and
Control (DMAIC). When fully implemented, DMAIC standardizes an organization's problem-solving approach
and shapes how it ideates new process solutions.

6 sigma tools
Six Sigma tools are defined as the problem-solving tools used to support Six Sigma and other process
improvement efforts. The Six Sigma expert uses qualitative and quantitative techniques to drive process
improvement.