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ISD 457:
SERVICE OPERATIONS
MANAGEMENT
Lecturer: Emmanuel Quansah
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Course Overview
 The course material will integrate operations,
marketing, strategy, information technology and
organizational issues.
 Emphasis is focused on preparing students to

identify and apply appropriate management

processes to ensure efficient, effective, and quality
oriented service operations, while achieving
operational excellence.
 The course covers both qualitative concepts and
quantitative models.
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Course Objectives
Upon completion of this course, students should be able
to;
 To understand the basic issues and problems arising in
service operations delivery processes and how they
differ from a manufacturing setting.
 To apply frameworks, quantitative tools and techniques
in the design, improvement and evaluation of service
processes.
 To develop analytical thinking in the identification,
modeling and resolution of basic problems in service
operations.
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Course Content

 Session 1 - The Role of Services

 Session 2 - The Nature of Services

 Session 3 - Managing Capacity and Demand

 Session 4 - Process Improvement

 Session 5 - Technology in Services

 Session 6 - Service Quality

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Course Grading, Assignment and

Midsem

Continuous Assessment 30%

Group Assignment - 10 Marks

Mid-Semester - 20 Marks

Final Exam 70%

Total 100%
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Session1

Role of Services in an Economy

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Learning Objectives
After reading this unit you should be able to:
 Understand what services are.

 Understand the need for service operations as

an academic discipline.
 Describe the role of services in an economy.

 State the Clark-Fisher hypothesis concerning

the evolution of an economy.
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Learning Objectives…cont’d
 Identify and differentiate the five stages of
economic activity.
 Describe the features of preindustrial,
industrial, and postindustrial societies.
 Identify the sources of service sector growth.
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What is a service? (2)

 James Fitzsimmons also defines services as;
‘A service is a time-perishable, intangible experience
performed for a customer acting in the role of co-
producer.’

 This course will adopt Fitzsimmon’s definition of

services as our working definition, however it will be
realised that one commonality expressed in all
these definitions is the fact that services are
intangible.
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Goods and Services

 A good is a tangible object that can be created and
sold or used later.
 A service is intangible and perishable. It is created
and consumed simultaneously (or nearly
simultaneously).
 Most of the time, goods are accompanied by
facilitating services, and sometimes service
purchases are accompanied by facilitating goods.
 Thus, these items are not completely distinct, but
rather are two poles on a continuum.
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Most Products Are a “Bundle”

of Goods and Services
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What about Restaurants?

 Service or Manufacturing?

 Such companies certainly manufacture tangible

products.

 Why then would we consider a restaurant as a

service business?

8
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Differences Between Goods and

Services

 Goods  Services
Tangible Intangible
Can be inventoried Cannot be
No interaction inventoried
between customer and Direct interaction
process between customer
and process

1-6
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Why Study Service Operations?

 Service firms constitute an overwhelmingly large

percentage of the economy of every industrialized
nation
 Not all management tools that are appropriate for
manufacturing are transferable into a service
environment
 Another reason to study service operations is the fact
that regardless of the functional area a person is in, he
or she still must engage in transformative processes
(operations) to produce work.
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What is Operations?
 The transformation process that turns inputs into
outputs; that is, the act of combining people, raw
materials, technology, etc. into useable services
and products

 Put simply, operations are processes that take in a

set of input resources which are used to transform
something, or are transformed themselves, into
outputs of products and services.
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Operations as a transformative
process?

INPUT
•Material
OUTPUT
•Machines TRANSFORMATION
•Goods
•Labor PROCESS
•Services
•Management
•Capital
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What is Operations?
 Inputs to the process:
 Transformed resources. These are the resources that are
treated, transformed or converted in the process.
 Materials
 Information
 Customers

 Transforming resources. These are the resources which act

upon the transformed resources.
 Facilities
 Staff

 Outputs from the process:

 Outputs from processes are most often products and/or services
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Similarities Between
Service & Manufacturing Operations

Both are concerned with:

 Efficiency

 Effectiveness

 Quality

 Cost
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Nature of the Service Sector (1)

 In most developed countries, the service sector is the
greatest contributor to GDP
 Over the past ten years Ghana’s service industry has
seen consistently increase and agriculture which was
once the leading contributor to Ghana’s GDP has
been overtaken by Services
 The service sector currently represents the largest
industrial segment in Ghana and accounts for 51.4 %
of Gross Domestic Product (as at 2010)
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Nature of the Service Sector (2)

 Ghana’s service sector is made up of;
 Public Administration Services (defence, taxation,
judicial, social services etc.),
 Education,

 Health and Social Work,

 Information and Communication,

 Financial and Insurance Services,

 Business Services (Consulting, Auditing, Advertising etc.),

 Distribution Services (Wholesaling and Retailing),

 Personal services, Tourism etc.

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Nature of the Service Sector (3)

60

50

40

Agriculture
30
Industry
Services
20

10

0
Agriculture Industry Services
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0
10
20
30
40
50
60
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Nature of the Service Sector (4)

Industry
Services
Agriculture
 Contribution of Agriculture, Industry and
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Services to the GDP of some developing

Countries:
70.0%
62.0%
60.0%
51.4% 51.9%
48.9%
50.0% 47.6%

40.0%
31.4%
29.9%
30.0% 28.4%
24.0% 24.5% 23.6%
22.0%
18.6% 19.7%
20.0% 16.0%

10.0%

0.0%
Kenya Ghana Tanzania Cameroon Uganda
Contribution of Industrial Sector in GDP Contribution of Agricultural Sector in GDP
Contribution of Services Sector in GDP
 Contribution of Agriculture, Industry and
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Services to the GDP of some developed

Countries:
90.0%
79.5%
80.0% 76.8% 77.5%
73.8% 72.8%
71.3%
70.0% 67.4%

59.1%
60.0% 55.2%

50.0% 46.9%
43.0%
40.0% 36.8%

30.0% 26.3% 27.8% 26.8%

24.9% 25.3%
22.1% 21.8%
18.5% 18.5%
20.0%
10.2%
10.0% 4.0% 5.8%
1.1% 1.4% 0.9% 0.7% 2.0% 1.9%
0.0%
United China Japan India Germany Russia United Brazil France Italy
States Kingdom
WORLD ECONOMIES (2010) Contribution of Industrial Sector in GDP
WORLD ECONOMIES (2010) Contribution of Agricultural Sector in GDP
WORLD ECONOMIES (2010) Contribution of Services Sector in GDP
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Discussion

 Why is it that the contribution of Agriculture

to GDP in the developed countries is way
less than that for the developing countries?
Does it mean that the developed countries
have lower levels of involvement in
agriculture?
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Growth in Services in the United States

Source: Handbook of U.S. Labor Statistics, edited by Eva E. Jacobs,

1-6 Fifth Edition, Bernan Press, 2001, Table 2-1, pp. 161–164.
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Importance of the Service Sector (1)

 Employment: The service sector provides employment
to majority of the workforce in most countries.
 Gross Domestic Product: The service sector is the
highest contributor to GDP in most developed and some
developing countries. This means that the service sector is
the highest contributor in terms of economic activity in
these countries.
 Number of Business Starts : There are more business
stats in the service sector as compared to industry and
agriculture
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Importance of the Service Sector (1)

 International Trade: Services also play an important
role in international trade between countries enabling
countries earn foreign exchange and reduce trade
deficits. Countries both import and export services.
India as a country exports IT services to other
countries generating revenue whiles Cuba exports
medical service. Ghana has the potential to export
nursing services and other services to other countries.
 Contributions to Manufacturing: Services contribute
to manufacturing as a support activity.
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Stages of Economic Development (1)

 Preindustrial Society : The dominant characteristic of
economic activity in pre-industrial society is extractive
(i.e., agriculture, fishing, forestry, and mining). Level of
technology is low or non-existent; people are
dependent on raw muscle power to survive, and
therefore the productivity is low. Their success is
largely dependent on the elements—the seasons, rain,
the nature of the soil. Preindustrial societies are
agrarian and structured around tradition, routine, and
authority.
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Stages of Economic Development (2)

 Industrial Society: The dominant characteristic of
economic activity in industrial society is goods
production. Machines have replaced muscle power.
Productivity has increased tremendously; the art of
making more with less is valued. The economic
watchwords are maximization and optimization.
Division of labour is further extended. Technological
advancements lead to new, faster, and more
specialized machines that constantly improve
productivity and replace more workers.
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Stages of Economic Development (3)

 Post-industrial Society: The dominant characteristic of
economic activity in post-industrial society is service
production. What matters now is not muscle or machine
power or energy, but information and knowledge. This
demand for increased technical knowledge and skills in
the workplace makes higher education a prerequisite to
entry into post-industrial society and good life. The
quantity and quality of services such as health,
education, and recreation that an individual can afford
are indicators of his standard of living.
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Clark-Fisher Hypothesis

 As nations become industrialized, there is

an inevitable shift of employment from
one sector of the economy to another.
 As productivity increases in one sector, the
labor force moves into another.
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Sources of Service Sector Growth

 Expansion of Manufacturing (Joint symbiotic growth of
services with manufacturing)
 Increase in efficiency/productivity of other sectors
 Population Growth
 A rise in per capita income (Increasing Incomes)
 Information Technology
 Innovation
 Changing Demographics
 An increase in urbanization
 Deregulation
 An increase in international trade
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Discussion Topics

 Is it possible for an economy to be based entirely on

services?
 Which factors do you think will influence Ghana’s future
service needs?
 Is there any service activity in a typical manufacturing
firm and why/how?
 Why do service economies necessarily follow industrial
economies?
 What things indicate that a country has become a
service economy?
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Group Work (All Groups) - 1

 Present a brief discussion of Ghana’s Service Industry.

Describe the general service sector and then breaking it
down into sub-sectors. Discuss the growth trends of these sub-
sectors and the growth trend of the service sector in general.
 Amongst other things, your discussion should answer the
following questions;
 What percentage of Ghana’s workforce is currently employed in
services?
 Is Ghana’s service sector expanding or contracting and why?
....show charts if possible of this growth or decline. Do you see the
Clark-Fisher Hypothesis at play?
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Group Work (All Groups) - 2

 Identify the service firms listed in Ghana’s club 100

and group them into their respective industries. In
your opinion which sector/industry seems to have the
most service firms listed and why.
 Is the topmost company a manufacturing or service

organization? Do you think its product or service

orientation has contributed to it being number 1?
What other factors do you think has contributed to
this company currently being number 1 on Ghana’s
club 100?
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Group Work (All Groups) - 3

 The report should have the names, signature and

index numbers of all group members.
 The length of the report should be between five (5)
to ten (10) pages. No more No less.
 Include a bibliography of all references used (if
any). The Section(s) on referencing and appendix
does not count to the given page limits.
 HARDCOPY SUBMISSION:

1-38
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Group Work (All Groups) - 4

 Groups are encouraged to be innovation. Use sectional headings
of your choice in your work. Feel free to extensively use
secondary data sources (just make sure you reference them).
 Use times new roman font; size 12 with 1.5 spacing. Extra marks
will be given for a good arrangement and presentation of work.
 PLEASE DO NOT EVEN CONSIDER COPYING. All groups that
present similar work that will be determined to be the result of
COPYING will have their work cancelled and each member of
the involved group(s) will get a zero for this assignment. NO
FORM OF EXCUSES WILL BE ACCEPTED SUCH CASES OF
COPYING.
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THANK YOU

 END OF CLASS