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Shin‐Ming Guo
NKFUST
Service Operations Management
Department of Logistics Management
- ffice: C415, phone: 6011000 ext. 3216
Service Operations Shin Ming Guo NKFUST Management Department of - - PDF document
Service Operations Shin Ming Guo NKFUST Management Department of - - PDF document
Service Operations Shin Ming Guo NKFUST Management Department of Logistics Management office: C415, phone: 6011000 ext. 3216 e mail: smguo@nkfust.edu.tw web: www2.nkfust.edu.tw/~smguo/teaching/service.htm Textbook Fitzsimmons and
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Previous Topics for Team Report
Loan Processing at Capital One — Process Improvement Ritz‐Carlton — Hiring and Training Taco Bell Corp. — Chain Store Operation Alaska Airline — Service Quality Which Products Should You Stock? — Inventory Management London Olympic Game — Revenue Management
What is Service?
Tangible or intangible? Customer involvement?
Standardization or customization? Human or machine processing? Inventory and leftover? A service is a time‐perishable, intangible experience performed for a customer acting in the role of co‐producer.
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Nature of Service
Customer Participation: attention to facility design,
- pportunities for co‐production, concern for customer
and employee behavior
Simultaneity: opportunities for personal selling,
interaction creates customer perceptions of quality
Perishability: cannot inventory, opportunity loss of idle
capacity, need to match supply with demand
Intangibility: creative advertising, no patent protection,
importance of reputation
Heterogeneity: customer involvement in delivery
process results in variability
Compare Manufacturing & Service
Characteristic Manufacturing Service
Product Tangible Tangible & Intangible Customer involvement Low High Uniformity of input High Low Labor content Low High Uniformity of output High Low Performance Measurement Easy Difficult Quality Control High Low Inventory Much Little or Perishable
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Services: Nontransferrable Ownership
Type of Service Customer value Examples
Goods rental Obtain temporary right to exclusive use Vehicles, tools, furniture, equipment Place and space rental Obtain exclusive use of defined portion of a larger space Hotel room, seat on airplane, storage unit Labor and expertise Hire other people to do a job Car repair, surgery, management consulting Physical facility usage Gain admission to a facility for a period of time Theme park, camp ground, physical fitness gym Network usage Gain access to participate Electric utility, cell phone, internet
Moving to Experience Economy
Economy Agrarian Industrial Service Experience
Economic Offering Food Packaged goods Commodity service Consumer services Business services Function Extract Make Deliver Stage Co‐create Nature Fungible Tangible Intangible Memorable Effectual Attribute Natural Standardized Customized Personal Growth Method of Supply Stored in bulk Inventoried Delivered
- n demand
Revealed
- ver time
Sustained
- ver time
Seller Trader Producer Provider Stager Collaborator Buyer Market Customer Client Guest Collaborator Expectation Quantity Features Benefits Sensations Capability
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Competitive Environment of Services
11 Relatively Low Overall Entry Barriers Economies of Scale Limited Erratic Sales Fluctuations No Power Dealing with Buyers or Suppliers Product Substitutions for Service High Customer Loyalty Hobby or job satisfaction High Exit Barriers
What is Operation Management?
Transformation = Production = Service
Physical: restaurants Location: transportation Exchange: retailing Storage: warehousing Physiological: health care Informational: telecommunications
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How Can OM Improve a Service?
Low Cost with Same Quality? Fast Delivery with Same …? Quality Service with Same …? Better Selection with Same …? More Revenue with Same …?
Four Dimensions of Tradeoffs
Cost ▪ Efficiency ▪ Measured by:
‐ cost per unit ‐ utilization
Time ▪ Responsiveness to
demand
▪ Measured by:
‐ customer lead time ‐ flow time
Quality ▪ Product quality
(how good?)
▪ Process quality
(as good as promised?)
Variety ▪ Customer
heterogeneity
▪ Measured by:
‐ number of options ‐ flexibility / set‐ups
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The Boarding Procedure
Speed and Convenience for Passengers! On time performance and Cost for Airlines!
Service Queuing Explained in Words and Pictures
Call Center of Railroad Station
Goal: 80% of incoming calls wait less than 20 seconds Starting point: 30% of incoming calls wait less than 20 secs. Problem: Must decide staffing levels of call centers and understand impact on efficiency Solution: Provides tools to support strategic trade‐offs
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Revenue Management
- The Park Hyatt Hotel has 118 rooms.
- Regular fare is $225 targeting business travelers.
- Empty rooms do not create any profit.
- Hyatt offers $159 discount fare for a mid‐week
stay targeting leisure travelers. Choice 1: Accept low fare reservations without any limit. Choice 2: Do not accept low fare reservation. Hope that high fare customers will eventually show up.
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It’s the Details that Matter
- Choice 3: Accept low fare reservations but reserve rooms
for high fare customers
- Protection Level: the number of rooms reserved for
higher fare customers. Protect too much Empty rooms Protect too little Turn away good customers
- Problem: How to deal with no‐shows and last
minute cancellations?
Epilogue: Operation is Heart of Business
Service Managers need to perform
and make decisions in all functions.
Operations account for 60 to 80% of
the direct expenses that burden a firm’s profit.
Operations directly affect customers