Introduction to Service Operations PDF

**[L1 Intro to service operations]** **Manufacturing vs service operations** Products and services are seldom pure, instead they often are **along a spectrum** with some products/services reaching the definition of both ![A diagram of a diagram Description automatically generated with medium conf...

**[L1 Intro to service operations]** **Manufacturing vs service operations** Products and services are seldom pure, instead they often are **along a spectrum** with some products/services reaching the definition of both  **Definition of Services:** "Anything you can buy or sell but cannot be dropped on your foot" (Philip Kotler) 'A service is a Time-perishable, Intangible Experience performed for a Customer Acting in the Role of a Coproducer' (co-creator) (James Fitzsimmons) **Definition of Service [Firms]**: Service enterprises are organizations that **facilitate** the production and distribution of goods, **support** other firms in meeting their goals, and **add value to our personal lives** **Examples and roles of service providers in an economy** A diagram of a company Description automatically generated **Services make up the majority of GDP in an economy**  **Sources of service sector [growth]** *Information, business and social media* -- AI, Zoom, platforms based services *Innovation* - Push theory (e.g. Post-it), Pull theory (e.g. Cash Management), Services derived from products (aero engines), Exploiting information (e.g. Auto part sales) *Changing demographics --* ageing populations, two income families, growth in single people, home and phones becoming sanctuaries **Types of services** Public vs private / profit vs not for profit Government = legal, educational, military etc Private = airlines, restaurants, insurance etc **Compared to manufacturing** Methods quite similar in production and services Many additional but at the same time interesting challenges compared to production of products - impact of simultaneous production & consumption to quality (e.g. haircut) - improving employee's technical and customer interaction skills, as they often must do both - slow productivity gains compared to manufacturing (only about 1 % per year) A diagram of a service process Description automatically generated **Intangible** - cant be seen felt or experienced before purchase **Perishable** -- services cannot be stored for later sale i.e cannot be inventoried **Inseparability** -- cant be separated from the provider, customers involved in delivery **Heterogeneity** -- quality of service depends on the provider. How each customer experiences is different **Compared to manufacturing**: more uncertainty into the operating system... fewer options for managing uncertainty... an operational focus on managing the customer experience throughout the service delivery process **Service Dominant Logic (SDL)** Every economy is a service economy, but we are only realising it now. Essentially SDL argues that **value is not created by companies**. Instead it is "co-created" when **customers interact with the "value propositions" offered by companies.** Goods are considered to be "**exchange mechanisms" for service**. That is, when we buy goods, **we are actually buying the skills and effort of all the people who made them. So everything is service.** **Products and services are reliant on each other**  **The production side of the service -- e.g. car repair** A pink and purple sign with black text Description automatically generated Customers generally interact purely with the front office, i.e. the visible activities to the customer, whereas the back office do the invisible activities **Service contextualization: THE PROCESS MATRIX** Uses degree of interaction and customization + labour intensity to classify service types-  **The service package** A diagram of service package Description automatically generated **Explicit Services**: Benefits readily observable by the senses. The essential or intrinsic features. -- e.g. quality of meal, attitude of the waiter, on-time departure. **Implicit Services**: [Psychological] benefits or extrinsic features which the consumer may sense only vaguely. -- e.g: privacy of loan office, security of a well lit parking lot  1\. **The production of SP**: -- producing physical items (food in a restaurant, insurance schemes in an insurance company) -- the part which involves contact with the customer 2\. *Sometimes, production & consumption simultaneous* (e.g. hairdressers, travel on a bus, vaccine) 3\. **Performance standards for the SP**: -- customer perceptions will vary -- what should be the standards of performance when service is operational? -- setting standards for service contact element much more difficult than physical goods due to individuality and intangibility **How to differentiate between manufacturing and services?** 1. Nature of the product -- can you drop it on your foot? 2. Quality control -- before or during? 3. Customer involvement in production -- social media, hotels etc 4. Time -- delivered in real time with customers present to receive 5. No inventories of finished goods -- if demand is greater than capacity there is lost revenue 6. Distribution channels -- not factories to customers, but factories, retail and point of consumption all in one A yellow and black text Description automatically generated **COURSEWORK [INTERVIEW] QUESTIONS -- INDIVIDUAL SITE, NOT THE WHOLE COMPANY** What service package you're offering? What's your service strategy,, for delivering it, how have they designed it, do people order, sit in? Why have you located where you have? Layout -- why is shop etc laid out how it is, why is it laid out for optimal performance, or for customer satisfaction? How does your strategy ensure capacity and demand is managed? How do you ensure quality? Part b) is what they're doing what the literature says you should do? **[L2 Design and Development of Services]** **Why design or re design service operations?** - Develop new products and services for existing and new markets - New product applications - Improving quality - Cost reduction - Safety/ethical/legislation issues - Standardisation (ISO standards and continuous quality) - Increase competitiveness - Improve customer service - Product lifecycle, intro-growth-mature-redesign OR decline **The service package**  **Supporting facility** -- physical resources that must be in place before a service can be sold e.g. golf course, airplane, ski lift etc **Facilitating goods** -- material consumed by the buyer or the items provided by the consumer e.g. food items, legal documents, golf clubs **Information** -- operations data provided by the customer to enable efficient and customized service e.g. seats available on a flight, customer preferences, location of customer to dispatch a taxi **Explicit Services**: Benefits readily observable by the senses. The essential or intrinsic features. -- e.g. quality of meal, attitude of the waiter, on-time departure. **Implicit Services**: Psychological benefits or extrinsic features which the consumer may sense only vaguely. -- e.g: privacy of loan office, security of a well-lit parking area. **Service-product BUNDLE** A table with text on it Description automatically generated **For an organisation**, the service package **represents the components of the service**. **For the customer**, the service **should be more than the component parts**, unless things go wrong **The service concept --** helps guide new service development by creating a **shared mental picture** of the intended servicepo  A diagram of a tree Description automatically generated **The service concept** is a shared and **articulated understanding of the nature of the service** provided and received, which should capture information about: - **The organising idea** -- the essence of what is bought or used by the customer (what?) - **The service provided** -- the service process and its designed inputs/outputs (how?) - **The service received** -- including the explicit and implicit service (result?) **Examples of service concepts** **Disney** (Google: Oct 2023) - 'to be one of the world\'s leading producers and providers of entertainment and information' **IKEA** (Johnston et al., 2011)\_(website: Oct 2023) - \'to offer a wide range of well-designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them\' **Singapore International Airlines** (Gemmel et al., 2013) - "shiny new planes on the outside and warm, great service on the inside" **Apple** (Google: Oct 2023) -- 'to make the best products on earth and to leave the world better than we found it.' **Service concept entails: creating and delivering value**  You need all 3 to be successful -- how can we integrate the design and the delivery? **Reducing uncertainty of a new product (or service development)** A diagram of a product Description automatically generated **Innovation and design of products** "**Services and products are intimately and symbiotically linked**. A box of cereal, for example...is the culmination of a very long series of marketed services and products, beginning with the service of farming." "the **first step towards rational service design is a system for visualising this phenomenon**, so that services can be given proper position and weight in the context of any market entity." Digital technology can help with prototyping, seeing impacts etc **Product and process design** As the process in service is so important to the product itself, there is much more attention to making the process and service design integrated  **External and internal BENEFITS of good design performance** Diagram of a diagram of cost and quality Description automatically generated **Get your own process designs right and your product/consumers will benefit** **New service development cycle**  Development Analysis Design Full launch development (constant circle, there's always improved versions to be designed) **The design process** A diagram of a process Description automatically generated **Designing the intermediate NETWORK**  **Service blueprinting** Captures the service delivery system in a visual diagram, just like a blueprint (architect/engineering drawings) of buildings - Like a map or flowchart A diagram of a hotel Description automatically generated **Taxonomy of service processes**  **Generic approaches to service design** **Production line approach --** standardised service, division of labour, limited discretion of personnel **Customer as co-producer --** self service, customer-generated content (IKEA) - Smoothing Service Demand -- appointments and reservations; cheap drinks before 7pm - happy hour; offpeak train or bus fares) **Information empowerment --** empowering employees and customers (AMAZON) **Customer contact --** sales opportunities and service delivery options, separation of high and low contact operations A white text on a yellow background Description automatically generated  **[L3 Service strategy and globalization of services]**  **Reminder of typical characteristics of services** A yellow background with black text Description automatically generated **Mintzberg 1998 view points on strategy** **Emergent vs. Deliberate Strategy**: Mintzberg emphasized the difference between deliberate strategies, which are planned and intentional, and emergent strategies, which arise spontaneously from day-to-day operations and experiences. He argued that many successful strategies develop from unexpected opportunities and challenges. **Five Ps for Strategy**: Mintzberg proposed five different interpretations of strategy: - **Plan**: A predefined course of action. - **Ploy**: A specific manoeuvre intended to outsmart competitors. - **Pattern**: The consistent behavior over time, even if not consciously planned, culture, ideology shared by members of organisation determining norms - **Position**: The way an organization positions itself in the market relative to competitors, may involve benchmarking - **Perspective**: The fundamental way an organization views itself and its environment. **Operations strategy is the strategic reconciliation of market requirements with operations resources**  **Competitive service strategies** **OVERALL COST LEADERSHIP:** -- Seeking Out Low-cost Customers -- Standardizing a Custom Service -- Reducing the Personal Element in Service Delivery (promote self-service: self scan at supermarkets, online check-in for a flight) -- Reducing Network Costs (hub and spoke vs point to point (you go from one place to another and back, with no connections etc which higher end airines like emirates offer)) -- Taking Service Operations Off-line **DIFFERENTIATION** Making the Intangible, tangible (memorable) Customizing the Standard Product Reducing Perceived Risk Giving Attention to Personnel Training Controlling Quality Service Guarantees Note: Differentiation in service means being unique in brand image, technology use, features, or reputation for customer service. Differentiated/targeted Covid 19 vaccination strategies. **FOCUS** **Buyer/vulnerable group:** - Insurance ppolicies for over 50s - Home delivery of medicine for elderly - Childrens camps **Service offered** - Specialized care/eye clinics - Mother and toddler group - Visa service for different destinations **Geographic region** - Logistics company specializing in drone to remote regions - Covid 19 lockdown by regions **Customer criteria for selecting a service provider** A close-up of a list of words Description automatically generated **How to win customers in the marketplace** **Service qualifier** To be taken seriously a certain level must be attained on the competitive dimension, as defined by other market players -- cleanliness for a fast-food restaurant or safe aircraft for an airline, disinfected surgical operating theatre, clean drinking water **Service winner** The competitive dimension used to make the final choice among competitors -- price or quality or guarantee etc **Service loser** Failure to deliver at or above the expected level -- failure to repair a car (dependability), rude treatment (personalization) or late delivery of package (speed). **Service trade off**  **Service profit chain** A diagram of customer service Description automatically generated **Drivers and enablers of globalization** - Exponential growth in recent decades in world trade, (until the USA-China trade-war, Covid-19, Russia-Ukraine; MiddleEast conflict) - Saturation of home markets - Reduction of legal & global trade barriers (except Brexit, USA-China) - Technology (Remote working) and infrastructure (Chinese BRI) - Convergence of consumer tastes and aspirations - Skills, procedures, resources **Service expansion strategies**  **Generic international strategies** A diagram of a strategy Description automatically generated **Challenges of service internationalization** Services harder to control than products Managing **cultural** issues such as expectations and acceptable vs agreed vs expected service levels Leveraging of skills and resources globally Speed of response Developing customer and supplier trust Process standardization Intellectual property issues and strategies for new technology developments **Considerations in selecting a global service strategy**  A close up of a text Description automatically generated **[L4 Managing capacity and demand in services]** **Matching capacity and demand** There is often a mismatch between supply and demand **Capacity --** the maximum level of activity over period of time for an operation under [normal operating conditions] The maximum "production" capability of a unit in a specified time **Operations capacity definitions**: - often defined in output units - served meals in a fast food restaurant, "seat-miles", rooms in a hotel, maximum number of students in a class room, maximum cargo load of a vessel - normal level of operations assumed (i.e. can exceed 100%) -- sometimes defined as input if a company has numerous different products - otherwise capacity difficult to calculate - working hours per year, square meters in a store **Marketing capacity definition:** - Firm's capability to respond to market demand (right product, right time, etc.)  **the main problem of measuring capacity is the complexity of many service operations** A green and white sign with black text Description automatically generated **How do you BALANCE capacity ad demand?**  A diagram of a business strategy Description automatically generated Can not store inventory as there is no inventory **Chase demand** This strategy seeks to match output to demand pattern over time Capacity is altered via policies including: - Changing number of part time staff - Overtime working - Equipment level changes and subcontracting - Volunteers (vaccinations) The strategy is costly in terms of activities like changing staff levels and overtime payments. Skills especially high in industries where skills are scarce **Strategies for matching supply and demand for services**  **Demand management** Attempts to adjust demand to meet available capacity Many ways of doing this but most involve altering the marketing mix which requires coordination with the marketing function - Marketing investments -- advertising and promotions etc - Playing with prices -- demand shifting or restricting - Counter cyclical offerings - Queue management - Minimizing variation -- booking system **Some services NEED high capacity** Policing, healthcare, fire services **Queue management** Queue is a bunch of customers/jobs which wait the service they need from one or multiple servers/machines A blue circle and a white square with red lines Description automatically generated  A diagram of a diagram of a service Description automatically generated with medium confidence **Some differences can be found in organizing**  **There are also different process types** A diagram of a computer program Description automatically generated with medium confidence **Combining queues reduces waiting times**  **Basic variables in queueing models:** Type of process - How many phases? Phases after each other? Size of customer population - Infinite? Can customer type be identified? Arrival rate - Often assumed to follow poisson distribution but in practice often differs by day/year Average service rate - Often assumed to follow exponential distribution Queuing principle and priority - FIFO? Most critical first? Customer behaviour - Discipline Number of servers and number of waiting lines **Queues and simulations** Only simple queues can be solved mathematically, but generally real world queues are very complex - Several servers, multiple queues - No shows, complaints, lane switching, queue jumping - Machine breakdowns We still need to analyse queues however computer simulations/digital twins **Culture** **How can waiting times be reduced?** **By increasing capacity or having some safety capacity** - increasing simply the number of servers and/or their efficiency - e.g. capacity sharing alliances, cross-training personnel, having flexible workforce, keeping excess capacity all the time... **By analyzing the process in-depth** - e.g. having multiple servers side-by-side if possible -- designing a layout that supports smooth operations... **By reducing the deviation of arrival intervals as well as service times** - the more randomness there is in the process, the longer the queues are - e.g. segmenting customers, limiting product assortment\... - specialization naturally also improves efficiency and speed **By balancing demand with resources** **Why should experiences such as queueing be understood?**  Customers are willing to wait longer for valuable things and positive service experience Waiting times during the process feel shorter than same amount of time in the beginning When designing a system: relationship between waiting length and dissatisfaction is NOT LINEAR   **[L5 Service Facillity Location and Layout]** **What to consider:** - Location and layout objectives - Tangible and intangible factors - Evaluation of alternative locations - Location models and 'optimal' solutions - Plant layout design decisions **Type of decisions** Location (MACRO) decisions - Where to locate factories, warehouses etc for manufacturing - Where to locate repair shops, distribution centres etc for services Layout (MICRO) decisions - Design of flowlines, arrangement of processing departments for manufacturing, layout of retail stores, rail and bus stations, airports etc for services **Typical location and layout objectives** **Minimise:** operating costs, movement of materials and people, response times, movement of machinery **Maximise:** revenue, profit **Why is location important:** One of the most important decisions for a firm Increasingly global in nature Long term impact and decisions are difficult to change Involves fixed and variable (and intangible) costs Objective is to maximise the benefit of location to the firm **Country level location decisions** 1. Political risks and incentives 2. Cultural and economic issues 3. Location of markets 4. Labour availability and costs -- Rolls Royce located in Singapore despite labour cost because of the talent pool 5. Availability of supplies, energy 6. Exchange rates and currency risks **Regional level critical location decisions** 1. Corporate needs 2. Attractiveness of region 3. Labour availability, costs, attitudes towards unions 4. Costs and availability of utilities 5. Environmental regulations 6. Investment incentives and fiscal policies 7. Proximity to raw materials and customers 8. Land and construction costs **Site level location decisions** 1. Site size and costs -- room to expand? 2. Transportation networks 3. Zoning restrictions 4. Proximity of services/supplies 5. Environmental impact issues **Site selection consideration factors** A chart of a list of jobs Description automatically generated with medium confidence **Classification of service location issues**  **What is involved in layout decisions?** The relative positioning of transformed resources within operations The allocation of tasks that dictate the flow of transformed resources A group of people in a store Description automatically generated **Different layout types**  **How layout design can improve efficiency in a surgical theatre?** **1. Product Layout** - **Definition:** Arranges service delivery processes in a linear sequence that mirrors a specific service flow. **2. Cell Layout** - **Definition:** Groups services that are related or have similar processes together in distinct areas or cells. **3. Functional Layout** - **Definition:** Organizes service areas based on the type of service offered, clustering similar functions together. **4. Fixed-Position Layout** - **Definition**: The service provider and resources come to the customer or the service remains in one location. **Summary** - **Product Layout** is effective for high-volume, standardized services. - **Cell Layout** enhances efficiency and responsiveness for varied services. - **Functional Layout** offers flexibility but may increase customer wait times. - **Fixed-Position Layout** is ideal for personalized, complex services but requires careful coordination.  **Army induction centre using product layout**  **Fixed position layout** **Advantages:** very high product and mix flexibility Product/customer not moved High variety of tasks for staff **Disadvantages:** very high unit costs Scheduling space and activities can be difficult **Functional layout** **Advantages:** high product and mix flexibility Relatively robust in the case of disruptions Easy to supervise **Disadvantages:** low utilization Can have very high WIP Complex flow **Cell/hybrid layout** **Advantages:** can give good compromise Fast throughput Group work can result in good motivation **Disadvantages:** can be costly to rearrange existing layout Can require more plant **Product layout** **Advantages:** low unit costs for high volume Opportunities for specialization of equipment **Disadvantages:** can have low mix flexibility Not very robust in the case of disruptions Work can be very repetitive **Volume and variety characteristics of layout types** A diagram of a flowchart Description automatically generated **Techniques used to design layout types** **Fixed position --** resource location analysis **Functional layout --** flow charts and relationship charts **Cell (hybrid) layout --** product flow analysis **Product layout --** assembly line balancing techniques  **[L6 Quality management in services]** **What is quality?** **-- Producer's perspective:** conformance to specification **-- Consumer\'s perspective:** customer typically defines quality as value or fitness for use Quality has evolved: from conformance.....through to meeting customer requirements..... to achieving total quality across the organisation **How to measure value?**  The function value of a BIC pen and a Mont Blanc pen is the same, however the esteem value of mont blanc is far more so you pay more (branding, clout) "\....the quality of the **service** is in a precarious state -- it is in the hands of the service workers who 'produce' and deliver it." (Karl Albrecht, founder Aldi) **Aspects of quality** A diagram of quality and quality Description automatically generated **Quality characteristics of goods and services** **Functionality** -- how well the product or service does the job for which it was intended. **Appearance** -- aesthetic appeal, look, feel, sound and smell of the product or service. **Reliability** -- consistency of product or services performance over time. **Durability** -- the total useful life of the product or service. **Recovery** -- the ease with which problems with the product or service can be rectified or resolved. **Contact** -- the nature of the person-to-person contacts that take place. **History of quality philosophies: from inspection to prevention**  **Total quality management**  **TQM is a natural extension of earlier approaches to quality management** A diagram of quality control Description automatically generated **Traditional cost of quality model**  Increasing the effort spent on preventing errors occurring in the first place brings a more than equivalent reduction in other cost categories A diagram of cost reduction Description automatically generated **Reducing or accommodating variability?** **Arrival variability:** Customers do not all want service at the same time or at times necessarily convenient to the service provider **Request variability**: Customers may well ask for aspects of the service not provided for **Capability variability**: Customers' own capabilities differ. Whether because of greater knowledge, skill, physical abilities, or resources, some customers perform tasks easily and others require hand-holding **Effort variability**: When customers must perform a role in a service interaction, it's up to them how much effort they apply to the task. Such effort variability has an impact on service quality and cost, either directly for the engagement at hand or indirectly for other patrons **Subjective preference variability**: Customers vary in their opinions about what it means to be treated well in a service environment  **Must have (Basics):** characteristics or features taken for granted -- Hotel: clean sheets & hot water **More is better (Performance):** we are disappointed if a need is poorly met, but have increasing satisfaction the better it is met -- Hotel: response time for room service **Delighter:** features that surprise and delight in a positive way -- Hotel: wine, flowers, bowl fresh fruit, chocolates upon arrival **Reversal (Tontini):** features that annoy -- TV not working A white background with blue text Description automatically generated  **Continuum of perceived service quality** A diagram of a process Description automatically generated **Ensuring quality of service** **Service guarantees --** an effective means to signal quality and fine tune internal processes **Zero defections --** keep every customer that can be profitably served **Service recovery --** a positive approach to complaint handling **Word of mouth, and past history matters --** prospective users gain confidence in possibility using the service **Consistency of offer --** it may take time to know what you may be offering. Then try and let it evolve only slowly **Consistency in personal manner**: The provider has a similar approach. Provides trust for the prospective customer or user **Servqual** A questionnaire-based approach to poll customers about service quality Important tool for customer satisfaction, but some critics Measures gap between expected and perceived service Highlights strengths and weaknesses of service provision -- Parasuraman et al. (1985) J. Marketing **Servqual Dimensions**  **Perceived quality is governed by the gap between customers' expectations and their perceptions of the product or service** A diagram of different types of customer satisfaction Description automatically generated with medium confidence  A table of marketing words Description automatically generated with medium confidence **[L7 Service Supply Chains]** **Supply chains:** all businesses produce/supply products and/or services All businesses require some materials, parts, components and sub-assemblies, complete modules, products... inbound supply Suppliers also have suppliers and you are your customers' supplier\... a chain **Challenges of getting it right** Achieving seamless integration, alignment and coordination -- a big challenge in reality **Power and trust** is a key component in supply chains **Evidence** on best strategies not always available Poor configuration and design often problematic due to **legacy systems and infrastructure** trends in global outsourcing makes logistics costly and increases pipeline inventory (Pipeline inventory, also known as pipeline stock, is the value of products that have been ordered but are still in transit to their final destination.) the emphasis needs to be on **continuous improvement** and adoption of **best practice** **Creating a formula 1 supply chain** **\ ** **Service Supply Chain Management** "The service supply chain is the **network of suppliers, service providers, consumers and other supporting units that performs the functions of transaction of resources required to produce services**; transformation of these resources into supporting and core services; and the delivery of these services to customers" "Service supply chain management is the management of information, processes, resources and service performances **from the earliest supplier to the ultimate customer.**" **Customer participation** Any production process **that requires customer participation can be called a service operation** There are three types of services: A close-up of a person holding a pen and a book Description automatically generated **Bi-directional supply chains**  The simplest form of a bidirectional supply chain is for the customers to provide their inputs to the service provider, who converts the input into an output which is delivered back to the customer. **Characteristics of bi-directional Supply Chains** 1\. Customer supplied inputs can **vary in quality** 2\. Service supply relationships are hubs, not chains 3\. Service capacity is like inventory **Typical issues/scenario** Supply chains **often exhibit unpredictable dynamic behaviour** Lack integration à leads to volatility & distortion in demand à resulting in high inventories, long lead-times and high costs etc. **Third-party logistics (3PL)** is a supply chain management practice that involves outsourcing logistics functions to a separate company. 3PL providers offer a variety of services, including: transportation, warehousing, inventory management, order fulfillment, packaging, freight forwarding, customs brokerage, and returns management.  A diagram of a truck Description automatically generated **Service bullwhip effect**  - Delays in information processing, decision-making, and/or deployment of capacity will lead to a**mplification of backlogs and workloads.** - A **growth in backlog will lead to amplification of customer-induced contact and the associated workload.** - **Increased variability in workload will lead to reduced productivity**, which in turn will lead to further increase in backlogs and variability in workloads. - Reduced productivity will lead to reduction in the quality of service from staff. - Reduction in service, combined with increased backlog, can eventually lead to a tipping point. Many service operations are **complex** and involve **collaboration between multiple individuals** and organisations (e.g. Solving crimes) All of those involved have their own priorities and requirements. **Problems emerge if no-one is control of the conflicting perspectives** A diagram of a scientific research Description automatically generated **Outsourcing activity is extremely valuable in many industries and areas of businesses**  **But why does outsourcing fail?** 50% of outsourcing relationships worldwide are deemed to be unsuccessful, some of the reasons: - Basing outsourcing decision based solely on COST - Failing to consider the destination's security/risk - Inadequate planning & expectation management - Lack of internal communication - Poor transition management Most frequently reported problems: A colorful circle with different colored lines Description automatically generated with medium confidence **Outsourcing process**  **Self-service** "labor alone can be sufficient to induce greater liking for the fruits of one's labor: Even constructing a standardized bureau, an arduous, solitary task... We call this phenomenon the "IKEA effect", named in honor of the Swedish manufacturer whose products typically arrive with some assembly required." **Technology in service encounters** A diagram of a computer service Description automatically generated **Customer processing technology**  A diagram of a diagram of a customer Description automatically generated  Several pictures of a person standing in an airport Description automatically generated  **Service SCs differ because they are bi-directional** -- **the customer is also a supplier** Inputs vary in quality, suppliers are more like hubs in a network than a chain, capacity can fluctuate like inventory (bullwhip effect) **[L8 Service encounter and customer experience ]** **Service experience** How could a parcel delivery service be described by the service provider? What is the customer experience? **The service encounter** "Service encounter is the **period of time during which the customer directly interacts with some aspect of the service organisation**, often in a controlled environment" (Fisk et al 2013) "moments of truth are the time and place when and where the service provider has the **opportunity to demonstrate to the customer the quality of its services**\... in the next moment the opportunity will be lost" (Gronroos, 2000) It is the interaction between a service provider and a customer **Moments of truth**: Encounters providing an opportunity to influence customer's perceptions of the service quality **The service encounter triad** **The service organisation -- culture** The interaction between customer and contact personnel within the context of an organisation's culture as well as its physical surroundings (Disney vs London Eye?)\ -- Hoy and Miskel (1991) - Culture is shared orientations that hold the unit together and give a distinctive identity. **Contact personnel** Play an ambassadorial role Flexibility Tolerance for ambiguity Ability to monitor and change behaviour Empathy for customers **Difficult interactions with customers** Difficulties with interactions between customers and contact personnel arise when there are unrealistic customer expectations and unexpected service failure  **Empowerment** Invest in people Use technology to enable personnel Recruitment and training critical Link compensation to performance for employees at all levels **Managing the servicescape** A diagram of a customer response Description automatically generated **Staging experiences** "\...organizations cannot control the ultimate customer experience because experiences are dependent on many personal and contextual factors. At best, organizations create or stage the prerequisites that enable customers to have the desired experiences\..." **Experience design involves:** 1. Designing a series of encounters and cues 2. Sensory design 3. Engaging front line employees with customers 4. Paying attention to the dramatic structure of events 5. Managing the presence of fellow customers 6. Closely coupling backstage employees to the frontstage experience  **Entering the experience economy** "In the Age of Access, cultural production ascends to the first tier of economic life, while information and services move down to the second tier, manufacturing to the third tier and agriculture to the fourth tier." A diagram of a market Description automatically generated **Staging experiences** "\... an experience occurs when a company intentionally uses services as the stage, and goods as props, to engage individual customers in a way that creates a memorable event\..." **Promised experience** "Dinner is served promptly... whenever. On a Luxury Cruise Liner (LCL) cruise, you can do whatever. With no set dining times and 12 restaurants, you're free to dine where you want, when you want. It's called Choice Cruising." **Service experience management** "We envision service experience management as a new functional area sufficiently high in the organizational hierarchy such that marketing and operations are its reports....this department, group or person would advocate for the customer and the operations team to **ensure that customers get what they want given realistic operational capabilities**" **Customer experience** "Successful experiences are those that the customer finds unique, memorable and sustainable over time, would want to repeat and build upon, and enthusiastically promotes via word of mouth." **A customer journey map** helps you visualize what customers, clients, patients etc. are thinking, feeling, and doing Gathering customer emotions---and acting on them---helps customers feel you \'get\' them and builds brand trust **Service transaction analysis**  **More on staging experience** Before executives asked: - what unique benefit is my product or service offering my consumers? Today, executives ask: - What memorable impact can I make in my consumers life? - or How can I combine my product benefits and/or service features to create an event that my consumers passively or actively participate in? A close-up of a report Description automatically generated **[L9 Managing service performance]** **Performance measurement:** what gets measured gets managed  **Operations management perspective: the five competitive objectives** A group of text on a colorful background Description automatically generated with medium confidence **Service guarantees** "Enjoy a hassle-free night -- guaranteed. If you don't get a good night's sleep we'll give you your money back." Zanes cycles guarantee example: "I know a lifetime free service guarantee may sound expensive but it really is not. The products are so well made these days that they actually don't need a great deal of service and a lot of bikes don't get ridden too much anyway\...we use the guarantee as a tool to help us develop a relationship with the customer." **What is a GOOD service guarantee** - Unconditional - Easy to understand and communicate - Meaningful - Easy to invoke - Easy and quick to collect **Guarantees have financial consequences but can have benefits -- making a service organisation focus on service execution and quality** 1. Forces the organization to focus on the customer 2. Sets clear standards 3. Generates feedback 4. Forces the organization to understand failures 5. Builds marketing muscle **Service failure and recovery** Services failures are inevitable Extends from rudeness by front line staff to complete breakdown/shutdown The ability to restore the service is critical for perceived competence Some service failures may not be noticed by the organisations - failure to complain can be a problem Recovery may present an opportunity to impress  **Service recovery framework** A diagram of a service recovery process Description automatically generated **Continuous improvement (Kaizen)** 'an effort to continuously seek and make changes for the better through the processes which are characterised by either incremental or radical transformation, and to maintain the results.' The concept of CI literally implies never ending cycle The plan--do--check--act, or 'Deming' improvement cycle, and the define-- measure--analyze--improve--control, or DMAIC six sigma improvement cycle A diagram of a control and control system Description automatically generated **Incremental and Breakthrough Improvement Processes**  Scatter diagrams, flow charts, cause-effect diagrams, pareto diagrams, why-why analysis all useful tools for improvement A diagram of different types of diagrams Description automatically generated with medium confidence **Quality improvement programs/initiatives**  **Lean service philosophy** 1. Satisfy the needs of the customer by performing only the activities which add value in the eyes of the customer 2. Define the "value stream" by flowcharting the process to identify both value added and non value added activities 3. Eliminate waste. Waste in the value stream is any activity for which the customer is not willing to pay **Example** A diagram of steps to a customer Description automatically generated **Value stream mapping in services** 1. Map current state of process 2. Look for scopes of improvement (kaizen bursts) - Kaizen bursts are short, focused events aimed at generating quick improvements in a specific area of a process. 3. Develop a future state of the process 4. Implement future state of process and apply process controls **S1**   **S2**  **S3** A close-up of a white background Description automatically generated  A close-up of a text Description automatically generated **S4**  A close up of a text Description automatically generated **S5**  **S6**  A close up of a sign Description automatically generated **S7**  A close up of a text Description automatically generated  **S8** A close up of a text Description automatically generated  Define, design and deliver value. Delivery is crucial, and the other two are futile if delivery is poor **S9** A close-up of a text Description automatically generated  **S10** **Exam points** Give bullet points in plan in case you cant finish questions -- may help marker think positively about direction of question -- more favourable Yen sushi, forensic science lab, own case study for individual coursework should all be used if possible