supply chain management chapter 12

how to compute productivity
productivity = outputs produced/inputs used
service productivity
effective use of overall resources

-outputs produced (sales amount)
-inputs (single factor productivity) (labor hours)
-inputs (multiple factor productivity) (labor, material, energy, capital)
-inputs and outputs vary depending on industry and managerial preferences

improving service productivity is challenging due to
-high labor content
-individual customized services
-difficulty of automating services
-problem of assessing service quality
baumols disease
productivity growth in services is low
global service issues
-labor, facilities and infrastructure support.
-legal and political issues
-domestic competitors and the economic climate
-identifying global customers
Service Strategy Development
three generic competitive strategies:
-cost leadership
cost leadership strategy
requires a large capital investment in automate, state-of-the-art equipment and significant efforts in the areas of controlling and reducing costs, doing things right the first time, standardizing services and aiming marketing efforts at cost-conscious customers.
-example is demand for cheap air travel to India and how they are marketing to people who dont need customization just need cheap flights.
differentiation strategy
creating a service that is considered unique. the uniqueness can take many forms of including customer service excellence, brand image, variety and use of technology. often created as the result of companies listening to their customers. does not necessary mean higher costs; it merely refers to the ability of the service to offer unique elements in their services. it may mean the customer is willing to pay more for the service.
-joanns making a website where customers can see and test out things before they buy them
focus strategy
incorporates the idea that a service can serve a narrow target market or niche better than other firms that are trying to serve broader market. companies that specialize in the market niches can provide customized services and expertise to suit the needs of these customers.
service delivery system
a continuum of services that may range from mass-produced, low-customer-contact systems, at one extreme (such as ATM’s) to highly customized, high-customer-contact systems at the other (such as expensive beauty salons)
-front of the house
-back of the house
-service bundle
service bundle
a group of attributes that are offered to customers when purchasing services, including the explicit service itself, the supporting facility, facilitating goods and implicit services. successful services are designed to deliver this bundle of attributes in the most efficient way, while still satisfying customer requirements.
front of the house operations
operations that are involved with interactions with customers, such as front desk operations
back of the house operations
those services that do no require customer contact
efficiency = actual output/ effective capacity
layout strategies
-departmental layouts to reduce distance traveled
-departmental layouts to maximize closeness desirability- a closeness desirability rating between departments used to design a layout that maximizes a rating for the entire office
service capacity
the number of customers per day that a firms service delivery systems are designed to serve, although it could also be some other period of time such as customers per hour or customers per shift.
capacity utilization
a ratio equal to capacity used/capacity available per period indicates the level at which the firm utilizes its available capacity.

capacity utilization= actual customers served per period/capacity

level demand
theory for managing capacity that occurs when a firm utilizes a constant amount of capacity regardless of demand variations
chase demand
a strategy that is used when the amount of capacity varies with demand.
Capacity Management when demand exceeds available service capacity
techniques used to minimize the costs of hiring workers and letting them go:
-cross training
-part-time employees
-using customers
-using technology
-using demand management techniques
cross training
firms create the capability to quickly expand capacity as demand dictates while simultaneously minimizing the costs of having customers wait or hiring and laying off workers.
using customers
have the customers do some off the work- pumping gas, filling soda cups, filing taxes, filing legal forms.
using technology
providing technological assistance in the form of computers or other equipment to service company personnel can improve the availability of servers to process customers, resulting in more service capacity, faster service completion times, better service quality and the need for fewer employees. voice activated telephone response systems, online banking.
using demand management techniques when demand exceeds available service capacity
-raising prices during busy periods to reduce demand and shift it to less busy periods, taking reservations or appointments to schedule demand for less busy periods, discouraging undesirable demand through use of screening procedures and marketing ads and segmenting demand to facilitate better service.
Capacity Management when available service capacity exceeds demand
-finding other uses
-using demand management techniques
finding other uses
-airlines partnering with resorts to provide vacation packages during off peak seasonal periods, hotels booking business conferences during slow periods or ski resorts designing mountain bike trails or building cement luge runs for summer use.
using demand management techniques when available service capacity exceeds demand
-lowering prices during off peak periods, as in early bird dinner specials or mid week hotel rates, as well as designing aggressive marketing campaigns for use during slow business periods
utilization = actual output/design capacity
service quality
the satisfaction or perceived level of quality a customer experiences with regard to a service. it includes many elements-for example, because of health and safety concerns, pharmacies are under intense pressure to provide high quality service to customers.
the five dimensions of service quality
generally used by customers to rate service quality
Recovery from poor service quality
-when service failures do occur, firms must be able to recover quickly and forcefully to satisfy customers, this involves empowering front line personnel to identify problems and then provide solutions quickly and in an empathetic way.
consistently performing the service correctly and dependably.
-billing accuracy
-order accuracy
-on-time completion
-promises kept
providing the service promptly and in a timely manner
-on-time appointment
-timely callback
-timely confirmation of order
using knowledgeable, competent, courteous employees who convey trust and confidence to customers
-skills of employees
-training provided to employees
-honesty of employees
-reputation of firm
providing caring and individual attention to customers
-customized service capabilities
-customer recognition
-degree of server-customer contact
-knowledge of customer
the physical characteristics of the service including the facilities, the servers, equipment and other customers.
-appearance of the employees
-appearance of the facility
-appearance of the customers
-equipment and tools used
managing perceived waiting lines
-customers to perceive the wait time to be much longer or short than it really is.

-first and second laws of service

-keep customers occupied
-start the service quickly
-relieve customer anxiety
-keep customers informed
-group customers together
-design a fair waiting system

law #1 of managing perceived waiting times
satisfaction = perception – expectation
law #2 of managing perceived waiting times
it is hard to play catch up ball. if customers start out happy when the service is first encountered it is easy to keep them happy.
why waiting lines cause concern
-the cost to provide waiting space
-a possible loss of business when customers leave the line before being served or refuse to wait at all
-a possible loss of goodwill
-a possible reduction in customer satisfaction
-resulting congestion may disrupt other business operations and or customers
queuing system design
the input process
-customers arrivals are referred to as demand source
-customers appear in arrival patterns
infinite source
-customer arrivals are unrestricted
-the number of potential customers greatly exceeds system capacity
-wal-mart, target, CVS, beauty parlor
-everyone store you go to
finite source
-the number of potential customers is limited
-capping the number of people who can use the system
-movie theatre, concert, arena
-a server in a service system
-it is assumed that each channel can handle one customer at a time
-toll booths
-the number of steps in a queuing system
-from one station to the next
single channel. single phase
demand source —> server
single channel, multiple phase
demand source —> server —> server —> server
multiple channel, single phase
demand source
multiple channel, multiple phase
/—–>server —>server —> server
demand source
l—–>server —>server —> server
demand source
the customers arrival