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1、ISM 270Service Engineering and ManagementLecture 2NotesVideo of class available from websiteUsername:Password: Homework 1 due next weekHomework 2 due 2 weeksOffice hours 5pm room 2085Computer access to SOE account availableLibrary challengesHomework: Week 1LinkData Envelopment Analysis (DEA)Method f

2、or evaluating efficiency of similar venues/productsIncorporates inputs and outputs not just one dimensionalUses LINEAR PROGRAMMING (LP)KEY IDEA:Weight the inputs and outputs to make one unit as efficient as possible, relative to all othersIf this is 100% efficient, then the unit is on the frontier o

3、f efficiency;If less than 100%, there are other units that could utilize the SAME inputs for MORE outputsDEA summary of termsDefine variablesE_k = efficiency of unit ku_j= coefficient for output j (relative decrease in efficiency per unit reduction of output value)v_i = coefficient for input i (rela

4、tive increase in efficiency per unit decrease of input value)O_jk = observed ouput j units generated by service unit k during one time periodI_ik = no. units input used by service unit k during one periodNote:k=1.K = service unit counterj=1.M = output counteri=1.N = input counterDEA Objective and co

5、nstraintsEvaluating unit eTrick = Rescaling to get linear equationsExample from Text: Burger PalaceSmall, artificial example for illustration!Page 68Excel formulationThe Nature of ServicesLearning ObjectivesClassify a service into one of four categories using the service process matrix.Describe a se

6、rvice using the four dimensions of the service package.Discuss the managerial implications of the distinctive characteristics of a service operation.Discuss the insights obtained from a strategic classification of services.Discuss the role of a service manager from an open-systems view of service. A

7、n Integrated Approach to Service ManagementThe Eight Components Product Elements Place, Cyberspace, and Time Promotion and Education Price and Other User Outlays + Process + Productivity and Quality + People + Physical EvidenceRequire the Integration of Marketing, Operations, and Human ResourcesServ

8、ice/Product BundleElementCore GoodsExampleCore ServiceExampleBusinessCustom clothierBusiness hotelCoreBusiness suitsRoom for the nightPeripheralGoodsGarment bagBath robePeripheralServiceDeferred payment plansIn house restaurantVariantCoffee loungeAirport shuttleThe Service Process Matrix Degree Degr

9、ee of Interaction and Customization of labor Intensity Low High Service factory: Service shop: * Airlines * Hospitals Low * Trucking * Auto repair * Hotels * Other repair services * Resorts and recreation Mass service: Professional service: * Retailing * Doctors High * Wholesaling * Lawyers * School

10、s * Accountants * Retail aspects of * Architects commercial banking The Service PackageSupporting Facility: The physical resources that must be in place before a service can be sold. Examples are golf course, ski lift, hospital, airplane.Facilitating Goods: The material consumed by the buyer or item

11、s provided by the consumer. Examples are food items, legal documents, golf clubs, medical history.Information: Operations data or information that is provided by the customer to enable efficient and customized service. Examples are patient medical records, seats available on a flight, customer prefe

12、rences, location of customer to dispatch a taxi.Explicit Services: Benefits readily observable by the senses. The essential or intrinsic features. Examples are quality of meal, attitude of the waiter, on-time departure.Implicit Services: Psychological benefits or extrinsic features which the consume

13、r may sense only vaguely. Examples are privacy of loan office, security of a well lighted parking lot.Distinctive Characteristics of ServicesCustomer Participation in the Service Process: attention to facility design but opportunities for co-productionSimultaneity: opportunities for personal selling

14、, interaction creates customer perceptions of qualityPerishability: cannot inventory, opportunity loss of idle capacity, need to match supply with demandIntangibility: creative advertising, no patent protection, importance of reputation Heterogeneity: customer participation in delivery process resul

15、ts in variabilityStrategic Service Classification (Nature of the Service Act) Direct Recipient of the ServiceNature of the Service Act People Things Peoples bodies: Physical possessions: Health care Freight transportation Passenger transportation Repair and maintenanceTangible actions Beauty salons

16、Veterinary care Exercise clinics Janitorial services Restaurants Laundry and dry cleaning Peoples minds: Intangible assets: Education BankingIntangible actions Broadcasting Legal services Information services Accounting Theaters Securities Museums Insurance Strategic Service Classification (Relation

17、ship with Customers) Type of Relationship between Service Organization and Its CustomersNature of Service Delivery “Membership relationship No formal relationship Insurance Radio station Telephone subscription Police protectionContinuous delivery Electric Utility Lighthouseof service Banking Public

18、Highway Long-distance phone calls Restaurant Theater series tickets Pay phoneDiscrete Transit pass Toll highwaytransactions Sams Wholesale ClubMovie theater Airline frequent flyer Public transportation Strategic Service Classification (Customization and Judgment) Extent to Which Service Characterist

19、ics Are CustomizedExtent to Which Personnel Exercise Judgment in Meeting Customer Needs High Low Surgery Preventive health programs High Taxi services Education (large classes) Gourmet restaurant Family restaurant Telephone service Public transportation Hotel services Spectator sports Low Retail ban

20、king Movie theater Cafeteria Institutional food service Strategic Service Classification (Nature of Demand and Supply) Extent of Demand Fluctuation over TimeExtent to which Supply Is Constrained Wide Narrow Electricity Insurance Peak demand can Telephone Legal services usually be met Police emergenc

21、y Banking without a major delay Hospital maternity unit Laundry and dry cleaning Tax preparation Fast food restaurant Peak demand regularly Passenger transportation Movie theater exceeds capacity Hotels and motels Gas station Strategic Service Classification (Method of Service Delivery) Availability

22、 of Service OutletsNature of Interaction between Customer and Service Organization Single site Multiple site Customer travels to Theater Bus service service organization Barbershop Fast-food chain Service provider Taxi Mail delivery travels to customer Pest control service AAA emergency repairs Tran

23、saction is at Credit card company Broadcast network arms length Local TV station Telephone company Open Systems View of Services Service Process Consumer Evaluation Consumer arrivals Consumer participant departures Criteria (input) Consumer-Provider ( output) Measurement interface Control Monitor Cu

24、stomer demand Service operations manager Service personnel Production function: Perceived needs Alter Monitor and control process Schedule Empowerment Location demand Marketing function: supply Training Interact with consumers Attitudes Control demand Modify as necessary Define standard Service pack

25、age Supporting facility Communicate Facilitating goods Basis of by advertising Explicit services selection Implicit services Topics for DiscussionWhen does collecting information through service membership become an invasion of privacy?What are some management problems associated with allowing servi

26、ce employees to exercise judgement in meeting customer needs?What factors are important for a manager to consider when attempting to enhance a service firms image?Sample QuizLinkService Strategy Learning ObjectivesFormulate a strategic service vision.Discuss the competitive environment of services.D

27、escribe how a service competes using the three generic service strategies.Discuss the service purchase decision.Discuss the competitive role of information in services.Explain the role of the virtual value chain in service innovation.Discuss the limits in the use of information.Categorize a service

28、firm according to its stage of competitiveness.Conduct a data envelopment analysis (DEA).Strategic Service VisionTarget Market SegmentsWhat are common characteristics of important market segments?What dimensions can be used to segment the market, demographic, psychographic?How important are various

29、segments?What needs does each have?How well are these needs being served, in what manner, by whom? Strategic Service VisionService ConceptWhat are important elements of the service to be provided, stated in terms of results produced for customers?How are these elements supposed to be perceived by th

30、e target market segment, by the market in general, by employees, by others?How do customers perceive the service concept?What efforts does this suggest in terms of the manner in which the service is designed, delivered, marketed?Strategic Service VisionOperating StrategyWhat are important elements o

31、f the strategy: operations, financing, marketing, organization, human resources, control?On which will the most effort be concentrated?Where will investments be made?How will quality and cost be controlled: measures, incentives, rewards?What results will be expected versus competition in terms of, q

32、uality of service, cost profile, productivity, morale/loyalty of servers?Strategic Service VisionService Delivery SystemWhat are important features of the service delivery system including: role of people, technology, equipment, layout, procedures?What capacity does it provide, normally, at peak lev

33、els?To what extent does it, help insure quality standards, differentiate the service from competition, provide barriers to entry by competitors?Competitive Environment of ServicesRelatively Low Overall Entry BarriersEconomies of Scale LimitedHigh Transportation CostsErratic Sales FluctuationsNo Powe

34、r Dealing with Buyers or SuppliersProduct Substitutions for ServiceHigh Customer LoyaltyExit Barriers Competitive Service Strategies (Overall Cost Leadership)Seeking Out Low-cost CustomersStandardizing a Custom Service Reducing the Personal Element in Service Delivery (promote self-service)Reducing

35、Network Costs (hub and spoke)Taking Service Operations Off-lineCompetitive Service Strategies (Differentiation)Making the Intangible Tangible (memorable)Customizing the Standard ProductReducing Perceived RiskGiving Attention to Personnel TrainingControlling QualityNote: Differentiation in service me

36、ans being unique in brand image, technology use, features, or reputation for customer service.Competitive Service Strategies (Focus)Buyer Group: (e.g. USAA insurance and military officers)Service Offered: (e.g. Shouldice Hospital and hernia patients) Geographic Region: (e.g. Austin Cable Vision and

37、TV watchers)Customer Criteria for Selecting a Service ProviderAvailability(24 hour ATM)Convenience(Site location)Dependability(On-time performance)Personalization(Know customers name)Price(Quality surrogate) Quality(Perceptions important)Reputation(Word-of-mouth)Safety(Customer well-being)Speed(Avoi

38、d excessive waiting)Service Purchase DecisionService Qualifier: To be taken seriously a certain level must be attained on the competitive dimension, as defined by other market players. Examples are cleanliness for a fast food restaurant or safe aircraft for an airline.Service Winner: The competitive

39、 dimension used to make the final choice among competitors. Example is price. Service Loser: Failure to deliver at or above the expected level for a competitive dimension. Examples are failure to repair auto (dependability), rude treatment (personalization) or late delivery of package (speed). Compe

40、titive Role of Information in ServicesStrategic Focus Competitive Use of Information On-line(Real time)Off-line(Analysis)External (Customer) Creation of barriers to entry:Reservation system Frequent user clubSwitching costsData base asset:Selling information Development of services Micro-marketingIn

41、ternal(Operations)Revenue generation: Yield managementPoint of sale Expert systems Productivity enhancementInventory status Data envelopmentanalysis (DEA) The Virtual Value ChainMarketplace vs MarketspaceCreating New Markets Using Information (Gather, Organize, Select, Synthesize, and Distribute)Thr

42、ee Stage Evolution 1st Stage (Visibility): See physical operations more effectively with information Ex. USAA “paperless operation 2nd Stage (Mirroring Capability): Substitute virtual activities for physical Ex. USAA “automate underwriting 3rd Stage (New Customer Relationships): Draw on information

43、to deliver value to customer in new ways Ex. USAA “event oriented serviceLimits in the Use of InformationAnti-competitive (Barrier to entry)Fairness (Yield management)Invasion of Privacy (Micro-marketing)Data Security (Medical records)Reliability (Credit report)Using Information to Categorize Custom

44、ersCoding grades customers on how profitable their business is.Routing is used by call centers to place customers in different queues based on customer code.Targeting allows choice customers to have fees waived and get other hidden discounts.Sharing data about your transaction history with other fir

45、ms is a source of revenue.Stages in Service Firm Competitiveness 1. Available for service 2. Journeyman 3. Distinctive competence 4. World-class service delivery Customers patronize service Customers neither seek Customers seek out the firm The companys name is synonymous firm for reasons other than

46、 out nor avoid the firm. on the basis of its sustained with service excellence. Its service performance. reputation for meeting doesnt just satisfy customers; it customer expectations delights them and thereby expands customer expectations to levels its competitors are unable to fulfill. Operations

47、is reactive, Operations functions in a Operations continually excels, Operations is a quick learner and fast at best. mediocre, uninspired reinforced by personnel innovator; it masters every step of the fashion. management and systems service delivery process and provides that support an intense cap

48、abilities that are superior to customer focus. competitors. SERVICE QUALITY Is subsidiary to cost, Meets some customer Exceeds customer Raises customer expectations and highly variable. expectations; consistent expectations; consistent seeks challenge; improves on one or two key on multiple dimensions. continuously. dimensions.Stages in Service Firm Competitiveness1. Available for service 2. Journeyman 3. Distinctive competence 4. World-class service deliveryBACK OFFICECounting room. Contributes to service, plays Is equall