UNIT 1:- SERVICES OPERATIONS Role of Services in an Economy:-1)Services are central to the

Service Definitions:- A service is an activity or series of activities of economic activity in any society. 2)Infrastructure services, such as
more or less intangible nature that normally, but not necessarily, take transportation and communications, are the essential links among all
place in interactions between customer and service employees sectors of the economy, including the final consumer. 3)In an
and/or physical resources or goods and/or systems of the service industrialized economy, specialized firms can supply business services
provider, which are provided as solutions to customer problems. - to manufacturing firms more cheaply and efficiently than
(Christian Gronroos, Service Management and Marketing, Lexington, manufacturing firms can supply these services for themselves.
Mass: Lexington Books, 1990, p. 27.) 4)Government services play a critical role in providing a stable
Service Operation:- is an open transformation process of converting environment for investment and economic growth (public education,
inputs (consumers) to desired outputs (satisfied consumers) through health care, well-maintained roads, etc..) 5)It is imperative to
the appropriate application of resources (family, material, labor, recognize that services are not peripheral activities but rather
information, and the consumer as well). It is related with delivering integral parts of society.
service to the customers of the service. It involves understanding the
service needs of the target customers, managing the processes that
deliver the services, ensuring objectives are met, while also paying
attention to the constant improvement of the services.
Services Operations Management:- is managing the service
operations to create customer-value and achieve organisational
objectives. It includes creating and managing the service operations,
managing organisational resources, processing customer orders,
ensuring outputs and customer experience to create customer value,
generate organisational revenues for organisational success, etc.
Service Managers design and deliver services; they are responsible
to manage most of the resources in many organisations; they
contribute significantly to the success of the organisation.

1
DISTINCTIVE CHARACTERISTICS OF SERVICES:- Customer 9) Knowing, implementing and influencing strategy 10) Continually
Participation in the Service Process: the presence of the customer as improving the operation 11) Encouraging innovation 12) Managing
a participant in the service process requires an attention to facility short-term and long-term issues simultaneously.
design that is not found in traditional manufacturing operations. Types of services
Simultaneity: services are created and consumed simultaneously,
thus, cannot be stored is a critical feature in management of services.
Perishability: a service cannot y be stored, it is lost forever when not
used. Intangibility: services are ideas and concepts; products are
things; therefore, it follows that service innovations are not
patentable. Heterogeneity: customer involvement in delivery process
results in variability.
The Service Package:- It is defined as a bundle of goods and services
with information that is provided in some environment. This bundle
consists of five features as shown in figure in the shape of an onion
with the service experience at the core.1) Supporting facility - the
physical resources that must be in place before a service can be
offered. (Eg. a golf course, a ski lift, a hospital, and an airplane).
2)Facilitating goods - the material purchased or consumed by the
buyer, or the items provided by the customer. (Eg. golf clubs, skis,
food items, replacement auto parts, legal documents, and medical
supplies). 3) Information ) - Data that is available from the customer
or provider to enable efficient and customized service. (Eg. electronic
patient medical records, airline Web site showing seats available on a
flight,) 4) Explicit services - The benefits that are readily observable
by the senses and that consist of the essential or intrinsic features of
the service. (Eg. the absence of pain after a tooth is repaired, a
smooth-running automobile after a tune-up) 5) Implicit services -
Psychological benefits that the customer may sense only vaguely, or
the extrinsic features of the service. (Eg. the status of a degree from a
premier institution, the privacy of a loan office)
Challenges facing Service Operations Managers:- 1) Managing
multiple customers 2) Understanding the service concept 3)
Managing the outcome and experience 4) Managing the customer 5)
Managing in real-time 6) Co-ordinating different parts of the 2
organization 7) Understanding the relationship between operations
decisions and business/ 8) Organizational success
Object of the Service Process:- For services such as dry cleaning or Service Blueprinting:- Developing a new service based on the
auto repair, the service is performed on the property of the subjective ideas contained in the service concept can lead to costly
customer; in this case, the property must be secured from damage or trial-and error efforts to translate the concept into reality. When a
loss. building is developed, the design is captured on architectural
Type of Customer Contact:- Customer contact with the service drawings called blueprints. A blueprint is a precise definition of the
delivery system can occur in three basic ways. i)The customer can be service delivery system that allows management to test the service
physically present and interact directly with the service providers in concept on paper before any final commitments are made. The
the creation of the service. ii)The contact may be indirect and occur blueprint also facilitates problem solving and creative thinking by
via the Internet from the customer’s home or office iii)Some service identifying potential points of failure and highlighting opportunities
activities can be performed with no customer contact at all. to enhance customers’ perceptions of the service.
Service blue print of luxury hotel

5
Generic Approaches to Service System Design:- Service package is
key to designing the service system itself. This design can be
approached in the following ways: 1)Production-Line Approach:- This
approach attempts to translate a successful manufacturing concept
into the service sector, and several features contribute to its success.
Limited Discretionary Action of Personnel, Division of Labor,
Substitution of Technology for People, Service Standardization.
2)Customer as Co-producer:- For most service systems, the customer
is present when the service is being performed. Instead of being a
passive bystander, the customer represents productive labor just at
the moment it is needed, and opportunities exist for increasing
productivity by shifting some of the service activities onto the
customer (i.e., making the customer a co-producer ). The following
features illustrate some of the contributions that customers can
make in the delivery of services. Self-Service, Smoothing Service
Demand, Customer-Generated Content. 3)Customer Contact
Approach:- Customer contact refers to the physical presence of the
customer in the system. This approach depends on the required
amount of customer contact in the creation of the service, and on
the ability to isolate a technical core of low-contact operations. This
approach to service design would seem to be most appropriate for
the processing-of-goods category (e.g., dry cleaning, where the
service is performed on the customer’s property). Degree of
Customer Contact, Separation of High- and Low-Contact Operations,
Sales Opportunity and Service Delivery Options.

Information Empowerment:- IT is such a fundamental part of daily

life throughout the entire world that the challenge is to find some
aspect not touched by it. No service today could survive without use
of IT, and successful managers will see that IT offers much more than
simply a convenient way to maintain records. Indeed, one of its most
important functions is to Empower Employees, Empower Customers
6
Service Innovation:- Innovation is viewed both as the process of Unique Challenges for Service Innovation are: Ability to protect
creating something new and also as the actual product or outcome. intellectual and property technologies: The transparency of service
For services the outcome need not be a new service product but systems makes imitation simpler, and patents are difficult to obtain.
rather some degree of modification to an existing service. Radical Incremental nature of innovation: Because customers participate in
innovations are offerings not previously available to customers or service systems, innovation tends to be evolutionary rather than
new delivery systems for existing services (e.g., Noble Web site). radical to allow for acceptance. Degree of integration required:
Incremental innovations are changes to existing services that are Service innovation requires interactions among people, products, and
valued as improvements (e.g., the addition of play scapes at fast-food technology and thus requires systems integration. Ability to build
restaurants). Service innovation can provide an effective way to prototypes or conduct tests in a controlled environment: Services
create sustained competitive advantage for a company. Turning to or cannot be tested realistically in an isolated laboratory, so the risk of
assuming service strategies may help organizations to overcome the failure or poor performance upon launch.
problem of growth maintenance in saturated markets as well as the Frontline employees in service innovation processes:- In service
problem caused by the circumstance of commoditization. Services innovation, frontline employees, as previous argued, are seen as
are mainly intangible or knowledge products, a discussion on service important sources for innovation, and with a potential to engage in
innovation can benefit from conceptualizations of innovations innovation activities, based on their interaction with customers.
stepping back from product-based definitions “Service innovation” However, innovations that are characterized as un-intended, such as
has become a term referring to innovation taking place in the various ad hoc innovations, are criticized. , Drejer (2004) for one argues that
contexts of services, including the introduction of new services or these forms of innovation are too close to continuous improvement
incremental improvements of existing services. that would come out of regular learning activities in any organization,
and thus do not represent innovation. Innovation is therefore seen as
an intended and planned change, versus ad hoc innovation that
although containing reproducible elements (Sundbo, 1997), can
occur from an unplanned situation.

9
Customer role in service innovation:- Interaction between customer Service operations design on service innovation:- The dearth of
and service provider is perhaps the most basic feature of service insight on how service organizations can design their operations to
activities. The importance of customer-based innovation in services enable service innovation is noteworthy. This is evident when one
(involving customers directly in service innovation) seems intuitively considers the paucity of strategies for designing and executing
right: service organizations should take advantage of their core innovative customer-focused service operations). Service operations
competence – that of interacting with their customers – also in design based on customer demand is regarded as “a critical mindset
service development. In case of services where person-to-person that organizations need to master in order to innovate successfully”.
interaction between a customer and a service provider’s employees Service operations design is emerging as a response to service
is a constitutive element in the service, customer involvement in sector’s need to improve innovation; and the challenge is to
service development is natural. investigate what form of, service operations design facilitates and
operationalize service innovation in organizations
Technological Innovation in Services:- Innovation is a destroyer of
tradition; thus, it requires careful planning to ensure success. By
necessity, the productivity benefits of new technology will change
the nature of work. Any introduction of new technology should
include employee familiarization to prepare workers for new tasks
and to provide input into the technology interface design. For
services, the impact of new technology might not be limited to the
back office. It could require a change in the role that customers play
in the service delivery process. Customer reaction to the new
technology, determined through focus groups or interviews, also
could provide input into the design to avoid future problems of
acceptance (e.g., consider the need for surveillance cameras at
automated teller machines). For services, “the process is the
Marketing in service innovation:- Marketing innovation and product” because customers participate directly in the service
creativity in service sector can help in attracting new clients and delivery. Therefore, the success of technological innovations,
retain the current clients which will finally result in achieving a particularly for the front office, depends on customer acceptance.
competitive edge for the firm. When quality is improved in creative Customers also might need to learn new skills (e.g., how to operate
ways, cost is reduced and productivity is raised a quality-first an automatic teller machine or pump gasoline), or they might have to
philosophy and innovative efforts are indispensable p and forgo some benefit (e.g., loss of float through the use of electronic
appropriate ways for enhancing corporate performance. In funds transfer) The contribution of customers as active participants
promoting services and delivering those services to customers in the or co-producers in the service process must be considered when
right time and place since time and speed, became essential in making changes in the service delivery system. As internal customers,
service sector, and depends on innovation in this competition in
order to deliver the best products and services to achieve
1 employees also are affected by new technology and often need
retraining
competitive advantage and gain customer satisfaction and loyalty. 0
Service Strategy:- Service strategy begin with a vision of the place Global Trends in Services Sector:- The services sector plays an
and purpose of the enterprise. A strategic service vision is formulated increasingly important role in the global economy and the growth
by addressing questions about the target market, service concept, and development of countries. Services are becoming crucial in a
operating strategy, and delivery system. However, the competitive country's development, including for the achievement of the
environment of services presents challenges such as low entry Millennium Development. Goals, such as poverty reduction and
barriers, product substitution, and limited opportunities for access to basic services, including education, water and health
economies of scale that must be overcome. It begins with a vision of services. Service trade is the new frontier for enhancing their
the organisation’s service:- 1)Strategic service vision 2)Competitive participation in international trade and, in turn, realizing
environment 3)Competitive service strategies 4)Strategic analysis development gains. It is critically important to design and implement
5)Winning customers 6)Competitive role of information 7)Using a services driven development strategy within a coherent and
information to categorise customers 8)Stages in competitiveness of comprehensive policy framework, ensuring linkages with other policy
service firms areas and overall national development objectives. Major worldwide
trends are: 1)Quality of services 2)Operational excellence.
3)Innovation 4)Commercial efficiency 5)Steering performance
6)Controlling risk while maintaining compliance
Services’ Contribution to Manufacturing:- Services are used
throughout the manufacturing process and the manufacturing value
chain. Some services are needed early in the chain (e.g., research and
development); some are needed at the end (retailing, maintenance
and repair); and some are needed at every stage
(telecommunications and financial services). Individual
manufacturers often require a full spectrum of services. Services can
include a wide variety of activities, such as trade, transportation,
information, education, health, and financial and professional
services.
Rationales of Services in the Manufacturing Sector:- Services have
always been embedded throughout the manufacturing value chain.
Developments in the services economy have transformed the way
traditional services activities are conducted and have even
introduced new services related to the use of new technology. Key
drivers of manufacturing firms’ use of services are identified as:
1)The increasing geographic dispersion of supply chains with
specialization. 2)The need to cut costs and improve efficiency. 3)The
3 desire to deepen customer relationships by providing services related
to their products.
Role of Services in Manufacturing:- Productivity Gains in Service Design Elements:- strategy to target customers are: Delivery
Manufacturing Are Associated with Business Services. Services Create system, Facility design, Location, Capacity planning, Information,
Downstream Benefits for Manufacturers. Services Are Associated Quality, Service encounter, Managing capacity and demand.
with Intangible Capital, a Source of Gains in Labor Productivity.
Services Liberalization Benefits Manufacturing
Service Development:- Ideas for new service innovations can
originate from many sources. Customers can offer suggestions (e.g.,
menu additions at a restaurant). Frontline employees can be trained
to listen to customers’ concerns (i.e., listening posts). Customer
databases can be mined for possible service extensions (e.g.,
additional financial services). Trends in customer demographics can
suggest new services (e.g. long-term health care) and new advances
in technology. These ideas from the input to the “development”
stage of the New Service Development (NSD) cycle as shown in
following Fig.

TAXONOMY FOR SERVICE PROCESS DESIGN:- Degree of Divergence:-

A standardized service (i.e., low divergence) is designed for high
volumes with a narrowly defined and focused service. The tasks are
routine and require a workforce with relatively low levels of technical
skills. For customized services (i.e., high divergence), more flexibility
and judgment are required to perform the service tasks. To achieve
customer satisfaction, decision making is delegated to service
4 workers who can perform their tasks with some autonomy and
discretion (i.e., the workers are empowered).
The Internet as a Service Enabler:- The Internet is the worldwide,
publicly accessible network of interconnected computer networks
that transmits data using the standard Internet Protocol (IP). It is a
“network of networks” that consists of millions of smaller academic
(.edu), business (.com), non-profit (.org), and government (.gov)
networks, which together carry various information and services,
such as electronic mail, online chat, file transfer, streaming media,
voice-over-IP (VoIP), and access to the World Wide Web (www).
Internet is a collection of interconnected computer networks, linked
by copper wires, fiber-optic cables, and wireless connections; the
Web is a collection of interconnected documents and other
resources, linked by hyperlinks and uniform resource locators (URLs).
From a service provider’s perspective, the Internet is an ideal vehicle
for connecting with its customers in a cost effective manner. With the
advent of modern wireless communications (portability) and Web 2.0
social networking (YouTube, Linked in, and Twitter), new
opportunities emerge for connecting with your customers or finding A comprehensive review of the literature of pricing of services
new ones. Also available is a new communications technology, identified twelve pricing methods falling into three large categories
General Packet Radio Service (GPRS), a packet oriented mobile data as follows: (1)Cost-based methods:- i)Cost-plus method – a profit
service available to users of the 3G/4G cellular communications margin is added on the service’s average cost ii)Target return pricing
system. In the future, service firms can push information to customers – the price is determined at the point that yields the firm’s target rate
rather than passively waiting for an inquiry. of return on investment iii)Break-even analysis – the price is
Pricing Strategies in Services:- Service sector has become a dominant determined at the point where total revenues are equal to total costs
sector in every economy around the world. The contribution of iv)Contribution analysis – a deviation from the break- even analysis,
services to the overall development of the economy has become where only the direct costs of a product or service are taken into
more in recent years not only in developed countries, but also in consideration v)Marginal pricing – the price is set below total and
developing countries. The contribution of services to Indian GDP has variable costs so as to cover only marginal costs (2) Competition-
been more than fifty percent during previous decade. The expanding based methods:- i)Pricing similar to competitors or according to the
economy and markets opened the doors for many business houses to market’s average prices ii)Pricing above competitors iii)Pricing below
start their venture in service sector. Because of having unique competitors. iv)Pricing according to the dominant price in the market
characteristics, services are posing challenges to the marketers in – the leader’s price that is adopted by the rest of the companies in
formulating strategies. the market. (3) Demand-based methods:- i)Perceived-value pricing –
the price is based on the customers’ perceptions of value ii)Value
7 pricing – a fairly low price is set for a high quality service iii)Pricing
according to the customers’ needs – the price is set so as to satisfy
customers’ needs.
Performance Measurement:- Performance measurement is costly The Emergence of Self-Service:- The vignette of a typical business
and few organizations have calculated just how much time and trip illustrates many opportunities for self-service and suggests that
energy they spend on measuring their performance. There are four provider motivation and customer benefits can drive the growth of
main purposes or reasons to take measurement: communication, self service. Elimination of labor costs for nonproductive activity is
motivation, control and improvement. The key measures used by the principal driver for the service provider. Service has migrated
operations managers to control and assess their service processes from human interaction to substitution of machines for service
were primarily internal operational measures, such as productivity, employees or, where feasible, to any where any time electronic
throughput times and volumes. Operations managers need to ensure service. Introduction of ATMs by banks a quarter century ago saved
that they have a mix or balance of measures to communicate their teller costs but also provided customers with place-and-time
intentions, motivate their workforce, control and improve their convenience.
processes.

The vignette of a typical business trip illustrates many opportunities

Performance Issues in Service Systems:- Identifying performance for self-service and suggests that provider motivation and customer
issue beacons still remains as a time consuming and challenging task. benefits can drive the growth of self service. Elimination of labor
System performance issues may be caused by various causes. Huge costs for nonproductive activity is the principal driver for the service
investigation scope brings a lot of uncertainties and makes the provider. Service has migrated from human interaction to
diagnosis time consuming. Systems usually record a large amount of substitution of machines for service employees or, where feasible, to
monitoring data. In practice, however, quite often only a small subset any where any time electronic service. Introduction of ATMs by banks
of monitoring data is actually related to a given performance issue. 8 a quarter century ago saved teller costs but also provided customers
The overwhelming amount of irrelevant monitoring data brings with place-and-time convenience.
challenges for identifying performance issue beacons.
 UNIT 2
MANAGING CAPACITY AND DEMAND:- Optimum utilisation of
service capacity is a challenge to service operations managers
because of the inherent variability of demand. Two generic strategies
are often used to match capacity with demand; Level capacity
strategy (aims to manage demand to the level of available capacity),
Chase demand strategy (aims to manage capacity to match the levels
of demand).
Generic Strategies of Level Capacity or Chase Demand

Strategies for Managing Demand:- When capacity is maintained at a

constant level, demand needs to be managed to bring it close to the
level of capacity available. Six strategies used for such demand
management are:- 1)Customer induced variability:- Customers often
arrive at random. E.g., airlines, banks, hospital. 2)Segmenting
demand:- Customer characteristics are seldom homogeneous. E.g.,
business travelers vs weekend pleasure travelers (airline) 3)Offering Service Capacity Management:- Service Capacity is defined in terms
price incentives:- Discriminating pricing based on marginal benefits of an achievable level of output per unit time (eg. transactions per
to the last customer. E.g., Off-season hotel rates at resort locations. day for a busy bank teller). Service capacity also can be defined in
4)Promoting off-peak demand:- Creative use of off-peak capacity terms of the supporting facility, such as number of hotel beds or
results from seeking different sources of demand. One example is use available seat miles at the system level for airlines. Looking at the
of a resort hotel during the off-season as a retreat location for airline example, capacity can be limited by several factors such as
business or professional groups. 5)Developing Complementary available labor by skill classification (pilots, cabin crew, ground crew,
Services:- Restaurants have discovered the benefits of and maintenance personnel), equipment (number and type of
complementary services by adding a game zone 6)Reservation aircraft), and availability of gates. Service Capacity Management
System & Overbooking:- Faced with flying empty seats because of focuses To manage, control and predict the performance and
the no-shows, airlines adopted a strategy of overbooking. By 1 capacity of operational services. This includes initiating proactive and
accepting reservations for more than the available seats, airlines reactive action to ensure that the performances and capacities of
hedge against significant numbers of no-shows; 1 services meet their agreed targets.
STRATEGIES FOR MANAGING CAPACITY:- When a chase demand Yield Management is a hybrid strategy that aims to maximise revenue
strategy is used, capacity needs to be managed to bring it to the through price discrimination & capacity allocation to different
same level as the demand. For many services, demand cannot be customer segments in real time. Other strategies like reservations &
smoothed, Eg., Call centre, Hospitals, Banks etc. 1)Daily work shift overbooking are also made use of in yield mgt. Yield mgt
scheduling:- By scheduling work shifts carefully during the day, the applications – Eg, airlines, hotels, transportation, etc.
profile of service capacity can be made to approximate demand.
2)Weekly work shift scheduling with days-off constraints:-
developing work schedules and meeting the varying employee
requirements for weekdays and weekends with the smallest number
of staff members possible. 3)Increasing customer participation:-
customer can often play a facilitating role in the service delivery
process as a co-producer, eg, supermarket, fast-food restaurant, etc.
4)Creating adjustable capacity:- total available capacity can be
partitioned into different levels so as to cater to specific levels of
demand. Eg, dining tables in a restaurant can be combined to
accommodate larger groups, size of different conference halls in a
convention centre can be varied by shifting the partition between
those 5)Sharing capacity:- periods of under utilisation, capacity can
be offered to other needy service providers. Eg, at smaller airports,
one airline makes use of the services of the ground staff of another
airline. 6)Cross-training of employees:- to perform tasks in several
operations creates flexible capacity to meet localized peaks in
demand. When one operation is too busy, staff from any idle
operation can be drawn to supplement it, Eg. stockers in
supermarkets move to cash counters at peak hours & vice versa,
provided they have been cross-trained 7)Using part-time
employees:- When peaks are persistent & predictable, part-time
employees can supplement the regular, provided they can be suitably
trained, eg, meal time in restaurants, pay day at banks, Off-duty
personnel who are placed on standby.
YIELD MANAGEMENT:- Service output being perishable, increasing
capacity utilization (filling all seats) even at a discount may generate
more revenue for service providers. But selling too much of the
available capacity at a discount would reduce the capacity available
for full price sales & therefore the total revenue.
1
2
Yield Mgt applications:– are appropriate for services like airlines, Queuing System:- Customers waiting for service are an issue with
hotels, transporters, etc which exhibits the following characteristics -: economic implications for both the service provider & the customers.
1)Relatively fixed capacity, 2)Ability to segment markets, 3)Perishable The perception of waiting often is more important to the customer
inventory, 4)Product sold in advance, 5)Fluctuating demand, 6)Low than the actual time spent waiting, suggesting that innovative ways
marginal sales costs and high marginal capacity change costs. should be found to reduce the negative aspects of waiting.
RESOURCE AND WORKFORCE SCHEDULING IN SERVICES:- Resource Economics of waiting:- For the service provider the cost involved in
scheduling refers to g the set of actions and methodology used by managing waiting lines would include the cost of keeping their
organizations to efficiently assign the resources they have to jobs, service providing employees idle at times plus the cost of losing
tasks or projects they need to complete, and schedule start and end potential future customers at other times. The waiting customers
dates for each task or project based on resource availability. In many help the provider to achieve higher levels of productivity through
service organizations, scheduling is complicated because service higher capacity utilisation.
demand— quantity, type of service, and timing—is often variable and Queuing Systems - A Queue is a line of waiting customers who
hard to forecast. For example, a movie theater cannot show the require service from one or more servers. The queue need not be a
movie before the customers arrive and hope to satisfy demand. physical line of individuals in front of a server. Servers are individual
Techniques for scheduling services demanded range from setting stations where customers receive service. The stereotypical queue -
appointments, requiring reservations, using a public schedule, and people waiting in a formal line for service - is seen at the check-out
delaying or back-ordering the service. Workforce scheduling is counters of a supermarket and the teller windows in a bank, yet
defined as the process of establishing the schedules of hourly queuing systems occur in a variety of forms.
workers to meet the current and future demands in a workplace, The Psychology of Waiting- Customer’s judgment of their waiting
such as a restaurant, a hospital, or a retail store. It also involves depends on their prior expectations & perceptions of their
defining schedules so that the transition from one shift to the other experience. Also it is influenced by their first impressions. Four
is seamless and work remains uninterrupted. Workforce scheduling is aspects of the psychology of waiting are -: 1)That old empty feeling:–
an integral component of workforce management, which involves Waiting customers invariably feel unoccupied, empty, powerless & at
taking into account predicted workloads and then the number of the mercy of servers. 2)A foot in the door:- Higher levels of customer
resources needed to complete the job. dissatisfaction are created by a perception that the service has not
CAPACITY VS SYSTEM PERFORMANCE:- CAPABILITY: the ability to even started. 3)Light at the end of the tunnel:- Customers waiting for
perform some task Performance: carrying into execution or action; their service to start have several anxieties, like when the service
execution; achievement; accomplishment; representation by action. would start, etc. 4)Excuse me, but I was next:– The anxiety of waiting
Enhancing Capability or skill is a learning outcome. It means that customers gets compounded & turns into anger, leading to explosion
people have the capability to perform in some manner. A if & when a waiting customer sees a later arrived customer being
Performance outcome occurs when people take what they know and served earlier. Principles of Waiting Line Management:- The line-up
turn it into what they do on the job. And, of course, making the of waiting customers may follow different patterns. The simplest is
conversion from learning to doing requires a work environment that the conventional style called the snake, where a single line of
supports the capability that was developed. 1 customers wait at a single service counter. A second type of line-up is
a multiple server system, each with its own queue & each customer
3 choosing which queue to join; this is called the hospitality line-up. A
third option is a hybrid of the two.
 3)Queue configuration:- refers to the number of queues, their
locations, their spatial requirements, and their effects on customer
behavior.

Essential Features of Queuing Systems:- 1)Calling population:– part

of the population that feels a need for the service, potential
customers. It may consist of different classes of customers, eg, at an
outpatient clinic the calling population may consist of walk-in
patients, appointment patients & emergency patients.
4)Queue discipline:- is a policy established by management to select
the next customer from the queue for service. The most popular
service discipline is the first-come, first served (FCFS) rule.

2)Arrival process:– typically customers arrive at random. The pattern

of randomness in general is found to follow an exponential
distribution of inter-arrival times

5)Service process:– The distribution of service times, arrangement of

servers, management policies, and server behavior all contribute to
service performance. It may be constant, if automated (automated
car wash). Service times may be exponential for simple & brief
1 processes (toll plaza).

4
 Information Technology Enabled Services (ITeS):- services or Tele-
working, covers the entire gamut of operations which exploit
information technology for improving efficiency of an organization.
These services provide a wide range of career options that include
opportunities in call Centre, medical transcription, medical billing and
coding, back office operations, revenue claims processing, legal
databases, content development, payrolls, logistics management, GIS
(Geographical Information System), HR services, web services etc.
ITeS provide a range of IT-intensive processes and services, which
includes Business Process Outsourcing (BPO) and Knowledge Process
Outsourcing (KPO), provided from a distant location and delivered
over telecom networks.
Capacity Management:- Capacity management is concerned with:
Monitoring the performance and throughput or load on a server,
server farm, or property Performance analysis of measurement data,
including analysis of the impact of new releases on capacity.
Performance tuning of activities to ensure the most efficient use of
existing infrastructure, Understanding the demands on the service
and future plans for workload growth (or shrinkage), Influences on
demand for computing resources, Capacity planning of storage,
computer hardware, software and connection infrastructure
resources required over some future period of time.
Challenges to Capacity Management:- 1)Determining existing
IT Service Management:- directed by policies, organized and storage capacity and usage trends across the organization:- It might
structured in processes and supporting procedures – that are be difficult to obtain an accurate inventory of existing storage
performed by an organization to plan, design, deliver, operate and capacity and current usage trends. 2)Determining whether usage
control information technology (IT) services offered to customers. It effectively supports organizational goals:- Need to understand and
is concerned with the implementation of IT services that meet identify where storage capacity is used inefficiently to determine
customers' needs, and it is performed by the IT service provider measures to address capacity issues and match the goals of the
through an appropriate mix of people, process and information organization. 3)Defining and implementing storage policies:- After
technology. IT service management is characterized by adopting a existing storage capacity and goals have been determined,
process approach towards management, focusing on customer needs mechanisms must be identified and implemented to prevent future
and IT services for customers rather than IT systems, and stressing capacity misuse. 4)Adjusting the policies as capacity needs grow and
continual improvement. IT service management is often equated 1 as organizational needs change:- To be proactive against future
with the Information Technology Infrastructure Library (ITIL). capacity issues, it is important to manage and monitor usage patterns
7 and utilization levels.
Capacity management:- it is concerned with Monitoring the Capacity Planning Criteria:- 1)Average Customer Waiting Time:– The
performance and throughput or load on a server, server farm, or criterion of average customer waiting time for capacity planning can
property. Performance analysis of measurement data, including be appropriate in several circumstances. Identify the service capacity
analysis of the impact of new releases on capacity, Performance in terms of the number of servers that would guarantee the desired
tuning of activities to ensure the most efficient use of existing expected customer waiting time. 2)Probability of Excessive Waiting:-
infrastructure Understanding the demands on the service and future For public services that have difficulty identifying the economic cost
plans for workload growth (or shrinkage) Influences on demand for of waiting, a service level often is specified. This service level is stated
computing resources, Capacity planning of storage, computer in a manner such that more percent of all customers should
hardware, software and connection infrastructure resources required experience a delay of less than time units. 3)Minimizing the Sum of
over some future period of time. Customer Waiting Costs and Service Costs:- If both customers and
Challenges to Capacity Management:- 1)Determining existing servers are members of the same organization, then the costs of
storage capacity and usage trends across the organization:- It might providing service and employee waiting are equally important to the
be difficult to obtain an accurate inventory of existing storage organization’s effectiveness. The cost of employees’ waiting time is at
capacity and current usage trends. 2)Determining whether usage least equal to their average salary, and in fact, this cost could be
effectively supports organizational goals:- Need to understand and considerably more if all the implications of waiting, such as the
identify where storage capacity is used inefficiently to determine frustration of not completing a task or the effect of delays on others
measures to address capacity issues and match the goals of the in the organization, are assessed. 4)Probability of Sales Lost Because
organization. 3)Defining and implementing storage policies:- After of Inadequate Waiting Area:- This planning criterion concerns
existing storage capacity and goals have been determined, capacity of the waiting area rather than capacity to serve. An
mechanisms must be identified and implemented to prevent future inadequate waiting area may cause potential customers to balk and
capacity misuse. 4)Adjusting the policies as capacity needs grow and seek service elsewhere. This problem is of particular concern where
as organizational needs change:- To be proactive against future arriving customers can see the waiting area, such as the parking lot at
capacity issues, it is important to manage and monitor usage patterns a restaurant or the driveway at a drive-in bank.
and utilization levels. Unit 3
Capacity Planning:- Capacity is the ability to deliver service over a Service Inventory:- Service inventory is a collection of internal
particular time period. For services, the time horizon can vary from services that allow an organization to react rapidly to customer
decades (e.g., the decision to build a resort hotel) to hours (e.g., demand and offer quality. A Service product can be viewed as a
staffing a fast-food restaurant during the lunch hour). Capacity is bundle of goods and services. Inventory plays a very important role
determined by the resources available to the organization in the form in services. Providing inadequate service or no service due to
of facilities, equipment, and labor. Capacity planning is the process of unavailability of output material may result in loss of customer
determining the types and amounts of resources that are required to forever. In services, there is no option of backordering. There is
implement an organization’s strategic business plan. The objective of always a risk of losing customer to competitor. In healthcare, the
strategic capacity planning is to determine the appropriate level of concept of Service inventory can be used to plan hospital resources
service capacity by specifying the proper mix of facilities, equipment, 1 such as hospital beds or appointments for an MRI. In services the
and labor that is required to meet anticipated demand. facilitating goods and work storage based on information like reports
8 and documents act as important types of inventories.
INVENTORY MANAGEMENT UNDER UNCERTAINTY:- Each time an Periodic Review System:- Periodic inventory takes stock every week
order is placed; there are uncertainties which pose a risk of stock or month. Do not track inventory on a daily basis; rather, they allow
outs occurring before the replenishment order arrive, To reduce the organizations to know the beginning and ending inventory levels
risk of stock outs during this time, extra inventory can be held in during a certain period of time. These types of inventory control
excess of expected demand during the lead time. The key to systems track inventory using physical inventory counts. 
inventory management under uncertainty is the concept of a service ABC Inventory Control System:- The ABC Inventory Control System is
level. This is a customer-oriented term and is defined as the applied by those firms that have to maintain several types of
percentage of demand occurring during the lead time that can be inventories. Ideally, it is not desirable to keep the same degree of
satisfied from inventory. The service level is used to determine a control over all the inventory types, since each vary in terms of its
reorder point (ROP), which is the level of inventory on hand when a value of annual consumption. Thus, the ABC Inventory Control
replenishment order is initiated. When we set the reorder point, we System is used to determine the importance of each item of the
also are determining the safety stock level (SS), which is the excess stock in terms of its value of annual consumption and are categorized
inventory that is held during the reorder lead time to achieve the as A, B, and C.
desired service level.
INVENTORY CONTROL SYSTEMS:- The Inventory control system is
maintained by every firm to manage its inventories efficiently.
Inventory is the stock of products that a company manufactures for
sale and the components or raw materials that make up the product.
Hence, an inventory comprises of the buffer of raw material, work-in-
process inventories and finished goods. In all inventory control
systems, two questions must be answered: (1)When should an order
be placed? And (2)What size is the order quantity? Two of the most DEFINITION OF SUPPLY-CHAIN:- All the activities involved in
common inventory control systems: 1)continuous review system, delivering a product from raw material through to the customer
2)periodic review system including:- Sourcing raw materials and parts, Manufacturing and
Continuous Review System:- Continuous inventory constantly tracks assembly, Warehousing and inventory tracking, Order entry and
inventory quantities so you always know your stock levels.  It order management, Distribution across all channels, Delivery to the
continually updates inventory records and accounts for additions and customer, Information systems necessary to monitor all activities
subtractions when inventory items are received, sold from stock, Supply Chain Management:- Unreliable deliveries either increase
moved from one location to another, picked from inventory, and inventory investments in safety stocks or result in unsatisfied
scrapped.  They deliver accurate results on a continual basis when customers and lost sales. Success is achieved only by formation of
managed properly. These systems cannot be maintained manually effective partnerships and cooperation among participants
and require specialized equipment and software that results in a throughout the entire supply chain. Bullwhip effect:– when a small
higher cost of implementation. E.g.,: Retailers like WALMART use change in retail order is magnified as we move back up the supply
point-of-sale(POS) cash registers to record up-to-the-minute status of 2 chain to the distributor and finally to the customer – due to
stock levels, with an end-of-day report on all items that have reached overreaction caused by lack of integration and trust
their reorder points. 1
Supply Chain for Physical Goods

The physical goods supply chain can be viewed as a network of value

adding material processing stages each defined with supply input, Single-Level Bidirectional Service Supply Relationship
material transformation, and demand output. The figure shows
Service Customer – >Input Service
these stages as suppliers, manufacturing, distribution, and retailing Category Supplied Output> Provider
and recycling – depicting the flow of material by an arrow, with
>mind
inventory stocks at each stage. Information transfer is in the opposite Minds Student Professor
Knowledge>
direction – shown by dashed lines. Lack of proper information flow
creates uncertainty and results in inventory holding. >Tooth
Bodies Patient Dentist
Filling>
SERVICE SUPPLY RELATIONSHIPS:- 1)Customer-Supplier Duality
>Money
2)Service Supply Relationships Are Hubs, Not Chains, 3)Service Belongings Investor
Interest>
Bank
Capacity Is Analogous to Inventory, 4)Customer Supplied Inputs Can
>Documents
Vary in Quality. Information Client Tax Preparer
1040>
1)Customer-Supplier Duality:- The nature of services creates a Two-Level Bidirectional Service Supply Relationship
customer-supplier duality that results in service supply relationships
rather than the supply chain found in manufactured goods that Service Customer >input Service >input Provider’s
depicts a physical object passed from one entity to another. Services Category -Supplier Output> Provider Output> Supplier
can be considered as acting on people’s minds (e.g., education, Minds Patient >Disturbe Therapist >Prescriptio Pharmacy
entertainment, religion), bodies (e.g., transportation, lodging, health d n
Treated> Drugs>
care), belongings (e.g., auto repair, dry cleaning, banking), and
information (e.g., tax preparation, insurance, legal defense). Thus, all Bodies Patient >Blood Physician >Sample Lab
services act on something provided by the customer. The implication Diagnosis Test Result>
>
is that customers are also acting as suppliers in the service exchange,
that is, the customer-supplier duality. For example, a patient feeling Belonging Driver >Car Garage >Engine Machine
ill sees a physician who draws blood that is sent to an off-site 2 s Repaired> Rebuilt> Shop
laboratory for analysis. Upon receiving the blood report from the Informati Home >Property Mortgage >Location Title
laboratory the physician makes the diagnosis. 2 on Buyer Loan> Company Clear Title> Search
 Model V : (M/E/1) : (/FCFS)
Model VI : (M/E/I) : (1/FCFS)
Model VII : (M/M/R) : (K/GD) K<R
Model VIII : Power supply model
Model IX : Economic Cost Profit Models
Model X : (M/G/I) : (/GD)
Here first M stands for Poisson arrival and second M stands for
Poisson departure. FCFS stands for first come first served
I - stands for single service,  - stands for infinite capacity of the
system, N - stands for finite number of channels (capacity), S - stands
Applications in Service Systems:- 1)Banks/ATMs 2)Hospitals 3)Traffic for several service,R - stands for number of channels, k – stands for
system 4) Toll plaza 5)Railway station 6)Computer system number of phases, K - stands for number of machines, GD - stands
7)Scheduling and Routing salesman for General Queue discipline.
QUEUING MODELS:- Notations: 1)t stands for inter arrival time
between two successive customers. 2) n stands for number of Let  stand for mean arrival rate and  stand for mean service rate
customers in the queuing system. 3)Pn (t) stands for probability that 1.Probability that the service facility is not idle =/ (traffic intensity)
there are 'n' units in the system at any time, 't'. 4)Pn stands for
probability that there are exactly 'n' units in the system. 5)n stands 2. Probability that service facility is idle =
for mean arrival rate of customers when there are 'n units in the 3. P(‘n’ units in the system)=
system. 6)n stands for mean service rate when there are 'n' units in
the system. 7)stands for mean arrival rate of customers 4. P(the number of units in the Queue is atleast n)=
(independent of n) 8)stands for mean service rate (independent of
n) 5. Average number of units in the system=
Classes of Queuing system:- Four important classes of Queuing
system are 1)Single queue - single service point. (single channel
facility) 2)Multiple queues - multiple service points. (multi channel 6. Average number of units in the queue=
facilities) 3)Single queue - multiple service points 4)Multiple queues -
single service point. 7. Average time a unit spends in the system=
Classification of Queuing models 8. Average time a unit spends waiting in the queue=
Model I : (M/M/1) : (/FCFS)
9. Average length of non empty queue =
Model II : (M/MI) : (/FCFS) with long queue
Model III : (M/M/1) : (N/FCFS)
Model IV : (M/M/S) : (/FCFS)

1
5
10. P(time a unit spends the system Issues for the Franchiser:- Franchising relies heavily on the
11. P(time a unit spends in a queue motivation of investor-owners, and it allows the firm to grow without
the cost of developing key managers. The process of screening
Globalization of Services:-Domestic Growth and Expansion potential franchisees must go beyond the minimum requirement of
Strategies:- The expectation of an entrepreneurial innovation is initial simply having the necessary capital. Other issues include decisions on
acceptance of the service concept followed by increasing customer the degree of franchisee autonomy, the nature of the franchise
demand. The need to expand a successful innovative service often is contract, process for conflict resolution.
thrust on the owner by the pressure of market potential and the GLOBAL SERVICE STRATEGIES:- Firms and industries must pay
desire to protect the service concept from competitors through attention to the need for global competitive strategies for their
building barriers to entry. In general growth is considered a desirable services. The biggest factor in a service operations globalization
option & a service firm can grow in one of four ways. 1)Focused decision should be whether it fits with the firm’s global strategy. The
Service - a service innovation begins at a single location with an service company that responds to heightened competition will look
initial service concept. This initial service concept usually is a well- very different from its predecessors. Five basic globalization
defined vision focused on delivering a new and unique service. strategies can be identified: (1)Multicounty expansion, (2)Importing
2)Focused Network- A service firm that must be readily accessible to customers, (3)Following your customers, (4)Service off shoring,
customers (e.g., a fast-food restaurant) must consider adding sites to (5)Beating the clock.
achieve significant growth. 3)Clustered Service - Service firms with (1)Multicounty expansion:- Multisite expansion commonly has been
large fixed facilities of ten decide to grow by diversifying the service accomplished using franchising to attract investors and a “cookie-
they offer. 4)Diversified Network - Service firms that grow through cutter” approach to clone the service rapidly in multiple locations.
acquisition often find themselves combining both the multisite and This expansion strategy is necessary when the service market is
the multiservice strategies. defined by the need for customers to travel physically to the service
FRANCHISING:- It is an alternative to expanding through use of facility. (2)Importing customers:- service that decides to retain its
internally generated profits or by seeking funds in the capital location and attract customers from around the world will be faced
markets. it is a common vehicle, however, for replicating a service with developing the foreign-language skill and cultural sensitivity of
geographically by attracting investors who become independent its customer-contact employees. (3)Following your customers:-
owner-operators bound by a contractual agreement. The Many service companies open offices overseas not to serve the local
International Franchise Association defines franchising as a system by markets but to follow their corporate clients overseas and continue
which a firm (i.e., the franchiser) grants to others (i.e., the to serve them. (4)Service Off shoring:- is a class of outsourcing that
franchisees) the right and license (i.e., franchise) to sell a product or is distinguished by the foreign location of the outsourced provider.
service and, possibly, use the business system developed by the firm. Some service firms can save labor costs by sending back-office
Benefits to the Franchisee:- As a franchisee, the owner relinquishes operations via the Internet to overseas locations and focusing on
some personal independence and control in return for a relationship customer contact activities locally. (5)Beating the clock:- describes
based on the expectation of greater gains through group the competitive advantages gained from the fact that one can bypass
membership. Membership in the franchiser organization also 1 the constraints of the clock and domestic time zones, including time-
includes many additional benefits. Management Training, Brand based domestic work rules and regulations.
Name, National Advertising, Acquisition of a Proven Business, 6
Economies of Scale
TYPES OF INVENTORY IN SERVICES: Facilitating Goods, Work Storage Role of Inventory in Services:- Inventories serve a variety of
Based On Information functions in service organizations, such as decoupling the stages in
Facilitating Goods:- Facilitating goods are the materials or items the distribution cycle, accommodating a heavy seasonal demand, and
purchased or consumed by the buyer and/ or provided by the maintaining a supply of materials as a hedge against anticipated
customer. Facilitating goods are the goods which are given as or increases in their cost. 1)Decoupling inventories:- Consider the
along with the core service. physical goods distribution system depicted in the figure. Two types
of flow exist within the system. One is the flow of information and
Service Organization Facilitating Goods the other is the actual movement of goods. 2)Seasonal inventories:-
Retailers Consumer Goods Some services involve significant seasonal demands. Consider toy
Airline Food and Beverages stores and the year-end holidays, camping-gear retailers and summer
Restaurant Prepared or ready to eat food, beverages vacation time, or garden-supply stores and spring planting time.
3)Speculative inventories:- A service that anticipates a significant
Maintenance and Repair Consumer goods and repair parts
increase in the cost of a good in which it deals may find it more
Stores
economical to accumulate and maintain a large inventory at present
prices rather than to replenish its supplies after the increase. The
Work Storage Based On Information:- Work storage based on
strategy of maintaining a speculative inventory is known as forward
information is a type of inventory where some amount of work can
buying. 4)Cyclical inventories:- The term cyclical inventory refers to
be completed and stored for the customer before the customer
normal variations in the level of inventories. 5)In-transit inventories:-
arrives and demands for the service. It reduces the waiting time of a
The term in-transit inventories is used for stock that has been
customer. Unlike in manufacturing where physical resources are
ordered but has not yet arrived. 6)Safety stocks:- An effective service
stored, the service inventory is based on work storage is viewed as all
maintains an inventory of stock that will meet expected demand.
process steps required to be completed before the arrival of a
Services operate in a dynamic environment, however, which means
customer. These steps are completed in the anticipation of customer
that uncertainties in replenishment lead time and demand always
demand.
exist.
Service Organization Work Storage
Real estate Legal documents
Publisher Books, Magazines
Consulting Forms and reports
INVENTORY THEORY:- Inventory theory covers several aspects of the
inventory of goods and supplies, including the role that inventory
plays in the operation of a service, the characteristics of various
inventory systems, and the costs that are involved in maintaining
inventories.
1
9
Characteristics Of Inventory System:- a)Type of customer demand:- C)Holding or carrying costs:- 1)Interest changes on money invested
Based on demand having are trends, cycles or seasonality, Based on in inventories. 2)Opportunity cost of capital tied up in inventory
whether the demand occurs in discrete units or in continuous units, items, warehouses, and other parts of the inventory systems. 3)Taxes
Highly varying demand e.g. a supermarket may face some days of no and insurance. 4)Moving items into and out of inventory stores and
demand for a particular product and bulk demand for the same keeping records of the movements. 5)Theft or pilferage. 6)Providing
product on some other day. b)Planning time horizon (Hospital security systems for protecting inventories. 7)Breakage, damage, and
always need tanks of oxygen; Sports clothing retailer not need spoilage. 8)Obsolescence of parts and disposal of out- of-date
endless supply of Olympics sweatshirts):- Indefinite stocking of materials. 9)Depreciation. 10)Storage space and facilities.
inventory for example respiratory supports in hospital, Temporary 11)Providing controlled environments of temperature, humidity,
stocking of items based on the season, perishability or expiry dates. dust, etc. 12)Managing(tasks such as supervising stores personnel,
c)Replenishment lead time:- Deterministic lead time, Stochastic lead taking physical inventory periodically, verifying and correcting
time, Based on the above factors various inventory models can be records, etc. D)Shortage costs:- 1)Lost sales and profits. 2)Customer
used like Economic Order Quantity(EOQ) models, periodic review dissatisfaction and ill-will; lost customers. 3)Penalties for late delivery
policy, continuous review policy, Newsboy model. d)Constraints and or non-delivery. 4)Expediting orders to replenish exhausted stock
relevant inventory costs:- Some constraints are straightforward. For ORDER QUANTITY MODELS: 1)Economic Order Quantity: EOQ is the
example, available storage space determines the maximum amount optimum inventory you should purchase to minimize the costs of
of goods that can be stored, and the “shelf life” of a good likewise ordering and holding. The Economic Order Quantity (EOQ) is the
may limit the number of perishable items that can be held in number of units that a company should add to inventory with each
inventory. Other constraints are more complex, such as the costs of order to minimize the total costs of inventory—such as holding costs,
maintaining an inventory, and there are obvious costs such as the order costs, and shortage costs. The EOQ is used as part of a
capital expenditures for the storage facility, be it a warehouse or a continuous review inventory system in which the level of inventory is
walk-in refrigerator. monitored at all times and a fixed quantity is ordered each time the
Relevant Costs of an Inventory System:- A)Ordering costs:- inventory level reaches a specific reorder point. EOQ = √(2DK / H),
1)preparing specifications for items to be purchased, 2)Locating or Where annual fixed costs (D), demand in units (K), and carrying costs
identifying potential suppliers and soliciting bids, 3)Evaluating bids per unit (H).
and selecting suppliers, 4)Negotiating prices, 5)preparing purchasing Economic Order Quantity:
orders, 6)Issuing or transmitting purchase orders to outside suppliers, D= Annual demand (units)
7)Following up to ensure that purchase orders are received by
suppliers. B)Receiving and inspection costs:- 1)Transportation, S= Cost per orders ($)
shipping, and pickup. 2)preparing and handling records of receipt C= Cost per unit ($)
and other paperwork. 3)Examining packages for visible damage. I =Holding cost (%)
4)unpacking items. 5)Counting or weighing items to ensure that the H = holding cost ($) = I  C
correct amount has been delivered. 6)Withdrawing samples and
transmitting them to inspection and testing organizations.
7)Inspecting or testing items to ensure that they conform to purchase
specifications. 8)Transferring items into storage areas.

2
0
2.Service Supply Relationships Are Hubs, Not Chains:- Simultaneous 2)Productive capacity:- Strategies to improve productive capacity of
consumption and production makes services more like hubs than the service worker include:-i)Transfer: Make knowledge available to
chains (in sequence). For example, when one visits the dentist for customers so that value can be transferred with very low cost.
teeth cleaning, the supply relationship is compressed to a single Example, web based FAQ database can be used instead of human
transaction between your teeth and the dental hygienist. In fact, the resources to answer questions. ii)Replacement: Is a strategy of
service supply relationship is more like a hub than a chain because substituting technology for human resources (e.g. Digital Blood
the service provider acts as the agent for the customer when dealing Pressure Measurement device). iii)Embellishment: enable self-
with outside suppliers. Hubs are more desirable than chains because service by teaching (e.g. change surgical dressing)
there are fewer opportunities for delays and information can be 3)Perishability: -Management of perishability is the approach used in
more easily shared. service chain management to minimize the negative impact of idle
3.Service capacity is analogous to inventory:- For goods supply time on the productive capacity of the distributed service workforce.
chains, inventory is used to buffer the variations in final customer If you can communicate with workers then you can change their
demand and allow full utilization of productive capacity. Services schedule to optimize capacity. If no communication is available then
cannot be inventoried, excess capacity must be held in reserve. For you have to work with a fixed schedule and cannot deal with
example, visitors to a fast-food restaurant seldom will wait more than uncertainties in the best possible way. Managing Perishability also
a few minutes for service. Because services cannot be inventoried, involves training and extending skills and capabilities of workers to
excess capacity must be held in reserve to accommodate work at more than one station to match changing needs.
expectations.
4. Customer supplied inputs can vary in quality:- Customer inputs
can be incomplete (e.g., tax documents), unprepared (e.g., students),
or have unrealistic expectations (e.g., cancer patient). This lack of
consistency in the quality of customer-supplied inputs represents a
challenge for the service provider to deliver on promises when inputs
are questionable. This situation places a premium on effective
communications. Explicitly communicating value-adding expectations
with customers prior to service can avoid misunderstandings.
MANAGING SERVICE RELATIONSHIPS: Value in service supply
relationship depends on:- 1)Bi-directional optimization:-
Bidirectional optimization implies the possibility of doing what is best
from the customer’s perspective while doing the best for the service
enterprise. In home health care the patient is an active participant in
the service. Direct customer involvement facilitates bidirectional
optimization, a simultaneous optimization of both supply and
demand for the service. This translates into providing a highly 2
individualized service for the patient that is very cost effective for the
organization. 3
Impact of Service Supply Relationships Professional Service Firms-Body of Knowledge:- Cognitive
knowledge (know-what) is the basic mastery of a discipline achieved
Elements or Link Before After
through extensive training and certification. This knowledge is
Service Recipient Passive Active as a co-producer necessary but not sufficient for commercial success. Advanced skills
Available waiting for
Flow of Service Activated upon demand (know-how) translate “book learning” into effective execution. The
demand
ability to apply the rules of a discipline to complex real-world
Pull: manual reporting Push: high level of
of demand data connectivity and
problems is the most widespread value-creating professional skill
Flow of Information level.  Systems understanding (know-why) is deep knowledge of the
results in delayed transparency with fast or
(upstream)
management instantaneous access to web of cause-and-effect relationships underlying the discipline.
Response most recent demand data Professionals with know-why can anticipate subtle interactions and
Little or no knowledge unintended consequences. The ultimate expression of a systems
Flow of Information Real-time tracking and
(downstream)
of resource
dispatching
understanding is highly trained intuition. Self-motivated creativity
Deployment (care-why) consists of will, motivation, and adaptability for success.
Proactive involving Without self-motivated creativity, intellectual leaders can lose their
Limited to use of
Demand customer in scheduling to knowledge advantage through complacency.
appointments and
Management achieve bidirectional
reservations. Professional Service Firms Operational Characteristics:- Professional
optimization
service firms often are organized as partnerships instead of
Creative use of cross-
trained employees,
corporations. The economic success of a partnership is measured by
Capacity Limited to use of part-
Management time employees outsourcing, and customer profit-per-partner, which is driven by three factors: margin,
self-service productivity, and leverage as shown in the relationship below:
Inflexible;
Flexible; personable with
Profit-per-Partner
Service Delivery standardized and
customization Possible
impersonal
Dynamic; based on system =(Margin)(Productivity)(Leverage)
Routing and Static; fixed daily Margins:- Margins often are the most-utilized factor in measuring
connectivity and process
Scheduling schedules
PROFESSIONAL SERVICE FIRMS:- Professional services are attractive
visibility the profitability of departments within a professional services firm.
because of the intellectual challenge,
Marketing potential
initiatives Virtualforvalue
job growth, and
chain design Unfortunately, however, margins frequently are inaccurate and
based on firm’s with customer
high income. Examples of professional service providers include data base misleading indicators.
New Service Design
architects, lawyers,perception of information
consultants, accountants, and driving new
contracting Productivity:- Productivity can be further broken down into two
customer needs services
engineers. Professionals command a specific body of knowledge that factors that affect the short- and long term success of the firm,
operates on four levels of increasing importance, a)Cognitive realized fee-per-hour (value) and utilization of professional staff as
knowledge (know-what) b)Advanced skills (know-how) c)Systems shown below:
understanding (know-why) d)Self-motivated creativity (care-why) Productivity = Fees/Staff = (Fees/ Hours)(Hours/Staff)

2 = (Value)(Utilization)
Utilization is the ratio of the number of hours billed to the number of
4 possible billable hours. Utilization is affected by two aspects of the
professional services business.
Leverage:- Leverage is the ratio of the number of professional staff Classification of Business Services:- Business services are often
members to the number of partners, an essential factor in classified according to degree of tangibility. The degree of tangibility
determining the profit-per-partner. Partners get profit from two
sources: the high rates a senior staff member charges for services, describes the extent to which the service has physically measurable
and, more important, the ability to hire professional staff and bill output properties. Some services such as janitorial or laundry are
them to customers at multiples of their salary. A successful firm will highly tangible and have well defined and measurable output. Other
maximize its leverage while still maintaining the ability to complete services such as public relations or advertising have output that is
projects successfully. significantly less measurable and more difficult to define. Thus, the
OUTSOURCING SERVICES:- Service providers themselves have focus of the business service (property, people, and process) is used
relationships with other service firms that contribute to satisfying the
customer. A transaction cost is incurred in seeking and maintaining as the principal dimension for the taxonomy. A second dimension
the outsourced relationship. There are three kinds of transaction representing the criticality or importance of the service to the buying
costs: i)Search costs are incurred in finding a capable supplier. firm must be considered in the purchase decision. The table shows a
ii)Bargaining costs are associated with reaching an acceptable six-cell matrix of this two-way classification. Each cell has a
agreement with the other party and drawing up a contract. descriptive title for the business service category, that is, facility
iii)Enforcement costs are incurred in making sure the other party
sticks to the terms of the contract, and taking legal action if it does support, equipment support, employee support, employee
not. development, facilitator, and professional.
Benefit:- 1)allows the firm to focus on its core competence 2)service Taxonomy for Outsourcing Business Services,
is cheaper to outsource than perform in-house 3)provides access to
latest technology 4)leverage benefits of supplier economy of scale.
Out sourcing should be undertaken with caution because of the
following considerations: (a)loss of direct control of quality
(b)jeopardizes employee loyalty (c)exposure to data security and
customer privacy (d)dependence on one supplier compromises
future negotiation leverage (e)additional coordination expense and
delays (f)atrophy of in-house capability to perform service.
Outsourcing Process

OUTSOURCING CONSIDERATIONS:- 1)Focus on Property: Facility

support service:- Low cost, Identification of responsible party to
evaluate performance, Writing of precise specifications. Equipment
support service:- Experience and reputation of vendor, Availability of
vendor for emergency response, Designation of person to make
2 service call and to check that service is satisfactory

5
2)Focus on People:-Employee support service:- Vendor clients COMPUTER SIMULATION:- A Simulation model is a simplified
contacted for references, Specifications prepared with end-user input, representation of real life situations which helps to understand a
Performance evaluated on a periodic basis. Employee development problem and helps to find its solution by trial and error approach.
service:- Experience with particular industry important, Involvement of Computer simulation provides management an experimental
high levels of management in vendor identification and selection, laboratory in which to study a model of a real system and to
Vendor clients contacted for references, Employees used to evaluate determine how the system might respond to changes in policies,
vendor performance. resource levels, or customer demand. Systems simulation can be
3)Focus on Process:- Facilitator service:- Knowledge of alternate used to answer “what-if” questions about existing or proposed
vendors important, Involvement of end user in vendor identification, systems (For example, what if another teller is added in a bank lobby?
References or third-party evaluations useful, Detailed specifications What if an ATM is placed outside the lobby?) The response of the
written by user. Professional service:- Involvement of high-level system to these changes can be “observed” over an extended period
management in vendor identification and selection, High importance by means of a simulation. Without having to change the real system,
of reputation and experience, Performance evaluation by top a simulation model generates estimates of system performance, such
management as average customer waiting time, for each scenario of interest. An
DATA ENVELOPMENT ANALYSIS (DEA):- A technique has been animated simulation running on a personal computer allows decision
developed with the ability to compare the efficiency of multiple service makers to view the activity of the system (e.g., flow of customers) in
units that provide similar services by explicitly considering their use of accelerated time. Service delivery systems are both dynamic and
multiple inputs (i.e., resources) to produce multiple outputs (i.e., stochastic in their nature. A dynamic system is one that is influenced
services). The technique, which is referred to as data envelopment by actions over time (Eg. Queue behavior at an airline terminal),
analysis (DEA), circumvents the need to develop standard costs for Stochastic refers to the underlying probabilistic nature of a system
each service, The DEA measure of efficiency explicitly accounts for the with events occurring at random from a probability distribution.
mix of inputs and outputs and, consequently, is more comprehensive Systems Simulation:- Simulation is a tool for evaluating ideas. The
and reliable than a set of operating ratios or profit measures. DEA is a process of developing a systems simulation is a substantial
linear programming model that attempts to maximize a service unit’s undertaking that has been made easier with the availability of
efficiency, expressed as a ratio of outputs to inputs, by comparing a modeling software.
particular unit’s efficiency with the performance of a group of similar
Simulation Methodology:- Developing an accurate and concise
service units that are delivering the same service. In the process, some
problem definition is important because this activity involves the
units achieve 100 % efficiency and are referred to as the relatively
client in the process and facilitates implementation of the results.
efficient units, whereas other units with efficiency ratings of less than
The statement of objectives follows naturally and provides a
100 % are referred to as inefficient units. Corporate management use
framework for the scope of the model and system performance
DEA to compare a group of service units to identify relatively inefficient
measures. Data collection and model development often are
units, measure the magnitude of the inefficiencies, and by comparing
the inefficient with the efficient ones, discover ways to reduce those
accomplished concurrently to save time.
inefficiencies. The DEA linear programming model is formulated
according to Charnes, Cooper, and Rhodes, and is referred to as the 2
CCR Model.
6
Principles for Good Routing & Scheduling:- Minimizes inter-stop UNIT 4
travel between, Develop overall route, plus daily routes, Build routes Defining Service Quality:- For services, the assessment of quality is
beginning with the farthest stop from the depot, Try to keep route made during the service delivery process. Customer satisfaction with
paths from crossing, Allocate largest vehicles first, then smaller, a service can be defined by comparing perceptions of service
Pickups should be mixed into delivery routes rather than assigned to received with expectations of service desired. When expectations are
the end of routes, A stop that is greatly removed from the other exceeded, service is perceived to be of exceptional quality and also
stops in a route cluster is a good candidate for an alternative means to be a pleasant surprise. When expectations are not met, however,
of delivery, Narrow stop time window restrictions should be avoided service quality is deemed unacceptable. When expectations are
INVENTORY POOLING:- Inventory pooling is the consolidation of confirmed by perceived service, quality is satisfactory.
multiple inventory locations into a single one. Inventory locations Dimensions of Service Quality
may be associated with different geographical sites, different
products, or different customers. The need to assess the benefits of
inventory pooling arises in a variety of contexts. Inventory pooling
refers to a firm’s ability to serve multiple markets–each with their
own uncertain demand–from a single stock of inventory. The practice
is often analyzed in the context of two distinct, but closely related,
cases: Location pooling and Product pooling. Location pooling refers
to the practice of pooling demands from separate geographic
markets (e.g., combining the inventory from stores in two different
physical locations). Product pooling, refers to the practice of meeting
demand for multiple distinct products with a single, “universal” 1)Reliability:- The ability to perform the promised service both
product capable of satisfying the needs of all customers. Inventory dependably and accurately. Reliable service performance is a
pooling is frequently cited as an effective tool to mitigate demand customer expectation and means that the service is accomplished on
uncertainty: combining inventory in this manner allows the firm to time, in the same manner, and without errors every time.
reduce demand variability, reduce operational costs, and increase 2)Responsiveness:- The willingness to help customers and to provide
profit, particularly if the component market demands are negatively prompt service. Keeping customers waiting, particularly for no
correlated. apparent reason, creates unnecessary negative perceptions of
quality. If a service failure occurs, the ability to recover quickly and
with professionalism can create very positive perceptions of quality.
3)Assurance:- The knowledge and courtesy of employees as well as
their ability to convey trust and confidence. The assurance dimension
includes the following features: competence to perform the service,
politeness and respect for the customer, effective communication
2 with the customer, and the general attitude that the server has the
customer’s best interests at heart.
9
4)Empathy:- The provision of caring, individualized attention to There are seven major gaps in the service quality concept:- Gap1:
customers. Empathy includes the following features: approachability, Customers’ expectations versus management perceptions. GAP 1
sensitivity, and effort to understand the customer’s needs. One arises from management’s lack of full understanding about how
example of empathy is the ability of an airline gate attendant to make customers formulate their expectations on the basis of a number of
a customer’s missed connection the attendant’s own problem and to sources: advertising, past experience with the firm and its
find a solution. 5)Tangibles:- The appearance of physical facilities, competitors, personal needs, and communications with friends.
equipment, personnel, and communication materials. The condition Strategies for closing this gap include improving market research,
of the physical surroundings (e.g., cleanliness) is tangible evidence of fostering better communication between management and its
the care and attention to detail that are exhibited by the service contact employees, and reducing the number of levels of
provider. This assessment dimension also can extend to the conduct management. Gap2: Management perceptions versus service
of other customers in the service (e.g., a noisy guest in the next room specifications. GAP 2 may result from a lack of management
at a hotel). Customers use these five dimensions to form their commitment to service quality or a perception of the unfeasibility of
judgments of service quality, which are based on a comparison meeting customers’ expectations; however, setting goals and
between expected and perceived service. The gap between expected standardizing service delivery tasks can close this gap. Gap3: Service
and perceived service is a measure of service quality; satisfaction is specifications versus service delivery. GAP 3 can arise for a number of
either negative or positive. reasons, including lack of teamwork, poor employee selection,
GAPS IN SERVICE QUALITY:- Measuring the gap between expected inadequate training, and inappropriate job design. Gap4: Service
service and perceived service is a routine customer feedback process delivery versus external communication. GAP 4 is the discrepancy
that is practiced by leading service companies. between service delivery and external communications in the form of
exaggerated promises and lack of information provided to contact
personnel. Gap5: The discrepancy between customer expectations
and their perceptions of the service delivered. Gap6: The
discrepancy between customer expectations and employees’
perceptions. Gap7: The discrepancy between employee’s perceptions
and management perceptions.
Measuring Service Quality:- Measuring service quality is a challenge
because customer satisfaction is determined by many intangible
factors. Unlike a product with physical features that can be
objectively measured (e.g., the fit and finish of a car), service quality
contains many psychological features (e.g., the ambiance of a
restaurant).The multiple dimensions of service quality are captured in
the SERVQUAL instrument, which is an effective tool for surveying
customer satisfaction that is based on the service quality gap model.
3
0
 3)Customer-Dominated Encounter:- The extremes of standardized
and customized services represent opportunities for customers to
control the encounter. For standardized services, self-service is an
option that gives customers complete control over the limited service
that is provided. For example, at a self-service gasoline station that is
equipped with a credit card reader, the customer need not interact
with anyone. The result can be very efficient and satisfying to the
customer who needs or desires very little service.
THE SERVICE ORGANIZATION:- The service organization establishes
the environment for the service encounter. The interaction between
customer and contact personnel occurs within the context of an
organization’s culture as well as its physical surroundings. 1)Culture:-
Culture is a pattern of beliefs and expectations that is shared by the
organization’s members and produces norms that powerfully shape
the behavior of individuals or groups in organizations. Organizational
culture is a system of shared orientations that hold the unit together
1)Encounter Dominated by the Service Organization:- To be efficient and give a distinctive identity. The use of language and symbols
and, perhaps, to follow a cost leadership strategy, an organization communicates the culture of organization. 2)Empowerment:-
might standardize service delivery by imposing strict operating Empowerment does not begin with delegation, but by trusting
procedures and, thus, severely limit the discretion of the contact unconditionally the inherent power within employees to evaluate
personnel. Customers are presented with a few standard service choices and competently execute creative decisions. It unleashes
options from which to choose, and personalized service is not within each person the opportunity to make a difference that cannot
available. Contact personnel in such organizations may sympathize be given or taken away. Delegation is acting upon another’s behalf as
with the customer but are forced to go “by the book,” and their job a surrogate to perform a particular task. It is not power, but rather
satisfaction is diminished in the process. permission given as often as taken away. 3)Control Systems:- (Belief,
2)Contact Personnel-Dominated Encounter:- Service personnel Boundary, Diagnostic, Interactive) such Organizational control
attempt to limit the scope of the service encounter to reduce their systems to encourage creative employee empowerment. The belief
own stress in meeting demanding customers. When contact system is facilitated by a well-articulated organizational culture. A
personnel are placed in an autonomous position, they may perceive boundary system defines limits to employee initiative. Diagnostic
themselves as having a significant degree of control over customers. systems define measurable goals to achieve. The interactive control
The customer is expected to place considerable trust in the contact system is most appropriate for “knowledge industries” such as
person’s judgment because of the service provider’s perceived consulting firms, because the organization’s very survival depends on
expertise. The relationship between physician and patient best delivering creative solutions for its customers.
illustrates the shortcomings of the contact personnel–dominated 3
encounter
3
CONTRACT PERSONNEL:- Customer contact personnel should have Service Profit Chain:- The service profit chain proposes a relationship
personality attributes that include flexibility, tolerance for ambiguity, that links profitability, customer loyalty, and service value to
an ability to monitor and change behavior on the basis of situational employee satisfaction, capability, and productivity. Loyal customers,
cues, and empathy for customers. Empathy for customers has been in turn, result from satisfaction that is influenced by the perceived
found to be more important than age, education, sales-related value of the service. Satisfied, committed, capable, and productive
knowledge, sales training, and intelligence. Various factors:- Selection employees create service value. Satisfied and loyal employees begin
of Personnel, Training of Personnel, Creating an Ethical Climate. with selection and training, but require investment in information
The Customer:- Every purchase is an event of some importance for technology and other workplace support that allow decision-making
the customer, whereas the same transaction usually is routine for the latitude to serve customers.
service provider. Service customers are motivated to look for a
service much as they would for a product; similarly, their
expectations govern their shopping attitudes. Gregory Stone
developed a now-famous topology in which shopping-goods
customers were classified into four groups:- 1)The economizing
customer. 2)The ethical customer. 3)The personalizing customer.
4)The convenience customer.
Satisfaction Mirror:- This relationship that develops between the
customer and the employee. It suggests, the way management
relates to the contact personnel (or internal customers) is reflected in
how the external customers are treated.

• Internal quality drives employee satisfaction.

• Employee satisfaction drives retention and productivity.
• Employee retention and productivity drive service value.
• Service value drives customer satisfaction.
3 • Customer satisfaction drives customer loyalty.
•
4 Customer loyalty drives profitability and growth.
Monte Carlo Simulation:- Typically, systems simulation is used to
analyze complex models that cannot be solved practically by means
of analytical methods. These models often are stochastic to account
for the realities of the system. Monte Carlo simulation is a method
that enables us to model random variables with their associated
probability distributions. It relies upon sampling values from the
probability distributions associated with the random variables. Values
of the random variables are selected at random from the appropriate
distributions and then are used in the simulation. These observations
of the random variables are made repetitively to imitate the behavior
of the variables.
Generating Random Variables:- Random variables can be either
discrete (e.g., number of customers arriving during an hour) or
continuous (e.g., the time a customer spends being served). The
process of generating observations in both cases makes use of the
unique feature of any random variable. Discrete Random Variable - is
a variable which can only take a countable number of values.
Continuous Random Variable - is a random variable where the data
can take infinitely many values. There are three common continuous
random variable distributions: uniform distribution, negative
exponential distribution and normal distribution.
Discrete-Event Simulation:- A discrete-event simulation is driven by
events that occur at certain points in time such as the arrival of a
customer or completion of a service. When an event occurs, the state
of the system changes. A customer arrival increases the number of Service Model Simulation Software:- The Windows operating
customers in the system, for example, while a customer departure environment has allowed the development of point-and-click, menu-
(i.e., service completion) reduces the number in the system. The driven, non-programming, graphic simulation models. Using a
computer maintains a timing device known as the simulation clock, personal computer, complex systems can be simulated with graphic
which advances with each event taking place. After each event animation of the process activity. The layout of a benefits planning
occurs, descriptors of the state of the system are recorded. office is shown in Figure. This model can be found in the Training file
of Service Model and is used in a tutorial for learning how to build
animated simulation models. Models are defined by completing the
necessary modules contained in the Build menu. These modules
2 consist of edit tables and dialog boxes used to structure the
parameters that are required for the model.
7
Simulation Software:- Simulation software is based on the process of Disadvantages of Simulation:- 1) Knowledge obtained from the part of the
modeling a real phenomenon with a set of mathematical formulas. It system, cannot be used for deriving the behavior of the entire system.
is, essentially, a program that allows the user to observe an operation 2)Simulation model does not given an analytical solution 3) It provides only
through simulation without actually performing that operation. statistical estimates rather than exact results 4) It only compares the
Simulation software is used widely to design equipment so that the alternatives rather than generating the optimal one 5) Its expensive 6)
final product will be as close to design specs as possible without Simulation method comprise a no. of ‘runs’; each run is like a single
experiment (its time consuming)
expensive in process modification. Simulation software with real-time
response is often used in gaming, but it also has important industrial Simulation Applications
Application Simulation Objective
applications. When the penalty for improper operation is costly, such Staffing bank tellers Consider the waiting time of customers
as airplane pilots, nuclear power plant operators, or chemical plant when determining the number of tellers
operators, a mock up of the actual control panel is connected to a to staff a workshift
real-time simulation of the physical response, giving valuable training
Emergency ambulance Analyze the response time implications
experience without fear of a disastrous outcome. Advanced computer Location of location Options
programs can simulate power system behavior, weather conditions,
electronic circuits, chemical reactions, mechatronics, feedback control Hospital–patient flows Develop procedures to manage patient
systems, atomic reactions, even complex biological processes flows and resource utilization
biological processes. In theory, any phenomena that can be reduced to Order processing Analyze order processing procedures to
mathematical data and equations can be simulated on a computer. support just-in-time shipments
Simulation Modeling:- Simulation modeling solves real-world Aircraft maintenance Determine the impact on downtime of
problems safely and efficiently. It is an important method of analysis preventive maintenance schedules
which is easily verified, communicated, and understood. Across
Hazardous waste handling Analyze capacity of recycling facilities
industries and disciplines, simulation modeling provides valuable
and transportation Needs
solutions by giving clear insights into complex systems. Simulation
modeling is experimentation on a valid digital representation of a Scheduling of police Investigate the impact of targeting crime
system. Unlike physical modeling, such as making a scale copy of a patrols areas on crime Prevention
building, simulation modeling is computer based and uses algorithms
and equations. The model of the system is dynamic and can be
analyzed while it is running, even viewed in 2D or 3D. Advantages of
Simulation:- 1)It can be used to solve the problems where values of VEHICLE ROUTING AND SCHEDULING:- Selecting the best paths for the
the variables are not known or partly known. 2)A model once transport mode to follow to minimize travel time or distance reduces
transportation costs and improves customer service. It start with
constructed for a system can be employed again for analyzing different
determining g shortest possible routes based on Transit time, Distance,
situations. 3)Simulation methods are handy for analyzing proposed
Cost. The objective of most routing and scheduling problems is to minimize
system in which information can be presented well. 4)The effect of the total cost of providing the service. This includes vehicle capital costs,
using simulation model can be studied without actually using it in real
situation. 5)From simulation model, data for further analysis can be
2 mileage, and personnel costs. But other objectives also may come into
play, particularly in the public sector. For example, in school bus routing
generated 6)Simulation methods are easier than analytical methods.
8 and scheduling, a typical objective is to minimize the total number of
student minutes on the bus.
SERVQUAL:- A score for the quality of service is calculated by It is more reliable than the case-by-case approach because it is a
computing the differences between the ratings that customers assign planned response based on identification of critical failure points and
to paired expectation and perception statements. This score is prior determination of appropriate recovery criteria.
referred to as GAP 5. Scores for the other four gaps also can be
calculated in a similar manner. This instrument has been designed
and validated for use in a variety of service encounters. SERVQUAL
for measuring the five dimensions of service quality they are
reliability, responsiveness, assurance, empathy, and tangibles. This
instrument has been designed and validated for use in a variety of
service encounters. Its most important function is tracking service
quality trends through periodic customer surveys. SERVQUAL could
be used in marketing studies to compare a service with a
competitor’s and again identify the dimensions of superior or
inadequate service quality.
Walk-Through Audit:- A walk-through audit (WtA) is a customer
focused survey to uncover areas for improvement. The walk-through
audit is an opportunity to evaluate the service experience from a
customer’s perspective, because customers often become aware of
cues the employees and managers might overlook. There is no
inherently superior service design. There are, instead, designs that
are consistent and that provide a signal to customers about the
service they can expect. Providing tangibility in a service involves
giving the customer verbal, environmental, and sensory cues that
create a pleasant experience and encourage repeat visits. KANO’S MODEL:- The Kano model is a theory for product
Service Recovery:- Service recovery is a company's resolution of a development and customer satisfaction developed in the 1980s by
problem from a dissatisfied customer, converting them into a loyal Professor Noriaki Kano, which classifies customer preferences into
customer. It is the action a service provider takes in response five categories. They are:
to service failure. A service failure can be turned into a service 1)Must-be Quality:- These are customers expects, if present
delight by empowering frontline employees with the discretion to customers are neutral but not present make them highly dissatisfied.
“make things right.” There are four basic approaches to service Examples: In a hotel, providing a clean room is a basic necessity. In a
recovery: the case-by-case, the systematic response, the early call center, greeting customers is a basic necessity.
intervention, and the substitute service recovery approaches. 1)The 2)One-dimensional Quality:- These attributes result in satisfaction
case-by-case approach:- addresses each customer’s complaint when fulfilled and dissatisfaction when not fulfilled. Examples: Time
individually. This inexpensive approach is easy to implement, but it 3 taken to resolve a customer's issue in a call center. Waiting service at
can be haphazard. 2)The systematic-response approach uses a a hotel.
protocol to handle customer complaints. 1
3)Attractive Quality:- These provide satisfaction when fully satisfied Service Guarantees:- A service guarantee is a marketing
but not satisfied if not fully satisfied. These attributes are not tool service firms have increasingly been using to reduce consumer
expected by customers. Examples: In a call center, providing special risk perceptions, signal quality, differentiate a service offering, and to
offers and compensations to customers or the proactive escalation institutionalize and professionalize their internal management of
and instant resolution of their issue is an attractive feature. In a customer complaint and service recovery. As per the dictionary
hotel, providing free food is an attractive feature. 4)Indifferent definition ‘service guarantee’ as defined, “an assurance of the quality
Quality: These attributes do not create either satisfaction or of or length of use to be expected from product offered for sale,
dissatisfaction for customers. Examples: In a call center, highly polite often with a promise of reimbursement.”
speaking and very prompt responses might not be necessary to Benefits of Service Guarantee:- Sets Clear Standards for the
satisfy customers and might not be appreciated by them. The same Organisation, Forces the Company to Focus on its Customers, A Good
applies to hotels. 5)Reverse Quality: High degree of achievement Service Guarantee Studies the Impact on Employee Morale and
that result in dissatisfaction and to the fact that not all customers are Loyalty,  Immediate and Relevant Feedback from Customers, Reduces
alike. In a hotel, producing elaborate photographs of the facilities their Sense of Risk and Builds Confidence in the Organisation for
that set high expectations which are then not satisfied upon visiting Customers.
can dissatisfy the customers. SERVICE ENCOUNTER:-Most services are characterized by an
encounter between a service provider and a customer. This
interaction, which defines the quality of the service in the mind of
the customer, has been called a “moment of truth” by Richard
Normann. Encounter is a moment in time when the customer is
evaluating the service and forming an opinion of its quality. A
moment of truth occurs during every customer-employee
interaction. A customer experiences many encounters with a variety
of service providers, and each moment of truth is an opportunity to
influence the customer’s perceptions of the service quality. For
example, an airline passenger
Service Encounter Triad : One of the unique characteristics of
services is the active participation of the customer in the service
production process. Every moment of truth involves an interaction
between a customer and a service provider; each has a role to play in
an environment staged by the service organization. The service
encounter triad captures the relationships between the three parties
in the service encounter and suggests possible sources of conflict.
The managers of for-profit service organizations have an interest in
3 delivering service as efficiently as possible to protect their margins
and remain competitive.
2
SERVICE CONSOLIDATION:- A service in which a company combines UNIT 5
several different shipments on a single vessel or airplane in order to PROCESS BEHAVIOUR:- To determine whether a process should
extract bulk rates and other favourable treatment from the undergo a formal examination for quality-related problems. Control
transportation service. A consolidation service is also called an charts, also known as Shewhart charts or Process-Behavior Charts,
assembly service, cargo consolidation, and freight consolidation. are a statistical process control tool used to determine if a
Cargo consolidation service provided by a freight forwarder in which manufacturing or business process is in a state of control. Traditional
several smaller shipments are assembled and shipped together to control charts are mostly designed to monitor process parameters
avail of better freight rates and security of cargo. when underlying form of the process distributions is known.
Critical Fractile Model:- The Critical Fractile method is an inventory SERVICESCAPES:- The physical environment or servicescape of the
and production quantity method which incorporates variability in supporting service facility influences both customer and employee
demand, and therefore is somewhat more representative of behaviour and should be designed with an image and feel that is
situations a business faces than more static calculations. It is an congruent with the service concept. In other words,
incremental method of viewing inventory ordering or production. By the servicescape refers to the non-human elements of the
“incremental” we mean we can use it to look at things from a “one environment in which service encounters occur.
step at a time” viewpoint - if we are at 10, we look at 9 and 11. This SERVICESCAPES TYPOLOGY
concept is known as the Customer Lifetime Value, and this would be Who Performs in Physical Complexity of the Servicescape
incorporated into our loss figure for purposes of the Critical Fractile Servicescape Elaborate Lean
process.
Self-service Golf course Post office kiosk
The Newsvendor Model:- The newsvendor (or newsboy or single-
(customer only) Water slide park E-commerce
period or perishable) model is a mathematical model in operations
management and applied economics used to determine optimal Interpersonal Luxury hotel Budget hotel
inventory levels. It is (typically) characterized by fixed prices and (both) Airline terminal Bus station
uncertain demand for a perishable product. This model is also known Remote service Research lab Telemarketing
as the Newsvendor Problem or Newsboy Problem by analogy with (employee only) L.L. Bean Online tech support
the situation faced by a newspaper vendor who must decide how
many copies of the day's paper to stock in the face of uncertain
demand and knowing that unsold copies will be worthless at the end
of the day.
The Newsvendor Framework:- One chance to decide on the stocking
quantity for the product you’re selling, Demand for the product is
uncertain, Known marginal profit for each unit sold, Known marginal
loss for the ones that are bought and not sold, Goal: Maximize
expected profit. Examples where the Newsvendor framework is
appropriate:- Perishable goods:-Meals in a cafeteria, Dairy foods, 3
Short selling season, Christmas trees, toys, Flowers on Valentine’s
day, Fashion clothes, seasonal clothes, Newspapers. 5
 The physical environment may assume a variety of strategic
roles in support of the service concept. First, the servicescape
provides a visual metaphor for an organization’s offering. The
environmental dimensions of the servicescape create a package,
similar to the packaging of a product that conveys an image
suggesting relative quality, potential usage, and target market
segment. Second, the servicescape can facilitate the delivery of
the service by either aiding or hindering the ability of customers
and employees to carry out their respective activities. In a
physical setting, the floorplan, signage, and equipment (e.g.,
self-scanning checkout) impact the user friendliness of the
facility and the ability to service customers effectively. Third, the
servicescape can also encourage social interaction among
customers. Finally, the physical environment can serve as a
subtle method to focus employee behavior.
FACILITY DESIGN:- Service operations can be directly affected by
the design of the facility. Facility Layout and Design - The basic
meaning of facility is the space in which a business's activities
take place. The layout and design of that space impact greatly
how the work is done—the flow of work, materials, and
information through the system. FACTORS INFLUENCING
FACILITY DESIGN:- 1)The nature and objectives of the service
organization 2)Land availability and space requirements
3)Flexibility 4)Aesthetic factors 5)The community and
environment.
ENVIRONMENTAL DIMENSIONS:- The dimensions of the
physical environment surroundings include all the objective PROCESS ANALYSIS:- A process analysis is a systematic review of
factors that can be controlled by the firm to enhance employee all steps and procedures followed to perform a given activity. It
and customer actions and perceptions of the service. Although is a description of the way a particular task is done within an
these dimensions will be discussed independently, it is organization.
important to realize that people respond to their environment
holistically; that is, the total combined effect on all our senses
defines our perception of the servicescape.
1)Ambient Conditions: background characteristics such as
noise level, music, lighting, temperature, and scent. 2)Spatial
Layout and Functionality: reception area, circulation paths of
employees and customers, and focal points. 3)Signs, Symbols,
and Artifacts: selection, orientation, location, and size of
objects.
3
6
FLOWCHARTING:- The ability to diagram a process, identify the Capacity utilization:- Capacity utilization is a measure of how much output is
bottleneck operation, and determine the system capacity are actually achieved relative to the process capacity when fully busy. Throughput
fundamental skills in managing service operations and making time:- Throughput time is the time it takes to complete a process from time of
arrival to time of exit. Throughput time is the sum of the critical path operation
improvements. times plus the average time spent in all queues. Rush Order Flow Time:- Rush
Terminator: An ellipse represents a start or stop in a process. order flow time is the time it takes to go through the system from beginning to
Operation: A rectangle represents a process or action step. end without any time in queue. Total direct labor content:- Total direct labor
content is the sum of all the operations times (i.e., touch time) consumed in
Decision: A diamond represents a question or branch.
performing the service. In professional services this often is referred to as
Wait: A triangle represents a delay or inventory of goods. “billable” hours. Direct labor utilization:- Direct labor utilization is a measure
Flow: An arrow shows movement of customers, goods, or of the percentage of time that workers actually contribute value to a fully busy
information. service organization.
PROCESS IMPROVEMENT:- Process Improvement is the proactive task of
identifying, analysing and improving upon existing business processes within an
organization for optimization and to meet new quotas or standards of quality It
focuses continuous improvement in service organizations using productivity
and quality initiatives. The philosophy of continuous improvement is captured
in the plan-do-check-act (PDCA) cycle proposed by Deming.
FOUNDATION OF CONTINUOUS IMPROVEMENT:- The foundations of Deming’s
teachings consisted of three principles: 1)Customer satisfaction:- Focusing on
satisfying customers’ needs should be paramount in workers’ minds. This
requires an attitude of putting the customer first and a belief that this principle
is the object of one’s work. 2)Management by facts:- To encourage scientific
thinking, objective data must be collected and presented to management for
decision making. This approach requires formal data gathering and statistical
analysis of the data by the quality improvement teams. 3)Respect for people:-
A companywide quality-improvement program assumes that all employees
have a capacity for self-motivation and for creative thought. Employees are
given support, and their ideas are solicited in an environment of mutual
respect.
PROCESS TERMINOLOGIES:- Cycle time:- Cycle time (CT) is the
PDCA Cycle: Deming’s approach, represented by a wheel, consists of four
average time between completions of successive units. For an steps: plan, select and analyse the problem; do, implement the solution; check
operation, CT is the average service time to perform the activity. the results of the change; and act to standardize the solution and reflect on the
Bottleneck:- A bottleneck is the factor that limits production. Usually learning. Plan:- Planning begins with the selection of the problem. Problems
the bottleneck is the slowest operation (or longest CT). Capacity:- will appear as changes to important customer indicators, such as rate of
Capacity is a measure of output per unit of time when fully busy (e.g., defections or complaints. Do:-Implement the solution or process change
activity is never idle). The unconstrained capacity of any operation is perhaps on a trial basis. Monitor the implementation plan by collecting data on
measured as 1/CT. 3 performance measures and noting progress against milestones. Check:- Review
and evaluate the result of the change. Check that the solution is having the
intended effect and note any unforeseen consequences. Act:- Reflect and act
7 on learning from the experience.
 7)Scatter Diagram:- A scatter diagram visually shows the
relationship between two variables. Plotting possible-cause
variables against the problem can identify where a strong
correlation exists (i.e., scatter points form a tight trend line).
8)Control Chart:-Control charts are used to monitor a process.
SERVICE FACILITY LAYOUT:- Layout is the way or arrangement in
which service facility is organized. The arrangement could be of
service facility area, equipment, workstations or any physical entity.
QUALITY TOOLS FOR ANALYSIS AND PROBLEM SOLVING:- It is important to design a proper facility layout to have smooth
1)Check Sheet:- A check sheet is a historical record of observations and flow of work and efficient flow of information, material and people.
represents the source of data to begin the analysis and problem Layouts are also designed to maximize the space utilization to
identification. Originally a check sheet was simply a sheet of paper eliminate waste or redundant movement. It increases the capacity
listing potential problems, and each day workers would place check of service facility and hence reduces the customer waiting and
marks in the appropriate column to tally the frequency of occurrence. service time. Facility layouts are designed so as to encourage
2)Run Chart:- A run chart tracks change in an important process proper and convenient maintenance activities and to incorporate
variable over time to detect trends, shifts, or cycles in performance. safety and security measures.
Run charts are easy to interpret and useful in predicting trends. Teams Different types of facility layouts are: 1)Product layout 2)Process
can use run charts to compare a performance measure before and after
layout 3)Fixed -position layout 4)Office layout 5)Retail layout
implementation of a solution. 3)Histogram:- A histogram presents data
collected over a period of time as a frequency distribution in bar-chart SERVICE FACILITY LOCATION:- From marketing perspective service
form. Using the chart command in Excel, data from the check sheet can location focuses on attracting customers to a site because of
be presented visually to obtain a sense of the distribution. 4)Pareto convenience (fast food restaurant on a high traffic street) or
Chart:- A Pareto chart orders problems by their relative frequency in a physical attributes (resort on a beautiful beach). Location also
descending bar graph to focus efforts on the problem that offers the effects the service delivery design and has an impact on employees.
greatest potential improvement. Vilfredo Pareto, a 19th-century Italian Traditionally, location decisions have been based on intuition and
economist, observed that relatively few factors usually account for a had a considerable range of success. Although site selection often is
large percentage of the total cases. 5)Flowchart:- Flowcharts are a based on opportunistic factors such as site availability and favorable
visual representation of the process and help team members identify leasing, a quantitative analysis can be useful to avoid a serious
points where problems might occur or intervention points for solution. mistake.
Flowcharting conventions use diamonds to represent decision points, Strategic Location Dimensions:-1)Flexibility of a location is a
rectangles for activities, and ovals for beginning and ending points.
measure of the degree to which the service can react to changing
6)Cause-and-Effect Diagram:- Cause-and-effect analysis offers a
economic situations. 2)Competitive positioning refers to methods
structured approach for a team to identify, explore, and display
by which the firm can establish itself relative to its competitors.
graphically, in increasing detail, all of the possible causes related to a
problem in order to discover the root cause. The cause-and-effect
3 3)Demand management is the ability to control the quantity,
quality, and timing of demand. 4)Focus can be developed by
diagram is also known as a fishbone chart, owing to its skeletal shape,
or an Ishikawa chart, named after its originator.
8 offering the same narrowly defined service at many locations.
where Huff Model for Retail Outlet: locating a retail outlet such as a
w i _ weight attached to the i th point (e.g., trips per month) supermarket, the objective is to maximize profit. In this case, a
x i , y i _ coordinates of the i th demand point discrete number of alternative locations must be evaluated to find
the most profitable site. A gravity model is used to estimate
x s , y s _ coordinates of the service facility
consumer demand. This model is based on the physical analog that
n _ number of demand points served the gravitational attraction of two bodies is directly proportional to
Note that the objective function may be restated as two independent the product of their masses and inversely proportional to the square
terms. of the distance that separates them. David L. Huff developed a retail
location model using this gravity model to predict the benefit that a
Minimize customer would have for a particular store size and location. For a
service, the attractiveness of a facility may be expressed as

where
A ij = attraction to facility j for consumer i
S j =size of the facility j
T ij = travel time from consumer i ’s location to facility j
= parameter estimated empirically to reflect the effect of travel time
on various kinds of shopping trips (e.g., where a shopping mall may
have a = 2, convenience
stores would have a = 10 or larger)

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 Location Set Covering for Multiple Facilities

Ford’s Auto Collection Concept:- Objectives are: Cost reduction,

Service enhancement
Operating Model adopted by Ford:- IT/Technology:
Development of an intranet, Construction of customer loyalty
database. Prediction system for vehicle sales, Organization
Structure, HR Management, Marketing
Response through Auto Collection: Efforts to increase customer
satisfaction by charging fair prices, providing better services etc,
Location Set Covering for Multiple Facilities:- The difficulty of Greater selection; customers had various brands and options to
evaluating decisions regarding public facility location has resulted in a choose from, Services were promised to be customer needs
search for surrogate, or substitute, measures of the benefit of the driven low pressure, “One price policy” was adopted.
facility location. One such measure is the distance that the most
distant customer would have to travel to reach the facility. This is
known as the maximal service distance. We want to find the
minimum number and location of facilities that will serve all demand
points within some specified maximal service distance; this is known
4
as the location set covering problem.
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STRATEGIC LOCATION CONSIDERATIONS:- 1)Competitive clustering:- 6)Impact of the Internet on Service Location – Impact of the Internet
is a reaction to observed consumer behavior when they are choosing on Service Location. A web site has become the virtual location of
among competitors. When shopping for items such as new pure e-commerce firms. The concept of “edistance”, the barrier
automobiles or used cars, customers like to make comparisons and, created by internal and external navigation, arises from the desire to
for convenience, seek out the area of town where many dealers are attract customers to a web site. (e.g. Amazon.com, eBay, FedEx).
concentrated (i.e., the so-called motor mile). 2)Saturation 7)Site Considerations:- Available real estate represents a major
Marketing:- the idea is to group outlets of the same firm tightly in constraint on the final selection of a site. Moreover, site selection
urban and other high-traffic areas. This strategy works best in high- requires a physical visit to assess the local environment.
density, downtown locations, where shops can intercept impulse
customers with little time to shop or eat. 3)Marketing Intermediaries
- The idea that services are created and consumed simultaneously
does not seem to allow for the “channel-of-distribution” concept as
developed for goods. Because services are intangible and cannot be
stored or transported, the geographic area for service would seem to
be restricted. However, Service channels of distribution have involved
that use separate organizational entities as intermediaries between
the producer and the customer. 4)Substitution of Communication
for Travel – an appealing alternative to moving people from one
place to another is the use of telecommunications. One proposal that
has met with some success is the use of telemetry to extend health
care services into remote regions. 5)Separation of Front from Back
Office – If the front office and back office need not be co-located,
opportunities exist for creative service design. (e.g. Dry cleaning, ATM
etc.). Notice the strategic role of front office location in creating a
barrier to entry and the back office location in achieving cost
economies.

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SERVICE FACILITY LOCATION ISSUES:-1)Geographic representation:- FACILITY LOCATION TECHNIQUES:- 1)Geographic Representation:-
The traditional classification of location problems is based on how The traditional classification of location problems is based on how
the geography is modeled. Location options and travel distance can the geography is modeled. Location options and travel distance can
be represented on either a plane or a network. Location on a plane be represented on either a plane or a network. Location on a plane
(i.e., flat surface) is characterized by a solution space that has infinite (i.e., flat surface) is characterized by a solution space that has infinite
possibilities. 2)Number of facilities:- The location of a single facility possibilities. Facilities may be located anywhere on the plane and are
generally can be treated mathematically with little difficulty. identified by an xy cartesian coordinate (or, in a global context, by
Unfortunately, the methods used to site a single facility do not latitudes and longitudes).Distance between locations is measured at
guarantee optimal results when they are modified and applied to the extremes in one of two ways.
multisite location problems. 3)Optimization criteria:- Private and Euclidian metric:- or vector, travel distance (remember the
public sector location problems are similar in that they share the Pythagorean theorem), which is defined as
objective of maximizing some measure of benefit. The location
criteria that are chosen differ, however, because the “ownership” is
different. Within the private sector, the location decision is governed
by either minimization of cost or maximization of profit. Where,
dij = distance between points i and j
xi, yi = coordinates of the i th point
xj, yj = coordinates of the j th point
Metropolitan metric:- or rectangular displacement, travel distance
(i.e., north-south and east-west travel in urban areas), which is
defined as

An understanding of the facility location problem can be gained from

the results of locating a single facility on a line. Locating a site along a
line can be generalized for locating a site on a plane if we use the
metropolitan metric. Total travel distance will be minimized if the
coordinates of the site correspond to the intersection of the x and y
medians for their respective density distributions. We will refer to
this as the cross-median approach.
2)Cross Median Approach for a Single Facility:- Locating a single
facility on a plane to minimize the total travel distance Z by means of
the metropolitan metric is straightforward using the cross-median
4 approach. The objective is
Minimize
0
CUSTOMER CENTRIC STRATEGY:- Customer centric is a way of doing REPAIRABLE PARTS INVENTORY MANAGEMENT:- Service parts
business with your customer in a way that provides a positive management is an important requirement for meeting customer
customer experience before and after the sale in order to drive expectations for product support in a cost effective manner. Most
repeat business, customer loyalty and profits. Customer centricity is customers are dependent on the “uptime” of their products, and if a
not just about offering great customer service, it means offering a break down occurs, they expect rapid restoration of service through
great experience from the awareness stage, through the purchasing repair and/or replacement. Repairable service parts are often those
process and finally through the post-purchase process. It’s a strategy parts with low demand rates, long “new buy” procurement lead
that’s based on putting your customer first, and at the core of your times and high unit costs. Hence it is especially important to manage
business. repairable well. Repairable service parts follow a closed cycle as
illustrated in Figure. In a closed cycle no parts are added to or taken
out of the system. If a part fails, it is replaced by a good part from the
service parts inventory, if available (otherwise the system waits until
a good part becomes available). The failed part is then sent to the
repair queue. When its turn comes, it is repaired and then placed in
the good parts inventory.

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Sometimes there are restrictions on whether a part can be repaired. PERFORMANCE BASED LOGISTICS (PBL):- Performance-based
Among these restrictions are physical restrictions (e.g. the part may logistics (PBL), also known as performance based life-cycle product
be too severely damaged to be repaired) and policy restrictions (e.g. support or performance-based contracting, is a strategy for cost-
maximum number of three repairs is allowed for a specific part). In effective weapon system support. Rather than contracting for the
such cases, the cycle will be open, meaning that material “leaks” out acquisition of goods and services, the product support manager
through disposal at a testing stage and gets resupplied through identifies product support integrators(s) (PSI) to deliver performance
additional acquisitions. Such a cycle. outcomes as defined by performance metric(s) for a system or
product. The integrator often commits to this performance level at a
lower cost, or increased performance at costs similar to those
previously achieved under a non-PBL or transactional portfolio of
product support arrangements for goods and services.
Attributes of an effective PBL arrangement include: Objective,
measurable work description that acquires a product support
outcome. Appropriate contract length, terms, and funding strategies
that encourage delivery of the required outcome. A manageable
number of metrics linked to contract requirements that reflect
desired outcomes and cost reduction goals. Incentives to achieve
required outcomes and cost reduction initiatives. Risks and rewards
shared between government and commercial product support
integrators and providers. Synchronization of product support
arrangements to satisfy requirements.

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