High-contact processes have the customer in the system while providing the service. This can lead to difficulties in standardizing the service or inefficiencies when the customer makes demands or expects unique services. On the other hand, high-contact also provides the possibility of self-service where customers provide part of the service themselves e.
Low-contact services are performed away from the customer in what is often called "the back room. Low-contact services can be managed more like manufacturing, high-contact services cannot. In Levitt introduced the "production-line approach to service". He gave the example of McDonald's that has standardized both the services at the front counter and the backroom for producing the food.
They have limited the menu, simplified the jobs, trained the managers at "Hamburger U" , automated production and instituted standards for courtesy, cleanliness, speed and quality. As a result, McDonald's has become a model for other service processes which have been designed for high efficiency, not only in fast food, but in many other services. At the same time, it leaves open the option for more customized and flexible services for customers who are willing to pay more for "better" or more personalized service.
While these services are less efficient, they cater more to unique customer's needs. Many different service process matrices have been proposed for explaining the relationship between service products that are selected and corresponding processes. The Service Delivery System Matrix  by Collier and Meyer illustrates the various types of routings used for service process depending on the amount of customization and customer involvement in the process.
With high levels of customization and customer involvement, there are many pathways and jumbled flows for service. As a result, the service delivery of Customer-Routed services is less efficient than Co-routed or Provider-Routed processes that have less customization and less customer involvement. Process that should be used for each combination of customization and customer involvement are shown on the diagonal of this matrix.
Self-service is in wide use. For example, in the s gas station attendants came out and pumped your gas, cleaned your windshield and even checked your oil.
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Fast food is famous for self-service, since customers have been trained to order their own food, pay immediately, find a table, and clean up the trash. ATM's have replaced many traditional tellers and online banking provides even more self-service. When self-service is accepted by the customer, it can reduce costs and even provide better service in the customer's eyes—faster service with less hassle.
Services that were previously customer-routed have been moved down the diagonal to be more efficient and accepted by customers.
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Service Blueprint The service blueprint is a way to describe the flow of a customer through a service operation from the start to the finish, along with the actions provided by the service providers both in interaction with the customer and in the "back room" out of sight of the customer. A blueprint flowchart shows every step in the process and can be used to illustrate the process and improve it. If lean thinking is applied, the time taken for each step in a service blueprint flowchart can be recorded, or a separate value-stream map can be constructed.
Then the process can be analyzed for time reductions to reduce waiting and non-value added steps. Waste is anything that does not add value to the process including waiting time in line, possibility of more self-service, customer hassle, and defects in service. But, lean thinking also requires attention to the customer and the people providing the service. It is important to apply important principles such as completely solve the customer's problem, don't waste time and provide exactly what the customer requires.
Leite and Vieira state that service managers must realize that the customer will be happy if the service provided meets or exceeds expectations. Also the interaction between the customer and the people providing the service is essential to achieve satisfied customers. Employee involvement is often emphasized as part of lean thinking to achieve high levels of commitment by service employees. Queuing is an analytic method for determining waiting time when customers must wait in line to get service.
The length of the queue and waiting time can be calculated based on the arrival rate, service rate, number of servers and type of lines. There are many formulas for various types of queuing theory problems. The reason for this is that a long line will build up when randomness of arrivals occurs faster than the average and service times are longer than the average. If the distributions of arrival times and service times are known, formulas are available for calculating the exact waiting times and line lengths for many different queuing configurations of servers, types of lines, server distributions and arrival distributions.
Heskett, Sasser and Schlensinger proposed the service-profit chain as a way to design service processes. The service-profit chain links various aspects and tasks required to deliver superior service and profits. It starts with a high level of internal quality leading to employee satisfaction and productivity to deliver superior external customer service leading to customer satisfaction, customer loyalty and finally high revenues and profits.
Every link in this chain is important and the linkage between the service providers and the customer is essential in service operations. The service manager should not break any of the links in order to receive the results of high probability and growth. Others argue that ultimately the service result is judged by the customer relative to the customer's expectations and not by the service provider.
Quality management practices for services have much in common with manufacturing, despite the fact that the product is intangible. The following approaches are widely used for quality improvement in both manufacturing and services:. These approaches have several things in common.
They begin with defining and measuring the customer's needs e. Any service that does not meet a customer's need is considered a defect. Then these approaches seek to reduce defects through statistical methods, cause-and-effect analysis, problem solving teams, and involvement of employees. They focus on improving the processes that underlie production of the service.
In addition to intangibility, there are two approaches about quality that are unique to service operations management. For manufactured products, quality problems are handled through warranties, returns and repair after the product is delivered. In high contact services there is no time to fix quality problems later; they must be handled by service recovery as the service is delivered. For example, if soup is spilled on the customer in a restaurant, the waiter might apologize, offer to pay to have the suit cleaned and provide a free meal. If a hotel room is not ready when promised, the staff could apologize, offer to store the customer's luggage or provide an upgraded room.
Service recovery is intended to fix the problem on the spot and go even further to offer the customer some form of consolation and compensation. The objective is to make the customer satisfied with the situation, even though there was a service failure. A service guarantee is similar to a manufacturing guarantee, except the service product cannot be returned. A service guarantee provides a specific monetary reward for failure of service delivery. Service guarantees serve to assure the customer of quality and they provide a way for the employees to know the cost of service failure.
Forecasting demand is a prerequisite for managing capacity and scheduling. Forecasting demand often uses big data to predict customer behavior.
Operations management for services
The data comes from scanners at retail locations or other service locations. In some cases traditional time series methods are also used to predict trends and seasonality. Future demand is forecasted based on past demand patterns. Many of the same time-series and statistical methods for forecasting are used for manufacturing or service operations. Capacity planning is quite different between manufacturing and services given that service cannot be stored or shipped to another location.
Customers are only willing to travel short distances to receive most services. Exceptions are health care when the illness requires a specialist, airline transportation when the service is to move the customer, and other services where local expertise is not available. Aside from these exceptions, location analysis depends on the "drawing power" based on the distance a customer is willing to travel to a service site relative to competitive offerings and locations. The drawing power of a site for a particular customer is high if the site is close by and provides the required service.
High drawing power is related to high sales and profits. This is much different than manufacturing locations which depend on the cost of building a factory plus the cost of transporting the goods to the customers. Manufacturing plants are located on the basis of low costs rather than high revenues and profits for services.
A second difference from manufacturing is planning for capacity utilization once a facility is built. Since the product cannot be stored in inventory and sold later, service capacity is perishable and must meet peak demand at any point in time. First, management can attempt to reduce peak demand and level it over time by the following actions. While some of these same mechanisms are used in manufacturing, they are much more crucial in service operations.
Revenue management is unique to services, since capacity is perishable. This applies to the airline industry. When the plane leaves the runway, empty seats generate no revenue, but the cost of the flight is almost the same. As a result, mathematical models have been formulated to allocate capacity at various prices and times as the flight is booked in advance. Initially, a certain number of seats are reserved for first class, coach, premium coach and various other categories. Based on the elasticity of demand, seats prices are lowered at the last minute in order to fill empty seats and maximize the revenue of the flight.
Scheduling has some differences between manufacturing and service. In manufacturing, jobs are scheduled through a factory to sequence them in the best order to meet due dates and reduce costs. In services, it is customers who are being scheduled. As a result, waiting time becomes much more critical. While manufacturing orders don't mind waiting in line or waiting in inventory, real customer's do mind.
Some of the scheduling applications for services are: Many scheduling problems have been solved by using operations research methods to optimize the schedule. Inventory management and control is needed in service operations with facilitating goods. Almost every service uses some amount of facilitating goods. The presence of facilitating goods is critical in retail and wholesale operations but these operations don't manufacture anything, rather they distribute goods and provide service while doing it.
One difference from manufacturing inventories is that services use only finished goods, while manufacturing has finished goods, work-in-process and raw-materials inventories. As a result, manufacturing uses a Materials Requirements Planning System, while services do not. Services use Replenishment inventory control systems such as order-point and periodic-review systems.
A step-by-step funneling process
Supply chains for service operations are critical to supply facilitating goods. A typical hospital supply chain is an example. A hospital will use many goods from suppliers to construct and furnish the building. During day-to-day operation of the hospital, inventories of supplies will be held for the operating rooms and throughout the building.
The pharmacy will hold drugs and the kitchen will need supplies of food. The supply chain of facilitating goods in hospitals is extensive. Service inputs are critical for manufacturing including capital from banks, energy, information systems and human resources. Services are part of the manufacturing supply chain, just like the physical inputs of products from other manufacturing companies. Both manufacturing and service operations can purchase services from outside the organization. Internal business services such as accounting, legal, human resources, call centers, and information systems may be outsourced in part or entirely.
Some of these services can also be purchased from offshore. These services include transportation, warehousing, order fulfillment, returns and tariffs. Any major system selection process should take into account your existing solution architecture, the strategy of your business, and market conditions. Too often, firms rely purely on recommendations from peers and risk investing in the wrong solution. Each firm has its own system architecture and its own business requirements, and with an increasingly complex market, each selection must be carefully tailored to the specific business.
Furthermore, the systems, the vendors, and the market are all constantly evolving with advances in technology, features, and deployment options, further complicating the choice. However, to be frank, underpinning all of the above considerations should be a credible business case, approved by the board, which demonstrates the fiscal case even if it is negative!
Selection Management Systems, Inc. | Better Business Bureau® Profile
When initiating a system selection process, it is essential to define the critical success factors necessary for the process to result in a system and vendor selection success story. Investing in a new system is a costly affair with long-term consequences, meaning that it should never be a crisis-driven process but rather a pro-active strategy-driven process. To take these steps, informed choices are essential. As summarized below, a number of things can go awry in a system selection process if it is not carefully and effectively planned and executed.
The potential failures can have considerable consequences in terms of higher costs, increased risk, and the inability to realize business objectives. A newly acquired system is not something that is easily replaceable should it turn out to be the wrong decision, in fact selecting the wrong system can severely damage a business. Making a proper business case, careful planning, including the right stakeholders, ensuring business buy-in, liaising with external consultants, and tight project management will keep the process on track for success.