Chapter 5 Service Design Operations Management

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Lecture Outline w Service Economy w Characteristics of Services w Service Design Process w Tools for Service Design w Waiting Line Analysis for Service Improvement Copyright 2009 John Wiley & Sons, Inc. 5 -2

Continuum of Goods and Services w Services n acts, deeds, or performances w Goods n tangible objects w Facilitating services n accompany almost all purchases of goods w Facilitating goods n accompany almost all service purchases Copyright 2009 John Wiley & Sons, Inc. 5 -5

Continuum from Goods to Services Source: Adapted from Earl W. Sasser, R. P. Olsen, and D. Daryl Wyckoff, Management of Service Operations (Boston: Allyn Bacon, 1978), p. 11. Copyright 2009 John Wiley & Sons, Inc. 5 -6

Characteristics of Services (cont. ) w w Services are intangible Service output is variable Services have higher customer contact Services are perishable Copyright 2009 John Wiley & Sons, Inc. w Service inseparable from delivery w Services tend to be decentralized and dispersed w Services are consumed more often than products w Services can be easily emulated 5 -7

Service Design Process (cont. ) w Service concept n purpose of a service; it defines target market and customer experience w Service package n mixture of physical items, sensual benefits, and psychological benefits w Service specifications n n n performance specifications design specifications delivery specifications Copyright 2009 John Wiley & Sons, Inc. 5 -9

High v. Low Contact Services Design Decision High-Contact Service w Facility w Convenient to location customer w Facility layout Low-Contact Service w Near labor or transportation source w Must look presentable, w Designed for accommodate efficiency customer needs, and facilitate interaction with customer Source: Adapted from R. Chase, N. Aquilano, and R. Jacobs, Operations Management for Compensative Advantage (New York: Mc. Graw-Hill, 2001), p. 210 Copyright 2009 John Wiley & Sons, Inc. 5 -11

High v. Low Contact Services (cont. ) Design Decision High-Contact Service Low-Contact Service w Quality control w More variable since w Measured against customer is involved in established process; customer standards; testing expectations and rework possible perceptions of quality may differ; customer to correct defects present when defects occur w Capacity w Excess capacity required to handle peaks in demand w Planned for average demand Source: Adapted from R. Chase, N. Aquilano, and R. Jacobs, Operations Management for Compensative Advantage (New York: Mc. Graw-Hill, 2001), p. 210 Copyright 2009 John Wiley & Sons, Inc. 5 -12

High v. Low Contact Services (cont. ) Design Decision High-Contact Service Low-Contact Service w Worker skills w Must be able to interact well with customers and use judgment in decision making w Technical skills w Scheduling w Must accommodate customer schedule w Customer concerned only with completion date Source: Adapted from R. Chase, N. Aquilano, and R. Jacobs, Operations Management for Compensative Advantage (New York: Mc. Graw-Hill, 2001), p. 210 Copyright 2009 John Wiley & Sons, Inc. 5 -13

High v. Low Contact Services (cont. ) Design Decision High-Contact Service Low-Contact Service w Service process w Mostly front-room w Mostly backactivities; service may room activities; change during delivery planned and in response to executed with customer minimal interference w Service package w Varies with customer; includes environment as well as actual service w Fixed, less extensive Source: Adapted from R. Chase, N. Aquilano, and R. Jacobs, Operations Management for Compensative Advantage (New York: Mc. Graw-Hill, 2001), p. 210 Copyright 2009 John Wiley & Sons, Inc. 5 -14

Tools for Service Design w Service blueprinting n n line of influence line of interaction line of visibility line of support w Front-office/Backoffice activities Copyright 2009 John Wiley & Sons, Inc. w Servicescapes n n n space and function ambient conditions signs, symbols, and artifacts w Quantitative techniques 5 -15

Elements of Waiting Line Analysis w Operating characteristics n average values for characteristics that describe performance of waiting line system w Queue n a single waiting line w Waiting line system n consists of arrivals, servers, and waiting line structure w Calling population n source of customers; infinite or finite Copyright 2009 John Wiley & Sons, Inc. 5 -18

Elements of Waiting Line Analysis (cont. ) w Arrival rate (λ) n frequency at which customers arrive at a waiting line according to a probability distribution, usually Poisson w Service time (μ) n time required to serve a customer, usually described by negative exponential distribution w Service rate must be shorter than arrival rate (λ < μ) w Queue discipline n order in which customers are served w Infinite queue n can be of any length; length of a finite queue is limited Copyright 2009 John Wiley & Sons, Inc. 5 -20

Elements of Waiting Line Analysis (cont. ) w Channels n number of parallel servers for servicing customers w Phases n Copyright 2009 John Wiley & Sons, Inc. number of servers in sequence a customer must go through 5 -21

Psychology of Waiting w Waiting rooms n n magazines and newspapers televisions w Bank of America n w Disney n n costumed characters mobile vendors accurate wait times special passes mirrors w Supermarkets n n magazines “impulse purchases” Copyright 2009 John Wiley & Sons, Inc. 5 -23

Psychology of Waiting (cont. ) w Preferential treatment n n n Grocery stores: express lanes for customers with few purchases Airlines/Car rental agencies: special cards available to frequent-users or for an additional fee Phone retailers: route calls to more or less experienced salespeople based on customer’s sales history w Critical service providers n n services of police department, fire department, etc. waiting is unacceptable; cost is not important Copyright 2009 John Wiley & Sons, Inc. 5 -24

Waiting Line Models w Single-server model n simplest, most basic waiting line structure w Frequent variations (all with Poisson arrival rate) n n n exponential service times general (unknown) distribution of service times constant service times exponential service times with finite queue exponential service times with finite calling population Copyright 2009 John Wiley & Sons, Inc. 5 -25

Basic Single-Server Model w Assumptions n n n Poisson arrival rate exponential service times first-come, firstserved queue discipline infinite queue length infinite calling population Copyright 2009 John Wiley & Sons, Inc. w Computations n n n λ = mean arrival rate μ = mean service rate n = number of customers in line 5 -26

Basic Single-Server Model (cont. ) w probability that no customers are in queuing system P 0 = ( ) 1– λ L= μ w probability of n customers in queuing system Pn = ( )( ) λ μ n ∙ P 0 = λ μ w average number of customers in queuing system λ n 1– μ Copyright 2009 John Wiley & Sons, Inc. λ μ–λ w average number of customers in waiting line Lq = λ 2 μ ( μ – λ) 5 -27

Basic Single-Server Model (cont. ) w average time customer spends in queuing system W= 1 μ–λ = L λ w average time customer spends waiting in line λ Wq = μ ( μ – λ) Copyright 2009 John Wiley & Sons, Inc. w probability that server is busy and a customer has to wait (utilization factor) λ ρ= μ w probability that server is idle and customer can be served I=1– ρ =1– λ μ = P 0 5 -28

Service Improvement Analysis w waiting time (8 min. ) is too long n hire assistant for cashier? l n increased service rate hire another cashier? l reduced arrival rate w Is improved service worth the cost? Copyright 2009 John Wiley & Sons, Inc. 5 -31

Advanced Single-Server Models w Constant service times n occur most often when automated equipment or machinery performs service w Finite queue lengths n occur when there is a physical limitation to length of waiting line w Finite calling population n number of “customers” that can arrive is limited Copyright 2009 John Wiley & Sons, Inc. 5 -34