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8/28/2012

MGT 3121- Lecture 1

MGT 3121 Service Operations Management Fall 2012


Lecture 01: Services in the Economy

Aims and Objectives


At this end of this lecture, you should be able to: Assess the importance of service operations management Goods vs. Services Understand the characteristics of services Understand the Service Process Matrix Understand the managerial g challenges g associated with a service process matrix Key models include: Customer Contact Model The Service Process Matrix

Anirban Ganguly, MBA, PhD, Zicklin School of Business

8/28/2012

MGT 3121- Lecture 1

There are no such things as service i d ti industries. Th There are only l i industries d ti whose service components are greater or less than those of other industries. Everybody is in service
(Levitt 1972: 41-42).

Why Study Service Operations Service firms forms a large percentage of the economies of industrialized nations
80% of the US economy (employment and GDP)

Gain a competitive edge. There is little focus on services in the academic world Not all management tools that are appropriate for manufacturing are transferable into a service environment

Anirban Ganguly, MBA, PhD, Zicklin School of Business

8/28/2012

MGT 3121- Lecture 1


Historical US Employment by Economic Sector

What is Operations? The transformation process that turns inputs p , that is, , the act of combining g into outputs, people, raw materials, technology, etc. into useable services and products Who is in the operations function?
The people who actually make a product or perform a service Typically operations has the largest number of employees of any functional area

Anirban Ganguly, MBA, PhD, Zicklin School of Business

8/28/2012

MGT 3121- Lecture 1


But Im going into marketing, finance, strategy

Regardless of your functional area, you will b involved be i l d in i t transformational f ti l processes, in other words, getting things done Service operations can help you get things done more effectively and more efficiently
Event Management Incident Management Problem handling and management Data management

Fundamentally, there are no differences between service and manufacturing operations! Both are concerned with: Efficiency Effectiveness Quality Cost

Anirban Ganguly, MBA, PhD, Zicklin School of Business

8/28/2012

MGT 3121- Lecture 1


Goods vs. Services
Services Intangible Production, distribution and consumption can take place simultaneously Generally produced by buyerseller interaction Consumers participate in production Cannot be stored Goods Tangible All three are separate

Generally produced in factories

Consumers generally do not participate in production Can be stored

Adapted and modified from Ravi Garg, (http://www.authorstream.com/Presentation/ravi.garg13-167711-classification-serviceseducation-ppt-powerpoint/)

Characteristics of services
Rules: Services are intangible Simultaneous production and consumption Proximity to the customer Services cannot be inventoried Exceptions: Tangible services taxi service, etc. Computer system upgrades; janitorial services Internet-based services; catalogs Retailers hold inventory; hotel rooms, airline seats are inventory

Anirban Ganguly, MBA, PhD, Zicklin School of Business

8/28/2012

MGT 3121- Lecture 1


Characteristics of services
Services are performances or actions differ from one to the next are produced as they are consumed cannot be inventoried often involve direct contact with employees and processes often do not involve a transfer of property rights concepts are easy for others to copy quality is difficult to evaluate Are therefore are characterised by: Intangibility Heterogeneity Simultaneity Perishability Direct Contact Inalienability Imitability Subjectivity

Why Classify Service?


For proper design of techniques in order to ensure complete customer satisfaction To determine commonalities and differences among the service operations among different industries To dig deep into the root of the problem, if any To ensure better troubleshooting Two commonly used tools to classify services: Customer contact model Service process matrix

Anirban Ganguly, MBA, PhD, Zicklin School of Business

8/28/2012

MGT 3121- Lecture 1


Customer Contact Model Services are classified according to the amount of f customer t contact t t
Pure Services
Medical Restaurants Transportation

Mixed Services
Branch offices

Quasi-Mfg.
Home offices Distribution centers

Manufacturing

Guiding G idi P Principle: i i l


Customer _ Contact _ Time Potential_ Efficiency f 1 Service _ Creation _ time

Service Process Matrix


Degree of Interaction and Customization L Low Service Factory Airlines Low Trucking Hotels Mass Service Retailing R t ili High Wholesaling Schools Retail Aspects of Commercial Banking Hi h High Service Shop Hospitals Auto Repair Other Repair Services Professional Service Doctors D t Lawyers Accountants Architects

Degree of Labor Intensity y

Anirban Ganguly, MBA, PhD, Zicklin School of Business

8/28/2012

MGT 3121- Lecture 1


The Service Process Matrix: Challenges for Service Managers

Low Labor Intensity

Challenges for managers


Capital decisions Technological advances Managing peak/non-peak demand Scheduling service delivery

Anirban Ganguly, MBA, PhD, Zicklin School of Business

8/28/2012

MGT 3121- Lecture 1


High Labor Intensity

Challenges for managers


Hiring, training Methods development Employee welfare Scheduling workforces Control of far-flung far flung locations Managing growth

Low Interaction/Customization Challenges for managers


Marketing Making service warm Attention to physical surroundings Managing fairly rigid hierarchy with need for p gp procedures standard operating

Anirban Ganguly, MBA, PhD, Zicklin School of Business

8/28/2012

MGT 3121- Lecture 1


High Interaction/Customization Challenges for managers
Fighting cost increases Maintaining quality Reacting to consumer intervention in process Managing flat hierarchy with loose subordinatep relationships p superior Gaining employee loyalty

Lessons learned

Service firms constitute an overwhelmingly large percentage of the economy. economy Despite the size, a lack of attention given to services provides a competitive advantage to those students who pursue its study. Moreover, specialized and different managerial techniques are employed in services.

Anirban Ganguly, MBA, PhD, Zicklin School of Business

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8/28/2012

MGT 3121- Lecture 1

Anirban Ganguly, MBA, PhD, Zicklin School of Business

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