Chapter 12 service response logistics

CHAPTER 12 SERVICE RESPONSE LOGISITCS Learning Objectives You should be able to:  Understand how supply chain management in services differs from supply chain management in manufacturing  Define service response logistics  Describe the strategies for managing capacity, wait times, distribution and quality in services  Define service quality and describe how to measure it and improve it MBA Nguyen Phi Hoang@2015_SCM Chapter 12 Outline An Overview of Service Operations  Service Productivity  Global Service Issues  Service Strategy Development  The Service Delivery System  Service Location & Layout Strategies Supply Chain Management in Services MBA Nguyen Phi Hoang@2015_SCM The Primary Concerns of Service Response Logistics  Managing Service Capacity  Managing Waiting Times • Queuing System Design • Queuing System Applications • Managing perceived waiting times  Managing Distribution Channels  Managing Service Quality Introduction  Many services are considered pure services, offering few or no tangible products to customers  Other services may have end products with a larger tangible component such as restaurants, repair facilities, transportation providers  Customers are often involved in the production of the service  Services may provide state utility - they something to things that are owned by the customer, such as transport and store supplies, repair machines, cut hair, and provide health care MBA Nguyen Phi Hoang@2015_SCM An Overview of Service Operations Some of the differences between goods and services are reviewed here:  Services cannot be inventoried  Services are often unique Insurance policies, legal services  Services have high customer-service interaction Services today are finding ways to automate or standardize services  Services are decentralized Because of their inability to inventory and transport service products MBA Nguyen Phi Hoang@2015_SCM An Overview of Service OperationsCont Service Productivity Outputs produced Productivity = Inputs used • Outputs produced - customers served, services produced, sales $ • Inputs – single factor productivity (ex labor hours) • Inputs - multiple-factor productivity (ex labor, material, energy, and capital) Improving service productivity is challenging due to: • High labor content • Individual customized services • Difficulty of automating services • Problem of assessing service quality MBA Nguyen Phi Hoang@2015_SCM An Overview of Service Operations- Cont Global Services Issues- Global services are increasing all over the world Managing global services involves a number of issues:  Labor, facilities, and infrastructure support: locating support facilities, suppliers, transportation, communications  Legal and political issues: Laws may restrict foreign competitors, limit available resources, attach tariffs  Domestic competitors and the economic climate: Managers must be aware of local competitors, their services, their pricing structure, and current state of local economy  Identifying global customers MBA Nguyen Phi Hoang@2015_SCM An Overview of Service OperationsService Strategy Development: Cont.1 Cost Leadership Strategy- Requires large capital investment in automated, state-of-the art equipment and significant efforts in the areas of controlling and reducing costs Differentiation Strategy- Service that is considered unique Differentiation is created as companies listen to customers Focus Strategy- serve a narrow niche better than other firms MBA Nguyen Phi Hoang@2015_SCM An Overview of Service Operations- Cont The Service Delivery System Bundle of attributes (the combination of):  Explicit service (ex storage and use of your money)  Supporting facility (ex bank building with drive-up tellers)  Facilitating goods (ex deposit forms, monthly statements), &  Implicit services (ex security provided, the atmosphere in the bank, privacy, and convenience) Service delivery systems (a continuum) with mass produced, low-customer contact systems at one end and highly customized, high-customer-contact systems at the other The service system should be audited often to assess the system MBA Nguyen Phi Hoang@2015_SCM An Overview of Service Operations- Cont Service Location and Layout Strategies • Location Strategies- Have a significant impact on the longterm profits of the company It is desirable to consider relevant factors and to reduce decisions based solely on intuition • Layout Strategies  Departmental Layouts to Reduce Distance TraveledWhen moving from one area to another  Departmental Layouts to Maximize Closeness Desirability- A closeness desirability rating between various departments must be determined with the objective of designing a layout that maximizes a desirability rating for the entire office MBA Nguyen Phi Hoang@2015_SCM 10 The Primary Concerns of Service Response LogisticsCont Managing Waiting Times  Good waiting line management consists of the management of actual waiting time and perceived waiting time  What is the average arrival rate of the customers?  In what order will customers be serviced?  What is the average service rate of the service providers?  How are customer arrival and service times distributed?  How long will customers wait in line before they either leave or lower their perceptions of service quality?  How can customers be kept in line even longer without lowering their perceptions of service quality? MBA Nguyen Phi Hoang@2015_SCM 15 The Primary Concerns of Service Response Logistics- Cont Queuing System Design  Customer arrivals (or demand source) is either infinite or finite  Customers also arrive in patterns  Poisson distribution is often used to model customer arrival Px(T) = e -λT (λT) x x! λ = average customer arrivals in Time Period T e = 2.71828 (natural log base), and x! = x factorial  Most queuing models assume that customers stay in line Customers not exhibit balking – refusing to join the queue, or reneging – leaving the line prior to completing the service MBA Nguyen Phi Hoang@2015_SCM 16 The Primary Concerns of Service Response LogisticsCont Queue Characteristics Queuing models generally assume the length of a queue can grow to an infinite length Queuing configuration can contain single or multiple lines Queue discipline Describes the order in which customers are served MBA Nguyen Phi Hoang@2015_SCM 17 The Primary Concerns of Service Response LogisticsCont Service Characteristics  Provided either by single server or by multiple servers who act in series or in parallel  Multiple servers, acting in parallel, referred to as a multiplechannel queuing system  Multiple servers acting in series is referred to as a multiplephase queuing system  The single-channel, single-phase configuration is the most basic  Another characteristic of the service is the time required to complete each of the services provided MBA Nguyen Phi Hoang@2015_SCM 18 The Primary Concerns of Service Response LogisticsCont MBA Nguyen Phi Hoang@2015_SCM 19 The Primary Concerns of Service Response LogisticsCont The Single-Channel, Single-Phase Queuing Model λ – average arrival rate μ= average service rate ρ= average server utilization = λ/μ Ls = expected customers in the system = λ/(μ-λ) Lq = expected customers in the queue = λ2/[μ(μ -λ) = Ls - λ/μ Ws = expected waiting time in the system = l(μ-λ) = Ls/ λ Wq = expected waiting time in the queue = λ/[μ(μ - λ )] = Lq/λ Pn = probability of n units in the queuing system = (λ/μ)n(1 - λ/μ) MBA Nguyen Phi Hoang@2015_SCM 20 The Primary Concerns of Service Response LogisticsCont The Single-Channel, Single-Phase Queuing ModelExample: Mary Jane’s Sewing Shop serves customers/hr In the last wks the average has been customers/hr Based on the following information, how often will there more than customers per hour in her shop: λ = customers/hr μ = customers/hr ρ= 4/5 = 80% utilization Ls = 4/(5-4) = customers Lq = – 4/5 = 3.2 customers Ws = 4/4 = hr Wq = 3.2/4 = 0.8 hrs = 48 Mary Jane can expect more than customers about 33% of the time P0 = (4/5)0 (1 – 4/5) = 0.200 P1 = (4/5)1 (1 – 4/5) = 0.160 P2 = (4/5)2 (1 – 4/5) = 0.128 P3 = (4/5)3 (1 – 4/5) = 0.102 P4 = (4/5)4 (1 – 4/5) = 0.0.82 For n >4 Pn>4 = – (.2 + 16 + 128 + 102 + 082) = 0.328 MBA Nguyen Phi Hoang@2015_SCM 21 The Primary Concerns of Service Response LogisticsThe Multiple Channel Single Phase Model Cont Cont λ – average arrival rate sμ= average service rate ρ= average server utilization = λ/sμ P0 probability of zero customers in the system = S-1 ∑ (λ/μ)n N=0 n! + (λ/μ)s s! [ ] 1-(λ/sμ) Pn = Probability of n customers in system = P Lq = expected number of customers in queue = P0 , for sμ >λ (λ/μ)n , for n≤s n! (λ/μ)s (λ/sμ) = P0 (λ/μ)N s!ss-n , for n>s s!(1-λ/sμ)2 Ls = expected number of customers in system = L q + λ/μ Wq = expected waiting time in queue = L q/λ Ws = expected waiting time in the system = W q + 1/μ MBA Nguyen Phi Hoang@2015_SCM 22 The Primary Concerns of Service Response LogisticsThe Multiple Channel Single Phase Model Cont Example- Mary Jane’s Shop decided to hire a 2nd worker and buy a 2nd checkout stand w/cash register Mary Jane and the 2nd worker can serve customers/hr and average arrival rate is customers/hr What are the new operating configurations? P0 = (4/5)0 0! + (4/5)1 1! + (4/5)2 2! [ 1-(4/10) ] = 428 ρ = 4/10 = 40 % utilization Lq = (0.428) (4/5)2 (4/10) 2(1-.4)2 = 0.152 customers Ls = 0.152 + 4/5 = 0.952 customers Wq = 0.152/4 = 0.038 hrs 0r 2.28 minutes Ws = 0.038 + 0.2 = 0.238 hrs or 14.28 minutes MBA Nguyen Phi Hoang@2015_SCM 23 The Primary Concerns of Service Response LogisticsManaging Perceived Waiting Times Cont Often, demand exceeds expectations & capacity First and Second Laws of Service: Rule 1: Satisfaction = perception – expectation Rule 2: It is hard to play catch-up ball  Keep Customers Occupied  Start the Service Quickly  Relieve Customer Anxiety  Keep Customers Informed  Group Customers Together  Design a Fair Waiting System MBA Nguyen Phi Hoang@2015_SCM 24 The Primary Concerns of Service Response LogisticsEatertainment Cont is the combination of restaurant and entertainment elements Entertailing refers to retail locations with entertainment elements Edutainment attract more customers and increase revenues Combines learning with entertainment to appeal to customers looking for substance along with play MBA Nguyen Phi Hoang@2015_SCM 25 The Primary Concerns of Service Response LogisticsCont Franchising- allows services to:  expand quickly in dispersed geographic markets  protect existing markets  build market share and when owners have limited financial resources International Expansion  Operate/partner with firms who are familiar with the region’s markets, suppliers, infrastructure, government regulations, and customers  Must address language and cultural barriers MBA Nguyen Phi Hoang@2015_SCM 26 The Primary Concerns of Service Response LogisticsInternet Distribution Strategies Cont  Internet retailing is growing faster than traditional retailing  Primary advantages of the Internet ability to offer convenient sources of real-time information, integration, feedback, and comparison shopping  Many retailers today sell products exclusively over the Internet (a pure strategy), while others use it as a supplemental distribution channel (a mixed strategy) MBA Nguyen Phi Hoang@2015_SCM 27 The Primary Concerns of Service Response Logistics- Cont Managing Service Quality- Service Delivery Process Quality involves an interaction between a customer and a service employee Service quality depends on the firm’s employees to satisfy customers varying expectations MBA Nguyen Phi Hoang@2015_SCM 28 The Primary Concerns of Service Response LogisticsRecovering from PoorCont Service Quality- keep customers loyal and coming back and serves as good wordof-mouth advertising Service Recovery System- Firms may:  develop recovery procedures  train employees in these procedures  empower employees to remedy customer problems MBA Nguyen Phi Hoang@2015_SCM 29 ... Primary Concerns of Service Response Logistics- Cont Managing Service Quality- Service Delivery Process Quality involves an interaction between a customer and a service employee Service quality depends... of Service Operations Some of the differences between goods and services are reviewed here:  Services cannot be inventoried  Services are often unique Insurance policies, legal services  Services... Cont MBA Nguyen Phi Hoang@2015_SCM 12 The Primary Concerns of Service Response Logistics Managing Service Capacity- the number of customers per day the firm’s service system is designed to serve