Chapter 12 service response logistics

The Primary Concerns of Service Response Logistics- Cont.Level-demand strategy- Capacity remains constant regardless of demand Capacity Management When Available Service Capacity... The

CHAPTER 12

SERVICE RESPONSE LOGISITCS

Learning Objectives

Learning Objectives

You should be able to:

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.

 Managing Service Capacity

 Managing Waiting Times

• Queuing System Design

 Managing Service Quality

 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 do

something to things that are owned by the customer, such as transport and store supplies, repair

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.

An Overview of Service Operations- Cont.

• 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

Productivity =

Outputs produced Inputs used

Service Productivity

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.

An Overview of Service Operations- Cont.Service Strategy Development:

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

2 Differentiation Strategy- Service

that is considered unique

Differentiation is created as companies listen to customers

3 Focus Strategy- serve a narrow

niche better than other firms

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 goo ds (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

An Overview of Service Operations- Cont.

Service Location and Layout Strategies

• Location Strategies- Have a significant impact on the

long-term 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 Traveled

-When 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

Supply Chain Management

in Services

Services performed require a larger labor component than

manufactured products

Services also require use of facilitating products (e.g.,

computers, furniture, office supplies) that are not part of the

services sold

Customers have no idea how things actually get to the

destination But they sure notice when the shipment is late !

Supply Chain Management

in Services- Cont.

The Primary Concerns of Service Response Logistics

 When demand exceeds

capacity, firms turn away

customers or hire personnel

 Hiring, training, supervising,

and equipping service

personnel is costly (Often 75

% of operating costs)

 Therefore, service managers

must forecast demand &

provide capacity to meet the

forecast demand

Managing Service Capacity- the number of customers per day the

firm’s service system is designed to serve

The Primary Concerns of Service Response Logistics- Cont.

Level-demand strategy-

Capacity remains constant

regardless of demand

Capacity Management When

Available Service Capacity

The Primary Concerns of Service Response Logistics- Cont.

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?

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.

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 do not exhibit balking – refusing to join the queue, or reneging – leaving the line prior to completing the service.

Px(T) = e

-λT (λT) x x!

The Primary Concerns of Service Response Logistics- Cont.

Queuing models generally assume the length of a queue can grow to an infinite length Queuing configuration can contain single or multiple lines.

the order in which customers are served.

The Primary Concerns of Service Response Logistics- Cont.

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

multiple-channel queuing system

 Multiple servers acting in series is referred to as a

multiple-phase 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

The Primary Concerns of Service Response Logistics- Cont.

The Primary Concerns of Service Response Logistics- Cont.

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)

The Primary Concerns of Service Response Logistics- Cont.

The Single-Channel, Single-Phase Queuing Model-

Example: Mary Jane’s Sewing Shop serves 5 customers/hr In the last 2 wks the average has been 4 customers/hr Based on the following information, how often will there more than 4 customers per hour in her shop:

The Primary Concerns of Service Response

Logistics-

Cont.

The Multiple Channel Single Phase Model

λ – average arrival rate sμ= average service rate ρ= average server utilization = λ/sμ

P0 probability of zero customers in the system =

1

∑ (λ/μ)n + (λ/μ)

s

[ 1 ] n! s! 1-(λ/sμ)

Ls = expected number of customers in system = Lq + λ/μ

Wq = expected waiting time in queue = Lq/λ

The Primary Concerns of Service Response

Logistics-

Cont.

The Multiple Channel Single Phase Model

Example- Mary Jane’s Shop decided to hire a 2nd worker and buy a 2 nd checkout stand w/cash register Mary Jane and the 2 nd worker can serve 5 customers/hr and average arrival rate is 4 customers/hr What are the new operating configurations?

P0 =

1 (4/5) 0

The Primary Concerns of Service Response

Logistics-

Cont.

Managing Perceived Waiting Times

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

The Primary Concerns of Service Response

attract more customers and increase

revenues Combines learning with

entertainment to appeal to customers

looking for substance along with play

The Primary Concerns of Service Response Logistics- Cont.

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

The Primary Concerns of Service Response

Logistics-

Cont.

Internet Distribution Strategies

traditional retailing.

ability to offer convenient sources of

real-time information, integration,

feedback, and comparison shopping.

supplemental distribution channel (a

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.

The Primary Concerns of Service Response

Logistics-

Cont.

Recovering from Poor Service

Quality- keep customers loyal and

coming back and serves as good