ROLE AND NATURE OF SERVICES

BBB 3273 | Service Operation Management

Lecturer: Babita Guptababita.gupta@limkokwing.edu.my

Ext:8404

Chapter 1

Role of Services in an Economy& The Nature of Services

McGraw-Hill/IrwinService Management: Operations, Strategy, and Information Technology, 6e

Copyright © 2008 by The McGraw-Hill Companies, Inc. All Rights Reserved.

ALL RIGHTS RESERVEDNo part of this document may be reproduced without written approval from Limkokwing University of Creative Technology Worldwide

FBMG

BBB 3273| SERVICE OPERATION MANAGEMENT

Service Definitions

Services are deeds, processes, and performances. Valarie Zeithaml & Mary

Jo Bitner

A service is a time-perishable, intangible experience performed for a customer acting in the role of a co-producer.

James Fitzsimmons

1-3

ALL RIGHTS RESERVEDNo part of this document may be reproduced without written approval from Limkokwing University of Creative Technology Worldwide

FBMG

BBB 3273| SERVICE OPERATION MANAGEMENT

Definition of Service Firms

Service enterprises are organizations that facilitate

the production and distribution of goods, support

other firms in meeting their goals, and add value to

our personal lives.

James Fitzsimmons

1-4

ALL RIGHTS RESERVEDNo part of this document may be reproduced without written approval from Limkokwing University of Creative Technology Worldwide

FBMG

BBB 3273| SERVICE OPERATION MANAGEMENT

STAGES OF ECONOMIC ACTIVITY

Primary Extractive Agriculture, mining, fishing, forestry

Secondary Goods – processing Manufacturing, processing

Tertiary Domestic – service Restaurant & hotels, barber & beauty shop, laundry & dry cleaning, maintenance & repair

Quaternary

Trade & commerce service

Transportation, retailing, communication, finance & insurance, real estate

Quaternary

Refining and extending human capacities

Health care, education, research, recreation, arts

ALL RIGHTS RESERVEDNo part of this document may be reproduced without written approval from Limkokwing University of Creative Technology Worldwide

FBMG

BBB 3273| SERVICE OPERATION MANAGEMENT

Role of Services in an Economy

INFRASTRUCTURE SERVICE· Communications· Transportation· Utilities· Banking

PERSONAL SERVICES

· Healthcare· Restaurants· Hotels

CONSUMER(Self-service)

GOVERNMENT SERVICES· Military· Education· Judicial· Police and fire protection

DISTRIBUTION SERVICES

· Wholesaling · Retailing · Repairing

FINANCIAL SERVICES

· Financing · Leasing · Insurance

MANUFACTURINGServices inside company:

· Finance· Accounting· Legal· R&D and design

BUSINESS SERVICES

· Consulting· Auditing· Advertising· Waste disposal

1-6

ALL RIGHTS RESERVEDNo part of this document may be reproduced without written approval from Limkokwing University of Creative Technology Worldwide

FBMG

BBB 3273| SERVICE OPERATION MANAGEMENT

Stages of Economic Development

Pre- Use of Standard dominant Human Unit of of Living Society Game Activity Labor Social Life Measure Structure Technology

Pre- Against Agriculture Raw Extended Sub- Routine Simple hand

Industrial Nature Mining muscle household sistence Traditional tools power Authoritative

Industrial Against Goods Machine Individual Quantity Bureaucratic Machines

fabricated production tending of goods Hierarchical nature Post- Among Services Artistic Community Quality of Inter-

Information industrial Persons Creative life in terms dependent Intellectual health, education, recreation

1-7

ALL RIGHTS RESERVEDNo part of this document may be reproduced without written approval from Limkokwing University of Creative Technology Worldwide

FBMG

BBB 3273| SERVICE OPERATION MANAGEMENT

Stages of Economic Development

• Service economy has moved from transactional

nature to experience-based relationship (refer next

slide)

• In experience base we have

– Customer services

– Business services

ALL RIGHTS RESERVEDNo part of this document may be reproduced without written approval from Limkokwing University of Creative Technology Worldwide

FBMG

BBB 3273| SERVICE OPERATION MANAGEMENT

Economic Evolution

Economy Agrarian Industrial Service Experience

EconomicOffering

Food Packagedgoods

Commodityservice

Consumer services

Businessservices

Function Extract Make Deliver Stage Co-create

Nature Fungible Tangible Intangible Memorable Effectual

Attribute Natural Standardized Customized Personal Growth

Method of Supply

Stored in bulk

Inventoried Delivered on demand

Revealed over time

Sustained over time

Seller Trader Producer Provider Stager Collaborator

Buyer Market Customer Client Guest Collaborator

Expectation Quantity Features Benefits Sensations Capability1-9

Engaging with consumer in a personal & memorable wayConsumer becomes the co-producer and input to the service process

ALL RIGHTS RESERVEDNo part of this document may be reproduced without written approval from Limkokwing University of Creative Technology Worldwide

FBMG

BBB 3273| SERVICE OPERATION MANAGEMENT

Distinctive Characteristics of Services

• Simultaneity: buying and selling happens at one go• Perishability: time-perishable (will die off) capacity• Intangibility: depends on the reputation of the firm

and advertising • Heterogeneity: more than one element has to be

present• Customer Participation in the Service Process:

customer plays an active part in the process

2-10

ALL RIGHTS RESERVEDNo part of this document may be reproduced without written approval from Limkokwing University of Creative Technology Worldwide

FBMG

BBB 3273| SERVICE OPERATION MANAGEMENT

The Service Package

• Supporting Facility: The physical resources that must be in place before a service can be sold. Examples are golf course, ski lift, hospital, airplane.

• Facilitating Goods: The material consumed by the buyer or items provided by the consumer. Examples are food items, legal documents, golf clubs, medical history.

• Information: Operations data or information that is provided by the customer to enable efficient and customized service. Examples are patient medical records, seats available on a flight, customer preferences, location of customer to dispatch a taxi.

2-11

ALL RIGHTS RESERVEDNo part of this document may be reproduced without written approval from Limkokwing University of Creative Technology Worldwide

FBMG

BBB 3273| SERVICE OPERATION MANAGEMENT

The Service Package (cont.)

• Explicit Services: Benefits readily observable by the

senses. The essential or intrinsic features.

Examples are quality of meal, attitude of the waiter,

on-time departure.

• Implicit Services: Psychological benefits or extrinsic

features which the consumer may sense only

vaguely. Examples are privacy of loan office, security

of a well lighted parking lot.

2-12

ALL RIGHTS RESERVEDNo part of this document may be reproduced without written approval from Limkokwing University of Creative Technology Worldwide

FBMG

BBB 3273| SERVICE OPERATION MANAGEMENT

Service Package: Banking

• Supporting FacilityBuilding, machine and people

• Facilitating Goodsmoney, transaction, security, documents

• Informationabout the customers, where the transactions done

• Explicit Servicesimmediate attention given, on-time transaction

• Implicit Servicesquality, privacy (experienced by consumers)

ALL RIGHTS RESERVEDNo part of this document may be reproduced without written approval from Limkokwing University of Creative Technology Worldwide

FBMG

BBB 3273| SERVICE OPERATION MANAGEMENT

Challenges For Service Managers

SERVICE FACTORY

AirlinesTruckingHotelsResorts and recreation

SERVICE SHOP

HospitalsAuto repairOther repair services

Capital decisionTechnological changesManaging demandScheduling service delivery

ALL RIGHTS RESERVEDNo part of this document may be reproduced without written approval from Limkokwing University of Creative Technology Worldwide

FBMG

BBB 3273| SERVICE OPERATION MANAGEMENT

Challenges For Service Managers

SERVICE SHOP

HospitalsAuto repairOther repair services

Fighting cost increaseMaintain qualityReacting to consumerManaging advancement of peopleManaging flat hierarchy with loose employer- employee relationshipsGaining employee loyalty

PROFESSIONAL SERVICE

DoctorsLawyersAccountantsArchitects

ALL RIGHTS RESERVEDNo part of this document may be reproduced without written approval from Limkokwing University of Creative Technology Worldwide

FBMG

BBB 3273| SERVICE OPERATION MANAGEMENT

Challenges For Service Managers

MASS SERVICE

RetailingWholesalingSchoolsRetail banking

PROFESSIONAL SERVICE

DoctorsLawyersAccountantsArchitects

HiringTrainingEmployee welfareScheduling workforceStart-up of new unitsManaging growth

ALL RIGHTS RESERVEDNo part of this document may be reproduced without written approval from Limkokwing University of Creative Technology Worldwide

FBMG

BBB 3273| SERVICE OPERATION MANAGEMENT

Challenges For Service Managers

SERVICE SHOP

HospitalsAuto repairOther repair services

MarketingMaking service ‘warm’Attention to physical surroundingManaging rigid hierarchy with the need for standard operating procedure

MASS SERVICE

RetailingWholesalingSchoolsRetail banking

ALL RIGHTS RESERVEDNo part of this document may be reproduced without written approval from Limkokwing University of Creative Technology Worldwide

FBMG

BBB 3273| SERVICE OPERATION MANAGEMENT

Services can be classified base on various strategic insights, such as

• Nature of the service act (tangible action and intangible action)

• Relationship with customers and the nature of delivery

• Degree of customization and the judgment involved in meeting customer needs

• Extent of demand fluctuation and demand capacity• Nature of service delivery and service availability

(refer to the text book – page 26 - 29

ALL RIGHTS RESERVEDNo part of this document may be reproduced without written approval from Limkokwing University of Creative Technology Worldwide

FBMG

BBB 3273| SERVICE OPERATION MANAGEMENT

Source of Service Sector Growth

• Information Technology (e.g. Internet)

• Innovation

• Changing Demographics

Aging of the population

Two-income families

Growth in number of single people

Home as sanctuary

1-19

End of Lecture

ALL RIGHTS RESERVEDNo part of this document may be reproduced without written approval from Limkokwing University of Creative Technology Worldwide

FBMG

BBB 3273| SERVICE OPERATION MANAGEMENT

End of Lecture