Service Supply Relationships

Value chain coordinationFor balanced supplies & demands

Ch. 9, 第八章

• Hewlett-Packard Deskjet printers– Traditional• Made for all nations

– Taiwan, Hong Kong, …– If the sales in Taiwan is slow, inventory build up

– Supply chain approach• One generic Deskjet• Option to localize

– Manuals and power cords– Eliminate the need for separate inventory

• Supply chain management– A total systems approach• From product design to after sale customer service• To deliver manufactured products efficiently

– Poor planning• Lost sale opportunity• Expensive end-of-life inventory write-offs

– Greatest customer satisfaction at reasonable cost• Asset cost

– Inventory– Capital equipment

• Time domain characteristics of customer service– Responsiveness– Reliability in customer delivery

– Bullwhip effect• Uncoordinated supply chain

– Small change in retail orders– Magnified as we move back up the supply chain

» Distributors» Manufacturers

– Delays in orders being filled» Create the oscillation in inventory

– Simultaneously overstocking systemwide

– Network model• Physical goods supply chain

– Network of value adding material processing stages» Supply input» Material transformation» Demand output

• Figure 9.1

mfg

mfg

DistributorDistributor

DistributorDistributor

Retailing

Retailing

Retailing

Retailing

Retailing

Retailing

• Material flow downstream– Responsiveness, delivery reliability

• Information flow upstream– Utilization of information

» Automobile manufacturer• After sale service

» POS data• Facilitate planning production schedule

– Managing uncertainty• Sources of uncertainty

– Supplier delivery performance– Manufacturing reliability– Customer demand

» Inventory is used as insurance to cope with uncertainty

• Variation in delivery– Storm delay– Quality problems– Machine failure– Late arrival of raw materials

• Manufacturing reliability– Internal scheduling delays

» Several products competing for shared resources• Overhead crane• Raw materials

• Customer demands– Short product life cycle– Competition– General economy conditions

– Strategic initiatives to smooth uncertainty• Total quality management

– Improvement of manufacturing reliability

• Dependable transportation modes– Third party logistics contracts

• Supply chain collaboration– P&G and Walmart

» Efficient customer response (ECR)

Service supply relationship

• Customer-supplier duality– Manufacturing goods• Pass from one entity to another

– Service objects• Minds

– Education, entertainment, religion

• Bodies– Transportation, lodging, healthcare

• Information– Tax preparation, insurance, legal defense

– Services act on something provided by the customers• Bidirectional relationship

– Figure 9.2

– Single level service supply chains• Table 9.2

– Two-level service supply chains– Table 9.3

• Service supply relationships are hubs, not chains– Service providers act as agent for the customer– Dentist• Dentures• Dental procedures

• Service capacity is analogous to inventory– Goods supply chains• Inventory is used to buffer customer demands

– Service • Excess capacity is held in reserve

– Seasonal workers for high season– Part time employees for rush hours

• Reservation– To smooth the demand

• Customers supplied inputs can vary in quality• Incomplete

– Tax documents

• Unprepared– Naïve backpacker

• Unrealistic expectation– Cancer patients

– Effective communication• To avoid misunderstanding

Managing service relationship

• Home health care– Healthy enough

• No need for hospitalization or nursing home care

– Not mobile enough• To visit a healthcare

provider

– Nurse, dietitians, therapists• Visit patients at home

• Bidirectional optimization– Patients• Highly individualized service

– Organization• Very cost effective operations

– “Time windows” reservation• Between noon and 5pm

– Route, customers sequencing, language, worker skills, worker licenses, supplies on the vehicle

• No information available– Optimization is impossible

– Better information for optimization

• Productive capacity• Value

– Time at customer site

• Lost productive capacity– Time spent traveling

– Transfer• Make knowledge available to customers

– For self service– Web-based frequent asked questions

» Side effects of medicine, explanation of symptoms, procedure to follow

– Replacement• Substituting technology human resources

– Blood pressure measurement

– Embellishment customer skills to enable self service• Teach patient or patient’s family to change a surgical

dressing

• Perishability– Minimize the negative impact of idle productive

capacity• Dynamic job allocation

– Schedules are constructed and revised up until the very last possible moment» Before dispatch a worker

– Mobile data communication required

• Potential idle time – Training, refining, extending skills and capability of worker

Social media in service

• Social media enable the co-creation of value– Building customer relationship– A wide reach• Decentralized, less hierarchical

– Easy access– Ease of use– Immediacy– Flexibility that allow information to be altered

– Top 5 industry groups • Customers use social media for customer service

– Retail– Telephone– Travel and hospitality– Cable – Bank

• Social media as a competitive strategy– Tune-up reminders• First day of tickets on sale

– Cookie-cutter presence in cyberspace• Identify where customer go online• When they have feedback and questions

– Lead generation• Develop relationship lead to referral

– Customer education• Educate customer a lifestyle

– Align with its service offerings

• Insurance company– Promote safe driving practices

– Start online, finish offline• Information gathering online• Purchase offline

• Social media and customer convenience– Innovative use of technology• Check deposit with smartphone photo• Boarding pass on smartphone

– Insurance data mine customers information in social media• Identify a link between consumers’ payment history

and risky driving behavior• Privacy issues

– Social media “netiquettes” for service providers• “Three D’s” to avoid

– Disclosure, – Defamation, and – Discrimination

• “Three R’s” to promote– Reciprocation– Respect– Reliability

• Social media for organizing and co-creation of value– Red Robin• Launch Tavern Double burger

– Internal social network– Not spiral-bound books

• Reduce time for idea-to-counter process

– Dell computers• IdeaStorm site

– Product improvement idea

– Social media for service• Branding• Recruiting• Building awareness• Information sharing• Networking• Listen to customers

Professional service firms

• Professional services are attractive– Intellectual challenge– Potential for job growth– High income

• Architects• Lawyers• Consultants• Accountants• Contracting engineers

• Attributes of professional services– Knowledge workers• Work involves high level of specialization and

customization– Different from mass-market standardized approach– Ability to manage activities and information without proven

routines

• Face-to-face interaction with customer– Quality are perceived and measured

• Service are delivered by highly educated

• Command a body of knowledge– Cognitive knowledge (know-what)

» Basic mastery of a discipline» Extensive training and certification

– Advanced skills (know-how)» Ability to apply “book learning” into effective execution

– Systems understanding (know-why)» Anticipate subtle interaction and unintended

consequences– Self-motivated creativity (care-why)

» Will, motivation, and adaptability for success

• Service consulting– Firms face challenges or opportunity• Can not handle with its internal capabilities

– Health care– Financial service– Hospitality– Staffing– Billing – Office automation

– Major service firm• Accenture, Bain, Deloitte, IBM global services

– Strategy components of consulting business• People

– Workforce management, productivity improvement

• Processes– Process improvement, office automation

• Programs– Quality program, lean/kaizen projects

• Plant– Facility and layout

• Planning and control systems– Dispatching, close-loop systems

– Tips for success consulting• McKinsey model

– Under-promise and over-deliver– 80-20 rules

» 80% problems come from 20% issues– “Don’t boil the ocean”– Use the “elevator rule”

» Explain to your client in 30 seconds– Pluck the low-hanging fruit– Hit singles– Engage your client

– Operational characteristics

• Match skill level with project requirements– Brain Project

» Ability to create, innovate, and pioneer new approaches» “hire us because we are smart”

– Grey-hair project» Standardized and repeated with discretion» Implement ERP systems» “hire us because we have done this before”

Partner

Staff

Staff

Fees

Fees

ofitPartnerperofit

PrPr

– Procedure projects» Well recognized and standardized» Conducting an audit» Complete the work quickly and inexpensively» “hire us because we know how to do this and we can

deliver it effectively”

Outsourcing services

– Transaction cost for outsourcing• Search cost• Bargaining cost• Enforcement cost

– Stick to the term of the contract

• Benefits and risks of outsourcing services– Reasons for outsourcing• Focus on its core competence• Decreases costs by purchasing• Access to latest technology without investment

– Risks of outsourcing• Loss of direct control over quality• Jeopardizes employee loyalty because of job-loss fears• Exposure to data security• Dependence on suppliers• Additional coordination expense and delay• Decline of in-house capability

• Fig 9.4

– Supplier selection and performance evaluation• Multinational retailer

» Target, Walmart– Experience– Reputation– Geographical proximity– Cost parameters– Communication ability– Dependability– Flexibility– On-time delivery

– Supplier relationship structure• Arm’s-length relationship

– No need for closely control– Outsourcing candidates– Highly codified and standardized information

» Price, quantity, and delivery schedule

• Vertical integration– Strategic control desired– Intellectual property

• Multinational apparel» Sport Obermeyer

– Head quarter, Cororado» Monitor fashion trend» Consumer preference» Retailer management

– Manufacturing unit, Hong Kong» Fabric selection» Printing options» Managing suppliers

– Classification of business services• Table 9.6

• Managerial considerations with service outsourcing– Facility support service (property/ low

importance)• Commodity service• Tight specification• Vendor selection based on low bid• Evaluation of service delivered

– Quality and timeliness

– Equipment support service (property/high importance)• Locate close enough to provide emergency service• Reputation and references• Communication• Dependability

– Employee support service (people/low importance)• Temporary personnel• Specification• Periodically review

– Employee development (people/high importance)• Health care• Important investment in the firm’s human capital• Outside expertise often is sought• Vendor reputation and expertise

– Facilitator service (process/low importance)• Bookkeeping/travel booking

– Information processing– Detail specifications– Final selection might based on ancillary service

» Travel agency• Delivery of tickets• Monthly billing

– Professional service (process/high importance)• Significant impact on the strategic future• Need specification• Trust in the supplier

– Reputation– Experience

• Mini case– 9.1 Boomer consulting, Inc.– 9.2 Evaluation of B2C E-Commerce in Japan