TIM 270 Service Engineering and Management

TIM 270: Service Engineering and Management   Focus on Operations Decisions in the Service Industry   Open to students with an undergraduate engineering/science degree   Learn analytical tools and software for decision making   Featuring guest lectures from industry practitioners   Text: Fitzsimmons & Fitzsimmons ‘Service Management’ Operations, Strategy, Information Technology

Topics covered   The nature of service enterprises   Strategy for new service development Technology in services   Quality in service encounters   Forecasting demand   Managing service capacity   Supply chains in services   Globalization and outsourcing

Skills / Tools Learned Programming Tools Spreadsheet Programming Optimization Solvers Littlefield Management Simulation Analytical Methods Linear Programming Data Envelopment Analysis Statistics for Forecasting Capacity Management and Queueing Theory Project Management Under Uncertainty Theory of Service Supply Chains

Sample Project Utilizing statistics for web service development

ISM 270: Details   6 – 9pm, Wednesday evenings   April 4 – June 6 (Winter) 2012   UCSC Silicon Valley Center room 303 and/or Basking Engineering room 156   Instructor: Kevin Ross

Who is here?   My background   Brief introductions, student survey

Logistics   Location   Class website   Readings   Text book   Office hours by appointment 1-3pm Tuesdays on campus Often Wednesdays at SVC   Fee for Simulation Game (~$20)

Class Plan   Allotted class time = 3 hours   Average adult attention span = 20 minutes   …   Lecture / visitor / discussion / split

Computer issues   Who has a laptop?   Web access   Finding research papers   Excel, solver, …

Please…   Bring: Paper, pen, laptop, … Opinions Questions Interesting articles, stories, anecdotes   Provide feedback!!!   Make every effort to keep up with readings etc.

Schedule ClassDateText ChaptersTopicGuest Speaker Assessment 1 Apr 41, 2 The nature of service enterprises 2 Apr 113, 4 Strategy for new service development Geoff Ryder, SAP Labs 3 Apr 185 Technology in servicesJean-Philippe Loose, Cisco Homework 1 due 4 Apr 256,7, 8, 9 Quality in service encounters Paul Maglio, IBM Research Homework 2 due 5 May 2 10 Project ManagementCharles Ng, DemandTec Project Assigned 6 May 911 Forecasting demandQing Wu, Google Homework 3 due 7 May 1612, 13, 14 Managing service capacity Yan Zhou, Marketo Project Proposal Due 8 May 2315, 16 Supply chains in servicesVijay Mehrotra, USF Homework 4 due 9 May 30 Littlefield Technologies Service Management Game Challenge Littlefield Homework 5 due 10 June 617 Globalization and outsourcing Final Project Report due

Assessment ValueDue Date Homework50%Weekly (approx) Simulation Project 10%Feb 24 Final Project40%March 9

Sample Previous homework: Applying the Excel solver tool for data envelopment analysis (DEA)

Sample Previous Homework 2: use AJAX calls to build a mashup with the Google Maps API

Sample Previous Homework 3: learn to use SAS Enterprise Miner

Project   More details later…   Focus on new service development   Written and Verbal Presentation at final class June 6

Questions and Break

Remaining in Lecture 1   Services in the Economy   Data Envelopment Analysis Linear Programming Excel

Perspective   World-wide trends   Personalization trends

Quiz Question   Name the top 10 USA companies by revenue in 2010   How many would you describe as service companies?

2011 Fortune Wal-Mart Stores 421, , Exxon Mobil 354, , Chevron 196, , ConocoPhillips 184, , Fannie Mae 153, , General Electric 151, , Berkshire Hathaway 136, , General Motors 135, , Bank of America Corp. 134, , Ford Motor 128, ,561.0 Revenue ($m) Profit ($m)

Definitions   What are services?   Service enterprises?

Service Definitions Intangible goods? 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 Folks doing things for folks for Money Paul Magio

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

Services Science, Management and Engineering …the application of science, management, and engineering disciplines to tasks that one organization beneficially performs for and with another (Wikipedia)

Role of Services in an Economy

Percent Employment in Services Top Ten Postindustrial Nations Country United States United Kingdom The Netherlands Sweden Canada Australia France Japan Germany41.8n/a Italy

Stages of Economic Activity Primary (Extractive): Agriculture, Mining, Fishing, Forestry Secondary (Goods-Producing): Manufacturing, Processing Tertiary (Domestic Services): Restaurants, Hotels, Laundry, Maintenance Quaternary (Trade and Commerce): Transportation, Communications, Retailing, Finance, Government Quinary (Extending Human Potential): Health, Education, Research, Arts, Recreation 1-29

Trends in U.S. Employment by Sector 1-30

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 1-31

Percent Distribution of U.S. Employment by Industry 1-32

Projected Percent Change in U.S. Employment by Industry -20%-10%0%10%20%30% Health care and social assistance Professional and business services Educational services Financial services Leisure and hospitality Other services Construction Transportation and utilities Information State and local government Retail and wholesale trade Federal government Agriculture and mining Manufacturing All Industry Average 1-33

Economic Evolution EconomyAgrarianIndustrialServiceExperience Economic Offering FoodPackaged goods Commodity service Consumer services Business services FunctionExtractMakeDeliverStageCo-create NatureFungibleTangibleIntangibleMemorableEffectual AttributeNaturalStandardizedCustomizedPersonalGrowth Method of Supply Stored in bulk InventoriedDelivered on demand Revealed over time Sustained over time SellerTraderProducerProviderStagerCollaborator BuyerMarketCustomerClientGuestCollaborator ExpectationQuantityFeaturesBenefitsSensationsCapability 1-34

The Four Realms of an Experience 1-35

Experience Design Principles   Theme the Experience (Forum shops)   Harmonize Impressions with Positive Cues (O’Hare airport parking garage)   Eliminate Negative Cues (Cinemark talking trash containers)   Mix in Memorabilia (Hard Rock T-shirts)   Engage all Five Senses (Mist in Rainforest) 1-36

Typology of Services in the 21 st Century Core ExperienceEssential FeatureExamples CreativePresent ideasAdvertising, theater EnablingAct as intermediaryTransportation, communications ExperientialPresence of customerMassage, theme park ExtendingExtend and maintainWarranty, health check EntrustedContractual agreementService/repair, portfolio mgt. InformationAccess to informationInternet search engine InnovationFacilitate new conceptsR&D services, product testing Problem solvingAccess to specialistsConsultants, counseling Quality of lifeImprove well-beingHealthcare, recreation, tourism RegulationEstablish rules and regulationsEnvironment, legal, patents 1-37

Source of Service Sector Growth   Information Technology (e.g. Internet)   Innovation Push theory (e.g. Post-it) Pull theory (e.g. Cash Management) Services derived from products (e.g. Netflix) Exploiting information (e.g. Auto part sales) Difficulty of testing service prototypes   Changing Demographics Aging of the population Two-income families Growth in number of single people Home as sanctuary 1-38

Distribution of GDP in the US Economy ProductServices Physical Information 6% 10% 31% 53% 37% 63% 84% 16% D BA C 1-39

Question: What has engineering got to do with all of this?

Discussion Topics   Describe the work that you do from a service perspective   Illustrate how the type of work you do influences a person’s lifestyle.

Example Service Innovation: Disney World

Lessons from Disney

Data Envelopment Analysis (DEA)   Method for evaluating efficiency of similar venues/products   Incorporates inputs and outputs – not just one dimensional   Uses LINEAR PROGRAMMING (LP)

Sample LP: Product Mix Problem   How much beer and ale to produce from three scarce resources: 480 pounds of corn 160 ounces of hops 1190 pounds of malt   A barrel of ale consumes 5 pounds of corn, 4 ounces of hops, 35 pounds of malt   A barrel of beer consumes 15 pounds of corn, 4 ounces of hops and 20 pounds of malt   Profits are $13 per barrel of ale, $23 for beer

Other LP examples   Transportation problem   Blending problem   Diet problem   Assignment problem

Key terms of LP   Variables   Parameters   Objective function   Constraints

Standard Form (according to Hillier and Lieberman) Concise version: A is an m by n matrix: n variables, m constraints

Data Envelopment Analysis (DEA)   Method for evaluating efficiency of similar venues/products Incorporates inputs and outputs – not just one dimensional Uses LINEAR PROGRAMMING (LP)   KEY IDEA: Weight the inputs and outputs to make one unit as efficient as possible, relative to all others If this is 100% efficient, then the unit is on the frontier of efficiency; If less than 100%, there are other units that could utilize the SAME inputs for MORE outputs

DEA Example from Text: Burger Palace   Small, artificial example for illustration!   Page 203, 7 th edition of text   Burger chain has six units in several cities Each unit uses different combination of labor hours and dollars to produce meals Which units use their resources most efficiently?

Productivity of Burger Palace Service Units Service Unit Meals SoldLabor Hours Dollars

DEA summary of terms   Define variables E_k = efficiency of unit k u_j= coefficient for output j (relative decrease in efficiency per unit reduction of output value) v_i = coefficient for input i (relative increase in efficiency per unit decrease of input value) O_jk = observed ouput j units generated by service unit k during one time period I_ik = no. units input used by service unit k during one period   Note: k=1..K = service unit counter j=1..M = output counter i=1..N = input counter

DEA Objective and constraints Evaluating unit e Trick = Rescaling to get linear equations

Next Week   Geoff Ryder   Strategy in Services