Services in the Economy

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Presentation transcript:

Services in the Economy Chapter 1

Why Study Service Operations Service firms are a large percentage of the economies of industrialized nations 80% of the US economy (employment and GDP) Gain a competitive edge. There is little focus on services in the academic world Not all management tools that are appropriate for manufacturing are transferable into a service environment 1 Chapter 1 - Services in the Economy

Historical US Employment by Economic Sector 2 Chapter 1 - Services in the Economy

What is Operations? The transformation process that turns inputs into outputs, that is, the act of combining people, raw materials, technology, etc. into useable services and products Who is in the operations function? The people who actually make a product or perform a service Typically operations has the largest number of employees of any functional area 3 Chapter 1 - Services in the Economy

But I’m going into marketing, finance, strategy… Regardless of your functional area, you will be involved in “transformational processes”, in other words, “getting things done” Service operations can help you get things done more effectively and more efficiently. 4 Chapter 1 - Services in the Economy

Characteristics of services … Rules: Services are intangible Simultaneous production and consumption Proximity to the customer Services cannot be inventoried Exceptions: Facilitating goods: playbills, groceries Computer system upgrades; janitorial services Internet-based services; catalogs Retailers hold inventory; hotel rooms, airline seats are inventory 5 Chapter 1 - Services in the Economy

Customer Contact Model Services are classified according to the amount of customer contact Pure Services Mixed Services Quasi-Mfg. Manufacturing Medical Restaurants Transportation Branch offices Home offices Distribution centers Guiding Principle: 6 Chapter 1 - Services in the Economy

Service Process Matrix Professional Service Doctors Lawyers Accountants Architects Mass Service Retailing Wholesaling Schools Retail Aspects of Commercial Banking High Service Shop Hospitals Auto Repair Other Repair Services Service Factory Airlines Trucking Hotels Low Degree of Labor Intensity Degree of Interaction and Customization 7 Chapter 1 - Services in the Economy

Low Labor Intensity Challenges for managers Capital decisions Technological advances Managing peak/non-peak demand Scheduling service delivery 8 Chapter 1 - Services in the Economy

High Labor Intensity Challenges for managers Hiring, training Methods development Employee welfare Scheduling workforces Control of far-flung locations Managing growth 9 Chapter 1 - Services in the Economy

Low Interaction/Customization Challenges for managers Marketing Making service “warm” Attention to physical surroundings Managing fairly rigid hierarchy with need for standard operating procedures 10 Chapter 1 - Services in the Economy

High Interaction/Customization Challenges for managers Fighting cost increases Maintaining quality Reacting to consumer intervention in process Managing flat hierarchy with loose subordinate-superior relationships Gaining employee loyalty 11 Chapter 1 - Services in the Economy