Ch. 4 Product & Service Design SCM 352 Operations Mgt Dr. Ron Lembke

How are Services Different? Everyone is an expert on services What works well for one service provider doesn’t necessarily carry over to another Quality of work is not quality of service “Service package” consists of tangible and intangible components Services are experienced, goods are consumed Mgmt of service involves mktg, personnel Service encounters mail, phone, F2F

Degree of Customer Contact More customer contact, harder to standardize and control Customer influences: Time of demand Exact nature of service Quality (or perceived quality) of service

3 Approaches Which is Best? Production Line Self-Service Personal attention

What do People Want? Amount of friendliness and helpfulness Speed and convenience of delivery Price of the service Variety of services Quality of tangible goods involved Unique skills required to provide service Level of customization

Service-System Design Matrix Degree of customer/server contact Buffered Permeable Reactive High core (none) system (some) system (much) Low Face-to-face total customization Face-to-face loose specs Sales Opportunity Production Efficiency Face-to-face tight specs Phone Contact Internet & on-site technology Mail contact Low High

Impact of Life Cycle iTunes CDs DVD Audio Cassettes Records MiniDisc DAT 8-Tracks Introduction Growth Maturity Decline

Impact of Life Cycle Records DAT Introduction Growth Maturity Decline

Applying Behavioral Science The end is more important to the lasting impression (Colonoscopy) Segment pleasure, but combine pain Let the customer control the process Follow norms & rituals Compensation for failures: fix bad product, apologize for bad service

Restaurant Tipping Introduce self(Sun brunch) 15% 23% Normal Experiment Introduce self(Sun brunch) 15% 23% Smiling (alone in bar) 20% 48% Waitress 28% 33% Waiter (upscale lunch) 21% 18% “…staffing wait positions is among the most important tasks restaurant managers perform.”

Modular Components Take advantage of modules: parts or products previously prepared Restaurants: prepared ingredients, assembled to order Suppliers can develop new, interesting products to use more quickly, cheaply Variety is gained by different combinations of same components

Mass Customization Highly customized Integrate design, processes, supply network Supply components cheaply to production points Fast, responsive production, quick delivery Higher weight, lower value

Fail-Safing “poka-yokes” – Japanese for “avoid mistakes” Not possible to do things the wrong way Indented trays for surgeons ATMs beep so you don’t forget your card Pagers at restaurants for when table ready Airplane bathroom locks turn on lights Height bars at amusement parks

Blueprinting Fancy word for making a flow chart “line of visibility” separates what customers can see from what they can’t Flow chart “back office” and “front office” activities separately.

Sustainability = Long Run Profitability

What does it mean? sus·tain: Middle English sustenen, from Anglo-French sustein-, stem of sustenir, from Latin sustinēre to hold up, sustain, from sub-, sus- up + tenēre to hold, Date: 13th century 1 : to give support or relief to 2 : to supply with sustenance : nourish 3 : keep up, prolong 4 : to support the weight of : to carry or withstand (weight or pressure)

Triple Bottom Line

Corporate Social Responsibility GE – Frank Mantero, Director Corporate Citizenship Programs Audited, like financial statements 40% of value based on reputation It’s not “giving” back – it’s a partnership Wal-Mart Sustainable Supply Chain “We’re making money at this”

Corporate Reporting

This is Not New Frank Capra, 1958

Global Weirding In the US, it’s a political issue, so there must be two sides? CO2 280 ppm for human history Last 250 years up to 384 ppm – where we are now Milankovich Cycles (pp 117-8): Earth’s orbit not circular, 100,000 year cycle Tilted axis shifts: 40,000 year cycle Plane of orbit relative to sun: 21,000 year cycle Seems unlikely

Atmospheric CO2 ppm Mauna Loa Observatory Data: National Oceanic and Atmospheric Administration Graph: Ron Lembke, 1/12/2010

Climate Models We’re at 384 ppm 450 ppm would be 2°C increase 550 ppm would lead to 3° C increase Used to be target Pests not killed by freezes Ice sheets melting faster than predicted Oceans more acidic than thought 350? Really hard

Rupert Murdoch News Corp. owns Fox. “Climate change poses clear, catastrophic threats” and that “We may not agree on the extent, but we certainly can’t afford the risk of inaction.” Rupert Murdoch, May 9, 2007 James Murdoch, heir apparent “Thanks to friendships with Al Gore and Bill Clinton, he has developed deep green instincts,” London Telegraph Wife Kathryn Hufschmid works for Clinton Climate Initiative

Sun sends UV? Infrared – show on spectrum

CO2 collects in Troposphere Ozone O3 layer – absorbs ultraviolet radiation from sun