Operations Management Service Quality This is a basic course blah, blah, blah… Dr. Tai-Yue Wang Department of Industrial and Information Management National Cheng Kung University Tainan, TAIWAN, ROC

Learning Objectives Describe the five dimensions of service quality. Use the service quality gap model to diagnose quality problems. Illustrate how Taguchi methods and poka-yoke methods are applied to quality design. Perform service quality function deployment.

Learning Objectives Construct a statistical process control chart. Develop unconditional service guarantees. Plan for service recovery. Perform a walk-through audit (WtA)

Moments of Truth Each customer contact is called a moment of truth. You have the ability to either satisfy or dissatisfy them when you contact them. A service recovery is satisfying a previously dissatisfied customer and making them a loyal customer.

Dimensions of Service Quality Reliability(可靠度): Perform promised service dependably and accurately. Example: receive mail at same time each day.

Dimensions of Service Quality Responsiveness(反應度): Willingness to help customers promptly. Example: avoid keeping customers waiting for no apparent reason. Quick recovery, if service failure occurs

Dimensions of Service Quality Assurance(保證性): Ability to convey trust and confidence. Give a feeling that customers’ best interest is in your heart Example: being polite and showing respect for customer.

Dimensions of Service Quality Empathy(同理心): Ability to be approachable, caring, understanding and relating with customer needs. Example: being a good listener. Tangibles(感受性): Physical facilities and facilitating goods. Example: cleanliness.

Perceived Service Quality Word of mouth Personal needs Past experience Expected service Perceived Service Quality Dimensions Reliability Responsiveness Assurance Empathy Tangibles Service Quality Assessment 1. Expectations exceeded ES<PS (Quality surprise) 2. Expectations met ES~PS (Satisfactory quality) 3. Expectations not met ES>PS (Unacceptable quality)

Service Quality Gap Model(服務品質缺口模式)

Gaps in Service Quality Gap1: Market research gap Management may not understand how customers formulate their expectations from past experience, advertising, communication with friends Improve market research Foster better communication between employees and its frontline employees Reduce the number of levels of management that distance the customer

Gaps in Service Quality Gap 2: Design gap Management unable to formulate target level of service to meet customer expectations and translate them to specifications Setting goals and standardizing service delivery tasks can close the gap

Continued…. Gap 3: Conformance gap Actual delivery of service cannot meet the specifications set by management Lack of teamwork Poor employee selection Inadequate training Inappropriate job design

Continued…. Gap 4: Communication gap Discrepancy between service delivery and external communication Exaggerated promises in advertising Lack of information provided to contact personnel to give customers

Continued….. Gap 5: Customer expectations and perceptions gap Customer satisfaction depends on minimizing the four gaps that are associated with service delivery Companies try to measure the gap between expected service and perceived service through the use of surveys SERVQUAL – measures the five dimensions

Scope of service quality View quality from five perspectives Content – are standard procedures being followed? Process – is the sequence of events in the service process appropriate? Structure – are the physical facilities and organizational design adequate for the service?

Scope of service quality View quality from five perspectives Outcome – what change in the status has the service effected? Is the consumer satisfied? Impact – what is the long-range effect of the service on the consumer?

Quality Service by Design Taguchi method Poka-Yoke

1. Quality in the Service Package Budget Hotel example Supporting facility Design of the building Facilitating goods Room furnishings like: bedside tables, carpet cleaning Explicit services Maids are trained to clean and make up roooms Implicit services Pleasant appearances of individuals at front office

2. Taguchi Method (Robustness) Robust designs to serve under adverse conditions Robustness concept also applied to the manufacturing process – for example using online computer to notify the cleaning staff when the room has been vacated

2. Taguchi Method (Robustness) Taguchi emphasized that quality was achieved by consistently meeting the design specifications Cost to society of poor quality was measured by the square of the deviation from the target (see fig. 6.4 pp. 139)

3. Poka-Yoke (Fail safing) Shigeo Shingo observed that errors occurred, not because employees were incompetent, but because of interruptions in routines or lapses in attention.

3. Poka-Yoke (Fail safing) He advocated adoption of Poka-Yoke methods – foolproof devices to prevent employee mistakes. Example, hotel reservation employee is expected to make eye-contact with customer. So Poka-Yoke is to ask the employee to enter the eye-color of the customer.

3. Poka-Yoke (Fail safing) Since customers also play an active role in service-delivery so you need Poka-Yoke for them to prevent them from making errors. Example, frames at airport check-in counters to help customers determine if their bag can go in overhead bin as hand luggage.

Classification of Service Failures with Poka-Yoke Opportunities Server Errors Task: Doing work incorrectly Doing work not required Doing work in the wrong order Doing work too slowly Treatment: Failure to listen to customer Failure to acknowledge the customer Failure to react appropriately Tangible: Failure to clean facilities Failure to wear clean uniform Failure to control environmental factors Failure to proofread documents Customer Errors Preparation: Failure to bring necessary materials Failure to understand role in transaction Failure to engage in correct service Encounter: Failure to remember steps in process Failure to follow system flow Failure to specify desires sufficiently Failure to follow instructions Resolution: Failure to signal service failure Failure to learn from experience Failure to adjust expectations Failure to execute post-encounter action

4. Quality Function Deployment Allows to incorporate the voice of the customer into the design of the product/service – by translating customer satisfaction into identifiable and measurable conformance specifications for product or service design 1. Establish the aim of the project – assess Village Volvo’s competitive position

4. Quality Function Deployment 2. Determine customer expectations (rows) – interviews etc. 3. Describe the elements of the service (columns) 4. Roof of the house - note the strength of relationship between the service elements 5. Body of the matrix – relationship between service elements (columns) and customer expectations (rows)

4. Quality Function Deployment 6. Weighting the service elements – rating customer expectations; getting weighted scores for each column (basement) 7. Basement – service element improvement difficulty rank 8. Assessment of competition – RHS (comparison on customer satisfaction) Comparison on strength of the service elements

House of Quality

5. Benchmarking Compare your performance with other companies known for being ‘the best in class’ For every quality dimension, some firm has earned the reputation for being the best in class Learn how the management has achieved to be the best in class to correct your process

6. Walk-Through-Audit Impressions about service quality are determined by both the outcome and the process (because customers are a part of service delivery)

6. Walk-Through-Audit Walk through audit is a customer-focused survey to find the areas for improvement Entire customer experience is traced from beginning to end, and a flow chart of customer interaction with service system is made Customer is asked for his/her impressions on each of these interactions

6. Walk-Through-Audit Customers can provide anew perspective to service – they can notice things easily as they are new in the system Service managers and employees can get de-sensitize to their surroundings and also may not notice marginal decreases in service levels.

Methods for Measuring Service Quality SERVQUAL Mystery Shopping Undercover agent Undercover customer

Methods for Measuring Service Quality Post Service Rating Follow-up Survey In-App Survey

Methods for Measuring Service Quality Post Service Rating Follow-up Survey In-App Survey

Methods for Measuring Service Quality Customer Effort Score How much effort did it take you to have your questioned answered? Social Media Monitoring Facebook, twitter, … Documentation Analysis

Methods for Measuring Service Quality Objective Service Metrics Volume per channel First response time Response time First contact resolution ratio Reply per ticket Backlog inflow/outflow

Methods for Measuring Service Quality Objective Service Metrics Customer success ratio Handover per issue Thing gone wrong Instant service/queueing ratio Average queueing waiting time Queueing hang-up

Methods for Measuring Service Quality Objective Service Metrics Problem resolution time Minutes spent per call ………

Achieving Service Quality Cost of Quality (Juran) Service Process Control Statistical Process Control (Deming) Unconditional Service Guarantee

1. Cost of Quality Products can be returned or exchanged if faulty; but what recourse does customer have to faulty services? Legal recourse – for example in medical may lead to more procedures and tests and more paperwork leading to higher cost Prevention cost Costs associated with activities that keep failure from happening and minimize detection cost

1. Cost of Quality Detection cost Internal failure Costs incurred to ascertain the condition of a service to determine whether it conforms to safety standards Internal failure Costs incurred to correct nonconforming work prior to delivery to the customer

1. Cost of Quality External failure $1 in invested in prevention Costs incurred to correct nonconforming work after delivery to customer or to correct work that did not satisfy a customer’s special needs $1 in invested in prevention = $100 in detection = $10,000 in failure cost (Juran)

Costs of Service Quality (Bank Example)

2. Service Process Control The control of service quality can be viewed as a feedback control system – where output is compared with a standard. The deviation from the standard is communicated back to the input, and adjustments are made to the process to keep the output within the defined range.

2. Service Process Control Difficult to implement an effective control cycle for service due to the intangible nature of service, which makes direct measurement difficult – so we proxy or surrogate measures.

2. Service Process Control Simultaneous nature of production and consumption – prevents any direct intervention in the service process to observe conformance to requirements. Consequently, we ask customers to express their impression of service quality after the consumption – by which time we are too late to avoid service failure. Instead, we try to focus on delivery process by employing SPC

3. Service Process Control Resources Identify reason for nonconformance Establish measure of performance Monitor conformance to requirements Take corrective action Service concept Customer input output process

4. Unconditional Service Guarantee: Customer View Unconditional (Costco, 萬客隆) – without exception Easy to understand and communicate (Bennigan’s) – to the customer Meaningful (Domino’s Pizza) – it should provide compensation that is meaningful

4. Unconditional Service Guarantee: Customer View Easy to invoke (Cititravel) – not to fill out cumbersome forms or go through a lengthy process Easy to collect (Manpower) – should be given soon after the service lapse and after a significant time

Unconditional Service Guarantee: Management View Focuses on customers (British Airways) Sets clear standards (FedEx) – knows when the service has failed Guarantees feedback (Manpower) – gets data on service failure because dissatisfied customers have an incentive to complain

Unconditional Service Guarantee: Management View Promotes an understanding of the service delivery system (Bug Killer) – you will have a better understanding of your service delivery process Builds customer loyalty by making expectations explicit

Customer Feedback and Word-of-Mouth The average business only hears from 4% of their customers who are dissatisfied with their products or services. Of the 96% who do not bother to complain, 25% of them have serious problems. The 4% complainers are more likely to stay with the supplier than are the 96% non-complainers.

Customer Feedback and Word-of-Mouth About 60% of the complainers would stay as customers if their problem was resolved and 95% would stay if the problem was resolved quickly. A dissatisfied customer will tell between 10 and 20 other people about their problem. A customer who has had a problem resolved by a company will tell about 5 people about their situation.

Service Recovery Framework

Service Recovery Disasters can be turned into loyal customers by proper and rapid service recovery Frontline workers, therefore, need to be properly trained and given the discretion to make things right.

Service Recovery Approaches to service recovery Case-by-case addresses each customer’s complaint individually but could lead to perception of unfairness. Systematic response uses a protocol to handle complaints but needs prior identification of critical failure points and continuous updating.

Service Recovery Approaches to service recovery Early intervention attempts to fix problem before the customer is affected. Substitute service allows rival firm to provide service but could lead to loss of customer.

Inspection Opinion surveys - about quality of service 100 percent inspection - every unit is checked; fatigue error unless automated First article inspection - usually after the process is set up Destructive testing

Inspection Acceptance sampling - based on statistical sampling table, the associate checks a random or stratified sample from a larger lot. If the sample is within the acceptable quality level, the lot passes inspection.

Process focus Process capability means capable of meeting customer requirements or specifications.

Tools for Process Improvement Coarse Grained Analysis Check Sheet – historical record of observations and represents the source of data to begin analysis and problem identfication. Histograms - display frequency data collected over a period of time. It is more structured than a check sheet, has equal-interval numeric categories on the X-axis of an X-Y graph

Tools for Process Improvement Coarse Grained Analysis Pareto Analysis: helps differentiate between trivial and important causes by ordering problems by their relative frequency in a descending order – focus efforts on the problem that offers the greatest potential improvement. Process flowchart: it may show the steps that are unnecessary, or that need to be rearranged

Tools for Process Improvement Coarse Grained Analysis Fishbone chart (cause and effect diagram): here the team works backwards from the target for improvement on the spin bone, identifying causes down through the ‘bone structure’. The lowest level of detail may reveal root causes, which need to be worked upon. (5 whys)

continued Fine Grained Tools Scatter diagram and correlation: useful for complex processes where cause-effect relationships are unclear. It visually shows the relationship between two variables Run diagram: it is simply a running plot of a certain measured quality characteristic. It could be number of minutes each successive airplane departs late. Or number of customers visiting the complaint desk of a store each day. The company may specify the upper limit and the lower limit.

Topics for Discussion How do the five dimensions of service quality differ from those of product quality? Why is measuring service quality so difficult? Compare the philosophies of Deming and Crosby.

Topics for Discussion What are the limitations of “benchmarking”. Illustrate the four components in the cost of quality for a service. Why do service firms hesitate to offer a service guarantee? How can recovery from a service failure be a blessing in disguise?