ISM 270 Service Engineering and Management

ISM 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 SAS Enterprise Miner SAS Enterprise Miner Spreadsheet Programming Spreadsheet Programming Optimization Solvers Optimization Solvers Web Programming in a Browser Web Programming in a Browser Littlefield Team-Based Management Simulation Littlefield Team-Based Management Simulation Analytical Methods Linear Programming Linear Programming Data Envelopment Analysis Data Envelopment Analysis Statistics for Forecasting Statistics for Forecasting Capacity Management and Queueing Theory Capacity Management and Queueing Theory Project Management Under Uncertainty Project Management Under Uncertainty Theory of Service Supply Chains Theory of Service Supply Chains

Sample Project Utilizing statistics for web service development

ISM 270: Details  6 – 9pm, Tuesday evenings  January 10 – March 13 (Winter) 2007  UCSC Silicon Valley Center  Instructor: Kevin Ross  Teaching Assistant: Geoff Ryder

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

Logistics  Class website  Readings  Text book  Office hours 5-6pm before class, or by appointment 5-6pm before class, or by appointment  Fee for Simulation Game

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

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

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

Schedule ClassDateTopicLab ActivityGuest SpeakerReadingAssessm ent 1Jan 10 The nature of service enterprises Data envelopment analysis of service productivity linear programming 2 Jan 17 Strategy for new service development Web programming: access the Google Maps API using JavaScript to display data for a service facility location problem Paul Maglio Senior Manager IBM Research 3Jan 24 Technology in services Web programming: aggregate and process business data using XML and MySQL. Web project assignment. TBA Vargo, S. L. & Lusch, R. F (2004). HW1 due 4Jan 31 Quality in service encounters Statistical service process control problem. Frank Tung HW2 due 5Feb 7 Project Management Statistics review homework as preparation for forecasting demand section. Project management exercise. Christoph Heitz

Schedule ClassDateTopicLab ActivityGuest SpeakerReadingAssessm ent 6Feb 14 Forecasting demand Analyze real call center arrival data to predict future traffic levels. Max Maximilien HW3 due 7Feb 21 Managing service capacity Apply principles from queueing theory to service capacity planning problems. TBA Bring Laptop 8Feb 28 Service Managemen t Game Challenge Competitive team-based service management simulation challenge Littlefield Challenge Bring LaptopHomewor k 4 due 9Mar 6 Supply chains in services Continue Littlefield management challenge Charles Ng Homewor k 5 due 10Mar 13 Globalizatio n and outsourcing Project presentations Final Project Report due

Assessment AssessmentValue Due Date Homework50%Weekly Littlefield Project 10% Feb 28 Final Project 40% March 13

Homework 1: Applying the Excel solver tool for data envelopment analysis (DEA)

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

Homework 3: learn to use SAS Enterprise Miner

Put in some lab time and learn other useful SAS features...

Project  More details later…  Focus on new service development  Written and Verbal Presentation at final class March 13

Questions and Break

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

Perspective  World-wide trends  Personalization trends

Text Chapter 1: Role of Services in an Economy Text Chapter 1: Role of Services in an Economy Service Management Professor James Fitzsimmons University of Texas at Austin

Quiz Question  Name the top 10 USA companies by revenue in 2007  How many would you describe as service companies?

Top Wal-Mart Stores. Wal-Mart Stores 2. Exxon MobilExxon Mobil 3. GeneralGeneral 4. ChevronChevron 5. ConocoPhillipsConocoPhillips 6. General ElectricGeneral Electric 7. Ford MotorFord Motor 8. CitigroupCitigroup 9. Bank of AmericaBank of America 10. American Intl. GroupAmerican Intl. Group

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. 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. 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 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)(Wikipedia)

Role of Services in an Economy

Percent Service Employment for Selected Nations Country United States Canada Israel Japan France Italy Brazil China

Trends in U.S. Employment by Sector

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 Pre- Against Agriculture Raw Extended Sub- Routine Simple hand Industrial Nature Mining muscle household sistence Traditional tools Industrial Nature Mining muscle household sistence Traditional tools power Authoritative power Authoritative Industrial Against Goods Machine Individual Quantity Bureaucratic Machines Industrial Against Goods Machine Individual Quantity Bureaucratic Machines fabricated production tending of goods Hierarchical fabricated production tending of goods Hierarchical nature nature Post- Among Services Artistic Community Quality of Inter- Information Post- Among Services Artistic Community Quality of Inter- Information industrial Persons Creative life in terms dependent industrial Persons Creative life in terms dependent Intellectual of health, Global Intellectual of health, Global education, education, recreation recreation

The New Experience Economy

The Four Realms of an Experience

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)

Source of Service Sector Growth  Innovation Push theory (e.g. Post-it) Product looking for a problem Product looking for a problem  Pull theory (e.g. Cash Management) Need drives innovation Need drives innovation  Services derived from products (Video Rental) Information driven services Difficulty of testing service prototypes  Social Trends Aging of the population Two-income families Growth in number of single people Home as sanctuary

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  Link Link

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 480 pounds of corn 160 ounces of hops 160 ounces of hops 1190 pounds of malt 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

Sample LP: Transportation Problem  A firm produces computers in Singapore and Hoboken.  Distribution Centers are in Oakland, Hong Kong and Istanbul  Supply, demand and costs summary: Oakland Hong Kong IstanbulSupply Singapore Hohboken Demand

Other LP examples  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

Geometry of LP  Consider the plot of solutions to a LP

Data Envelopment Analysis (DEA)  Method for evaluating efficiency of similar venues/products Incorporates inputs and outputs – not just one dimensional Incorporates inputs and outputs – not just one dimensional Uses LINEAR PROGRAMMING (LP) Uses LINEAR PROGRAMMING (LP)  KEY IDEA: Weight the inputs and outputs to make one unit as efficient as possible, relative to all others 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 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 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 68 of 5 th edition, text  Burger chain has six units in several cities Each unit uses different combination of labor hours and dollars to produce meals Each unit uses different combination of labor hours and dollars to produce meals Which units use their resources most efficiently? Which units use their resources most efficiently?

Productivity of Burger Palace Service Units Service Unit Meals Sold Labor Hours Dollars

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

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

Homework: Week 1  Link Link

Next Week  Paul Maglio  Strategy in Services