ROLE AND NATURE OF SERVICES BBB 3273 | Service Operation Management Lecturer: Babita Gupta babita.gupta@limkokwing.edu.my Ext:8404
Chapter 1 Role of Services in an Economy & The Nature of Services McGraw-Hill/Irwin Service Management: Operations, Strategy, and Information Technology, 6e Copyright © 2008 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Service Definitions 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 1-3
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 1-4
STAGES OF ECONOMIC ACTIVITY Primary Extractive Agriculture, mining, fishing, forestry Secondary Goods – processing Manufacturing, processing Tertiary Domestic – service Restaurant & hotels, barber & beauty shop, laundry & dry cleaning, maintenance & repair Quaternary Trade & commerce service Transportation, retailing, communication, finance & insurance, real estate Refining and extending human capacities Health care, education, research, recreation, arts
Role of Services in an Economy FINANCIAL SERVICES · Financing · Leasing · Insurance INFRASTRUCTURE SERVICE · Communications · Transportation · Utilities · Banking PERSONAL SERVICES · Healthcare · Restaurants · Hotels MANUFACTURING Services inside company: · Finance · Accounting · Legal · R&D and design DISTRIBUTION SERVICES · Wholesaling · Retailing · Repairing CONSUMER (Self-service) BUSINESS SERVICES · Consulting · Auditing · Advertising · Waste disposal GOVERNMENT SERVICES · Military · Education · Judicial · Police and fire protection 1-6
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 1-7
Stages of Economic Development Service economy has moved from transactional nature to experience-based relationship (refer next slide) In experience base we have Customer services Business services
Engaging with consumer in a personal & memorable way Economic Evolution Engaging with consumer in a personal & memorable way Consumer becomes the co-producer and input to the service process Economy Agrarian Industrial Service Experience Economic Offering Food Packaged goods Commodity service Consumer services Business services Function Extract Make Deliver Stage Co-create Nature Fungible Tangible Intangible Memorable Effectual Attribute Natural Standardized Customized Personal Growth Method of Supply Stored in bulk Inventoried Delivered on demand Revealed over time Sustained over time Seller Trader Producer Provider Stager Collaborator Buyer Market Customer Client Guest Expectation Quantity Features Benefits Sensations Capability 1-9
Distinctive Characteristics of Services Simultaneity: buying and selling happens at one go Perishability: time-perishable (will die off) capacity Intangibility: depends on the reputation of the firm and advertising Heterogeneity: more than one element has to be present Customer Participation in the Service Process: customer plays an active part in the process 2-10
The Service Package Supporting Facility: The physical resources that must be in place before a service can be sold. Examples are golf course, ski lift, hospital, airplane. Facilitating Goods: The material consumed by the buyer or items provided by the consumer. Examples are food items, legal documents, golf clubs, medical history. Information: Operations data or information that is provided by the customer to enable efficient and customized service. Examples are patient medical records, seats available on a flight, customer preferences, location of customer to dispatch a taxi. 2-11
The Service Package (cont.) Explicit Services: Benefits readily observable by the senses. The essential or intrinsic features. Examples are quality of meal, attitude of the waiter, on-time departure. Implicit Services: Psychological benefits or extrinsic features which the consumer may sense only vaguely. Examples are privacy of loan office, security of a well lighted parking lot. 2-12
Service Package: Banking Supporting Facility Building, machine and people Facilitating Goods money, transaction, security, documents Information about the customers, where the transactions done Explicit Services immediate attention given, on-time transaction Implicit Services quality, privacy (experienced by consumers)
Challenges For Service Managers SERVICE FACTORY Airlines Trucking Hotels Resorts and recreation SERVICE SHOP Hospitals Auto repair Other repair services Capital decision Technological changes Managing demand Scheduling service delivery
Challenges For Service Managers SERVICE SHOP Hospitals Auto repair Other repair services Fighting cost increase Maintain quality Reacting to consumer Managing advancement of people Managing flat hierarchy with loose employer- employee relationships Gaining employee loyalty PROFESSIONAL SERVICE Doctors Lawyers Accountants Architects
Challenges For Service Managers Hiring Training Employee welfare Scheduling workforce Start-up of new units Managing growth MASS SERVICE Retailing Wholesaling Schools Retail banking PROFESSIONAL SERVICE Doctors Lawyers Accountants Architects
Challenges For Service Managers SERVICE SHOP Hospitals Auto repair Other repair services Marketing Making service ‘warm’ Attention to physical surrounding Managing rigid hierarchy with the need for standard operating procedure MASS SERVICE Retailing Wholesaling Schools Retail banking
Services can be classified base on various strategic insights, such as Nature of the service act (tangible action and intangible action) Relationship with customers and the nature of delivery Degree of customization and the judgment involved in meeting customer needs Extent of demand fluctuation and demand capacity Nature of service delivery and service availability (refer to the text book – page 26 - 29
Source of Service Sector Growth Information Technology (e.g. Internet) Innovation Changing Demographics Aging of the population Two-income families Growth in number of single people Home as sanctuary End of Lecture 1-19
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