OPSM 405 Service Management Class 1: Introduction: What is a service? Koç University Zeynep Aksin

What is a service?  Go to Migros, buy minced meat, onions, parsley, bread, etc and make some kofte-ekmek at home  Rather than buying the ingredients, buy ready made Pinar kofte and bread at Migros  Have pigastro deliver the kofte-ekmek to your dorm room  Go to Koz kebap in Zekeriyakoy and eat your kofte- ekmek there

What are the trends? Some recent events:  SBS runs multi-language call center for Toshiba in Istanbul  All business services of Citigroup performed through one of their 3 shared service centers around the globe  PC manufacturers like IBM, Compaq earn more from the add-on services they sell than actual PC sales  People market, sell and buy experiences. Marketing firms that focus on experience marketing.  Technology enabled new conveniences.

Service characteristics  What is a service? anything that is not manufacturing, agriculture.. perishable intangible something you can’t drop on your foot

Services in economic thought: Adam Smith “…The labor of some of the most respectable orders in society is, like that of menial servants, unproductive of any value, and does not fix or realize itself in any permanent subject, or vendible commodity, which endures after that labor is past, … The sovereign, for example, with all the officers both of justice or war who serve him, the whole army and navy, are unproductive laborers … Their service, how honorable, how useful, or how necessary soever, produces nothing for which an equal quantity of service can afterwards be procured … In the same class must be ranked … churchmen, lawyers, physicians, men of letters of all kinds; players, buffoons, musicians, opera singers, opera dancers, etc… the work of all of them perishes in the very instant of its production. “

Services in economic development  Pre-industrialization  Industrialization  Post-industrialization

Types of productive systems  Extraction –Mining the earth, under the ocean –Extracting gases from atmosphere  Biological –Agricultural –Animal and fish  Tangible-output conversion –custom –Batch –Continuous –process  Intangible-output conversion –Consulting –Movies –Radio broadcasting –Physical examinations –Day-care centers –Public administration  Hybrid conversion systems –Restaurants –Book publishing –Barber shop –Automobile repair –Surgery

Services.. .. lead to some desired transformation or improvement in the condition of the consuming unit  …are provided to customers and cannot be produced independently of them  …are produced, distributed and consumed simultaneously

Services and service processes (Lovelock) PEOPLE PROCESSING  Passenger transportation  Heart transplant  Immunization  Criminal justice system MENTAL STIMULUS PROCESSING  Entertainment  Education  Art exhibit  Concerts POSSESSION PROCESSING  Repair and maintenance  Dry cleaning  Housecleaning  Landscaping INFORMATION PROCESSING  Internet services  Banking  Financial services  Software development Inputs TANGIBLEINTANGIBLE CUSTOMER ASSETS

Service characteristics  Intangibility  Simultaneity  Perishability  Heterogeneity

Service characteristics = challenges  Intangibility –Search qualities –Experience qualities –Credence qualities  How do you measure?  How do you signal quality?

Service characteristics = challenges  Simultaneity –Production –Distribution, consumption  Focus on customer contact  Co-production  Quality control implies process control

Service characteristics = challenges  Heterogeneity –The service provider –The customer –The surroundings  Standard quality control tools won’t work

Service characteristics = challenges  Perishability  Everything is in the performance  HRM  Capacity management

Where is the customer? Service Design Production Quality Assurance Marketing Co-production Measurement

Classifying services: High customer contact  Potential operating efficiency= f( 1- customer contact time / service creation time) (Chase)  implies a decoupling of the technical core in a process to achieve efficiency  addresses many of the challenges: quality, capacity and demand management, human resource management

Types of contact  constant physical contacthairdresser  constant communication contacthot line  sporadic physical contactdoctor  sporadic communication contactconsulting  end of processdry cleaner  end of processstock broker

Implications for operations  Need to identify the decoupling point in processes: this point is not stationary!  Contact reduction strategies: ATMs, call centers, reservation systems  Contact enhancement strategies: consistent work hours, well trained service personnel, good queue discipline  Classical efficiency improvement in low contact services: can use tools from manufacturing

Course overview design & positioning process design; capacity & demand managing & measuring quality & performance Putting it together: IT HR