Welcome to Service Operations Management & Chapter 1: The Service Economy OPS 5095 Service Operations Management

Course Overview Define, describe and classify services (Ch 1) Strategic view of service design & development (Ch 2,3) Encounter view of customers & employees (Ch 4) Process view of quality improvement (Ch 5,6,7) VIEWSSPECIAL TOPICS Supply Chains & Outsourcing (Ch 9) Globalization (Ch 10) TOOLS Capacity planning & queuing models (Ch 11,12,13) Project management (Ch 16) Facility location (Ch 8) Inventory control (Ch 15)

Blackboard Videos (1 of 2)

Blackboard Videos (2 of 2)

Service Definitions (1 of 3) 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

With service processes, the customer provides significant inputs into the production process. Sampson & Froehle Unified Services Theory Service operations are producer-consumer interactive operations. The interaction can be direct or indirect/surrogate. Sampson (2012) Service Definitions (2 of 3)

Service Definitions (3 of 3) 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

Percent Employment in Services Nation% of World Labor % Ag% Goods% Services China India USA Indonesia Brazil Russia Japan Nigeria Bangladesh Germany

Trends in U.S. Employment by Sector

Goods Based Service Distribution Retail Restaurant Auto Sales Equipment rental Intangibles Based Service Entertainment Communications Education Financial Services / Banking Airlines Healthcare Resorts & Casinos Insurance Government Raw material, commodities, energy Capital equip mfg Goods mfg OUTPUT: Satisfied Customer INPUTS:PROCESS: Role of Service in Commerce

Distribution of U.S. Employment, 2009

Projected U.S. Job Growth, 2008 – 2018

2013 Fortune 25 Companies 17 of top 25 are services (59.7% of Top 25 Co’s revenues)

The New Experience Economy Entertainment (Movie) Esthetic (Tourist) Education (Language) Environmental Relationship Customer Participation Passive Active Absorption Immersion Escapist (Scuba Diving)

Typology of Service Experiences

Service-Product Bundle

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 Service Package

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 Service Package

Simultaneity: Opportunities for personal selling, interaction creates customer perceptions of quality Perishability: Cannot inventory, opportunity loss of idle capacity, need to match supply with demand Intangibility: Creative advertising, no patent protection, importance of reputation Heterogeneity: Customer involvement in delivery process results in variability Customer Participation in the Service Process: Attention to facility design, opportunities for co-production, concern for customer and employee behavior Distinctive Characteristics of Services

Supporting Facility Facilitating Goods Information Explicit Services Implicit Services Village Volvo’s Service Package

Intangibility Perishability Heterogeneity Simultaneity Customer Participation in the Service Process Village Volvo’s Distinctive Service Characteristics

Schmenner’s Service Process Matrix Service Factory Airlines Trucking Hotels Resorts & recreation Mass Service Retailing Wholesaling Schools Retail banking Professional Service Doctors Lawyers Accountants Architects Service Shop Hospitals Auto repair Other repair services Degree of Interaction and Customization Low High Degree of Labor Intensity Low High

Nature of the Service Act People’s Bodies People’s healthcare Passenger transportation Beauty salons Exercise clinics Restaurants People’s Minds Education Broadcasting Information services Theater Museums Intangible Assets Banking Legal services Accounting Securities Insurance Physical Possessions Freight transportation Repair & maintenance Veterinary care Janitorial service Laundry & dry cleaning Direct Recipient of the Service PeopleThings Nature of the Service Act Tangible Actions Intangible Actions