1. SERVICE PROCESSES CHAPTER 5

2. Learning Objectives After completing the chapter you will: Understand the characteristics of service processes and how they are different from manufacturing processes Be able to classify service processes Understand what waiting line (queuing) analysis is Be able to model some common waiting line situations and estimate server utilization, the length of the waiting line, and average customer wait time

3. DHL’sSupply Chain Services DHL offers a variety of value-added supply chain- related services  Order management  Call center management  Global inventory management  Consolidated billing services  Freight and customs solutions

4. Service Businesses A service business is the management of organizations whose primary business requires interaction with the customer to produce the service

5. Classification of Services Service organizations are generally classified by  Who the customer is  E.g., individuals, other businesses  The service they provide  E.g., financial services, health services, transportation services, and so on Not appropriate for OSM purposes because they tell us little about the process

6. Classification of Services One additional item  Information to reflect the fact that the customer is involved in the production system  Which operationally distinguishes one from another  The extent of customer contact in the creation of the service

7. Classification of Services Customer contact  The physical presence of the customer in the system Creation of the service  The work process involved in providing the service itself Extent of contact  Percentage of time the customer must be in the system relative to the total time it takes to perform the customer service

8. Classification of Services High degree of customer contact  More difficult to control and more difficult to rationalize  The customer can affect  the time of demand,  the exact nature of the service,  the quality, or perceived quality, of service Low degree of customer contact

9. Designing Service Organizations Distinctive characteristic of services  We cannot inventory services  We must meet demand as it arises Important design parameter in services  What capacity should we aim for? Assistance of marketing  It is difficult to separate the OM functions from marketing in services

10. Service Encounter Service encounter is defined as  All activities involved in the service delivery process  Can be configured in a number of different ways Structuring service encounter  Service-system design matrix  6 common alternatives

11. Service-System Design Matrix Mail contact Face-to-face loose specs Face-to-face tight specs Phone Contact Face-to-face total customization Buffered core (none) Permeable system (some) Reactive system (much) High Low High Low Degree of customer/server contact Internet & on-site technology Sales Opportunity Production Efficiency

12. Six alternatives Mail contact  Customers have little interaction with the system  Allows the system to work more efficiently  Relatively little opportunity for additional product sales Internet and on-site technology  Internet clearly buffers the company from the customers  Can provide information and services  System can be made to interface with real employees

13. Six alternatives Phone contact Face-to-face tight specs  Little variation in the service processes  E.g., fast-food restaurant, Disney land Face-to-face loose specs  Generally understood processes with options  E.g., full service restaurant, car sales agency Face-to-face total customization  Service encounter specs must be developed through some interaction between the customer and server  E.g., legal and medical services

14. Extension of Design of Workers, Operations, and Innovations Relative to the Degree of Customer/Service Contact

15. Waiting Line A central problem in service settings  Management of waiting line Cost trade-off decision  Waiting is cost  Decision could be reduced to dollar terms

16. Practical View of Waiting Line

17. Control arrivals  Short line, Specific hours for specific customers, Specials Control services  Faster or slower servers, machines, different tooling, material, layout, faster setup time, etc. Waiting lines are  Not a fixed condition of a productive system  But are largely within the control of the system management and design

18. Practical View of Waiting Line Suggestions for managing queues  Segment the customers  Train your servers to be friendly  Inform your customers of what to expect  Try to divert the customer’s attention when waiting  Encourage customers to come during slack periods

19. Queuing System

20. Customer Arrivals Finite population  Limited-size customer pool  Probabilities of the customer arrivals varies  Ex. (Machine maintenance system)  Six machines by one repairperson Chance of one of six breaking down is certainly more than that of one of five breaking down Infinite population  Customer pool size is large enough  Probability is not significantly affected  E.g.,  A repairman with 100 machines  A physician with 1000 patients  A department store with 10000 customers

21. Distribution of Arrivals The manner in which customers (or the waiting units) are arranged for service Arrival rate  The number of units per period (λ)  Types  Constant arrival distribution  Variable arrival distribution Two viewpoints for arrivals  Time between successive arrivals  ~exponentially distributed  The number of arrivals per time  ~Poison distributed

22. Exponential Distribution

24. Poisson Distribution

25. Exponential and Poisson Continuous, discrete distribution Mean and variance? Can be derived from one another

26. Other Arrival Characteristics Arrival Patterns  Controllable  Extra charge for Saturday service  Off season sales, one-day-only sales  Excursion and off-season rates  Posting of business hours Uncontrollable  Emergency medical demand

27. Other Arrival Characteristics Size of arrival units  Single  Batch Degree of patience  Patient  Impatient  Balking  Reneging

28. Degree of Patience No Way! BALK No Way! RENEG

29. Arrival Characteristics

30. Queuing System Queuing system consists of  Waiting line(s)  Available number of servers Issues  Waiting line characteristics and management  Line structure  Service rate

31. Waiting Lines Three factors

32. Queue Discipline Two major practical problems  Customers know and follow the rules  A system exists to enable employees to manage the line

33. Service Time Distribution Service time  Time that the customer or unit spends with the server once the service has started Service rate  The capacity of the server in number of units per time period Types of service time  Constant  Random  Exponentially distributed  μ: Average number of units or customers that can be served per time period

34. Line Structures

35. Single channel, single phase  One-person barbershop Single channel, multiphase  Car wash  A critical factor is the amount of buildup of items allowed in front of each service Multichannel, single phase  Tellers’ windows  Difficulty: unequal flow among the lines  Forming a single line

36. Line Structures Multichannel, multiphase  Admission of patients in a hospital Mixed  Multi-to-single channel  Bridge-crossing  Subassembly lines feeding into a main line Alternative paths  Multichannel-multiphase with channel switch  Number of channels and phase vary after performance of the first service

37. Examples of Line Structures Single Channel Multichannel Single Phase Multiphase One-person barber shop Car wash Hospital admissions Bank tellers’ windows

38. Exiting Two exit fates  Return to the source population  Routine repair of a machine  Low probability of reservice  Overhauling a machine

39. Waiting Line Models Three basic cases

40. The Queuing System Queue Discipline Length Number of Lines & Line Structures Service Time Distribution Queuing System

41. Notations

42. Assume a drive-up window at a fast food restaurant. Customers arrive at the rate of 25 per hour. The employee can serve one customer every two minutes. Assume Poisson arrival and exponential service rates. Determine: A) What is the average utilization of the employee? B) What is the average number of customers in line? C) What is the average number of customers in the system? D) What is the average waiting time in line? E) What is the average waiting time in the system? F) What is the probability that exactly two cars will be in the system? Determine: A) What is the average utilization of the employee? B) What is the average number of customers in line? C) What is the average number of customers in the system? D) What is the average waiting time in line? E) What is the average waiting time in the system? F) What is the probability that exactly two cars will be in the system? Example: Model 1

43. A) What is the average utilization of the employee?

44. Example: Model 1 B) What is the average number of customers in line? C) What is the average number of customers in the system?

45. Example: Model 1 D) What is the average waiting time in line? E) What is the average waiting time in the system?

46. Example: Model 1 F) What is the probability that exactly two cars will be in the system (one being served and the other waiting in line)?

47. Example: Model 2 An automated pizza vending machine heats and dispenses a slice of pizza in 4 minutes. Customers arrive at a rate of one every 6 minutes with the arrival rate exhibiting a Poisson distribution. Determine: A) The average number of customers in line. B) The average total waiting time in the system. Determine: A) The average number of customers in line. B) The average total waiting time in the system.

48. Example: Model 2 A) The average number of customers in line. B) The average total waiting time in the system.

49. Example: Model 3 Recall the Model 1 example: Drive-up window at a fast food restaurant. Customers arrive at the rate of 25 per hour. The employee can serve one customer every two minutes. Assume Poisson arrival and exponential service rates. If an identical window (and an identically trained server) were added, what would the effects be on the average number of cars in the system and the total time customers wait before being served?

50. Example: Model 3 Average number of cars in the system Total time customers wait before being served

51. Queuing Approximation This approximation is quick way to analyze a queuing situation. Now, both interarrival time and service time distributions are allowed to be general. In general, average performance measures (waiting time in queue, number in queue, etc) can be very well approximated by mean and variance of the distribution (distribution shape not very important). This is very good news for managers: all you need is mean and standard deviation, to compute average waiting time

52. Queue Approximation Inputs: S,, , (Alternatively: S,, , variances of interarrival and service time distributions)

53. Approximation Example Consider a manufacturing process (for example making plastic parts) consisting of a single stage with five machines. Processing times have a mean of 5.4 days and standard deviation of 4 days. The firm operates make-to-order. Management has collected date on customer orders, and verified that the time between orders has a mean of 1.2 days and variance of 0.72 days. What is the average time that an order waits before being worked on? Using our “Waiting Line Approximation” spreadsheet we get: L q = 3.154 Expected number of orders waiting to be completed. Wq = 3.78 Expected number of days order waits. Ρ = 0.9 Expected machine utilization.

54. Question Bowl Which of the following is an example of a Service Business? a. Law firm b. Hospital c. Bank d. Retail store e. All of the above

55. Question Bowl Based on the Service-System Design Matrix, which of the following has a lower level of “production efficiency”? a. Face-to-face loose specs b. Phone contact c. Internet and on-site technology d. Face-to-face tight specs e. Mail contact

56. Question Bowl The central problem for virtually all queuing problems is which of the following? a. Balancing labor costs and equipment costs b. Balancing costs of providing service with the costs of waiting c. Minimizing all service costs in the use of equipment d. All of the above e. None of the above

57. Question Bowl Customer Arrival “populations” in a queuing system can be characterized by which of the following? a. Poisson b. Infinite c. Patient d. FCFS e. None of the above

58. Question Bowl Customer Arrival “rates” in a queuing system can be characterized by which of the following? a. Constant b. Infinite c. Finite d. All of the above e. None of the above

59. Question Bowl An example of a “queue discipline” in a queuing system is which of the following? a. Single channel, multiphase b. Single channel, single phase c. Multichannel, single phase d. Multichannel, multiphase e. None of the above

60. Question Bowl Withdrawing funds from an automated teller machine is an example in a queuing system of which of the following “line structures”? a. Single channel, multiphase b. Single channel, single phase c. Multichannel, single phase d. Multichannel, multiphase e. None of the above

61. Question Bowl Refer to Model 1 in the textbook. If the service rate is 15 per hour, what is the “average service time” for this queuing situation? a. 16.00 minutes b. 0.6667 hours c. 0.0667 hours d. 16% of an hour e. Can not be computed from data above

62. Question Bowl Refer to Model 1 in the textbook. If the arrival rate is 15 per hour, what is the “average time between arrivals” for this queuing situation? a. 16.00 minutes b. 0.6667 hours c. 0.0667 hours d. 16% of an hour e. Can not be computed from data above

63. Summary Classification of services  Service-system design matrix Economics of the waiting line problem Queuing system

64. End of Chapter 5