1. Operations and Supply Chain Management, 8th Edition
Chapter 5
Service Design
Russell and Taylor
Operations and Supply Chain Management, 8th Edition

2. Lecture Outline Service Economy – Slide 4
Characteristics of Services – Slide 8
Service Design Process – Slide 11
Tools for Service Design – Slide 18
Waiting Line Analysis for Service Improvement – Slide 21
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

3. Learning Objectives
Evaluate the impact of services on jobs and the economy
Appreciate and articulate the differences between products and services
Utilize tools for envisioning and designing quality services
Map out service processes and suggest process improvements
Model waiting lines and evaluate their performance for service improvement
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

4. Service Economy International Employment by Industry Sector
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

5. U.S. Economy – Percent of GDP by Industry Sector
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

6. Characteristics of Services
acts, deeds, or performances
Goods
tangible objects
Facilitating services
accompany almost all purchases of goods
Facilitating goods
accompany almost all service purchases
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

7. Continuum From Goods to Services
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

8. Characteristics of Services
Services are intangible
Service output is variable
Services have higher customer contact
Services are perishable
The service and the service delivery are inseparable
Services tend to be decentralized and geographically dispersed
Services are consumed more often than products
Services can be easily emulated
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

9. Service Design Process
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

10. Service Design Process
Service concept
purpose of a service; it defines target market and customer experience
Service package
mixture of physical items, sensual benefits, and psychological benefits
Service specifications
performance specifications
design specifications
delivery specifications
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

11. Service Process Matrix
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

12. High vs. Low Contact Services
Design Decision
High-Contact Service
Low-Contact Service
Facility location
Convenient to customer
Near labor or transportation source
Facility layout
Must look presentable, accommodate customer needs, and facilitate interaction with customer
Designed for efficiency
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

13. High vs. Low Contact Services
Design Decision
High-Contact Service
Low-Contact Service
Quality control
More variable since customer is involved in process; customer expectations and perceptions of quality may differ; customer present when defects occur
Measured against established standards; testing and rework possible to correct defects
Capacity
Excess capacity required to handle peaks in demand
Planned for average demand
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

14. High vs. Low Contact Services
Design Decision
High-Contact Service
Low-Contact Service
Worker skills
Must be able to interact well with customers and use judgment in decision making
Technical skills
Scheduling
Must accommodate customer schedule
Customer concerned only with completion date
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

15. High vs. Low Contact Services
Design Decision
High-Contact Service
Low-Contact Service
Service process
Mostly front-room activities; service may change during delivery in response to customer
Mostly back-room activities; planned and executed with minimal interference
Service package
Varies with customer; includes environment as well as actual service
Fixed, less extensive
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

16. Tools for Service Design
Service blueprinting
line of influence
line of interaction
line of visibility
line of support
Front-office/Back-office activities
Servicescapes
space and function
ambient conditions
signs, symbols, and artifacts
Quantitative techniques
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

17. Service Blueprinting
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

18. Service Blueprinting
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

19. Elements of Waiting Line Analysis
Operating characteristics
average values for characteristics that describe performance of waiting line system
Queue
a single waiting line
Waiting line system
consists of arrivals, servers, and waiting line structure
Calling population
source of customers; infinite or finite
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

20. © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

21. Elements of Waiting Line Analysis
Arrival rate (λ)
frequency at which customers arrive at a waiting line according to a probability distribution, usually Poisson
Service rate (μ)
time required to serve a customer, usually described by negative exponential distribution
Service rate must be higher than arrival rate (λ < μ)
Queue discipline
order in which customers are served
Infinite queue
can be of any length; length of a finite queue is limited
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

22. Elements of Waiting Line Analysis
Channels
number of parallel servers for servicing customers
Phases
number of servers in sequence a customer must go through
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

23. Operating Characteristics
Operating characteristics are assumed to approach a steady state
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

24. Traditional Cost Relationships
As service improves, cost increases
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

25. Psychology of Waiting Waiting rooms Bank of America Supermarkets
magazines and newspapers
televisions
Bank of America
mirrors
Supermarkets
magazines
“impulse purchases”
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

26. Psychology of Waiting Preferential treatment
Grocery stores: express lanes for customers with few purchases
Airlines/Car rental agencies: special cards available to frequent-users or for an additional fee
Phone retailers: route calls to more or less experienced salespeople based on customer’s sales history
Critical service providers
services of police department, fire department, etc.
waiting is unacceptable; cost is not important
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

27. Waiting Line Models Single-server model
simplest, most basic waiting line structure
Frequent variations (all with Poisson arrival rate)
exponential service times
general (unknown) distribution of service times
constant service times
exponential service times with finite queue
exponential service times with finite calling population
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

28. Basic Single-Server Model
Assumptions
Poisson arrival rate
exponential service times
first-come, first-served queue discipline
infinite queue length
infinite calling population
Computations
λ = mean arrival rate
μ = mean service rate
n = number of customers in line
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

29. Basic Single-Server Model
probability that no customers are in queuing system
probability of n customers in queuing system
average number of customers in queuing system
average number of customers in waiting line
( )
P0 = 1 – λ μ
L = λ
μ – λ
( ) ( )( )
Pn = ∙ P0 = –
λ n λ n λ
μ μ μ
Lq = λ2
μ (μ – λ)
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

30. Basic Single-Server Model
average time customer spends in queuing system
average time customer spends waiting in line
probability that server is busy and a customer has to wait (utilization factor)
probability that server is idle and customer can be served L
μ – λ λ
W = = λ μ
ρ = λ
μ (μ – λ)
Wq =
I = 1 – ρ
= 1 – = P0 λ μ
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

31. Basic Single-Server Model Example
µ = 30
P0 = L=
Lq =
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

32. Basic Single-Server Model Example
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

33. Basic Single-Server Model Example
W =
Wq =
ρ =
I =
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

34. Basic Single-Server Model Example
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

35. Service Improvement Analysis
Waiting time (8 min.) is too long
hire assistant for cashier?
increased service rate
hire another cashier?
reduced arrival rate
Is improved service worth the cost?
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

36. Excel Single-Server Solution
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37. Advanced Single-Server Models
Constant service times
occur most often when automated equipment or machinery performs service
Finite queue lengths
occur when there is a physical limitation to length of waiting line
Finite calling population
number of “customers” that can arrive is limited
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

38. Advanced Single-Server Models
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

39. Advanced Single-Server Model
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

40. Basic Multiple-Server Model
Single waiting line and service facility with several independent servers in parallel
Same assumptions as single-server model
sμ > λ
s = number of servers
servers must be able to serve customers faster than they arrive
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

41. Basic Multiple-Server Model
probability that there are no customers in system
probability of n customers in system
1 λ n λ s sμ
n! μ s! μ sμ - λ
( ) ( )( )
n = s – 1
n = 0 1
P0 = ∑
1 λ n
n! μ
( ) {
P0, for n > s
Pn =
λ n
s!sn – s μ
P0, for n ≤ s
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

42. Basic Multiple-Server Model
probability that customer must wait
( )
1 λ s sμ
s! μ sμ – λ
Pw = P0
Lq = L – λ μ
λμ (λ/μ)s λ
(s – 1)! (sμ – λ) μ
L = P0 + Lq
μ λ
Wq = W – = L λ
W =
ρ = λ sμ
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

43. Basic Multiple-Server Model Example
Three-server system
λ =10/hr
μ = 4/hr
S = 3
sμ = 3 x 4 = 12
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

44. Basic Multiple-Server Model Example
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

45. Basic Multiple-Server Model Example
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

46. Basic Multiple-Server Model Example
To cut waiting time, add another service rep
Four-server System
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

47. Multiple-Server Waiting Line in Excel
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

48. Multiple-Server Waiting Line in Excel
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

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© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e