1. Managing Service operation

2. Strategies for Matching Capacity and Demand for Services MANAGING DEMAND Partitioning demand Developing complementary services Establishing price incentives Developing reservation systems Promoting off-peak demand Yield managemen t MANAGING CAPACITY Cross- training employees Increasing customer participation Sharing capacity Scheduling work shifts Creating adjustable capacity Using part-time employees Airport Beijing Walmart

3. Ideal Characteristics for Yield Management 1. Relatively Fixed Capacity 2. Ability to Segment Markets 3. Perishable Inventory 4. Product Sold in Advance 5. Fluctuating Demand 6. Low Marginal Sales Cost and High Capacity Change Cost west

4. 1.Level Capacity and Chase Demand Strategic DimensionLevel CapacityChase Demand 1.Customer WaitingGenerally LowModerate 2.Employee UtilizationModerateHigh 3.Labor-skill LevelHighLow 4.Labor TurnoverLowHigh 5.Training Required per EmployeeHighLow 6.Working ConditionsPleasantHectic 7.Supervision RequiredLowHigh 8.ForecastingLong-runShort-run Airport

5. Customer-induced Variability 1. Arrival: customer arrivals are independent decisions not evenly spaced. 2. Capability: level of knowledge and skills vary resulting in some hand-holding. 3. Request: uneven service times result from unique demands. 4. Effort: level of commitment to coproduction or self-service varies. 5. Subjective Preference: personal preferences introduce unpredictability. Changi

6. Segmenting Demand at a Health Clinic Smoothing Demand by Appointment Scheduling Day Appointments Monday 84 Tuesday 89 Wednesday 124 Thursday 129 Friday 114

7. Scheduling Part-time Bank Tellers 0 1 2 3 4 5 6 7 Tellers required Mon. Tues. Wed. Thurs. Fri. Two Full-time Tellers 5 4 1 3 2 1 4 3 21 52 Fri. Mon. Wed. Thurs Tues. 0 1 2 3 4 5 Tellers required Decreasing part-time teller demand histogram DAILY PART-TIME WORK SCHEDULE, X=workday Teller Mon. Tues. Wed. Thurs. Fri. 1 x …. x …. x 2 x …. …. x x 3,4 x …. …. …. x 5 …. …. x …. x Fun

8. Seasonal Allocation of Rooms by Service Class for Resort Hotel First class Standard Budget Percentage of capacity allocated to different service classes 60% 50% 30% 20% 50% Peak Shoulder Off-peak Shoulder (30%) (20%) (40%) (10%) Summer Fall Winter Spring Percentage of capacity allocated to different seasons 30% 20% 10% 30% 50% 30% Hotel

9. Demand Control Chart for a Hotel Expected Reservation Accumulation 2 standard deviation control limitsdeviation

10. Single-Level Bidirectional Service Supply Relationship Service Category Customer -Supplier >Input Output> Service Provider 1.MindsStudent>Mind Knowledge> Professor 2.BodiesPatient>Tooth Filling> Dentist 3.BelongingsInvestor>Money Interest> Bank 4.InformationClient>Documents 1040> Tax Preparer

11. Two-Level Bidirectional Service Supply Relationship Service Category Customer -Supplier >Input Output> Service Provider >Input Output> Provider’s Supplier 1.MindsPatient>Disturbed Treated> Therapist>Prescription Drugs> Pharmacy 2.BodiesPatient>Blood Diagnosis> Physician>Sample Test Result> Lab 3.BelongingsDriver>Car Repaired> Garage>Engine Rebuilt> Machine Shop 4.InformationHome Buyer >Property Loan> Mortgage Company >Location Clear Title> Title Search

12. Service Supply Relationships 1. Customer-Supplier Duality 2. Service Supply Relationships are Hubs, not Chains 3. Service Capacity is Analogous to Inventory 4. Customer Supplied Inputs Can Vary In Quality

13. Sources of Value in Service Supply Relationships 1. Bi-directional Optimization 2. Managing Productive Capacity - Transfer: make knowledge available - Replacement: substitute technology for server (e.g. digital blood pressure device) - Embellishment: enable self-service by teaching (e.g. change surgical dressing) 3. Management of Perishability

14. Professional Service Firms Body of Knowle dge 1. Cognitive knowledge (know-what) 2. Advanced skills (know-how) 3. Systems understanding (know-why) 4. Self-motivated creativity (care-why )

15. Profitability Tactics TacticCategory Lower Fixed (Overhead) CostsMargin Improve cash cycle Reduce office space and equipment Reduce administrative and support staff Raise Prices and DifferentiateProductivity Specialize, innovate, add more value Target higher value work Invest in training Invest in higher value services Address Underperforming ProjectsProductivity Drop unprofitable services Drop unprofitable customers Increase VolumeProductivity Increase utilization Increase the use of paraprofessionals