1. Copyright 2006 John Wiley & Sons, Inc. Beni Asllani University of Tennessee at Chattanooga Processes, Technology, and Capacity Operations Management - 5 th Edition Chapter 6, Part 1 Roberta Russell & Bernard W. Taylor, III

2. Copyright 2006 John Wiley & Sons, Inc.6-2 Service Strategy: Processes and Technology  Professional Service highly customized and very labor intensive highly customized and very labor intensive  Service Shop customized and labor intensive customized and labor intensive  Mass Service less customized and less labor intensive less customized and less labor intensive  Service Factory least customized and least labor intensive least customized and least labor intensive  See Figure 2.4, page 43, and page 44

3. Copyright 2006 John Wiley & Sons, Inc.6-3 Classifying Services (1)  Pure services High, face-to-face customer contact High, face-to-face customer contact Low standardization Low standardization Examples: medical care, law offices, accounting firms, universities, schools, health clubs Examples: medical care, law offices, accounting firms, universities, schools, health clubs Employees must have technical job skills and customer relations skills Employees must have technical job skills and customer relations skills Facility must be adapted to customer needs. Facility must be adapted to customer needs. Meet customer needs and be as cost-effective as possible. Meet customer needs and be as cost-effective as possible.

4. Copyright 2006 John Wiley & Sons, Inc.6-4 Classifying Services (2)  Quasi-manufacturing services: Contact with customers is limited to telephone, mail, or Internet Contact with customers is limited to telephone, mail, or Internet Examples: Internet retailers, distribution centers Examples: Internet retailers, distribution centers Employees who have phone contact with customers need both technical job skills and customer service skills Employees who have phone contact with customers need both technical job skills and customer service skills Other employees need technical job skills. Other employees need technical job skills. Manage for efficiency. Manage for efficiency. Design facility for efficiency. Design facility for efficiency.

5. Copyright 2006 John Wiley & Sons, Inc.6-5 Classifying Services (3)  Mixed services: "Front office": high customer contact. May have low standardization "Front office": high customer contact. May have low standardization Manage like a pure service. Manage like a pure service. "Back office": Little customer contact. "Back office": Little customer contact. Manage for efficiency but meet customer service deadlines. Manage for efficiency but meet customer service deadlines. Examples: car repair shop, retail banks. Examples: car repair shop, retail banks.

6. Copyright 2006 John Wiley & Sons, Inc.6-6 Approaches to Service Design  Design for efficiency: High standardization High standardization Limited variety Limited variety Automation Automation High-volume services purchase at low cost. High-volume services purchase at low cost.  Customer involvement in producing the service Self-service salad bar Self-service salad bar  High customer attention: pure services, high- end hotels and retailers

7. Copyright 2006 John Wiley & Sons, Inc.6-7 Process Analysis   Process flowcharts Symbolic representation of processes Incorporate nonproductive activities (inspection, transportation, delay, storage) productive activities (operations)  See Figures 6.4 – 6.10, pages 232-238

8. Copyright 2006 John Wiley & Sons, Inc.6-8 Principles for Redesigning Processes   Remove waste, simplify, and consolidate similar activities   Link processes to create value   Let the swiftest and most capable enterprise execute the process   Flex process for any time, any place, any way   Capture information digitally at the source and propagate it through process

9. Copyright 2006 John Wiley & Sons, Inc.6-9 Principles for Redesigning Processes (cont.)   Provide visibility through fresher and richer information about process status   Fit process with sensors and feedback loops that can prompt action   Add analytic capabilities to process   Connect, collect, and create knowledge around process through all who touch it   Personalize process with preferences and habits of participants

10. Copyright 2006 John Wiley & Sons, Inc.6-10 Make-or-Buy Decisions  Compare your capabilities with those of potential suppliers Cost Cost Capacity Capacity Quality Quality Speed Speed Dependable delivery Dependable delivery Design expertise Design expertise Production expertise Production expertise

11. Copyright 2006 John Wiley & Sons, Inc.6-11 Make-or-Buy Decisions (2)  Do not outsource a core competency  Be cautious about revealing proprietary technology  Build long-term, mutually beneficial relationships with suppliers

12. Copyright 2006 John Wiley & Sons, Inc.6-12 Sourcing Continuum Source: Adapted from Robert Hayes, Gary Pisano, David Upton, and Steven Wheelwright, Operations Strategy and Technology: Pursuing the Competitive Edge (Hoboken, NJ: 2005), p. 120 Arms-Length Relationship (short-term contract or single purchasing decision) Vertical Integration (100% ownership) Joint Venture (equity partner) Strategic Alliance (long-term supplier contract; collaborative relationship)