The customer may participate in the design of, and in the delivery of, services.

In week 2 of the course we played the Root Beer Game, using Harvard’s online simulation combined with Adobe Connect and Skype. The simulation illustrates issues in systems integration related to operations and supply chain and it was a useful exercise. No blog entry appeared because there was no formal course lecture.

In week 3 the course topic is Service Operations. Much of our thinking on operations and supply chain comes from a manufacturing perspective but that thinking is increasingly being applied to services and services are being recognised as requiring thinking that is specific to them. There are plenty of examples of the issues that many service operations face:Customers who are unhappy about the level of service that they receive have many avenues today to express their frustration and this has a direct impact on company performance:

The following areas are covered in this week of the course:

1. Understanding the characteristics of service processes and how they differ from manufacturing processes.

2. How to construct a service blueprint.

3. How different services are classified.

4. The involvement of the customer in services.

The nature of services

In service operations, usually more visibly than in manufacturing, the customer is the focal point of all decisions and actions. Services are usually provided to and used by people and this creates a clearer focus on the customer. The purpose of the service organisation is to serve the customer. Operations is responsible for the systems that are used to create and deliver the service – they are also responsible for managing the work of the service workforce.

Scott Sampson introduces Service Operations Management:

The elements that make up a service offering are often referred to as the service package. Most services require physical resources that need to be in place before a service can be offered – this is known as the “supporting facility”. Material purchased by the buyer or the items provided to the customer are known as the “facilitating goods”. Information features as part of the service package, provided by the customer to enable a service to be provided. An example of this might be the services of a medical doctor who provides services based partly on what they are told by their patient.

Explicit services are those that provide benefits that are observable by the senses (for example car brakes operating better after they have been fixed). Implicit services usually provide psychological benefits that the customer may sense only vaguely (for example, the assurance of a regular medical check up).

Designing service operations

The design of service operations needs to take into account a number of factors. First, normally it is impossible to inventory services so service operations must meet their demand when it arises. This raises issues with service capacity which is a very important issue in service operations and supply chain. It is necessary to determine the capacity that you will design your operation to meet. Do you want to design your operation to be able to meet your peak demand all of the time (which could be very expensive) or will you take into account trade offs in terms of service quality and cost?

In service operations it is commonly believed that marketing has a stronger role than in manufacturing in influencing service demand and so tempering variation in levels of demand for services over time. For this reason, operations and marketing often work closely together in service operations.

Waiting lines are also often used to help manage capacity. We are all familiar with the recorded message that states that the service we are attempting to reach is experiencing higher than normal call volumes and that our wait time will be x minutes.

The following video illustrates the differences between operations layouts for manufacturing and service operations:

How service design is different from product design

The design of service operations is also different from manufacturing. The process and the product must be developed simultaneously because the process is the product – it is the service that the customer receives. While manufactured products are often protected by patents and copyrights, services do not usually have that protection. The service package (described earlier) is the major output from the service development process – the elements that comprise the service. Many parts of the service package are defined by the training that people receive – the service provided by engineers is dependent on the training that they have. Service operations are also more flexible in that they can change their service offerings quickly in response to market demand. They often do not have significant costs in terms of capital investment that are required to make a change.

Virtual services

In recent years we have seen the emergence of virtual services in which the customer has a new role. Customers no longer just interact with the business but rather become part of the service delivery. Pure virtual customer contact services involve customers interacting with services in an open environment – such as with eBay or SecondLife.

Mixed virtual and actual customer contact involves customers interacting with each other in a server moderated environment like YouTube or Wikipedia.

The following video introduces ITIL – an approach to managing Information Technology services:

Service blueprinting

The standard tool for service process design is the flowchart which may also be called a service blueprint. A unique feature of the service design is the distinction between the high customer contact aspects of the service and those activities that the customer does not see. The division between these areas is often referred to as the “line of visibility”.

Poka yoke (or fail-safing) is the creation of procedures that block a mistake from becoming a defect in an operation. They are very common in factories and arise from Japanese manufacturing. They are now being applied in services. Warning methods can be created that prevent errors – for example in a restaurant where people are waiting in a line for tables, bleepers are often given out to allow people to retain their place in line and not miss their table when it becomes available. These fail safe activities can be used for customers as well as service workers.

There are many types of service operations designs. Three in particular are useful in contrasting the approaches that are available. McDonalds design their service operations using a product operations approach. Their services are based on lean manufacturing operations. Other services are based on self service models – such as a buffet restaurant or an ATM where the customer does work that was previously done by a service employee.

Other service operations apply a personal attention approach – high class hotels and restaurants are able to command a premium price based on highly attentive human service.

The approach adopted will depend on the nature of the service itself. The following video discusses the changes that are taking place in the retail sector as a result of the application of information technology:

Seven characteristics of a well designed service system

The course textbook authors refer to seven characteristics of a well designed service system. They are:

1. Each element of the service system is consistent with the operating focus of the firm. Inconsistent elements may conflict with this focus and compromise effective service delivery.

2. It is user friendly. It is easy for customers and service employees to use.

3. It is robust. It is able to cope with variability in customer demands.

4. It is structured so that consistent performance is maintained by its people and systems and it is easily maintained.

5. It provides effective links between the back office and the front office.

6. It manages evidence of service quality so that customers see the value of the service provided.

7. It is cost effective.

Customer introduced variability

Service operations deal with people as customers and as such are subject to variability and service operations need to be able to deal with that. The standard approach to this is to assume that there is a trade off between cost and quality, the more accommodation is made for variation, the more the service will cost and the less accommodation is made, the less the customer will be satisfied.

However, this standard approach may overlook ways that the customer may be accommodated without increasing cost. For example, lean approaches to service operations may allow more flexibility to customer demands at a lower cost.

Five types of variability in customers are typically identified. Arrival variability involves customers arriving at times when there are not enough service providers (airports have many examples of this). Request variability is when there is variability in the requests that a customer might make such as a particular table in a restaurant. Capability variability refers to the variance in customer capability in interacting with a service operation – such as a technical service helpdesk. Effort variability is the variability in effort that a customer may expend – such as their effort in returning items to their proper location in a retailer environment after they have been inspected. Subjective preference variability occurs where there is a difference in the interpretation by the customer of a service action. These variations in customer behaviour should be considered in service operations design.

Behavioural science is also often applied to service encounters. From it we learn that the front end and back end of the customer service encounter are not created equal – different behaviours are appropriate for each. A rule that is often applied here is to combine the pain and segment the pleasure to place greater emphasis on the positive aspects of the encounter. Allowing the customer to control the process is often thought to improve satisfaction. Paying attention to the customers norms and rituals is also important. Recognising that it is often easier to blame people than it is the systems that have driven their behaviour will lead to more focus on dealing with systems design problems. Finally it is understood that there is a relationship between the compensation provided and the service issue that has occurred when dealing with a dissatisfied customer.

Service guarantees

Service guarantees have featured more in recent years but have been used by organisations for a long time. Offering a guarantee can be valuable in service design and is often attractive to customers and motivational for employees. In designing guarantees it is often useful to involve customers and employees in the guarantee design, taking into account what the customer believes to be of value and what the employees believe to be possible. It is important to avoid complexity or legalistic language in guarantees and quibbling or wriggling when a customer invokes a guarantee will not usually result in satisfied customers. The organisation should appear happy for customers to invoke the guarantee.

ITIL

ITIL is an approach that is use in the design of information technology services and it has frequently been used to create a stronger customer focus in IT service operations:

This course introduces two approaches to operations and supply chain, traditional and lean. The following video is a good introduction to lean in a service operation – a government service operation:

This week the characteristics of service processes have been introduced and how they differ from manufacturing processes. Guidance has been provided on the construction of a service blueprint and different types of services explained. Finally, the involvement of the customer in services has been outlined.