Professional Documents
Culture Documents
WMP-Term VI
Dr. S Venkat
QM and OM Area
IIM Lucknow
SOM-WMP S Venkat
Outline
Recap on OM learnings
Introduction and Importance of services
Role of services in economy-Indias GDP
Characteristics of Services
Decision Framework and their importance
Design of services
Automation in Services
Conclusions
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Re-cap on OM Topics
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Specific Learnings
The order came on the plea of Delhi resident Vimal Chaudhary who had
alleged that she had ordered for two vegetarian burgers, but she was delivered
one non-vegetarian and one vegetarian burger
New Delhi: Fast food giant McDonald's has been directed by a consumer
forum here to pay Rs 15,000 as compensation to one of its customers for
delivering a non-veg burger instead of the vegetarian one she had ordered. The
South West District Consumer Disputes Redressal Forum said, "By delivering
her a non-vegetarian burger instead of the vegetarian burger ordered by her is a
gross negligence on the part of the delivery-crew-member, whose conduct is
tantamount to deficiency-in-service.
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In its defence, the McDonald's had contended that the woman had willfully
accepted the non-veg burger instead of the vegetarian one ordered by her. The
forum, however, rejected the contention, saying had she wanted a non-veg
burger she would have ordered one.
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Airline Industry-Innovations
Unbundling services: A new revenue stream for airlines
(May 8, 2013, BL)
Governments decision to unbundle certain services on
domestic flights is good news or bad for flyers.
Learning from developed countries, many airlines,
especially low-cost airlines charges for various services.
List of services: Preferential seat, Meal/snack/drinks,
airline lounges, check in baggage, sports equipment
carriage, musical instruments, special declaration of
valuable baggage
Civil Aviation Ministry studied the airline industry and
its services before unbundling move.
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Airline Industry-Innovations
Revenue stream
Charging for services is seen as a separate revenue
stream for airlines.
Ryanair charges a priority boarding fee of 7-10 (Rs
500-700) and this allows the flyer to be among the first
to board a flight.
AirAsia, plans to charge Rs 90 for a standard seat and
Rs 450 for a hot seat. This allows the flyer priority
boarding and get a comparatively comfortable seat with
more leg space.
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Airline Industry-Innovations
Revenue stream
For sports equipment and musical instruments (20 kg/per
item/one way) Ryanair charges 50-60 (Rs 3,500-4,200).
Checked-in bags will attract the usual charge. The
unbundling in India covers these two categories.
For every first checked-in bag (15 kg) Ryanair charges
15 (about Rs 1,100) if done at the time of booking on
the airlines Web site.
This figure goes up to 60 (Rs 4,200) if the booking is
made through the call centre or if the ticket is purchased
at the airport.
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Airline Industry-Innovations
Revenue stream
For the second checked-in bag (15 kg), the rate ranges
from 105 (Rs 7,500) to 160 (Rs 11,000), depending
on the flight and low/peak season.
American Airlines charges domestic flyers $25 (about
Rs 1,400) for the first checked-in bag and $35 (about Rs
1,900) for the second.
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Airline Industry-Innovations
Commercial decision
DGCA has allowed airlines in India also to start
charging separately for these services.
Air India (is the first one) to reduce the baggage
allowance to 15 kg and setting a fee of Rs 250/kg for
excess weight. This applies from May 13.
British Airlines Example for students
Other airlines are yet to make their minds.
SpiceJet CEO said this will be a commercial
decision which the airline will take at an appropriate
time.
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Airline Industry-Innovations
Fundamental issues on service unbundling
Is it good in Indian context? Yes or No and why?
How many fly by air in India compared to other
countries?
What are the alternate channels for customers?
How these alternate channels are going to evolve?
What will be role of Govt and service providers?
How customers will get the benefit?
What about issues related to customer service like
delays, quality of services, loss/damage of baggage?
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* Economic Survey of India 2011-12, Government of India, Ministry of Finance, Economic Division.
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GDP Growth
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GDP growth
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GDP growth
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Banking Sector
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Insurance Sector
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IT/ITeS Sector
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Retail Sector
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Design of Services
Characteristics
Frameworks
Best practices
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Nature of Services
Seven major aspects (Colours)
1. Everyone is an expert on services
2. Services are idiosyncratic (what works well in
one case may be disastrous in another case)
3. Quality of work is not quality of service- Ex.
Completing a repair in one day instead of an
hr
4. Most services contain a mix of tangible and
intangible attributes that constitute a service
package- pure service does not exist
5. High-contact services are experienced,
whereas goods are consumed
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Nature of Services
6. Effective management of services requires
an understanding of marketing and
personnel, as well as operations
7. Services often take the form of cycles of
encounters involving face-to-face, phone,
Internet, electromechanical, and/or mail
interactions
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Characteristics of Services
Intangibility- legal advise, classroom training, special
show tickets etc. Services are performances and actions
rather than objects, therefore having poor tangibility.
Inseparability-service cant be stored or inventoried as in
the case of manufactured products an degree of customer
contact is very high
Perishability- simultaneous production and consumption.
Variability- outcome of service depends on amount of
interaction and mode of interaction etc. Heterogeneity
leads to high variability in the system performance
Service system- operations sys, mrkt sys, service, delivery
sys, service personnel
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Characteristics of Services
Intangibility- Expectations and perceptions,
appropriability, materialisation
Perishability- Services can not be inventoried in
traditional sense (Idle time is costly), managers need
to match demand and supply. Ex preventive
maintenance during low demand time, pre-packaged
goods, filling of forms while waiting in the line,
differential pricing
Heterogeneity-inconsistency in service delivery as
well as customers
Simultaneity- co-production and co-consumption
Transferability customer experience comparison
with non-related service providers (Car and tennis
racket)
Cultural Specificity- culture influences the service
offered (Ex. Restaurants, health care)
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Characteristics of Services
External environment- Customers and competitors
present- Mgrs need to identify customer needs (Mrktg)
and sizing up the opportunity and threats (Strategy)
Strategy (PST- product, segment and target)- Product
definition and differentiation, org culture and leadership
( Ex. Telecom seconds billing), market segmentation,
competitive forces
Internal- Planning and Execution related- Information
packaging, efficiency, resource org and their utilisation,
performance measurement and evaluation. System
design, matching demand and supply
Interface- Execution/delivery of service- Moment of
truth- understand the characteristics of service and
customer (quality, encounters etc)
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Service Manufacturing
Continuum
Pure Product
Pure Service
Ayurvedic Healing Treatment
Legal/Tax Consulting
Cyber Caf Telephone Booths
Emergency Maintenance Services
Facilities Maintenance
High quality restaurant meal
Fast food in a eat out joint
Customised durable goods
Fast moving commodities
Vending Machines
Adopted from Hill, T. (2005), Operations Management (Palgrave Macmillan), 2nd Edition, pp 14.
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Service Organizations
Differences
Local markets
Large facilities
Small facilities
Capital intensive
Labour intensive
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Critical Indicators
Time
02/26/16
Cost
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Variability
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Facilities-based services:
Where customers go to
service facility
Ex. Po, hospitals, ed inst
Field-based services:
Where the production
and consumption of the
service takes place in
the customers site
Ex. Cleaning, home repair
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The
Systems
The Service
Strategy
The
Customer
The
People
In
Inservice
servicetriangle
triangleoperations
operations
play
playaavital
vitalrole,
role,Why?
Why?
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Classification of services
Customer affect the time of demand, nature of
service, quality of service etc
Design decision depends on customer contact/
presence
Work done behind scenes is performed on customer
surrogates. Ex.
Reports, databases, invoices,
diagnostic tests etc
This is similar to maximisation of units produced in a
manufacturing system
Diversity in services is due to customer related issues
Ex. Bank- ATM, cash withdrawal, teller services, loan, TT, etc
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Mass
Mass and
and professional
professional
service
service firms
firms refers
refers to
to
general
general industry
industry and
and other
other
two
two are
are more
more descriptive
descriptive
Service
Factory
Airlines, trucking
Hotels, Resorts etc
High
Degree
Degree of
of labour
labour intensity
intensity
and
and degree
degree of
of customer
customer
interaction
interaction
Service
Service firms
firms differ
differ widely
widely
and
and poses
poses different
different
problems.
problems. Clear
Clear demarcation
demarcation
helps
helps in
in addressing
addressing them
them
better.
better.
Low
Hospitals,
Auto repair,
Repair services
Retailing, wholesale
Doctors,
Schools, Bank Lawyers, consultants
Mass
Service
Professional
Service
Low
High
The
The nature
nature of
of work
work performed
performed should
should be
be the
the basis
basis for
for classification
classification
Routine
Routine and
and knowledge
knowledge work
work has
has been
been widely
widely used
used in
in the
the industry
industry
and
and other
other issue
issue isis integrated
integrated vs
vs decoupled
decoupled tasks-specifies
tasks-specifies how
how
service
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for
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service isis delivered
delivered and
and useful
useful
for improvement
improvement
Decoupled
Service delivery
Service
Store(SSt)
Service
Shop(SSh)
Auto repair
Personal services
Profesl services
Hospitals,
large clinics, adv
Inv banks
Service
Complex(SC)
Knowledge
Routinised
Service task/process
This
Thisisissimple
simpleto
tounderstand.
understand.Considers
Considerssize
sizeand
andscope
scopeof
ofservices
services
delivered,
delivered,improvement
improvementcan
canbe
beachieved
achievedthrough
throughSERVQUAL
SERVQUALattributesattributestangibles,
tangibles,reliability,
reliability,responsiveness,
responsiveness,assurance
assuranceand
andempathy
empathy
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Profel services
SFSF-routine
routineprocesses,
processes,tightly
tightly
integrated
integratedinindelivery
delivery
SSt-variety
SSt-varietyof
ofroutine
routineservices,
services,
decoupled
decoupled
SSh-non-routine
SSh-non-routineknowledge/
knowledge/craft
craft
work,
work,closely
closelyintegrated
integratedinin
delivery
delivery
SCSC-delivering
deliveringdecoupled,
decoupled,nonnonroutine
routineknowledge
knowledgework
work
Service
Factory(SF)
Mass services
Characteristics
Characteristics
Problems
Problems
Improvement
Improvement steps
steps
Transition
Transition relationship
relationship
Integrated
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Execution Stage
Full Launch
People
Design
Products
Technology
Systems
Development
Analysis
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MANUFACTURING
FIRMS
SERVICE FIRMS
Aggregate
planning
Translate strategic
decisions into productive
capacity. ( 1-3 years)
Translate strategic
decisions into
technology & resource
planning. ( 1-3 years)
Disaggregate
planning
1.Decisions on individual
product lines.
2. Disaggregated facilities
decision. ( 1 y ahead )
1.Decisions on basic
service design. 2.
Capacity management
decisions. ( 1 y ahead)
Scheduling
Assignment of
individual work
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Automation in Services
Example
Airlines air traffic control, passenger reservation
Banks ATMs, computerized bank statements
Gas Stations automated payment (pay-at-the-pump)
Health Care MRI system, AGVS for waste disposal
Grocery Store self-service checkout stations
Real Estate web based house-for-sale tour video
Vending machines
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Automation in Services
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High
Mechanized Operations
Automated
Operations
Low
Low
High
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Capital
Intensity
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Best Practices
Lesson 1: Base decisions on what the customer wants and
expects
Ex. customer business not furniture business, customer
experience focus, SW airlines-low fares, on-time, friendly
service
Mgrs need to identify key drivers of Customer satisfaction
Lesson 2: Think and act in terms of the entire customer
experience- what, where and how of customer experienceAirlines missed flight example
Lesson 3: Continuously improve all parts of the customer
experience
Lesson 4: Hire and reward people who can effectively build
relationships with customers(Ex.Taj palace customer safety)
Lesson 5: Train employees in how to cope with emotional
labour cost- do the job consistently
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Best Practices
Lesson 6: Create and sustain a strong service culture
Truly guest focused- helps guide the employee, gives
meaning and value to the work, it helps to fill the gaps
Lesson 7: Avoid failing your customer twice- focus on cost
of failure
Lesson 8: Empower customers to co-produce their own
experience- customers as quasi employees
Lesson 9: Get managers to lead from the front, not the top
Examples- Marriot owner, Automobile Company
Lesson 10: Treat all customers as if they were guests- call
them as guests instead of customers.
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Conclusions
Services are characterised by different
dimensions and needs special approaches
Highly varies, intangible, perishable
Data from the University of Michigan's survey
of customer satisfaction show that services
are getting worse.
In other words, the apparent common sense
underlying these lessons isn't common.
While the principles may seem simple, they
are hard to follow on a consistent basis by
everyone throughout the organization.
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Discussion
Thank you
02/26/16
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