service response logistics

CHAPTER 12- SERVICE RESPONSE CHAPTER 12- SERVICE RESPONSE LOGISITCSLOGISITCS

Principles of Supply Chain Management: A Balanced Approach

Prepared by Daniel A. Glaser-Segura, PhD

Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.

© 2005 Thomson Business and Professional Publishing 2

Learning ObjectivesLearning Objectives

You should be able to:– Understand how supply chain management in services differs

from supply chain management in manufacturing.– Define service response logistics.– Describe the strategies for managing capacity, wait times,

distribution and quality in services.– Define service quality and describe how to measure it and

improve it.



Chapter Twelve OutlineChapter Twelve Outline

An Overview of Service Operations– Service Productivity– Global Service Issues– Service Strategy

Development– The Service Delivery

System– Service Location & Layout

Strategies

Supply Chain Management in Services

The Primary Concerns of Service Response Logistics– Managing Service Capacity– Managing Waiting Times

• Queuing System Design

• Queuing System Applications

• Managing perceived waiting times

– Managing Distribution Channels

– Managing Service Quality



IntroductionIntroduction

– Many services are considered pure services, offering few or no tangible products to customers.

– Other services may have end products with a larger tangible component such as restaurants, repair facilities, transportation providers.

– Customers are often involved in the production of the service. – Services may provide state utility - they do something to things

that are owned by the customer, such as transport and store supplies, repair machines, cut hair, and provide health care.



An Overview of Service OperationsAn Overview of Service Operations

Some of the differences between goods and services are reviewed here:

– Services cannot be inventoried.– Services are often unique. Insurance policies, legal services.– Services have high customer-service interaction. Services today

are finding ways to automate or standardize services– Services are decentralized. Because of their inability to inventory

and transport service products.



An Overview of Service Operations- Cont.An Overview of Service Operations- Cont.

• Outputs produced - customers served, services produced, sales $ • Inputs – single factor productivity (ex. labor hours) • Inputs - multiple-factor productivity (ex. labor, material, energy,

and capital).

Improving service productivity is challenging due to:• High labor content • Individual customized services• Difficulty of automating services• Problem of assessing service quality.

Productivity =Outputs produced

Inputs used

Service Productivity



An Overview of Service Operations- An Overview of Service Operations- Cont.Cont.

Global Services Issues- Global services are increasing all over the world. Managing global services involves a number of issues:– Labor, facilities, and infrastructure support: locating support

facilities, suppliers, transportation, communications.– Legal and political issues: Laws may restrict foreign competitors,

limit available resources, attach tariffs.– Domestic competitors and the economic climate: Managers must

be aware of local competitors, their services, their pricing structure, and current state of local economy.

– Identifying global customers.




Service Strategy Development:

1. Cost Leadership Strategy- Requires large capital investment in automated, state-of-the art equipment and significant efforts in the areas of controlling and reducing costs.

2. Differentiation Strategy- Service that is considered unique. Differentiation is created as companies listen to customers.

3. Focus Strategy- serve a narrow niche better than other firms




The Service Delivery System

Bundle of attributes (the combination of): – Explicit service (ex. storage and use of your money)

– Supporting facility (ex. bank building with drive-up tellers)

– Facilitating goods (ex. deposit forms, monthly statements), &

– Implicit services (ex. security provided, the atmosphere in the bank, privacy, and convenience).

Service delivery systems (a continuum) with mass produced, low-customer contact systems at one end and highly customized, high-customer-contact systems at the other.

The service system should be audited often to assess the system.




Service Location and Layout Strategies• Location Strategies- Have a significant impact on the long-term

profits of the company. It is desirable to consider relevant factors and to reduce decisions based solely on intuition.

• Layout Strategies– Departmental Layouts to Reduce Distance Traveled- When

moving from one area to another.– Departmental Layouts to Maximize Closeness Desirability-

A closeness desirability rating between various departments must be determined with the objective of designing a layout that maximizes a desirability rating for the entire office.



Supply Chain Management in ServicesSupply Chain Management in Services

Services performed require a larger labor component than manufactured products

Services also require use of facilitating products (e.g., computers, furniture, office supplies) that are not part of the services sold

Customers have no idea how things actually get to the destination. But they sure notice when the shipment is late!



Supply Chain Management in Services- Supply Chain Management in Services- Cont.Cont.



The Primary Concerns of Service The Primary Concerns of Service Response LogisticsResponse Logistics

– When demand exceeds capacity, firms turn away customers or hire personnel

– Hiring, training, supervising, and equipping service personnel is costly (Often 75 % of operating costs)

– Therefore, service managers must forecast demand & provide capacity to meet the forecast demand.

Managing Service Capacity- the number of customers per day the firm’s service system is designed to serve.



The Primary Concerns of Service The Primary Concerns of Service Response Logistics- Cont.Response Logistics- Cont.

Level-demand strategy- Capacity remains constant regardless of demand

Capacity Management When Available Service Capacity Exceeds Demand.

– Finding Other Uses for Service Capacity

– Using Demand Management Techniques.

Chase-demand strategy - Capacity varies with demand

– Cross-Training Employees– Part-Time Employees– Using Customers– Using Technology– Using Employee

Scheduling Policies– Using Demand

Management Techniques

Capacity Mgmt when Demand exceeds Capacity




Managing Waiting Times– Good waiting line management consists of the management of

actual waiting time and perceived waiting time. – What is the average arrival rate of the customers?– In what order will customers be serviced?– What is the average service rate of the service providers?– How are customer arrival and service times distributed?– How long will customers wait in line before they either leave or

lower their perceptions of service quality?– How can customers be kept in line even longer without lowering

their perceptions of service quality?




Queuing System Design– Customer arrivals (or demand source) is either infinite or finite. – Customers also arrive in patterns. – Poisson distribution is often used to model customer arrival.

λ = average customer arrivals in Time Period T

e = 2.71828 (natural log base), and

x! = x factorial.

– Most queuing models assume that customers stay in line. Customers do not exhibit balking – refusing to join the queue, or reneging – leaving the line prior to completing the service.

Px(T) =e -λT (λT) x

x!




Queue Characteristics. Queuing models generally assume the length of a queue can grow to an infinite length. Queuing configuration can contain single or multiple lines.

Queue discipline. Describes the order in which customers are served.




Service Characteristics. – Provided either by single server or by multiple servers who act in

series or in parallel. – Multiple servers, acting in parallel, referred to as a multiple-

channel queuing system. – Multiple servers acting in series is referred to as a multiple-phase

queuing system.– The single-channel, single-phase configuration is the most basic.– Another characteristic of the service is the time required to

complete each of the services provided.




The Single-Channel, Single-Phase Queuing Model

λ – average arrival rateμ= average service rateρ= average server utilization = λ/μLs = expected customers in the system = λ/(μ-λ)Lq = expected customers in the queue = λ2/[μ(μ -λ) = Ls - λ/μWs = expected waiting time in the system = l(μ-λ) = Ls/ λWq = expected waiting time in the queue = λ/[μ(μ - λ )] = Lq/λPn = probability of n units in the queuing system = (λ/μ)n(1 - λ/μ)




The Single-Channel, Single-Phase Queuing Model- Example: Mary Jane’s Sewing Shop serves 5 customers/hr. In the last 2 wks the average has been 4 customers/hr. Based on the following information, how often will there more than 4 customers per hour in her shop:

λ = 4 customers/hrμ = 5 customers/hr

ρ= 4/5 = 80% utilizationLs = 4/(5-4) = 4 customersLq = 4 – 4/5 = 3.2 customersWs = 4/4 = 1 hrWq = 3.2/4 = 0.8 hrs = 48 min.

P0 = (4/5)0 (1 – 4/5) = 0.200P1 = (4/5)1 (1 – 4/5) = 0.160P2 = (4/5)2 (1 – 4/5) = 0.128P3 = (4/5)3 (1 – 4/5) = 0.102P4 = (4/5)4 (1 – 4/5) = 0.0.82For n >4 Pn>4 = 1 – (.2 + .16 + .128 + .102 + .082) = 0.328

Mary Jane can expect more than 4

customers about 33% of the time.




The Multiple Channel Single Phase Model λ – average arrival ratesμ= average service rateρ= average server utilization = λ/sμ P0 probability of zero customers in the system =

1

∑ (λ/μ)n

+(λ/μ)s

[ 1

] n! s! 1-(λ/sμ)

S-1

N=0

Pn = Probability of n customers in system = P0(λ/μ)n

, for n≤sn!

, for sμ >λ

= P0

(λ/μ)N

, for n>ss!ss-n

Lq = expected number of customers in queue = P0(λ/μ)s (λ/sμ)

s!(1-λ/sμ)2

Ls = expected number of customers in system = Lq + λ/μ

Wq = expected waiting time in queue = Lq/λ

Ws = expected waiting time in the system = Wq + 1/μ




The Multiple Channel Single Phase Model Example- Mary Jane’s Shop decided to hire a 2nd worker and buy a 2nd checkout stand w/cash register. Mary Jane and the 2nd worker can serve 5 customers/hr and average arrival rate is 4 customers/hr. What are the new operating configurations?

P0 =

1

(4/5)0

+(4/5)1

+(4/5)2

[ 1

] 0! 1! 2! 1-(4/10)

ρ = 4/10 = 40 % utilization

Lq = (0.428) (4/5)2 (4/10)

2(1-.4)2

Ls = 0.152 + 4/5 = 0.952 customers

Wq = 0.152/4 = 0.038 hrs 0r 2.28 minutes

Ws = 0.038 + 0.2 = 0.238 hrs or 14.28 minutes

= .428

= 0.152 customers




Managing Perceived Waiting Times

Often, demand exceeds expectations & capacity.

First and Second Laws of Service:

Rule 1: Satisfaction = perception – expectation.

Rule 2: It is hard to play catch-up ball.– Keep Customers Occupied– Start the Service Quickly– Relieve Customer Anxiety– Keep Customers Informed– Group Customers Together– Design a Fair Waiting System




Eatertainment -

is the combination of restaurant and entertainment elements.

Entertailing -

refers to retail locations with entertainment elements.

Edutainment -

attract more customers and increase revenues. Combines learning with entertainment to appeal to customers looking for substance along with play.




Franchising- allows services to: – expand quickly in dispersed geographic markets– protect existing markets– build market share and when owners have limited financial

resources.

International Expansion– Operate/partner with firms who are familiar with the region’s

markets, suppliers, infrastructure, government regulations, and customers.

– Must address language and cultural barriers




Internet Distribution Strategies– Internet retailing is growing faster than

traditional retailing.– Primary advantages of the Internet - ability to

offer convenient sources of real-time information, integration, feedback, and comparison shopping.

– Many retailers today sell products exclusively over the Internet (a pure strategy), while others use it as a supplemental distribution channel (a mixed strategy).




Managing Service Quality- Service Delivery Process Quality involves an interaction between a customer and a service employee. Service quality depends on the firm’s employees to satisfy customers varying expectations.




Recovering from Poor Service Quality- keep customers loyal and coming back and serves as good word-of-mouth advertising

Service Recovery System- Firms may: – develop recovery procedures– train employees in these

procedures– empower employees to remedy

customer problems