OPSM 405 Service Operations Management Class 5: Service Design Service Process Blueprinting Chapters 5 & 7 Koç University Zeynep Aksin

New Service Development Cycle Full Launch Design Analysis Develop -ment Execution StagePlanning Stage People Products Tech- nology Systems

New Services Execution  Incremental Innovations –Service line extension Divan vitamin bufe –Service improvement THY self-check-in –Style changes Pigastro Planning  Radical innovations –Major innovations Online auctions –Start-up business Personal coaches for diet, pregnancy etc. –New services for a market being served Can load Hazir kart credits in markets

Service design factors  Location  Layout  Product-process design –Features –Customer contact –Standardization –Industrialization  Resources: workers, technology, etc.  Management: Quality, capacity, standards, etc.

Service Design Tools  Service process blueprinting  Conjoint analysis

Automotive Service Operation Service shuttle is inconvenient Parts are not in stock Vehicles not cleaned correctly it takes too long to arrive F F F F

Understanding the link between positioning and service structure  Complexity  Divergence  Customer contact

Low complexity, high divergence

High complexity, low divergence

High complexity, high divergence

Defining terminology complexity vs. divergence what is done? how is it done?

Structural change: reduce divergence  positioning: economies of scale  + : perceived increase in reliability  - : conformity, inflexibility

Structural change: increase divergence  positioning: niche  + : prestige, customization, personalization  - : difficult to manage and control

Structural change: reduce complexity  positioning: specialization  + : expert image, easy control  - : stripped down image

Structural change: increase complexity  positioning: wallet share  + : maximize revenue generation / customer  - : customer confusion, decline in service quality

Example: Structural Alternatives Lower Complexity/DivergenceCurrent ProcessHigher Complexity/ Divergence No reservationsTake reservationSpecific table selection Self seat, menu on blackboardSeat guests, give menuRecite menu: describe choices EliminateServe water and breadAssortment of meze & bread Customer fills out formTake orders, prepare ordersAt table Pre prepared-no choiceSalad (4 choices)Individual prep at table Limit to 4 choicesMain dish (15 choices)Expand choices, bone fish at table etc. Ice cream bar-self serviceDessert (6 choices)Expand choices Serve salad and main dish; Dessert and bill together Serve ordersSeparate service or orders; change plates Cash only, pay when leavingCollect paymentChoice of payment, serve karanfil & kolonyali mendil

Basic Principles of De-coupling  Customer contact model  Services categorized by level of customer contact High ContactLow Contact Pure Services Mixed ServicesQuasi-Manufacturing (medical) (branch banks)(distribution centers) Efficiency: f(1 – contact time/service creation time) Potential for efficiency increases as customer contact time/service creation time decreases

Decoupling and process attributes  Decoupling and cost –Idle time due to removal of non-contact work –Duty overlap between front and back –Duty reduction without personnel reduction  Decoupling and quality –Conformance quality increases –Handoffs may affect dependability or accuracy negatively

Decoupling and process attributes  Decoupling and time –Task specialization and automation helps speed –Handoffs and insufficient data collection in front office might hurt –Also centralized back-office processes imply batch processing which hurts delivery speed  Decoupling and flexibility –Homogenized services due to standardization –Front-end over-promising

Managerial Differences High Contact:Low Contact: BranchSupport Center Facility Locationnear the customernear supply, transportation, labor Facility Layoutcustomer-orientedproduction efficiency Productionorders cannot besmooth production planning storedwith backorders Worker Skillspublic interactiontechnical Quality Controlvariable standardsnumerical measurement Capacityset to peak set to average work loadwork load

Management Practice Cost LeaderCheap ConvenienceFocused Professionals High Service Level of De-coupling HighLowHighLow Competitive Advantage Low costsLocational convenience/low cost Personalized service at moderate cost Premium level of personalized service Reason to De-couple Scale economiesMaintain cost competitiveness Quality control; disaggregation of high-and low-contact Centralize only when it is cost prohibitive not to Activities to De-couple All back-office workCentralize back- office work in excess of front-office idle time Back-office activities “regionalized,” not centralized Activities requiring expensive capital goods Operational Strategic Focus Cost minimization; Conformance quality Cost minimization; conformance quality Maintain sufficient flexibility, response time, or service quality at lower cost than High Service Maximize flexibility, response time, or service quality Cost focusQuality, flexibility, time focus

Shared Services Brings together functions that are duplicated across companies and offers those services more efficiently, at a lower cost and higher profitability through a Shared Services function

The Rationale  Improved customer satisfaction getting products/services at the level, quality, cost that clients are willing to pay for  Operating /business divisions can focus on what they do best running their business

Who is doing it?

Why?  Allied Signal combined 75 functions into a Shared Services Centre Saving $300 million over five years  Shell has set-up a separate Shared Services company With 5000 employees and $1 billion in sales it has reduced costs by per cent  On average a company can save 25 to 30 per cent of its related costs

Citigroup Business Services - Why?  Business Units (Front Office and Operations & Technology) can better focus on customer activities and the competitive marketplace  Reduce corporate expense base by consolidating all activities into one centrally managed organisation that can leverage economies of scale integrate processes eliminate redundant systems  Simplify and improve management control, analysis and reporting through standardised corporate MIS  Leverage Citigroup’s buying power into a global purchasing unit