1. Service Operations Management: The total experience Chapter One Introduction to Service Operations Management

2. Box 1.1

3. What is a service? A concise definition of service operations management is: The organization of a designed process to deliver a service Similarly, a simple definition of a service is: A service is supply of particular intangible benefits

4. Table 1.1. List of services and service sectors EducationCleaning & maintenanceConstruction  university  car mechanics  carpenters  school  gardeners & pool cleaners  electricians  museum  janitors  plumbers  library Consultants & advisors  architects Entertainment  business advisors  surveyors  movie theatres  tax consultants Military & armed forces  performing arts  investments Financial services  art gallery  real estate  banks  DVD hire  lawyers  mortgage brokers ChildcareHealth careTransport Food service industry  hospitals Public utilities  restaurants  dentist  electricity  fast foods  social services  water

5. To understand service, and thereby its design, execution and subsequent monitoring and management, we need to explore more fully what services include: delivered from the accountable service provider, mostly in close cooperation with various suppliers; generated by functions of technical systems and by distinct activities of individuals; produced according to the needs of the service customer; carried out individually for a service consumer when required; used by the service consumer for business or personal use.

6. Intangibility Services cannot be handled, looked at, weighed, smelled or tasted, cannot be re-sold, nor can it be returned. Perishability Service skills, experience, resources, are assigned for a period in time. When used this particular service vanishes. Inseparability The service provider is indispensable for service delivery to the requesting service consumer. Simultaneity Services are rendered and consumed during the same period of time. Variability Each service is unique.

7. Service operation systems A service operation system comprises: People Technology Organizational networks Service systems are frequently characterised by the value that results from exchanges between people, businesses, or nations. Recent times has seen application of mobile and wireless technology.

8. Fig. 1.1 Service operations high-level conceptual model

9. Design of service operation systems Criteria used to classify service systems are: Level of customer contact, Capital intensity Extent of customer involvement Level of customer involvement is also a factor in determining the type of design required. Customer satisfaction used metric employed as a measure of quality.

10. Service Economy Increased importance of the service sector in industrialized economies. Importance of service in a product offering e.g., financial services, health, education, motor cars, white goods have a higher service component than in the past. The separation and contrast between physical products and intangible services is becoming increasingly blurred.

11. Fig. 1.2 The service-product continuum

12. Table 1.2. Nominal GDP sector composition shown in percentage and US$ millions [Source: International Monetary Fund (IMF), World Economic Outlook Database, April 2010: Nominal GDP list of countries; Data for year 2009.]

13. Australian service-tertiary industries Australian financial services Generates 7.9 per cent of real gross value-added in 2006–07; achieving an average annual growth rate of 4.8 per cent a year between 1987 and 2007. Tourism, retail and food and beverage industries Australian tourism and hospitality industry attracts 5 million overseas visitors each year; and contributes $20 billion to the economy annually. Australians’ spend annually $60 billion on domestic tourism, making 208 million trips in 2006–07. Tourism accounts for 3.9 per cent of gross domestic product; employs 464,500 people, or 4.5 per cent of the total workforce. The retail industry is the largest employer in Australia:, accounting for 920 000 jobs, or 12 per cent of the workforce. Majority employ fewer than 20 people.

14. Government and not-for-profit Largest, in terms of public spending, are: Health care Education Welfare. Australian expenditure on welfare and social security represents the single largest outlay of the government sector: A$96.4 billion for the 2007–08 financial year. Government spending on the health sector was A$45.9 billion in 2007–08. Expenditure on education was A$17.8 billion in 2007–08.

15. Total service operations management Designing, achieving and preserving a service success is a harmonizing act and, as there is no such thing as a single sustainable advantage, organizations must continually be learning and developing ways to maintain that balance. Total Service Operations Management is a philosophy delivering outcomes aimed at identifying: the desires of customers (and potential customers) the aspirations of service delivery staff the goals of the organization.

16. Successful organizations Successful organizations are recognized as having particular characteristics: A Focused Business Adaptable and Flexible Organizational Cohesion Supportive and Innovative Culture Integrity ‘Hands-on’ Senior Management

17. Implementing Total Service Operations Management Philosophy that focuses on leadership, customer research, quality, benchmarking, performance measurement, staff development, systems, motivational rewards and team working. Five phases for implementation: Underpinning preparation Strategy Development Communication and Skills Building Problem Solving Continuous Improvement

18. Service operations sensitivity Staff exercising total service operations management skills are demonstrating service sensitivity, i.e., being able to focus on the customers' needs, their own needs, and the organization’s needs in harmony. Sensitivity skills are a synthesis of personal customer service; and the honing of these skills comes from personal feedback, and performance appraisal.

19. Change management Embarking on change – supporters - saboteurs Critical factors for success

20. Service operations management and service relationship marketing The ultimate decision of any service operations organization: Seek to become the lowest cost provider and secure a competitive price advantage or above average margins Achieve a differentiated position, market-wide, as perceived by customers and prospects Focus on particular market sectors or target audiences and, by achieving a low cost or differentiated position, gain economies or advantages that would not be apparent from a mass market approach.

21. Fig 1.3. Generic competitive strategies

22. customer relationship marketing versus services operations Environmental Analysis The Competitor Analysis Internal Resource Analysis SWOT Analyses Market Structural Analysis Competitive rivalry Bargaining power of suppliers Bargaining power of buyers Threat of substitutes Threat of new entrants Critical Success Factors Strategic Options Service Mission and Objectives

23. Fig 1.4. The differentiation quadrant

24. The Seven S’s provides a useful : Strategy, relates to the key choices made to secure competitive advantage through customer service. Structure of the operations, relates to the organization, management and the lines of control required to achieve the strategy. Systems, specifies the processes and procedures that will support service delivery. Staff, concerns their number, recruitment, remuneration, training, and development. Skills, details the skills and competencies required to support the operations strategy. Style, pertains to the way that service operations will be managed. Shared values, relates to the desired customer service cultures that should suffuse the company. Framework for operations planning

25. Fig 1.5. Planning process steps

26. Lean service operation management business model Elimination of poor quality methods; and make more effective use of empowered employees Introduce systems and processes which support the workforce on core activities, withdrawing from those costly peripheral areas that contribute little to real revenue Gain greater understanding of those existing customers that make long-term economic sense to keep Question whether the organization makes cost-effective decisions aimed at preserving and stimulating long-term loyalty Challenge if people who interface with existing customers leverage that opportunity to stimulate incremental profitable revenue as part of the loyalty-commitment process.

27. Making value flow along the value stream The key lean service principles are: Perfect first-time quality - quest for zero errors, revealing and solving problems at the source Waste minimisation - eliminating all activities that do not add value, and maximize use of scarce resources (capital, people and space) Continuous improvement – reducing costs, improving quality, increasing productivity and information sharing Pull-processing - operations are ‘pulled’ from the consumer-end, not pushed from the organization-end Flexibility - producing different mixes or greater diversity of services, without sacrificing efficiency at lower volumes of activity. Building and maintaining a long term relationship with suppliers through collaborative risk-sharing, cost sharing and information sharing arrangements.