Service Operation Management

Session 1
Topic 1
Overview of Service Operations
 Seven Distinctive Characteristics of Service

1. Customer Participation
2. Intangibility
3. Simultaneity
4. Perishability
5. Heterogeneity
6. Transferability
7. Cultural Specificity

2
 1. Customer Participation
2. Intangibility
3. Simultaneity
Customer Participation 4.
5.
Perishability
Heterogeneity
6. Transferability
7. Cultural Specificity

Physical presence of customer in service process many times is inevitable.

What a customer notices when he/she enters the service process?
 Physical surroundings of service facility
 Matching the service facility design of physical surroundings as per customer’s
perceptions (Interior decoration, Layout, Noise)

Customer participates in the service system by providing right information, by

acquiring knowledge about utilizing the self-service technologies and by being
motivated to learn advance technologies which are substitutes of labor intensive
services
Some Examples:
 The effective treatment of a patient depends on the right and correct medical
record provided by the customer
 Effective learning at school depends on the efforts of students
 Customer must learn how to use internet to perform web check-in well in
advance of flight departure to avoid any delay at check-in counters at airport

3
 1. Customer Participation
2. Intangibility
Managing Intangibility 3.
4.
Simultaneity
Perishability
5. Heterogeneity
6. Transferability
• Address customer’s psychological needs 7. Cultural Specificity

India’s successful airline Indigo always provide services which are on time
performance, clean, neat aircraft and good onboard service. Indigo believe that
on-time flights means on-time meetings
• Avoid being copied by the competitors by introducing innovations which are highly
dependent on infrastructure of services like information systems
Implementing flexible expensive information systems where new services can be
introduced with ease can prevent companies from being copied
• Materialize the service by using some symbols and slogans, offering gifts
Some hotels give a fruit basket, some cookies and drinks on the arrival of guest
just to convey the guest that he is being cared by the hotel.

***** 4
 1. Customer Participation
2. Intangibility
Simultaneity 3.
4.
Simultaneity
Perishability
5. Heterogeneity
6. Transferability
7. Cultural Specificity

Services are produced and consumed at the same time hence service production and
service consumption are inseparable.
Service is a experience, which cannot be stored as inventory unlike goods which can be
inventoried.
Goods inventory can act as buffer to meet varying demand
Customer’s demand for goods is met quite late after the production of goods in some
factory from the stored inventory
Goods can be inspected for quality before delivering to the customer because of time
gap between production and consumption
We cannot inspect services before the consumption of service by the customer

5
 1. Customer Participation
2. Intangibility
Perishability 3.
4.
Simultaneity
Perishability
5. Heterogeneity
6. Transferability
7. Cultural Specificity
Service is a perishable commodity and cannot be inventoried.
In contrast to services, tangible goods can be stored for long and can be used at the
later date. Fluctuations of demand can be accommodated by keeping inventory.
During the lean demand periods inventory can be held for later periods when demand
rises.
Services cannot stock its inventory. During less demand periods or no demand periods
the idle capacity leads to opportunity loss. The opportunity lost is a loss forever in
services.

EXAMPLES
Can we measure the cost involved in
• Unoccupied room during Off season in a hotel?
Can we store a service and retrieve it for later use?
• An hour of lawyer or a doctor
Perishability occurs due to highly varying customer demand and due to fixed
capacity of services.

6
 1. Customer Participation
2. Intangibility
Heterogeneity 3.
4.
Simultaneity
Perishability
5. Heterogeneity
6. Transferability
7. Cultural Specificity

Inconsistent behavior of service provider

Consistent performance of service provider can be experienced differently by different customers due to
varying perceptions as shown in figure
Same service provider may perform differently due to physical and psychological conditions
• Due to lack of proper training and employee retaining policies
• Due to nonstandard working environment
• Due to lack of proper evaluation of performance of employee during customer is getting served
All above points lead to Inconsistent service delivery

7
 1. Customer Participation
2. Intangibility
3. Simultaneity
Transferability 4.
5.
Perishability
Heterogeneity
6. Transferability
7. Cultural Specificity

Customer expectations are transferable from one type of service to another type of
service or from one service sector to other service sector.
• Can we compare two goods: A Car and A T- shirt?
• Diverse services tend to have more in common because of similar elements.

EXAMPLES: Level of personal contact, length of time spent, assistance provided by

sales person and guarantee of satisfaction
Customers compare a particular service not only with direct competitors but with
the other similar non related services.

8
 1. Customer Participation
2. Intangibility
3. Simultaneity
Cultural Specificity 4.
5.
Perishability
Heterogeneity
6. Transferability
7. Cultural Specificity

Culture is very important attribute of service

‒ Culture influences the expectations and behavior of customers and service

providers
‒ Existing gaps between service provider’s and customer’s cultural orientation
can either enhance or detract from the service encounter

EXAMPLE: In India people like to buy the grocery items in a way local grocery
(Kirana) stores provide that is in a customized amount and packing (loose
grocery items like grains, lentils etc.). Many upcoming retail shops with
multinational presence are accounting for this factor, which were earlier selling
the grocery items in a fixed quantity and in pre-defined packaging.

9
 Examples of service industries exhibiting
distinctive characteristics
Distinctive Service Industries
Characteristics
Healthcare IT Banking

Customer Patient fill Client provides the Customer provides

Participation registration form and business and fills personal
provide medical requirements for information to open
history which they seek savings account
solution

Simultaneity The doctor diagnoses The solution provided Customer needs

the problem from by the service money which can be
test reports and gives provider after system simultaneously
treatment to the level and end user withdrawn from ATM
patient acceptance testing is
simultaneously run in the client’s
main system, which is
simultaneously
consumed by the
users of the client’s
system

10
 Examples of service industries exhibiting
distinctive characteristics
Distinctive Service Industries
Characteristics
Healthcare IT Banking

Intangibility Treatment of the Good visual look, Accessing banking

disease or relief from better design with functions over
pain user friendly internet
functions

Perishability Unutilized bed and Unutilized employees Due to time

idle doctor is lost due to losing projects consuming process, a
opportunity to the competitor loan seeker customer
can be an
opportunity loss

11
 Examples of service industries exhibiting
distinctive characteristics
Distinctive Service Industries
Characteristics
Healthcare IT Banking

Heterogenicity Different behaviour Inconsistency in Different behaviour

of different terms of of a teller or
doctors/nurses due to development customer relation
skill, number of shifts, efficiency and testing managers
general behaviour efficiency in a project
team

Cultural Specificity Desire of being seen Straight forward Depending on the

by a lady doctor for interaction versus culture of region a
gynaecological formal mode of bank can provide
problems in India communication with services ranging from
client based of pure banking to other
different client investment schemes
geographies

12
 Topics Index

S. No Reference No Particulars

1 Topic 1 Overview of Service Operations

2 Topic 2 Strategic Positioning and Service Strategy

3 Topic 3 New Service Development

4 Topic 4 Improving the Delivery System

5 Topic 5 Six Sigma for Service Process Improvement

6 Topic 6 Matching Supply Demand in Service

7 Topic 7 Site Selection for Services

8 Topic 8 Service Supply Relationship

 Books

Author - Robert Johnston Author - Richard B Chase Author - B Mahadevan

Graham Clark F Robert Jacobs Publisher – Pearson Education India
Publisher – Pearson Education India Nicholas J Aquilano
Nitin K Agarwal
Publisher – Tata McGraw-Hill Education
 Teaching Plan

Session Particulars Reference Book

Service Operation Management
Overview of Service Operations by Johnston
The session will enable the students to understand: Chapter 1
1 • Operations Management
• What are services
• What are Service Operations Management
• Importance of service operations management
Service Operation Management
Introductory CASELET Singapore General Hospital by Johnston
Service Concept and Customer perspective Chapter 2
The session will enable the students to understand:
2
• Service concept
• Understanding Customer Perspective
• Challenges for types of service

Operations Management for

Introductory CASELET – SouthWest Airline competitive Advantage by Chase
Strategic Positioning and Service Strategy Chapter 7
The session will enable the students to understand:
3 • The concepts of operations strategy
• How an operations strategy can contribute to the
sustainable competitiveness of the business
 Teaching Plan….

Session Particulars Reference Book

Service Operation Management
Case Study: Technology & Innovation NLB Singapore by Johnston
New Service Development Chapter 7
The session will enable the students to understand:
4 • Service Innovation
• Service System Design and Tools
• Managing service experiences
• The Front-Office Back Office Interface

Case Study: Blackboard.com Service Operation Management

Improving the Delivery System by Johnston
The session will enable the students to understand: Chapter 8
• Analysing Processes
5 • Process Flow Diagrams, Process Simulation
• Service Quality/ Service Quality Designs,
• Taguchi and Poka-Yoke

Case Study: Singapore Airlines Operations Management for

Improving the Delivery System competitive Advantage by Chase
The session will enable the students to understand: Chapter 5
6 • Measures of Customer Satisfaction
• Achieving Service Quality
• Developing a Culture of Service Quality
• Service Recovery
 Teaching Plan…..
Session Particulars Reference Book
Case Study: The Legend Hotel Service Operation Management
Six Sigma for Service Process Improvement by Johnston
The session will enable the students to understand: Chapter 12
7 • Process Capability
• Cost of Poor Quality
• Metrics and Strategic Consistency
Case Study: The Kowloon Hotel Service Operation Management
Matching Supply and Demand in Services: by Johnston
The session will enable the students to understand: Chapter 11
8 • Yield Management
• Inventory Management in Services
• Waiting Time Management
Site Selection for Services: Operations Management Theory
The session will enable the students to understand: and Practice
• Site Selection Considerations by Mahadevan
9 • Site selection for Demand-Sensitive Services Chapter 10
• Factor Rating Method, Gravity Model

Service Supply Relationships:  Operations Management for

The session will enable the students to understand: Competitive Advantage by Chase
• Managerial Implications of bidirectional Chapter 10
10 relationships Service Operation Management
• Sources of value in services supply relationships by Johnston
• Outsourcing services Chapter 6
 Learning Objective

This session will enable you to understand:

• What are services
• What are Service Operations Management
• Importance of service operations management
• The differentiate goods from services
• The nature and distinctive characteristics of services

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 What Is Operations Management?

Operations management (OM) is the set of activities that creates value in the
form of goods and services by transforming inputs into outputs
What are the typical inputs for a process?

 Raw
Goods
Materials Transformation and/or
 Labour Services
Resources

 Machine
 Working
Capital

Input Process Output

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 Typical Process - Goods

Transformation Output
Process
Inputs

Resources

A transformation process is defined as a use of resources to

transform inputs into some desired outputs

20
 Typical Process - Service

Transformation Output
Inputs Process

Resources

In service operation the Input is always Customers (People) who is often a part of the
process.

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 OM is a process oriented discipline
• A process is interrelated activities performed in some sequence to transforms inputs
into valuable outputs.

Inputs Transformation Outputs

Service
22
 Price Cost Profit

100 80 20

PRICE ?

23
 100 80 20

Rs.100 Competitive Global Market

80 80 0

Rs.80

24
 100 80 20

Rs.100

80 65 15

Rs.80

25
 80
PRICE 65
COST 15
PROFIT

Rs.80
The new formula for a competitive market is

Cost Price Profit

Rs.80 Market Driven Stakeholders Driven

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 100 80 20
Price Cost Profit

80
Rs.100

80 60 20
Price Cost Profit

In the globalized world, companies seek for new operations strategies

to ensure corporate success. The efficacy of the models application
Rs.80 depends on their alignment with the competitive strategy.

27
Major functions of Business Organizations

 Marketing – generates demand

 Production/operations – creates the
product/service
 Finance/accounting – tracks how well the
organization is doing, pays bills, collects the
money

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 Options for Increasing Contribution

Current

Sales 100,000
Cost of Goods – 80,000 What are the ways the organization can
Gross Margin 20,000 increase its contribution?
Finance Costs – 6,000
Subtotal 14,000
Taxes at 25% – 3,500
Contribution 10,500
All figures in Rs
 Options for Increasing Contribution

Finance/
Marketing Accounting OM
Option Option Option

Increase Reduce Reduce

Sales Finance Production
Current Revenue 50% Costs 50% Costs 20%

Sales 100,000 150,000 100,000 100,000

Cost of Goods – 80,000 – 120,000 – 80,000 – 64,000
Gross Margin 20,000 30,000 20,000 36,000
Finance Costs – 6,000 – 6,000 – 3,000 – 6,000
Subtotal 14,000 24,000 17,000 30,000
Taxes at 25% – 3,500 – 6,000 – 4,250 – 7,500
Contribution 10,500 18,000 12,750 22,500
All figures in Rs
 Options for Increasing Contribution
Finance/
Marketing Accounting OM
Option Option Option

Increase Reduce Reduce

Sales Finance Production
Current Revenue 50% Costs 50% Costs 20%

Sales 100,000 150,000 100,000 100,000

Cost of Goods – 80,000 – 120,000 – 80,000 – 64,000
Gross Margin 20,000 30,000 20,000 36,000
Finance Costs – 6,000 – 6,000 – 3,000 – 6,000
Subtotal 14,000 24,000 17,000 30,000
Taxes at 25% – 3,500 – 6,000 – 4,250 – 7,500
Contribution 10,500 18,000 12,750 22,500

All figures in Rs
 Options for Increasing Contribution

Finance/
Marketing Accounting OM
Option Option Option

Increase Reduce Reduce

Sales Finance Production
Current Revenue 50% Costs 50% Costs 20%

Sales 100,000 150,000 100,000 100,000

Cost of Goods – 80,000 – 120,000 – 80,000 – 64,000
Gross Margin 20,000 30,000 20,000 36,000
Finance Costs – 6,000 – 6,000 – 3,000 – 6,000
Subtotal 14,000 24,000 17,000 30,000
Taxes at 25% – 3,500 – 6,000 – 4,250 – 7,500
Contribution 10,500 18,000 12,750 22,500

All figures in Rs
 Services Sector contributed to India's GVA

Services sector is the largest sector of India.

Gross Value Added (GVA) at current prices for Services sector is estimated at 92.26
lakh crore INR in 2018-19.

Services sector accounts for 54.40% of total India's GVA of 169.61 lakh crore Indian
rupees.

With GVA of Rs. 50.43 lakh crore, Industry sector contributes 29.73%.

While, Agriculture and allied sector shares 15.87%.

Source: Ministry of Statistics and Programme Implementation (2018-2019); Planning Commission, Government of India (2004-05 series)

33 33
 Role of Service in an Economy
We can see that from the standpoint of economic value alone we should pay attention to
the service sector, and to service operations in particular as this is where the service, and
therefore wealth and value, are created.
Services also have an important economic role in non-service organisations.
Many manufacturing companies have significant revenue-earning service activities, such as
customer support, and also many service activities internal to the organisation, such as
payroll, catering, information and IT services etc.
It has been estimated that around 75 per cent of non-service organisations’ activities may
be directly or indirectly associated with the provision of services
Service organisations provide employment for the vast majority of the working population
in most developed and developing countries. In many economies the service sector is the
only area where new jobs are being created, notably in tourism and leisure.
Many service organisations, such as hospitality and transportation, are people-intensive,
requiring different mixes of skilled and unskilled labour. Other organisations, such as
banking and many financial services, are more technology-based

34 34
Role of Service in an Economy

35
 Role of Service in an Economy

Service organisations provide employment for the vast majority of the working
population in most developed and developing countries.
In many economies the service sector is the only area where new jobs are being
created, notably in tourism and leisure.
Many service organisations, such as hospitality and transportation, are people-
intensive, requiring different mixes of skilled and unskilled labour.
Other organisations, such as banking and many financial services, are more
technology-based.

36 36
 Various Sectors Constitute Service Industry

 Hotels and Restaurants

 Railways
 Other Transport & Storage
 Communication (Post, Telecom)
 Banking
 Insurance
 IT
 IT enabled services (ITeS)
 Real Estate
 Business Services
 Public Administration
 Personal Services
 Community Services
 Other Services

37
 Goods Vs Services
Goods Service

• Tangible • Intangible
• Can be Inventoried • Cannot be Inventoried
• Consistent Product definition • Often unique
• Low customer inter action • High customer inter action

38
 What is a Service
Definition: “Any act or performance one party can offer to another that is essentially intangible
and does not result in the ownership of anything”

What is a Service: Lawyers, Doctors, Banks, Insurance, Police, Fire, Electricity, Water, Telecom,
Postal and Courier, Teachers, Airlines, Hotels, Restaurants, Travel Agencies, Consultancies, Real
estate firms…

Categories of Service :
 Tangible good with accompanying service E.g. Car, Laptop, Cellphone
 Hybrid : Equal parts of goods and services E.g. Restaurants
 Major service minor goods accompanied : E.g. Air trip or Train trip
 Pure Service : E.g. Haircutting, Doctor’s visit, Physiotherapy

Major characteristics of a Service:

 Intangible : cant be seen, felt, tasted or heard before they are bought
 Inseparable : Usually produced and consumed simultaneously
 Variable: Services highly variable depending on who provides them, when, where…
 Perishable : Cannot be stored; so many a times consumer charged for wastage
 How Services differ from Goods
Physical Goods Services
tangible intangible
homogeneous heterogeneous
Production and distribution are Production, distribution and
separated from consumption consumption are simultaneous processes

A thing An activity or process

Core value processed in factory Core value produced in the buyer-seller
interaction

Customers do not participate in the Customers participate in production

production process

Can be kept in stock Cannot be kept in stock

Transfer of ownership No transfer of ownership
What is similar between Goods & Services
Goods Service

• Both must have a process

• Both use Technology
• Both have Quality concerns
• Both aim for high productivity

41
 Understanding Service

Service is a process or a set of activities in which a customer interacts with service

provider to produce intangible experiences as an outcome.
Service can be provided as a combination of tangible good and intangible experience.
Customer’s inputs and mostly physical presence are important to initiate the
service.
In some self-services, customer acts as co-producer of service.
The simultaneous activities, customer request and service delivery, leads to the
perishable characteristic of services.

42
Service Process

Customer experience is an intrinsic

part of the operation’s process

43
 Forms of Services

Services that deploy resources in order to deliver some form of service,

which are given below.
‒ Business to consumer (Financial services, retail)
‒ Business-to-business (Consultants, communications)
‒ Internal services (Personnel, IT)
‒ Not-for-profit services (Charities, faith organizations)
‒ Public services (sometimes referred to as G2C – government-to-consumer)
(Social housing, police, education, welfare and health services)

44
 Customers

It is important to note that different organisations often use different terms for their
customers.
‒ Public services provide services to citizens
‒ Police service has victims and criminals
‒ IT service providers talk about users
‒ Hotels have guests
‒ Radio stations have listeners

The word ‘customer’ is used to cover all of these individuals and communities to
which organisations deliver service.
We also use the word ‘customer’ to cover all the individuals and departments within
organisations who provide each other service (internal customers) and also the
external organisations with which they provide services

45
 Importance of Service Management

The success of service operations managers is not simply about performing a

good technical task, such as
‒ educating a student
‒ delivering a project on time
‒ providing a holiday.
Good service operations management should lead to better (or more appropriate)
services and experiences that are

‒ better for the customer

‒ better for the staff
‒ better for the organisation

This also known as the ‘triple bottom line’.

46
 Value for Customer

Customers will be satisfied, even delighted if they are provided with the right
service, a good experience and the desired outcomes. This delivers value for the
customer
A problem for service managers is that the customer’s idea of what represents
value may well vary from customer to customer and shift through time, and even
from day to day.
At the most basic level, the economising customers will think of value as getting
more for their money. Other customers may be prepared to pay more in order to
receive a higher service specification. Still others will value the psychological
value in being able to say that they are able to afford to be customers of high-
status services (even though the specification may be no better than a lower
priced service).
The service operations manager must be aware of the full range of influences on
the customer’s assessment of value. A key element in this understanding is the
relationship between the service brand values as communicated to the customer
and the potential mismatch in terms of customer experience. Ola share, Big bzar
wed, amzon prime
47
 Value Attributes of Consumer Customers
When you buy a Product or Service what values are important to you?

• Cost – What does it cost?

• Quality – Does it meet my needs?
• Convenience – How easy is it to get?
• Timeliness – How quickly can I get it?
• Personalization – Will the business treat me as special? Do they know me?
• Ethical Issues – Is the business acting responsibly?
• Style/Fashion – Is the product the most current style?
• Technology – Do I need technical skills to use this product?
• Right service – Act of taking care of the customer's needs 
• Good experience – Impression you leave with your customer, resulting in how they
think of your brand, across every stage of the customer journey.
• Desired outcomes – What the customer needs to achieve 

A problem for service managers is that customer’s idea of what represents value
may well vary from customer to customer and shift through time.
 Value Attributes of Business Customers
When determining product or service value, a Business evaluates its potential to
add value to the products or services it sells to its customers.
• Cost – What does it cost for the total time of ownership?
• Quality – Does it meet our specifications?
• Delivery Dependability – Does the firm meet delivery promises?
• Flexibility – Can they adapt to special needs?
• Response Time – How quickly can they get it to us?

49
 Staff Experience

Good service operations management and the provision of the right services,
experiences and outcomes for the customer will also mean a better experience for the
staff:
Customers will be easier to deal with because they are satisfied and the service and
experience meet their needs.
Because the operation works well and generates the right outcomes there will be
fewer problems and therefore less hassle for the staff and fewer (unpleasant)
complaints to deal with.
Customers who are satisfied tend to be more tolerant, so when things go wrong they
are much more accepting than they might otherwise have been, again making life
easier for the staff.
A smooth operation and contented customers means things are going well, thus staff
are more likely to have pride in both the job they do and the organisation they work
for.

50
 The Organisation Benefits

Delivering the right service and experience through good operations management
delivers many organisational benefits:
‒ Satisfied customers who perceive value from the service are more likely to return
and also more likely to provide positive word-of-mouth and recommend the
organisation and its services to others, thus generating more revenue (assuming it’s
a revenue-generating organisation).
‒ Increased revenue and/or reduced costs will improve the profitability and/or
viability of the organisation.
‒ Better services may also provide the organisation with a source of competitive
advantage.
‒ Good service operations management which thinks both reactively and proactively
should be able to help shape and develop the organisation’s future intent and
develop skills and competencies that will support the development of the
organisation.

51
 The Organisation Benefits
Delivering the right service and experience through good operations management
delivers many organisational benefits:
‒ Satisfied customers
‒ Better service operations management
‒ Increased revenue and/or reduced costs
‒ A source of competitive advantage.
‒ Enhance the organisation’s reputation and brand.
‒ Enable the organisation to achieve its goals/objectives/mission, supporting the
organisation’s strategic intent.
‒ Develop skills and competencies that will support the development of the
organisation.

52
 Service Classification

Some service industries have similar challenges and common problems to address.
Most of the services share relevant marketing characteristics which are:
‒ Relationship between customers and service provider
‒ Patterns of demand
‒ Supply constraints

53
 Similar behavior of different service industries

Telecom industry and call center

• Similar demand patterns
Doctors, consultants and lawyers
• Frequent meetings with more personalization
Airlines and Hotels
• High infrastructure costs
Haircutting, boutique and spa
• More personalized services
Education, health and other utilities provided by government
• Maximum reach to each individual of nation

54
 Different services within a sector
Just as each particular sector has its own set of challenges, there can be significant
differences between service operations within sectors. This may relate to the way
the organisation has chosen to compete or which customer segments are to be
served. 
For Example comparing airline operation operating in the same sector: a ‘low-cost’
airline and a ‘full-service’ airline

55
 Service Classifications

Services can be classified based on

 Nature of service act and the recipient of service
 Customization required by customer and the judgment of customer
contact personnel
 The nature of demand for the service relative to supply
 Common problems across service industries in terms of degree of labor
intensity and degree of interaction and customization.
 Mostly used classification is represented by Service Process matrix

56
 Service classification 1
Service Act and Recipient of service

This classification is based on nature of service act and actual recipient of service
The service act or performance
• Service performance may result in tangible action
• Service performance may result in intangible action
Actual recipient of service
• Directly people or more precisely people bodies or mind
• Services directed at goods and other physical possessions or intangible assets

57
 Categorizing Service Processes
Quadrant I - Possession processing includes tangible actions to goods and other physical
possessions belonging to the customer.
Examples of possession processing include airfreight, laundry service, and cleaning
services. In these instances, the object requiring processing must be present, but the
customer need not be. Tangible actions to goods and other physical possessions belonging
to customers.

Quadrant II - People processing involves tangible actions to people's bodies.

Examples of people-processing services include passenger transportation, haircutting, and
dental work. Customers need to be physically present throughout service delivery to
receive its desired benefits. Services that involve tangible actions to people’s bodies.

58 58
 Categorizing Service Processes
Quadrant 3 - Mental stimulus processing refers to intangible actions
directed at people's minds. Services in this category include
entertainment, spectator sports, theater performances, and
education. In such instances, customers must be present mentally
but can be located either in a specific service facility or in a remote
location connected by broadcast signals or telecommunication
linkages. intangible actions directed at peoples minds.

Quadrant 4 - Information processing describes intangible actions

directed at a customer's assets. Examples of information-processing
services include insurance, banking, and consulting. In this category,
little direct involvement with the customer may be needed once the
request for service has been initiated.

These four different types of processes often have distinctive

implications for marketing, operations, and human resource
strategies.

59 59
INSIGHTS FROM CLASSIFICATION BASED ON
SERVICE ACT AND RECIPIENT OF SERVICE

60
 Service Classification 2
Customization and Discretion given to contact personnel

This classification is based on customization required by customer and the

judgment of customer contact personnel.
1. Extent to which service characteristics are customized
• Low: A service leaves less choice to the customer
• High: A service leaves wide choice of options to the customer
2. Extent to which customer contact personnel exercise judgment in meeting
individual customer needs
• Low: Standardized service delivery, little discretion given to personnel in
altering the characteristics of the service delivery
• High: Personnel is given wide latitude in delivering the service

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 Service classification 2
Customization and Discretion given to contact personnel
Decreasing Cost

A service leaves wide

Capability
choice to the customer
Complexity
Personnel is given wide
Increasing process definition

latitude in delivering the

service

Many process lie close to

this Capacity – Commodity
spectrum

A service leaves less

Simplicity choice to the customer
Commodity
Standardized service
delivery

62
Four main types of service processes

63
Capability versus commodity processes

64
 Service classification 3- Constrained supply and
demand fluctuations

This classification is based on nature of demand for the service relative to supply
Extent to which supply is constrained
• Peak demand can usually be met without a major delay
• Peak demand regularly exceeds capacity
Extent of fluctuations over time
• Wide
• Narrow

65
CLASSIFICATION BASED ON NATURE OF DEMAND FOR
THE SERVICE RELATIVE TO SUPPLY

66
 Service classification 4- Degree of Labor intensity and
degree of interaction and Customization

This classification is based on degree of labor intensity and degree of interaction and
customization
Degree of labour intensity
• Ratio of labor cost to capital cost
Degree of Interaction and customization
• Ability of customer to affect personally the nature of the service being
delivered

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CLASSIFICATION BASED ON DEGREE OF LABOR
INTENSITY AND DEGREE OF INTERACTION AND
CUSTOMIZATION

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• Operations Management
‒ The word ‘Operations’ is defined as the transformation process in
which inputs in the form of people, raw material, technology and
money are transformed using some process to an output as goods,
service or product.
• What are services
‒ Services are provided by a variety of types of organisations,
including business-to-consumer services (B2C), business-to-
business services (B2B), internal services, public services and not-
for-profit and voluntary services.
• Definition of ‘service’
‒ A service is an activity – a process or set of steps (unlike a
product which is a thing) – which involves the treatment of a
customer (or user) or something belonging to them, where the
customer is also involved, and performs some role (co-production),
in the service process.

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• What are Service Operations Management
‒ Service operations management is concerned with the activities,
decisions and responsibilities of operations managers in service
organisations. It entails providing services, and value, to customers
or users, ensuring they get the right experiences and the desired
outcomes.
‒ It involves understanding the needs of the customers, managing
the service processes, ensuring the organisation’s objectives are
met, while also paying attention to the continual improvement of
the services.
• Importance of service operations management
‒ At a macro level services are a critical part of most economies,
accounting for a significant proportion of GDP and employment
‒ Have a significant impact on the success of an organisation.

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• Service Classification
‒ Some service industries have similar challenges and common
problems to address.
‒ Most of the services share relevant marketing characteristics which
are:
• Relationship between customers and service provider
• Patterns of demand
• Supply constraints

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