Introduction to

Services
 Definition of Services
 Services are deeds, processes and performances. (Zeithaml & Mary Jo Bitner)
 A Service is a time-perishable, intangible experience performed for a customer
acting in the role of a co-producer (James Fitzsimmons)
Dependency of Mfg on
Services
 Transportation, Banking, Advertising, repair or
communication in support of distribution of
manufacturing goods.
 Manufacturers are increasingly exploiting value added
services.
 Auto sector has discovered that offering after sales
service and selling spare parts is highly profitable.
Definition of Service Firms
Service enterprises are organizations that facilitate the
production and distribution of goods, support other
firms in meeting their goals, and add value to our
personal lives.
James Fitzsimmons
Role of Services in an Economy
Infrastructure Services
•Communications
Value-Added Services
•Transportation
•Financing
•Utilities
•Leasing
•Banking
•Insurance

Personal Services
•Health care
Services inside company Distribution Services •Restaurants
•Finance
•Wholesaling •Hotels
•Accounting
•Retailing
•Legal
•Repairing
•R & D and Design Consumer
(Self –service)

Supporting Business
Government Services
Services
•Military
•Consulting
•Education
•Auditing
•Judicial
•Advertising
•Police and Fire Service
•Waste disposal
Why study Services?
 Nearly three fourths of the employment is generated from the Services Sector.
In the USA it is 80% of the jobs.
 From 3 out of every 10 workers in 1900, USA has 8 out of 10 workers now in the
Services Sector.
 As productivity increases in one sector, labour force moves into another – Clark-
Fisher hypothesis
Percent Service Employment for Selected Nations

Country 1980 1987 1993 2000

United States 67.1 71.0 74.3 74.2
Canada 67.2 70.8 74.8 74.1
Israel 63.3 66.0 68.0 73.9
Japan 54.5 58.8 59.9 72.7
France 56.9 63.6 66.4 70.8
Italy 48.7 57.7 60.2 62.8
Brazil 46.2 50.0 51.9 56.5
China 13.1 17.8 21.2 40.6
 Why Study Service Operations?
 Operations studies the transformation process that
turns inputs into outputs.
 Operations function typically employs far larger
number of employees.
 To become a top manager in a service firm, knowing
how to manage and what to expect from the largest
group of employees is imperative.
 Service Operations includes the study and
improvement of all service processes, regardless of
the functional areas.
 Historical perspective of how improved productivity
in operations over the years has shifted focus from
primary occupations, through manufacturing to the
Service sector.
 Lack of academic focus on Services.
Trends in U.S. Employment by Sector

90
Proportation of total employement

80

70

60

50

40

30

20

10

Service
Year Manufacturing
Agriculture
 Stages of Economic Activity
 Primary – Agriculture/Mining/Fishing/Forestry
 Secondary – Manufacturing/Processing
 Tertiary – Hotels/Barbers/Laundry/Repair
 Quaternary – Transport/Retail/Communication
Finance/Insurance/Real Estate/Government
 Quinary – Health/Education/Research
Recreation/Arts
Stages of Economic
Development
 Preindustrial Society – A game against nature

 Industrial Society – Manufacturing of goods

 Postindustrial Society – Quality of Life

Stages of Economic
Development
Pre- Use of Standard
dominant human Unit of of living
Society Game activity labor social life measure Structure Technology

Pre- Against Agriculture Raw Extended Sub- Routine Simple hand

Industrial Nature Mining muscle household sistence Traditional tools
power Authoritative

Industrial Against Goods Machine Individual Quantity Bureaucratic Machines

fabricated production tending of goods Hierarchical
nature

Post- Among Services Artistic Community Quality of Inter- Information

industrial Persons Creative life in terms dependent
Intellectual of health, Global
education,
recreation
The New Experience Economy
Economy Agrarian Industrial Service Experience
Function Extract Make Deliver Stage
Nature Fungible Tangible Intangible Memorable
Attribute Natural Standardized Customized Personal
Method of Stored in Inventoried Delivered Revealed
supply bulk on demand over time

Seller Trader Manufacturer Provider Stager

Buyer Market User Client Guest

The Four Realms of an Experience
Customer Participation

Passive Active

Absorption Entertainment Education

Environmental (Movie) (Language)
Relationship Immersion Esthetic Escapist
(Tourist) (ScubaDiving)
Experience Design Principles
 Theme the Experience (Forum shops)
 Harmonize Impressions with Positive Cues
(O’Hare airport parking garage)
 Eliminate Negative Cues
(Cinemark talking trash containers)
 Mix in Memorabilia (Hard Rock T-shirts)
 Engage all Five Senses (Mist in Rainforest)
Source of Service Sector
Growth
 Innovation
Push theory (e.g. Post-it)
Pull theory (e.g. Cash Management)
Services derived from products (Video
Rental)
Information driven services
Difficulty of testing service prototypes
 Social Trends
Aging of the population
Two-income families
Growth in number of single people
Home as sanctuary
Nature of the Service Sector

 Appetite for Services especially innovative ones is

insatiable.
 The economy has become less cyclical as even in
recession times, service sector has absorbed more
people while manufacturing jobs have been lost.
 Services cannot be inventoried.
 Production and consumption occurs simultaneously.
Services – Now an Experience

 From mere transactions, Services are now creating new

and memorable experiences.

 Eg: Café Coffee Day

Service Sector Growth

 Innovation
1. Growth of world wide web
2. New methods of providing services
 Social Trends
1. Growth of nuclear families with two
incomes
2. Aping of the western habits by the
Indian youth
3. Single parent families/Singles.
Nature of Services
An Integrated Approach to Service Management

The Eight Components

• Product Elements
• Place, Cyberspace, and Time
• Promotion and Education
• Price and Other User Outlays
+ Process
+ Productivity and Quality
+ People
+ Physical Evidence
Require the Integration of Marketing,
Operations, and Human Resources
 Service/Product Bundle

Element Core Goods Core Service

Example Example
Business Custom clothier Business hotel

Core Business suits Room for the

night
Peripheral Garment bag Bath robe
Goods
Peripheral Deferred In house
Service payment plans restaurant
Variant Coffee lounge Airport shuttle
 Service Classification
Degree of interaction and customization

Low High
Service factory Service shop
Degree of labour intensity

•Airlines •Hospitals
•Trucking •Auto Repair
•Hotels •Other repair
Low •Resorts services

Mass service Professional Service

High •Retailing •Physicians
•Wholesaling •Lawyers
•Schools •Accountants
•Retail aspects of •Architects
Commercial
banking
Challenges for Service Managers
Challenges for managers (low labor intensity ):
● Capital decisions
● Technological advances
● Managing demand to avoid peaks and to promote off-peaks
● Scheduling service delivery

Challenges for managers

Service factory Service shop (high interaction/
Challenges for managers (low labor/low (low labor/high high customization):
(low interaction/ interaction and ● Fighting cost increases
interaction and
low customization): ● Maintaining quality
customization) customization) ● Reacting to consumer
● Marketing
● Making service “warm” intervention in process
Mass service Professional Services ● Managing advancement
● Attention to physical
surroundings (high labor/low (high labor/ high of people delivering
● Managing fairly rigid interaction and interaction and service
hierarchy with need customization) customization) ● Managing flat hierarchy
for standard operating with loose subordinate–
procedure superior relationships
Challenges for managers (high labor intensity): ● Gaining employee
● Hiring loyalty
● Training
● Methods development and control
● Employees’ welfare
● Scheduling workforces
● Control of far-flung geographical locations
● Start-up of new units
● Managing growth
 The Service Package
 A bundle of goods and services that is provided in
some environment. The bundle has 5 features.
1. Supporting facility – Physical resources that must
be in place before a service can be offered – Golf
course, hospital
2. Facilitating goods – The material purchased or
consumed by the buyer – golf clubs, medical
supplies.
3. Information – Operations data or information that
is provided to enable efficient and customized
service – Patient medical records, seats available
on a flight.
The Service Package
4 Explicit Services – The benefits that are readily observable and that consist of the
essential or intrinsic features of the service.
Absence of pain after tooth is removed, smooth running of a car after repairs.
5. Implicit Services – Psychological benefits that the customer may vaguely sense or
the extrinsic features of the service. – Degree from a top college, worry free
auto repair.
Budget Hotel

1. Supporting facility – Concrete building with austere

furnishings
2. Facilitating goods – Soap and Paper
3. Information – on room availability
4. Explicit Service – Comfortable bed in a clean room
5. Implicit Service – Friendly clerk or secure parking
area.
Criteria for Evaluating the Service Package
 Supporting Facility
 1. Location:
 Is it accessible by public transportation?
 Is it centrally located?
 2. Interior decorating:
 Is the proper mood established?
 Quality and coordination of furniture.
 3. Supporting equipment:
 Does the dentist use a mechanical or air drill?
 What type and age of aircraft does the
 charter airline use?
 4. Architectural appropriateness:
 Renaissance architecture for university campus.
 Unique recognizable feature of a blue tile roof.
 Massive granite facade of downtown bank.
 5. Facility layout:
 Is there a natural flow of traffic?
 Are adequate waiting areas provided?
 Is there unnecessary travel or backtracking?
Facilitating Goods

 1. Consistency:
 Crispness of french fries.
 Portion control.
 2. Quantity:
 Small, medium, or large drink.
 3. Selection:
 Variety of replacement mufflers.
 Number of menu items.
 Rental skis available.
Information

 1. Accurate:
 Up-to-date customer addresses.
 Correct credit report.
 2. Timely:
 Severe storm warning.
 3. Useful:
 X-ray to identify a broken bone.
 Inventory status.
Explicit Services
 1. Training of service personnel:
 Is the auto mechanic certified by the National
 Institute for Automotive Service Excellence
 (NIASE)?
 To what extent are paraprofessionals used?
 Are the physicians board certified?
 2. Comprehensiveness:
 Discount broker compared with full service.
 General hospital compared with clinic.
 3. Consistency:
 Airline’s on-time record.
 Professional Standards Review Organization
 (PSRO) for doctors.
 4. Availability:
 Twenty-four-hour ATM service.
 Is there a Web site?
 Is there a toll-free number?
Implicit Services
 1. Attitude of service:
 Cheerful flight attendant.
 Police officer issuing traffic citation with tact.
 Surly service person in restaurant.
 2. Atmosphere:
 Restaurant decor.
 Music in a bar.
 Sense of confusion rather than order.
 3. Waiting:
 Joining a drive-in banking queue.
 Being placed on hold.
 Enjoying a martini in the restaurant bar.
 4. Status:
 College degree from Ivy League school.
 Box seats at sports event.
 5. Sense of well-being:
 Large commercial aircraft.
 Well-lighted parking lot.
 6. Privacy and security:
 Attorney advising client in private office.
 Magnetic key card for hotel room.
 7. Convenience:
 Use of appointments.
 Free parking.
Characteristics of Service
Operations

 Customer Participation requiring good ambience.

 Simultaneity – Created and consumed simultaneously
 Perishability - Perishable commodity
 Intangibility – Customer cannot see the product before
purchase
 Heterogeneity – Lack of uniformity in the Services
provided.
 Nature of the Service Act
Direct recipient of the service

People Things

Services directed Services directed at

At people’s bodies Goods and other
•Health care Physical possessions
Nature of the Service Act

Tangible •Passenger transportation •Freight transportation

Actions •Beauty Salons •Repair & Maintenance

•Exercise clinics •Laundry & dry cleaning
•Restaurants • Veterinary care

Services directed at
Services directed at
Intangible People’s minds Intangible assets
•Banking
Actions •Education
•Legal Services
•Broadcasting
•Accounting
•Information Services
•Securities
•Theatres
•Insurance
•Museums
 Type of Relationship between Service
organization and its customers

Membership Relationship No formal relationship

Nature of the Service delivery

Insurance Radio station

Continuous Telephone subscription Police protection
delivery Electric utility Lighthouse
Banking Public highway

Long-distance phone calls Toll highway

Theater series tickets Pay phone
Transit pass Movie theater
Discrete Wholesale buying club Public transportation
transactions Airline frequent flyer Restaurant
Extent to which Service characteristics are
customized

High Low
meeting individual customer needs
Extent to which customer contact

Surgery Education (large classes)

personnel exercise judgment in

High Taxi service Preventive health programs

Gourmet restaurant Family restaurant

Low Telephone service Public transportation

Hotel services Movie theater
Retail banking Spectator sports
Cafeteria Institutional food service
Extent of Demand fluctuations over
time
Wide Narrow
Extent to which supply is constrained

Peak demand Electricity Insurance

can usually be Telephone Legal services
met without Hospital maternity unit Banking
major delay Police emergencies Laundry and dry cleaning

Peak demand Tax preparation Fast-food restaurant

regularly Passenger transportation Movie theater
exceeds Hotels and motels Gas station
capacity
Availability of Service outlets

Single site Multiple sites

Nature of interaction between customer

Customer travels Theater Bus service

to service firm Barbershop Fast-food chain
and service organization

Pest control service Mail delivery

Service firm Taxi AAA emergency repairs
delivers

Transaction at Credit card company National TV network

arm’s length Local TV station Telephone company
Open-Systems view of Service Operations

Service process Consumer Evaluation

Consumer arrivals Consumer participant departures Criteria
Consumer–provider (output) Measurement
(input) interface
Monitor
Control

Service operations manager

● Production function: Service personnel
Consumer demand Schedule
Alter Monitor and control process Empowerment
Perceived needs ● Marketing function: supply Training
demand
Location Interact with consumers Attitude
Control demand
Modify as necessary

Define standard

Service package
Communicate Supporting facility
by advertising
Facilitating goods
Information
Explicit services
Implicit services
Service Strategy
Strategic Service Vision

 Target Market
 Service Concept
 Operating Strategy
 Delivery System
Target Market
 Common characteristics of important market segments
 How to segment the market?
 How important are the various segments?
 What needs does each segment have?
 How well are these needs being served ? In what manner? By whom?

How well is the service concept positioned in relation to customers’

needs and competitors’ offering?
Service Concept
 What are the important elements of the service to
be provided, in terms of results produced for
customers?
 How are these elements supposed to be perceived
by the target market segment?
 By the market in general?
 By the employees?
 By others?
 How do customers perceive the service concept?
 What efforts does this suggest in terms of the
manner in which service designed, delivered,
marketed?
To what extent is the value of results and process quality for customers
leveraged over cost to the service provider?
Operating Strategy
 What are important elements of the strategy?
Operations/Financing/Marketing/Organization/Human
Resources/Control?
 On which will the most effort be concentrated?
 Where will investments be made?
 How will quality and cost be controlled?
Measures/Incentives/Rewards?
 What results will be expected vs competition in terms of :
Quality of service? Cost profile? Productivity? Morale/loyalty of servers?

Does the service delivery system support the operating strategy?

 Service Delivery System
 What are the important features of the service delivery system including
The role of the people? Technology? Equipment? Layout? Procedures?
 What capacity does it provide?
Normally? At peak levels?
 To what extent does it:
Help ensure quality standards?
Differentiate the service from competition?
Provide barriers to entry by competitors?
 Competitive Environment of Services
 Relatively low entry barriers
 Minimal opportunities for economies of scale
 Erratic sales fluctuations
 No advantage of size in dealing with buyers or suppliers (exceptions are there)
 Possible substitution by product innovations
 Customer loyalty
 Exit barriers
Generic Strategies

1. Overall cost leadership

2. Differentiation
3. Focus

Michael Porter
Competitive Service Strategies
(Overall Cost Leadership)

 Seeking Out Low-cost Customers

 Standardizing a Custom Service
 Reducing the Personal Element in Service
Delivery (promote self-service)
 Reducing Network Costs (hub and spoke)
 Taking Service Operations Off-line
Competitive Service
Strategies (Differentiation)
 Making the Intangible Tangible
(memorable)
 Customizing the Standard Product
 Reducing Perceived Risk
 Giving Attention to Personnel Training
 Controlling Quality

Note: Differentiation in service means being

unique in brand image, technology use,
features, or reputation for customer service.
Competitive Service
Strategies (Focus)
 Buyer Group: (e.g. USAA insurance and military
officers)

 Service Offered: (e.g. Shouldice Hospital and hernia

patients)

 Geographic Region: (e.g. Austin Cable Vision and TV

watchers)
Customer Criteria for Selecting
a Service Provider

 Availability (24 hour ATM)

 Convenience (Site location)
 Dependability (On-time performance)
 Personalization (Know customer’s name)
 Price (Quality surrogate)
 Quality (Perceptions important)
 Reputation (Word-of-mouth)
 Safety (Customer well-being)
 Speed (Avoid excessive waiting)
Service Purchase Decision

 Service Qualifier: To be taken seriously a certain level

must be attained on the competitive dimension, as
defined by other market players. Examples are
cleanliness for a fast food restaurant or safe aircraft for
an airline.
 Service Winner: The competitive dimension used to
make the final choice among competitors. Example is
price.
Service Purchase Decision
(cont.)
 Service Loser: Failure to deliver at or above the
expected level for a competitive dimension. Examples
are failure to repair auto (dependability), rude
treatment (personalization) or late delivery of package
(speed).
 Competitive role of IT in Services
Competitive use of information

Online Offline
(Real Time) (Analysis)

Creation of barriers Database asset:

to entry:
External Reservation System Selling information
(Customer) Frequent user club Development of services
Strategic focus

Switching costs Micromarketing

Productivity enhancement:
Revenue generation:
Internal Inventory status
(Operations) Yield management
Data envelopment analysis
Point of Sales
(DEA)
Expert Systems
Virtual Value Chain

 Marketplace – Physical world of people

and things

 Marketspace – Vitrual world of

information

 Companies are trying to move from

the marketplace to marketspace using
a three stage process
 Virtual Value Chain
 First Stage – Visibility – Do physical operations more
efficiently. Moving from manual operations to full
computerization.

 Second Stage (Mirroring capability) – Physical

activities are substituted with virtual alternatives.
Building an effective database.

 Third Stage – (New customer relationships) – Member

information is analyzed to discover new product
needs and methods to deliver value. Members can
manage their portfolio using the company web site.
Limitations in use of
information
 Anticompetitive – frequent flyer club
 Fairness - YM
 Invasion of Privacy – sharing of records
 Data Security
 Reliability – Accuracy / corruption of data
Using information to categorize customers
 Coding grades customers based on their profitability
 Routing is used by call centers to place customers in different queues based on
customer code.
 Targeting allows choice customers to have fees waived and get other hidden
discounts based on the business transacted.
 Sharing corporate data with other firms is a source of revenue.
 Stages in Service Firm
Competitiveness
1. Available for service 2. Journeyman 3. Distinctive competence 4. World-class service delivery

Customers patronize service Customers neither seek Customers seek out the firm The company’s name is synonymous

firm for reasons other than out nor avoid the firm. on the basis of its sustained with service excellence. Its service

performance. reputation for meeting doesn’t just satisfy customers; it

customer expectations delights them and thereby expands

customer expectations to levels its

competitors are unable to fulfill.

Operations is reactive, Operations functions in a Operations continually excels, Operations is a quick learner and fast

at best. mediocre, uninspired reinforced by personnel innovator; it masters every step of the

fashion. management and systems service delivery process and provides

that support an intense capabilities that are superior to

customer focus. competitors.

SERVICE QUALITY

Is subsidiary to cost, Meets some customer Exceeds customer Raises customer expectations and

highly variable. expectations; consistent expectations; consistent seeks challenge; improves

on one or two key on multiple dimensions. continuously.

dimensions.
Stages in Service Firm Competitiveness

1. Available for service 2. Journeyman 3. Distinctive competence 4. World-class service delivery

BACK OFFICE
Counting room. Contributes to service, plays Is equally valued with front Is proactive, develops its own
an important role in the total office; plays integral role. capabilities, and generates
service, is given attention, opportunities.
but is still a separate role.
CUSTOMER
Unspecified, to be A market segment whose A collection of individuals A source of stimulation, ideas,
satisfied at minimum cost. basic needs are understood. whose variation in needs is and opportunity.
understood.
INTRODUCTION OF NEW TECHNOLOGY
When necessary for When justified by cost When promises to enhance Source of first-mover advantages,
survival, under duress. savings. service. creating ability to do things your
competitors can’t do.
WORKFORCE
Negative constraint. Efficient resource; disciplined; Permitted to select among Innovative; creates procedures.
follows procedures. alternative procedures.
FRONT-LINE MANAGEMENT
Controls workers. Controls the process. Listens to customers; coaches Is listened to by top management
and facilitates workers. as a source of new ideas. Mentors
works to enhance their
career.
 Internet
Strategies
Why study Internet
Strategies?

 Growth of click and brick firms

 Growing e-commerce
Internet marketing and
Operations Advantages
 Better products and services
 More intelligent products and services
 Lower costs resulting in lower prices
 Ease of making comparisons
 No limitations like store space
Comparison of Brick vs Click

 Bricks - Cost of building and maintaining physical stores

 Inventory and Personnel – Internet firms enjoy a large
advantage.
 Logistics – Internet firms have a significant disadvantage
vs. traditional firms.
 Traditional vs Digital
distribution
 Traditional System Internet System

Central
Warehouses

Distribution
Centres

Retail Outlets

Customers
Inventory and shipping strategies for combined retailers

Traditional /Internet inventory

Cost Minimizer Professional Shopper

Integrated

Transportation
Dedicated Systems
Segregated Sharing

Bulk Single Item

Inventory Segregation of Internet and
Traditional Retail
Where Internet order picking occurs

High Low

Bulk Break-bulk Flagship Retail Contiguous Dedicated

Distribution Distribution Retail Stores Distribution Distribution
Centre Centre Store Centre Centre
 Options for delivering
internet orders

Bulk Shipments Individual Shipments

Customer pickup Customer pickup Bulk from distribution Shipping

at retail store/Retail at retail store/Delivery centre to general area/ direct to
Store order pick from distribution centre Individual delivery to customer
home home
Customer Service and Internet

 Cos. which want to integrate internet format must

perform customer service through multiple channels
including in-person, phone, traditional mail, online chat,
web site and email.
 As per some research
1. 47% of email queries got a response within 24 hours, 37%
got no response.
2. 2/3rd of online shoppers abandon their effort midway due
to lack of information
3. 90% of online shoppers prefer to have some kind of
human contact
 Questions to be asked by
Service Companies venturing
 Will customers buy anything?
into Internet
 Will they get all information on the web site?
 Will customers return?
 Will customers understand the business concept?
 Will the business be able to handle outbound and
inbound (returns) volume?
 Will the customers prefer self-serve or some form
of human contact?
 Will the internet service be in-house or through a
third party vendor?
 What are the metrics and goals for customer
service?
 Internet Service Design

Product Process Touch Point Outcome

Technology Customer

Performance
Product

Task Employee
Range of Internet Services

E-Service E-commerce

Providing pure Selling Selling value Selling a

Service, free or information added service Bundle Selling goods
with service (Infomediaries) Online Travel Of service (Books/CDs
contract agent and goods
(PC)
Internet Service Processes
Back-Office Processes
Distribution and Fulfillment Systems
Transaction Systems •Inventory
•Billing
•Distribution
•Shipping
•Receiving •Tracking

Information Systems Knowledge Systems

•Data •Capture
•Supporting hardware •Organization
•Supporting software •Access
•Use (Selling & Monitoring)

Interaction Systems •Call-back buttons

•Status checking
•Real-time chat
•FAQ, keyword search, FUP, scripting •VOIP
•Wizards
•Language Translations
•Bulletin boards
•Voice recognition
•Monitored discussion forms

Front-Office Processes
Customer Contact Centre

 Places where a customer can access a real person

through various means
 Offers 24 x 7 support for multiple touch points
 Phone, email, online chats, chat rooms, bulletin
boards, I-telephony.
 These advanced centres service a large number of
accounts with a small number of agents.
 Depending on account needs, vendors offer a variety
of pricing and ‘pick and choose’ service options.
 Outcomes

 Employee satisfaction
 Customer Satisfaction
 Response time (chat/email)
 Employee knowledge of topic during interaction
 Customer regard
 Form (greeting, language, offering additional help, proper template use)
 Intention for repeat encounter
Environmental
Strategies
Business & Environment

 Receiving increased attention

 Focus is more on manufacturing companies
 Environmental impacts of service companies is also
significant
 Companies also offer environmental services
Environmental Services

 Waste disposal
 Cleaning services
 Environmental lawyers
 Environmental consultants
Environmental Management and Profitability
Financial Performance

ROI, ROE
ROA, EPS

The Triple Bottom Line

Minority% of workforce, Hazardous chemical

Family-friendly forces Emissions, energy use
Living wage for international labour Solid waste recycled

Social Performance Environmental Performance

 Poor environmental performance
 Can lead to fines
 Litigation and its costs
 Damage to the company’s brand

While sound environmental management

Leads to cost reductions, quality and yield improvements,
improved relationships with regulators, reduced insurance
costs and enhancement to the company’s revenue streams
and brands. Positive mention in the media about a company
wrt environmental issues have contributed positively to the
share price.
Delta Airlines achieved significant cost reductions when they
pioneered the practice of using only one engine while
taxiing. It effected substantial fuel cost savings while fuel
not burned contributed to energy conservation and
pollution reduction.
UPS example

 UPS redesigned its packaging making its next day air

service packaging both lighter and reusable.
 Saved UPS – 1.6 mn USD per year, conserved enough
energy to light 20,000 light bulbs for a year, eliminated
550 tons of solid waste and saved more than 2200 tons
of trees.
Market for environmental services
 In US alone worth 200 mn USD
 An environmental service co alters the
environmental performance of another company.
 BCG undertook many projects with significant
environmental implications
 PriceWaterhouseCoopers offers a wide range of
environmental services. Their services range from
raw material use and disposal to developing
sustainable product strategies to advice related to
global climate change.
 Both BCG and PWC are members of WBCSD (World
Business Council for Sustainable Development)
 LEED Certified Buildings
 Architects and Builders offer important
environmental services.
 Leadership in Energy and Environmental Design
(LEED) programme sets guidelines for designing
and constructing environmentally friendly
buildings.
 LEED emphasizes five design areas:
1. Building site selection and erosion control
2. Water efficiency
3. Energy and atmosphere
4. Materials and resources
5. Indoor environmental quality
 Environmental Services

Degree of interaction and customization

Low High

Service factory Service shop

Traditional •Hospitals and Auto Repair
•Airlines and Hotels
Degree of labour intensity

Environmental
Low Environmental •Hospital environmental
•Solid waste management services and hazardous
and facilities management waste management

Mass service
Professional Service
Traditional
•Retailing and Schools
Traditional
High •Lawyers and doctors

Environmental
•Environmental Standards
Environmental
Environmental consultants,
Organizations like
Architects and auditors
ISO 14000
 Environmental Issues for Service
Degree of interaction and customization
Low High

Service factory
Service shop
Airlines
Hospitals
Solid waste from cabin service, fuel
Solid waste from rooms, biohazards,
use, engine emissions, hazardous
Energy uses from lighting and climate
chemicals from aircraft maintenance
Degree of labour intensity

Control, water use from laundry, cleaning

blue water
Chemicals.
Low Hotels
Auto Repair Shops
Solid waste from restaurant and
Hazardous chemicals to clean parts,
room operations, energy use,
Waste oil, solid waste of replaced parts,
Lighting and climate control,
Hazardous chemical-soaked rags
Water use from laundry
Mass service Professional Service
Retailing Operations Consultants
Fuel and emissions from product Fuel and emissions from travel, paper
distribution, urban sprawl from location Use, carbon dioxide emitted during client
High decisions, solid waste from packaging
meetings
Schools
Energy use from lighting and climate
control, food waste, hazardous Dentists
cleaning products, paper use from Biohazard waste, toner cartridges, paper
copiers and printing and other office waste
 Coalition for Environmentally
Responsible Economies
 Protection of the biosphere
-
CERES
Sustainable use of natural resources
 Reduction and disposal of wastes
 Energy conservation
 Risk reduction
 Safe products and services
 Environmental restoration
 Informing the public
 Management commitment
 Audits and reports
 Hotels offer guests the choice not to have sheets
and towels changed every day which saves water,
electricity and saves the amount of residual
laundry soap discharged into the sewer system.
 Office waste – paper/cartridges
 Medical wastes from doctors include soiled/blood
soaked bandages, used surgical gloves,
instruments, needles, cultures, swabs, glassware
and removed body organs.
 Auto repair shops work with hazardous cleaners,
worn out parts, motor oil and other hazardous
wastes.
 Environmental Strategies
 for
ProcessService
Opportunities Operations
1. Process improvement (TQEM)
2. Process certification – ISO 14000, Self-certification or subscribing to
environmental standards like CERES principles
3. E-commerce – Migrating to paper based processed to e-commerce model. E-
ticketing, E-statements
 Product opportunities
 Product Redesign – Change from high contact design to low contact design
impacts costs
 Value-added services along environmental dimensions – UPS – Service Parts
logistics group manages critical repair component distribution systems for
telecom and computer companies.
 Dematerialize