operations in service industry 1

Dr. Swatantra Kumar, SSVGI, Bareilly

Operations in Service Industry

ByDr. Swatantra Kumar


Why to study service operations management

Services now are the biggest contributors to global GDP.

Understanding how services are created and distributed is critical for any business management professional.

The current course deals with understanding the peculiarities of services creation as compared to goods manufacturing.

Moreover we shall also discuss issues such as service operations strategy, capacity planning, service quality management etc.


Production management

Creation of product Input – process – output process Easy standardization Keeping inventory possible which

helps utilize the capacities to the fullest

Tangibility to create an image in the mind of consumer

Easy to manage quality


Operations Management

Production management broadened in scope to include services

Services operations are complex


Service Industry - Basics


Why Services are so important

“There is no such thing as service industries…only industries where service components are greater or less than those of other industries. Everyone is in the service industry…” – Theodore Levitt, (“Production-line approach to service,” Harvard Business Review (September – October, 1972), pp. 41-52)


Service Industry - Basics

Services started generating professional and public attention from the fifties in the western world and the early eighties in India.

Banking, financial services, software, entertainment & media, telecommunications, dotcoms, BPR, Retailing, Education, travel & tourism are the biggest sections of the global service industry.


Service - defined

Services are economic activities that create value and provide benefits for customers at specific times and places as a result of bringing about a desired change in – or on behalf of – the recipient of the service. – Christopher Lovelock


Service Definitions

Services are deeds, processes, and performances.

Valarie 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


Role of Services in an Economy

INFRASTRUCTURE SERVICE· Communications· Transportation· Utilities· Banking

PERSONAL SERVICES· Healthcare· Restaurants· Hotels

CONSUMER(Self-service)

GOVERNMENT SERVICES· Military· Education· Judicial· Police and fire protection

DISTRIBUTION SERVICES

· Wholesaling · Retailing · Repairing

FINANCIAL SERVICES · Financing · Leasing · Insurance

MANUFACTURINGServices inside company:

· Finance· Accounting· Legal· R&D and design

BUSINESS SERVICES· Consulting· Auditing· Advertising· Waste disposal


Percentage share of sectors in India’s GDP (at constant prices)


Economic Survey 2010-11 The contribution of the services sector to

the Indian economy has been manifold: a 55.2% in GDP Growing by 10% annually Contributing to about a quarter of total

employment Accounting for a high share in FDI inflows Over one-third of total exports Recording very fast (27.4%) export growth

through the first half of 2010-11


Share of GDP across the globe


Employment dispersion across sectors in India


Percent Employment in ServicesTop Ten Postindustrial Nations

COUNTRY 1965 1975 1985 1995 2005

United States 59.5 66.4 70.0 74.1 78.6

United Kingdom 51.3 58.3 64.1 71.4 77.0

The Netherlands

52.5 60.9 68.3 73.4 76.5

Sweden 46.5 57.7 66.1 71.5 76.3

Canada 57.8 65.8 70.6 74.8 76.0

Australia 54.6 61.5 68.4 73.1 75.8

France 43.9 51.9 61.4 70.0 74.8

Japan 44.8 52.0 57.0 61.4 68.6

Germany 41.8 n/a 51.6 60.8 68.5

Italy 36.5 44.0 55.3 62.2 65.5


Trends in U.S. Employment by Sector

1850

1860

1870

1880

1890

1900

1910

1920

1930

1940

1950

1960

1970

1980

1990

2000

0

10

20

30

40

50

60

70

80

90

ServiceManufacturingAgriculture


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 health, education, recreation


Source of Service Sector Growth

Information Technology (e.g. Internet)

Innovation

Changing Demographics Aging of the population Two-income families


The nature of services

Everyone is an expert on services. We all think we know what we want from a service organization and, by the very process of living, we have a good deal of experience with the service creation process.


Nature

Services are idiosyncratic – what works well in providing one kind of service may prove disastrous in another.

For example, consuming a restaurant meal in less than half an hour may be exactly what you want at jack-in-the-box but be totally unacceptable at an expensive French Restaurant.


Nature

Quality of work is not quality of service.

An auto dealership may do good work on your car, but it may take a week to get the job done.


Nature

Most services contain a mix of tangible and intangible attributes that constitute a service package.

This package requires different approaches to design and management than the production of goods.


Nature

High contact services are experienced, whereas goods are consumed.


Nature

Effective management of services requires an understanding of marketing and personnel, as well as operations.


Nature

Services often take the form of cycles of encounters involving face to face, phone, electromechanical, and/or mail instructions.

The term encounter by the way is defined as “meeting in conflict or battle” and hence is often opt as we make our way through the service economy.


Service businesses and internal services

Service operations management issues exist in two broad organizational contexts:

Service business: is the management of organizations whose primary business requires interaction with the customer to produce the service. These include such familiar services as banks, airlines, hospitals, law firms, retail stores, and restaurants. These can be further divided into –▪ Facilities based services (customer must go to the

service facility) – Restaurant ▪ Field based services (where production and consumption

of the service take place in the customer’s environment)


Contd..

Internal Services: is the management of services required to support the activities of the larger organization. These services include such functions as data processing, accounting, engineering, and maintenance.


Global Business Services @ P&G

P&G saved $600 million to date by consolidating all back office functions, such as finance and accounting, HR, Facilities management, and IT into one unit – Global Business Services and by outsourcing many of the nonstrategic activities involved in providing these services.

GBS played a key role in the integration of Gillette, which P&G acquired in 2005


GBS…

It has emerged as a key strategic partner with the operating units of the global consumer products group by providing innovative solutions in consumer and customer interactions and in product development

All this happened after P&G build its current business services platform.

The process started in 1999 and resulted in the formation of GBS


A contemporary view of service management (The service Triangle)

Customer

The service strategy

The Systems The people

Customer should be the focal

point

Operations is

responsible for

service systems


High contact & low contact services

In a bank a branch office is a high contact system and a check processing center is a low contact system

Service systems with a high degree of customer contact are more difficult to control and more difficult to rationalize than those with a low degree of customer contact.

In high contact systems, the customer can affect the time of demand, the exact nature of the service, and the quality, or perceived quality, of service since the customer is involved in the process.


Discussion Topic

Is it possible for an economy to be based entirely on services?


THANKS

FOR KEEPING YOUR

MINDS OPEN

operations in service industry 1

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