Service Supply Relationships

Distributing Services

Learning Objectives

Discuss the concept of customer-supplier duality.

Discuss the challenge of managing a bidirectional service supply relationship.

Classify the purchase of a business service.

Discuss the implications of purchasing business services.

Supply Chain for Physical Goods

Material transfer Information transfer

Suppliers

Process and Product Design

Manufacturing Distribution Retailing Customer Customer Service

Recycling/Remanufacturing

Customer-Supplier Duality in Service Supply Relationships (Hubs)

Material transfer Information transfer

Supplier

Service Design

Service Provider Customer

Single-Level Bidirectional Service Supply Relationship

ServiceCategory

Customer-Supplier

>InputOutput>

ServiceProvider

Minds Student >MindKnowledge>

Professor

Bodies Patient >ToothFilling>

Dentist

Belongings Investor >MoneyInterest>

Bank

Information Client >Documents1040>

Tax Preparer

Two-Level Bidirectional Service Supply RelationshipService

CategoryCustomer-Supplier

>InputOutput>

ServiceProvider

>InputOutput>

Provider’sSupplier

Minds Patient >DisturbedTreated>

Therapist >PrescriptionDrugs>

Pharmacy

Bodies Patient >BloodDiagnosis>

Physician >SampleTest Result>

Lab

Belongings Driver >CarRepaired>

Garage >EngineRebuilt>

MachineShop

Information HomeBuyer

>PropertyLoan>

MortgageCompany

>LocationClear Title>

TitleSearch

Sources of Value in Service Supply Relationships

Bi-directional Optimization Managing Productive Capacity

- Transfer: make knowledge available (e.g. web based FAQ database)- Replacement: substitute technology for server (e.g. digital blood pressure device)- Embellishment: enable self-service by teaching (e.g. change surgical dressing)

Management of Perishability

Impact of Service Supply Management

Element or Link Before AfterChannel Structure Functional silos Process orientationService Recipient Passive Active as a co-producerChannel Integration Vertical (own the channel to

integrate)Virtual (IT and othermechanism permit integrationwithout ownership)

Flow of Service Available waiting for demand Activated upon demandFlow of Information(upstream)

Pull: manual reporting ofdemand data results indelayed managementresponse.

Push: high level of connectivityand transparency with fast orinstantaneous access to mostrecent demand data.

Flow of Information(downstream)

Little or no knowledge ofresource deployment

Real-time tracking anddispatching

Business Processes Predominantly in-house;locally optimized forefficiency

In-house for key processes,others out-sourced forflexibility; integrated andsynchronized to match supplywith demand

Demand Management Limited to use ofappointments andreservations.

Proactive involving customer inscheduling to achieve bi-directional optimization

Impact of Service Chain Management

Element or Link Before AfterCapacity Management Limited to use of part-time

employeesCreative use of cross-trainedemployees, outsourcing, andcustomer self-service.

Facilitating Goods High; in anticipation ofdemand

Lower; owing to processtransparency

Service Delivery Inflexible; standardized andimpersonal

Flexible; personable withcustomization possible.

Routing and scheduling Static; fixed daily schedules Dynamic; based on systemconnectivity and processvisibility

New Service Design Marketing initiatives based onfirm's perception of customerneeds

Virtual value chain design withcustomer data base informationdriving new services

Pricing Fixed Variable; yield managementpromotes off-peak demand andavoid idle capacity

InternationalOperations

Focus on domestic market Global reach with Internet

Purchasing Business Services

The Business Service Purchasing Process: intangible, many personnel affected, often customized, end user involvement, and complex.

Classification of Business Services - Focus of Service (property, people, process) with consideration for tangibility - Importance of Service (in relation to firm’s core business)

Purchasing Process

Need Identification

Problem Definition"Do-versus-Buy" AnalysisInvolve Interested PartiesSpecification Development

Information Search

ReferencesPersonal ContactRecommendationsTrade Directory

Vendor Selection

ExperienceReputationReferences

CostLocationSize

Performance Evaluation

Identify EvaluatorQuality of WorkCommunication

Meet DeadlinesFlexibilityDependability

Taxonomy for Purchasing Business Services

Importance of Service Low High

Property

Focus

Facility Support: -Laundry -Janitorial -Waste disposal

Equipment Support: -Repairs -Maintenance -Product testing

of PeopleEmployee Support: -Food service -Plant security -Temporary personnel

Employee Development: -Training -Education -Medical care

Service Process

Facilitator: -Bookkeeping -Travel booking -Packaged software

Professional: -Advertising -Public relations -Legal

Purchasing ConsiderationsFocus on Property

Facility Support Service

• Low cost• Identify responsible party to evaluate performance• Precise specifications can be written

Equipment Support Service

• Experience and reputation of vendor• Availability of vendor for emergency response• Designate person to make service call and to check that service is satisfactory

Purchasing Considerations

Focus on People Employee Support Service • Contact vendor clients for references • Specifications prepared with end user input • Evaluate performance on a periodic basis Employee Development Service • Experience with particular industry important • Involve high levels of management in vendor

identification and selection • Contact vendor clients for references • Use employees to evaluate vendor performance

Purchasing ConsiderationsFocus on Process

Facilitator Service

• Knowledge of alternate vendors important• Involve end user in vendor identification• References or third party evaluations useful• Have user write detailed specifications

Professional Service

• Involve high level management in vendor identification and selection• Reputation and experience very important• Performance evaluation by top management

Topics for Discussion What are some possible disadvantages

associated with the product postponement strategy?

Discuss the similarities and differences in the product postponement strategy used by Hewlett-Packard and Taco Bell?

Speculate on the effect that the Internet will have on the process of business-to-business purchase of services?