EBUS634: Service

Operations Management

1. Introduction

Dr. Bruce Pinnington

Module Introduction

• Content of this 12 week, 15 credit module

• Assessment: how and when you are assessed

• Module style of delivery and expectations

 Module Sessions
Week Topic Notes
1 Introduction Nature of services; service concept
2 Challenges for Ops Manager Good and bad service; models intro
3 Service delivery processes Capacity and demand management
4 Service support processes Incident, change and support processes
5 Techniques and models Blueprinting; using models in practice
6 People and services Human side of service operations
7 Advanced concepts 1 Service Dominant Logic; servitization
8 Service Design Specifying and measuring; quality
9 Public and third sector services Not for profit impacts
10 Advanced concepts 2 Sustainability; social impacts; sourcing
11 Value and cost management Ensuring that ops delivers value
12 Revision week Re-covering key / difficult concepts
Assessments
Three forms of assessment:
 1500 word assignment (30%)
 Issued week 2 – basic concepts
 Due 1st Nov, 2018 12:00 Noon
 1500 word assignment (30%)
 Issued week 7 – advanced topic
 Due 6th Dec, 2018 12:00 Noon
 2 hour examination (40%)
 3 questions out of 4
 Exam period 14th-25th Jan. 2019
Module delivery style
 Structure of sessions
o Presentations on key concepts that will be used in the
session
o Group discussions and exercises
o Case study exercises
o In the news this week session
o Video clips and discussion
o Feedback and mini-tests
Icons: www.flaticon.com/authors/yannick
www.flaticon.com/authors/dave-gandy
www.flaticon.com/authors/freepik
Expectations of you
 These sessions are designed to be INTERACTIVE especially in the
discussions and exercises
 They are meant to be informal with just a little bit of FUN
 You will learn by applying models and concepts to real-life services –
not by reading slides
 Please attend ALL sessions and please be on-time
 For the presentations please be attentive
 For the group sessions please be interactive
 For the assessments please be diligent in your research
of academic sources, and read feedback
Session 1

AN INTRODUCTION TO
SERVICE OPERATIONS
Session Introduction
 Importance of services
 Characteristics of services
 Distinction between products and services
 Exercise classifying real examples
 Service classifications
 Exercise service characteristics
 In The News - Ryanair
o What are they doing?
o Is this strategy, or a service operations disaster?
 Introduction to the 4Vs model
 … and for next week
 Learning outcomes
At the end of this week’s session, students should be
able to:
 Articulate the importance of services
 Identify the key characteristics of services
 Understand the usefulness of the 4V framework for
profiling services
The Service Sector
 Economies are typically sub-divided into:
o (Primary) Agriculture including farming, fishing and forestry
o (Secondary) Industry including minerals, manufacturing, utilities
and construction
o (Tertiary) Service sector
 Service sector is sub-divided into several categories:
o Distribution (transport, logistics, communication)
o Producer services (banking, insurance, engineering, accounting,
legal)
o Social services (health, education, social care, NPOs)
o Personal services (recreational, domestic, tourism)
Importance of the Service Sector
Sector Changes in UK economy

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
1948 2013

Services Production Agriculture Construction

Percentage of GDP coming from the services, production, agriculture

and construction sectors, UK, 1948 and 2013 (Source: ONS)
Economic Significance of Services
 In advanced economies service sector GDP is now around
80%
o US 79.5% in 2016 (trade.gov)
o UK 79% in 2017 and still growing faster than other sectors up
from 46% in 1948 (Office for National Statistics www.ons.gov.uk)
 Developing economies are increasing continually:
o China: for the last 2 years service sector has exceeded 50% of GDP
o Chinese government is committed to continued growth (Forbes, 2017)
o India: Services sector has exceeded 50% for a decade and
currently around about 54-55% (see:
 https://www.ibef.org/industry/services.aspx
 http://statisticstimes.com/economy/sectorwise-gdp-contribution-of-india.php )
 Defining services
 “Services are actually all those economic activities in which
the primary output is neither a product nor a construction”
(Quinn and Gagnon, 1986)
 “A service is any activity or benefit that one party can offer
to another that is essentially intangible and does not result
in ownership of anything” (Kotler,1987)
 “A service is an primary or complimentary activity that does
not directly produce any physical product” (Collier and Evans,
2012)
 Service Characteristics
1. Intangible
o Cannot be touched, tasted, smelt or seen. No physical substance.
Even mental perception may be limited
2. Perishable
o Cannot be stored / stocked
3. Lack of Ownership
o Cannot be owned: consumers have access to a service for a limited
time period
4. Simultaneity
o Typically the customer is involved in the production process and
consumes the service at the same time
5. Variable (heterogeneity)
o Customer experience of the service varies due to interpretation
 Differences between products and services

• The nature of the output; what you get

• Consumer involvement in the output
• Greater problems in maintaining quality
• Harder for customers to evaluate
• Absence of inventories
• Relative importance of time
• Structure and nature of distribution channels
Differences between services and goods

Services Goods
Activity or process Physical object
Intangible Tangible
Simultaneously produced Separation between production
and consumed and consumption
Heterogenous Homogenous
Perishable (cannot be Can be stocked (stored)
stored)
Pure Services vs Pure Products
CRUDE OIL PRODUCTION Pure Product
Tangible
ALUMINIUM SMELTING Can be stored
Production precedes
consumption
SPECIALIST MACHINE TOOL Low customer contact
MANUFACTURER
Can be transported
Quality is evident

COMPUTER SYSTEMS
RESTAURANT

SERVICES

PSYCHOTHERAPY CLINIC
MANAGEMENT
CONSULTANCY
Intangible
Cannot be stored
Production and
consumption are
simultaneous
High customer contact
Cannot be transported
Quality difficult to judge
Pure Service
Exercise
Place the items on the right into order:
- Put the item that is most characterised as a product (and least
characterised as a service) at the top
- Working down so that the item that is most characterised as a
service is at the bottom

Mostly product Starbucks coffee (in)

1. Getting your house valued
2.
New car purchase
3. Marriage guidance
4. Starbucks coffee to go
5.
Buying a tin of beans
6.
Mostly service
Service Classification:
based on intangibility and simultaneity

Video
High Psychotherapist
education
Degree of
intangibility
Fast-food
Low Hairdressing
restaurant
salon
bookshop

High Low
Degree of simultaneity
 Service Classification:
based on Maister’s framework
Standard process Custom process
High level of patient
Nurse
contact: Psychotherapist
Key skill: using pre-
Value delivered in Key skill: real-time
set processes to
the ‘front-office’ in diagnosis of complex
provide comfortable
interaction with poorly-specified
and friendly patient
problems
patient experience

Low level of patient

contact: Pharmacist Brain Surgeon
Value delivered in Key skill: supervision Key skill: creative,
the ‘back-office’. of low-cost delivery innovative solutions
Patient focus on team to one-off problems
outputs/outcomes

Adapted from Maister, D. (1997)

 Exercise
• For the 5 service characteristics…..
• (Intangibility, perishability, no ownership, simultaneity,
variability):
• What issues do they present to:
• Service operations (people providing service)
• Customers
• Provide examples from your own experience
In the News

In The News - Ryanair

Is this yet more bad
publicity?
Is there such a thing?

 What are the operational benefits?

 What are the financial benefits?
 What is the effect on customers?
23

Differences in operations
Low repetition High repeatability
Staff members perform Specialisation
more of job Low Volume High Systemisation
Less systemisation Capital intensive
High unit costs Low unit costs
Flexible Well defined
Complex Routine
Match customer needs High Variety Low Standardised
High unit cost Low unit costs
Changing capacity Stable
Anticipation Routine
Flexibility High Variation Low Predictable
In touch with demand in demand High utilisation
High unit cost Low unit cost
Short waiting tolerance Time lag between
Satisfaction governed production and
by perception High Customer Low consumption
Customer contact skills contact High staff utilisation
High unit cost Low unit cost
Exercise – Bad Service

Bad customer service montage:

https://www.youtube.com/watch?v=bTbHwnxCGaI

 List at least 6 examples of bad service from this montage

and then order them
Next week …
 We will be looking at good and bad service, and the
challenges operations managers face in providing good
service
 You will be introduced to the important volume-variety
matrix (services)
 You will be introduced to the service gap model

For next week look out for:

• Examples of good or bad service you experience
• Service that hits the news headlines
End of Session 1 – thank you for attending