Lecture #3 Prof. John W. Sutherland January 13, 2006

© John W. Sutherland

Service Processes & SystemsDept. of Mechanical Engineering - Engineering Mechanics

Michigan Technological University

Lecture #3

Prof. John W. Sutherland

January 13, 2006




Service Process Relationship




Infrastructure Services

Support Services

Recreational and Leisure Services

Time Saving Services

Evolution of Services in an Economy




Some More Thoughts on Classification

v Definitions:q Interaction: a mutual or reciprocal

action.

q Customization: making or altering to individual or personal specifications.

q Labor: productive work (especially physical work done for wages);




Source: Schmenner 1986

Service Classification: Interaction vs. Labor

Degree of Interaction and Customization Low High

Low

Service factory: • Airlines • Trucking • Hotels • Resorts and recreation

Service shop: • Hospitals • Auto repair • Other repair services

Deg

ree

of L

abor

Inte

nsity

Hig

h

Mass service: • Retailing • Wholesaling • Schools • Retail aspects of

commercial banking

Professional service: • Physicians • Lawyers • Accountants • Architects




Source: Lovelock 1983

Direct recipient of the service People Goods

Tan

gibl

e ac

tions

Services directed at people’s bodies:

• Health care • Passenger

transportation • Beauty salons • Restaurants

Services directed at goods and other physical possessions:

• Freight transportation • Repair and maintenance • Laundry • Veterinary care

Nat

ure

of th

e se

rvic

e ac

t

Inta

ngib

le

actio

ns

Services directed at people’s minds:

• Education • Theaters • Information services • Broadcasting

Services directed at intangible assets:

• Banking • Accounting • Insurances

Service Classification: Nature of the Service Act





Type of relationship between service organization and its customers

“Membership” relationship No formal relationship

Con

tinuo

us

deliv

ery

of

serv

ice

• Insurance • Telephone

subscription • Electric utility • Banking

• Radio station • Police protection • Lighthouse • Public highway

Deg

ree

of la

bor

inte

nsity

Dis

cret

e tr

ansa

ctio

ns • Long-distance

phone calls • Transit pass • Airline frequent flyer • Theater series

tickets

• Toll highway • Pay phone • Movie theater • Public transportation • Restaurant

Service Classification: Relationship with Customers





Extent to which service characteristics are customized High Low

Hig

h

• Surgery • Taxi service • Gourmet restaurant

• Education (large classes) • Preventive health

programs • Family restaurant

Ext

ent t

o w

hich

cu

stom

er c

onta

ct

pers

onne

l exe

rcis

e ju

dgm

ent i

n m

eetin

g

Low

• Telephone service • Hotel services • Retail banking • Cafeteria

• Public transportation • Movie theater • Spectator sports • Institutional food service

Service Classification: Customization and Judgment





Extent of demand fluctuations over time Wide Narrow

Pea

k de

man

d ca

n us

ually

be

met

with

out

maj

or d

elay

• Electricity • Telephone • Hospital maternity unit • Police emergencies

• Insurance • Legal services • Banking • Laundry

Ext

ent t

o w

hich

sup

ply

is

cons

trai

ned

Pea

k de

man

d re

gula

rly

exce

eds

capa

city

• Tax preparation • Passenger

transportation • Hotels and motels

• Fast-food restaurant • Movie theater • Gas station

Service Classification: Nature of Demand and Supply




Source: Schmenner 1986

Service Classification: Method of Service Delivery

Availability of service outlets Single site Multiple sites

Cus

tom

er

trav

els

to

serv

ice

firm

• Theater • Barbershop

• Bus service • Fast-food chain

Ser

vice

pr

ovid

er tr

avel

s to

cus

tom

er • Pest control service

• Taxi • Mail delivery • AAA emergency repairs

Nat

ure

of in

tera

ctio

n be

twee

n cu

stom

er a

nd s

ervi

ce o

rgan

izat

ion

Tra

nsac

tion

is a

t arm

's

leng

th

• Credit card company • Local TV station

• National TV network • Telephone company




Performance Measures

v Speed/efficiencyv Profitabilityv Perceived valuev Sustainabilityv Other?v

v

v

v

v

v

v

v

v

v

v We will revisit this topic next week




Customer Value

Perceived Customer Value = Total Benefits / Total Costs

Perceived Customer Value = Total Benefits - Total Costs

Other??




Cos

t

Speed of Delivery

Fast Slow

Low

High

A

B

How do technology factors affect this trend?

Traditional Trade-off between Speed of Delivery and Cost




Del

iver

y

D e g re e o f C u s to m iz a tio n

L o w H ig h

S lo w

F a s t

A

B

Traditional Trade-off between Degree of Customization and Speed of Delivery




Cos

t

S p eed o f D elive ry

Fa st S low

L o w

H igh

A 1 A 2B 1

B 2

Creating Value by Moving to a Superior Performance Curve




Sustainability?????Where are we Heading?

v Global population is increasing…

0

2000

4000

6000

8000

10000

1950 1975 2000 2025 2050

Year

Po

pu

latio

n (m

illio

ns)




Population – Not the Whole Story

v Economic Growth (GDP/Capita)q U.S. (3%) – may be ~$100k by 2050q India & China (6-8%) – may be $50k by 2050

GD

P/C

apit

a G

row

th R

ate




Resources and GDPv Resource use, wastes, and energy

consumption all proportional to GDP

0

2

4

6

8

10

12

14

$- $10,000 $20,000 $30,000 $40,000 $50,000 $60,000

GDP per Capita (in US$)

En

erg

y C

on

sum

pti

on

per

Cap

ita

(kg

OE

)

x 103

MasterEqn.

I=N·E·ηηηη




Are We Sustainable?

v In 50 yearsq 2x Populationq 5-10x

economicgrowth

q 10-20x EarthDemand/Impact

v Can we meet this increased demand using business as usual? NO!!




Many Sustainability Challengesv Energyv Take-back / Demanufacturingv Manufacturing / Remanufacturingv Dematerialization / Servicizing

q The selling of a service or function rather than a product. May include operating leases and trade-ins. Actual ownership of the product remains with the supplier – customers pay for use/ maintenance. Examples: carpet leasing, office equipment leasing, outsourcing of onsite chemical management, and office furniture supply, maintenance, and moving services.

Lecture #3 Prof. John W. Sutherland January 13, 2006

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Transcript of Lecture #3 Prof. John W. Sutherland January 13, 2006