BUSI4490: Managing
Contemporary Operations:
Fundamentals and Challenges
Service Operations and Quality Management
Lecture 7 (15th November 2024)
Dr Murtaza Faruquee
Weekly plan in brief
Uni Week Date Title and Description
2 1 4 Oct 2024 Fundamentals of Operations Management
3 2 11 Oct 2024 Sustainability and OM
4 3 18 Oct 2024 Process Design
5 4 25 Oct 2024 Process Analysis
6 5 28-29 Oct 2024 Seminar 1
6 5 1 Nov 2024 Planning and Control
7 6 8 Nov 2024 Capacity and inventory
8 7 15 Nov 2024 Services Management
9 8 18-19 Nov 2024 Seminar 2
9 8 22 Nov 2024 Resilience
10 9 29 Nov 2024 Technology and data-driven operations management
11 10 6 Dec 2024 Practising operations management tools and techniques
12 11 13 Dec 2024 Revision
2
Cocoa case study
▪ How has capacity impacted the 2024 chocolate market?
▪ What role did inventory play in 2024?
▪ How was the capacity-inventory challenge addressed
for the 2024 holiday season?
▪ How to plan (and control) for 2025 considering the
capacity and inventory conditions of the current cocoa
production?
3
Service operations
What is service?
Service is taking action to create
value for someone else.
- Ron Kaufman
5
What is a service?
▪ A service is an activity – a process or a set of steps (unlike a
product which is a thing)- which involves the treatment of a
customer (or user) or something belonging to them, where
the customer is also involved, and performs some role (co-
production), in the service process.
Adapted from Johnson et al (2012)
6
Product and Services Continuum
Book publishing Food service Airline service Theme park Psychotherapy
Pure Pure
goods service
Coal mining Automobile Hotel service Health care Cinema
7
Services Process Types
Degree of interaction and customisation
High
Low High
Low
Service Factory Service Shop
Costs associated with ‘Customised mass Professional
Degree of Labour intensity
facility & equipment services’. service
Variety
Service shop
Mass Service Professional
Customers treated as Service
similar Costs principally for Service
‘elite’ labour. factory
High
Low
Mass service
Low Volume High
8
Service as ‘Theatre’
Back Stage Front Stage Customers
1) Physical
Environment
Customer
Experience
5) Back office 2) Service
support Employees
3) Service
4) Fellow
Delivery
Customers
Process
(Zomerdijk and Voss 2010)
9
Four types of service concept
Many
We explore the four types Unfocused –
of service concepts Service focused
everything for everyone
together with the notion of Number
focus, applying to both of
markets
market served and range of served
services offered. Service and market
Market focused
focused
Few
Narrow Range of services Wide
Adapted from Johnson and Clark (2005)
10
B2B relation in service
Dyadic Dyadic
interaction interaction
Cleaning Airport retail
Retailer
service organisation
Cleaning
service
Triadic interaction
Airport retail Retailer
organisation
11
Servitisation
▪ Finding ways to add value to the product
▪ Focus on customer expectations and satisfaction
▪ Financial viability
▪ Design service
▪ Drift away from the core product and generate service for different
customers.
12
Servitisation
▪ Modern corporations are increasingly offering fuller market packages or “bundles” of customer-
focussed combinations of goods, services, support, self-service, and knowledge.
▪ But services are beginning to dominate.
Stage 3: Goods
+ Services +
Stage 2: Goods Support +
+ Services Knowledge +
Stage 1: Goods Self-Service
or Services
13
Waiting line
(a) Any delays by one server (b) Any delays by one server only
delays the whole queue affects that one server
14
Managing waiting line
Break into Take service Ideally, no
Distract multiple lines Make the off the line Controlled waiting line
waiting line line active booking
Low involved Highly involved
services services
15
Service layout
16
What is a good service guarantee?
▪ Unconditional (‘no ifs and buts’)
▪ Easy to understand and communicate (airlines: no delays except for air
traffic control or weather – approx 95% delays due to these factors)
▪ Meaningful (pizza delivery in 30mins or £5 off)
▪ Easy (and painless) to invoke
▪ Easy and quick to collect (don’t expect customers to jump through hoops)
(e.g. asking for purchase receipt after 5 years)
(Hart 1988)
17
Sustainability and service
Service done in a sustainable way Service for sustainable practices
18
Quality Management
Bottled water 1990
Photo of bottle of Perrier water
▪ In 1990 Perrier was market leader in this
growing market for bottled water
▪ Benzene was discovered
(poor maintenance in plant)
▪ 160 million bottles recalled worldwide
▪ Lost market dominance
▪ Family company of over 100 years,
sold out to Nestle in 1992.
20
Volkswagen diesel engine recall 2015
▪ VW set up to cheat official
environmental test
▪ 40 times more polluting outside
the test centre
▪ $18.3billion
21
[Link]
Software update due (Microsoft)
▪ A routine software update by one of the
world's largest cybersecurity companies
caused a global tech outage affecting
Microsoft users.
▪ The outage impacted an estimated 8.5 million
Windows devices worldwide, leading to
disorder at airports, outages for 911 services,
and challenges at health care facilities.
▪ The issues were not linked to a malicious
cyberattack but rather stemmed from a
misconfigured/corrupted update pushed out to
CrowdStrike's customers.
What we know about the global Microsoft and CrowdStrike outage 22
Dimensions of Product Quality
Performance: Primary operating characteristics
Features: Secondary characteristics
Conformance: How well specifications are met
Reliability: Consistency of performance
Durability: Product life
Serviceability: Ease of service/friendliness of server
Aesthetics: Effect on senses
Perceived Quality: Brand image/reputation
23
Health service quality
24
Is service quality the same as the product?
Service quality example
26
Measuring quality
Conformance
to standards Specification Good
intention
Quality:
customers’
wants are
understood Performance Customer
and delivered wants
consistently
Lucky
customers 27
What is quality?
▪ From operations ▪ From customer perspective:
perspective: ▪ Each customer may
▪ Consistent conformance perceive a service or
to customers’ product in a different way
expectations ▪ Past experiences, individual
▪ Conformance implies the knowledge and history will
need to meet a clear shape customers’
specification. expectations.
What is the gap between
perceptions and expectations?
28
Adapted from Slack et al (2016)
Customer’s view of quality
▪ Perceived quality is governed by the magnitude and direction of the gap
between customers’ expectations and their perceptions of a service or product
29
Adapted from Slack et al (2016)
A ‘Gap’ model of Quality
30
Source: Adapted from Parasuraman, A. et al. (1985) A conceptual model of service quality and implications for future research, Journal of Marketing, vol. 49, Fall.
Quality Management Approaches
Total quality management
can be viewed as a natural
extension of earlier
approaches to quality
management
© 2016, Pearson Education
31
PDCA: The Deming Cycle
32
Why is service quality more complicated?
▪ Arrival variability: Customers do not all want service at the same time or at
times necessarily convenient for the company
▪ Request variability: Customers may well ask for aspects of the service not
provided for
▪ Capability variability: Customers’ own capabilities differ. Whether because
of greater knowledge, skill, physical abilities, or resources, some customers
perform tasks easily and others require hand-holding
▪ Effort variability: When customers must perform a role in a service
interaction, it’s up to them how much effort they apply to the task. Such
effort variability has an impact on service quality and cost, either directly for
the engagement at hand or indirectly for other patrons
▪ Subjective preference variability: Customers vary in their opinions about
what it means to be treated well in a service environment.
33
Cost of Quality to the Firm
Appraisal Costs
▪ To assure incoming & outgoing quality
▪ Appraisal activities to detect non-conforming items
▪ Acceptance sampling, inspection, final testing
Prevention Costs
▪ Prevent rework, scrap, and other failures
▪ Activities include process control, preventive maintenance, most ISO 9000
activities, training
Failure Costs
▪ Internal failure: scrap, rework, rectification, retest, and including opportunity costs
▪ External failure: warranty, returns, customer dissatisfaction, customer defection
34
Service can be an “Order Winner”
▪ Order Qualifiers: hygiene
factor, needed to be
considered by customer
▪ Order Winners:
distinguishing factors that
drive customer choice
35
The Kano Model
Delight
Customer Neutral
satisfaction
Dissatisfaction
Absent Fulfilled
Presence
of characteristic
36
Source: Professor Noriaki Kano, 1984
The Kano Model
Delight
Customer Neutral
satisfaction Must be
Dissatisfaction
Absent Fulfilled
Presence
of characteristic
37
Source: Professor Noriaki Kano, 1984
The Kano Model
Delight
More is
better
Customer Neutral
satisfaction
Dissatisfaction
Absent Fulfilled
Presence
of characteristic
38
Source: Professor Noriaki Kano, 1984
The Kano Model
Delight
Delighters
Customer Neutral
satisfaction
Dissatisfaction
Absent Fulfilled
Presence
of characteristic
39
Source: Professor Noriaki Kano, 1984
The Kano Model
Delight
Delighters More is
better
Customer Neutral
satisfaction Must be
Dissatisfaction
Absent Fulfilled
Presence
of characteristic
40
Source: Professor Noriaki Kano, 1984
The Kano Model
Delight
Customer Neutral
satisfaction
Reversal
Dissatisfaction
Absent Fulfilled
Presence
of characteristic
41
Source: Professor Noriaki Kano, 1984
The Kano Model
Delight
Delighters More is
better
Customer Neutral
satisfaction Must be
Reversal
Dissatisfaction
Absent Fulfilled
Presence
of characteristic
42
Source: Professor Noriaki Kano, 1984
The Kano Model - Service Features, for a Hotel…
Photo of a Travelodge hotel room with made up beds, uplighting from bed end, carpets and raditor and window
▪ Must have (Basics): characteristics or features
taken for granted
Hotel: clean sheets & hot water
▪ More is better (Performance): we are
disappointed if a need is poorly met, but have
increasing satisfaction the better it is met Price £50-£100
Hotel: response time for room service
▪ Delighter: features that surprise and delight in a
Photo of front of Claridge's hotel, London Typical hotel room at Claridge's hotel, with large bed, comfy armchairs, nice lighting, wall art
positive way
Hotel: fruits and flowers upon arrival
▪ Reversal: features that annoy
Hotel: TV not working
Price £990
43
Most unhappy customers do not complain
…But they do tell their friends and associates
Make it easy for customers to complain:
▪ Dedicated means to capture feedback
▪ Question customers – how was everything?
▪ Listen for offhand comments
Solve the problem even if it is not the customer’s fault:
▪ Act quickly, empower employees to respond
▪ Follow up on complaints if process changes as a result
44
Thank you
See you next week…
