9/24/2024

Khulna University
MBA 1st year, 2nd term

Operations and Supply Chain Management

(0413 03 MBA 5217)
Week 4: Service Design (from p. 189)

By
Dr. ATM Jahiruddin

Learning Objectives
• Evaluate the impact of services on jobs and the economy
• Appreciate and articulate the differences between products
and services
• Utilize tools for envisioning and designing quality services
• Map out service processes and suggest
process improvements
• Model waiting lines and evaluate their performance for
service improvement

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Lecture outline

• Service economy
• Characteristics of services
• Service design process
• Tools for service design
• Waiting line analysis for service
improvement

5-3

Service Economy

Source: U.S. Bureau of Labor Statistics, IBM Almaden Research Center

5-4

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GDP – Employment by sector

5-5

Characteristics of Services p. 191

• Services
– acts, deeds, or performances
• Goods
– tangible objects
• Facilitating services
– accompany almost all purchases of goods
• Facilitating goods
– accompany almost all service purchases

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Characteristics of Services (cont.)

• Services are intangible • Service inseparable from

• Service output is delivery
variable • Services tend to be
• Services have higher decentralized and
customer contact dispersed
• Services are perishable • Services are consumed
more often than
products
• Services can be easily
emulated

5-7

Continuum from Goods to Services

Source: Adapted from Earl W. Sasser, R.P. Olsen, and D. Daryl Wyckoff,
Management of Service Operations (Boston: Allyn Bacon, 1978), p.11.
5-8

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Service Design Process (p. 193)

Service Design Process

• Service concept
– purpose of a service; it defines target market and
customer experience
• Service package
– mixture of physical items, sensual benefits, and
psychological benefits
• Service specifications
– performance specifications
– design specifications
– delivery specifications

© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

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Service Process Matrix (from p. 195)

• Two dimensions
• The degree of customization/ involvement
– involvement of the customer in service design and the
delivery of a service
• Labor intensity
– involvement of the service provider in service design and
delivery

• Service specifications
– performance specifications
– design specifications
– delivery specifications

© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

Service Process Matrix (p. 195)

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Service Process Matrix (p. 195)

Design Decision High contact service Low contact service
Near labor or transportation
Facility location Convenient to customer
source
Must look presentable, accommodate customer Designed for efficiency
Facility layout
needs, and facilitate interaction with customer
More variable since customer is involved in process; Measured against established
Quality control customer expectations and perceptions of quality standards; testing and rework
may differ, customer present when defects occur possible to correct defects

Capacity Excess capacity required to handle peaks in demand Planned for average demand
High ability to interact well with customers and use
Worker skill Technical skills
judgment in decision making
Customer concerned only with
Scheduling Must accommodate customer schedule
completion date
Mostly back-room activities;
Mostly front-room activities; service may change
Service process planned and executed with
during delivery in response to customer
minimal interference
Varies with customer; includes environment as well
Service package Fixed, less extensive
as actual service

High vs. Low Contact Services

Design High-Contact Service Low-Contact Service

Decision

 Facility  Convenient to  Near labor or

location customer transportation source

 Facility  Must look presentable,  Designed for

layout accommodate customer efficiency
needs, and facilitate
interaction with
customer

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High vs. Low Contact Services

Design High-Contact Service Low-Contact

Decision Service
 Quality  More variable since  Measured against
control customer is involved in established standards;
process; customer testing and rework
expectations and
perceptions of quality possible to correct
may differ; customer defects
present when defects
occur
 Capacity  Excess capacity required  Planned for average
to handle peaks in demand
demand

High vs. Low Contact Services

Design High-Contact Service Low-Contact

Decision Service
 Worker skills  Must be able to interact  Technical skills
well with customers and
use judgment in decision
making

 Scheduling  Must accommodate  Customer

customer schedule concerned only
with completion
date

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High vs. Low Contact Services

Design High-Contact Service Low-Contact

Decision Service
 Service process  Mostly front-room  Mostly back-
activities; service may room activities;
change during delivery in planned and
response to customer
executed with
minimal
interference

 Service  Varies with customer;  Fixed, less

package includes environment as extensive
well as actual service

Tools for Service Design (p. 196)

• Service blueprinting • Service scapes

• line of influence • space and function
• line of interaction • ambient conditions
• line of visibility • signs, symbols, and
• line of support artifacts
• Front-office/Back-office • Quantitative techniques
activities

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Service Blue print 1 (p. 198)

• Service blueprinting Service operations involve

several different parties such as the customer, other
customers in the system, the primary service
provider, other service providers
• It involves both front and back room operations, and
different opportunities for interaction among the
players during the service process.

Service Blue print-2 (p. 198)

• Service blueprinting is the process of recording in

graphical form the activities and interactions in
a service process.
• a specialized flow chart used for service processes
• The term blueprinting is used to reinforce the idea
that services need to be as carefully designed as a
physical product and documented with a blueprint
of its own.

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Service Blueprinting

Service Blueprinting

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Elements of Waiting Line Analysis

• Operating characteristics
• average values for characteristics that describe performance
of waiting line system
• Queue
• a single waiting line
• Waiting line system
• consists of arrivals, servers, and waiting line structure
• Calling population
• source of customers; infinite or finite

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Elements of Waiting Line Analysis

• Arrival rate (λ)

• frequency at which customers arrive at a waiting line according to a
probability distribution, usually Poisson
• Service rate (μ)
• time required to serve a customer, usually described by negative
exponential distribution
• Service rate must be higher than arrival rate (λ < μ)
• Queue discipline
• order in which customers are served
• Infinite queue
• can be of any length; length of a finite queue is limited

Elements of Waiting Line Analysis

• Channels
• number of
parallel
servers for
servicing
customers
• Phases
• number of
servers in
sequence a
customer
must go
through

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Operating Characteristics

• Operating characteristics are assumed to approach

a steady state

Traditional Cost Relationships

• As service improves, cost increases

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Psychology of Waiting

• Waiting rooms
• magazines and
newspapers
• televisions
• Bank of America
• mirrors
• Supermarkets
• magazines
• “impulse purchases”

Psychology of Waiting

• Preferential treatment
• Grocery stores: express lanes for customers with few
purchases
• Airlines/Car rental agencies: special cards available to
frequent-users or for an additional fee
• Phone retailers: route calls to more or less experienced
salespeople based on customer’s sales history
• Critical service providers
• services of police department, fire department, etc.
• waiting is unacceptable; cost is not important

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Waiting Line Models

• Single-server model
• simplest, most basic waiting line structure
• Frequent variations (all with Poisson arrival rate)
• exponential service times
• general (unknown) distribution of service times
• constant service times
• exponential service times with finite queue
• exponential service times with finite calling population

Basic Single-Server Model

• Assumptions • Computations
• Poisson arrival rate • λ = mean arrival rate
• exponential service • μ = mean service rate
times • n = number of customers
• first-come, first-served in line
queue discipline
• infinite queue length
• infinite calling
population

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Basic Single-Server Model

• probability that no customers are in • average number of customers in
queuing system queuing system

P0 =
( )
1–
λ
μ
L=
λ
μ–λ

• probability of n customers in queuing• average number of customers in

system waiting line

λ2
Lq =
μ (μ – λ)

Basic Single-Server Model

• average time customer • probability that server is busy

spends in queuing system and a customer has to wait
(utilization factor)
1 L
W= = λ
μ–λ λ ρ=
μ
• average time customer
spends waiting in line • probability that server is idle
and customer can be served
λ
Wq = I=1– ρ
μ (μ – λ)
λ
=1– = P0
μ

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Basic Single-Server Model Example

5-35

Basic Single-Server Model Example

(cont.)

5-36

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Service Improvement Analysis

• Waiting time (8 min.) is too long

• hire assistant for cashier?
• increased service rate
• hire another cashier?
• reduced arrival rate
• Is improved service worth the cost?

Excel Single-Server Solution

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Advanced Single-Server Models

• Constant service times

• occur most often when automated equipment or
machinery performs service
• Finite queue lengths
• occur when there is a physical limitation to length of
waiting line
• Finite calling population
• number of “customers” that can arrive is limited

Advanced Single-Server Models

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Advanced Single-Server Model

Basic Multiple-Server Model

• Single waiting line and service facility with several
independent servers in parallel
• Same assumptions as single-server model
• sμ > λ
• s = number of servers
• servers must be able to serve customers faster than they
arrive

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Basic Multiple-Server Model

• probability that there are no customers in system
1
P0 = n = s – 1

( ) + ( )( )
1 λ n 1 λ s sμ
∑
n=0 n! μ s! μ sμ - λ

• probability of n customers in system

()
1 λ n

{
P0, for n > s
s!sn – s μ
Pn =

()
1 λ n
P0, for n ≤ s
n! μ

Basic Multiple-Server Model

• probability that customer must wait

()
1 λ s sμ λ
Pw = P0 Lq = L –
s! μ sμ – λ μ

λμ (λ/μ)s λ
L= P0 + 1 Lq
(s – 1)! (sμ – λ)2 μ Wq = W – =
μ λ

L λ
W= ρ=
λ sμ

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Basic Multiple-Server Model Example

Three-server system
λ =10/hr
μ = 4/hr
S=3
sμ = 3 x 4 = 12

Basic Multiple-Server Model Example

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Basic Multiple-Server Model Example

Basic Multiple-Server Model Example

• To cut waiting time, add another service rep
• Four-server System

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Multiple-Server Waiting Line in Excel

Multiple-Server Waiting Line in Excel

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Product design Introduction 1

• New products are the life blood of an organization

• Make most of the technological advancement
• Enables to cope up with dynamic business world and
customer’s choice
• A critical tool for competitive advantage:
− matches product or service characteristics with customer
requirements
− ensures that customer requirements are met in the simplest
and least costly manner
− reduces time required to design a new product or service
− minimizes revisions necessary to make a design workable

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Product design Introduction 2

• When a product/service is designed:

− The detailed characteristics of the product/service are
established.
− The characteristics of the product/service directly affects
how the product/service can be produced/ delivered.
− How the product/service is produced/delivered
determines the design of the production/delivery system.
• A challenging process because:
− it encourages companies to look outside their
boundaries
− bring in new ideas, challenge conventional thinking, and
experiment.
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