Introduction to Services

and Service Operations

Mac Bering ME IE-2
MIE 113

Definitions of Service
Services are economic activities offered by one

party to another, most commonly employing timebased performances to bring about desired results
in recipients themselves or in objects or other
assets for which purchasers have responsibility. In
exchange for their money, time, and effort, service
customers expect to obtain value from access to
goods, labor, professional skills, facilities,
networks, and systems; but they do not normally
take ownership of any of the physical elements
involved. (Christopher Lovelock and Lauren Wright)

A service is a time-perishable, intangible

experience performed for a customer acting in the

role of a co-producer. (James Fitzsimmons)

Role of Services in an Economy

FINANCIAL SERVICES
Financing
Leasing
Insurance

MANUFACTURING
Services inside company:
Finance
Accounting
Legal
R&D and design

BUSINESS SERVICES
Consulting
Auditing
Advertising
Waste disposal

INFRASTRUCTURE SERVICE
Communications
Transportation
Utilities
Banking

DISTRIBUTION
SERVICES
Wholesaling
Retailing
Repairing

PERSONAL SERVICES
Healthcare
Restaurants
Hotels

CONSUMER
(Self-service)

GOVERNMENT SERVICES
Military
Education
Judicial
Police and fire protection

Sources of Service Sector

Growth
Information Technology (e.g. Internet)
Innovation

Push theory (e.g. Post-it)

Pull theory (e.g. Cash Management)
Services derived from products (e.g. Netflix)
Exploiting information (e.g. Auto part sales)
Difficulty of testing service prototypes

Changing Demographics

Aging of the population

Two-income families
Growth in number of single people
Home as sanctuary

Key Operations Principles

Aggregation Principle
The higher the level of aggregation of resources and

information, the more predictable operations becomes

(e.g. forecasts of total resources needed tend to be
more accurate than forecasts of individual resources).
This is a manifestation of the Central Limit Theorem.
Uncertainty Principle
The more uncertainty in operations, the greater the

need to employ extra resources to cope with this

uncertainty. Alternatively, the greater the stability and
predictability, the more efficiently operations can
function.
Efficiency Principle
All else being equal, operations should function as

efficiently as possible.

Distinctive Characteristics of
Services
Customer participation in the service process: attention

to facility design, opportunities for co-production, concern for

customer and employee behavior
Simultaneity: process and outcomes are coupled, customerfacing activities cannot be inventoried, increased importance
of matching capacity to demand
Perishability: opportunity loss of idle capacity, capacity
utilization is a significant managerial challenge due to variable
customer demand and lack of inventory for absorbing
fluctuations
Intangibility: customers cannot assess quality a priori,
importance of reputation
Heterogeneity: customer involvement in delivery process
results in variation in service from customer to customer

Service Package
The service package is a bundle of goods and services with
information that is provided in some environment. The
bundle consists of:
Supporting Facility: The physical resources that

must be in place before a service can be sold.

Examples are golf course, ski lift, hospital,
airplane.
Facilitating Goods: The material consumed by
the buyer or items provided by the consumer.
Examples are food items, legal documents, golf
clubs, medical history.
Information: Operations data or information that
is provided by the customer to enable efficient
and customized service. Examples are patient
medical records, seats available on a flight,
customer preferences, location of customer to
dispatch a taxi.

Service Package
(cont.)
Explicit Services: Benefits readily observable

by the senses. The essential or intrinsic

features. Examples are quality of meal,
attitude of the waiter, on-time departure.
Implicit Services: Psychological benefits or
extrinsic features which the consumer may
sense only vaguely. Examples are privacy of
loan office, security of a well lighted parking
lot.

Open Systems View of

Services
Service process

Consumer arrivals

Consumer participant
Consumer-provider
interface

(inputs)

Consumer
departures
(output)

Control

Alter
demand

Production function:
Monitor and control process
Marketing function:
Interact with consumers
Control demand

Service personnel
Schedule
supply

Modify as necessary
Define standard
Service package
Communicate
by advertising

Supporting facility
Facilitating goods
Information
Explicit services
Implicit services

Criteria
Measurement

Monitor

Service operations manager

Consumer demand
Perceived needs
Location

Evaluation

Basis of
selection

Empowerment
Training
Attitudes

Why is Service Important?

Driving force of economies to grow up to

the national scale

Specialize peoples expertise
Innovation for customization
Rewarding experience
Making a difference
Gives an individual or a company a sense
of involvement and self-actualization

Science of Service
Developing service systems from

technological breakthroughs is to
understand and catalog service systems
and to apply that understanding to
advancing our ability to design, improve,
and scale service systems for practical
business and societal purposes.
The study of service systems is an
integrative, multidisciplinary undertaking,
and many disciplines have knowledge and
methods to contribute.

Science of Service
Service system development should look the

following theoretical aspects:

Sciencewhat service systems are and how to

understand their evolution

Managementhow to invest to improve service
systems
Engineeringhow to invent new technologies that
improve the scaling of service systems
Should meet the following dimensions:
Efficiency (plans). Things are done in the right way.
Effectiveness (goals). The right things get done.
Sustainability (relationships). The right

relationships exist with other service systems.

Example: GrabCar Service

App

Service Description
GrabCar is a car-booking app that
revolutionizes the way you move by
sending a private vehicle along your way
via smartphone app. The app which takes
form in chauffeur-style service.

Rules
In accordance to the Department Order No.

2015-011, Transport Network Vehicles are

Sedans, AUVs, SUVs, or other similar
vehicles that are not more than 3 years old
from date of manufacture upon registration
with a Transportation Network Company
(TNC). Vehicles may, however, operate for
up to 7 years from date of manufacture.

Cars Allowed to Operate

Vehicles allowed in the service are: Toyota

Vios, Hyundai Accent, Honda City,

Mitsubishi Mirage, Mitsubishi Lancer.

Rates
Rates are automatically computed from

the app from the point of origin to the

destination. However, a fare increase
during rush hours can be up to 1.5 times
the regular rate to compensate costs in
operating a vehicle amidst traffic jams.

Why is it in demand?
Unavailability of taxis, especially on

instances where drivers deny passengers

the moment they are asked to go to a far
destination
Ease in commuting and could cut
commuting time due to the ability to use
alternative routes compared to jeepneys
The use and popularization of smartphones
makes the service accessible to customers
at any location; as well as using technology
like GPS and mobile networking

Thanks for listening!