OPERATIONS MANAGEMENT - II

GMP for Defence Officers

Term III, 2010-11
IIM Lucknow
 Major Topics in Operations - II
Part A (Prof. R.K. Srivastava) Part B (Prof. Sushil Kumar)
• Service Operations
Management • Materials & Supply Chain
Management
• Project Planning & Scheduling
• Inventory Management (2)

• Resource Planning
• Quality Management (2)
• Lean Operations
• Maintenance & Reliability
• 5 sessions as per schedule
• 5 sessions as per schedule
• Assignment/ Quiz etc. ~15%
• Assignment ~15%

Remaining 70%: Term-end Examination

SERVICE OPERATIONS
MANAGEMENT

(Mahadevan Text Chapter 5)

 Perspectives On Services ..
“There are no such things as service industries.

There are only industries whose service

components are greater or less than other
industries.

Everybody is in service.”

Theodore Levitt, Marketing Guru

 .. Perspectives On Services
“You can duplicate the airplanes.
You can duplicate the gate facilities.
You can duplicate all the hard things, the
tangible things you can put you hands on.
But it’s the intangibles that determine success.
They’re the hardest to duplicate, if you can do it
at all.”

Herb Kelleher, Airline Executive

 The Nature of Services
• Societal evolution:
Pre-Industrial – Industrial – Post-Industrial

• Large and increasing sector of organised

economy

• A definition of Service Package:

“ A bundle of explicit and implicit benefits
provided using facilitating goods and with a
supporting facility.”
The Service - Manufacturing Continuum

Pure Product Pure Service

Spiritual (Ayurvedic) Healing/ Treatment

Legal/Tax Consulting
Cyber Café – Telephone Booths
Emergency Maintenance Services
Facilities Maintenance
High quality restaurant meal
Fast food in a eat out joint
Customised durable goods
Fast moving commodities
Vending Machines
Based on Text Fig. 1.1 (Adapted from Operations Management by Hill, T., 2005)
 The Service Operations Challenge
• Intangibility
• Non-inventoriability/ Perishability
(output/capacity)
• Simultaneous Production and Consumption
• Customer Presence/ Participation
• Heterogeneity/ Variability
• Service Worker Capabilities
• Everybody’s an Expert
A Couple of Service Operations
Classifications
 1. Customer Contact Based

Low Medium High

Contact Contact Contact

Buffered Permeable Reactive

Core System System

Sales Opportunity

Production Efficiency
 1. Contact-Based Classification
Degree of customer/server contact
Buffered Permeable Reactive
High core (none) system (some) system (much) Low
Face-to-face
total
customization
Face-to-face
Sales loose specs Production
Face-to-face
Opportunity tight specs Efficiency
Phone
Internet & Contact
on-site
Mail contact technology

Low High
Service-system
Service-system
Design
DesignMatrix
Matrix
2. The Service Process Matrix
Quasi- Mass

Standardized
Degree of Standardization Manufacturing Service

Customized

Service/ Professional
Custom Shop Service
Back Room Front Office
Location of Main Value Addition
 SERVICE DESIGN

Basic Choices & Approaches

(not mutually exclusive)
 Design Issues in Services
• Value apportionment between Explicit/ Implicit
benefits provided by service itself and by
facilitating goods/ supporting facilities

• Design Considerations:
Function/ Form/ Production

• Product/ Process Design not separable

• Design of procedures for creation/ exchange of

materials, information, advice, money etc.
 Service Design Choices

• Degree of Standardization/ Customization

• Degree/ Stages of Customer Involvement

• Work partitioning between Back Room and

Front Room

• Balance sought between Efficiency, Flexibility

& Sales Opportunity
 Production Line Approach
• Service Standardization

• Division of Labour

• Limited Discretionary Action of Personnel

• Substitution of Technology/ Systems for

People

(The “Technocratic Hamburger” - Theodore

Levitt)
 Customer As Co-producer/
Participant Approach
• Substitution of Customer Effort for Provider’s
– May be at one or more stages of the value chain,
e.g. Design, Delivery, or both

• Involving Customers in Smoothing Service

Demand
– also a supply/ demand matching approach

Either way, customer must be willing to

participate in creation/ delivery of the service,
or in determination of its timing
 Information Technology Based
Approach
• Information Empowerment:
– Employee
– Customer

• Deployment of Information Technology for:

– Productivity Enhancement, e,g., Inventory Status
– Revenue Generation, e.g., Yield Management
– Customer Lock-in/ Barriers to entry, e.g., Club/
Reservation systems
– Database Asset,e.g., Micro-marketing
 The USA Principle
UNDERSTAND SIMPLIFY AUTOMATE

Existing processes Processes by Simplified

eliminating waste processes

through by using

Process Mapping Eliminating Operations

Diagramming Combining Technologies, EDI/
Internet etc.
Brainstorming Rearranging

“Simplify before Automating, otherwise you Simply Automate Waste.”

- Shigeo Shingo, Japanese Manufacturing Guru
Designing Services With Queues
 Murphy On Queues

“The other lines move faster.”

“The longer you wait in line, the greater the likelihood that
you are standing in the wrong line.”

“If you change lines, the one you just left will start to
move faster than the one you are now in.”

“Switching back screws up both lines and makes

everybody angry.”
 Designing Services With Queues
The Psychology of Waiting Lines …
• Unoccupied time feels longer than occupied time.
(That Old Empty Feeling)

• Pre-process waits feel longer than in-process waits.

(A Foot in the Door)

• Anxiety makes waits seem longer.

• Uncertain waits seem longer than known, finite waits.

(The Light at the End of the Tunnel)

(Lovelock, “Services Marketing”; Larson, “The Waiting Line Blues”)

 Designing Services With Queues
… The Psychology of Waiting Lines
• Unexplained waits seem longer than explained waits.
(Just What Is Going On?)

• Unfair waits feel longer than equitable waits.

(Excuse Me, But I Was First)

• Solo waits feel longer than group waits.

(We’re All In It Together)

• The more valuable the service, the longer the customer

will wait.

(Lovelock, “Services Marketing”; Larson, “The Waiting Line Blues”)