Service Management: Operations, Strategy, Information Technology, Ninth Edition
By Sanjeev Bordoloi, James A. Fitzsimmons and Mona J. Fitzsimmons
Table of Contents:
PART ONE
UNDERSTANDING SERVICES 1
Chapter 1
The Service Economy 3
Learning Objectives 3
Chapter Preview 4
Service Definitions 4
Facilitating Role of Services in an Economy 4
Economic Evolution 5
Stages of Economic Development 6
Preindustrial Society 6
Industrial Society 7
Postindustrial Society 7
Nature of the Service Sector 8
The Experience Economy 9
Consumer Service Experience 10
Business Service Experience 10
Service-Dominant Logic 11
Distinctive Characteristics of Service Operations 13
Customer Participation 13
Simultaneity 14
Intangibility 15
Heterogeneity 15
Nontransferrable Ownership 16
The Service Package 17
Grouping Services by Delivery Process 18
Open-Systems View of Service Operations
Management 20
Service Benchmark: Sharing Economy Pioneers Uber and Airbnb 22
Summary 22
Key Terms and Definitions 22
Topics for Discussion 23
Interactive Exercise 23
CASE 1.1: Village Volvo 23
CASE 1.2: Xpresso Lube 24
Selected Bibliography 26
Endnotes 26
Chapter 2
Service Strategy 27
Learning Objectives 27
Chapter Preview 27
The Strategic Service Vision 28
Understanding the Competitive Environment of Services 29
Competitive Service Strategies 30
Overall Cost Leadership 30
Differentiation 31
Focus 32
Strategic Analysis 33
Porter’s Five Forces Analysis 33
SWOT Analysis: Strengths, Weaknesses, Opportunities, Threats 34
Winning Customers in the Marketplace 34
Qualifiers 35
Service Winners 35
Service Losers 36
Sustainability in Services 36
Triple Bottom Line (TBL) 36
The Competitive Role of Information in Services 38
Creation of Barriers to Entry 38
Revenue Generation 40
Database Asset 40
Productivity Enhancement 41
The Internet of Things (IoT) 42
Data Analytics in Services 44
The Virtual Value Chain 45
First Stage (New Processes) 46
Second Stage (New Knowledge) 47
Third Stage (New Products) 47
Fourth Stage (New Relationships) 47
Economics of Scalability 47
Limits in the Use of Information 48
Anticompetitive 48
Fairness 49
Invasion of Privacy 49
Data Security 49
Reliability 49
Using Information to Categorize Customers 49
Stages in Service Firm Competitiveness 50
Available for Service 50
Journeyman 50
Distinctive Competence Achieved 50
World-Class Service Delivery 52
Service Benchmark: Outside the Box 52
Summary 52
Key Terms and Definitions 53
Topics for Discussion 53
Interactive Exercise 54
CASE 2.1: United Commercial Bank and El Banco 54
CASE 2.2: The Alamo Drafthouse 56
Selected Bibliography 58
Endnotes 59
PART TWO
DESIGNING THE SERVICE ENTERPRISE 61
Chapter 3
New Service Development 63
Learning Objectives 63
Chapter Preview 64
Sources of Service Sector Growth 64
Information Technology 64
The Internet as a Service Enabler 65
Innovation 66
Changing Demographics 66
Innovation in Services 67
Challenges of Adopting New Technology in Services 70
Readiness to Embrace New Technology 70
New Service Development 70
Service Design Elements 72
Strategic Positioning through Process Structure 73
Service Blueprinting 74
Taxonomy for Service Process Design 76
Degree of Divergence 77
Object of the Service Process 77
Type of Customer Contact 77
Generic Approaches to Service System Design 78
Production-Line Approach 79
Customer as Coproducer 80
Customer Contact Approach 81
Information Empowerment 83
Intellectual Property 84
Service Benchmark: Ten Things Google Has Found To Be True 85
Summary 85
Key Terms and Definitions 86
Topics for Discussion 86
Interactive Exercise 86
CASE 3.1: 100 Yen Sushi House 86
CASE 3.2: Commuter Cleaning—A New Venture Proposal 87
CASE 3.3: Amazon.com 89
Selected Bibliography 92
Endnotes 92
Chapter 4
The Service Encounter 95
Learning Objectives 95
Chapter Preview 95
Technology in the Service Encounter 96
The Emergence of Self-Service 97
The Service Encounter Triad 98
Encounter Dominated by the Service Organization 99
Contact Personnel–Dominated Encounter 99
Customer-Dominated Encounter 99
The Service Organization 100
Culture 100
Empowerment 101
Control Systems 102
Customer Relationship Management 102
Contact Personnel 103
Selection 103
Training 104
Creating an Ethical Climate 105
The Customer 106
Expectations and Attitudes 106
The Role of Scripts in Coproduction 107
Creating a Customer Service Orientation 108
Service Profit Chain 109
Service Benchmark: Miss Manners on Complaint
Handling 111
Summary 111
Key Terms and Definitions 112
Topics for Discussion 112
Interactive Exercise 112
CASE 4.1: Amy’s Ice Cream 112
CASE 4.2: Enterprise Rent-A-Car 113
Selected Bibliography 116
Endnotes 117
Chapter 5
Supporting Facility and Process Flows 119
Learning Objectives 119
Chapter Preview 120
Environmental Psychology and Orientation 120
Servicescapes 120
Behaviors in Servicescapes 121
Environmental Dimensions of Servicescapes 122
Facility Design 124
Nature and Objectives of Service Organizations 124
Land Availability and Space Requirements 125
Flexibility 125
Security 125
Aesthetic Factors 126
The Community and Environment 126
Process Analysis 127
Types of Processes 127
Flowcharting 127
Gantt Chart 128
Process Terminology 129
Facility Layout 131
Flow Process Layout and the Work Allocation Problem 131
Job Shop Process Layout and the Relative Location
Problem 133
Summary 136
Service Benchmark: Where, Oh Where Shall We Go? 137
Key Terms and Definitions 137
Topics for Discussion 138
Interactive Exercise 138
Solved Problems 138
Exercises 140
CASE 5.1: Health Maintenance Organization (A) 143
CASE 5.2: Health Maintenance Organization (B) 144
CASE 5.3: Esquire Department Store 144
CASE 5.4: Central Market 145
Selected Bibliography 147
Endnotes 147
Chapter 6
Service Quality 149
Learning Objectives 149
Chapter Preview 149
Defining Service Quality 150
Dimensions of Service Quality 150
Gaps in Service Quality 151
Measuring Service Quality 153
SERVQUAL 153
Walk-through Audit 154
Quality Service by Design 158
Incorporation of Quality in the Service Package 158
Taguchi Methods 159
Poka-Yoke (Failsafing) 160
Quality Function Deployment 161
Achieving Service Quality 163
Cost of Quality 163
Statistical Process Control 164
Unconditional Service Guarantee 168
Stages in Quality Development 170
Service Recovery 170
Approaches to Service Recovery 172
Complaint Handling Policy 173
Service Benchmark: Bronson Methodist Hospital 173
Summary 174
Key Terms and Definitions 174
Topics for Discussion 174
Interactive Exercise 175
Solved Problems 175
Exercises 176
CASE 6.1: Clean Sweep, Inc. 179
CASE 6.2: The Complaint Letter 180
CASE 6.3: The Helsinki Museum of Art and
Design 182
Selected Bibliography 183
Endnotes 185
Chapter 7
Process Improvement 187
Learning Objectives 187
Chapter Preview 187
Quality and Productivity Improvement Process 188
Foundations of Continuous Improvement 188
Plan-Do-Check-Act (PDCA) Cycle 188
Problem Solving 189
Quality Tools for Analysis and Problem Solving 190
Check Sheet 190
Run Chart 190
Histogram 190
Pareto Chart 191
Flowchart 191
Cause-and-Effect Diagram 192
Scatter Diagram 193
Control Chart 193
Benchmarking 194
Improvement Programs 195
Deming’s 14-Point Program 195
ISO 9001 196
Six Sigma 196
Lean Service 200
Service Benchmark: When Something Doesn’t
Work—Sometimes Just Hit it with a Hammer! 203
Summary 203
Key Terms and Definitions 204
Topics for Discussion 204
Interactive Exercise 204
CASE 7.1: Sonora County Sheriff 204
CASE 7.2: Mega Bytes Restaurant 205
Chapter 7 Supplement: Data Envelopment Analysis
(DEA) 209
Measuring Service Productivity 209
The DEA Model 209
DEA and Strategic Planning 215
Exercises 216
CASE 7.3: Mid-Atlantic Bus Lines 216
Selected Bibliography 217
Endnotes 218
Chapter 8
Service Facility Location 219
Learning Objectives 219
Chapter Preview 219
Strategic Location Considerations 220
Competitive Clustering 220
Saturation Marketing 220
Marketing Intermediaries 221
Substitution of Communication for Travel 221
Separation of Front from Back Office 222
Impact of the Internet on Service Location 222
Site Considerations 223
Geographic Information Systems 223
Facility Location Modeling Considerations 225
Geographic Representation 225
Number of Facilities 227
Optimization Criteria 227
Facility Location Techniques 229
Cross-Median Approach for a Single Facility 230
Huff Model for a Retail Outlet 232
Location Set Covering for Multiple Facilities 234
Regression Analysis in Location Decisions 235
Summary 236
Service Benchmark: Here a Bun, There a Bun,
Everywhere a Bun-Bun 237
Key Terms and Definitions 237
Topics for Discussion 238
Interactive Exercise 238
Solved Problems 238
Exercises 240
CASE 8.1: Health Maintenance Organization (C) 242
CASE 8.2: Athol Furniture, Inc. 242
Selected Bibliography 245
Endnotes 245
PART THREE
MANAGING SERVICE OPERATIONS 247
Chapter 9
Service Supply Relationships 249
Learning Objectives 249
Chapter Preview 249
Supply Chain Management 250
Network Model 250
Managing Uncertainty 251
Omnichannel Supply Chain 251
Service Supply Relationships 253
Customer–Supplier Duality 253
Service Supply Relationships Are Hubs, Not Chains 254
Managing Service Relationships 254
Bidirectional Optimization 255
Productive Capacity 256
Perishability 256
Social Media in Services 257
Social Media as a Competitive Strategy 258
Social Media and Customer Convenience 258
Social Media for Organizing and Co-creation of Value 259
Professional Service Firms 259
Attributes of Professional Services 259
Service Consulting 260
Operational Characteristics 261
Outsourcing Services 263
Benefits and Risks of Outsourcing Services 264
Classification of Business Services 265
Managerial Considerations with Service Outsourcing 266
Summary 268
Service Benchmark: Citizens Come First in
Lynchburg 269
Key Terms and Definitions 269
Topics for Discussion 269
Interactive Exercise 270
CASE 9.1: Boomer Consulting, Inc. 270
CASE 9.2: Evolution of B2C E-Commerce in Japan 272
CASE 9.3: Mortgage Service Game 274
Selected Bibliography 276
Endnotes 276
Chapter 10
Globalization of Services 279
Learning Objectives 279
Chapter Preview 280
Domestic Growth and Expansion Strategies 280
Focused Service 280
Focused Network 281
Clustered Service 281
Diversified Network 282
Franchising 282
The Nature of Franchising 283
Benefits to the Franchisee 283
Issues for the Franchiser 284
Globalization of Services 285
Generic International Strategies 285
The Nature of the Borderless World 287
Planning Transnational Operations 288
Global Service Strategies 290
Multicountry Expansion 291
Importing Customers 292
Following Your Customers 292
Service Offshoring 293
Beating the Clock 293
Service Benchmark: Small World and Other Myths 294
Summary 294
Key Terms and Definitions 295
Topics for Discussion 295
Interactive Exercise 295
CASE 10.1: Goodwill Industries of Central Texas 295
CASE 10.2: FedEx: Tiger International
Acquisition 297
Selected Bibliography 300
Endnotes 300
Chapter 11
Managing Capacity and Demand 301
Learning Objectives 301
Chapter Preview 301
Generic Strategies of Level Capacity or Chase
Demand 302
Strategies for Managing Demand 302
Customer-Induced Variability 302
Segmenting Demand 303
Offering Price Incentives 304
Promoting Off-Peak Demand 305
Developing Complementary Services 306
Reservation Systems and Overbooking 306
Strategies for Managing Capacity 308
Defining Service Capacity 308
Daily Workshift Scheduling 309
Weekly Workshift Scheduling with Days-Off Constraint 311
Increasing Customer Participation 312
Creating Adjustable Capacity 313
Sharing Capacity 313
Cross-Training Employees 313
Using Part-Time Employees 313
Yield Management 315
Yield Management Applications 319
Service Benchmark: Pay Up Front and Take Your
Chances 320
Summary 320
Key Terms and Definitions 321
Topics for Discussion 321
Interactive Exercise 321
Solved Problems 321
Exercises 323
CASE 11.1: River City National Bank 325
CASE 11.2: Gateway International Airport 327
CASE 11.3: The Yield Management Analyst 328
CASE 11.4: Sequoia Airlines 331
Selected Bibliography 332
Endnotes 333
Chapter 12
Managing Waiting Lines 335
Learning Objectives 335
Chapter Preview 335
The Economics of Waiting 336
Queuing Systems 336
Strategies for Managing Customer Waiting 337
The Psychology of Waiting 337
That Old Empty Feeling 338
A Foot in the Door 338
The Light at the End of the Tunnel 339
Excuse Me, but I Was Next 340
Essential Features of Queuing Systems 340
Calling Population 341
Arrival Process 342
Queue Configuration 345
Queue Discipline 346
Service Process 349
Summary 350
Service Benchmark: The Magic of Disney Makes
Queues Disappear 351
Key Terms and Definitions 351
Topics for Discussion 351
Interactive Exercise 351
Solved Problem 351
Exercises 352
CASE 12.1: Thrifty Car Rental 352
CASE 12.2: Eye’ll Be Seeing You 353
CASE 12.3: Field Study 354
Selected Bibliography 354
Endnotes 355
Chapter 13
Capacity Planning and Queuing Models 357
Learning Objectives 357
Chapter Preview 358
Capacity Planning 358
Strategic Role of Capacity Decisions 359
Analytical Queuing Models 360
Relationships among System Characteristics 362
Standard M/M/1 Model 362
Standard M/M/c Model 364
M/G/1 Model 367
General Self-Service M/G/∞ Model 368
Finite-Queue M/M/1 Model 368
Finite-Queue M/M/c Model 369
Capacity Planning Criteria 370
Average Customer Waiting Time 370
Probability of Excessive Waiting 371
Minimizing the Sum of Customer Waiting Costs
and Service Costs 372
Probability of Sales Lost Because of Inadequate
Waiting Area 373
Service Benchmark: Don’t Guesstimate, Simulate! 374
Summary 375
Key Terms and Definitions 375
Topics for Discussion 375
Interactive Exercise 375
Solved Problems 375
Exercises 377
CASE 13.1: Houston Port Authority 380
CASE 13.2: Freedom Express 380
CASE 13.3: Renaissance Clinic (A) 381
Chapter 13 Supplement: Computer Simulation 382
Systems Simulation 382
Simulation Methodology 383
Monte Carlo Simulation 384
Generating Random Variables 384
Discrete Random Variable 385
Continuous Random Variable 386
Discrete-Event Simulation 387
Process Simulator by ProModel 389
Solved Problems 391
Exercises 394
CASE 13.4: Drivers License Renewal 397
CASE 13.5: Renaissance Clinic (B) 398
Selected Bibliography 398
Endnotes 399
PART FOUR
Quantitative Models for Service Management 401
Chapter 14
Forecasting Demand for Services 403
Learning Objectives 403
Chapter Preview 403
The Choice of Forecasting Method 404
Subjective Models 404
Delphi Method 405
Cross-Impact Analysis 406
Historical Analogy 406
Causal Models 407
Regression Models 407
Econometric Models 408
Time Series Models 408
N-Period Moving Average 408
Simple Exponential Smoothing 409
Forecast Error 411
Relationship Between α and N 412
Exponential Smoothing with Trend Adjustment 413
Exponential Smoothing with Seasonal Adjustment 414
Exponential Smoothing with Trend and Seasonal Adjustments 416
Summary of Exponential Smoothing 418
Summary 418
Service Benchmark: Googling the Future 419
Key Terms and Definitions 419
Topics for Discussion 419
Interactive Exercise 420
Solved Problems 420
Exercises 422
CASE 14.1: Oak Hollow Medical Evaluation Center 423
CASE 14.2: Gnomial Functions, Inc. 424
Selected Bibliography 425
Endnotes 426
Chapter 15
Managing Service Inventory 427
Learning Objectives 427
Chapter Preview 428
Inventory Theory 429
Role of Inventory in Services 429
Characteristics of Inventory Systems 430
Relevant Costs of an Inventory System 431
Order Quantity Models 432
Economic Order Quantity 433
Inventory Model with Quantity Discounts 435
Inventory Model with Planned Shortages 437
Inventory Management under Uncertainty 440
Inventory Control Systems 441
Continuous Review System 441
Periodic Review System 442
The ABCs of Inventory Control 444
Radio Frequency Identification 445
Single-Period Model for Perishable Goods 446
Expected Value Analysis 446
Marginal Analysis 447
Retail Discounting Model 448
Service Benchmark: Your Bag Is Tagged 450
Summary 450
Key Terms and Definitions 450
Topics for Discussion 451
Interactive Exercise 451
Solved Problems 451
Exercises 453
CASE 15.1: A.D. Small Consulting 458
CASE 15.2: Last Resort Restaurant 458
CASE 15.3: Elysian Cycles 459
Selected Bibliography 460
Endnotes 460
Chapter 16
Managing Service Projects 461
Learning Objectives 461
Chapter Preview 461
The Nature of Project Management 462
Characteristics of Projects 462
Project Management Process 462
Selecting the Project Manager 463
Building the Project Team 463
Principles of Effective Project Management 464
Techniques for Project Management 464
Gantt Project Charts 464
A Critique of Gantt Charts 466
Constructing a Project Network 466
Critical Path Method 467
Microsoft Project Analysis 470
Resource Constraints 473
Activity Crashing 473
Incorporating Uncertainty in Activity Times 478
Estimating Activity Duration Distributions 478
Project Completion Time Distribution 479
A Critique of the Project Completion Time Analysis 480
Problems with Implementing Critical Path Analysis 482
Monitoring Projects 482
Earned Value Chart 483
Project Termination 483
Project History Report 484
Service Benchmark: The House That Warren Built 484
Summary 484
Key Terms and Definitions 485
Topics for Discussion 485
Interactive Exercise 485
Solved Problems 485
Exercises 487
CASE 16.1: Info-Systems, Inc. 491
CASE 16.2: Whittier County Hospital 492
Selected Bibliography 494
Endnote 494
Appendix A: Areas of Standard Normal Distribution 495
Appendix B: Uniformly Distributed Random Numbers [0, 1] 496
Appendix C: Values of Lq for the M/M/c Queuing Model 497
Appendix D: Equations for Selected Queuing Models 499
Name Index 505
Subject Index 509