Service Operations Management

Transcription

1 Aalto Introduction to Services TU-E Service Operations Management Paul Lillrank What is Operations Management Production in Open Systems Managing capacity and demand 1

2 THE WORLD OF SCIENCE Sciences of the natural world Causality Evolution Sciences of the artificial world: Behavioral science Understanding Nature Out there Artefacts within, between, and among us Sciences of the mind: Mathematics, Logic Explanation Design Teleology Art and commentary: Humanities 2

3 THE OPERATIONS MANAGEMENT PLAYING FIELD Sciences of the natural world Organization Sciences of the artificial world: Behavioral science Emplyees Competitors Regulators Investors Natural science Product technolog y Production technology Operations Management Sales Marketing Finance Strategy Hard issues: science, technology, money P s Customers - Chooser - Payer - User Markets e o Sciences of the mind: Mathematics, Logic o p l e c i e t Stakeholders Art and commentary: Humanities, y 3

4 OPERATIONS MANAGEMENT STUDIES TRANSFORMATIONS External constraints Input Transformation Output Transactions Feedback Input customer orders, requests, signals consumables (material, energy) Resources (non-consumables) people, competences, qualifications, equipment, facilities Architecture steps, events, flow, process, chain, network Internal constraints capacity bottlenecks External constraints transactional environmet, contextual environment, regulations, institutions Output Output, throughput, outcome Feedback single-loop adjustment, double-loop learning 4

5 IN SERVICES TRANSFORMATIONS AND TRANSACTIONS ARE NOT EASILY SEPARATED PRODUCTION PLANNING AND PREPARATION - Capacity management - Facilities management - Staffing and sceduling SALES - Value propositions - Revenue models PRODUCTION - Cocreation - Open systems - Value chains, processes, episodes Consumption DEMAND MANAGEMENT - Segmentation - Yield management Developed on: Moeller, Sabine: Characteristics of services a new approach uncovers their value. Journal of Service Marketing 2010, 24/5 5

6 GOODS OR SERVICE DOMINANT LOGIC IN PRODUCTION? GOODS DOMINANT LOGIC Closed system Standard processes Identical copies of prototype Inventory management Value stream additive possibility to repair Value resides in product Property rights SERVICE DOMINANT LOGIC Open system Routine processes Each offering is designed Capacity management Value stream may include multiples of zero possibility of total failure Value resides in process Rights and responsibilities 6

7 A PRODUCTION PROCESS HAS MANY SOURCES OF VARIATION Operators Methods Materials Measurement instruments Output Tools Machines Environment Inspector performance 7

8 A MANUFACTURING PROCESS IS CLOSED FROM EXTERNAL DISTURBANCES Operators Methods Materials Inspection Training Procedures Measurement instruments Output Tools Preventive maintenance Standardization Machines Insulation Environment Inspector performance 8

9 THE PROCESS DOES NOT DETERMINE THE PRODUCT IN HIGHER EDUCATION student works and learns something important student reads something student hangs around at the campus student applies for a personal minor Learning event Learning episode record information system examination certificate Freshman Graduate resources Teaching event (lecture) student is wholly present at a guidance session student is physically but not mentally present student experiences a crisis and needs special service Teaching process (curriculum) Outcome value (marketable skills, employment opportunities, income level) 9

10 THE ENVIRONMENTS OF SERVICE OPERATIONS Contextual environment the legal environment macroeconomic conditions cultural patterns climate, etc. Input Value Customer introduced variability Transactional environment - customers - markets - techologies - financing, etc. 10

11 TYPES OF CUSTOMER INTRODUCED VARIABILITY situation arrival request capability effort preferences Service experience Quantitative Capacity strategy: - Level - Chase - Demand mg. Qualitative -Same or different segment - Communication, Quality of information - Variability reduction - Variability absorption Arrival variability, Time related variability demand peaks and valleys too early, too late, leaves early, stays late,. Request variability needs, wants, demand Capability variability articulation: can you communicate what you want level of skill, experience Effort variability, Cooperation and compliance rule following, promise keeping, role preformance Subjective preference variability 11

12 BASIC PROCESS TYPES Identical repetition, High volume Setup Fixed sequence STANDARD PROCESS Variability reduced and controlled One best way Quality metrix: Deviation Similar but not identical repetition Known alternative paths Variable sequence Situational judgement ROUTINE PROCESS Predetermined variability, classifications Several alternatives. Error in choice No clear understanding of task sequence NONROUTINE PROCESS Overwhelming variability Best way unknowable ex ante. Neglect 12

13 CHAINS, PROCESSES AND EPISODES VALUE CHAIN: The tasks needed to create value What is done? PRODUCTION PROCESS: A sequence of steps to produce an output. How / when is it done? step Output CUSTOMER EPISODE: A series of service events How it is experienced? event 13

14 EVENTS ACTIVATE PROCESSES Resource efficiency The appointment process The anamnesis process The diagnostic process The treatment process Preparations Preparations Preparations Preparations Output: Outcome: Health event Service event: Customer input and involvement Flow efficiency What was done to a patient What happened to a patient 14

15 FLOW AND RESOURCE EFFICIENCY Large Cheap, but slow Swift, even flow Resource efficiency Capacity utilization rate Unit cost PRODUCERS PERSPECTIVE Get out of here! Fast, but expensive Small Flow efficiency Throughput time, Inventory cost, Hand-offs Large CUSTOMERS PERSPECTIVE 15

16 QUALITY IN HEALTHCARE What is it? (Ontology) How is it known and measured? (Epistemology) What to do about it? (Technology) Clinical decision making Diagnosis, care plan, routines How individual care is designed; value chain and process. Number of iterations, waiting time, complications, outcomes Professional knowledge, experience, support from peers Patient safety Conformance to standards How a care process is executed following standards and best practices. Adverse events Flow efficiency Quality assurance, Standardization, Error prevention Patient experience The patient s subjective perception of a care episode. Interviews, surveys, observation of behavior Patient-centric service culture Service design 16

17 Figure 8.4 The impact of variability on queues 17

18 Figure 8.2 Chase capacity strategy for a fast-food restaurant 18

19 Table 8.1 Capacity strategies 19

20 THE CAPACITY MANAGEMENT PROBLEM I have some unbooked capacity. Should I sell immediately at a reduced price to be sure it will be sold, or should I take the risk and wait until a customer will pay the full price? We have been full booked since some time. Now I have last minute requests from customers that are willing to pay any price to get in! 20

21 ESTIMATED WEEKLY DEMAND Full capacity Mo Tu We Th Fr Sa Su 21

22 REAL DEMAND Mo Tu We Th Fr Sa Su 22

23 PRICING OBJECTIVES A: Price set for the price-conscious leisure traveller. Great campaign and all the seats are sold. B: Price set high, but the busy business traveller does not care. Weekdays are selling well. C: Differential pricing: Different prices for customer groups that have different sensitivity to schedule, flexibility and price. Rules, advance booking, cancellation policy etc. to keep segments apart 23

24 MARKETING OBJECTIVE TO SELL 400 SEATS COMPANY A: Fill the seats! COMPANY B: Sell at a good price! COMPANY C: Optimize total revenue! Result: A B C Price Price Total seats sold Load factor 90% 72% 81% Total revenue Unit revenue 80,50 96,50 89,80 24

25 CUSTOMER VALUE IN COCREATION Why do I have to pay for the producers idle capacity? The sharing economy, value-based business models. What riskd do I have to carry in an immaterial service deal? Reputation platforms, track record What should I do as a service customer rights and responsibilities in the service process What s the value for me? What resources should I deploy? Which are my trade-offs? 25