Exercise Quality Management

Exercise Quality Management 12 Quality Management in Service Industries Dipl.-Ing. M.Eng. Sven Schumacher Dipl.-Psych. Sarah Hatfield Production Metrology & Quality Fraunhofer Institute for Production Technology IPT Steinbachstraße 17, D-52074 Aachen, Tel.: +49 (0)241 8904-257 Fax: +49 (0)241 8904-6257 Email: sarah.hatfield@ipt.fraunhofer.de URL: http://www.ipt.fraunhofer.de 0

Content of the Exercise 12 Quality Management in Service Industries Case Study Rhiem Services GmbH Presentation of the company: - Important facts about Rhiem Services GmbH - History of Rhiem Services GmbH - Heutiges Leistungsangebot Detailed explanations on the following methods: - Service Blueprinting - Vignetten-Technik - ServQual Practical application of the methods Seite 1 1

Foundation of RHIEM Services GmbH Circumference of 1000 km: 240 Mio. people (= 70% of all European citizens) 1958 Foundation of RHIEM Druck 1999 Outsourcing of all service related activities and foundation of RHIEM Services GmbH 2004 RHIEM today: - 232 Employees (RHIEM total) - Headquarters: Voerde - Legal form of organisation: GmbH Limited liability company (privately owned) - Core competence: fulfillment-services - Certification: DIN EN ISO 9000:2000 ff Seite 2 Case Study Rhiem Services GmbH In this exercise the company Rhiem Services will be introduced and a case study out of the company will be discussed. 2

Service business yields success 1999: Foundation of RHIEM Services 2000 / Growth of service activities 2001: focussing around Fulfillment 2002: Strategic decision to expand company in the area of: Distribution-Fulfillment 2003: Acquisition of important key accounts/customers (Structural growth phase 1) 2004: Enhancement of business with key accounts; (Structural growth phase 1) Number of employees Turnover [Mio. EUR] 15 Service Scout 10 12 8 5 3,7 3,7 4,4 0,36 0,63 0 1999 2000 2001 2002 2003 2004 2005 Business year 200 180 (160) 150 120 100 60 45 47 50 10 15 0 1999 2000 2001 2002 2003 2004 2005 Business year Seite 3 Foundation of Rhiem Services GmbH The Rhiem Services GmbH is a pretty young company, but currently passes through a strong period of expansions. The company s origin lies in the printing industry. 3

Business of RHIEM Services OEM (PC, Multimedia, Mobiles) Distribution- Fulfillment Retail Markets Consumer Supplier A Supplier B Supplier C Seite 4 OEM: original equipment manufacturer 4

What is fulfillment? Fulfillment does not include manufacturing of the main product, but more... Procurement and Purchasing Manufacturing (of additional products) Kitting & Assembly Warehousing Inventory Management Seite 5 Fulfillment is a term out of the US-American area and includes all processes that run before and after the manufacturing of the main product. The low partition of manufacturing within these processes allows to call fulfillment a service. 5

Service offer of Rhiem Services GmbH (extract) B- customer A-customer Complete Fulfillment Centralization of marketing material Welcome Packages rising scale of the service C- customer Single printing products CD/ DVDmanufacturing, Disks duplication Single carton products Seite 6 Today s product and service offer - Today s services are divided into different groups according their scale and different customers. - Services for C-customers are closely linked with material products and can still be named products. - Services for B-customers already integrate preliminary and follow-up processes of production processes. E.g. activities like warehousing and procurement are part of a process to centralize marketing material. - Services for A-customers include the entire service range and are called Fulfillment. A characteristic of the service range of Rhiem Services GmbH is the core element of printing products. 6

Content of the exercise Initial situation: Invitation to bid by the company Agomie Placement of order for Fulfillment (duration min. 5 years) 1.5 mill. drives for data saving by magnetic storage medium (floppy disks) per year Manufacturing of floppy-drives in south east Asia Work of Rhiem Services GmbH (door-to-door-time 7 workdays) Warehousing of the complete products in interim storages for the market Which service processes shall be operated within Rhiem Services? By which means is it possible to establish service quality? How can service quality be assessed and improved? Seite 7 Task of the exercise is the preparation of an offer for a fulfillment-service. Main part will be the modeling of the service processes and their quality assurance. A detailed description of the starting situation will be given in the exercise. This exercise discusses a similar customer like Panasonic already is for Rhiem Services. All important processes that follow up the production in Asia and prepare the product for mass distribution of completely packaged products are being handled by RHIEM. 7

Modeling of service processes by Service Blueprinting Customer-activities Service provider s activities Onstage- activities invisible activities Backstage-activities secondary activities Support-activities Potentialactivities Perceived by the customer Service Blueprinting direct customer induce activities Preparation-activities Facility-activities Line of interaction Line of visibility Line of internal interaction Line of order penetration Line of implementation F Service provider s activities Customer s activities Specific event Source of failure Decision Activities input-/output Basic service process Quelle: Kleinaltenkamp, Michael: Service-Blueprinting Nicht ohne den Kunden. In: technischer vertrieb, April, 2(1999), S.33-39 Seite 8 Service Blueprinting Detailed information about the method - The modeling of service processes is mostly done with service blueprints. - The service blueprint represents the service process and structures all its partial activities independently from the providing business unit in different labels. These labels can be distinguished by their distance to the customer. Structure and labels of a service-blueprint: - Customer-activities lie above the line of interaction and include all activities, that are done by the customer. - Onstage-activities are located between the line of interaction and the line of visibility and include all direct customer induced and activities, that are perceived by the customer. - Backstage-activities lie between the line of visibility and the line of internal interaction and include all direct customer-related activities. These activities have to be fulfilled by the customer interfaces human being or machine and they can not be perceived by the customer. - Support-activities lie between the line of internal interaction and the line of order penetration and include all activities where customer information is transferred to customer related activities by internal units (e.g. office duty services). - Preparation-activities lie between the line of order penetration and the line of implementation and 8

Functions of a Service Blueprint Consumer research tool (modeling of the customer-service provider-interface) - supplying the customer with necessary information - guaranteeing transparent procedures for the customer - informing the customer of changes and innovations Planning- and structuring tool (process modeling) - process flow planning - organization structure of the service provider (one-face-to-the-customer) - resource set up and deployment Analysis tool (business-process-reengineering) - optimization of existing/ grown procedures Seite 9 The method Service Blueprinting can be used for modeling service processes and as a Consumer Research Tool, for Planning and Structuring and as an Analysis Tool, too. 9

Procedure for the development of a Service Blueprint 1. Preparation phase - define and describe the process - define the task clearly - define an interdisciplinary team - appointment for a co-operative workshop - invite the team members 2. Working phase - workshop using the pin-board technique 3. Post processing phase - final documentation of the developed process flows 4. Implementation phase - distributing the results among the involved departments and employees - defining necessary actions for implementation and introduction - controlling of the implementation Seite 10 The creation of a Blueprint is done in four steps with a interdisciplinary workshop as main part. 10

Fundamentals for modeling the main process Parts list: floppy drive, packaged in protective film folding box board, high gloss printed filler (3 parts) welcome package - installation software on disks - connecting cable - screws - installation manual - certification of guarantee - filler, protective film, elastic Order drives at the manufacturer and package the drives Printing and folding the box board Purchasing and stocking the piece goods Duplicating disks/ purchasing cables and screws Printing installation manual and certification of guarantee Purchasing, controlling and stocking the raw material (paper, carton, film, elastics, disks) Supporting processes: - Order management - Accounting and billing Seite 11 Creation of a Service blueprint for the Fulfillment process The entire fulfillment-process combines several value added processes. 11

Main process in overview Ordering Fulfillment Billing customeractivities receive the send confirmation the order of order - amount - delivering time & place receive the order delivering the drives Line of interaction receive the bill Onstageactivities receive the order confirm the order order the drives accept the drives send the bill Line of visibility backstageactivities check the actual stock dispatch the order notify the requirement of drives check the drives storage package the retail the drives products Line of internal interaction supportactivities entry database plan checks write the bill Line of order penetration preparationaktivities warehouse management organise quality tasks warehouse management accounting 1 day 5 days 1 day time Seite 12 The whole process is divided into ordering, fulfillment itself and billing. 12

Task: Fulfillment - Manufacturing (Disk duplication) duplication order recieve the order Task: Transfer the process diagram to the form of a service-blueprint and indicate the different levels according to their proximity to the customer! consultation with the customer NO Master in stock YES New part? NO compare order with Master documentation list get master disk & enter in production list YES order new master disk consultation with the customer enter master disk in documentation list NO recieve query Testing& written approval by customer YES activate write protection on master disk produce & deliver masterdisk produce submaster from master disk design and print disk label send labeled submaster disk to customer archive master disk read and copy master disk print label and put it on the disk sampling inspection storage disks warehouse management Seite 13 Main process Manufacturing (Exercise) 13

Vignette-Technique - Assessment of Service Variants with regard to Customer Satisfaction How does the customer perceive different values of quality characteristics? Use of the vignette-technique (or conjoint analysis etc.) quality characteristics Value 1 Value 2 1 Listing of all generated combinations (vignettes) availability Normal hours of business 24 h-service 2 Perform a customer survey: promtptness individuality 3-4 days Standard procedure 1 day Various levels of service Presentation of all vignettes Assessing all vignettes by pair wise comparison Vignette 3 Determining the favorite service option Customer s favorite service option Quelle: Hoeth (1997), S.31ff Seite 14 14

Vignette-Technique Task: List all feasible combinations (vignettes) quality characteristics Value 1 Value 2 Listing of all generated combinations (vignettes) availability Normal hours of business 24 h-service promtptness 3-4 days 1 day Normal hours of business 1 day individuality Standard procedure Various levels of service Standard procedure24 h-service Vignette 1 3-4 days Various levels of service? Vignette 2 Vignette 3-8 Generate the theoretically possible number of vignettes: Z = n k Quelle: Hoeth (1997), S.31ff with n = number of possible values with k = number of quality characteristics => example: 2 values, 3 quality characteristics: => 2 3 = 8 vignettes Seite 15 15

Vignette-Technique Task: List all feasible combinations (vignettes) Normal hours of business 1 day Standard procedure Vignette 1 24 h-service 3-4 days Various levels of service Vignette 2 Vignette 3 Listing of all generated combinations (vignettes) Vignette 7 Vignette 8 Vignette 4 Vignette 5 Vignette 6 Seite 16 16

Vignette-Technique Task: Evaluation of vignettes by pairwise comparison Vignette 1 Vignette 1 Vignette 2 Vignette 3 Vignette 4 Vignette 5 Vignette 6 Vignette 7 Vignette 8 Sum 1 Listing of all generated combinations (vignettes) Vignette 2 2 Perform a customer survey: Vignette 3 Presentation of all vignettes Vignette 4 Assessing all vignettes by pair wise comparison Vignette 5 Vignette 6 Vignette 7 Vignette 8 Legend: 0= Horizontal vignette is rated below vertical vignette 1= Horizontal and vertical vignette are egual 2= Horizontal vignette is superior to vertical vignette => Effort: x= Z x= 1 1 ( Z := Amount of vignettes Z x) 28 pairs have to be compared! Seite 17 17

Advantages and disadvantages of the vignette-technique Advantages: Disadvantages: Conclusion: Services can be evaluated ahead of their release to market Different variants of services can be compared The test-customer doesn t have to pay for the selected vignette => To be comparable, different variants of a service have to be of same dimension regarding their price/cost The effort necessary to perform the analyses is extremely dependent on the number of vignettes compared: e.g. 4 quality characteristics with 3 values: Z = n k = 3 4 = 81 vignettes! The service variants offered have to be of the same level regarding their price/cost. It can be helpful to add the price of a service-offer as a quality characteristic. The number of vignettes to be compared should be reduced in advance to performing the pair wise comparison. Seite 18 18

Basics of the ServQual-Questionnaire Scientific basis ServQual (SERVice QUALity) is based on the GAP-Model and focuses on GAP 5. The method is based on measurement techniques of the empirical social research and is a multi-attributive procedure of the satisfaction research. Methodical basis First the customer is asked by standard questionnaire how the service should be (expectations). Then he is asked how the service really was perceived (perception). The difference between both values represents the necessity of improvement actions. Seite 19 ServQual - Detailed information about the method - The subjective and customer-orientated assessment procedure SERVQUAL is based on the GAP-model and evaluates the GAPs 1 to 5. - The assessment procedure SERVQUAL has been developed at the Marketing Science Institute (MSI) in Cambridge (MA) USA in 1980 s. 19

The five ServQual dimensions Tangibles Physical environment, equipment and employees outside Reliability Ability, to provide the pronounced service reliably and accurately. Responsiveness Willingness to help the customer and to offer a prompt service. Assurance Staff s competence, politeness and professional skill to build up customer s confidence. Empathy Best care and individual attention towards the customer. Seite 20 The service quality is assessed in five dimensions. 20

Questionnaire of the ServQual method Tangibles Reliability Responsiveness Assurance Empathy 1. XYZ Company has modern-looking equipment. 2. XYZ Company s physical facilities are visually appealing. 3. XYZ Company s employees are neat-appearing. 4. Materials associated with the service are visually appealing at XYZ Company. 5. When XYZ Company promises to do something by a certain time, it does so. 6. When you have a problem, XYZ Company shows a sincere interest in solving it. 7. XYZ Company performs the service right the first time. 8. XYZ Company provides its services at the time it promises to do so. 9. XYZ Company insists on error free records. 10. Employees in XYZ Company tell you exactly when services will be performed. 11. Employees in XYZ Company give you prompt service. 12. Employees in XYZ Company are always willing to help you. 13. Employees in XYZ Company are never too busy to respond to your request. 14. The behavior of employees in XYZ Company instills confidence in you. 15. You feel safe in your transactions with XYZ Company. 16. Employees in XYZ Company are consistently courteous with you. 17. Employees in XYZ Company have the knowledge to answer your questions. 18. XYZ Company gives you individual attention. 19. XYZ Company has operating hours convenient to all its customers. 20. XYZ Company has employees who give you personal attention. 21. XYZ Company has your best interests at heart. 22. Employees of XYZ Company understand your specific needs. Seite 21 A questionnaire includes these five dimensions in 22 questions and can used for acquiring their characteristics. 21

Ascertainment of the customer satisfaction by double scale Servqual - Quality dimensions Service quality = Perceived service Expected service Quelle: Parasuraman, Zeithaml, Berry (1985) Tangibles Reliability Responsiveness Assurance Empathy Actual-state Target-state I totally agree! 77 Physical environment, equipment and employees outside Ability, to provide the pronounced service reliably and accurately. Willingness to help the customer and to offer a prompt service. Staff s competence, politeness and professional skill to build up customer s confidence. Best care and individual attention towards the customer. Servqual double scale 66 55 44 33 22 I do not agree at all! 77 66 55 44 33 22 11 11 Seite 22 The characteristic of the quality dimensions is analyzed by a double scale with their actual situation and their target situation. The difference between both situations presents the service quality. 22

Questionnaire of Rhiem Services GmbH (extract) Tangibles 1. Rhiem Services has state-of-the-art technical equipment. Reliability Responsiveness 5. When Rhiem Services promises to do something by a certain time, the company delivers on time. 6. When a customer has a problem, Rhiem Services shows a sincere interest in solving it. 7. Rhiem Services performs the service right the first time. 9. Rhiem Services Company insists on error free records. 10. Rhiem Services keeps customers informed about when services will be performed. 11. Employees in Rhiem Services give you prompt service. 12. Employees in Rhiem Services are always willing to help you. Seite 23 Executing a ServQual-survey - Rhiem Services has assessed their service quality, an extract these findings is shown above. - A slightly modified ServQual-questionnaire was used fpr this survey. 23

Results of the customer survey at Rhiem Services (extract) Tangibles Reliability Responsiveness 1. Rhiem Services has a modern technical equipment. 5. When Rhiem Services promises to do something by a certain time, the company delivers on time. 6. When you have a problem, Rhiem Services shows a sincere interest in solving it. 7. Rhiem Services performs the service right the first time. 9. Rhiem Services Company insists on error free records. 10. Rhiem Services keeps customers informed about when services will be performed. 11. Employees in Rhiem Services give you prompt service. 12. Employees in Rhiem Services are always willing to help you. Expectations Perception 6 6 7 4 4 6 6 5 5 6 7 4 5 5 3 4 Seite 24 The survey resp. the assessment yield different results: - The majority of the quality dimensions contribute to the customer s satisfaction. - But some results reveal deficits regarding service quality. 24

Conclusions of the ServQual Questionnaire Serious quality problems at subjects 5 and 10 5. When Rhiem Services promises to do something by a certain time, it delivers on time. 10. Rhiem Services keeps customers informed about when services will be performed. The customer regards the delivery of the service on time as very important and wants to have an overview about the order status. Rhiem Services has optimized its service processes and has installed a web-based track system, that offers a permanent monitoring of orders via internet to the customers. Seite 25 The revealed quality deficits gave reason to Rhiem Services for starting improvement actions. 25