Operations in service industry 1

By
Dr. Swatantra Kumar

Dr. Swatantra Kumar, SSVGI, Bareilly

 Services now are the biggest contributors to
global GDP.
 Understanding how services are created and
distributed is critical for any business
management professional.
 The current course deals with understanding the
peculiarities of services creation as compared to
goods manufacturing.
 Moreover we shall also discuss issues such as
service operations strategy, capacity planning,
service quality management etc.


 Creation of product
 Input – process – output process
 Easy standardization
 Keeping inventory possible which helps
utilize the capacities to the fullest
 Tangibility to create an image in the mind of
consumer
 Easy to manage quality


 Production management broadened in scope
to include services
 Services operations are complex


“There is no such thing as service industries…only industries
where service components are greater or less than those of
other industries. Everyone is in the service industry…”
– Theodore Levitt, (“Production-line approach to
service,” Harvard Business Review (September – October,
1972), pp. 41-52)


 Services started generating professional and
public attention from the fifties in the
western world and the early eighties in India.
 Banking, financial services, software,
entertainment & media,
telecommunications, dotcoms, BPR,
Retailing, Education, travel & tourism are the
biggest sections of the global service
industry.

 Services are economic activities that create
value and provide benefits for customers at
specific times and places as a result of
bringing about a desired change in – or on
behalf of – the recipient of the service. –
Christopher Lovelock


Services are deeds, processes, and performances.
Valarie Zeithaml & Mary Jo Bitner

A service is a time-perishable, intangible experience
performed for a customer acting in the role of a co-
producer.
James Fitzsimmons


FINANCIAL SERVICES INFRASTRUCTURE SERVICE
· Financing · Communications
· Leasing · Transportation
· Insurance · Utilities
· Banking

PERSONAL SERVICES
MANUFACTURING · Healthcare
Services inside company: · Restaurants
· Finance DISTRIBUTION · Hotels
· Accounting SERVICES
· Legal · Wholesaling
· R&D and design · Retailing
· Repairing CONSUMER
(Self-service)

BUSINESS SERVICES
· Consulting GOVERNMENT SERVICES
· Auditing · Military
· Advertising · Education
· Waste disposal · Judicial
· Police and fire protection

 The contribution of the services sector to the
Indian economy has been manifold:
 a 55.2% in GDP
 Growing by 10% annually
 Contributing to about a quarter of total
employment
 Accounting for a high share in FDI inflows
 Over one-third of total exports
 Recording very fast (27.4%) export growth
through the first half of 2010-11

59.5 66.4 70.0 74.1 78.6
51.3 58.3 64.1 71.4 77.0

52.5 60.9 68.3 73.4 76.5
46.5 57.7 66.1 71.5 76.3
57.8 65.8 70.6 74.8 76.0
54.6 61.5 68.4 73.1 75.8
43.9 51.9 61.4 70.0 74.8
44.8 52.0 57.0 61.4 68.6
41.8 n/a 51.6 60.8 68.5
36.5 44.0 55.3 62.2 65.5


90
80
70
60
50
Service
40 Manufacturing
30 Agriculture
20
10
0
1920

2000
1870

1970
1860

1890

1980
1850

1910

1930
1940

1960

1990
1880

1900

1950


Pre- Use of Standard
dominant Human Unit of of Living
Society Game Activity Labor Social Life Measure Structure Technology

Pre- Against Agriculture Raw Extended Sub- Routine Simple hand
Industrial Nature Mining muscle household sistence Traditional tools
power Authoritative

Industrial Against Goods Machine Individual Quantity Bureaucratic Machines
fabricated production tending of goods Hierarchical
nature

Post- Among Services Artistic Community Quality of Inter- Information
industrial Persons Creative life in terms dependent
Intellectual health,
education,
recreation


 Information Technology (e.g. Internet)
 Innovation
 Changing Demographics
Aging of the population
Two-income families


 Everyone is an expert on services. We all think
we know what we want from a service
organization and, by the very process of
living, we have a good deal of experience with
the service creation process.


 Services are idiosyncratic – what works well
in providing one kind of service may prove
disastrous in another.
 For example, consuming a restaurant meal in
less than half an hour may be exactly what
you want at jack-in-the-box but be totally
unacceptable at an expensive French
Restaurant.


 Quality of work is not quality of service.
 An auto dealership may do good work on
your car, but it may take a week to get the job
done.


 Most services contain a mix of tangible and
intangible attributes that constitute a service
package.
 This package requires different approaches to
design and management than the production
of goods.


 High contact services are
experienced, whereas goods are consumed.


 Effective management of services requires an
understanding of marketing and
personnel, as well as operations.


 Services often take the form of cycles of
encounters involving face to
face, phone, electromechanical, and/or mail
instructions.
 The term encounter by the way is defined as
“meeting in conflict or battle” and hence is
often opt as we make our way through the
service economy.


 Service operations management issues exist in
two broad organizational contexts:
 Service business: is the management of
organizations whose primary business requires
interaction with the customer to produce the service.
These include such familiar services as
banks, airlines, hospitals, law firms, retail stores, and
restaurants. These can be further divided into –
▪ Facilities based services (customer must go to the service
facility) – Restaurant
▪ Field based services (where production and consumption of the
service take place in the customer’s environment)

 Internal Services: is the management of services
required to support the activities of the larger
organization. These services include such
functions as data
processing, accounting, engineering, and
maintenance.


 P&G saved $600 million to date by
consolidating all back office functions, such
as finance and accounting, HR, Facilities
management, and IT into one unit – Global
Business Services and by outsourcing many
of the nonstrategic activities involved in
providing these services.
 GBS played a key role in the integration of
Gillette, which P&G acquired in 2005

 It has emerged as a key strategic partner with
the operating units of the global consumer
products group by providing innovative
solutions in consumer and customer
interactions and in product development
 All this happened after P&G build its current
business services platform.
 The process started in 1999 and resulted in
the formation of GBS

The service
strategy

Customer should be
Operations is the focal point
responsible
for service
systems Customer

The Systems The people


 In a bank a branch office is a high contact system
and a check processing center is a low contact
system
 Service systems with a high degree of customer
contact are more difficult to control and more
difficult to rationalize than those with a low
degree of customer contact.
 In high contact systems, the customer can affect
the time of demand, the exact nature of the
service, and the quality, or perceived quality, of
service since the customer is involved in the
process.

 Is it possible for an economy to be based
entirely on services?


Operations in service industry 1

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