Service Operations

Summary

This lecture delves into the nuances of service operations, highlighting the significant role services play in modern economies. It contrasts services with products through four key characteristics: intangibility, inseparability, heterogeneity, and perishability. The lecture introduces the concept of a product-service continuum, emphasizing the blend of products and services in reality. It also explores service archetypes and the importance of customer involvement in service processes, termed 'co-production.' The distinction between back-office and front-office operations is clarified, with examples provided to illustrate these concepts, aiming to enhance understanding of service management.

Takeaways

• 🌟 Services are a dominant sector in industrialized countries, often accounting for over 80% of GDP.
• 🔍 Services vary widely, from teaching to banking, each with unique processes but analyzable using similar improvement methods.
• ✋ Traditionally, services differ from products in four key ways: intangibility, inseparability, heterogeneity, and perishability.
• 🤝 In services, the customer is often part of the production process, leading to 'co-production' of the service experience.
• 🕒 Services are time-restricted and cannot be stored, emphasizing the importance of quality at the point of delivery.
• 🧩 The line between manufacturing and services is blurred, with many industries offering a mix of products and services.
• 📊 The Product-service continuum illustrates the spectrum from pure products like raw materials to pure services like education.
• 🏢 Services can be categorized into six types: Business-to-business, Business-to-consumer, Internal, Public, Not-for-profit, and Consumer-to-consumer.
• 👥 The SIPOC model in services highlights the customer as a crucial input and part of the service process.
• 🏠 Back office and front office operations are key concepts, with the latter being more visible and critical to the customer experience.
• 🔄 The ability to shift activities between back and front office operations can impact both costs and service quality.

Q & A

What is the significance of services in industrialized countries?

Services are hugely important in industrialized countries as they are now service economies where the majority of people work in the tertiary sector, and services often account for more than 80% of a country's gross domestic product.

How can service jobs be similar despite their differences?

Although service jobs like teaching, flying, banking, gardening, and others are different, they can all be broken down into processes and analyzed with similar improvement methods used in production management.

What are the four key characteristics that differentiate services from products?

The four key characteristics are intangibility, inseparability, heterogeneity, and perishability. Intangibility means services cannot be held or touched but can be experienced. Inseparability indicates that production and consumption of services occur simultaneously. Heterogeneity suggests that each service experience can be different. Perishability means services cannot be stored and are time-restricted.

Why is the customer's presence important in service processes?

The customer is often an integrated part of the service process, making them a participant in the production and consumption. This is due to the inseparability characteristic, where the service is produced and consumed at the same time.

What is the implication of services being equal to the process?

When the product is equal to the process in services, there are limited chances to correct quality problems before delivery, which has significant implications for capacity management and emphasizes the importance of frontline employees.

How does the development of IT blur the lines between manufacturing and services?

The development of IT has made the boundaries between manufacturing and services more blurred, leading to a more fruitful discussion about service-intensiveness versus manufacturing-intensiveness rather than a strict separation between products and services.

What is the Product-service continuum and why is it important?

The Product-service continuum is a concept that recognizes the mix of products and services in practice, with pure products at one end, like raw materials, and pure services at the other, like education. It highlights that most industries involve a mix of both.

What are the six types of services mentioned in the script?

The six types of services are Business-to-business services, Business-to-consumer services, Internal services, Public services, Not-for-profit services, and Consumer-to-consumer services.

How does the SIPOC model differ for services compared to manufacturing?

In services, the customer is often a part of the process, making them an input and sometimes even a supplier. This contrasts with manufacturing where the customer is typically not part of the production process.

What is the difference between back office and front office service operations?

Back office operations are those parts of the service process that do not require customer presence and can be more standardized. Front office operations are customer-facing and are essential for the service experience, requiring careful planning and maintenance.

Why are frontline employees crucial for a service company?

Frontline employees are crucial because they directly interact with customers during the service delivery, which is often an integral part of the service process. Their performance can significantly impact customer satisfaction and the success of the service.

Outlines

00:00

🌟 Understanding Service Operations

This paragraph introduces the concept of service operations and highlights the importance of services in modern economies. It explains that services are intangible, inseparable, heterogeneous, and perishable, which are the four key characteristics that differentiate them from products. The paragraph also discusses the role of the customer in service processes, emphasizing that the customer is often an integral part of the service production, leading to the concept of 'co-production.' Additionally, it touches upon the blurring lines between manufacturing and services due to IT advancements and introduces the product-service continuum, which illustrates the mix of products and services in various industries.

05:02

🏢 Distinguishing Between Back Office and Front Office Operations

The second paragraph delves into the operational aspects of services by differentiating between back office and front office operations. It describes the back office as the part of the service process that does not require customer presence and can be more standardized and streamlined. In contrast, the front office operations are crucial for the customer service experience and need to be meticulously planned. The paragraph uses the example of a lecture being watched as a front office operation, where the viewer interacts with the technology, and contrasts it with the back-office processes that occurred prior to the video's production, such as scriptwriting and recording. It also hints at future front-office interactions during question and answer sessions and back-office activities like preparing exam questions.

Keywords

💡Service Operations

Service Operations refers to the management and delivery of services, which are activities that one party performs for another. In the context of the video, it's emphasized that services are a significant part of modern economies, often making up over 80% of a country's GDP. The video discusses how services can be analyzed and improved using similar methods to those in production management, highlighting the importance of understanding service operations in a business environment.

💡Intangibility

Intangibility is a key characteristic that distinguishes services from products. It means that services cannot be held or touched; they are not physical entities. The video uses the example of a teacher's service, which is an experience rather than a tangible output. This concept is crucial for understanding how services are perceived and valued differently from physical goods.

💡Inseparability

Inseparability is another distinctive feature of services, indicating that the production and consumption of a service occur simultaneously. The video gives the example of hairdressing, where the service cannot be provided without the customer's presence. This characteristic has implications for service design, as it often requires the customer's active involvement in the service process.

💡Heterogeneity

Heterogeneity in services refers to the variability in the quality and nature of service experiences. Unlike products, which can be standardized, services can differ greatly depending on various factors. The video points out that even if friends attend the same restaurant or soccer match, their service experiences may vary, emphasizing the challenge of ensuring consistency in service delivery.

💡Perishability

Perishability is the characteristic of services that they cannot be stored or saved for later use. Services are time-bound and must be consumed when produced. The video mentions that unlike physical products, which can be inventoried, services like a haircut cannot be saved for future use, which influences how service capacity is managed and the importance of timely delivery.

💡Product-service continuum

The product-service continuum is a concept introduced in the video to illustrate the spectrum between pure products and pure services. It suggests that most offerings are a mix of both. For instance, buying a car involves not only the physical product but also various services like sales, insurance, and repairs. This concept helps to understand the blend of products and services in the market.

💡SIPOC

SIPOC is an acronym for Suppliers, Inputs, Process, Outputs, and Customers, a tool used to map and analyze processes. In the video, it's adapted for services to reflect that the customer is often an integral part of the service process. For example, when visiting a doctor, the patient is both an input and an output of the service, highlighting the co-production nature of many services.

💡Back office

Back office refers to the administrative and support processes of a service that do not directly involve customer interaction. The video explains that back-office operations can be more standardized and flexible, such as script writing and video recording for an online lecture. Understanding back-office processes is essential for streamlining service operations and improving efficiency.

💡Front office

Front office operations are the customer-facing aspects of service delivery. The video uses the example of a lecture being watched by a student, where the quality of sound and picture, as well as the student's interaction with the content, are part of the front-office experience. Effective front-office operations are critical for customer satisfaction and service quality.

💡Co-production

Co-production in services refers to the involvement of the customer in the creation and delivery of the service. The video explains that in many services, such as healthcare, the customer is an integral part of the process, contributing to the outcome. This concept is important for understanding how service quality is influenced by customer participation and the need for customer engagement in service design.

💡Capacity management

Capacity management in services involves the strategic planning and utilization of resources to meet service demand. The video touches on how perishability and inseparability of services affect capacity management, as services cannot be stored and require customer presence. Effective capacity management is crucial for balancing supply and demand, ensuring quality, and optimizing operational efficiency.

Highlights

Services are crucial in industrialized countries where they often account for over 80% of GDP.

Services are diverse, ranging from teaching to piloting, each with unique processes.

Services can be analyzed using similar improvement methods as in production management.

Services differ from products due to four key characteristics: intangibility, inseparability, heterogeneity, and perishability.

Intangibility means services cannot be held or touched but can be experienced.

Inseparability indicates that production and consumption of services occur simultaneously.

Heterogeneity implies that service experiences can vary significantly.

Perishability means services cannot be stored and are time-restricted.

In services, the product is the process, limiting pre-delivery quality corrections.

Frontline employees are critical for service companies due to their role in service delivery.

The distinction between manufacturing and services is increasingly blurred with IT advancements.

Service-intensiveness versus Manufacturing-intensiveness is a more fruitful concept than products versus services.

The Product-service continuum illustrates the mix of products and services in various industries.

Services can be categorized into six types: Business-to-business, Business-to-consumer, Internal, Public, Not-for-profit, and Consumer-to-consumer.

SIPOC diagrams in services highlight the customer as an integral part of the process.

The concept of co-production in services emphasizes the customer's role in creating the service experience.

Back office and front office operations are differentiated by customer visibility and involvement.

The lecture itself serves as an example of a service process, blending back-office preparation with front-office delivery.

Service processes should be analyzed for potential shifts between back and front office operations for cost and outcome benefits.

Transcripts

Everyone knows there are differences  between services and products,  

but not everyone knows what the differences are. 

In this lecture, we will  look at Service Operations. 

Services are hugely important.   Most industrialized countries are now service economies,  

where the majority of people work  in the so-called tertiary sector.  

It is not unusual that services account for more  than 80% of a country's gross domestic product. 

Note that services are widely different.   Being a teacher is not the same as being a pilot,  

a banker, gardener, chef, consultant, or prison guard. Although all these jobs sort as services. 

These jobs are clearly different, but each of them can be broken down into processes 

and analyzed with the similar improvement methods we use in production management.

Traditionally, four key characteristics  make services different from products. 

First, intangibility. 

You cannot hold or touch a service but you can experience it. 

While manufacturers produce an output,  service companies produce an outcome.

Second, inseparability. Services tend to require  a simultaneity of production and consumption. 

For example, it is quite difficult to cut your hair with the hairdresser, without being there. 

Hence, in services the customer is  present in the conversion process.

Third, heterogeneity. 

It is very difficult to make each  service experience identical. 

If you take your friends to  a restaurant or soccer match,  

your service experience will differ, even though  you eat the same food or watch the same game.

And fourth, perishability. Services are time-restricted  

and you cannot store a service. In services, the product is equal to the process. 

This means that the chances to correct  quality problems before delivery are rare. 

It also has important implications  for capacity management, 

and explains why frontline employees can  make it or break it for a service company.

However, in reality, there is no sharp demarcation between manufacturing and services,  

and those boundaries that used to be there are  more and more blurred by the development of IT. 

Instead of products versus services, it may be more fruitful to talk about  

Service-intensiveness versus  Manufacturing-intensiveness. 

In practice, there's always a  mix of products and services. 

Hence, we can introduce the  Product-service continuum. 

The purest products are arguably  commodity raw materials, 

and among the purest services, we find education. 

In between, in all kinds of different industries,  there's a mix of products and services. 

Even if you buy your own car, there's a  range of related services that you need,  

such as the sales process, insurance, and repair. Or consider a restaurant, which traditionally is  

considered a service, but clearly involves  the production or assembly of food products. 

Even the entertainment industry, such as cinema, involves the production of a film.

But back to the more general definition of services. 

Let's first differentiate archetypes of services. We can split between six types: 

Business-to-business services include  catering, maintenance, consultancy, and so on. 

Business-to-consumer services  include, for example, restaurants,  

hairdressers, wellness, bars, and festivals. Internal services, which are service departments  

within firms, such as Finance, HR, internal audit. Then we have public services, such as those  

provided by the government, police and prisons, public schools, and  

higher education, and even hospitals. Then, Not-for-profit organizations,  

such as charities, student organizations,  and religious organizations. 

And finally, we have  Consumer-to-consumer services, 

which cover all type of services  we conduct between friends and family.

Now let's look at the few useful concepts  that help us analyze service processes! 

In manufacturing, SIPOC looks like this. But in services, SIPOC looks like this. 

Think about it. If you're  sick and visit your doctor,  

you are the most important Input to the process, you're even your own Supplier. 

There are also other inputs, of course,  like the doctor, and medical equipment. 

Then, during your visit, you are part of the  Process, for example, taking a blood sample,  

or answering the doctor's question. And what about the Output? 

Correct! That's you too, and  hopefully with a good diagnosis. 

In many services the customer is  an integrated part of the process.  

We can therefore say that these services  are 'co-produced' by the customer. 

In other services, the customer  is more of a passive receiver, 

an example here can be  cleaning services in a hotel.

One useful concept is the differentiation between  Back office and Front office service operations. 

There's a line of visibility, which  separates the parts of the process 

that require customer presence, and those that do not. 

Note that we are more flexible in organizing  things as we please in the back office. 

Often these processes can be more  standardized and streamlined. 

The front office operations are essential  for the customer service experience,  

and must therefore be carefully  planned and maintained. 

I am sure you have experienced both exceptionally  good and terribly bad front office operations.

When we analyze service processes we  can always ask if we can move activities  

from or to the front office, 

and what effects that would have  on the costs and service outcomes.

Let's take this lecture as an example!

The service process happens right  now, as you watch the video.

Your experience depends on the range of  factors: the quality of the sound and picture,  

the complexity of the content, my performance,  your mood, your familiarity with the topic,  

where you see it, what else you have  on your mind, and so on, and so on, and so on. 

Even if I'm not there with you physically, this is  front office, where you interact with technology. 

There were, of course, also a lot of  back-office processes taking place  

before the video was produced, including writing a script, planning, and recording the video. 

When we meet for questions and  answers, it will be front-office again.  

And when I start preparing exam questions,  based on this material, it will be back-office. 

I can only hope that  the outcome of this lecture is 

that you learn something about service  processes that you didn't know before.

To recap, we first presented how  services differ from products,  

and introduced the product-service continuum. 

We then separated different types of services, before we discussed how the customer 

is often an integrated part of inputs, the process, and even the output in service processes. 

And finally, we introduced the useful concept  of front-office versus back-office processes. 

Okay. - Excuse me, may I order a coffee, please?

- Of course!

- There's your coffee, enjoy!

- Thank you!

See ya!