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PartⅠ SERVICES AND THE ECONOMY 1

1.The Role of Services in an Economy 3

Learning Objectives 3

Chapter Preview 5

Economic Evolution 5

Stages of Economic Development 7

Preindustrial Society 7

Industrial Society 8

Postindustrial Society 9

Nature of the Service Sector 9

Role of the Service Manager 13

Innovation 13

Social Trends 14

Management Challenges 15

Summery 18

Key Terms and Definitions 18

Topics for Discussion 19

Service Benchmark：In the 1990’s the New Jobs Are in Services and Many Are High Paying! 19

Selected Bibliography 21

2.The Nature of Services 22

Learning Objectives 22

Chapter Preview 23

Service Classification 24

The Service Package 25

Distinctive Characteristics of Service Operations 27

The Consumer as a Participant in the Service Process 27

Simultaneous Production and Consumption of Services 29

Time-Perishable capacity 30

Site Selection Dictated by Location of Customers 31

Labor Intensiveness 32

Intangibility 33

Difficulty in Measuring Output 33

An OPen-Systems View of Service 34

Summary 35

Keg Terms and Definitions 35

Service Benchmark：To Compete Better，Look Far Afield 36

Topics for Discussion 37

Case：Village Volvo 38

Selected Bibliography 39

PartⅡ THE SERVICE CONCEPT AND COMPETTTIVE STRATEGY 43

3.Service Strategy 43

Learning Objectives 43

Chapter Preview 44

The Strategic Service Concept 44

Classifying Services for strategic Insights 46

Nature of the Service Act 47

Relationship with Customers 48

Customization and Judgment 48

Nature of Demand and Supply 49

Method of Service Delivery 50

Understanding the Competitive Environment of Services 51

Competitive Service Strategies 52

Overall Cost Leadership 52

Differentiation 53

Focus 54

Winning Customers in the Marketplace 55

Qualifiers 57

Service Winners 57

Service Losers 57

Summary 57

Key Terms and Definitions 58

Topics for Discussion 58

Service Benchmark：Central Market shuns conventional wisdom and big name products 59

Case：America West Airlines 60

Selected Bibliography 61

4.Services and Information Technology 62

Learning Objectives 62

Chapter Preview 63

Technological Innovation in Services 64

Challenges of Adopting New Technology in Services 64

Automation in Services 65

Managing the New Technology Adoption Process 66

The Competitive Role of Information in Services 68

Creation of Barriers to Entry 69

Revenue Generation 70

Data Base Asset 71

Productivity Enhancement 72

The Virtual Value Chain 74

Limits in the Use of Iformation 75

Anticompetitive 76

Fairness 76

Invasion of Privacy 77

Data Security 77

Reliability 77

Summary 77

Key Terms and Definitions 78

Topics for Discussion 78

Service Benchmark：Frito Lay Puts Handheld Computers in tbe Field 79

Case：The Best Little Cookie House Around 80

Selected Bibliography 81

Part Ⅲ STRUCTURING THE SERVICE ENTERPRISE 85

5.The Service Delivery System 85

Learning Objectives 85

Chapter Preview 86

Service Blueprinting 87

Strategic Positioning Through Process Structure 89

Taxonomy for Service Process Design 90

Degree of Divergence 92

Object of the Service Process 92

Type of Customer Contact 92

Generic Approaches to Service System Design 93

Production-Line Approach 94

Customer as Coproducer 96

Customer Contact Approach 97

Information Empowerment 101

Summary 103

Key Terms and Definitions 103

Topics for Discussion 103

Service Benchmark：PacBell’s Experiment 104

Cases：100 Yen Sushi House 106

Commuter Cleaning—A New Venture Proposal 107

Selected Bibliography 109

CHAPTER 5 SUPPLEMENT：VEHICLE ROUTING 111

USing the C-W Algorithm Unconstrained 112

Using the C-W Algorithm with Constraints 114

Use of a “Minimal Technology Routing System” 115

Solved Problems 117

Exercises 119

Cases：The Daley Monthly Car Pool 121

Airport Services，Inc． 122

6.The Supporting Facility 123

Learning Objectives 123

Chapter Preview 124

Design 125

Nature and Objectives of Service Organizations 125

Land Availability and Space Requirements 126

Flexibility 126

Aesthetic Factors 127

The Community and Environment 127

Layout 128

Product Layout and the Line-Balancing Problem 130

Process Layout and the Relative Location Problem 132

Process Flowcharting 136

Environmental Psychology and Orientation 138

Walk-Through-Audit 139

Person-to-Person Service 141

Service Delays 141

Ambiance Variables 141

Check Presentation 142

Promotion and Suggestive Selling 142

Implications for Management 143

The Walk-Through-Audit as a Diagnostic Tool 143

Summary 149

Key Terms and Definitions 149

Solved Problems 151

Topics for Discussion 153

Exercises 153

Service Benchmark：Software，Peripherals Take a Back Seat to Big Iron 156

Cases：Health Maintenance Organization（A） 157

Health Maintenance Organization（B） 157

Esquire Department Store 158

Selected Bibliography 159

7.Service Facility Location 161

Learning Objectives 161

Chapter Preview 162

Location Considerations 163

Geographic Representation 163

Number of Facilities 165

Optimization Criteria 165

Estimation of Geographic Demand 166

Define the Target Population 167

Select a Unit of Area 167

Estimate Geographic Demand 168

Map Geographic Demand 168

Facility Location Techniques 168

Single Facility 170

Locating a Retail Outlet 174

Multiple Facilities 176

Site Considerations 178

Breaking the Rules 179

Competitive Clustering 179

Saturation Marketing 180

Marketing Intermediaries 180

Substitution of Communication for Transportation 180

Summary 181

Service Benchmark：Saturating Cities with Stores Can Pay 182

Key Terms and Definitions 184

Solved Problems 185

Topics for Discussion 187

Exercises 187

Cases：Health Maintenance Organization（C） 190

Athol Furniture，Inc. 191

Selected Bibliography 193

8.Managing Service Projects 195

Learning Objectives 195

Chapter Preview 196

The Nature of Project Management 197

Characteristics of Projects 197

Activities of Project Managers 197

Techniques for Project Management 198

Gantt Project Charts 198

A Critique of Gantt Charts 200

Constructing a Project Network 200

Critical Path Method 202

Microsoft Project for Windows Analysis 205

Resource Constraints 209

Activity Crashing 212

Incorporating Uncertainty in Activity Times 215

Estimating Activity Duration Distributions 215

Project Completion Time Distribution 216

A Critique of the Project Completion Time Analysis 218

Problems with Implementing Critical Path Analysis 220

Sereice Benchmark：Project Management Software in Use 221

Summary 222

key Terms and Definitions 223

Solved Problems 223

Topics for Discussion 225

Exercises 226

Cases：Info-Systeins，Inc. 231

Whittier County Hospital 231

Selected Bibliography 233

Part Ⅳ MANAGING SERVICE OPERATIONS 237

9.The Service Encounter 237

Learning Objectives 237

Chapter Preview 238

The Service Encounter Triad 239

Encounter Dominated by the Service Organization 239

Contact Personnel-Dominated Encounter 240

Customer-Dominated Encounter 240

The Service Organization 240

Culture 241

Empowerment 242

Contact Personnel 243

Selection 243

Training 244

The Customer 246

Expectations and Attitudes 247

The Customer as CoProducer 248

Creating a Customer Service Orientation 248

The Service Profit Chain 250

Summary 252

Key Terms and Definitions 253

Topics for Discussion 253

Service Benchmark：Miss Manners on Complaint Handling 254

Case：Amy’s Ice Cream 255

Selected Bibliography 256

CHAPTER 9 SUPPLEMENT：WORK MEASUREMENT 258

Time Study 258

Work Sampling 260

Sample Size 261

Work Methods Charts 262

Worker-Customer Charts 263

Activity Charts 263

Solved Problems 264

Exercises 265

Case：County General Hospital 266

10.Service Quality 268

Learning Objectives 268

Chapter Preview 269

Defining Service Quality 270

Dimensions of Service Quality 270

Gaps in Service Quality 271

Measuring Service Quality 274

SERVQUAL 274

Benchmarking 274

Scope of Service Quality 277

Quality Service by Design 280

Incorporating Quality in the Service Package 280

Taguchi Methods 282

Poka-yoke 283

Quality Function Deployment 283

Achieving Service Quality 286

Cost of Quality 286

Tools for Achieving Service Quality 288

Programs for Service Quality Improvement 296

Personnel Programs for Quality Assurance 296

Quality-Improvement Program to Achieve Zero Defects 297

Deming ’s 14-Point Program 299

Unconditional Service Guarantee 300

Malcolm Baldrige National Quality Award 301

ISO 9000 303

Service Recovery 303

Stages in Quality Development 304

Summary 304

Key Terms and Definitions 306

Topics for Discussion 306

Service Benchmark：Service Winners of the Malcolm Baldrige National Quality Award 307

Solved Problems 308

Exercises 309

Cases：Clean Sweep，Inc. 312

The Complaint Letter 314

Selected Bibliography 316

11.Managing Queues 318

Learning Objectives 318

Chapter Preview 321

Queuing Systems 322

The Inevitability of Waiting 322

The Psychology of Waiting 324

That Old Empty Feeling 324

A Foot in the Door 325

The Light at the End of the Tunnel 325

Excuse Me，But I Was Next 326

They Also Serve，Who Sit and Wait 327

The Economics Of Waiting 327

Essential Features of Queuing Systems 328

Calling Population 329

Arrival Process 329

Queue Cofiguration 334

Queue Discipline 336

Service Process 337

Summary 340

Key Terms and Definitions 340

Topics for Discussion 340

Sereice Benchmark：Conquering Those Killer Queues 341

Cases：Thrifty Car Rental 342

Eye’ll Be Seeing You 343

Selected Bibliography 344

12.Managing Facilitating Goods 346

Learning Objectives 346

Chapter Preview 348

Inventory Theory 348

Role of Inventory in Services 348

Characteristics of Inventory Systems 350

Relevant Costs of an Inventory System 351

Order Quantity ModelS 352

Economic Order Quantity 353

Inventory Model with Quantity Discounts 356

Inventory Model with Planned Shortages 359

Inventory Management Under Uncertainty 362

Inventory Control Systems 364

Continuous Review System 364

Periodic Review System 366

The ABCs of Inventory Control 367

Single-Period Model for Perishable Goods 369

Expected Value Analysis 370

Incremental Analysis 371

Retail Discounting Model 372

Summary 373

Key Terms and Definitions 374

Topics for Discussion 374

Seruice Benchmark：Where Parts Are the Whole 375

Solved Problems 375

Exercises 377

Case：Elysian Cycles 383

Selected Bibliography 384

13.Managing Capacity and Demand 385

Learning Objectives 385

Chapter Preview 386

Strategies for Managing Demand 387

Partitioning Demand 387

Offering Price Incentives 389

Promoting Off-Peak Demand 390

Developing Complementary Services 391

Using Reservation Systems and Handling the Overbooking Problem 391

Strategies for Managing Supply 395

Using Daily Workshift Scheduling 395

Using Weekly Workshift Scheduling with Days-Off Constraint 398

Increasing Customer Participation 399

Creating Adjustable Capacity 400

Sharing Capacity 400

Cross-Training Employees 401

Using Part-Time Employees 401

Scheduling Part-time Tellers at a Drive-In Bank 401

Yield Management 403

Yield Management Applications 408

Summary 409

Key Terms and Definitions 410

Topics for Discussion 410

Service Benchmark：Yield Management at American Airlines 411

Solved Problems 412

Exercises 415

Cases：River City National Bank 418

Gateway International Airport 420

The Yield Management Analyst 421

Selected Bibligrphy 424

Part Ⅴ TOWARD WORLD-CLASS SERVICE 429

14.Productivity and Quality Improvement 429

Learning Objectives 429

Chapter Preview 431

Stages in Service Firm Competitiveness 431

Available for Service 431

Journeyman 433

Distinctive Competence Achieved 434

World-Class Service Delivery 434

Making Continual Improvement a Competitive Strategy 435

Inventory and Waiting Line Analogy 436

Continual Improvement as Part of the Service Organization Culture 437

Management Implications 439

An Application of Deming’s Philosophy of Continual Improvement：The Case of Florida Power and Light 440

Foundations of the Quality-Improvement Program 441

Phases of the Quality-Improvement Program 442

Summary 442

Key Terms and Definitions 443

Topics for Discussion 443

Seruice Benchmark：Shoppers Act as Their Own Cashiers at Some Stores 443

Case：Mega Bytes Restaurant 445

Selected Bibliography 449

CHAPTER 14 SUPPLEMENT：DATA ENVELOPMET ANALYSIS（DEA） 451

Measuring Service Productivity 451

The DEA Model 451

Definition of Variables 451

Objective Function 452

Constraints 452

DEA and Strategic Planning 453

Exercises 457

Case：Mid-Atlantic Bus Lines 457

15.Growth and Expansion 459

Learning Objectives 459

Chapter Preview 460

Growth and Expansion Strategies 461

Focused Service 461

Focused Network 462

Clustered Service 463

Diversified Network 464

Franchising 464

The Nature of FranchiSing 464

Benefits to the Franchisee 465

Issues for the Franchisor 466

Multinational Development 467

The Nature of the Borderless World 468

Considerations in Planning Multinational Operations 469

Global Service Strategies 470

Multicountry Expansion 471

Importing Customers 472

Follow Your Customers 473

Service Unbundling 474

Beating-the-Clock 474

Summary 475

Key Terms and Definitions 476

Topics for Discussion 476

Service Benchmark：IS America Being Shut Out Again？ 477

Case：Federal Express：Tiger International Acquisition 478

Selected Bibliography 481

Part Ⅵ QUANTITATIVE MODELS WITH SERVICE APPLICATIONS 485

16. Forecasting Demand for Services 485

Learning Objectives 485

Chapter Preview 486

Subjective Models 487

Delphi Method 487

Cross-Impact Analysis 489

Historical Analogy 489

Causal Models 489

Regression Models 490

Econometric Models 492

Time Series Models 492

N-Period Moving Average 492

Simple Exponential Smoothing 494

Relationship between a and N 496

Forecast Error 497

Exponential Smoothing with Trend Adjustment 498

Exponential Smoothing with Seasonal Adjustment 499

Exponential Smoothing with Trend and Seasonal Adjustments 502

Summary of Exponential Smoothing 503

Summary 504

Key Terms and Definitions 505

Topics for Discussion 505

Service Benchmark：L.L.Bean ImProves Call-Center Forecasting 505

Solved Problems 508

Exercises 510

Cases：Oak Hollow Evaluation Center 511

Gnomial Functions，Inc. 512

Selected Bibliography 514

17.Queuing Models and Capacity Planning 515

Learning Objectives 515

Chapter Preview 517

Analytical Queuing Models 517

Standard M/M/l Model 519

Finite-Queue M/M/l Model 522

M/G/l Model 523

Standard M/M/c Model 524

Finite-Queue M/M/c Model 527

General Self-Service M/G/∞ Model 528

General Relationships Between System Characteristics 529

Capacity Planning Criteria 530

Average Customer Waiting Time 530

Probability of Excessive Waiting 531

Minimizing the Sum of Customer Waiting Costs and Service Costs 532

Probability of Sales Lost Because of Inadequate Waiting Area 534

Requirment That Expected Profit on Last Unit of capacity Should Just Exceed Expected Loss 535

Summary 536

Key Terms and Definitions 537

Topics for Discussion 537

Service Benchmark：Simulation Modeling for Process Reengineering in the Telecommunications Industry 538

Equations for Selected Queuing Models 541

Definition of Symbols 541

Ⅰ.Standard M/M/1 Model 541

Ⅱ.Standard M/M/c Model 542

Ⅲ.Standard M/G/1 Model 543

Ⅳ.Self-Service M/G/∞ Model 543

Ⅴ.Finite-Queue M/M/1 Model 543

Ⅵ.Finite-Queue M/M/c Model 544

Solved Problems 545

Exercises 547

Cases：Houston Port Authority 551

Freedom Express 551

Cedar Valley Community College 552

Pronto Pizza 552

Selected Bibliography 553

18.Linear Programming Models in Services 554

Learning Objectives 554

Chapter Preview 555

Constrained Optimization Models 555

Formulating Linear Programming Models 558

Diet Problem 558

Shift-Scheduling Problem 560

Workforce-Planning Problem 561

Transportation Problem 563

Optimal Solutions and Computer Analysis 564

Graphical Solution of Linear Programming Models 565

Linear Programming Model in Standard Form 566

Computer Analysis and Interpretation 569

Sensitivity Analysis 571

Objective-Function Coeffcient Ranges 571

Right-Hand-Side Ranging 571

Goal Programming 573

Summary 577

Key Terms and Definitions 577

Topics for Discussion 578

Service Benchmark：An Analysis of Alternative Locations and Service Areas of American Red Cross Blood Facilities 578

Solved Problems 581

Exercises 583

Cases：Munich Delicatessen 592

Sequoia Airlines 592

Selected Bibliography 594

APPENDIX A：AREAS OF A STANDARD NORMAL DISTRIBUTION 595

APPENDIX B：VALUES OF Lq FOR THE M/M/c QUEUING MODEL 597

INDEXES 599

Name Index 601

Subject Index 605