Unit 2: Operations Concepts

Services Scenario in India

The service sector plays a vital role in India's economy. It includes industries like banking, IT, healthcare, retail, tourism, telecom, and education. Operations management in services focuses on customer satisfaction, service quality, speed, and efficiency.

Growth of Service Sector in India

Key Features of Services Operations

Major Service Sectors in India

India's service sector is dynamic and growing rapidly. Efficient operations management ensures cost control, quality service, and customer satisfaction, which are key for success in this sector.

Difference Between Product and Service

Summary

• Products are physical goods you can own.
• Services are activities or benefits that provide value without ownership.

Characteristics of Services

Services have unique features that differentiate them from products. These are also known as the 5 I’s of Services:

Classification of Services

Services can be classified in different ways depending on their nature, target customers, and delivery methods.

A. Based on Nature of Service

B. Based on Tangibility & Direct Recipient

Summary

• Services are intangible, perishable, and variable.
• They can be classified based on end-users, delivery, or nature of the service.

Product and Service Design

Product Design

Product design refers to the process of creating a new product or improving an existing one to meet customer needs, align with market trends, and ensure functionality, aesthetics, and profitability.

Key Elements of Product Design

• Functionality: Does it perform its intended function well?
• Aesthetics: The look, feel, and design of the product.
• Usability: How easy and comfortable is it for users?
• Durability: The longevity and reliability of the product.
• Cost-effectiveness: Balancing quality with production costs.

Service Design

Service design is the process of planning and organizing a service's components (people, processes, physical evidence) to ensure it meets customer expectations and delivers efficient service.

Key Elements of Service Design

• Customer Experience: Focus on delivering a great experience at every touchpoint.
• Service Delivery: Organizing processes to ensure efficiency and effectiveness.
• Employee Involvement: Ensuring that staff are well-trained and motivated.
• Technology Use: Incorporating technology to streamline service delivery.

Factors Affecting Service Design

• Product design focuses on creating physical items, while service design aims to improve the delivery and experience of services.
• Successful service design factors in customer needs, technology, costs, and regulatory concerns.

Service Designing Process

Service design is a strategic process that focuses on creating services that are functional, efficient, and provide an excellent customer experience. The design process includes several steps to ensure that the service aligns with customer expectations and organizational goals.

Steps in the Service Designing Process

Service Blueprinting

Service blueprinting is a detailed visual representation that maps out the service process, including customer interactions, frontstage and backstage activities, and physical evidence. It helps in understanding the complete service delivery cycle.

Components of Service Blueprint

Benefits of Service Blueprinting

• Identifies inefficiencies in the service process.
• Improves customer experience by ensuring smooth and consistent service delivery.
• Clarifies roles and responsibilities of employees.
• Aids in training new staff by providing a clear process map.

Service Capacity Planning

Service capacity planning involves determining the amount of service output that a company can provide under normal operating conditions. It's essential for maintaining a balance between demand and service delivery capacity to avoid underutilization or overloading of resources.

Factors Affecting Service Capacity Planning

Types of Service Capacity

Strategies for Service Capacity Planning

• Capacity Cushion: Maintain extra capacity to handle unexpected demand spikes.
• Demand Management: Use pricing, promotions, and reservations to manage fluctuating demand.
• Flexible Capacity: Use part-time workers, outsourcing, or automation to adjust capacity as needed.

Summary

• Service Design Process ensures services meet customer expectations and operational goals.
• Service Blueprinting helps visualize and understand the service process to improve customer experience.
• Service Capacity Planning ensures the company can meet demand without overburdening its resources.

Dimensions of Quality in Services

Quality in services refers to how well a service meets or exceeds customer expectations. Unlike products, the quality of services is often subjective and influenced by various factors. Here are the key dimensions of quality in services:

1. Reliability: The ability to perform the promised service dependably and accurately. Example: A bank consistently offering correct and timely transactions.

2. Assurance: The knowledge, courtesy, and ability of employees to instill confidence in customers. Example: A doctor’s competence and ability to reassure patients about their health.

3. Tangibles: The physical appearance of facilities, equipment, personnel, and communication materials. Example: Clean, modern, and well-maintained hotel rooms or well-dressed staff at a restaurant.

4. Empathy: The provision of caring, individualized attention to customers. Example: A customer service representative listening to a customer's issue and offering personalized solutions.

5. Responsiveness: The willingness to help customers and provide prompt service. Example: A restaurant responding quickly to a customer's request for more water or a change in the order.

6. Consistency (or Service Reliability Over Time): Ensuring that services are delivered in the same manner every time, maintaining reliability over the long term. Example: A fast-food chain consistently delivering the same quality and taste of food at every outlet.

Summary of Service Quality Dimensions

Understanding Service Quality Gap

The Service Quality Gap refers to the difference between customer expectations and the service delivered. This gap can occur at different stages of service delivery, and managing it is essential for providing excellent customer service and ensuring satisfaction.

Service Quality Gap Model

The Service Quality Gap Model identifies five key gaps that can occur between customer expectations and perceptions of the service. These gaps can be broken down as follows:

Gaps in the Service Quality Model

How the Service Quality Gap Occurs

1. Knowledge Gap (Customer Expectations vs. Management Perception): If management doesn’t have accurate data or research on customer expectations, they might misunderstand what customers need or want. Example: A hotel assumes customers expect basic amenities but overlooks customer desires for eco-friendly options, like sustainable toiletries or energy-saving systems.

2. Policy Gap (Management Perception vs. Service Quality Standards): If policies or procedures are outdated or don’t reflect customer needs, the service delivered may fail to meet customer expectations. Example: A customer support call center has policies that limit agents from offering personalized solutions, resulting in generic responses that frustrate customers.

3. Delivery Gap (Service Standards vs. Actual Service): Even with strong service standards, if employees don’t follow them properly or lack training, there’s a gap in service delivery. Example: A restaurant sets a service standard of 15-minute delivery but fails to meet this consistently due to staffing issues or poor time management.

4. Communication Gap (Service Delivery vs. Customer Communication): When customers are given a false impression of service capabilities (through ads or promises), the actual service delivered can lead to disappointment. Example: A theme park advertises a “VIP experience” with no wait times, but customers experience long lines and confusion when they arrive.

5. Perception Gap (Customer Perception vs. Actual Service Delivered): If the service doesn’t meet the customers’ expectations due to poor communication or misalignment, the perceived service quality is lower than expected. Example: A customer expects high-quality service from a luxury hotel based on its reputation, but if the service doesn’t live up to that expectation (e.g., slow check-in process), they feel dissatisfied.

Closing the Service Quality Gap

To bridge these gaps and ensure consistent service quality, businesses can take the following steps:

The Service Quality Gap model helps identify areas where businesses may fall short in meeting customer expectations. By understanding these gaps and taking steps to close them, organizations can improve their service delivery, reduce dissatisfaction, and enhance customer loyalty.

The SERVQUAL Model is one of the most widely used tools for measuring service quality. It helps assess the gap between customer expectations and their perceptions of the service they receive. This model focuses on the dimensions of service quality and provides a systematic way to measure and improve service delivery.

SERVQUAL Model

The SERVQUAL model was developed by Parasuraman, Zeithaml, and Berry in the late 1980s. It identifies five dimensions of service quality that are crucial for customers when evaluating a service. The model compares customer expectations (what customers expect from the service) and customer perceptions (what customers actually experience during the service delivery).

Five Dimensions of SERVQUAL

SERVQUAL Model 

The SERVQUAL model compares two aspects:

• Customer Expectations: What the customer anticipates they will receive from the service.
• Customer Perceptions: What the customer actually receives from the service.

Service Quality Gap (SERVQUAL Gap):

Service Quality Gap = Customer Perception - Customer Expectation

A positive score means the service exceeded expectations (good quality), and a negative score means the service failed to meet customer expectations (poor quality).

Measuring Service Quality with SERVQUAL

The SERVQUAL model uses a questionnaire based on the five dimensions of service quality. Customers are asked to rate both their expectations and their perceptions of the service they received on a Likert scale (usually 1 to 7).

Example: For each dimension (e.g., Tangibles), customers would be asked two questions:

• Expectation: "I expect the service facility to be neat and professional."
• Perception: "The service facility was neat and professional."

The difference between the perception and expectation scores is calculated to measure the quality gap.

5. Steps in Using SERVQUAL

Example of SERVQUAL Measurement

Analyzing the Gaps

• Tangibles (-1 gap): The service environment is not up to expectations (need to improve physical facilities).
• Reliability (+1 gap): The service is consistently reliable and exceeds customer expectations (strength to maintain).
• Responsiveness (-1 gap): The staff should be more responsive to customer needs and quicker in addressing them.
• Assurance (-1 gap): The staff should work on building more trust and confidence with customers.
• Empathy (0 gap): Customers feel that the service is generally empathetic and personalized as expected.

Benefits of SERVQUAL

• Comprehensive Quality Measurement: It evaluates service quality across multiple important dimensions.
• Identifying Service Gaps: Helps businesses understand where they need to improve and how to meet customer expectations more effectively.
• Customer-Centric: Focuses on customer perceptions, providing a direct link to improving customer satisfaction.

The SERVQUAL model provides a robust framework for measuring service quality by comparing customer expectations with their actual experiences across five dimensions. By identifying and analyzing the gaps, organizations can make targeted improvements to enhance customer satisfaction and service performance.

Tags: OPERATION MANAGEMENT

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