Introduction to the Field Introduction to the Field

Strategic Planning

Missionand VisionMission

and Vision

CorporateStrategy

CorporateStrategy

OperationsStrategy

OperationsStrategy

MarketingStrategy

MarketingStrategy

FinancialStrategyFinancialStrategy

Voice of theVoice of theBusinessBusiness

Voice of theVoice of theBusinessBusiness

Voice of theVoice of the

CustomerCustomerVoice of theVoice of the

CustomerCustomer

What Operations Management……

• What is operations?– A function or system that transforms inputs into

outputs of greater value

• What is operations management?– Design, operation, and improvement of

productive systems

• What is a transformation process?– A series of activities along a value chain

extending from supplier to customer

Transformation Process

• Physical: as in manufacturing operations

• Locational: as in transportation or warehouse operations

• Exchange: as in retail operations

• Physiological: as in health care

• Psychological: as in entertainment

• Informational: as in communication

Operations as a Transformation Process

INPUT •Material•Machines•Labor•Management•Capital

TRANSFORMATIONPROCESS

OUTPUT •Goods•Services

Feedback & Requirements

Positioning the Firm

• Cost• Quality• Speed• Flexibility

Positioning the Firm: Cost

• Waste elimination• Examination of cost structure

– looking at the entire cost structure for reduction potential

• Lean production– providing low costs through disciplined

operations

Positioning the Firm: Speed

• Fast moves, fast adaptations, tight linkages• Internet - conditioned customers to expect

immediate responses

• Service organizations - always competed on speed (McDonald’s, LensCrafters, and Federal Express)

• Manufacturers - time-based competition: build-to-order production and efficient supply chains

• Fashion industry - two-week design-to-rack lead time of Spanish retailer, Zara

Positioning the Firm: Quality

• Minimizing defect rates or conforming to design specifications; please the customer

• Ritz-Carlton - one customer at a time– Service system is designed to “move heaven

and earth” to satisfy customer– Every employee is empowered to satisfy a

guest’s wish – Teams at all levels set objectives and devise

quality action plans– Each hotel has a quality leader

Positioning the Firm: Flexibility

• Ability to adjust to changes in product mix, production volume, or design

• Astra Honda Motor (AHM)– Production capacity 3,5 million units per year– mass customization: the mass production of

customized parts

% Perubahan Pekerjaan 2004-2009

5.96%

10.13%

13.96%

-8.26%

1.55%

14.21%

8.52%

31.96%29.44%

-20%

-10%

0%

10%

20%

30%

40%

Industri

% P

erub

ahan

Pertanian, Kehutanan, Perburuan dan PerikananPertambangan dan PenggalianIndustri PengolahanListrik, Gas, dan AirBangunanPerdagangan Besar, Eceran, Rumah Makan, dan HotelAngkutan, Pergudangan dan Komunikasi Keuangan, Asuransi, Usaha Persewaan Bangunan, Tanah, dan Jasa PerusahaanJasa Kemasyarakatan, Sosial dan Perorangan

5.96%

10.13%

13.96%

-8.26%

1.55%

14.21%

8.52%

31.96%29.44%

-20%

-10%

0%

10%

20%

30%

40%

Industri

% P

erub

ahan

Pertanian, Kehutanan, Perburuan dan PerikananPertambangan dan PenggalianIndustri PengolahanListrik, Gas, dan AirBangunanPerdagangan Besar, Eceran, Rumah Makan, dan HotelAngkutan, Pergudangan dan Komunikasi Keuangan, Asuransi, Usaha Persewaan Bangunan, Tanah, dan Jasa PerusahaanJasa Kemasyarakatan, Sosial dan Perorangan

Sumber: Survei Angkatan Kerja Nasional 2004, 2005, 2006, 2007, 2008 and 2009

Indonesian household spending makes way for growth of non-food sector

Businesses in non-food segments will benefit from the shift in consumer expenditure patterns: Businesses in a wide range of non-food sectors including communications and household goods and services will see an increase in business. The education sector will also grow as more people are taking post-graduate degrees in order to advance their careers and more parents are sending their children to good schools. Indonesian people will also spend more on transport, leisure and recreation and hotels and catering.

http://www.euromonitor.com/Indonesian_household_spending_makes_way_for_growth_of_non_food_sector

Author: An Hodgson, Date published: 6 Dec 2007

What is a Service and What is a Good?• “If you drop it on your foot, it won’t hurt

you.” (Good or service?)

The Goods-Services Continuum

• “Services never include goods and goods never include services.” (True or false?)

Proportion of Goods & Services in Purchase Bundle

Goods Services

100% 75 50 25 0 25 50 75 100%

Self-service gasoline…………….

Personal computer……………

Office copier………………….

Fast-food restaurant…………

Gourmet restaurant…………

Auto repair……………………

Airline flight…………………….

Haircut………………………….

Goods versus ServicesGoods versus Services

Can be resold Can be inventoried Some aspects of quality

measurable Selling is distinct from

production Product is transportable Site of facility important for cost Often easy to automate Revenue generated primarily

from tangible product

Reselling unusual Difficult to inventory Quality difficult to measure Selling is part of service Provider, not product is

transportable Site of facility important for

customer contact Often difficult to automate Revenue generated primarily

from intangible service.

Good Service

Something to remember!

Customer conduct transactions directly with the service provider, most often in person

Customer must rely on the reputation of the service firm.

Customer can play an active part in the process.

Service can’t be inspected before delivery.

You can’t make happy guests with unhappy employess.

In the service business, ………

Service Definitions“Services are economic activities that produce time, place, form, or psychological utility for the consumer”

(Robert G. Murdick, Barry Render, & Roberta S. Russel)

“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 Coproducer” (James Fitzsimmons)

Definition of Service Firms

Service Enterprises are Organizations that Facilitate the Production and Distribution of Goods, Support Other Firms in Meeting Their Goals, and Add Value to Our Personal Lives.

(James Fitzsimmons)

The Service PackageSupporting Facility: The physical resources that must be in place before a service can be sold. Examples are golf course, ski lift, hospital, airplane.Facilitating Goods: The material purchased or consumed by the buyer or items provided by the consumer. Examples are food items, auto parts, legal documents, golf clubs.Information: Data of information that is provided by the customer to enable efficient and customized service. Examples patient medical records, customer preferences from prior visit.Explicit Services: Benefits readily observable by the senses. The essential or intrinsic features. Examples are quality of meal, attitude of the waiter, on-time departure.Implicit Services: Psychological benefits or extrinsic features which the consumer may sense only vaguely. Examples are privacy of loan office, security of a well lighted parking lot.

Unique Characteristics of Services

IntangibilityIntangibility: creative advertising, no patient protection, importance of reputation

PerishabilityPerishability: cannot inventory, opportunity loss of idle capacity, need to match supply with demand

HeterogeneityHeterogeneity: customer participation in delivery process results in variability

SimultaneitySimultaneity: opportunities for personal selling, interaction creates customer perceptions of quality

Customer Participation in the Service ProcessCustomer Participation in the Service Process:: attention to facility design but opportunities for co-production

The Service Process Matrix

Degree of Interaction and Customization

Low High

Services Factory: Service Shop:

Degree of Labor Intensity

Low

Airlines Hospitals

Trucking Auto repair

Hotels Other repair services

Resort & Recreation  

High

Mass Service: Professional Service:

Retailing Doctors

Wholesaling Lawyers

Schools Accountants

Retails Aspects of Com- Architects

mercial Banking  

Challenges for Service manager

Service Factory

Service Shop

Mass Service

Professional Service

Low Labor Intensity:• Capital decisions• Technological advance• Managing demand peaks/off-peaks• Scheduling service delivery

High Labor Intensity:• Hiring• Training & Method of development• Employee’s welfare• Scheduling workforce

High Interaction/Customization:• Fighting cost increases• Maintain quality• Response to customer interactions• Gaining employee loyalty

Low Interaction/Customization:• Marketing• Making service “warm”• Attentions to physical surroundings• Maintaining SOP

Stages of Economic Development

Features 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 of health, Global education, recreation

The New Experience Economy

Economy Agrarian Industrial Service Experience

Function Extract Make Deliver Stage

Nature Fungible Tangible Intangible Memorable

Attribute Natural Standardized Customized Personal

Method of supply

Stored in bulk Inventoried Delivered on

demandRevealed over

time

Seller Trader Manufacturer Provider Stager

Buyer Market User Client Guest

The Four Realms of an Experience

Customer Participation Passive Active

Absorption Entertainment

(Movie) Education (Language)

Environmental Relationship

Immersion Esthetic (Tourist)

Escapist (Skydiving)

Customer Participation Passive Active

Absorption Entertainment

(Movie) Education (Language)

Environmental Relationship

Immersion Esthetic (Tourist)

Escapist (Skydiving)

Service Process Orientation

Customer as Co-producerFront and Back Office PerspectivesService Profit Chain Focus on Internal and External CustomersQuality (perceptions vs expectations) Focus on Both Efficiency and Effectiveness Use IT as Productivity Enabler for Both Internal and External Customers

Strategic Service Classification (Relationship with Customers)Strategic Service Classification (Relationship with Customers)

Type of Relationship between Service Organization and Its Customers

Nature of

Service Delivery “Membership” relationship No formal relationship

Insurance Radio station

Telephone subscription Police protection

Continuous delivery College enrollment Lighthouse

of service Banking Public Highway

American Automobile association

Long-distance phone calls Restaurant

Theater series subscription Mail service

Discrete transactions Commuter ticket or transit pass Toll highway

Sam’s Wholesale Club Movie theater

Egghead computer software Public transportation

Strategic Service Classification (Method of Service Delivery)Strategic Service Classification (Method of Service Delivery)

Availability of Service OutletsNature of Interaction between Customer and Service Organization Single site Multiple site Customer goes to Theater Bus serviceservice organization Barbershop Fast-food chain

Service organization Lawn care service Mail deliverycomes to customer Pest control service AAA emergency repairs Taxi

Customer and serviceorganization transact at Credit card company Broadcast network arm’s length (mail or Local TV station Telephone companyelectronic communications)

Dimensions of Service Quality

Time and timeliness: How long a customer must wait for service, and if it is completed on time. For example, is an overnight package delivered overnight? Completeness: Is everything the customer asked for provided? For example, is a mail order from a catalog company complete when delivered? Courtesy: How customers are treated by employees. For example, are catalog phone operators at Lands' End nice and are their voices pleasant? Consistency: Is the same level of service provided to each customer each time? Is your newspaper delivered on time every morning? Accessibility and convenience: How easy it is to obtain the service. For example, when you call Lands' End or L. L. Bean does the service representative answer quickly? Accuracy: Is the service performed right every time? Is your bank or credit card statement correct every month? Responsiveness: How well the company reacts to unusual situations, which can happen frequently in a service company. For example, how well a telephone operator at L.L. Bean is able to respond to a customer's questions about a catalog item not fully described in the catalog.

Open Systems View of Service Operations

Service Process Consumer Evaluation

Consumer arrivals Consumer participant departures Criteria

(input) Consumer-Provider ( output) Measurement

interface

Control Monitor

Customer demand Service operations manager Service personnel

Production function:

Perceived needs Alter Monitor and control process Schedule Empowerment

Location demand Marketing function: supply Training

Interact with consumers Attitudes

Control demand

Modify as necessary

Define standard

Service package

Supporting facility

Communicate Facilitating goods Basis of

by advertising Explicit services selection

Implicit services