Transcript Service Supply Chain Management

Chapter 13
Service Supply Relationships
McGraw-Hill/Irwin
Service Management: Operations, Strategy, and
Information Technology, 6e
Copyright © 2008 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Learning Objectives
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Contrast the supply chain for physical goods with
service supplier relationships.
Identify the sources of value in a service supply
relationship.
Discuss the managerial implications of bidirectional
relationships.
Identify the three factor that drive profitability for a
professional service firm.
Classify business services based on the focus of the
service and its importance to the outsourcing
organization.
Discuss the managerial considerations to be
addressed in outsourcing services.
13-2
Supply Chain for Physical Goods
Suppliers
Disposal
Recycling/Remanufacturing
Product and
Process
Design
Manufacturing
Material Transfer
Distribution
Retailing
Consumer
After-sales
Service
Information Transfer
13-3
Customer-Supplier Duality in Service
Supply Relationships (Hubs)
Supplier
Service
Design
Material transfer
Service
Provider
Customer
Information transfer
13-4
Single-Level Bidirectional
Service Supply Relationship
Service
Category
Customer
-Supplier
>Input
Output>
Service
Provider
Minds
Student
>Mind
Knowledge>
Professor
Bodies
Patient
>Tooth
Filling>
Dentist
Belongings
Investor
>Money
Interest>
Bank
Information
Client
>Documents
1040>
Tax Preparer
13-5
Two-Level Bidirectional Service
Supply Relationship
Service
Category
Customer
-Supplier
>Input
Output>
Service
Provider
>Input
Output>
Provider’s
Supplier
Minds
Patient
>Disturbed
Treated>
Therapist
>Prescription
Drugs>
Pharmacy
Bodies
Patient
>Blood
Diagnosis>
Physician
>Sample
Test Result>
Lab
Belongings
Driver
>Car
Repaired>
Garage
>Engine
Rebuilt>
Machine
Shop
Information
Home
Buyer
>Property
Loan>
Mortgage
Company
>Location
Clear Title>
Title
Search
13-6
Service Supply Relationships
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Customer-Supplier Duality
Service Supply Relationships are Hubs,
not Chains
Service Capacity is Analogous to
Inventory
Customer Supplied Inputs Can Vary In
Quality
13-7
Sources of Value in Service
Supply Relationships
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Bi-directional Optimization
Managing Productive Capacity
- Transfer: make knowledge available (e.g.
web based FAQ database)
- Replacement: substitute technology for
server (e.g. digital blood pressure device)
- Embellishment: enable self-service by
teaching (e.g. change surgical dressing)
Management of Perishability
13-8
Impact of Service Supply
Relationships
Element or Link
Channel Structure
Service Recipient
Channel Integration
Before
Functional silos
Passive
Vertical (own the channel to
integrate)
Flow of Service
Flow of Information
(upstream)
Available waiting for demand
Pull: manual reporting of
demand data results in
delayed management
response.
Little or no knowledge of
resource deployment
Predominantly in-house;
locally optimized for
efficiency
Flow of Information
(downstream)
Business Processes
Demand Management
Limited to use of
appointments and
reservations.
After
Process orientation
Active as a co-producer
Virtual (IT and other
mechanism permit integration
without ownership)
Activated upon demand
Push: high level of connectivity
and transparency with fast or
instantaneous access to most
recent demand data.
Real-time tracking and
dispatching
In-house for key processes,
others out-sourced for
flexibility; integrated and
synchronized to match supply
with demand
Proactive involving customer in
scheduling to achieve bidirectional optimization
13-9
Impact of Service Supply
Relationships (cont.)
Element or Link
Capacity Management
Before
Limited to use of part-time
employees
Facilitating Goods
High; in anticipation of
demand
Inflexible; standardized and
impersonal
Static; fixed daily schedules
Service Delivery
Routing and scheduling
New Service Design
Pricing
International
Operations
Marketing initiatives based on
firm's perception of customer
needs
Fixed
Focus on domestic market
After
Creative use of cross-trained
employees, outsourcing, and
customer self-service.
Lower; owing to process
transparency
Flexible; personable with
customization possible.
Dynamic; based on system
connectivity and process
visibility
Virtual value chain design with
customer data base information
driving new services
Variable; yield management
promotes off-peak demand and
avoid idle capacity
Global reach with Internet
13-10
Professional Service Firms
Body of Knowledge
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Cognitive knowledge (know-what)
Advanced skills (know-how)
Systems understanding (know-why)
Self-motivated creativity (care-why)
13-11
Professional Service Firms
Operational Characteristics
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Profit-per-Partner
 Pr ofit  Fees  Staff 
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Pr ofit  per  Partner  
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 Fees  Staff  Partners
 M arginPr oductivityLeverage
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Productivity
Fees  Fees  Hours

Pr oductivity


Staff  Hours Staff 
 ValueUtilization
13-12
Profitability Tactics
Tactic
Lower Fixed (Overhead) Costs
Category
Margin
Improve cash cycle
Reduce office space and equipment
Reduce administrative and support staff
Raise Prices and Differentiate
Productivity
Specialize, innovate, add more value
Target higher value work
Invest in training
Invest in higher value services
Address Underperforming Projects
Productivity
Drop unprofitable services
Drop unprofitable customers
Increase Volume
Productivity
Increase utilization
Lower Variable Costs
Leverage
Improve engagement management
Increase leverage of professionals
Increase the use of paraprofessionals
13-13
Outsourcing Services
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Benefits
• Allows the firm to focus on its core competence
• Service is cheaper to outsource than perform in-house
• Provides access to latest technology
• Leverage benefits of supplier economy of scale
Risks
• Loss of direct control of quality
• Jeopardizes employee loyalty
• Exposure to data security and customer privacy
• Dependence on one supplier compromises future
negotiation leverage
• Additional coordination expense and delays
• Atrophy of in-house capability to perform service
13-14
Outsourcing Process
Need Identification
Problem Definition
"Do-versus-Buy" Analysis
Involve Interested Parties
Specification Development
Information Search
Vendor Selection
References
Personal Contact
Recommendations
Trade Directory
Experience
Reputation
References
Cost
Location
Size
Performance Evaluation
Identify Evaluator
Quality of Work
Communication
Meet Deadlines
Flexibility
Dependability
13-15
Taxonomy for Outsourcing
Business Services
Importance of Service
Property
Focus
of
People
Service
Process
Low
Facility Support:
-Laundry
-Janitorial
-Waste disposal
Employee Support:
-Food service
-Plant security
-Temporary personnel
Facilitator:
-Bookkeeping
-Travel booking
-Packaged software
High
Equipment Support:
-Repairs
-Maintenance
-Product testing
Employee Development:
-Training
-Education
-Medical care
Professional:
-Advertising
-Public relations
-Legal
13-16
Outsourcing Considerations
Focus on Property
Facility Support Service
• Low cost
• Identify responsible party to evaluate performance
• Precise specifications can be written
Equipment Support Service
• Experience and reputation of vendor
• Availability of vendor for emergency response
• Designate person to make service call and to
check that service is satisfactory
13-17
Outsourcing Considerations
Focus on People
Employee Support Service
• Contact vendor clients for references
• Specifications prepared with end user input
• Evaluate performance on a periodic basis
Employee Development Service
• Experience with particular industry important
• Involve high levels of management in vendor
identification and selection
• Contact vendor clients for references
• Use employees to evaluate vendor performance
13-18
Outsourcing Considerations
Focus on Process
Facilitator Service
• Knowledge of alternate vendors important
• Involve end user in vendor identification
• References or third party evaluations useful
• Have user write detailed specifications
Professional Service
• Involve high level management in vendor
identification and selection
• Reputation and experience very important
• Performance evaluation by top management
13-19
Topics for Discussion
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How can effective goods supply chain
management support environmental
sustainability?
Explain why the goods analogy of a supply
chain is inappropriate for services?
Discuss the implication of service outsourcing
on employees, stockholders, customers, and
host country economy when a firm
outsources a call center overseas.
13-20