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