Service Oriented Supply

Chain
Syed Ubaid Ahmed
Service Supply Chain

• Any service delivery system can be viewed as a chain or network of

activities, which involves number of participants. Just like supply
chain in manufacturing, in services also we can see that all the
participants are related to each other. The objective of achieving
efficiency and or responsiveness is equally important and relevant in
the whole network of participants involved in delivery service called
service supply chain. The structure of supply chain can vary from a
simple serial supply chain to a broad network of supply chain entities.
Distinctive Characteristics of Service
• Customer Participation
• Intangibility
• Simultaneity
• Perishability
• Heterogeneity
• Transferability
Customer Participation
• Physical presence of customer in service process many times is inevitable.
• What a customer notices when he/she enters the service process?
Physical surroundings of service facility
Matching the service facility design of physical surroundings as per customer’s
perceptions (Interior decoration, Layout, Noise)
• Customer participates in the service system by providing right information, by acquiring
knowledge about utilizing the self-service technologies and by being motivated to learn
advance technologies which are substitutes of labor intensive services
The effective treatment of a patient depends on the right and correct medical record
provided by the customer
Effective learning at school depends on the efforts of students
Customer must learn how to use internet to perform web check-in well in advance of
flight departure to avoid any delay at check-in counters at airport
Intangibility
• We cannot touch service, feel service and test the performance of
service with objective measures like we do for goods
• Intangible service outcomes: Feelings of anxiety and joy, convenience,
personal satisfaction
• Services are ideas, concept and performance
• Difficult to obtain patents for services and hence innovations can be
copied easily and quickly.
• Due to intangibility, companies need to materialize the service to
make the customer aware that he has been served.
• How to measure?
Intangibility

• Address customer’s psychological needs

India’s successful airline Indigo always provide services which are on time
performance, clean, neat aircraft and good onboard service. Indigo believe that
on-time flights means on-time meetings
• Avoid being copied by the competitors by introducing innovations which are
highly dependent on infrastructure of services like information systems
Implementing flexible expensive information systems where new services can be
introduced with ease can prevent companies from being copied
• Materialize the service by using some symbols and slogans, offering gifts
Some hotels give a fruit basket, some cookies and drinks on the arrival of guest
just to convey the guest that he is being cared by the hotel.
Simultaneity
• Services are produced and consumed at the same time hence service
production and service consumption are inseparable.
• Service is a experience, which cannot be stored as inventory unlike goods
which can be inventoried.
Goods inventory can act as buffer to meet varying demand
Customer’s demand for goods is met quite late after the production of
goods in some factory from the stored inventory
Goods can be inspected for quality before delivering to the customer
because of time gap between production and consumption
• We cannot inspect services before the consumption of service by the
customer
Simultaneity

• We do not get any opportunity to check the quality of service before

it is delivered because the perception of a customer may change
during the service is being delivered.
• Once a service provider commits a mistake, It may be very difficult to
correct the mistake in services.
Perishability
• Service is a perishable commodity and cannot be inventoried.
• In contrast to services, tangible goods can be stored for long and can be used at the later
date. Fluctuations of demand can be accommodated by keeping inventory. During the
lean demand periods inventory can be held for later periods when demand rises.
• Services cannot stock its inventory. During less demand periods or no demand periods
the idle capacity leads to opportunity loss. The opportunity lost is a loss forever in
services.
• EXAMPLES
• Can we measure the cost involved in
Unoccupied room during Off season in a hotel?
Can we store a service and retrieve it for later use?
An hour of lawyer or a doctor
Perishability
• Perishability occurs due to highly varying customer demand and due to fixed capacity of services.
• Example of Perishable Airline Seats
• An airline opened booking of 100 tickets 3 months in advance on June 15, 2011 for the flight to
depart on September 15, 2011. On September 10, 2011 the airline realizes all tickets sold. They
stopped entertaining further reservation.
• On September 15, 2011, three hours before the departure of flight, airline realized that 5
passengers cancelled their trip. After deducting reservation charges, airline had to refund back
some amount to the passengers.
 Can Airline get 5 new passengers within three hours of flight departure?
 What would be the loss of flying with 5 empty seats?
 Can we adjust capacity (in terms of number of seats) of airplane?
Heterogeneity
• Services provided by humans for other humans
• Inconsistent behavior of service provider
• Consistent performance of service provider can be experienced differently
by different customers due to varying perceptions as shown in figure
• Same service provider may perform differently due to physical and
psychological conditions
Due to lack of proper training and employee retaining policies
Due to nonstandard working environment
Due to lack of proper evaluation of performance of employee during
customer is getting served
• All above points lead to Inconsistent service delivery
Heterogeneity
Transferability
• Customer expectations are transferable from one type of service to
another type of service or from one service sector to other service
sector.
• Diverse services tend to have more in common because of similar
elements.
• EXAMPLES: Level of personal contact, length of time spent, assistance
provided by sales person and guarantee of satisfaction
Customers compare a particular service not only with direct
competitors but with the other similar non related services.
Dimensions of Service Quality
Issues in service supply chains
• It is very important to understand the reasons which make service
supply chain different form that of goods supply chains. Some of
them are discussed below.
Customer-supplier duality
• In services, the service activity is initiated by the customers.
• Service is an act or deed performed on the customer’s mind, body,
belongings or information provided by the customer.
• Hence, customer acts like a supplier to the service provider who
provides something to get the service done.
• This dual role of customer, of being supplier also, in service exchange
is called as customer-supplier duality. The customer-supplier duality
is also known as bidirectional relationships between service provider
and customer
Customer-supplier duality
Single-level bidirectional relationship
Two level bidirectional relationship
Bidirectional relationships
• In single level bidirectional relationship, customer provides inputs to the
service provider and service provider performs the service. The service
provider converts the inputs into an output in the service production
process and delivers to the customer.
• In two-level bidirectional relationship service provider employs another
service provider (second level) or supplier who assists with the processing
of customer inputs. This is also analogous to situation where some service
providers (initial) outsource the repair work or any service to other service
provider, that is second level service provider. That means the initial service
provider acts as an interface between the second level service provider and
customer.
• Various examples of Single-level and Two-level bidirectional relationships
can be seen
SINGLE-LEVEL BIDIRECTIONAL RELATIONSHIP
TWO-LEVEL BIDIRECTIONAL RELATIONSHIP
Pure services provide packaged service
• Service providers of some of the pure services provide their
respective services in the form of packaged service. Packaged service
is a set of more than one service offered together by different service
provider. It can be widely seen in hospitality and tourism industry or
holiday industry, how travel agent through tour operator form link
with hotels, airlines, transportation and restaurants to provide
customers with a complete holiday experience
TOURISM AND HOSPITALITY SUPPLY CHAIN
Outsourcing
• To obtain (goods or a service) by contract from an outside supplier.
• In recent past most of the organizations have started outsourcing
their internal functions to focus on core competencies. Service
outsourcing is also referred to as Business Process Outsourcing (BPO),
which has become specialist firms offering focused services. Most of
the service companies like banking, financial services, and insurance
(BFSI) and telecommunication service providers are outsourcing their
in-house service products to outsource to IT and ITeS companies.
 Outsourcing Process

Need Identification Information Search Vendor Selection

Problem Definition References Experience Cost
"Do-versus-Buy" Analysis Personal Contact
Involve Interested Parties Recommendations Reputation Location
Specification Development Trade Directory References Size

Performance Evaluation
Identify Evaluator Meet Deadlines
Quality of Work Flexibility
Communication Dependability
Outsourcing
• 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 customer 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
Challenges in managing service supply chains
• Human element in services
In services human capital is the most contributory asset. Each human
being is unique regardless of training given to them. Each employee
works differently even if standardized procedures prevail in
organization. Due to varying outcome of each employee, managing and
controlling performance of service SC becomes a challenging task. The
other factor impacting the performance of service supply chain is the
influence of local environment which in broad sense will become more
varying from global perspectives. Most of the service organizations
have presence globally.
Challenges in managing service supply chains
• Difficulty in measuring performance of service supply chain
• The output or outcomes of services which are measured in terms of
‘service level agreements’ are not as precise as the clear
specifications exist in goods supply chain. In service delivery it is very
difficult to produce the complete service package in advance of the
actual demand realized, which further adds to the complexity in
measuring the performance of service. Generally, supply chain set
responsiveness as important performance measure. In service supply
chain like repair and servicing center, even if the servicing employee is
prompt and ready to serve, the unavailability of parts can affect the
responsiveness.
Challenges in managing service supply chains
Varying output
• In services, the output outcome or economic activity generated varies
greatly over time period, with region in which service is performed,
with human skill and capability, with the level of understanding of
customer