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Part ONE. UNDERSTANDING SERVICES, 1
Chapter 1. The Role of Services in an Economy, 3
Learning Objectives, 3
Chapter Preview, 4
Service Definitions, 4
Facilitating Role of Services in an Economy, 4
Economic Evolution, 5
Stages of Economic Development, 7
Preindustrial Society, 7
Industrial Society, 7
Postindustrial Society, 7
Nature of the Service Sector, 8
The 21^st Century Career, 10
New Experience Economy, 11
Consumer Service Experience, 11
Business Service Experience, 11
Sources of Service Sector Growth, 13
Information Technology, 13
Innovation, 14
Changing Demographics, 14
Service Benchmark: Wal-Mart is Number One on the Fortune 500 List, 15
Summary, 15
Key Terms and Definitions, 15
Topics for Discussion, 15
Interactive Exercise, 16
Selected Bibliography, 16
Endnotes, 16
Chapter 2. The Nature of Services, 17
Learning Objectives, 17
Chapter Preview, 18
Distinctive Characteristics of Service Operations, 18
Customer Participation in the Service Process, 18
Simultaneity, 19
Perishability, 19
Intangibility, 20
Heterogeneity, 20
Non-ownership Characteristic of Services, 21
The Service Package, 22
Grouping Services by Delivery Process, 24
Classifying Services for Strategic Insights, 26
Nature of the Service Act, 26
Relationship with Customers, 27
Customization and Judgment, 27
Nature of Demand and Capacity, 27
Method of Service Delivery, 28
An Open-Systems View of Services, 29
Service Benchmark: Outside the Box, 30
Summary, 30
Key Terms and Definitions, 31
Topics for Discussion, 31
Interactive Exercise, 31
Case 2.1. Village Volvo, 31
Case 2.2. Xpresso Lube, 32
Selected Bibliography, 34
Endnotes, 34
Chapter 3. Service Strategy, 35
Learning Objectives, 35
Chapter Preview, 35
The Strategic Service Vision, 36
Understanding the Competitive Environment of Services, 36
Competitive Service Strategies, 38
Overall Cost Leadership, 39
Differentiation, 40
Focus, 41
Winning Customers in the Marketplace, 41
Qualifiers, 42
Service Winners, 42
Service Losers, 42
The Competitive Role of Information in Services, 42
Creation of Barriers to Entry, 43
Revenue Generation, 44
Database Asset, 45
Productivity Enhancement, 45
The Virtual Value Chain, 47
First Stage (Visibility), 48
Second Stage (Mirroring Capability), 49
Third Stage (New Customer Relationships), 49
Limits in the Use of Information, 49
Anticompetitive, 49
Fairness, 49
Invasion of Privacy, 49
Data Security, 50
Reliability, 50
Using Information to Categorize Customers, 50
Stages in Service Firm Competitiveness, 50
Available for Service, 50
Journeyman, 52
Distinctive Competence Achieved, 52
World-Class Service Delivery, 52
Service Benchmark: Central Market Shuns Conventional Wisdom and Big-Name Products, 53
Summary, 53
Key Terms and Definitions, 54
Interactive Exercise, 54
Topics for Discussion, 55
Case 3.1. United Commercial Bank and El Banco, 55
Case 3.2. The Alamo Drafthouse, 57
Selected Bibliography, 59
Endnotes, 59
Part TWO. DESIGNING THE SERVICE ENTERPRISE, 61
Chapter 4. New Service Development, 63
Learning Objectives, 63
Chapter Preview, 64
Innovation in Services, 64
New Service Development, 66
Service Design Elements, 68
Customer Value Equation, 69
Strategic Positioning Through Process Structure, 70
Service Blueprinting, 71
Taxonomy for Service Process Design, 73
Degree of Divergence, 74
Object of the Service Process, 74
Type of Customer Contact, 74
Generic Approaches to Service System Design, 75
Production-Line Approach, 75
Customer as Coproducer, 77
Customer Contact Approach, 78
Information Empowerment, 80
Service Benchmark: A Better Mousetrap, 82
Summary, 82
Key Terms and Definitions, 82
Topics for Discussion, 83
Interactive Exercise, 83
Case 4.1. 100 Yen Sushi House, 83
Case 4.2. Commuter Cleaning—A New Venture Proposal, 84
Case 4.3. Golfsmith, 86
Selected Bibliography, 87
Endnotes, 88
Chapter 5. Technology in Services, 89
Learning Objectives, 89
Chapter Preview, 90
Technology in the Service Encounter, 90
The Emergence of Self-Service, 91
Automation in Services, 92
Internet Services, 94
E-Commerce, 94
Virtual versus Physical Services, 95
E-Service Product Dimensions, 96
E-Service Process Dimensions, 96
E-Business Models, 96
Economics of Scalability, 97
Technology Innovation in Services, 98
Challenges of Adopting New Technology in Services, 98
Readiness to Embrace New Technology, 100
The Case of Radio Frequency Identification, 100
Service Benchmark: Best-in-Practice is Just a Click Away, 101
Summary, 101
Key Terms and Definitions, 101
Topics for Discussion, 101
Interactive Exercise, 102
Case 5.1. Amazon.com, 102
Case 5.2. Evolution of B2C E-Commerce in Japan, 103
Selected Bibliography, 105
Endnotes, 106
Chapter 6. Service Quality, 107
Learning Objectives, 107
Chapter Preview, 107
Defining Service Quality, 108
Dimensions of Service Quality, 108
Gaps in Service Quality, 109
Measuring Service Quality, 111
SERVQUAL, 111
Quality Service by Design, 113
Incorporation of Quality in the Service Package, 113
Taguchi Methods, 114
Poka-Yoke (Failsafing), 114
Quality Function Deployment, 116
Walk-Through Audit, 118
Designing a Walk-Through Audit, 118
Implications for Management, 120
The Walk-Through Audit as a Diagnostic Instrument, 120
Achieving Service Quality, 122
Cost of Quality, 122
Statistical Process Control, 123
Unconditional Service Guarantee, 127
Service Recovery, 128
Approaches to Service Recovery, 129
Stages in Quality Development, 130
Service Benchmark: Bronson Methodist Hospital, 131
Summary, 131
Key Terms and Definitions, 132
Topics for Discussion, 132
Interactive Exercise, 132
Solved Problems, 132
Exercises, 134
Case 6.1. Clean Sweep, Inc., 136
Case 6.2. The Complaint Letter, 138
Case 6.3. The Museum of Art and Design, 140
Selected Bibliography, 141
Endnotes, 144
Chapter 7. Process Improvement, 145
Learning Objectives, 145
Chapter Preview, 145
Quality and Productivity Improvement Process, 146
Foundations of Continuous Improvement, 146
Plan-Do-Check-Act (PDCA) Cycle, 146
Problem Solving, 147
Quality Tools for Analysis and Problem Solving, 148
Check Sheet, 148
Run Chart, 148
Histogram, 148
Pareto Chart, 149
Flowchart, 149
Cause-and-Effect Diagram, 150
Scatter Diagram, 151
Control Chart, 151
Benchmarking, 151
Quality Improvement Programs, 153
Personnel Programs for Quality Assurance, 153
Deming's 14-Point Program, 154
Baldrige National Quality Award, 155
ISO 9000, 156
Six Sigma, 156
Service Benchmark: Service, Education, and Health Care Winners of The Baldrige National Quality Award, 159
Summary, 160
Key Terms and Definitions, 160
Topics for Discussion, 160
Interactive Exercise, 160
Case 7.1. Mega Bytes Restaurant, 160
Chapter 7 Supplement: Data Envelopment Analysis (DEA), 165
Measuring Service Productivity, 165
The DEA Model, 165
DEA and Strategic Planning, 171
Exercises, 171
Case 7.2. Mid-Atlantic Bus Lines, 172
Selected Bibliography, 172
Endnotes, 173
Chapter 8. The Service Encounter, 175
Learning Objectives, 175
Chapter Preview, 176
The Service Encounter Triad, 176
Encounter Dominated by the Service Organization, 177
Contact Personnel–Dominated Encounter, 177
Customer-Dominated Encounter, 177
The Service Organization, 177
Culture, 178
Empowerment, 179
Control Systems, 179
Contact Personnel, 180
Selection, 180
Training, 181
Creating an Ethical Climate, 182
The Customer, 183
Expectations and Attitudes, 183
The Role of Scripts in Coproduction, 184
Summary of Service Encounters, 185
Creating a Customer Service Orientation, 185
Service Profit Chain, 186
Summary, 188
Service Benchmark: Miss Manners on Complaint Handling, 189
Key Terms and Definitions, 190
Topics for Discussion, 190
Interactive Exercise, 190
Case 8.1. Amy's Ice Cream, 190
Case 8.2. Enterprise Rent-A-Car, 191
Selected Bibliography, 194
Endnotes, 196
Chapter 9. Supporting Facility and Process Flows, 197
Learning Objectives, 197
Chapter Preview, 198
Environmental Psychology and Orientation, 198
Servicescapes, 198
Behaviors in Servicescapes, 199
Environmental Dimensions of Servicescapes, 200
Facility Design, 202
Nature and Objectives of Service Organizations, 202
Land Availability and Space Requirements, 203
Flexibility, 203
Security, 203
Aesthetic Factors, 204
The Community and Environment, 204
Process Analysis, 205
Types of Processes, 205
Process Terminology, 205
Facility Layout, 207
Product Layout and the Work Allocation Problem, 207
Process Layout and the Relative Location Problem, 210
Service Benchmark: Where, Oh Where Shall We Go?, 213
Summary, 213
Key Terms and Definitions, 213
Topics for Discussion, 214
Interactive Exercise, 214
Solved Problems, 214
Exercises, 216
Case 9.1. Health Maintenance Organization (A), 219
Case 9.2. Health Maintenance Organization (B), 220
Case 9.3. Esquire Department Store, 220
Case 9.4. Central Market, 221
Selected Bibliography, 223
Endnotes, 223
Chapter 10. Service Facility Location, 225
Learning Objectives, 225
Chapter Preview, 226
Strategic Location Considerations, 226
Competitive Clustering, 227
Saturation Marketing, 227
Marketing Intermediaries, 228
Substitution of Communication for Transportation, 228
Separation of Front from Back Office, 228
Impact of the Internet on Service Location, 229
Site Considerations, 229
Regression Analysis in Location Decisions, 230
Geographic Information System, 230
Modeling Considerations, 232
Geographic Representation, 232
Number of Facilities, 234
Optimization Criteria, 234
Facility Location Techniques, 236
Single Facility, 237
Center of Gravity, 240
Locating a Retail Outlet Using the Huff Model, 241
Multiple Facilities, 242
Summary, 244
Service Benchmark: Here a Bun, There a Bun, Everywhere a Bun-Bun, 245
Key Terms and Definitions, 245
Topics for Discussion, 246
Interactive Exercise, 246
Solved Problems, 246
Exercises, 248
Case 10.1. Health Maintenance Organization (C), 250
Case 10.2. Athol Furniture, Inc., 251
Selected Bibliography, 253
Endnotes, 254
Part THREE. MANAGING SERVICE OPERATIONS, 255
Chapter 11. Managing Capacity and Demand, 257
Learning Objectives, 257
Chapter Preview, 257
Generic Strategies of Level Capacity and Chase Demand, 258
Strategies for Managing Demand, 258
Customer-induced Variability, 258
Segmenting Demand, 258
Offering Price Incentives, 260
Promoting Off-Peak Demand, 261
Developing Complementary Services, 261
Reservation Systems and Overbooking, 262
Strategies for Managing Capacity, 264
Defining Service Capacity, 264
Daily Workshift Scheduling, 265
Weekly Workshift Scheduling with Days-Off Constraint, 267
Increasing Customer Participation, 268
Creating Adjustable Capacity, 268
Sharing Capacity, 268
Cross-Training Employees, 269
Using Part-Time Employees, 269
Scheduling Part-Time Tellers at a Drive-In Bank, 269
Yield Management, 270
Yield Management Applications, 274
Summary, 275
Service Benchmark: Yield Management at American Airlines, 276
Key Terms and Definitions, 277
Topics for Discussion, 277
Interactive Exercise, 278
Solved Problems, 278
Exercises, 280
Case 11.1. River City National Bank, 282
Case 11.2. Gateway International Airport, 284
Case 11.3. The Yield Management Analyst, 285
Case 11.4. Sequoia Airlines, 288
Selected Bibliography, 289
Endnotes, 290
Chapter 12. Managing Waiting Lines, 293
Learning Objectives, 293
Chapter Preview, 294
The Economics of Waiting, 294
Queuing Systems, 294
The Psychology of Waiting, 295
That Old Empty Feeling, 296
A Foot in the Door, 296
The Light at the End of the Tunnel, 296
Excuse Me, But I Was Next, 297
Principles of Waiting Line Management, 297
Animate, 298
Discriminate, 298
Automate, 299
Obfuscate, 299
Essential Features of Queuing Systems, 300
Calling Population, 300
Arrival Process, 300
Queue Configuration, 304
Queue Discipline, 306
Service Process, 307
Summary, 308
Service Benchmark: Five Minutes in Line is Longer Than Five Minutes at Hard Labor, 309
Key Terms and Definitions, 309
Topics for Discussion, 309
Interactive Exercise, 309
Case 12.1. Thrifty Car Rental, 310
Case 12.2. Eye'll Be Seeing You, 311
Selected Bibliography, 312
Endnotes, 313
Chapter 13. Service Supply Relationships, 315
Learning Objectives, 315
Chapter Preview, 315
Supply Chain Management, 316
Network Model, 316
Managing Uncertainty, 317
Service Supply Relationships, 319
Customer-Supplier Duality, 319
Service Supply Relationships are Hubs, Not Chains, 319
Service Capacity is Analogous to Inventory, 320
Customer Supplied Inputs Can Vary in Quality, 320
Managing Service Relationships, 320
Bidirectional Optimization, 320
Productive Capacity, 322
Perishability, 322
Professional Service Firms, 323
Attributes of Professional Services, 323
Operational Characteristies, 323
Outsourcing Services, 326
Benefits and Risks of Outsourcing Services, 326
Classification of Business Services, 327
Managerial Considerations of Service Outsourcing, 328
Summary, 330
Service Benchmark: Citizens Come First in Lynchburg, 331
Key Terms and Definitions, 331
Topics for Discussion, 331
Interactive Exercise, 331
Case 13.1. Boomer Consulting, 332
Case 13.2. Peapod—Smart Shopping for Busy People, 334
Case 13.3. Mortgage Service Game, 336
Selected Bibliography, 338
Endnotes, 338
Chapter 14. Growth and Globalization of Services, 339
Learning Objectives, 339
Chapter Preview, 340
Domestic Growth and Expansion Strategies, 340
Focused Service, 340
Focused Network, 341
Clustered Service, 342
Diversified Network, 342
Franchising, 342
The Nature of Franchising, 343
Benefits to the Franchisee, 343
Issues for the Franchiser, 344
Globalization of Services, 345
Generic International Strategies, 346
The Nature of the Borderless World, 347
Planning Transnational Operations, 348
Global Service Strategies, 351
Multicountry Expansion, 352
Importing Customers, 352
Following Your Customers, 353
Service Offshoring, 353
Beating the Clock, 354
Service Benchmark: Small World and Other Myths, 354
Summary, 355
Key Terms and Definitions, 355
Topics for Discussion, 355
Interactive Exercise, 355
Case 14.1. Goodwill Industries International, Inc., 356
Case 14.2. Federal Express: Tiger International Acquisition, 358
Selected Bibliography, 360
Endnotes, 361
Chapter 15. Managing Projects, 363
Learning Objectives, 363
Chapter Preview, 363
The Nature of Project Management, 364
Characteristics of Projects, 364
Project Management Process, 364
Selecting the Project Manager, 365
Building the Project Team, 365
Principles of Effective Project Management, 366
Techniques for Project Management, 366
Gantt Project Charts, 366
A Critique of Gantt Charts, 368
Constructing a Project Network, 368
Critical Path Method, 369
Microsoft Project for Windows Analysis, 372
Resource Constraints, 375
Activity Crashing, 375
Incorporating Uncertainty in Activity Times, 380
Estimating Activity Duration Distributions, 380
Project Completion Time Distribution, 381
A Critique of the Project Completion Time Analysis, 382
Problems with Implementing Critical Path Analysis, 384
Monitoring Projects, 384
Earned Value Chart, 384
Project Termination, 386
Project History Report, 386
Summary, 386
Service Benchmark: The House That Warren Built, 387
Key Terms and Definitions, 387
Topics for Discussion, 387
Interactive Exercise, 388
Solved Problems, 388
Exercises, 389
Case 15.1. Info-Systems, Inc., 394
Case 15.2. Whittier County Hospital, 395
Selected Bibliography, 396
Endnotes, 397
Part FOUR. QUANTITATIVE MODELS FOR SERVICE MANAGEMENT, 399
Chapter 16. Capacity Planning and Queuing Models, 401
Learning Objectives, 401
Chapter Preview, 402
Capacity Planning, 402
Strategic Role of Capacity Decisions, 403
Analytical Queuing Models, 404
Relationships between System Characteristics, 406
Standard M/M/1 Model, 406
Standard M/M/c Model, 408
M/G/1 Model, 411
General Self-Service M/G/∞ Model, 412
Finite-Queue M/M/1 Model, 412
Finite-Queue M/M/c Model, 413
Capacity Planning Criteria, 414
Average Customer Waiting Time, 414
Probability of Excessive Waiting, 415
Minimizing the Sum of Customer Waiting Costs and Service Costs, 416
Probability of Sales Lost Because of Inadequate Waiting Area, 417
Summary, 418
Service Benchmark: Simulation Modeling for Process Reengineering in the Telecommunications Industry, 419
Key Terms and Definitions, 421
Topics for Discussion, 422
Interactive Exercise, 422
Solved Problems, 422
Exercises, 424
Case 16.1. Houston Port Authority, 426
Case 16.2. Freedom Express, 427
Case 16.3. Renaissance Clinic (A), 427
Chapter 16 Supplement: Computer Simulation, 428
Systems Simulation, 429
Simulation Methodology, 429
Monte Carlo Simulation, 431
Generating Random Variables, 431
Discrete-Event Simulation, 434
ServiceModel Simulation Software, 436
Demonstration: Customer Service Call Center, 438
Process Analysis: Manufacturing Cell, 439
Solved Problems, 441
Exercises, 443
Case 16.4. Pronto Pizza, 447
Case 16.5. Renaissance Clinic (B), 447
Selected Bibliography, 448
Endnotes, 448
Chapter 17. Forecasting Demand for Services, 449
Learning Objectives, 449
Chapter Preview, 449
The Choice of Forecasting Method, 450
Subjective Models, 450
Delphi Method, 451
Cross-Impact Analysis, 452
Historical Analogy, 452
Causal Models, 453
Regression Models, 453
Econometric Models, 454
Time Series Models, 454
N-Period Moving Average, 454
Simple Exponential Smoothing, 455
Relationship between α and N, 457
Forecast Error, 458
Exponential Smoothing with Trend Adjustment, 459
Exponential Smoothing with Seasonal Adjustment, 460
Exponential Smoothing with Trend and Seasonal Adjustments, 462
Summary of Exponential Smoothing, 465
Summary, 465
Service Benchmark: L. L. Bean Improves Call-Center Forecasting, 465
Key Terms and Definitions, 468
Topics for Discussion, 468
Interactive Exercise, 468
Solved Problems, 468
Exercises, 471
Case 17.1. Oak Hollow Medical Evaluation Center, 471
Case 17.2. Gnomial Functions, Inc., 473
Selected Bibliography, 474
Endnotes, 474
Chapter 18. Managing Facilitating Goods, 475
Learning Objectives, 475
Chapter Preview, 476
Inventory Theory, 477
Role of Inventory in Services, 477
Characteristics of Inventory Systems, 478
Relevant Costs of an Inventory System, 479
Order Quantity Models, 479
Economic Order Quantity, 480
Inventory Model with Quantity Discounts, 483
Inventory Model with Planned Shortages, 485
Inventory Management under Uncertainty, 488
Inventory Control Systems, 489
Continuous Review System, 489
Periodic Review System, 490
The ABCs of Inventory Control, 492
Single-Period Model for Perishable Goods, 493
Expected Value Analysis, 494
Marginal Analysis, 494
Retail Discounting Model, 496
Service Benchmark: A Chip in Time Isn't Stale, 497
Summary, 497
Key Terms and Definitions, 497
Topics for Discussion, 498
Interactive Exercise, 498
Solved Problems, 498
Exercises, 500
Case 18.1. A.D. Small Consulting, 505
Case 18.2. Last Resort Restaurant, 506
Case 18.3. Elysian Cycles, 506
Selected Bibliography, 507
Endnotes, 507
Appendix A. Areas of a Standard Normal Distribution, 508
Appendix B. Uniformly Distributed Random Numbers [0, 1], 509
Appendix C. Values of L_q for the M/M/c Queuing Model, 510
Appendix D. Equations for Selected Queuing Models, 512
Name Index, 517
Subject Index, 521

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