Download - Service Supply Relationship
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Service Supply RelationshipsMcGraw-Hill/Irwin Copyright 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
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Learning ObjectivesContrast 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-*
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Supply Chain for Physical GoodsMaterial TransferInformation Transfer13-*
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Customer-Supplier Duality in Service Supply Relationships (Hubs)13-*
Material transfer
Information transfer
Supplier
Service
Provider
Customer
Service
Design
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Single-Level Bidirectional Service Supply Relationship13-*
ServiceCategoryCustomer-Supplier>InputOutput>ServiceProviderMindsStudent>MindKnowledge>ProfessorBodiesPatient>ToothFilling>DentistBelongingsInvestor>MoneyInterest>BankInformationClient>Documents1040>Tax Preparer
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Two-Level Bidirectional Service Supply Relationship13-*
ServiceCategoryCustomer-Supplier>InputOutput>ServiceProvider>InputOutput>ProvidersSupplierMindsPatient>DisturbedTreated>Therapist>PrescriptionDrugs>PharmacyBodiesPatient>BloodDiagnosis>Physician>SampleTest Result>LabBelongingsDriver>CarRepaired>Garage>EngineRebuilt>MachineShopInformationHomeBuyer>PropertyLoan>MortgageCompany>LocationClear Title>TitleSearch
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Service Supply RelationshipsCustomer-Supplier DualityService Supply Relationships are Hubs, not ChainsService Capacity is Analogous to InventoryCustomer Supplied Inputs Can Vary In Quality
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Sources of Value in Service Supply RelationshipsBi-directional OptimizationManaging 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 Perishability13-*
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Impact of Service Supply Relationships13-*
Element or Link
Before
After
Channel Structure
Functional silos
Process orientation
Service Recipient
Passive
Active as a co-producer
Channel Integration
Vertical (own the channel to integrate)
Virtual (IT and other mechanism permit integration without ownership)
Flow of Service
Available waiting for demand
Activated upon demand
Flow of Information (upstream)
Pull: manual reporting of demand data results in delayed management response.
Push: high level of connectivity and transparency with fast or instantaneous access to most recent demand data.
Flow of Information (downstream)
Little or no knowledge of resource deployment
Real-time tracking and dispatching
Business Processes
Predominantly in-house; locally optimized for efficiency
In-house for key processes, others out-sourced for flexibility; integrated and synchronized to match supply with demand
Demand Management
Limited to use of appointments and reservations.
Proactive involving customer in scheduling to achieve bi-directional optimization
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Impact of Service Supply Relationships (cont.)13-*
Element or Link
Before
After
Capacity Management
Limited to use of part-time employees
Creative use of cross-trained employees, outsourcing, and customer self-service.
Facilitating Goods
High; in anticipation of demand
Lower; owing to process transparency
Service Delivery
Inflexible; standardized and impersonal
Flexible; personable with customization possible.
Routing and scheduling
Static; fixed daily schedules
Dynamic; based on system connectivity and process visibility
New Service Design
Marketing initiatives based on firm's perception of customer needs
Virtual value chain design with customer data base information driving new services
Pricing
Fixed
Variable; yield management promotes off-peak demand and avoid idle capacity
International Operations
Focus on domestic market
Global reach with Internet
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Professional Service FirmsBody of KnowledgeCognitive knowledge (know-what)Advanced skills (know-how)Systems understanding (know-why)Self-motivated creativity (care-why)13-*
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Professional Service FirmsOperational CharacteristicsProfit-per-Partner Productivity13-*
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Profitability Tactics13-*
TacticCategoryLower Fixed (Overhead) CostsMargin Improve cash cycle Reduce office space and equipment Reduce administrative and support staffRaise Prices and DifferentiateProductivity Specialize, innovate, add more value Target higher value work Invest in training Invest in higher value servicesAddress Underperforming ProjectsProductivity Drop unprofitable services Drop unprofitable customersIncrease VolumeProductivity Increase utilizationLower Variable CostsLeverage Improve engagement management Increase leverage of professionals Increase the use of paraprofessionals
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Outsourcing ServicesBenefits 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 service13-*
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Outsourcing Process13-*
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Taxonomy for Outsourcing Business Services13-*
Importance of Service
Low High
Property
Focus
Facility Support:
-Laundry
-Janitorial
-Waste disposal
Equipment Support:
-Repairs
-Maintenance
-Product testing
of People
Employee Support:
-Food service
-Plant security
-Temporary personnel
Employee Development:
-Training
-Education
-Medical care
Service
Process
Facilitator:
-Bookkeeping
-Travel booking
-Packaged software
Professional:
-Advertising
-Public relations
-Legal
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Outsourcing Considerations13-*
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
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Outsourcing Considerations13-*
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
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Outsourcing Considerations13-*
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
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Boomer ConsultingHow does The Boomer Technology Circle illustrate the concept of the bidirectional service supply relationship?How has Boomer Consulting made the client a coproducer in the service delivery process?How is the concept of leverage achieved by Boomer Consulting?Can the Boomer Technology Circle be applied to other industries? What are some of the risks in pursuing this strategy?13-*
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Peapod: Smart Shopping for Busy PeopleWhere are opportunities for bidirectional optimization at Peapod?How can Peapod manage service perishability?How can Peapod manage productive capacity?Suggest reasons why Peapod has not yet become profitable.
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Topics for DiscussionHow 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.
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Interactive Exercise The class divides into small groups and members come up with examples of multilevel bidirectional service relationships (i.e, service supplier relationships with three or more levels). Be prepared to argue why such service relationships are so rare.13-*