ISM 270ISM 270

Service Engineering and Service Engineering and ManagementManagement

ISM 270: Service Engineering and ISM 270: Service Engineering and ManagementManagement

Focus on Operations Decisions in the Service Focus on Operations Decisions in the Service IndustryIndustry

Open to students with an undergraduate Open to students with an undergraduate engineering/science degreeengineering/science degree

Learn analytical tools and software for decision Learn analytical tools and software for decision makingmaking

Featuring guest lectures from industry Featuring guest lectures from industry practitionerspractitioners

Text: Fitzsimmons & Fitzsimmons Text: Fitzsimmons & Fitzsimmons ‘‘Service Management’ Service Management’ Operations, Strategy, Information TechnologyOperations, Strategy, Information Technology

Topics coveredTopics covered

The nature of service enterprises The nature of service enterprises Strategy for new service development Strategy for new service development

Technology in services Technology in services Quality in service encounters Quality in service encounters Forecasting demand Forecasting demand Managing service capacity Managing service capacity Supply chains in services Supply chains in services Globalization and outsourcingGlobalization and outsourcing

ISM 270: DetailsISM 270: Details

6 – 9pm, Tuesday evenings6 – 9pm, Tuesday evenings January 9 – March 13 (Winter) 2007January 9 – March 13 (Winter) 2007 UCSC Silicon Valley Center UCSC Silicon Valley Center Instructor: Kevin Ross Instructor: Kevin Ross

kross@soe.ucsc.edukross@soe.ucsc.edu Teaching Assistant: Geoff RyderTeaching Assistant: Geoff Ryder

gryder@gmail.comgryder@gmail.com

Who is here?Who is here?

My backgroundMy background Brief introductions, student surveyBrief introductions, student survey

LogisticsLogistics

Class websiteClass website ReadingsReadings Text bookText book Office hoursOffice hours

5-6pm before class, or by appointment5-6pm before class, or by appointment

Class PlanClass Plan

Allotted class time = 3 hoursAllotted class time = 3 hours Average adult attention span = 20 minutesAverage adult attention span = 20 minutes ……

Lecture / visitor / lab / splitLecture / visitor / lab / split

Computer issuesComputer issues

Who has a laptop?Who has a laptop? Web accessWeb access Finding research papersFinding research papers Excel, solver, …Excel, solver, …

Please…Please…

Bring:Bring: Paper, pen, laptop, …Paper, pen, laptop, … OpinionsOpinions QuestionsQuestions Interesting articles, stories, anecdotesInteresting articles, stories, anecdotes

Provide feedback!!!Provide feedback!!! Make every effort to keep up with readings Make every effort to keep up with readings

etc.etc.

ScheduleScheduleDate CH Topic Lab Guest

1 Jan9 1, 2, 3 IntroductionThe nature of

service enterprises

Metrics used in services

2 Jan 16 3, 4 Strategy for new service development

Simulation project

Paul MaglioIBM Research

3 Jan 23 5 Technology in services

Web programming

Alan KarpHP Labs

4 Jan 30 6, 7, 8, 9

Quality in service encounters

Service process control

Michael (Max) Maximilien,

IBM Almaden Research Center

ScheduleScheduleDate CH Topic Lab Guest

5 Feb 6 10 Project Management

Statistics homework

Michael (Max) Maximilien, IBM Almaden Research Center(part 2)

6 Feb 13 11 Forecasting demand

Vijay MehrotraSan Francisco State Univesity

7 Feb 20 12, 13, 14

Managing service capacity

Dave NielsonStrikeIron.com

ScheduleScheduleDate CH Topic Lab Guest

8 Feb 27 Littlefield Technologies

Service Management Game Challenge

Simulation Challenge

Littlefield Technologies

9 March 6 15, 16 Supply chains in services

Nick BambosStanford University

10 March 13

17 Globalization and outsourcing

Project presentations

AssessmentAssessment

AssessmentAssessment ValueValue Due DateDue Date

HomeworkHomework 30%30% WeeklyWeekly

Project 1Project 1 20%20% Feb 5Feb 5

Littlefield Littlefield ProjectProject

10%10% Feb 26Feb 26

Final ProjectFinal Project 40%40% March 13March 13

Text Chapter 1:Text Chapter 1:Role of Services in an Role of Services in an

EconomyEconomyService ManagementService Management

Professor James FitzsimmonsProfessor James Fitzsimmons

University of Texas at AustinUniversity of Texas at Austin

Chapter 1 Learning ObjectivesChapter 1 Learning Objectives Describe the central role of services in an Describe the central role of services in an

economy.economy. Discuss the evolution of an economy from Discuss the evolution of an economy from

an agrarian society to a service society.an agrarian society to a service society. Describe the features of preindustrial, Describe the features of preindustrial,

industrial, and postindustrial societies.industrial, and postindustrial societies. Describe the features of the new service Describe the features of the new service

economyeconomy

DefinitionsDefinitions

What are services?What are services?

Service enterprises?Service enterprises?

Service DefinitionsService Definitions

Services are deeds, processes, and Services are deeds, processes, and performances.performances.

Valarie Zeithaml & Mary Jo BitnerValarie Zeithaml & Mary Jo Bitner

A service is a time-perishable, intangible A service is a time-perishable, intangible experience performed for a customer acting experience performed for a customer acting in the role of a co-producer.in the role of a co-producer.

James Fitzsimmons James Fitzsimmons

Definition of Service FirmsDefinition of Service Firms

Service enterprises are organizations that Service enterprises are organizations that facilitate the production and distribution of facilitate the production and distribution of goods, support other firms in meeting their goods, support other firms in meeting their goals, and goals, and add valueadd value to our personal lives. to our personal lives.

James James FitzsimmonsFitzsimmons

Role of Services in an Role of Services in an EconomyEconomy

Percent Service Employment for Selected Percent Service Employment for Selected NationsNations

Country 1980 1987 1993Country 1980 1987 1993 20002000United States 67.1 71.0 74.3United States 67.1 71.0 74.3 74.274.2

Canada 67.2 70.8 74.8Canada 67.2 70.8 74.8 74.1 74.1

Israel 63.3 66.0 68.0Israel 63.3 66.0 68.0 73.9 73.9

Japan 54.5 58.8 59.9Japan 54.5 58.8 59.9 72.7 72.7

France 56.9 63.6 66.4France 56.9 63.6 66.4 70.870.8

Italy 48.7 57.7 60.2Italy 48.7 57.7 60.2 62.8 62.8

BrazilBrazil 46.246.2 50.050.0 51.9 51.9 56.5 56.5

ChinaChina 13.1 17.8 21.2 13.1 17.8 21.2 40.6 40.6

Trends in U.S. Employment by SectorTrends in U.S. Employment by Sector

0

10

20

30

40

50

60

70

80

90

Year

Pro

po

rtati

on

of

tota

l em

plo

yem

en

t

Service

Manufacturing

Agriculture

Stages of Economic DevelopmentStages of Economic Development Pre- Use of Standard dominant human Unit of of living Society Game activity labor social life measure Structure Technology

Pre- Pre- Industrial Industrial Industrial Industrial Post- Post- Industrial Industrial

Stages of Economic DevelopmentStages of Economic Development Pre- Use of Standard dominant human Unit of of living Society Game activity labor social life measure Structure Technology

Pre- Against Agriculture Raw Extended Sub- Routine Simple handPre- Against Agriculture Raw Extended Sub- Routine Simple hand Industrial Nature Mining muscle household sistence Traditional toolsIndustrial Nature Mining muscle household sistence Traditional tools power power Authoritative Authoritative

Industrial Against Goods Machine Individual Quantity Bureaucratic Machines Industrial Against Goods Machine Individual Quantity Bureaucratic Machines fabricated production tending of goods Hierarchical fabricated production tending of goods Hierarchical naturenature Post- Among Services Artistic Community Quality of Inter- InformationPost- Among Services Artistic Community Quality of Inter- Information industrial Persons Creative life in terms dependentindustrial Persons Creative life in terms dependent Intellectual Intellectual of health, Global of health, Global education,education, recreation recreation

The New Experience EconomyThe New Experience EconomyEconomy Agrarian Industrial Service Experience

Function Extract Make Deliver Stage

Nature Fungible Tangible Intangible Memorable

Attribute Natural Standardized Customized Personal

Method of supply

Stored in bulk

Inventoried Delivered on demand

Revealed over time

Seller

Trader

Manufacturer

Provider

Stager

Buyer

Market

User

Client

Guest

The Four Realms of an ExperienceThe Four Realms of an Experience

Customer Participation

Passive Active

Environmental

Absorption Entertainment (Movie)

Education (Language)

Relationship Immersion Esthetic (Tourist)

Escapist (ScubaDiving)

Experience Design PrinciplesExperience Design Principles Theme the Experience (Forum shops)Theme the Experience (Forum shops) Harmonize Impressions with Positive CuesHarmonize Impressions with Positive Cues

(O’Hare airport parking garage)(O’Hare airport parking garage) Eliminate Negative CuesEliminate Negative Cues

(Cinemark talking trash containers)(Cinemark talking trash containers) Mix in Memorabilia (Hard Rock T-shirts)Mix in Memorabilia (Hard Rock T-shirts) Engage all Five Senses (Mist in Engage all Five Senses (Mist in

Rainforest)Rainforest)

Source of Service Sector Source of Service Sector GrowthGrowth

InnovationInnovationPush theory (e.g. Post-it)Push theory (e.g. Post-it)

Product looking for a problemProduct looking for a problem Pull theory (e.g. Cash Management)Pull theory (e.g. Cash Management)

Need drives innovationNeed drives innovation Services derived from products (Video Rental)Services derived from products (Video Rental)

Information driven servicesInformation driven servicesDifficulty of testing service prototypesDifficulty of testing service prototypes

Social TrendsSocial Trends Aging of the populationAging of the populationTwo-income familiesTwo-income familiesGrowth in number of single peopleGrowth in number of single peopleHome as sanctuaryHome as sanctuary

Discussion TopicsDiscussion Topics Describe the work that you do from a Describe the work that you do from a

service perspectiveservice perspective Illustrate how the type of work you do Illustrate how the type of work you do

influences a person’s lifestyle. influences a person’s lifestyle.

Quiz QuestionQuiz Question Name the top 10 USA companies by Name the top 10 USA companies by

revenue in 2006revenue in 2006 How many would you describe as How many would you describe as serviceservice

companies?companies?

Example Service Innovation: Example Service Innovation: Disney WorldDisney World

LinkLink

Data Envelopment Analysis (DEA)Data Envelopment Analysis (DEA)

Method for evaluating efficiency of similar Method for evaluating efficiency of similar venues/productsvenues/products

Incorporates inputs and outputs – not just Incorporates inputs and outputs – not just one dimensionalone dimensional

Uses LINEAR PROGRAMMING (LP)Uses LINEAR PROGRAMMING (LP)

Sample LP: Product Mix ProblemSample LP: Product Mix Problem

How much beer and ale to produce from three How much beer and ale to produce from three scarce resources:scarce resources: 480 pounds of corn480 pounds of corn 160 ounces of hops160 ounces of hops 1190 pounds of malt1190 pounds of malt

A barrel of ale consumes 5 pounds of corn, 4 A barrel of ale consumes 5 pounds of corn, 4 ounces of hops, 35 pounds of maltounces of hops, 35 pounds of malt

A barrel of beer consumes 15 pounds of corn, 4 A barrel of beer consumes 15 pounds of corn, 4 ounces of hops and 20 pounds of maltounces of hops and 20 pounds of malt

Profits are $13 per barrel of ale, $23 for beerProfits are $13 per barrel of ale, $23 for beer

Key terms of LPKey terms of LP

VariablesVariables ParametersParameters Objective functionObjective function ConstraintsConstraints

DEA summary of termsDEA summary of terms

Define variablesDefine variables E_k = efficiency of unit kE_k = efficiency of unit k u_j= coefficient for output j (relative decrease in efficiency per u_j= coefficient for output j (relative decrease in efficiency per

unit reduction of output value)unit reduction of output value) v_i = coefficient for input i (relative increase in efficiency per unit v_i = coefficient for input i (relative increase in efficiency per unit

decrease of input value)decrease of input value) O_jk = observed ouput j units generated by service unit k during O_jk = observed ouput j units generated by service unit k during

one time periodone time period I_ik = no. units input used by service unit k during one periodI_ik = no. units input used by service unit k during one period

Note:Note: k=1..K = service unit counterk=1..K = service unit counter j=1..M = output counterj=1..M = output counter i=1..N = input counteri=1..N = input counter

DEA Objective and constraintsDEA Objective and constraints

Niv

Mju

KkIvIvIv

OuOuOu

ts

IvIvIv

OuOuOuE

i

j

NkNkk

MkMkk

NeNee

MeMeee

,...,2,1,0

,...,2,1,0

,...,1,1...

...

..

...

...max

2211

2211

2211

2211

Evaluating unit eTrick = Rescaling to get linear equations

KkIvIvIvOuOuOu

ts

IvIvIv

NkNkkMkMkk

NeNee

,...,1,0)...(...

..

1...

22112211

2211

Example from Text: Burger PalaceExample from Text: Burger Palace

Small, artificial example for illustration!Small, artificial example for illustration! Page 68Page 68 Excel formulationExcel formulation

Service Portal: StrikeironService Portal: Strikeiron

Link to websiteLink to website

Homework: Week 1Homework: Week 1

LinkLink