Service Operations Management
An increasing number of businesses are offering services rather than tangible goods. Although customers' opinions of service quality are directly related to a company's profitability, many organizations fail to control and improve their customer service processes. These processes tend to be difficult and costly to control because of their intangibility, heterogeneity, and inseparability. However, operations management principles can be applied to service industries in an effort to improve quality. One must first understand what the customer wants from the customer service process and then identify fail points in the process where it is likely to go wrong. No matter how well the customer service process is designed and implemented, problems are unavoidable. Customer dissatisfaction as a result of errors, however, is not. There are a number of ways to recover from customer service problems and maintain customer loyalty.
Keywords Fail Point; Flow Chart; Operations Management; Service Sector; Strategic Planning
As the state-of-the-art 21st century technology continues to expand and high tech solutions proliferate, more and more businesses offer services instead of, or in addition to, tangible products. In fact, the service industry is the largest and fastest growing business sector in the United States. Despite the opportunities offered by this growing sector, however, businesses are faced with the problem of determining how to manage operations where the products are intangible. As a result, research has found that most consumers are dissatisfied with the customer service they receive from these businesses. This fact, combined with the increasing service competition that arises out of the growing trend toward globalization, means that increased emphasis needs to be placed on operations management in service organizations just as it is in manufacturing organizations.
Operations management comprises those areas of management that are concerned with productivity, quality, and cost in the operations function (i.e., those activities necessary to transform inputs such as business transactions and information into outputs such as completed transactions) as well as strategic planning for the organization. The service sector has been described in many ways. In its essence, the service sector includes those industries and businesses that provide services rather than tangible products for individual consumers, businesses, or a combination of the two. These can include physical, mental, or aesthetic activities (e.g., legal services, entertainment, auto repair) or the transformation of something through such an activity (e.g., hair cutting, education, management consulting).
Like defining the service sector itself, defining operations management for the service sector is more problematic than defining operations management for other sectors (i.e., transportation, communications, and utilities; wholesale or retail trade; finance, insurance, and real estate; public administration). It is relatively easy to determine when a widget is not of acceptable quality. The manufacturer will have a manufacturing specification that describes what the tolerances are for the product and quality control will accept or reject the product based on whether or not it is within the specifications. Similarly, a manufacturing process can be evaluated to see where there is waste in the process or where efficiencies can be introduced. However, it is not so obvious where to improve quality or cost-effectiveness for service industries. For example, how does one specify the quality of a new hairstyle? Although in some cases a bad haircut can be obvious to all, a new hairstyle may be a matter of aesthetics: What looked good in the magazine on the 20 year-old model may not look so good on the middle-aged customer with a different bone structure. Similarly, how does one evaluate the cost of creating a new work of art or the training of a hotel employee? Yet, the quality of customer service must be operationally defined in order for the organization to be consistently effective.
Despite the fact that research has shown that customers' opinions of service quality are directly related to company profitability, many service organizations do not try to control and improve quality. This is due in part to the fact that service quality is often difficult and costly to control and improve. It is also due to the differences between the activities and products of the service industry and those of the manufacturing industry. In manufacturing, results are tangible and can be quantified. This fact makes it easier to control quality than in the service industry where the "product" is intangible. Further, in manufacturing, statistical quality control methods can be built into the process so that quality is monitored and corrected at several key points in the process. In most manufacturing processes, there are typically several points at which the product can be quality tested so that substandard parts or products can be rejected or the process can be rectified as necessary before the products reach the consumer. This approach, however, is not possible in the service industry: One cannot do a quality control check on services before they reach the customer.
Three Reasons for Control Difficulties
There are three reasons that services are difficult to control: intangibility, heterogeneity, and inseparability. The quality of customer service is not based on a product that one can touch. Characteristics of good customer service more often have to do with speed of delivery of the service, the competence with which the service is delivered, and the courtesy with which it is offered. Such factors are difficult to quantify for a number of reasons, not the least of which is the perceptions and expectations of the customer. It can be difficult to operationally define good customer service. For example, does walking the customer through a troubleshooting procedure step-by-step in an attempt to be thorough constitute good customer service, or does listening to the customer in an attempt to find out what s/he has already tried constitute good customer service? The former situation is apt to antagonize someone who is knowledgeable about the process while the latter approach is likely to miss important steps with a customer who only thinks s/he is knowledgeable. In some situations, there are, of course, some aspects of customer service that are tangible (e.g., receiving starter checks when opening a new bank account). However, these tend to be much poorer predictors of customer satisfaction than are the intangible factors.
Factors that Affect Quality of Service
In addition to being intangible, services tend to be heterogeneous in nature, and not consistently performed. Quality of service depends on a number of factors, including the personalities and expectations of each of the parties involved. For example, when a technophobe calls a technical support help line to troubleshoot what is wrong with his computer, he expects and needs to be treated with a step-by-step, hand-holding approach that will allow him to trust the person on the other end to walk him through the steps. If an experienced computer programmer calls the technical help line, however, the same step-by-step approach based on the assumption that the customer is clueless is more apt to be irritating than helpful. Similarly, the retail assistant who greets the customer at the door and follows her throughout the shopping experience may be perceived as helpful to some customers and intrusive by other customers. Human nature makes customer service a complicated process. What works with a given customer today (e.g., when the customer wants help) may not work with the same customer tomorrow (e.g., when the customer is in a hurry and does not want to linger over the process).
A third characteristic of customer service is inseparability. Customer service is performed in the presence of the customer and becomes inseparable in the customer's mind from the organization as a whole. So, for example, if a software manufacturing company provides poor customer service to someone logging on to the support database or calling the technical help line, in the customer's mind, the service will be inseparable from the product. Most customers do not differentiate between the quality of the product and the quality of the service. An overview of the dimensions of customer service is given in Table 1.
Table 1: Dimensions of Customer Service (Adapted from Armistead, 1989, p. 249)
Steps to Improving Customer Service...
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