Unit 5: Service Operations

SERVICE OPERATIONS

Service Operations Strategy means planning and managing how a service organization delivers high-quality, cost-effective, and timely services to customers.

It aligns operations activities (people, processes, technology, facilities) with the overall business strategy

SERVICE OPERATIONS STRATEGY FORMULATION

This is the planning stage where managers decide:

What kind of services will be offered
How services will be delivered
What capabilities are needed (people, technology, capacity)
How to achieve competitive advantage

Steps in Formulating Service Operations Strategy

1. Define Service Vision & Mission

What does the service organization aim to achieve? Example: “Domino’s – fast, hot, on-time delivery.”

2. Identify Target Customers & Needs

Who is the customer?
What value do they expect?
Example: Banks → customers want convenience, security, and reliability.

3. Select Service Delivery Strategy

Options include:

High-touch or low-touch
Online or offline
Self-service or employee-driven

4. Service Process Design

Design the workflow, including:

Service blueprint
Customer journey map
Standard Operating Procedures (SOPs)

5. Capacity & Workforce Planning

How many employees?
What skills?
What shift timings?

6. Technology Strategy

Automation
CRM
Cloud computing
Self-service tools

7. Quality & Productivity Strategy

Reduce service defects
Improve response time
Ensure superior customer experience

8. Cost and Resource Allocation

Budgeting for:

Staff
Facilities
IT systems
Training

9. Competitive Positioning

Decide how to compete:

Cost (e.g., Indigo airlines low-cost model)
Quality (e.g., Taj Hotels premium service)
Speed (e.g., Zomato / Swiggy)

SERVICE OPERATIONS STRATEGY EXECUTION

This is the implementation stage.

Key Components of Execution

1. Service Delivery System Implementation

Put the designed process into action:

Layout design
Customer flow management
Service touchpoints

2. Workforce Management

Recruitment
Training
Scheduling
Performance monitoring

3. Technology Implementation

CRM systems
Automation tools
Online self-service portals

4. Performance Measurement

Use KPIs such as:

Customer satisfaction (CSAT)
Service delivery time
Capacity utilization
First-contact resolution

5. Continuous Improvement

Use techniques:

Kaizen
Six Sigma
PDCA (Plan-Do-Check-Act)

6. Cross-functional Coordination

Example: Sales + Operations + IT + HR must work together.

7. Customer Feedback Integration

Regularly collect feedback and refine service processes.

STRATEGIC CAPACITY MANAGEMENT

Capacity refers to the ability of a service system to handle customer demand at a given time.

In services, capacity is tricky because:

Services cannot be stored
Demand fluctuates
Performance depends on people

Objectives of Capacity Management

Meeting customer demand
Avoiding long waiting times
Reducing idle resources
Minimizing cost
Ensuring service quality

Types of Capacity Decisions

1. Long-Term Capacity Decisions

Strategic decisions for 2–5 years:

Number of service outlets
Size of the facility
Technology investment
Hiring full-time staff

Example: Hospital expanding ICU beds.

2. Medium-Term Capacity Decisions

6–12 months:

Outsourcing
Contract workers
Seasonal workforce

Example: E-commerce adding temp staff for Diwali sale.

3. Short-Term Capacity Decisions

Daily or weekly adjustments:

Shift scheduling
Overtime
Queue management

Example: Banks opening extra counters during peak hours.

Approaches to Managing Capacity and Demand

a) Manage Capacity

Hiring/layoffs
Overtime
Multiskilling employees
Using part-time staff
Sharing capacity (BPOs with multiple clients)

b) Manage Demand

Differential pricing (peak/off-peak)
Promotions during low demand
Reservations system
Outsourcing excess work

c) Yield Management

Used in airlines, hotels, and airlines:

Charging different prices based on demand intensity

FACILITY MANAGEMENT IN SERVICE OPERATIONS

Facility management involves designing, planning, and managing the physical environment in which services are delivered.

Goals of Facility Management

Improve customer experience
Ensure safety and comfort
Enhance employee productivity
Support efficient service delivery

Key Components

1. Facility Location

Choosing where to place service outlets.
Factors include:

Customer accessibility
Competition
Cost
Transport availability
Skilled workforce

Example: ATMs placed in high footfall areas.

2. Facility Layout

Designing flow of:

Customers
Employees
Materials

Examples:

Hospital → emergency close to entrance
Retail → billing counters near exit
Banks → separate counters for different services

3. Capacity Planning Within Facility

Number of seats (restaurants/cinemas)
Number of counters (banks/post offices)

4. Safety & Security Systems

Fire exits
CCTV
Emergency response

5. Maintenance Management

Regular equipment servicing
Cleanliness
HVAC (air conditioning)

6. Customer-Focused Design

Comfortable waiting areas
Clear signage
Wheelchair access

Practical Examples

Example 1: Starbucks

Selects high-footfall locations.
Standardized store layout.
Quick service model.

Example 2: Hospitals

ICU near operation theatre
Pharmacy near entrance
Queue management screens

Example 3: Airlines

Capacity allocation per flight
Dynamic pricing
Use of kiosks for faster check-in

Innovation in Service Operations

Innovation in service operations means introducing new ideas, technologies, processes, or methods to improve service quality, efficiency, customer experience, and competitiveness.

A. Types of Innovation in Service Operations

1. Service Process Innovation

Changing how the service is delivered.

Online check-in for airlines
Mobile banking apps
Automated ordering in restaurants

2. Service Product Innovation

Creating new or improved service offerings.

Telemedicine in hospitals
Virtual classes in education
Contactless delivery in e-commerce

3. Technological Innovation

Using new technologies like:

AI chatbots
Robotics
IoT (Internet of Things)
RPA (Robotic Process Automation)

4. Business Model Innovation

Changing how a service business earns revenue.

Subscription model (Netflix, Amazon Prime)
On-demand model (Uber, Urban Company)

5. Customer Experience Innovation

Improving touchpoints:

Personalized recommendations
Loyalty apps
Omnichannel support

B. Benefits of Innovation

Lower cost and higher productivity
Faster service delivery
Better customer satisfaction
Competitive differentiation
Higher service quality

C. Examples

Domino’s: Pizza tracker + 30-minute delivery innovation
Amazon: One-day delivery + automated warehousing
Banks: UPI, mobile banking, AI fraud detection

Sustainable Service Operations & Green Practices

Sustainable service operations focus on delivering services with minimal environmental impact while ensuring long-term social and economic benefits.

Goals of Sustainable Service Operations

Reduce carbon footprint
Save energy and resources
Minimize waste
Promote social welfare
Maintain long-term profitability

Green Practices in Service Operations

1. Energy Efficiency

LED lighting
Smart air conditioning
Solar power installations

Example: Hospitals using solar panels to reduce power cost.

2. Waste Reduction & Recycling

Paperless offices
Digital receipts
Segregated waste bins
Recycling old electronics

3. Green Supply Chain

Eco-friendly packaging
Choosing green vendors
Electric delivery vehicles

Example: Amazon using EVs for delivery in many Indian cities.

4. Water Conservation

Low-flow faucets
Rainwater harvesting

5. Sustainable Facility Design

Green buildings (LEED certified)
Natural lighting
Green roofs

6. Social Sustainability

Fair wages
Safe working environment
CSR activities

Benefits of Green Practices

Lower operating cost
Improved brand image
Compliance with environmental regulations
Increased customer loyalty
Long-term business sustainability

Benchmarking in Service Processes

Benchmarking means comparing your service performance with industry leaders or best practices to identify improvement opportunities.

Types of Benchmarking

1. Internal Benchmarking

Compare performance across departments or branches. Example: Compare customer satisfaction between two bank branches.

2. Competitive Benchmarking

Compare with direct competitors. Example: Domino’s comparing delivery time with Pizza Hut.

3. Functional Benchmarking

Compare with companies from similar functions (not direct competitors). Example: A hospital studying airline queue management efficiency.

4. Strategic Benchmarking

Compare long-term strategies. Example: Studying Amazon’s logistics strategy to improve e-commerce efficiency.

Benchmarking Process

Identify what to benchmark
Select benchmarking partners
Collect data
Compare performance
Identify performance gaps
Implement improvements
Review and monitor results

Continuous Improvement in Service Operations

Continuous improvement refers to ongoing, incremental upgrades in service processes to improve efficiency, reduce errors, and enhance customer experience.

A. Methods of Continuous Improvement

Kaizen - Small, continuous improvements every day.
PDCA Cycle - Plan → Do → Check → Act
Six Sigma

Use DMAIC method:

Define
Measure
Analyze
Improve
Control

Used to reduce service variability and defects.

4. Lean Service

Eliminate unnecessary steps ("waste") in the service process such as:

Waiting time
Extra movement
Errors
Over-processing

5. Total Quality Management (TQM)

Company-wide participation in quality improvement.

B. Examples of Continuous Improvement

Banks reducing wait time by adding token systems
Hospitals improving patient discharge process
Restaurants optimizing kitchen workflow

Summary Table

Topic	Key Points
Innovation in Service Ops	New processes, technology, business models, customer experience
Sustainable Service Ops	Energy-saving, waste reduction, green facilities, CSR
Benchmarking	Compare with best performers; identify gaps
Continuous Improvement	Kaizen, PDCA, Lean, Six Sigma

PERFORMANCE MEASUREMENT FRAMEWORKS IN SERVICES

Performance measurement in services means evaluating how well a service organization meets customer expectations, uses resources, and achieves goals.

Because services are intangible and customer-driven, measuring performance requires structured frameworks.

Balanced Scorecard (BSC)

Developed by Kaplan & Norton.
Measures performance across four key dimensions:

1. Financial Perspective

Revenue growth
Cost efficiency
Profitability

2. Customer Perspective

Customer satisfaction (CSAT)
Loyalty / retention
Service quality

3. Internal Process Perspective

Service delivery time
Error rates
Process efficiency

4. Learning & Growth Perspective

Employee training
Innovation capability
Employee satisfaction

Why useful?
Gives a balanced view—not just financial but overall service health.

SERVQUAL Framework (Service Quality Measurement)

Uses 5 dimensions of service quality:

Reliability – performing service accurately
Responsiveness – quick help
Assurance – employee knowledge, trust
Empathy – personalized care
Tangibles – facilities, equipment, appearance

Measures difference between expected vs perceived service.

KPIs (Key Performance Indicators) for Services

Operational KPIs

Turnaround Time (TAT)
First Contact Resolution (FCR)
Capacity utilization
Average wait time

Customer KPIs

NPS (Net Promoter Score)
Customer Lifetime Value (CLV)
Complaint rate

Quality KPIs

Error rate
Defect rate
Compliance rate

Employee KPIs

Productivity per employee
Absenteeism
Training hours

Six Sigma Measurement (DMAIC Metrics)

Used for reducing service defects:

DPMO (Defects Per Million Opportunities)
Process cycle efficiency
Sigma level

EFQM Model (European Foundation for Quality Management)

Focuses on:

Leadership
Strategy
People
Partnerships & Resources
Processes
Results (customer, business, society)

APPLICATION OF SERVICE OPERATIONS STRATEGIES IN DIFFERENT SECTORS

Now let’s see how these strategies work in real industries.

A. Banking Sector

Operations Strategies

Digital banking (UPI, mobile apps)
Queue management systems
CRM for personalized offers
Automation through ATMs and chatbots
Risk management and compliance processes

Key Focus Areas

Reduce wait time
Ensure security
Improve accuracy
Enhance customer experience

Examples

HDFC uses AI for loan approval
SBI uses YONO app for end-to-end banking

B. Hospitality Sector (Hotels, Restaurants)

Operations Strategies

Standardized service processes (SOPs)
Capacity planning (rooms, dining tables)
Revenue/yield management (pricing based on demand)
Layout and ambience design
CRM-enabled loyalty programs (Taj InnerCircle)
Use of self-service kiosks (check-in/out)

Key Focus

Customer satisfaction
Speed of service
High-quality experience

Examples

OYO uses centralized reservation systems
McDonald's uses lean operations in kitchens

Healthcare Sector

Operations Strategies

Patient flow management
Electronic Health Records (EHR)
Telemedicine services
Appointment scheduling systems
Capacity planning for beds, OT, ICU
Quality control (NABH standards)

Key Focus

Safety
Efficiency
Reliability
Empathy

Examples

Apollo uses digital health records
AIIMS uses queue systems to reduce waiting

Retail Sector

Operations Strategies

Inventory management systems
Point-of-sale technologies
Omni-channel retailing (online + offline)
Demand forecasting
Store layout optimization
Self-checkout systems

Key Focus

Reduce stockouts
Fast checkout
Better customer experience

Examples

Reliance Smart uses automated billing
Amazon Fresh uses cashier-less stores (Amazon Go model)

ITES / BPO Sector

Operations Strategies

Workforce scheduling (24×7)
Service Level Agreements (SLAs)
Quality assurance teams
CRM and ticket management tools
Automation using RPA
Training and skill development

Key Focus

Accuracy
Cost efficiency
Timely delivery

Examples

Infosys BPO uses RPA to reduce repetitive tasks
Wipro uses AI for customer care operations

Logistics & Supply Chain Sector

Operations Strategies

Route optimization
Warehouse automation
Tracking systems (GPS, RFID)
Inventory management
Fleet management
Demand forecasting

Key Focus

On-time delivery
Cost savings
Reliability

Examples

DHL uses robotics in warehouses
Delhivery and Blue Dart use real-time tracking apps

Summary Table

Sector	Key Service Operations Strategies
Banking	Digital banking, CRM, automation, queue mgmt, security
Hospitality	SOPs, revenue mgmt, CRM, ambience design
Healthcare	Patient flow mgmt, EHR, scheduling, safety
Retail	Inventory mgmt, omnichannel, layout, POS systems
ITES/BPO	Workforce scheduling, SLAs, QA, RPA
Logistics	Route optimization, tracking, warehousing automation