INTRODUCTION TO

SERVICE MANAGEMENT
Paolo Gaiardelli & Giuditta Pezzotta
Service Chain Management
 Goal & Scope
2

Through the utilization of  Introduction to Services

theoretical and practical
applications, focusing on both the  The classification of services
strategic and operational aspects
that characterise Service  Service Engineering & Operations
configuration and management,
this course deals with Service
 Service Capacity
design, organization, management
and performance measurement.
 Service Performance
Measurement
 Information
3

 Paolo Gaiardelli  Materials (on ILIAS)

 035/2052046
 Slides
 [email protected]
 Monday – 08.00-09.00
 Readings
(mandatory)
 Giuditta Pezzotta
 035/2052385
 Further readings
 [email protected]
(optional)
 Monday – 16.30-18.30

EXAM : Written
 Program
4

 May 04 (3h)- Introduction

 May 05 (2h)- Service classification models
 May 11 (5h)- Service capacity
 May 18 (5h)- Service Engineering
 May 25 (3h)- Service Operations
 May 26 (2h)- Service Operations – The ABB case
 June 08 (4h)- Service Performance Measurement
 Exam
5

Written
 The written exam includes exercises and questions, based on all the
Service Management program (theory and mandatory papers).

 The oral exam is taken only upon a specific request of the candidate, or
in case of a written evaluation between 15 and 18

 The oral exam will consist of a discussion on topics presented in this

course.
 Why services?
6

Gross value-added at basic prices, by branch of activity

Year 2007 Unit of measure: Million euro.
2.500.000,0

2.000.000,0

1.500.000,0

1.000.000,0 Services
Construction
Industry
500.000,0
Agriculture,

0,0

www.cia.gov]
 Why services?
7

% of GDP from services

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

[www.wikipedia.com, 2012]
 Service: a definition
8

“Any activity or benefit that one party can offer to another that is essentially
intangible and does not result in the ownership of anything”
[Kotler, 1997]

“A service is an activity or series of activities of a more or less intangible

nature that normally, but not necessarily, take place in interactions between
the customer and the service employees and/or physical resources or goods
and/or systems of the service provider, which are provided as solutions to
customer problems”
[Grönroos, 1990]
 Typical service industries
9

 Transport and distribution  Financial services

 Telecommunication  Legal services
 Hospitality/tourism  Marketing services
 Restaurant and food  Research & Development
 Mass media  Government
 Healthcare/hospitals/pharmacy  Administration
 Information Technology  Consulting
 Waste disposal  Gambling / Entertainment
 Banking  Retail sales / Franchising
 Insurance  Real estate
 Education
 Service Taxonomy
10

Services
Non-Material services

Product Result (result-oriented)

Product utility (use-oriented)
Product extension (product-oriented)

Material services
Goods

[adapted from Bartolomeo et al., 2003]

 The central notion of service
11

Variability / Heterogeneity
Services are not standardised.
The customer-providers interaction opens up possibilities of variation

Simultaneity /
Perishability
Inseparability
The realisation of a service
implies the presence of Services can not be kept
provider as well as in stock
customer

Intangibility
The result of a service is a process or an act
 Implications of Intangibility
12

 Search qualities Intangible

Can be determined prior to purchase
(such as colour, price, feel, smell)
 Experience quality
Can be discerned after the purchase Tangible
or during the consumption (taste) Search Experience Credence
 Credence quality
Can be evaluated after the purchase
or on the basis of an achieved skill
Marketing implications

“make tangible the intangible”

 Implications of Intangibility
13

“make tangible the intangible”

Sight
 Implications of Intangibility
14

“make tangible the intangible” Sound

 Implications of Intangibility
15

“make tangible the intangible” Smell

 Implications of Intangibility
16

“make tangible the intangible” Taste

 Implications of Inseparability
17

Production and consumption The customer has to be present

happen at the same time where the service is provided

Services are place dependent

Direct interaction between

service provider and customer
Services are human-
relationship dependent

Implications of Perishability
Production and consumption Supply and demand in service are
happen at the same time dependent on capacity
management
 Implications of Variability
18

SERVICES PERFORMANCE
Service Depends on service variability
provider  Service provider mood / skills
 Customer behaviour
 External factors
Sources
of
Surroundings
variability Customer 1. Adopt a strict service
quality monitoring
2. Improve service process
3. Introduce a risk analysis
4. Work on employees skills
and competences
 Services vs. goods
19

SERVICES GOODS
An activity or process A physical object
Intangible Tangible
Simultaneous production and Separation of production and
consumption consumption

Customers partecipate in Customers do not partecipate in

production production

Heterogeneous Homogeneous
Perishable: cannot be kept in stock Can be kept in stock
 Driving forces behind the growth of
20
services
 The impact of income changes on buying
behaviour

 Sociological and demographical changes

 The growing importance of producer services

 Technological developments
 Driving forces behind the growth of
21
services
Maslow’s pyramid vs. service
Services

Disposable Income
Goods
[Maslow, 1987]
The impact of income changes on buying behaviour

The rise of disposable incomes has boosted the demand for both social and
personal services (leisure, private health care, hotels, etc.)
 Driving forces behind the growth of
22
services
Sociological and demographical changes

The traditional family is being replaced by the duel-income family. The family
has to outsource many activities to service providers

The increase in life expectancy, boosts demand for nursing homes, health
care services and specialized travel agencies

The increase of life complexity calls for the need of professional services like
the legal advisers or the income tax consultants
 Driving forces behind the growth of
23
services
The growing importance of producer services

― Goods provision ― Integrated solutions

― Product-based organisations ― Services (consulting, legal, accounting,
R&D, transport, surveillance, cleaning)
supporting complex organisation and
business models
 The new manufacturing context
24

To survive manufacturing firms can

rarely remain as pure manufacturing
firms …
Deregulation
Innovation of technology
Globalisation
Industrialisation of emerging economies
Fierce competitive pressure

…they have to move beyond manufacturing

and offer services and solutions, delivered
through their products.
 The servitization phenomenon
25
Video

Servitization is the evolutionary phenomenon of the business model of a

manufacturing company, moving from a product-centric perspective towards
Product-Service Systems (PSSs), based on the provision of integrated bundles
consisting of both physical goods and services.

Product-oriented Use-oriented Result-oriented

Vandermerwe, S. and Rada, J. (1988). Servitization of business: Adding value by adding

services. European Management Journal, 6 (4), 314-324.
No more Ford T

26
 The servitization of manufacturing
27
(by country)

[Neely et al., 2011]

 Some successful examples
28

FROM FROM FROM

selling photocopiers… producing explosives… selling aircraft engines…

…TO providing
…TO being a …TO providing “rock on functionality
“document company” the ground” (“Power by the hour”)

[The Economist, 2009]

 The expected benefits
29

What are the main reasons for offering product-support services?

Customer loyalty 84
Differentiation 73
Support for the physical product 55
Economic objectives 48

4 Other

0 10 20 30 40 50 60 70
Percentage of
respondents
 The expected benefits
30

1. Economic rationale
 Profitability of services
 Stability of service revenues along the entire product lifecycle
2. Competitive rationale
 Differentiation
 Lock in customers and lock out competitors
 New customer needs
3. Environmental rationale
− Dematerialization (functional economy)

[Mathieu, 2001 (pp. 455-460)]

[Baines et al., 2009 (pp. 556-558)]
[Mont, 2002 (pp. 237-238)]
 Economic rationale
31

IfM, 2004
 The expected benefits
32

 Long-term
maintenance

Green maintenance

Help Desk Sharing

 Economic rationale
33
 Different Types of Value proposition
34

Service sophistication
On Demand Manufacturing
(e.g. takeover of production)

Services to Enhance Customer Productivity

(e.g. services to increase machine productivity)

Services to Enhance Availability

(e.g. SLA, Remote Services)

Consulting Services
(e.g. projection, financing, configuration)

Basic Services
(e.g. spare parts, maintenance, complaints, trainings)
 Driving forces behind the growth of
35
services
Technological developments
 Servitization and technology
STRATEGY & CUSTOMER INTEGRATION
Technology opens up new business opportunities to manufacturers through the
introduction of new business models characterised by a changed notion of asset
ownership and management.

Ex: Car-sharing

36
 Servitization and technology
STRATEGY & CUSTOMER INTEGRATION
Technology provides the opportunity to
develop a better understanding of customer
behaviours, easing the development of new
Product-Service (PS) solutions.

Ex: Connection multi-channel

37
 Servitization and technology

IMPROVEMENT OF
SERVICE PROVISION
PERFORMANCES

Provides better asset operating

conditions, time in use, and
location speeding up
Ex: TELESERVICE
maintenance and repairs
activities, improving equipment
design and operation behaviour
and reducing service delivery
costs.

Ex: AUGMENTED REALITY

38
 Servitization and technology
OPERATIONS AND SERVICE CHAIN MANAGMENT
Boosts value creation because it requires the redesign
and the standardization of operating processes.

Enables a comprehensive vertical and horizontal

information sharing and coordination in all directions
between department, divisions and network partners
supporting the implementation of the PS strategy.

39
The future is… «SMART» & «Social»

40
 Services = €?
41

41
 References
42
 Baines, T.S., Lightfoot, H., Benedettini, O., and Kay, J.M. (2009a). The servitization of manufacturing: A review of literature and reflection on future
challenges. International Journal of Technology Management, 20 (5), 547-567.
 Bartolomeo, M., dal Maso, D., de Jong, P., Eder, P.,Groenewegen, P., and Hopkinson, P., et al. (2003). Ecoefficient producer services e what are they, how
do they benefit customers and the environment and how likely are they to develop and be extensively utilised? Journal of Cleaner Production, 11, 829-37.
 Fitzsimmons, J.A., Fitzsimmons, M.J. (2000). New Service Development: Creating Memorable Experiences. Thousand Oaks, CA: SAGE Publications
 Gebauer, H., Fleisch, E., and Friedli, T. (2005). Overcoming the Service Paradox in Manufacturing Companies. European Management Journal, 23(1), 14-26.
 Grönroos, C. (1990). Service Management and Marketing: Managing the moments of truth in service competition. Lexington: Lexington Books, p. 27.
 Kotler, P. (1997). Marketing Management : Analysis, planning, implementation and control. Englewood Cliffs, NJ: Prentice-Hall.
 Maslow, H. (1987). Motivation and Personality (Third edition). Harper & Row , Publishers Inc.
 Mathieu, V. (2001). Service strategies within the manufacturing sector: benefits, costs and partnership. International Journal of Service Industry
Management, 12(5), 451-75.
 Mont, O. (2002). Clarifying the concept of product-service system. Journal of Cleaner Production, 10 (3), 237-245.
 Neely, A. (2009). Exploring the financial consequences of the servitization of manufacturing. Operations Management Research, 1 (2), 103-118.
 Neely, A.D., Benedettini, O. and Visnjic, I. (2011) ‘The Servitization of Manufacturing: Further Evidence’, 18th European Operations Management
Association Conference, Cambridge, July 2011 http://www.cambridgeservicealliance.org/uploads/downloadfiles/2011-
The%20servitization%20of%20manufacturing.pdf
 The Economist, Rolls-Royce - Britain's lonely high-flier, Jan 8th 2009. Available at: http://www.economist.com/node/12887368
 Vandermerwe, S. and Rada, J. (1988). Servitization of business: Adding value by adding services. European Management Journal, 6 (4), 314-324.
 Van Looy, B.V., Gemmel, P. and Van Dierdonck, R. (2003). Services Management: An Integrated Approach.Prantice Hall, Pearson Education Ltd.
 Mandatory
43

 Vandermerwe, S. and Rada, J. (1988). Servitization of business: Adding

value by adding services. European Management Journal, 6 (4), 314-324.