The Impact of Service Operations Failures on Customer Satisfaction: Evidence on How Failures

and Their Source Affect What Matters to Customers

1. What the author wants to test?

The author wants to test the composition of overall customer satisfaction.This paper researches on
service operations failures by hypothesizing that attributions of blame also affect what matters to the
customer during service failures. Specifically, we hypothesize that the relative weights that customers
assign to key service elements in eaching an overall assessment of customer satisfaction are affected by
customer attributions of blame for service failures.

2. What are the conclusions?

We found that in the airline industry, service failures affect what matters to customers and that attributions
of blame are critical moderators of the composition of overall customer satisfaction during service
failures. Specifically, when failures are not blamed on the service provider, average overall satisfaction is
lower than in the case of routine service; however, there are virtually no differences in the importance that
customers assign to the different service elements. In contrast, when failures are blamed on the service
provider, customers rely far less on employee interactions to evaluate the service, depending instead on
physical aspects of the service (e.g., aircraft cleanliness). Thus, even if a specific employee is not the
source of the delay, it appears that the customers distrust of the firm extends to all employees and overall
satisfaction is both lower and associated with different service elements, compared with either delays of
external origin or no delay.

3. Method used

A quasi-experimental research design was used in which we compare the relation between key service
elements of customer satisfaction with delayed flights against a benchmark model for flights without
delays.This model allowed us to test whether delays are associated with a lower level of satisfaction and
whether delays are associated with a change in what matters to customers. The sample of delayed flights
was partitioned into delays associated with external sources (i.e., weather) and those associated with
sources more likely to be attributed to the air carrier (i.e., equipment failure, crew shortages), helped us
to test whether compositional differences in customer satisfaction are related to attributions.

4. Details of sample

Construct three comparable treatment groups of passengers:

(1) those who experienced delays associated with external sources,

(2) those who experienced delays associated with internal sources,and

(3) those who experienced no delay.

5. Theories used

We use exploratory factor analysis with an oblique rotation to reduce the large number of rated attributes
of airline service to a much smaller number of service elements that are viewed as distinct by passengers.

Trade-offs Between Customer Service and Cost in Integrated Supply Chain Design

1. What the author wants to test?

The strategic supply chain design and redesign have become a major challenge for firms as they
simultaneously try to improve customer service and reduce operating costs. Hence, the author finds and
measures the factors associated to find the trade-offs between customer service and cost in integrated
supply chain design.

2. What are the conclusions? Method used? Details of sample? Theories used?

The three cost elements are considered jointly when making supply chain design decisions. These major
cost factors associated with designing and managing a supply chain are the facility location costs, the
inventory management costs, and the distribution costs(DC).

The author used a nonlinear integrated location-inventory model to incorporate a measure of customer
service quality. Key costs represented by the model include fixed DC location costs,working and safety
stock costs at the DCs, fixed and variable shipment costs from the plant to the DCs,and transportation
costs from the DCs to the customers. Customer service is measured by the fraction of all customer
demands that are within a specified distance or service standard of the DC to which they are assigned.

The nonlinear integrated location-inventory model simultaneously determines distribution center

locations and the assignment of demand nodes to distribution centers to optimize the cost and service
objectives. It also used a weighting method to find all supported points on the trade-off curve.

Results showed that it is important for a company to find the right trade-off between supply chain cost
and service. The service-maximization solution ranged from 6 to 20 times bigger than the cost-
minimization solution. It also showed that significant improvements in customer service can often be
achieved at relatively little cost. The cost of the incremental facilities is largely offset by reduced
outbound transportation costs.
Furthermore, It was found that it is very time consuming to find the optimal cost-service trade-off curve
for large problem instances. In this case ,another proposed approach was a heuristic solution approach
based on genetic algorithms that can generate optimal or close-to-optimal solutions in a much shorter time
compared to the weighting method. It was a very good alternative to solve the problem because it can
generate high quality solutions quickly.
Elliot rabinovich