Unit 2

Operations Concepts
Product Design

The definition of product design describes the process of imagining,

creating, and iterating products that solve users’ problems or address
specific needs in a given market.

• The key to successful product design is understanding the end-user

customer, the person for whom the product is being created.
New Product Design Process: Steps Involved
New Product Design Process: Steps Involved

1. Idea Generation:

Employees, Research & Development, Market

internal Research Sales Force, and Reverse Engineering.

Customers, Competitors, Perceptual Maps, Bench

external Marking, Legislation, Environment, Technology And
Strategic Position of the Organisation.
New Product Design Process: Steps Involved

2. Screening Ideas:

• To have a better evaluation of ideas, each of the dimensions of the ideas is scored
on a 0-10 scale and each dimension is attached weights as per these dimensions.

• The resulting aggregate score helps in deciding which idea to progress and which
idea should be dropped.
3. Feasibility Study
New Product Design Process: Steps Involved

4. Preliminary Design:

Process of preliminary design involves:

• Building a prototype,
• Testing the prototype,
• Revising the design,
• Retesting and so on, until a viable design is determined.
New Product Design Process: Steps Involved

5. Pilot Runs and Testing (Market Test):

 Once the prototypes are tested successfully, pilot run of the manufacturing process is
conducted.
 Adjustments are made as needed before finalizing the design.
 Market testing is also carried out to check the acceptability of the product in the defined
market and customer group.
New Product Design Process: Steps Involved
6. New Product Launch:
 Launching a new product or service involves ramp up production.

Marketing and production will work in a co-coordinated way during this phase.
Characteristics of Good Product Design

• Functions
• Productability
• Maintainability/ Serviceability
• Safety
• Reliable
• Appearance
Service Scenario in India
Service sector ….. largest recipient of FDI in India.
….. 83.14 billion USD between April 2000 and June 2020.

1. Research and Development services:

Highly-trained Indian manpower available at

competitive costs and intellectual capital

Opportunity for MNCs across the world

to set up R&D centers in India
Service Scenario in India

2. Telecom services

India has an average wireless data usage of about

11 GB per month per subscriber

Expected to reach 18 GB by 2024.

(According to FY20 by TRAI)

India will be one of the biggest consumers of data worldwide.

Service Scenario in India

3. IT Enabled Services (ITES):

India’s success in software and IT-enabled serviced

exports has made it a major exporter of services
with a share in world service exports rising from
0.6% to 3.3% from the year 1990 to 2013

4. Tourism Services:

During 2019, the total contribution of travel & tourism to

GDP was 6.8% of the total economy
In FY2020, the tourism sector in India accounted for 8
percent of the total employment in the country.
It is expected that about 53 million jobs will be created in
the Indian market by 2029.
Difference Between Product and Service

Sl No. Characteristics PRODUCT SERVICE

1 Tangibility
They are physical in nature such that
Services are intangible and they can only
they can be touched, smelled, felt and
be felt not seen.
even seen.

With a service, satisfaction is obtained

A product is specifically designed to but nothing is carried away. Essentially,
2 Need vs. Relationship satisfy the needs and wants of the marketing of a service is primarily
customers and can be carried away. concerned with creation of customer
relationship.
Products are perishable. For example,
Services cannot be stored for later use or
fresh farm and other food products are
sale since they can only be used during
3 Perish-Ability perishable and these can also be stored
that particular time when they are
for later use or sale.
offered.
Difference Between Product and Service (contd)

Sl No. Characteristics PRODUCT SERVICE

Services cannot be numerically
Products can be numerically quantified
quantified. Whilst you can choose
4 Quantity and they come in different forms,
different service providers, the concept
shapes and sizes.
remains the same.

A product can be separated from the Services cannot be separated from their
5 Inseparability: owner once the purchase has been providers since they can be consumed at
completed. the same time they are offered.
Quality of products can be compared However, it may be difficult to compare
6 Quality since these are physical features that the quality of the services rendered by
can be held. different service providers.
Difference Between Product and Service (contd)

Sl No. Characteristics PRODUCT SERVICE

It is easier to return a product to the
However, a service cannot be returned
seller if the customer is not satisfied
7 Return-Ability to the service provider since it is
about it. In turn, the customer will get a
something that is intangible.
replacement of the returned product.
Value of the product is derived from
using it by the customer. Value of a Value of a service is offered by the
8 Value Perspective product can be taken or created by the service provider. Value of a service
final user of the product, offered in the cannot be separated from the provider.
market.
A product has a longer shelf line A service has a shorter shelf line
compared to a service.A product can be compared to a product. Service has a
9 Shelf Line
sold at a later date if it fails to sell on a short shelve line and should be sold
given period. earlier.
Characteristics of Service
(i) Perish-Ability
(ii) Fluctuating Demand (seasonal eg. ACs, Heaters)
(iii) Intangibility
(iv) Inseparability
(v) Heterogeneity
(vi) Pricing of Services
(vii) Service quality is not statistically measurable
 Classification of Services
Four Categories of Services
Who or What Is the Direct Recipient of the Service?
Nature of the Service Act People Possessions
Tangible Actions People processing Possession processing

(services directed at (services directed at

people’s bodies): physical possessions):

 Barbers  Refueling

 Health care  Disposal/recycling

Intangible Actions Mental stimulus Information processing
processing
(services directed at
(services directed at intangible assets):
people’s minds):
 Accounting
 Education
 Banking
 Advertising/PR
Four Categories of Services: People Processing

People Processing
• Customers must:
• Physically enter the service
factory
• Co-operate actively with the
service operation
• Managers should think about
process and output from
customer’s perspective
Health care
• To identify benefits created
Beauty salons
and non-financial costs:
Gyms
• Time, mental, physical
Restaurants
effort
Passenger transportation
Four Categories of Services: Possession Processing

Possession Processing

 Customers are less

physically involved
compared to people
processing services

 Involvement is limited

 Production and
consumption are
separable
Transportation of goods
Laundry services
Repair & maintenance
Four Categories of Services: Mental Stimulus Processing

Mental Stimulus Processing

 Ethical standards required

when customers who depend
on such services can
potentially be manipulated
by suppliers

 Physical presence of
recipients not required
Education
Theatres/ Museums
 Core content of services is
Advertising/PR information-based
Psychotherapy
 Can be “inventoried”
Four Categories of Services: Information Processing

Information Processing

 Information is the most

intangible form of service
output

 But may be transformed

into enduring forms of
service output

 Line between information

Banking processing and mental
Accounting stimulus processing may be
Legal services blurred.
Insurance
Classify these Services (on Functions)
• Business services.
• Communication services.
• Construction and related engineering services.
• Distribution services.
• Educational services.
• Environmental services.
• Financial services.
• Health-related and social services.
• Tourism and travel-related services.
• Recreational, cultural, and sporting services.
• Transport services.
 “When you have two coffee shops right next to each
other, and each sells the exact same coffee at the exact
same price, service design is what makes you walk into
one and not the other.”
Service DESIGN
Service Design considers
the Inter-Related parts and
Service Design is the activity of
Experiences of a Whole
• planning and organizing people, System
• infrastructure,
• communication and
• material components of a service

…in order to improve its quality and the interaction between the
service provider and its customers.
Designing Service Processes

Based on 3 Generic Approaches

the Extent
of Customer 1. Designing High Customer Contact and Low Customer Contact
Involvement Operations separately.
2. Designing through an Assembly Line Approach
3. Designing Services through Technological Interfaces

1.
Signify the
Designing High
Customer Contact
i) High Contact Operations
and Low Customer
ii) Low Contact Operations
Contact Operations
separately.
Signify the

i) High Contact Operations

ii) Low Contact Operations
Service Design of High Customer Contact and Low Customer Contact
Operations separately.

Service Design of High Customer Contact Operations (Front End Operations)

 Good ambience.
Require:  Smiling & Well Behaved Employees.
 Personalized Attention.
 Less/No Waiting Time.
Service Design of High Customer Contact and Low Customer Contact
Operations separately.

Service Design of Low Customer Contact Operations (Back End Operations)

 Can be Treated as Assembly Line operations to

achieve best capacity utilization.
 Employee dress/grooming need not be flawless
as that of front end employees.
Designing Service Processes

2.
Designing Prominent in Fast food
through an restaurants viz. Nirula’s,
Assembly Line Pizza Corner, Pizza Hut,
Approach McDonalds

WORK-STATION: 1 WORK-STATION: 2 WORK-STATION: 3

Book Orders, Ordered Food Customer disposes
Receives Payment Received from the off the left-over
Counter food and tray at the
designated places
Designing Service Processes
3.
Designing Online Banking Services:
Services Money Transfer, Bill Payment,
through Credit Card Payment, Various
Technological Service Payment, A/c
Interfaces Statement Enquiry etc

ATMs for Withdrawal, Deposit,

Balance Check, Pass Book
Printouts, Money Transfer to
other Accounts.
New service design/development system should have the following four
characteristics:

1. It must be objective, not subjective.

2. It must be precise, not vague.

3. It must be fact driven, not opinion driven.

4. It must be methodological, not philosophical.

Factors Affecting Service Design
1. 4. 7.
Customer Design of Organization
Contact Service Structure
Facility and 10.
Accessories Procedures
2. 8.
Service Mix 5. Information
Technology
11.
Control
3. 6. 9.
Location of Employees Demand and
Service Supply
Consumption Management

https://www.yourarticlelibrary.com/company/service-management/service-designing-11-key-factors-that-should-be-taken-in-service-designing/34167
 Blueprinting Services to
Create Valued Experiences and
Productive Operations
• Identify key activities in creating and delivering service
• Define “big picture” before “drilling down” to obtain a higher level
of detail
• Distinguish between “front stage” and “backstage”
• Clarify interactions between customers and staff, and support by
backstage activities and systems
• Identify potential fail points; take preventive measures; prepare
contingency
• Develop standards for execution of each activity— times for task
completion, maximum wait times, and scripts to guide
interactions between employees and customers
Key Components of a Service Blueprint
1. Define standards for front-stage activities
2. Specify physical evidence
3. Identify principal customer actions
4. Line of interaction (customers and front-stage personnel)
5. Front-stage actions by customer-contact personnel
6. Line of visibility (between front stage and backstage)
7. Backstage actions by customer contact personnel
8. Support processes involving other service personnel
9. Support processes involving IT

- Identify fail points and risks of excessive waits

- Set service standards and do failure-proofing
Blueprinting the Restaurant Experience (Elements)
Timeline Act 1
Service Standards W
and Scripts Make W Valet
W
Coat Room …
Stage

Physical
Reservation Parking
Evidence Line of
interaction
Greet
Front -

Accept Greet, take Contact person

customer, coat, coat
reservation take car keys
(visible actions)
checks
Line of
visibility
Check Hang coat with
- Stage

Take car to Contact person

availability, visible check (invisible
insert booking parking lot numbers actions)
Line of
internal
Back

Maintain Maintain Maintain physical

interaction
reservation (or rent) facilities/
Support system facilities equipment
Processes
 Blueprinting the Restaurant Experience:
A Three Act Performance
• Act 1: Prologue and Introductory Scenes
• Act 2: Delivery of Core Product
• Cocktails, seating, order food and related services
• Potential fail points: Menu information complete? Menu intelligible? Everything on
the menu actually available?
• Mistakes in transmitting information a common cause of quality failure—e.g. bad
handwriting; poor verbal communication
• Customers may not only evaluate quality of food and drink, but how promptly it is
served, serving staff attitudes, or style of service
• Act 3: The Drama Concludes
• Remaining actions should move quickly and smoothly, with no surprises at the end
• Customer expectations: Accurate, intelligible and prompt bill, payment handled
politely, guest are thanked for their patronage
Service Capacity Planning
 Ability/Capacity of a service system to deliver the intended service and to match customer
demand.
 Service capacity is perishable and can be intangible.
 Service capacity cannot be inventoried & hence cannot be transferred from one customer to other.

Service capacity has to be managed in a highly dynamic environment where service

organizations face more personalized demand due to the presence of customer than in
manufacturing sector.
Meeting personalized demand directly affects the
service quality perceived by the customer.

Capacity of a service is also attributed to the highest possible amount of output that may be
obtained in a specified period of time with a predefined level of staff, installations and
equipment (Lovelock, 1992).
Important factors in planning service capacity: the need to be near customers, the inability to store
services, the degree of volatility of demand.
OBJECTIVES of Capacity Planning

1) Feasibility
Internal needs

Capability of the operations system

2) Optimality i.e., Meet/Design Capacity needs with Least Cost.

3) Capacity Management
Next Slide
Capacity Management

1. Current & Historical

facts Analysis

Construction
&
Commissioning
(Workable)

IT
Implementation
Determinants of Effective Capacity Planning
Facilities
Design Policy factors
Location
Layout Operational factors
Environment Scheduling
Product/service Materials management
Design Quality assurance
Product or service mix Maintenance policies
Process
Equipment breakdowns
Quantity capabilities
Quality capabilities
Human factors Supply chain factors
Job content
Job design External factors
Training and experience Product standards
Motivation Safety regulations
Compensation Unions
Learning rates Pollution control standards
Absenteeism and labor turnover
 Capacity Planning

Waiting Line/Queue Analysis

 Customers wait in line at the service counters of organizations, to avail the

required service.

Costs: Customer waiting in line,

Waiting Adding new counters to reduce service time.
line or
Queue How can a Service organization Reduce Queuing Cost?

Customer arrival is random; therefore, service rendered to them is also random

 Capacity Planning

Waiting Line/Queue…EXAMPLES

• Outside customers (Commercial Service Systems)

- Lines in Barber shops, bank tellers, cafeterias

• Transportation Systems
- Airports, traffic lights, waiting in line for bus or commuter rail

• Social Service Systems

- Judicial System, Healthcare

• Business or Industrial
- Production lines
 Capacity Planning
Mechanism/Factors in Typical Queue System
Arrival Process:
 Customers
 Could be in singles,
 Batch or bulk,
 Arrival as distribution of time,
 Arrival in finite population or infinite population.

Service Mechanism:
 Available resources for customer service,
 Underlining assumption: Service time of customers is independent of arrival to the
queue.

Queue Characteristics: Selection of customers from the queue for service.

FIFO LIFO Random
Result?
 Capacity Planning

Service Configuration (Waiting Line Management)

• Single Channel, Single Phase (Car wash)

• Single Channel, Multi Phase (Bank tellers)

• Multi Channel, Single Phase (Separate queue of man and women for
single ticket window)

• Multi Channel, Multi Phase {Laundromat (self-service laundry),

where option of several washers and several dryers}
 Single Channel, Single Phase

Single Channel, Multi Phase

Multi Channel, Single Phase

Multi Channel, Multi Phase

 Capacity Planning

GOAL of Queue/Waiting Line analysis

• The objective of queuing analysis is to predict the system

performance such as how many customers get processed per time
step,

• The average delay a customer endures before being served, and

• The size of the queue or waiting room required.

Challenges/Hurdles in Planning Service Capacity

 Need to be near customers.

 Inability to store services.
 Degree of volatility of demand.
 Location.
 Timing of demand.
 Speed of delivery or customer waiting time.

Formulating Demand Management Strategies

 Pricing
 Promotions
 Discounts
Strategies for Service Capacity Planning
# Mostly used to lure consumers and keep them
1. Lead Strategy: away from competitors.
 Adding capacity in anticipation of a very high demand of service.
 Excess inventory could get produced but the production cycle management
balances out this cost.

# Self evaluation of core competencies

is a must for every organization.

Having enough resources to meet demand planning forecasts

Strategies for Service Capacity Planning (contd)
2. Lag Strategy: (Conservative strategy)
• Capacity added based on actual, not on anticipated demand.
• Decreases wastage risk but may result in stock outs and invite sales loss and low
service levels (example: late delivery of goods).

# The strategy is applied when an additional capacity is required after the org. is already running on
full capacity or beyond

Having enough resources to meet actual demand

Strategies for Service Capacity Planning (contd)
3. Match Strategy: (Moderate Strategy)
 Adding capacity in small amounts with respect to the anticipated demand
signals and current market potential of the product.

Mix of the lead and lag Followed by Many Organizations.

Strategies for Service Capacity Planning (contd)
4. Adjustment Strategy:
• This strategy involves either reducing or adding to the capacity in small
amounts depending upon the prevalent consumer demand.

• The adjustment strategy can also take place because of some important
changes in the product.
Service Quality
• Customers purchase services as a response to specific needs.

• These specific needs of the customers shape the expectations/desires from the
service.

Service quality is a measure of how an organization delivers its services

compared to the expectations of its customers.

• A company with high service quality offers services that match or exceed its
customers' expectations.
PURPOSE OF SERVICE QUALITY

Improved Improved Improved

Service Customer Customer
Performance Satisfaction Retention

Increased
Increased Market
Profitability Share
 13

DIMENSIONS of Service Quality

Reliability

Responsiveness
SERVICE
Assurance
QUALITY
Empathy

Tangibles
DIMENSIONS of Service Quality (contd)
G e t it right
 Reliability the first
time!
 Dependability

 Accuracy

 Provide services at promised time dependably and accurately

 Perform services right the first time

Example: Receive mail at same time each day.

DIMENSIONS of Service Quality (contd)

 Responsiveness
 Promptness
 Helpfulness

 Willingness to help customers promptly

…and, on Time!
 Readiness to respond to customer’s request

Example: Avoid keeping customer’s waiting.

DIMENSIONS of Service Quality (contd)

 Assurance
 Credibility

 Security I feel
safe
 Ability to convey trust and confidence
 Give a feeling that customers best
interest is in your heart

Example: Being polite and showing respect for customer

DIMENSIONS of Service Quality (contd)

 Empathy
 Good communication

 Customer understanding

 Personalised attention

 Ability to be approachable, caring, understanding

and relating with customer needs

They listen t o
me!
Example: Being a good listener
DIMENSIONS of Service Quality (contd)

 Tangibles

 Physical evidence

 Appearance of physical facilities, equipment and

communication material.
Relative Importance of Service Dimensions

RELIABILITY 32%

TANGIBLES 11%

RESPONSIVENESS
EMPATHY 16%
22%

ASSURANCE 19%
 SERVQUAL… Quality Measurement Instrument
(Multi-dimensional research instrument)

Captures consumer expectations and perceptions of a service.

Along five dimensions (determinants) of service  Reliability

quality.  Assurance
 Tangibles
 Empathy
 Responsiveness

SERVQUAL questionnaire was first published in 1985

- A. Parasuraman, Valarie Zeithaml and Leonard L. Berry

SERVQUAL Items (RATER)
No. of Items in
Dimension Definition
Questionnaire
The ability to perform the promised service dependably
Reliability 5
and accurately
The knowledge and courtesy of employees and their
Assurance 4
ability to convey trust and confidence
The appearance of physical facilities, equipment,
Tangibles 4
personnel and communication materials
The provision of caring, individualized attention to
Empathy 5
customer
The willingness to help customers and to provide prompt
Responsiveness 4
service

SERVQUAL questionnaire has been described as "the most popular standardized

questionnaire to measure service quality."
Example:
Dimension Sample expectations item Sample perceptions item
When excellent telephone companies
XYZ company provides its services at the
Reliability promise to do something by a certain time,
promised time
they do so
The behaviour of employees in excellent The behaviour of employees in the XYZ bank
Assurance
banks will instill confidence in customers instils confidence in you.
Excellent telephone companies will have
Tangibles XYZ company has modern looking equipment
modern looking equipment
Excellent banks will have operating hours
Empathy XYZ bank has convenient operating hours
convenient to customers
Responsive Employees of excellent telephone companies
XYZ employees are never too busy to help you
ness will never be too busy to help a customer

…gave rise to a broader conceptualization of service quality… Model of

Service Quality / GAPS Model
 /Observed

Model of
Service
Quality / Gap 1: Can be Measured
Gap 2-5 : Cannot be Measured,
GAPS Model but have Diagnostic value
 Gap Brief description Probable Causes
Gap 1 Insufficient marketing research
Difference between the target market's expected
The Knowledge
service and management's perceptions of the target Inadequate upward communications
Gap
market's expected service
Too many layers of management
Gap 2 Lack of management commitment to service quality
The standards Difference between management's perceptions of
Employee perceptions of infeasibility
Gap customer expectations and the translation into service
procedures and specifications Inadequate goal setting
Inadequate task standardisation
Gap 3 Technical breakdowns or malfunctions

The Delivery Gap Role conflict/ ambiguity

Difference between service quality specifications and
the service actually delivered Lack of perceived control
Poor employee-job fit
Poor technology- fit
Poor supervision or training
 Gap Brief description Probable Causes
Gap 4 Lack of horizontal communications
The
Communications Poor communication with advertising agency
Gap
Difference between service delivery intentions and
what is communicated to the customer Inadequate communications between sales and
operations
Differences in policies and procedures across branches
or divisions of an entity
Why do we always Propensity to overpromise
have to wait?
 39

GAP 5: CUSTOMER EXPECTATIONS AND PERCEPTIONS (Ordered)

GAP
Customer expectations

Reasons Not knowing what customers expect

for Not selecting the right service standards and designs
provider Not delivering to service standards
gap Not matching performance to promised
5

Customer perceptions
 40

SOLUTION OF GAP 5
Customer satisfaction is difficult but not impossible

Surveys of customers

Resolve customer complaints

Employee surveys

Focus on a special groups of customers

Competitive market surveys – benchmark

Try to measure the gap between expected service and perceived service

Customer satisfaction depends on minimizing the four gaps that are

associated with service delivery
Measuring Service Quality…Equation

SQ = Service quality.
SQ = P- E P = Individual's perceptions (observations) of given service delivery.
E = Individual's expectations of a given service delivery.

When,
1. Customer’s Expectations > Customer’s Perceptions: Service quality is deemed LOW.
2. Customer’s Expectations < Customer’s Perceptions: Service quality is deemed HIGH.
CASE STUDY
Thank You