SUPPORTING FACILITY

Module 4

Creating the Right Environment

McGraw-Hill/Irwin Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved.
Module 4 Part1
• Supporting Facility -Environmental Psychology and
Orientation- Servicescapes -Facility Design -Facility
Layout

2
Environmental Orientation Considerations
• Spatial cues are needed to orient visitors.
• Formula facilities draw on previous experience.
• Entrance atrium allows visitors to gain a quick orientation
and observe others for behavioral cues.
• Orientation aids and signage such as “You Are Here”
maps reduce anxiety.

5-3
Servicescapes
Environmental Dimensions Of
Servicescapes.
Designing Physical Surroundings to Affect
Employee and Customer Behavior
• Ambient Conditions: background characteristics
such as noise level, music, lighting, temperature,
and scent
• Spatial Layout and Functionality: reception area,
circulation paths of employees and customers,
and focal points
• Signs, Symbols, and Artifacts: selection,
orientation, location, and size of objects
5-4
Servicescape Elements

5-5
Typology of Servicescapes
Who Performs in Physical Complexity of the Servicescape
Servicescape Elaborate Lean
Self-service Golf course Post office kiosk
(customer only) Water slide park E-commerce
Interpersonal Luxury hotel Budget hotel
(both) Airline terminal Bus station
Remote service Research lab Telemarketing
(employee only) L.L. Bean Online tech support

5-6
Roles of the Servicescape
• Package
• conveys expectations
• influences perceptions
• Facilitator
• facilitates the flow of the service delivery process
• provides information (how am I to act?)
• facilitates the ordering process (how does this work?)
• facilitates service delivery
• Socializer
• facilitates interaction between:
• customers and employees
• customers and fellow customers
• Differentiator
• sets provider apart from competition in the mind of the consumer
 Approaches for understanding Servicescape.
• The four approaches are Environmental surveys, Experiments,
Photographic Blueprint, Direct Observations
• 1.Environmental Surveys- Ask people to express their needs and
preferences for different environmental configurations by answering
predetermined questions in a questionnaire format.
• 2.Observation methods- trained observers make detailed accounts of
environmental conditions and dimensions-Observing and recording the
reactions and behaviors of customers and employees in the servicescape.
• Through direct observation ,depth interview and photography
• 3. Experiments-Involve exposing groups of customers to different
environmental configurations and measuring their reactions .Different
dimensions can be carried out systematically to assess the independent impact
of factors such as music, color, layout
• 4.Photographic Blueprints Provides a visualization of the service at each
customer action step. A slide, photograph ,or the entire service process –
videotaped from the customer’s point of view.
• Extremely useful in providing clear and logical documentation of the physical
evidence.
Guidelines for Physical Evidence Strategy.
1.Recognize the strategic impact of Physical Evidence.
2.Map the Physical Evidence of Service
Map the service- service process and the existing elements of physical
Evidence. Service map or blueprint -Useful in visually capturing physical
evidence opportunities-People, process and physical evidence can be seen in
the service map.
3.Clarify Roles of the Servicescape
4.Assess and Identify physical evidence Opportunities
5.Be prepared to update and Modernize the evidence
• Require frequent or at least periodic updating and modernizing- element of
fashion involved-Over time different colors, designs and styles may come to
communicate different messages.
6.Work Crossed-functionally.
• A multifunctional team approach to physical evidence strategy is often
necessary for making decisions about the servicescape.
• Operations, Human Resources, facility management group, marketing
(advertising and pricing)
Axis Bank

10
Facility Design Considerations
Critical design features of a service supporting facility
1. Nature and Objectives of Service Organization
2. Land Availability and Space requirements
3. Flexibility
4. Security
5. Aesthetic Factors
6. The Community and Environment

5-11
• Facility design
• Directly impact service operations
• Shouldice Hospital in Canada specialized in Inguinal Hernia
• Group operating rooms together
• Enable surgeons to communicate easily
• Provide ample pleasant place to walk
• Encourage early ambulation to promote faster recovery
• Community dining rooms
• Allow patients to get together
• Require walking
• Good design and layout enhance service
• Adequate lighting
• Fire exits
• Proper location of dangerous equipment
• Privacy & security

12
• 1. Nature and objectives of service organization
• Most important parameter
• Bank
• Spacious and comfortable waiting area
• Vaults
• Physicians
• Privacy for patient
• Modern and advance looks
• Bring about immediate recognition of service
• 2. Land availability and space requirement
• Costs, zoning requirement, actual area
• Urban area
• Relatively small
• Building expand upward
• Suburban & rural
• Lands are larger and more affordable
• Zoning laws on land usage & exterior appearance
• Off-street parking
• Future expansion
13
• 3.Flexibility
• Adapt to change in quantity and nature of demand
• Design for the future
• Expansion for present service
• Accommodate new and different service
• Walk-in, drive-thru
• Significant financial saving in the long run
• Airport
• Failure to anticipate growth
• Security check
• 4. Security
• Airport security after 911
• More sophisticate carry-on scanners
• Wipes to detect explosive residue
• Profiling (Info technology)
• Surveillance camera for buildings
• To discourage would-be robbers
• To identify violator
• Jails, level 4 labs
• Department stores: tags on merchandises

14
• 5.Aesthetic
• Sense of elegance and attention to customer’s needs
• Upscale department store
• Floor carpet
• Complimentary lighting
• Well-groomed salesperson
• Roomy fitting rooms
• Sense of bargain
• Outlet stores
• Both offer attractive, quality services
• 6.Community and environment
• Traffic congestion due to new stores
• Noise and odor of new restaurant
• New detention facility
• Zoning
•  
15
Aesthetics

5-16
 PROCESS IMPROVEMENT
Module 4- Part 2

McGraw-Hill/Irwin Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved.
Module 4 Part 2
• ProcessImprovement -Quality and Productivity
Improvement- Quality Tools for Analysis and Problem
Solving

18
• Midway Airlines, a regional carrier, served business travellers
from a hub at the Midway Airport in Chicago until taken over
by Southwest Airlines in 1991.
• The hub-and-spoke network required on-time departures to
avoid delays that would compromise the efficient transfer of
passengers during their multileg journeys.
• Midway monitored departure delays and found its system wide
on-time performance had deteriorated, causing irritation among
its business passengers.
• The quality tools are presented next in the sequence in
which they would be used in the problem-solving process.

19
Quality Tools for Analysis and Problem Solving
1. Check Sheet
2. Run Chart
3. Histogram
4. Pareto Chart
5. Flowchart
6. Cause-and-Effect Diagram
7. Scatter Diagram
8. Control Chart

7-20
Check Sheet of Problems faced by an Airline

Month Lost Departure Mechanical Overbooked Other

Luggage Delay
January 1 2 3 3 1
February 3 3 0 1 0
March 2 5 3 2 3
April 5 4 4 0 2
May 4 7 2 3 0
June 3 8 1 1 1
July 6 6 3 0 2
August7 9 0 3 0
September 4 7 3 0 2
October 3 11 2 3 0
November 2 10 1 0 0
December 4 12 2 0 1

Total 44 84 24 16 12

7-21
Run Chart of Departure Delays

14

12

10
Departure Delays

0
1 2 3 4 5 6 7 8 9 10 11 12
Months

7-22
Histogram of Lost Luggage

3.5

2.5
Frequency

1.5

0.5

0
1 2 3 4 5 6 7
Occurrences per Month

7-23
 Pareto Chart of Problems

Number of Problems

90
80
70
60
50
40
30
20
10
0
Departure Lost Mech. Over- Other
Delay Luggage booked
7-24
Cause-and-Effect Chart for Flight Departure Delay (Fishbone Chart)

7-25
Pareto Analysis of Flight Departure
Delay Causes
Cause Percentage of Incidents Cumulative Percentage

Late passengers 53.3 53.3

Waiting for pushback 15.0 68.3

Waiting for fuel 11.3 79.6

Late weight and balance 8.7 88.3

sheet

7-26
 27

Flowchart at Departure Gate

7-27
Scatter Diagram of Departure Delay vs Late Passengers
12

10

8
Departure Delays

0
0 1 2 3 4 5 6 7
Late Passengers
7-28
 Control chart

Control charts are used to monitor a process. As shown in Figure, a control chart
shows when a process is out of control (i.e., the plot did not remain within the
boundaries during the prior year). After the problem solution is implemented,
the control chart is a check that the process is under control (e.g., percentage of on-time
departures remains above 90 percent with a target of 95 percent). For the current year,
the process is in control and the solution appears permanent

29
 SERVICE FACILITY LOCATION
Module 4 Part 3

McGraw-Hill/Irwin Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved.
Module 4 Part 3
• Service Facility Location - Strategic Location
Considerations -Impact of the Internet on Service Location

31
Service Facility Location Planning
• Competitive positioning: prime location can be
barrier to entry
• Demand management: diverse set of
market generators
• Flexibility: plan for future economic changes and
portfolio effect

8-32
Strategic Location Considerations for a Service
Operation
1. Competitive Clustering (Among Competitors)
(e.g. Auto Dealers, Motels)
2. Saturation Marketing (Same Firm)
(e.g. Au Bon Pain, Ice Cream Vendors)
3. Marketing Intermediaries
(e.g. Credit Cards, HMO)
4. Substitute Communication for Travel
(e.g. telecommuting, e-Commerce)
5. Separation of Front from Back Office
(e.g. ATM, shoe repair)
6.Impact of the Internet on Service Location
(e.g. Amazon.com, eBay, FedEx)
7. Site Selection Considerations
8-33
7.Site Selection Considerations
1. Access: 5. Expansion:
Convenient to freeway exit and Room for expansion
entrance ramps 6. Environment:
Served by public transportation Immediate surroundings
2. Visibility: should complement service
Set back from street 7. Competition:
Sign placement Location of competitors
3. Traffic: 8. Government:
Traffic volume on street that may Zoning restrictions
indicate potential impulse buying Taxes
Traffic congestion that could be a 9. Labor:
hindrance (e.g.., fire stations) Available labor with needed skills
4. Parking: 10. Complements:
Adequate off-street parking Complementary services nearby

8-34
 MANAGING CAPACITY AND
DEMAND
Module 4 Part 4

McGraw-Hill/Irwin Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved.
Module 4 – Part 4
• Managing Capacity and Demand -Strategies for
Managing Demand -Strategies for Managing Capacity
• Yield Management

36
Variations in Demand Relative to Capacity- Four Basic Scenarios
that can result from different combinations of capacity and
demand
 38

Four Basic Scenarios that can result from different combinations of capacity and demand

1.Excess demand
2.Demand exceeds optimum capacity
3.Demand and supply are balanced at the
level of optimum capacity
4.Excess capacity
Constraints on Capacity
Strategies for Matching Capacity
and Demand for Services
MANAGING MANAGING
DEMAND CAPACITY

Segmenting Increasing
demand customer
Developing participation
Sharing
complementary
capacity
services
Offering
Scheduling
price
Reservation Cross- work shifts
incentives
systems and training
Overbooking employees
Promoting Creating
off-peak adjustable
Using
demand capacity
Customer- part-time
induced employees
variability
Yield
management 11-40
Customer-Induced Variability
• Arrival: customer arrivals are independent
decisions not evenly spaced.
• Capability: level of customer knowledge, physical
ability and skills vary resulting in some hand-
holding.
• Request: uneven service times result from unique
demands.
• Effort: level of commitment to coproduction or
self-service varies.
• Subjective Preference: personal preferences
introduce unpredictability.
11-41
Strategies for Managing Demand
1. Customer – induced Variability
2. Segmenting Demand
3. Offering Price incentives
4. Promoting Off-peak demand
5. Reservation Systems and overbooking
6. Developing Complementary Services

42
Strategies for Managing Capacity

1. Scheduling workshifts (daily and weekly workshifts

scheduling)
2. Increasing customer participation (customer as co-
producer and self service )
3. Creating adjustable capacity
4. Sharing capacity
5. Cross-training employees
6. Using part-time employees

43
Strategies for Shifting Demand to Match Capacity
Strategies for Adjusting Capacity to Match Demand
 Yield management -Balancing capacity Utilization,
Pricing, Market Segmentation and Financial Return

Yield= Actual Revenue

Potential Revenue

Actual Revenue= Actual Capacity used x

average actual price
Potential Revenue= Total capacity x maximum
price
Yield Management Examples
A hotel that has 300 rooms charges a rate of $150 per
night Monday through Thursday. During this period of
peak demand, the hotel operates at 100 percent capacity.
On weekends (Friday through Sunday), the hotel
discounts half of its rooms at a rate of $100 per night
while the remaining rooms are still priced at $150 per
night. Calculate the hotel's yield for a Saturday night, if it
fills 50 percent of the $150 rooms and sells all of the $100
rooms.
A) 58 percent
B) 63 percent
C) 78 percent
D) 93 percent
E) 171 percent
Yield Management Examples
The Vermont Expos, a Class A minor league baseball team
based in Burlington, Vermont, play its home games at
Centennial Field, which has a capacity of 4000 seats. The
price of a ticket to attend an Expos' game is $3.00 for adults
and $1.50 for children age 12 and under and senior citizens
age 65 and over. Calculate the yield for a Vermont Expos'
home game, if 3500 fans attend the game, and 75 percent
of the tickets sold are priced at $3.00, and the remaining
tickets are sold at $1.50.
A) 66 percent
B) 77 percent
C) 88 percent
D) 117 percent
E) 131 percent
Yield Management
Yield management is a term that has become
attached to a variety of methods, some very
sophisticated, matching demand and supply in
capacity-constrained services.
Using yield management models, organizations
find the best balance at a particular point in time
among the prices charged, the segments sold to,
and the capacity used.
The goal of yield management is to produce the best
possible financial return from a limited available capacity.
• Has been defined as “the process of allocating the right
type of capacity to the right kind of customer at the right
price so as to maximize revenue or yield.”
• The implementation of yield management can involve
complex mathematical models and computer programs,
• the underlying effectiveness measure is the ratio of actual
revenue to potential revenue for a particular measurement
period
Challenges and Risks in using Yield Management

• Loss of competitive focus-over focusing on profit

maximization
• Customer alienation
• Overbooking
• Employee morale problems
• Incompatible incentive and reward systems
• Lack of employee training-purpose, how it works
• Inappropriate organization of the yield
management function- need to have centralized
reservations
 MANAGING WAITING LINES

McGraw-Hill/Irwin Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved.
Module 4 –Part 5
• Managing Waiting Lines -The Economics of Waiting -
Queuing Systems
• Strategies for Managing Customer Waiting

53
Where the Time Goes

In a life time, the average person will spend:

SIX MONTHS Waiting at stoplights

EIGHT MONTHS Opening junk mail

ONE YEAR Looking for misplaced 0bjects

TWO YEARS Reading E-mail

FOUR YEARS Doing housework

FIVE YEARS Waiting in line

SIX YEARS Eating

12-54
Cultural Attitudes
• “Americans hate to wait. So business is trying a trick or two to
make lines seem shorter…” The New York Times, September 25,
1988
• “An Englishman, even when he is by himself, will form an
orderly queue of one…” George Mikes, “How to be an Alien”
• “In the Soviet Union, waiting lines were used as a rationing
device…” Hedrick Smith, “The Russians”

12-55
Waiting Realities
• Inevitability of Waiting: Waiting results from variations in
arrival rates and service rates
• Economics of Waiting: High utilization is purchased at the
price of customer waiting. Make waiting productive (salad bar)
or profitable (drinking bar).

12-56
Laws of Service
• Maister’s First Law:
Customers compare expectations with perceptions.
• Maister’s Second Law:
Is hard to play catch-up ball.( first impressions can influence
the rest of the service experience- to make the waiting period
memorable and pleasant)
• Skinner’s Law:
The other line always moves faster.
• Jenkin’s Corollary:
However, when you switch to another other line, the line you
left moves faster.

12-57
Remember Me
• I am the person who goes into a restaurant, sits down,
and patiently waits while the wait-staff does
everything but take my order.
• I am the person who waits in line for the clerk to finish
chatting with his buddy.
• I am the one who never comes back and it amuses me
to see money spent to get me back.
• I was there in the first place, all you had to do was
show me some courtesy and service.
The Customer
12-58
Waiting Line Strategies
1.Employ operational logic to reduce wait
• Modifications in the operational system-First National Bank of Chicago
• Express Check-in-Marriott Hotels
• Adjust queuing system- Queue Configuration
• Single and multiple Queue

2.Establish a reservation process

Restaurants, theatres, physicians,-reservation systems.
“No shows”
Overbooking
Fine or charge for cancelled reservations
3.Differentiate waiting customers
Importance of the customer
Urgency of the job
Duration of the service transaction
Payment of A premium price
4.Make waiting fun, or at least tolerable
Waiting Line Configurations
4. Make waiting fun, or at least tolerable
Issues to Consider in Making Waiting More Tolerable
David Maister’s “The Psychology of Waiting Lines”

1.That Old Empty Feeling: Unoccupied time goes

slowly-Unoccupied time feels longer than
occupied time.
2.Preprocess waits feel longer than in-process
waits-A Foot in the Door: Pre-service waits seem
longer that in-service waits.
3.Anxiety makes waits seem longer-The Light at
the End of the Tunnel: Reduce anxiety with attention.
4.Uncertain waits seem longer than known, finite
waits.
5.Unexplained waits seem longer than explained
waits.

6.Unfair waits feel longer than equitable waits-

Excuse Me, But I Was First: Social justice results
from FCFS queue discipline

7.The more valuable the service, the longer the

customer will wait.

8.Solo waits feel longer than group waits.

12-62
Choose a local organization in
which people have to wait in
line for service.
Design a waiting line strategy
for the organization