Improving Service Productivity

Intensive competition in many service sectors pushes firms to continually seek ways to improve their productivity. This section discusses various potential approaches to and sources of productivity gains.

1. Generic Productivity-Improvement Strategies: The task of improving service productivity has traditionally been assigned to operations managers, whose approach has typically centered oil such actions as:

  1. Careful control of costs at every step in the process.
  2. Efforts to reduce wasteful use of materials or labor.
  3. Matching productive capacity to average levels of demand rather than peak levels so that workers and equipment are not underemployed for extended periods.
  4. Replacement of workers by automated machines.
  5. Providing employees with equipment and databases that enable them to work faster or to a higher level of quality.
  6. Teaching employees how to work more productively (faster is not necessarily better if it leads to mistakes or unsatisfactory work that has to be redone).
  7. Broadening the array of tasks that a service worker can perform (which may require revised labor agreements) so as to eliminate bottlenecks and wasteful downtime by allowing managers to deploy workers wherever they are most needed.
  8. Installing expert systems that allow paraprofessionals to take on work previously performed by more experienced individuals earning higher salaries.

2. Systems Approach to Improving Productivity Service: The systems approach to service marketing is the principal way by which technology, engineering, and management science are being implemented into service industries in order to raise productivity, lower risk, increase output and increase customer satisfaction.

McDonald’s fast service restaurant is a classic example of the systems approach which produces technocratic hamburgers and utilizes automation.

In short, McDonald’s is an example of a basic service organization that, through better engineering and systems design, produces and markets a high-quality set of products at a low price and with marvelous efficiency and productivity.

3. Customer-Driven Approaches to Improve Productivity: If customers are deeply involved in the service production process (typically, people-processing services), operations managers should be examining how customers’ inputs can be made more productive.

Three such strategies are changing the timing of customer demand, involving customers more actively in the production process, and asking customers to use third parties.

i) Changing the Timing of Customer Demand: Customers often complain that the services they use are crowded and congested, reflecting time-of-day, seasonal, or other cyclical peaks in demand.

During the off-peak periods in those same cycles, managers often worry that there are too few customers and that their facilities and staff are not fully productive.

By shifting demand away from peaks, managers can make better use of their productive assets and provide better service.

ii) Involve Customers more in Production: Customers who assume a more active role in the service production and delivery process can take over some labor tasks from the service organization.

Benefits for both parties may result when customers perform self-service.

Today, many companies are trying to encourage customers who have access to the Internet to obtain information from the firm’s corporate Websites and even to place orders through the Web rather than telephone employees at the company’s offices.

iii) Ask Customers to Use Third Parties: In some instances, managers may be able to improve service productivity by delegating one or more marketing-support functions to third parties.

Specialist intermediaries may enjoy economies of scale, enabling them to perform the task more cheaply than the core service provider, allowing the latter to focus on quality and productivity in its own area of expertise.

Some intermediaries are identifiable local organizations, such as travel agencies, which customers can visit in person. Others, such as hotel reservation centers, often subjugate their own identity to that of the client service company.

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