Exam 2 Flashcards
what is a service
anything sold that cannot be dropped on your foot; cannot be inventoried, intangible, and time perishable
what does time perishable mean
today’s capacity cannot be used to meet tomorrow’s demand
what is the fastest growing service sector globally
healthcare
what is the purpose of providing good service
customer retention, grow the business (positive reviews, word of mouth, etc), good service equals more money
a _____% increase in customer loyalty can increase profits ____-____%
5
25
85
is it better to meet customer expectations or exceed them?
short term- exceed them
long term - meet them
how are starbucks and waho both so successful in customer satisfaction even though they are so different in how they treat them
they set customer expectations and meet them
How do you set customer expectations
reputation and marketing; keep their promise by meeting those expectations
how do you measure customer satisfaction
surveys, retention rate, net promoter score
how many positive reviews does it take to cancel out one negative review
12
when customer expectations are in line with expectations set by the firm, satisfaction is ____
high
most conflict comes from
a misunderstanding of expectations
customer ____ drives customer satisfaction
compatibility
the fit between the needs of the individual customer and the firm’s ability to meet those needs is important
in a service environment what is the reality about variability
it cannot be eliminated
customers measure quality of service by how their variability is accommodated
customers introduce variability but complain about inconsistency
five types of customer variability
arrival, request, capability, effort, and subjective preference variability
arrival variability
customers arrive at times when there are not enough service providers
request variability
travelers request a room with a view; don’t know what they will request when they get here
capability variability
a patient being unable to explain symptoms to a doctor; how helpful are customers in helping us serve them
effort variability
shoppers leaving carts in the parking lot; not putting forth the effort
subjective preference variability
interpreting service action differently; the most difficult to overcome
what is our choice when facing variability
accommodate it or reduce it
customers that rely on good customer experiences tend to
accommodate the variability
companies that rely on operational simplicity tend to
try to reduce variability
four strategies for dealing with variability
classic reduction, classic accommodation, uncompromised reduction, low cost accommodation
classic reduction
ex. restaurant menu; companies that use this tend to attract customers who are willing to trade-off an excellent service for low price
uncompromised reduction
uses knowledge of the customer to develop procedures that enable good service, while minimizing variability; try to reduce variability in a way that customers don’t really notice; ex. college chooses students with test scores in a narrow range so the school does not have to support more than one curriculum
classic accommodation
involves experienced/more employees to compensate for variations among customers; costs more and forces company to bear brunt of variability; success of strategy hinges on company’s ability to persuade customer to pay more
low cost accommodation
companies persuade customers to serve themselves; experience varies with customer’s capability and effort; effective for high arrival or request variability; customer has to feel compensated so lower prices
what is behavioral science/economics
the study of why people act and make decisions the way they do
why is behavioral science important
if you understand the dynamics of decision making, you can influence it in your favor
rational decision making
- consider the options, then pick the one that maximizes profit or experience 2. assess pros and cons objectively without prejudice
irrational decision making
allows irrelevant biases, emotions, and environment to influence our decisions
predictably irrational
susceptible to the same influences over and over
we as humans are
predictably irrational
how to influence behavior in service operations
not all parts of an encounter are equal
finish strong
always leave them wanting more
recovery paradox
customers after a service failure and appropriate recovery have higher repurchase intention and loyalty than customers who are satisfied at the very beginning; recovery must be “appropriate” in the eyes of customer and some failure is not recoverable (safety related or repeated failure)
framing expectations
expectations change the way we perceive experiences (ex. blind taste test the same bottles were equal but when given different price tags people said higher price wine was better)
we inherently expect higher priced items to be ______ quality and this extends to brand name, packaging, presentation…
quality
why does framing expectations work
confirmation bias; we don’t want to admit that we were wrong so we convince ourselves that the higher priced thing was better
the lesson from framing expectations
start with a higher price to frame expectations then offer a discount to get down to market price (college tuition)
decoy effect
want you to purchase the bundle so when facing two options for the same price but one has more stuff, you choose that one cause you think you are getting a deal
free effect
people have an emotional response to “free” and there is pain associated with spending money (so even if it is more profitable to spend money to get the higher gift card, people will still choose the free option)
what is the number one characteristic employees want from managers
to show that they care about their career and well being (do that by understanding what motivates them and how they perceive different events)
what is the most important part of any company
employees
behavioral management theory
people have different wants and needs that motivate them; people react differently to every situation; turn management into leadership
pitfall of having subject matter experts as managers
they have a harder time relating and understanding especially when the employees are not on the same level as them; pros also know what to do so easily that they have trouble communicating it and hard to teach (not a lot of time spent in conscious brain)
what is the most valuable commodity in the world
data
data analytics
process of inspecting, cleaning, and modeling data with the goal of discovering useful information to support decision making
why is data analytics important
support decision making to take action; to make predictions about the possibility of a future event; helps you focus (or target) specific customers or problems
data dilemma
convenience of personalization vs. invasion of privacy
4 types of data analytics
descriptive, diagnostic, predictive, and prescriptive
descriptive analytics
answers the question what happened?; gives valuable insight into the past; signals something is wrong/right without explaining why
diagnostic analytics
answers why something happened; measure data against other data to find relationships and dependencies
predictive analytics
answers what is likely to happen; uses the finding of diagnostic analytics to detect tendencies, clusters and exceptions, and to predict future trends
prescriptive analytics
answers what action to take; takes the predicted options and suggests a range of prescribed actions and the potential outcomes of each action (self driving cars and AI)
what field of business has data analytics transformed
marketing
no need for expensive and ineffective shotgun approach; now use
targeted marketing to send targeted advertisements to the right people, at the right time, with the right message
data analytics is also super helpful in operations with
forecasting (manpower planning)
how many data points does google collect on you
5,000
examples of data analytics in operations
optimization models (how can we maximize calories while minimizing cost); credit acceptance (cluster a prospective customer into a group); route optimization
predictive maitenance
condition based monitoring; maintenance should be done at the right time on the right part; ideally want to fix/maintain a part before it fails; use sensors to monitor conditions of parts at all times
IOT
internet of things
what real world events can cause productions variability
machine downtime, human attendance, human emotions, quality defect rate, raw material supply issues
what does having a buffer between stations do to throughput
reduces the impact of variability
changes the output of dice reduced the variability directly
real world ways to reduce production variability
backup machinery, automation, backup suppliers
what does reducing the amount of variability do to throughput
levels the output (makes it more consistent and can plan better) . and reduces the range
which is better buffer or reducing variability
increasing WIP inventory costs money and reducing variability is difficult to do but better (have to attack the root cause of variability
why is waiting line management important
no one likes to wait in lines even when waiting at home; time is valuable, perception that the business is poorly run; smart phones have greatly softened the negative experience
one thing that disney does to handle lines
virtual queues
what times of variability contribute to waiting times
arrival, request, effort, and capability
what are techniques to reduce or eliminate waiting
online troubleshooting; automation (self check out and ATMs); be transparent; segregate customers (disney fastpass and I85 toll lanes); distract them
waiting line mgt is very important for what types of companies
airlines, amusement parks, fast food chains (chick fil a)
what are some decisions disney or GDOT have to make when segregating customers
it is based on value
what can be used to help calculate optimal number of workers, queues, lines, etc for the manager to evaluate
simulation software
do we want to eliminate waiting all together
probably not; impulse buying in grocery stores; waiting a little longer can increase sales
why is quality important
everything we buy we expect a certain level of quality (order qualifier/order winner); also penalty for poor quality is much greater than the benefit of good quality
what is the most important part on any product
the one that fails
one example of poor quality management
challenger; did not keep track of the manufacturer recommendation so used the o ring in much colder temp; part design was fine but NASA’s application of how they used it was wrong
name a few companies that have suffered for quality issues
chipoltle (e coli); samsung exploding phones, boeing
what is the definition of quality
hard to pin down but you know it when you see it
quality is not the same as
luxury
how can you recover from poor quality
be honest and up front; if you have built up a good reputation you can recover; does not need to be a pattern of behavior
types of quality
product, process, and decision quality
product quality
characteristics that meet customers acceptabilty
process quality
consistent results within a specified range
decision quality
ethical or moral? like Volkswagon turning off the car emissions during the tests
costs of quality
appraisal, prevention, internal failure, external failure, and opportunity costs
appraisal costs
inspecting, auditing, testings
prevention costs
efforts to keep defects from occurring
internal failure costs
caught internally and either scrapped or corrected
external failure costs
defect seen by the customer
opportunity costs
loss of future business due to quality issues (hard to quantify but very large)
total quality management (TQM)
manage the entire organization to excel in all dimensions of products and services that are important to customers
two operational goals of total quality management
- careful design of the product or service 2. ensure the organization’s systems can consistently produce the design
six sigma
a philosophy and set of methods to eliminate defects in products and processes; seeks to reduce variation in the processes that lead to defects; (goal is no more than 3.4 defects per million opportunities)
what is the overall focus of the six sigma methodology
to understand and achieve what the customer wants
Six Sigma DMAIC
define, measure, analyze, improve, control
define
identify customers and their priorities
measure
determine how to measure the process and how it is performing
analyze
determine the most likely causes of defects
improve
identify means to remove the causes of defects
control
determine how to maintain improvements
who implemented lean manufacturing
toyota
lean manufacturing
activities designed to achieve high-volume production using minimal inventory and work; identify and eliminate waste, improve timing of production resources (just in time), remove anything that does not add value in the eyes of customer
lean is based on the logic that
nothing will be produced until it is needed
who gets to define what a defect is
the customer
push manufacturing
workers maximize output of their workstations regardless of customer demand; efficiency of each station is the goal and focuses on keeping individuals busy; high WIP inventory and bottlenecks; make same amount of items regardless of sales (downside lots of defects)
pull manufacturing
production line is controlled by the last operation (sales); efficiency of entire process is goal; want material busy and not just people; operators only work when there is a need; controls/eliminates WIP and bottlenecks; no buffer in system if problem arises
two lean concepts
quality at the source and just-in-time production
quality at the source
do it right the first time and if something goes wrong stop the process immediately (workers are personally responsible and become empowered)
just-in-time production
producing what is needed, when it is needed and nothing more; anything over the minimum is waste; typically applied to repetitive manufacturing; exposes problems otherwise hidden by inventory; vendors deliver several times a day
six sigma tools
flowchart, run chart, pareto chart, checksheet, cause and effect diagram, opportunity flow diagram, process control chart
flow chart
a diagram of the sequence of operations
run chart
depict trends in data over time; time is always the x axis
checksheet
basic form to standardize data collection
fish bone diagram
shows what the possible causes of a problem are in a standardized way; helpful in defining root causes (equipment, personnel, procedures, material, customers, information, other)
process control chart
used to assure that processes are in statistical control; monitor process in real time; upper and lower limit
project
a series of tasks that need to be completed in order to reach a specific outcome
project management
planning, directing, and controlling resources to meet the technical, cost and time constraints of the project
success is defined as
being on time, on budget and on scope; key resource is people’s time
project management constraint theory
the triangle; scope, cost, and time
types of project organization
pure project, functional project, and matrix project
pure project
self contained team works full time on a project; PM is manager of employee; one project at a time
functional project
may work on multiple projects within your function; needs of project may coincide with daily job
matrix project
blends functional and pure; uses people from different functional areas to work on project under PM; employees have two bosses; PM must be able to negotiate
most important part of the success/failure of a project
statement of work
statement of work
written description of the objectives to be achieved, with a brief statement of the work to be done and a proposed high level schedule; must be clear; sets expectations, prevents scope creep
critical path method
activities in a project that form the longest chain in terms of their time to complete; if any task on the CP are delayed the entire project is delayed
immediate predecessor
activity that needs to be completed before another activity can begin
popular tool to visualize tasks and their relationships
Gantt charts
burndown chart
track actual progress against planned progress
pitfall of burndown
how do you measure actual progress
earned value mgt (EVM)
combined measurement of scope, schedule, and cost in a project (adding cost as a metric helps identify discrepancies in work accomplished to date)
one major factor these systems don’t take into account
the quality
how to measure quality
pull in experts to evaluate at milestones
