Service Supply Relationships Learning Objectives n n n

Service Supply Relationships

Learning Objectives n n n Contrast the supply chain for physical goods with the customer-supplier duality of services. Discuss the challenge of managing service supply relationships. Classify business services based on the focus of the service and its importance to the outsourcing organization. Discuss the managerial considerations to be addressed in outsourcing services. Discuss the challenges of delivering services in the field. Prepare a delivery route using the Clarke-Wright algorithm.

Supply Chain for Physical Goods

Customer-Supplier Duality in Service Supply Relationships (Hubs)

Single-Level Bidirectional Service Supply Relationship Service Category Customer -Supplier >Input Output> Service Provider Minds Student >Mind Knowledge> Professor Bodies Patient >Tooth Filling> Dentist Belongings Investor >Money Interest> Bank Information Client >Documents 1040> Tax Preparer

Two-Level Bidirectional Service Supply Relationship Service Category Customer -Supplier >Input Output> Service Provider >Input Output> Provider’s Supplier Minds Patient >Disturbed Treated> Therapist >Prescription Drugs> Pharmacy Bodies Patient >Blood Diagnosis> Physician >Sample Test Result> Lab Belongings Driver >Car Repaired> Garage >Engine Rebuilt> Machine Shop Information Home Buyer >Property Loan> Mortgage Company >Location Clear Title> Title Search

Sources of Value in Service Supply Relationships n n n Bi-directional Optimization Managing Productive Capacity - Transfer: make knowledge available (e. g. web based FAQ database) - Replacement: substitute technology for server (e. g. digital blood pressure device) - Embellishment: enable self-service by teaching (e. g. change surgical dressing) Management of Perishability

Impact of Service Supply Relationships

Outsourcing Services n n Benefits - allows the firm to focus on its core competence - service is cheaper to outsource than perform inhouse - provides access to latest technology - leverage benefits of supplier economy of scale Risks - loss of direct control of quality - jeopardizes employee loyalty - exposure to data security and customer privacy - dependence on one supplier compromises future negotiation leverage - additional coordination expense and delays - atrophy of in-house capability to perform service

Outsourcing Process

Taxonomy for Outsourcing Business Services

Outsourcing Considerations

Topics for Discussion n What are some possible disadvantages associated with the product postponement strategy? Discuss the similarities and differences in the product postponement strategy used by Hewlett-Packard and Taco Bell? Discuss the implication of service outsourcing on employees, stockholders, customers, and host country economy when a firm outsources a call center overseas.

Interactive Exercise The class divides into small groups and members come up with examples of multilevel bidirectional service relationships (i. e, service supplier relationships with three or more levels). Be prepared to argue why such service relationships are so rare.

Peapod – Smart Shopping for Busy People 1. 2. 3. 4. Where are opportunities for bidirectional optimization at Peapod? How can Peapod manage service perishability? How can Peapod manage productive capacity? Suggest reasons why Peapod has not yet become profitable.