Business, Legal & Accounting Glossary
A service is primarily an intangible product, as opposed to a good.
Characteristics of services include:
The diagram on the right was originally developed by Roger Schmenner.
In services with high labour content, the firm’s workforce and human resources are critical. Because of the interaction and (sometimes) customization, extensive training is necessary.
In the sections with low customization, we see products that are mass-market and standardized, automated, or basic (such as those of budget airlines). However, such automation is often capital-intensive (expensive). Also, customer feedback is less immediate or direct, so stringent quality standards may need to be introduced.
Items in the low labor sectors may be good candidates for schedule optimization.
Rigid capacity is a capacity that is fixed and cannot easily be changed on a day-to-day schedule. It cannot be altered based on demand. Also, any wasted capacity cannot be inventoried and used later. Following are examples:
In the parking lot example, a shopping centre may not have any cars parked (paying) at night.
In these situations, capacity can move depending on the labor force. It can synchronize with demand.
Split demand into controllable and uncontrollable sources. Organizations must work controllables around uncontrollable to smooth demand.
For example, in a hospital, there are walk-ins (uncontrollable) and people who make reservations (controllable). Because most of the walk-ins are Friday to Monday, doctors set appointments for low walk-in days: Tuesdays through Thursdays.
This maximizes service level and reduces operating costs, therefore smoothing demand.
Price incentives (discounts for low-demand periods) help to smooth demand.
Examples of this smoothing technique include:
This inventories demand, so a company can fit customers nicely into their capacity. It also provides guaranteed availability to customers. Also, there is no loss of a sale for the provider because there is smoother and fuller capacity use.
Disadvantages are there could be no-shows. Airlines overbook to fight this; doctors’ offices call to confirm the day before; some companies may ask for deposits or even charge if they don’t show up.
Other distinguishing characteristics of services include:
To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.
Definitions for Service are sourced/syndicated and enhanced from:
This glossary post was last updated: 29th March, 2020 | 2 Views.