11.11: Operations Control for Service Providers

Overseeing a service organization puts special demands on managers, especially those running businesses, such as hotels, law firms, and healthcare providers, who have a high degree of contact with customers. Service firms provide customers with personal attention and must satisfy their needs in a timely manner. This task is complicated by the fact that demand can vary greatly over the course of any given day. Managers, therefore, must pay particular attention to employee work schedules and, in many cases, inventory management.

Managing service operations is about more than the efficiency of service. It is about finding a balance between profitability, innovation, customer satisfaction and associate satisfaction, sometimes referred to as the balanced scorecard. The balanced scorecard model utilizes 360-degree feedback, a process of collecting feedback from all of a business’s stakeholders, in order to improve operational efficiency.

Customer Experience

Moment of Truth marketing refers to the type of marketing that takes place at the moment when a customer interacts with a product, brand, or service, and forms or changes their impression about it. Moments can range from calling a help line, checking in at an airline counter, being greeted by a hostess in a restaurant, to having a maintenance problem resolved in a hotel guest room. The quality of staff a company hires, how they train their employees, and the focus management places on creating a culture of service will determine how successful the company is in service delivery and maximizing the impact of these moments of truth. Employee performance directly impacts service delivery, so effective training and engagement are key. Service organizations invest in training programs to ensure employees understand customer expectations and are equipped to handle diverse situations.

Both of the following companies emphasize the importance of investing in their employees’ training to ensure excellent service, which is a key differentiator in their respective industries.

RBC is renowned for its commitment to customer service excellence. The bank offers comprehensive training to its employees through its “Customer First” programs, which are designed to ensure that employees at all levels understand and meet customer needs. They emphasize skills like active listening, problem-solving, and delivering personalized service. RBC has been recognized for its exceptional customer service in the banking industry, contributing to its reputation as a customer-centric financial institution. Additionally, RBC has won various awards for customer satisfaction and service quality over the years.^[1]

The Keg is another Canadian company famous for its customer service. Known for its high-quality food and friendly atmosphere, The Keg invests significantly in employee training programs that focus on delivering an exceptional dining experience. Their training includes both technical aspects (such as menu knowledge) and soft skills (like interpersonal communication and empathy), which ensures that employees can connect with guests on a personal level and provide top-notch service. The Keg’s focus on training and employee empowerment has led it to rank consistently high in customer satisfaction in the restaurant industry.^[2]

Scheduling

In manufacturing, managers focus on scheduling the activities needed to transform raw materials into finished goods. Service organizations focus on scheduling workers so that they’re available to handle fluctuating customer demand. Restaurants, for example, will have more customers during the peak periods of breakfast, lunch, and dinner, but also during the slower periods in between. If the manager schedules too many people, the labour cost per sales dollar will be too high. If there aren’t enough employees, customers have to wait in line. When that happens, some get discouraged and even leave, and many may never come back.

Scheduling is made easier by information provided by a point-of-sale device built into many cash registers (also known as point-of-sale or POS machines). For restaurants, the register stores data on every sandwich, beverage, and side order sold by the hour, every hour of the day, every day of the week and sends that data to a computer system that helps managers set schedules. To determine how many people will be needed for next Thursday’s lunch hour, the manager reviews last Thursday’s data, using sales revenue to determine the appropriate staffing level. Each manager can adjust this forecast to account for other factors, such as current marketing promotions or a local sporting event that will increase customer traffic.

Inventory Control

Businesses that provide both goods and services, such as retail stores and auto-repair shops, have the same inventory control problems as manufacturers: keeping levels too high costs money, while running out of inventory costs sales. Technology, such as the point-of-sale (POS) registers, makes the job easier. POS systems track everything sold during a given time and provide information on how much of each item should be kept in inventory.

For fast-food restaurants, for example, it also makes it possible to count the number of burgers and buns, bags and racks of fries, and boxes of beverage mixes at the beginning or end of each shift. Because there are fixed numbers of supplies—say, beef patties or bags of fries—in each box, employees simply count boxes and multiply. In just a few minutes, the manager knows whether the inventory is correct (and should be able to see if any theft has occurred on the shift).

Operations managers must strike a balance between two threats to productivity: losing production time because they have run out of materials, and wasting money because they are carrying too much inventory. The process of striking this balance is called inventory control, and companies now regularly rely on a variety of inventory-control methods.

Service operations often rely on technology to streamline processes. For example, service organizations may implement Customer Relationship Management (CRM) systems, scheduling software, or automation tools to improve efficiency. Integrating technology helps reduce errors, improve customer interactions, and facilitate communication across departments.

Outsourcing in the Service Sector

Outsourcing is by no means limited to the manufacturing sector. Service providers also outsource many of their non-core functions. Some universities, for instance, outsource functions such as food services, maintenance, bookstore sales, printing, grounds keeping, security, and even residence operations. For example, there are several firms, like RGIS, that offer inventory services. They will send a team to your company to count your inventory for you. As RGIS puts it, “Our teams expertly deliver complete solutions needed to complete a wide variety of retail projects of all sizes, allowing your team to keep customer service as the number one priority.”^[3] Some software developers outsource portions of coding as a cost-saving measure. If you’ve ever had to get phone or chat assistance on your laptop, there’s a good chance you spoke with someone in an outsourced call centre. The centre itself may have even been located offshore. This kind of arrangement can present unique challenges in quality control, as differences in accents and the use of slang words can sometimes inhibit understanding. Nevertheless, in this era of globalization, we expect the trend toward offshore outsourcing to continue.

Media Attributions

“Cafe, Busy, People image” by protowink, used under the Pixabay license.