Service Supply Relationships

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Service Supply Relationships
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Learning Objectives

• 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.

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Supply Chain for Physical Goods
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Customer-Supplier Duality in Service Supply
Relationships (Hubs)
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Single-Level Bidirectional Service Supply
Relationship
Service Category Customer -Supplier gtInput Outputgt Service Provider
Minds Student gtMind Knowledgegt Professor
Bodies Patient gtTooth Fillinggt Dentist
Belongings Investor gtMoney Interestgt Bank
Information Client gtDocuments 1040gt Tax Preparer
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Two-Level Bidirectional Service Supply
Relationship
Service Category Customer -Supplier gtInput Outputgt Service Provider gtInput Outputgt Providers Supplier
Minds Patient gtDisturbed Treatedgt Therapist gtPrescription Drugsgt Pharmacy
Bodies Patient gtBlood Diagnosisgt Physician gtSample Test Resultgt Lab
Belongings Driver gtCar Repairedgt Garage gtEngine Rebuiltgt Machine Shop
Information Home Buyer gtProperty Loangt Mortgage Company gtLocation Clear Titlegt Title Search
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Sources of Value in Service Supply Relationships

• 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

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Impact of Service Supply Relationships
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Impact of Service Supply Relationships
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Outsourcing Services

• Benefits- allows the firm to focus on its core
  competence- service is cheaper to outsource than
  perform in-house- 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

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Outsourcing Process
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Taxonomy for Outsourcing Business Services
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Outsourcing Considerations
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Outsourcing Considerations
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Outsourcing Considerations
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Topics for Discussion

• 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.

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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.

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Peapod Smart Shopping for Busy People

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