Services Operations Management

Block

1
UNDERSTANDING SERVICE OPERATIONS

UNIT 1
Introduction to Service Operations 1-21

UNIT 2
Interdependence of Service Industries 22-39

UNIT 3
Virtual Value Chain and Profit Chain 40-55
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 COURSE INTRODUCTION
Globalization has brought about a paradigm shift in Operations Management. Manufacturing
became global and services became local. Service Operations constitute a lion’s share of
the production operations mix. Contribution of services sector in the growth of global and
national economies is significant. In Indian scenario, services sector contributes nearly 70%
of GDP of Indian economy. Services became a major force in influencing the value chain
of organizations.
It is against this background that Service Operations Management attained importance in
the business strategy of organizations. Advent of Information Technology revolutionized
service operations, enabling them to spread across all major sectors such as manufacturing,
finance and insurance, healthcare, education, travel and tourism, media and entertainment,
legal services, citizen services etc.
The curriculum of the course, ‘Service Operations Management’ has been designed to
address the emerging dimensions of service operations. The course is spread over four
logically grouped blocks, with 20 units populating these blocks.
Block 1, Understanding Service Operations, provides clarity on service operations and
associated conceptual framework with the help of three units. Starting with definition of a
service product, its types and characteristics, concept of manufacturing continuum is
presented. Inter-dependence of service operational performance is discussed, followed by
the concepts of virtual value chain and profit chain.
Block 2, Strategy Formulation, covered in three units, focuses on Business Strategy
encompassing vision, strategy hierarchy, different approaches and the concepts of
qualifiers and order winners. Use of Customer Relationship Management (CRM) as a
customer retention strategy is discussed, covering the concepts of service encounter,
service encounter triad, service recovery and CRM tools. Then, the topic of global service
strategy is presented with coverage of generic international strategies, off-shoring and
onsite operations.
Block 3, Designing Service Operations is spread over five units. Once the student
understands the basic issues in services operations and strategize which model is to be
adopted, the next step is designing the model. This block deals with various issues related
to designing the services operations.
Block 4, Monitoring Service Operations Performance, with the help of nine units,
exhaustively covers different aspects and contemporary trends in monitoring the
performance in service industry. Once service operations management system is designed
and implemented, its effectiveness needs to be monitored for necessary mid-course
corrections, if any. This needs an understanding of the performance parameters and tools
identified.
This edition has added a large number of contemporary examples and deleted old examples
and exhibits.

iii
BLOCK 1: UNDERSTANDING SERVICE OPERATIONS
Across the business world, service operations are playing an increasingly dominant role.
Services contribute a lion’s share in the national GDP, to the extent of nearly 70%.
Therefore, a need arises to understand the various dimensions of service operations. This
block provides an entry to this important subject through an overview of conceptual topics
as briefed hereunder.

Block 1 provides an understanding about service operations and associated conceptual

framework with the help of three units. Starting with an introduction to service operations
covering definition of a service product, its types and characteristics, concept of
manufacturing continuum is presented. Inter-dependence of service operational
performance is discussed, followed by the concepts of virtual value chain and profit chain.

Unit 1, Introduction to Services Operations, defines a service product and familiarises the
learner with various types of service products. Characteristics of a service product are
highlighted, differentiating it from physical product. The unit explains manufacturing
continuum and traces the contribution of services sector to the growth of Indian economy.

Unit 2, Interdependence of Service Operational Performance, discusses the nature of inter-

dependence of service industries for operational performance. The sectors covered include:
retail, healthcare, hospitality, IT, Communications, Logistics and e-commerce.
Unit 3, Virtual Value Chain and Profit Chain, defines the terms and provides an
understanding of such topics as new processes, new knowledge, new products, new
relationships in the ever changing services industry. A case study on Apollo Hospitals
describes how profit chain is put to work in the healthcare industry and optimize the
operational efficiency and increase the revenues and profit base.

iv
 Unit 1
Introduction to Service Operations
Structure
1.1 Introduction
1.2 Objectives
1.3 What is a Service Product?
1.4 Various Types of Service Systems
1.5 Characteristics of a Service Product
1.6 Physical Product vs. Service Product
1.7 Manufacturing Continuum
1.8 Importance of Operations in Services Management
1.9 Contribution of Services Sector in the Growth of Global and Indian
Economy
1.10 Summary
1.11 Glossary
1.12 Self-Assessment Test
1.13 Suggested Readings/Reference Material
1.14 Answers to Check Your Progress Questions

“Customer service is just a day in, day out ongoing, never ending, and
unremitting, persevering, compassionate, type of activity.”
– Leon Gorman

1.1 Introduction
Service is an intangible activity. Remember, customer needs it 24X7. Thus a
customer centric service oriented organization needs to plan their services to
ensure that, they train their people for reliability, commitment and passion, and
plan for continued support in equipping them to serve better. A quality oriented,
consistent, reliable, customer focused service will undoubtedly lead to customer
delight.
We seek and utilize a variety of services in our day-to-day life, starting from the
services of janitorial or security agencies utilized by the organizations.
Globalization brought into focus a new dimension and through a paradigm shift
to the retail sector. Companies like Amazon, Flipkart and Walmart are
dominating the retail market, supplying to any customer anywhere in the world
as per committed schedules. Most of these services are of B2C nature. If we see
Block 1: Understanding Service Operations

the B2B side, we can think of services of Janitorial or Security agencies rendering
services to the organizations at the lower end and accounting, software
development, logistics, HR recruitment, and payroll management at the higher
end.
One common feature observed in the service sector relates to customer
dissatisfaction due to the break-down of equipment, time delays, the inefficiency
of staff, incompetence of service providers, discourteous service, perceived low
value for money, and poor quality of service in general. Service operations
management is the art of creating and delivering value to the customers at the
right time, least cost and best quality as perceived by the customers.
With huge infrastructure and introduction of new technologies in operations
management, manufacturing organizations offering their infrastructure as
services to customers is gaining ground in the emerging field of servitization.
The service concept – focusing on experience, outcome, delivery mode, and value
- is central to understanding customer requirements and focusing operations on
those areas that have maximum impact on the customers’ perceptions. Service
providers have to recognize these operational issues and find solutions that will
improve customer satisfaction and reduce the cost of service.
The services sector is the fastest growing part of the global economy in general
and the Indian economy in particular. Across the world, services are contributing
on an average, around 70% of GDP. Technological developments in the past two
decades have facilitated the conversion of a number of small and large markets in
various countries into a single market place where there is an abundant choice of
goods and services at the click of a button or even a tap on the cell phone. This
change is true to both manufactured products and service products as we see and
hear of telemedicine for medical consultations and even surgeries through
satellite communications. There are certain differences in the approaches of
service operations when compared to manufactured product operations and we
would explore these areas in the coming units
This unit focuses exclusively on understanding certain fundamentals of services
in a generic sense like service product, physical and service products, service
systems, importance and the need to study service operations and reemphasise the
growing impact of services in economic development.

1.2 Objectives
At the end of this unit, you will be able to
 Define a service product.
 Establish a conclusion for a combination of physical and service attributes.
 Explain the study of operations in services.
 Examine the part played by services in the world economic development.

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 Unit 1: Introduction to Service Operations

1.3 What is a Service Product?

Definition of Services: “Services are economic activities offered by one party to
another. Often time-based performances bring about desired results to recipients,
objects or other assets for which purchasers have the responsibility. In exchange
for money, time and effort, service customers expect value from access to goods,
labor, professional skills, facilities, networks and systems, but they do not
normally take ownership of any of the physical elements involved.”
- Lovelock, Jochen Wirtz and Chatterjee.
The definition of a service product can be understood if we consider an example,
say the net-café usage for browsing or travel by the government transport system.
When we travel by train from one place to another place, we do not purchase a
train or rails or the stations. These are physical facilities used by the travel service
provider, Railways department or its agency like the IRCTC (Indian Railway
Catering and Tourism Services), to deliver the service product viz. travel. When
we buy a ticket, we actually buy the service called ‘travel’.
When we use the computer in an Internet café’, we don’t buy the computer
systems but the service of ‘hire’ or ‘use for money’. When we take internet
connection in our homes or offices, we seek the support of a service provider.
When we go to a music concert, we buy the experience of listening to the concert.
A service product is more in the nature of an ‘experience’ and the recipient/ buyer
has to feel that he/ she has received the service as compared to a buyer of a
physical product, say a mobile phone, where the product is handed over on receipt
of money.
“A service” is a time-perishable, intangible experience performed for a customer
acting in the role of co-producer.

Example: Customer Service in Hospitality Industry, 2020

At Ritz-Carlton, employees were empowered to spend up to $2,000 for
redressal of any complaint raised by a guest, without giving any explanation to
management. One of their customers, John DiJulius, forgot the charger at the
Ritz-Carlton Sarasota. He was delighted to receive an air parcel next day which
contained the charger. The exciting part was, a note stating: ‘Mr. DiJulius, we
were eager to reach this instrument in time in your hands, as we were definite
of your need of this instrument for your work. However, we also are sending
an additional charger for your computer.’
Given the empowerment, the employee could convert the error made by a
customer as a great service opportunity and went beyond the needed help to
ensure customer delight.
Contd….

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Block 1: Understanding Service Operations

The employee acted in a proactive way, properly foreseeing the need of the
customer for his computer. Employees could achieve customer delight by right
thinking, encouraging decision and showing necessary concern to ensure
loyalty in long run.
Source: https://www.qualtrics.com/blog/customer-service-examples/, published September 30,
2020, updated July 4, 2022, Accessed on 13th July, 2022.

1.4 Various Types of Service Systems

There are a number of services that we come across like Medical and Healthcare,
Transportation, Travel, Legal, Educational, IT/ITES, Hotels/hospitality, Banking,
Insurance, etc. However, from the operations management point of view, these
groupings do not adequately classify the services. They do not clarify the
processes as in the case of manufacturing where we can classify industries as
process-based, continuous process, critical processes, etc. It is useful to classify
service systems based on the extent of customer contact. This refers to the
physical presence of the customer in the system. Creation of service refers to the
work process involved in providing the service itself. Hence, the extent of contact
is the ratio of the time spent by the customer in the system to the total time of
customer service.
Service systems with a high degree of customer contact like in a bank or a
restaurant are more difficult to control and rationalize than those with lower levels
of customer contact. The customer is more involved in the process in the case of
high customer contact systems and can affect the demand, the nature of service,
quality, and quantity. The processes are highly varying in the case of high
customer contact systems. Hence service systems require that decisions on
facility location, layout, product design, process design, work scheduling,
production planning, quality systems, etc. are based on whether the system is of
high customer contact or not. Firms with similar levels of customer contact are
likely to encounter similar types of problems. They are capable of sharing
experiences with similar group members. This facilitates the adaptation of best
practices for the benefit of all members.
Service process matrix: This approach was proposed by Schmenner (1986) and
it seeks to differentiate services based on
a) Degree of interaction and customization, like in real-estate or banking
industry.
b) Degree of labor intensity:
 Low labor intensity and low interaction: Service Factory. e.g. Airlines and
Hotels
 Low labor and high interaction: Service Shop. E.g. Hospitals, Diagnostic
Labs.

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 Unit 1: Introduction to Service Operations

 High labor and low interaction: Mass Service. E.g. Schools.

 High labour and high interaction: Professional Service. E.g. Lawyers,
Chartered Accountants.

The challenges faced by each group are similar and solutions may be unique to
an industry.

Example: Customer Experience at a BPO, 2022

Alorica (BPO) had around 100,000 employees in 150 physical places, from
among 17 countries worldwide. Alorica focused basically on ‘customer
relationship management’ and total ‘back office support’. It was known for
multitude of world-class services, like acquiring, care, support and sales to the
customer. The domains of business, Alorica covered included: 70 percent
‘Fortune 500’ set of industries, spanning ‘communications, financial services,
healthcare, retail, and tech’.
The company Verint and Alorica together were identified in the “Gartner
Magic Quadrant” applicable to BPO industry in 2022. ‘Verint Enterprise
Workforce management’, ‘Verint Speech analytics’, and the ‘Verint
Community apps’ were used by Alorica in their BPO operations and services
to customers. With 20 years of business experience, Alorica was announced
as the “BPO of the Year” at the 2019 ‘CCW Excellence Awards’. This award
was generally given to contact centers innovating in their operations, and
having support to global clients and customers, and thus was a special honor.
Sources: https://www.cxtoday.com/contact-centre/8-insightful-cx-in-bpo-case-studies-to-read-in-
2022/ dated May 30, 2022, Accessed on 13th July, 2022.

1.5 Characteristics of a Service Product

Service product is different from a manufactured product and the following
characteristics differentiate it.
a) Intangibility: Services are intangible in nature and we experience the
services. For example, when we visit a doctor for treatment of an ailment, we
merely experience the treatment in terms of doctor’s advice and this is called
healthcare service. In an educational service, we gain knowledge and skill,
which are perceived by us. Health, wellness, and knowledge are not physical
products like a computer and in that sense, these are intangible products.
b) Storage not possible: Services cannot be stored or stocked for use at a later
point in time. When we go to a movie, our experience of having seen and
enjoyed the movie cannot be stored and resold to another person. In the case
of a physical product, say a car, the product can be used by us and sold later
for a price. The car manufacturer can produce cars or car parts, keep them in
inventory and use them or sell later.

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Block 1: Understanding Service Operations

c) Simultaneous production and consumption: Services are produced and

consumed at the same time. That is why they cannot be stored for later use.
A lawyer’s arguments in court for a client are produced and served at the
same time. Once the argument for a day is completed, another argument on
another day is a new service product as it is defined afresh. A musician’s
concert is consumed as it is produced and delivered.
d) Service Quality: It is difficult to gauge the acceptance of a service product
as the quality of service is perceived differently by different customers. A
doctor’s treatment is felt as ‘good’ by some patients and ‘poor’ by another
patient, both suffering from the same ailment. This could be due to the
expectations of the two patients being different.

Example: Digital Bank’s Financial Inclusion, 2022

TymeBank in South Africa was a fully digital retail bank founded with
financial inclusion as a core business objective. In short span, the bank had 4
million customers. The noticeable characteristic of their service was that it
aimed at serving low-income people as their customers, offering simple
products like savings and checking accounts, with debit cards. They utilized a
distribution network, combining interactions of both types of customers
serving in online and offline ways, using the partnership of chain of grocery
stores ‘Boxer and PnP’. This helped the bank to reach customer segments,
which were undeserved by conventional banking players.
This service characteristic proved to have transactional accounts at low-cost,
but ensured the yields were high for the savings account. TymeBank’s
customers also expressed their enhanced ability to do digital transaction for
receiving money. TymeBank also stood as a good example of CGAP’s (the
Consultative Group to Assist the Poor) recommendation of digital banks play
role in the mission of financial inclusion.
Source: https://www.cgap.org/research/publication/tymebank-case-study-customer-impact-
inclusive-digital-banking dated January 2022. Accessed on 13th July, 2022.

1.6 Manufacturing (Physical) Product vs. Service Product

The following Table 1.1 compares a manufacturing product and a service product.
Table 1.1: Manufacturing Product vs. Service Product

Manufacturing Product Service Product

Tangible product. We can feel Intangible. We can merely experience it.

and see the physical features.

Stock keeping possible Cannot be kept in stock for later use

Contd….

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 Unit 1: Introduction to Service Operations

Product can be resold for a price Service is consumed as it is produced.

after use by a customer. Nothing left for resale.

Product acceptance is Difficult to quantify acceptance as

quantifiable. service is a perception.

Quality control with product Quality of service is subjective and can

specifications vary from customer to customer.
Source: ICFAI Research Center

Another important distinction between a physical product and service product is

that many services must be close to the customer. For example, McDonald's have
to open new outlets wherever customers exist, unlike a Maruti car plant that need
not be close to the customers’ location. However, closeness is a precondition to
all services like specialty hospitals. They are few in a city due to the scarce
availability of specialist doctors and such other resources. However, patients can
be transported to the hospital by dedicated conveyance systems.
There are different criteria for choosing places for plant location in the case of
service products as compared to physical products.
Mass production concepts are not applicable to the majority of service products
where the type of service is tailor-made to suit the customer.

Example: Product Strategy of a Service Company, 2020

Netflix was the well-known and highly customer centric, ‘largest streaming
global service’ with 193 million users as on July 2020. Being a service
company, why it had to design a product strategy? and what was the secret?
Netflix’s need for product strategy was triggered by an aim of achieving big on
DVD, as they started out as rentals of DVD, where DVDs were sent via postal
services to the customers. Their highest priority as defined and set by the
product team was, retention of customers on monthly basis, which was also
measured through an engagement metric.
The other defined metrics to be paid attention included growth of the business
and monetization, and increased profits (‘margin-enhancing’) in multiple
ways. Netflix built some features of social experimentation like: ‘Friends’ in
2009, ‘XBox Party Mode’ in 2010, and ‘Tell a Friend’ initially, but discarded
subsequently because of lack of usage of these features. ‘Netflix Party’ was a
Chrome extension app to watch movies with friends and family jointly while
able to chat parallel. This chrome extension was hard-to-copy in short time,
and had the capability to increase profits, as it could be spread via word-of-
mouth, and enhance retention.
Source: https://productled.com/blog/netflixs-2020-product-strategy/ dated April 26, 2022.
Accessed on 13th July, 2022.

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Block 1: Understanding Service Operations

Activity 1.1
Covid-19 pandemic has brought healthcare services to main focus across the
world. People flock to hospitals with high hopes of getting free from pandemic
fear and other ailments. Keeping this in mind, find suitable and brief answers
to the following healthcare related aspects of service operations:

i. Who are the customers to be served? What is the service product?

ii. What type of service system to be deployed?
iii. Identify the characteristics of the service product offered?
iv. Formulate the service provider’s matrix for this situation
v. Find the reasons for customer dissatisfaction in healthcare services.

Answer:

Check Your Progress - 1

1. Which of the following is not a characteristic of ‘Service process matrix’

approach?
a. Labor intensity
b. Degree of interaction
c. Degree of customization
d. Both labor intensity and customer contact
e. Neither labor nor contact
2. Which of the following is not a B2B service?
a. Janitorial services
b. IT infrastructure services
c. Logistics services
d. Banking services to individual customers
e. Software development for a client

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 Unit 1: Introduction to Service Operations

3. A treatment process for a patient in a hospital involves:

a. High interaction between patient and service providers
b. Low labor and high interaction
c. High labor and high interaction
d. Telemedicine
e. B2C service
4. Which of the following is the average contribution of Service Operations to
the GDP in India?
a. 0-19%
b. 20-39%
c. 40-59%
d. 60-79%
e. 80-100%
5. When manufacturing infrastructure is used for service operations as a
business strategy, what is it called?
a. Service matrix
b. Servitization
c. Service as a product
d. B2B service
e. B2C service

1.7 Manufacturing Continuum

Sometimes we may have difficulty in distinguishing between a product and
service as both may be overlapping to different degrees. Management theorists
advise us to see the degree of physicality and the degree of intangibility to clear
this problem. For example, a mobile phone has physical features like color, shape,
weight, memory, etc. but the mobile phone is useful only when it is connected to
a service network as all the features like mobile Apps, Wi-Fi, etc. can be used
only then. This is probably midway in the product-service spectrum or extreme
left. A CD player or a car is more physical and stand-alone and they are on one
end. A banking or insurance product will be on the opposite end as it is intangible
in nature. The insurance policy merely represents a promise to compensate for
the loss in case of an event happening and the product, viz. promise is intangible.
The extent of customer contact is another factor to determine whether a product

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Block 1: Understanding Service Operations

is a service product or not. Reid and Sanders have explained these aspects by a
diagram as given below in Figure 1.1.
Figure 1.1: Degree of Customer Contact

Source: Reid & Sanders—Operations Management: Wiley 2002

The physical product-service continuum enables marketers to see the relative

goods/services composition of total products. A product’s position on the
continuum, in turn, enables marketers to spot opportunities. At the pure goods
end of the continuum, goods that have no related services are positioned.
Automobile sector is a classic example for showcasing product-service
continuum. We see sales and service showrooms for almost all manufacturers
across the world. With increasing focus on service quality as a primary
expectation of customers, businesses are concentrating on high quality customer
service as an ultimate selling proposition. We also come across TV and computer
manufacturers and their service offerings. Such products are cheaper but repair
and service are prohibitively costlier, encouraging the customer to exchange such
products for contemporary models.

Example: Transforming Customer Experience through Extended

Reality, 2022
SEACOMP (Engg. and Electronics design) company excelled in providing
wide range of manufacturing answers providing solutions for “consumer
merchandise, medical goods, and industrial industry related equipment”.
SEACOMP set its name above most other brands in the manufacturing industry
of electronics, by providing their customers with reliable service, ethical
operations, and immersive partnership.
Contd….

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 Unit 1: Introduction to Service Operations

This embodied exhibiting an exceptional customer experience, covering entire

gamut of their operations: development of products, manufacturing based on
customer specifications, and building highly operational engineering roadmap.
SEACOMP’s customers depended on SEACOMP for ideas on futuristic
products they work on. SEACOMP excelled in providing those expected
incredible solutions to the customers.
To retain the glory, SEACOMP discovered that extended reality (XR) would
be the right initiative to help develop stronger relationships with prospects and
clients. SEACOMP and Matterport jointly worked in ensuring and
transforming the customer expectations to achieve highest experience.
SEACOMP could scan numerous ‘digital twins’ as part of the faculties under
manufacturing to provide clients, amazing set of services. It also facilitated
3D walkthroughs of their infrastructure, at ‘no cost to pay, time to spare, and
any risks of health in this travel’. SEACOMP estimated that, the use of digital
twin technology saved the company yearly around $250,0000 in travel costs,
within the facility.
Source: https://www.xrtoday.com/mixed-reality/xr-manufacturing-case-study-in-focus-matterport-
and-seacomp/ dated April 14, 2022. Accessed on 13th July, 2022.

1.8 Importance of Operations in Services Management

Operations management, which was treated as the domain of manufacturing
operations, has extended to include service operations also. Like manufacturing,
service operations are also governed by similar processes such as supply chain
management. With increasing share of services in national economies, focus on
operations has gained increasing importance as briefly explained below.

a) Many services have different characteristics when compared to physical

products and hence specialized managerial techniques are employed in
managing services.
b) Many service organizations require the intensive application of operations
management techniques for their existence and success. A restaurant should
follow sound forecasting and inventory management to ensure that the
working capital is not locked up in unwanted stores and the production of
food items are not in excess of demand. A retail bank should know how to
handle crowding and queues at certain times and relaxed working at other
times. A hospital has far too many facilities like water supply, purification of
water for use, sterilization of equipment, air-conditioning system, patient
transportation, maintenance of hygiene, etc. Hence, these service units
depend on the efficient use of operations management techniques.
c) As the services are consumed while they are produced, it is often difficult to
clearly define a ‘standard level’ of resources to be consumed. This makes

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Block 1: Understanding Service Operations

standard costing difficult. However, the organizations have to find some basis
for costing their services or service components so that the cost control
measures can be implemented. Hence, operations management tools are
useful in ‘fixing’ standards.
d) Quality management & control is made difficult by the fact that the ‘quality’
is a perception in the case of many services. This does not mean that service
organizations need not worry about the ‘quality’ aspect. Survival and growth
of service companies depend on the improvement in ‘perceived’ quality.
Some concepts used in manufacturing quality assurance are useful for service
industries as well.
e) Planning and scheduling: there are quite a few operations research techniques
that come handy when service organizations face problems of queuing,
crowding and highly varying service times and arrival times. For example,
the time taken to service a customer depends on the kind of service. Cash
deposit and withdrawal take less time as compared to the preparation of a
demand draft. Handling varying service times and varying arrival rates and
meeting customer service goals are indeed a challenge.
f) Facility layout: This aspect and ergonomics play a key role in determining
customer experiences and perceived quality. The ambiance of a hospital
should be good enough to comfort a patient. Testing facilities in a hospital
should be ‘reachable’ and yet within the space constraints. These are aspects
of ‘plant layout’ in operations management.
Many techniques and tools used in operations management of manufactured
products are useful in service operations, though with modifications here and
there.
In some service industries like retailing, the success of the venture could depend
on the implementation of an operational management tool like Supply Chain
Management or RFID (Radio Frequency Identification).
Service operations managers need abilities to manage the total chain of processes,
which link together in delivering the service to customers or end-users.

Example: Service Operations in Food Industry, 2021

FieldFresh Foods Private Limited of India had a strategic drive to link Indian
agricultural commodities to the world, taking advantage of the available Indian
climate, vast area of production, volumes of labor force. They were faced with
supply chain difficulties in the initial phases of their operation. After multiple
experimentations, models of sourcing, varying crop types and other logistical
options, they decided to concentrate on only baby corn.
Contd….

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 Unit 1: Introduction to Service Operations

They worked for 2 years and overcame the road transportation issues, not so
regular power supply problems, and unavoidable bureaucratic procedures.
They had to work hand in hand with large numbers of farmers and gained the
confidence and trust. Meanwhile, FieldFresh team established efficient supply
chain across Punjab and Maharashtra for baby corn, covering all needed
aspects like ‘input delivery parameters, credit creation, irrigation methods,
timely scientific advice to needed farmers, and production volumes’ satisfying
the European market. They paid highest attention to cautious harvesting, well
planned produce handling, quick, hygienic, fast transportation, augmenting
with necessary cold chain storage, got accredited for safety certification, and
internationally approved grading, packaging, and labeling standards. In course
of time, they could export fresh baby corn of 500 metric tons to Europe from
their ‘Agri Centre of Excellence (ACE), an R&D’ farm.
Sources: https://som.yale.edu/story/2022/top-40-most-popular-case-studies-2021 Accessed on
14th July, 2022.

1.9 Contribution of Services Sector in the Growth of Global and

Indian Economy
There are three primary sectors in every economy: agriculture, industry, and
services. Initially, agriculture is a developing economy’s most important sector.
But as income per capita increases, agriculture loses its primacy, giving way first
to a rise in the industrial sector, then to a rise in the service sector. All growing
economies go through these stages. The economies of countries develop from
agriculture to industry and industry to services in their journey of development.
These stages of development are also called as pre-industrialization,
industrialization, and post-industrialization phases.
In India, agriculture was the primary sector during 1950 that accounted for more
than 70% of employment. As per Census 2011, 56.6% of people in the
employable age group worked in agriculture-related industries, 14% in
manufacturing, and the balance 30% in service industries. Modernization of
agricultural methods and the spread of scientific farming processes continue to
help the country achieve a better yield. However, an increase in the availability
of educational opportunities and consequently in the number of educated and
skilled youth has facilitated industrialization first and service industries next. In
2019, was 42.39%, 25.58% in industry and 32.04% in services.
The share of agriculture in total employment went up to 15.9% in 2020-21 from
15.4% in 2018-19.
The services sector is the largest sector of India. Gross Value Added (GVA) at
the then current prices for the services sector was estimated at 96.54 lakh crore
INR in 2020-21. The services sector accounted for 53.89% of total India's

13
Block 1: Understanding Service Operations

GVA of 179.15 lakh crore Indian rupees. While the industry sector contributed
25.92% with GVA of Rs. 46.44 lakh crore, agriculture and allied sectors
contributed 20.19%.1
As per Ricardo’s principle of competitive advantage, the production of goods and
services keeps moving from one country to another based on ‘competitive
advantage’ factors. Thus, we see labor-intensive manufacturing industries
moving away from the developed to developing countries and least developed
countries in stages. As per capita income increases due to industrialization, people
in developing and less developed nations look for services and consequently
services grow. Now, the principle of competitive advantage has caught up with
services also and hence we have BPO and Medical Tourism businesses
flourishing in developing countries like India. India’s software exports continue
to grow mainly because we have a huge pool of educated and skilled labor, which
would cost around US$ 15 per hour as against US$ 30-40 per hour in the USA.
Heart surgery in India would cost 40% of what it costs in the USA and hence
people choose to travel to India for surgery.
Services sector is the fastest growing sector in the world and as per the UNCTAD
statistics on trade for the period from 1980 to 2013, the services sector accounted
for 71% of Global GDP in 2010. Trading in services has caught up in the LDCs
and developing countries enabling these economies to participate in world trade
and improving their GDPs. The United Nations Conference on Trade and
Development (UNCTAD) report of 2019 establishes that the growth rate of
developing countries (3.5%) is better than that of developed countries (1.6%).
If we look at the growth of services sector as a percentage contribution to the
country’s GDP as per World Bank statistics for the period 1980 to 2013, we
understand that many LDCs like Bangladesh, African countries, Cuba,
Dominican Republic and others have gradually moved from agriculture to
industrialization phase. Even in these countries, the services sector has grown
between 2% to 20%. During this period, developing countries Indonesia and India
have clocked a growth rate of 5% and 11% respectively in terms of percentage
GDP.
The movement towards the services sector is more dramatic as is seen in the case
of Australia (17%) and France (13%) and moderate in other developed nations
like the USA, Japan, Germany, etc. Many regular services functions like data
entry, medical transcription, transaction processing, extracting information from
ECG and X-ray, etc. have been outsourced to countries like India where skilled
manpower is available at competitive prices.

1
https://statisticstimes.com/economy/country/india-gdp-sectorwise.php, 17 June 2021, Accessed on 1st
August 2022

14
 Unit 1: Introduction to Service Operations

The compounded annual growth rate (CAGR) for services in India was 8.5% for
the period from 2000-01 to 2013-14 as per statistics furnished by a research
agency (ibef.org).
One of the reasons for the growth of the services sector is technological
development, particularly in the field of Information and Communication that
enables faster transfer of information and data across the globe thus making the
world a global market place.
Another reason may be the opening up of the economy of many countries
including India that facilitated the transfer of knowledge and technology at a
faster rate. IT/ ITES has grown dramatically in the last 15 years, starting from the
Y2K boom and evolving into software exports. Healthcare industry has also
recorded high growth due to medical tourism and treatments/ sometimes surgery
through web-enabled consultations, robotic surgery, etc.
The growth of the export of services during 1990-2000 was 9% for developing
nations against 5.5% for developed nations. As per a study by the World Trade
Organization (WTO), liberalization in services is expected to help developing
nations to earn US$ 6 trillion by 2015 and impressively beyond 2015. Developed
nations are the customers for the newly identified services and developing
countries, with educated, trained and skilled manpower are the preferred suppliers
due to cost advantages. It is expected that by 2020 and beyond, services will
contribute more than 70% of GDP across the world. It is also predicted that
developing countries will contribute significantly to the global economy.
Emerging scenario
The services sector is not only the dominant sector in India’s GDP, but has also
attracted significant foreign investment, has contributed significantly to export
and has provided large-scale employment. India’s services sector covers a wide
variety of activities such as trade, hotel and restaurants, transport, storage and
communication, financing, insurance, real estate, business services, community,
social and personal services, and services associated with construction.
Market Size
The services sector is a key driver of India’s economic growth. The sector
contributed 55.39 per cent to India’s Gross Value Added at current price in
FY20*. Services sector’s GVA grew at a CAGR of 1.45 per cent to US$ 1,064.8
billion in FY20 from US$ 1,005 billion in FY16. Net export estimate in FY20
from services stood at US$ 214.14 billion, while import was at US$ 131.41 billion
in FY20.
Nikkei India Services Purchasing Managers' Index (PMI) stood at 14.6 in May
2020, indicating a contraction as COVID-19 led shutdown impaired businesses.

15
Block 1: Understanding Service Operations

Investments

Some of the developments and major investments by companies in the services

sector in the recent past are as follows:

 Services sector is the largest recipient of FDI in India with inflow of US$ 82
billion between April 2000 and March 2020.
 In June 2020, Jio Platforms Ltd. sold 22.38 per cent stake worth Rs 1.04
trillion (US$ 14.75 billion) to ten global investors in a span of eight weeks
under separate deals, involving Facebook, Silver Lake, Vista, General
Atlantic, Mubadala, Abu Dhabi Investment Authority (ADIA), TPG Capital
and L. Catterton. This is the largest continuous fundraise by any company in
the world.
 In February 2020, Novartis launched Biome India, a digital innovation hub,
in Hyderabad, its first such centre in Asia and the fourth globally.
 Indian healthcare companies are entering into mergers and acquisition
(M&A) with domestic and foreign companies to drive growth and gain new
markets.

Government Initiatives
The Government of India recognises the importance of promoting growth in
services sector and provides several incentives across a wide variety of sectors
like health care, tourism, education, engineering, communications, transportation,
information technology, banking, finance and management among others.
The Government of India has adopted few initiatives in the recent past, some of
these are as follows:

 The Cabinet Committee on Economic Affairs has given its approval for
continuation of the process of recapitalization of Regional Rural Banks
(RRBs) by providing minimum regulatory capital to RRBs for another year
beyond 2019-20.
 Government of India has launched the National Broadband Mission with an
aim to provide Broadband access to all villages by 2022.
 Under the Mid-Term Review of Foreign Trade Policy (2015-20), the Central
Government increased incentives provided under Services Exports from
India Scheme (SEIS) by two per cent.
 Government of India has been working to remove many trade barriers to
services, for which it tabled a draft legal text on Trade Facilitation in Services
to the WTO in 2017.

16
 Unit 1: Introduction to Service Operations

Achievements
Following are the achievements of the Government:
 India’s rank jumped to 22 in 2019 from 137 in 2014 on World Bank’s Ease
of doing business - Getting Electricity ranking. Ministry of Tourism
sanctioned 18 projects covering all the Northeast States for Rs 1,456 crore
(US$ 211.35 million) for development and promotion of tourism in the region
under Swadesh Darshan and PRASHAD schemes. A total of 11 projects
worth Rs 824.80 crore (US$ 127.98 million) were sanctioned under the
Swadesh Darshan scheme. During 2019-20, an additional fund Rs 1,854.67
crore (US$ 269.22 million) was sanctioned for new projects under this
scheme.
 Statue of Sardar Vallabhbhai Patel, also known as ‘Statue of Unity’, was
inaugurated in October 2018 and the total revenue generated till November
2019 stood at Rs 82.51 crore (US$ 11.81 million).
 IT-BPM industry’s revenue was estimated at around US$ 191 billion in FY20
with a growth rate of 7.7 per cent.
Road Ahead
Services sector growth is governed by domestic and global factors. The Indian
facilities management market is expected to grow at 17 per cent CAGR between
2015 and 2020 and surpass the US$ 19 billion mark supported by booming real
estate, retail, and hospitality sectors.
By 2023, healthcare industry is expected to reach US$ 132 billion. India’s digital
economy is estimated to reach US$ 1 trillion by 2025. By end of 2023, India’s IT
and business services sector is expected to reach US$ 14.3 billion with 8 per cent
growth.

Example: Service Sector Contribution in India, 2022

The Economic Survey of India analysed that ‘Services Sector’ contribution
was over 50%, in India's GDP during 2021-22. FDI covered $ 16.73 billion
(H1 2021-22), and contributing areas were: ‘outsourcing, R&D, Courier, Tech
Testing & Analysis, and Education’. Survey mentioned growth in ‘gross
exports services, exports of software, business and transportation services’,
with an increase of 22.8% (H1 2021-22).
This was facilitated due to policy changes made to ‘drive innovation and
technology adoption’, relaxing of ‘Services Provider Regulations’, ‘Telecom
Sector Reforms and Consumer Protection (e-commerce) Rules, 2020’.
The startups in Services Sector had grown remarkably for the past six years.
The cumulative cargo capacity of all existing ports had increased to 1,246.86
Million Tons Per Annum (March 2021) with 10.16% (April-November 2021)
growth.
Source: https://www.livemint.com/economy/economic-survey-services-sector-contributed-over-
50-to-india-s-gdp-11643622695809.html dated 31st January, 2022. Accessed on 13th July, 2022.

17
Block 1: Understanding Service Operations

Activity 1.2
The implementation of Goods and Services Tax (GST) is a major tax reform
in the post-independent India. It is claimed that it has created a common
national market and reduced the overall tax burden on goods. GST
implementation is expected to cut costs in the long run on account of
availability of GST input credit, which will result in the reduction in prices
of services.
You are required to explain the process of GST implementation, hurdles
faced in the process, how to overcome the hurdles and its implications in the
future, keeping in view the fast moving service operations in India.
Answer

Check Your Progress - 2

6. Which of the following does not exemplify manufacturing continuum as a
framework to verify whether a product as a service product or not?
a. Degree of tangibility
b. Physicality
c. Degree of customer contact
d. Ability to store
e. Cost
7. Which of the following is a unique characteristic of a manufactured product
as different from a service product?
a. Off-line quality control
b. High customer contact
c. Intangibility
d. Short response time
e. Immediate consumption
8. Which is the most adversely effected problem due to the growth of services
in a country?
a. Raising unemployment
b. Reduction in GDP growth
c. High costs
d. Technology
e. Reduction in labour-intensive manufacturing

18
 Unit 1: Introduction to Service Operations

9. Which aspect is not true as per Ricardo’s theory of competitive advantage?

a. Movement of manufacturing and service sectors from developing to
developed countries
b. Focus on advanced technologies in developed countries
c. Increase in the need for better services in developing countries
d. Employment opportunities for developing countries in services sector
e. Reskilling is an essential aspect of emerging service sector

1.10 Summary
 Services are intangible products and we consume a wide variety of services
in our day-to-day life.
 As services are intangible and generally tailor-made to each customer on each
occasion, the quantity of service is difficult to measure and control and
quality is a perception that can vary from customer to customer.
 Services are classified based on the degree of customer contact and industries
having similar levels of customer contact can share their experiences for
adaptation of best practices.
 The services sector has significantly contributed to the world economy in
general and the Indian economy in particular.
 Services account for nearly 60% of our GDP and help us grow at a faster rate.
Technology has been a major enabler of this growth.
 Growth of service industries enables high job opportunities and
understanding the dynamics of the situation offers a competitive advantage
in this fast-growing sector.
 National economies have to move fast in today’s services-driven economic
opportunities for faster growth in GDP.
 Services sector growth is governed by domestic and global factors.
 By 2023, healthcare industry is expected to reach US$ 132 billion. India’s
digital economy is estimated to reach US$ 1 trillion by 2025. By the end of
2023, India’s IT and business services sector is expected to reach US$ 14.3
billion with 8 per cent growth.
 The implementation of the Goods and Services Tax (GST) has created a
common national market and reduced the overall tax burden on goods. It is
expected to reduce costs in the long run on account of availability of GST
input credit, which will result in the reduction in prices of services.

19
Block 1: Understanding Service Operations

1.11 Glossary
Business Process Outsourcing (BPO): Business process outsourcing (BPO) is a
method of subcontracting various business-related operations to third-party
vendors. When business process outsourcing began, it applied chiefly to
manufacturing entities, such as soft drink manufacturers that outsourced large
segments of their supply chains.
Business to Business (B2B) Transactions: These are transactions among
different organizations.
Business to Customer (B2C): Business-to-consumer, denoting trade conducted
via the internet between businesses and consumers.
Gross Domestic Product (GDP): Gross Domestic Product (GDP) is
the monetary value of all finished goods and services made within a country
during a specific period.
Information Technology (IT): It is the technology based on computer hardware
and software, used for information processing
Information Technology Enabled Services (ITES): These are the services
provided by deploying Information technology
Least Developed Country (LDC): The Least Developed Countries (LDCs) is a
list of developing countries that, according to the United Nations, exhibit the
lowest indicators of socioeconomic development, with the lowest Human
Development Index ratings of all countries in the world.
Radio Frequency Identification (RFID): This is a technology using a barcode
system to identify products and materials for easy traceability.
The Year 2000 (Y2K): This refers to the year 2000 where a financial crisis was
expected in the banking sector, for which Y2K software was developed.

1.12 Self-Assessment Test

1. What are the important characteristics of service products? Compare these
characteristics with physical products.
2. What is the manufacturing continuum? How does it help in the classification
of products as service or physical products?
3. Trace the growth of service industries in India over the last 20 years.
4. Do you think that services have grown only in countries like India, the USA,
China or the UK? Explain your views with statistics.
5. Discuss the concept of competitive advantage and its impact on the migration
of manufacturing and service industries.

20
 Unit 1: Introduction to Service Operations

1.13 Suggested Readings / Reference Material

1. Chase R. B., Ravi Shankar, Jacobs F. R. (2018), Operations and supply chain
management, McGraw Hill, 15th edition.
2. Haskett J. L. (1986), Managing in the service economy, Harvard Business
School Press.
3. Nitin Joshi, S. Rajagopalan (2019), Service Operations Management:
Towards Excellence, Himalaya Publishing House, 1st edition
4. Mathur S. S., S Mathur and Kenyon A. (2017), Creating Value: Successful
Business Strategies, Routledge, 2nd edition.
5. Robert Johnston, Michael Shulver, Nigel Slack and Graham Clark (2020),
Service Operations Management: Improving Service Delivery, Pearson,
5th edition.
1.14 Answers to Check Your Progress Questions
1. (d) Neither labor nor contact.
It is a situation which is not a characteristic of Service Process Matrix.
2. (d) Banking services to individual customers
It is not a B2B e-commerce application.
3. (e) B2C, Business to Customer service
It is the e-commerce activity of organizations directly selling goods and
services to customers.
4. (d) 60-79%
60-79% is the share of services in Indian GDP during 2019.
5. (b) Servitization
It is the business strategy of utilizing manufacturing infrastructure for
service operations.
6. (e) Cost
Cost will not exemplify manufacturing continuum as a framework for
services.
7. (a) Off-line Quality Control
It is a unique characteristic of manufacturing operations.
8. (e) Reduction in labour-intensive manufacturing
It is the most adverse impact due to increase in service operations.
9. (d) 30-49%.
It is the average employment in service industry in India.
10. (a) Movement of manufacturing and services sector from developing to
developed countries
It is not the trend happening due to increasing service operations.

21
 Unit 2
Interdependence of Service Industries
Structure
2.1 Introduction
2.2 Objectives
2.3 Agglomeration and Association
2.4 Coalition of Service Industries
2.5 Industry-specific Associations
2.6 Retail Industry dependence on Logistics/ SCM Industries
2.7 Hospital Management depending on Inventory Management and
Hospitality Industry
2.8 Supply Chain Industry and Software Industry
2.9 Interdependence of IT and Communications Industries
2.10 Hotel & Tourism Industries
2.11 Summary
2.12 Glossary
2.13 Self-Assessment Test
2.14 Suggested Readings / Reference Material
2.15 Answers to Check Your Progress Questions

“Service to others is the rent you pay for your room here on Earth.”
- Muhammad Ali

2.1 Introduction
Rendering service to others is a basic human requirement beyond transactions.
In the previous unit, we discussed, Introduction to Service Operations. The
concepts covered include, What is a Service Product?, Various Types of Service
Systems, Characteristics of a Service Product, Physical Product vs. Service
Product, Manufacturing Continuum, Importance of Operations in Services
Management and the Contribution of Services Sector in the Growth of Global and
Indian Economy.
Global economy develops when all the parts or sectors in the economy develop.
Even though some sectors in an economy migrate to another country as per the
principle of competitive advantage, global economic development continues as
the migrating sector creates value in a new setting and a new sector takes its place
in the country from where the migration took place.
 Unit 2: Interdependence of Service Industries

Large-scale migration of automobile industry from developed countries is a

classic example.
 In this sector, real migration of manufacturing activity happened from
developed countries to developing countries mainly due to cost
considerations. After globalization, China became the workshop of the world,
followed by India, and other countries. After its economy was also developed
to a global level, China too ceased to be a low cost location. Migration
continued to other countries in Asia and Africa.
 Another important reason for such migration is to locate plants closure to the
places of consumption to serve the customer better. This strategy is because
of increasing costs of transportation and to meet exacting customer delivery
demands.
Expansion of world trade has been greatly facilitated by the growth of businesses
in services that account for more than 60% of Foreign Direct Investments (FDI)
across the world. In developing countries like India, service industry is a
dominant sector in the national economy, contributing around 70% to the national
Gross Domestic Product (GDP).
Another factor that we should remember is that every sector depends on the
fortunes of another sector for its existence and growth.
 The growth of textile industry mostly depends on the off-take from garment
industry. Electronics industry depends mostly on industries supplying raw
materials in the downstream. Original equipment manufacturers (OEMs) in
the upstream industries also use components, parts and subassemblies
 Service industry is mutually dependent on other service industries as deemed
necessary.
 Real estate industry survives only on its inter-dependence on all other
supplier industries.
Future Prospects of the Service Sector in India
The service sector in India has the highest employment elasticity among all
sectors. Thus, it has the potential for huge growth as well as the capability to
deliver highly productive jobs - leading to revenue generation. To address the
challenge of job creation, the Skill India program aims to create jobs by fostering
private sector initiatives in skill development programs, and by providing them
with the necessary funding.
Similarly, the Make in India program - while attempting to bolster the
manufacturing sector - will cause a multiplier effect in adding to the portfolio of
the Service Sector. In this context, the Startup India initiative is a key enabler for
both the manufacturing as well as service industry in India - by offering to support
innovative start-ups.

23
Block 1: Understanding Service Operations

In the light of fast developing services sector as a dominant contributor to national

economy, inter-dependencies are increase among various sectors. This is further
accelerated by the adoption of IT everywhere.
This unit will discuss the mutual dependence of service industries for their
operational survival, growth, and excellence.

2.2 Objectives
By the end of the unit, you will be able to
 Discuss the concept of the mutual dependence of service industries
 Identify different trade associations in the service sector
 Examine the role played by technology in enabling operational efficiency.

2.3 Agglomeration and Association

The traditional trade theory states that a country would produce and export those
products where the country has a competitive advantage in terms of availability
of factors of production. The new trade theories also focused on mass production,
economies of scale, and cost of production as the basis for international trade.
Though this is true to some extent, the following fall-outs were noticed as per a
research paper (ISSN: 1439-2305) prepared by Prof. Astrid Krenz of Universitat
Gottingen, Germany.
a) In the case of homogenous goods, countries would specialize in these goods
only when their market share is high. When the market share drops, these
countries would migrate to some other products irrespective of economies of
scale.
b) In the case of heterogeneous goods, intra-industrial trade groups and cartels
regulate so that all players get equal opportunity.
New economic geography approach connects transport costs with coming
together of similar industries. Agglomeration is coming together of industries that
face an opportunity to grow together and make the best of trade opportunities.

Example: Agglomeration of High-skilled Tradeable Services Led to

Differences in Productivity Gap between Different Areas in UK
Increasing service-related economy vis-à-vis industry related economy is a
fundamental change over the last 20 years or so. Cities like London have
become hub for high skilled tradeable services like insurance, consultancy
which can be taken global. The high skilled service companies have formed
agglomeration to enhance their overall growth while competing individually.

Contd….

24
 Unit 2: Interdependence of Service Industries

Cities where such associations were not in place or where the high skilled
workforce was not available, the overall economic activity has not grown. In
fact, it was seeing a downtrend. This explained the economic and productivity
among cities and urban/rural areas.
Source: https://blogs.lse.ac.uk/businessreview/2022/07/05/bridging-the-productivity-gap-between-
different-areas-in-the-uk/ Accessed on 18/07/2022.

2.4 Coalition of Service Industries (CSI)

“A Coalition of Service Industries in a developing country can identify market
access priorities for governments in trade negotiations at the WTO, regionally
and bilaterally as well as contribute to a domestic agenda that strengthens services
trade and export opportunities”, says the concept paper by International Trade
Centre of UNCTAD/ WTO.
These CSI units assist respective Governments to formulate strategies for
international trade negotiations before WTO. These were started to facilitate the
developing countries to establish powerful mechanisms to articulate their growth
potential, constraints and requirements to the respective governments. These CSI
units are needed to identify problems in market access, trade barriers (both tariff
and non-tariff) and their priorities in WTO negotiations. CSI agenda will focus
on the General Agreement in Services (GATS), share of exports, and metrics for
service trade. CSIs are constituted by experts and representatives from different
service industries like hospitality, healthcare, financial services, logistics,
airlines, software, technology, etc.
Activities of CSI (Coalition of Service Industries) are as follows:
 Conduct regular meetings of members
 Develop position/ status reports and representations to the Governments
 Take up with Government agencies to resolve trade barriers
 Conduct conferences in collaboration with CSIs of other countries
 Maintain relations with media, governments, and stakeholders
Confederation of Indian Industries (CII) is one such CSI for all industries—
service and product-based.

Example: Thirty-seven Companies and Organizations Across 8

Countries form a Coalition of Service Industries to Address Global
Cyber Security Issues
Thirty-seven companies and organizations across 8 nations formed a Coalition
of Service Industries esp. related to Cyber Security. The company list included
AT&T IBM Cisco etc. The list of organizations includes Coalition of Service
Industries (CSI).
Contd….

25
Block 1: Understanding Service Operations

The coalition was making a case with their governments to bring centre-stage
international security management systems like ISO 27110/27113, NIST
framework for cyber security. The objective was to mitigate risk and enhance
growth.
Source: https://www.darkreading.com/risk/37-major-companies-and-organizations-pledge-to-
enhance-cyber-resiliency-and-counter-evolving-global-threats dated June 9, 2022. Accessed on
18/07/2022.

2.5 Industry-specific Associations

These are the associations which focus on the specific issues confronted by the
members of the association. They may pertain to government policies, tax
concessions, export incentives etc.
i) NASSCOM: This is an association of IT/IT-enabled services industries
established with the vision, which reads as under:
“To help the IT and IT-enabled products and services industry in India to be
a trustworthy, respected, innovative and society friendly industry in the
world”.
Activities include:
a) Set strategic directions for industry, b) Policy advocacy for industry
growth, c) Sharing best practices and collaboration, d) International
partnerships and affiliations, e) Workforce development, and
f) Sustainability.
ii) Federation of Indian Airlines (FIA): This is an apex body of airline
industries in India formed to articulate the business-related issues of the
industry and act as a single representative of the industry in negotiations with
the government. Some of the issues articulated are regarding safety,
passenger facilities, ground services, aviation protocols, fuel cost increases,
international aviation-related problems, etc. The association also maintains a
relationship with the International Air Transport Association (IATA) and the
International Civil Aviation Organization (ICAO).
iii) Healthcare industry: Following are some of the associations in healthcare
industry.
 Indian Medical Association
 Indian Homeopathy Medical Association
 Association of Surgeons in India
 Indian Association of Physiotherapists
 Indian Dental Association
 Indian Cancer Society
 Indian Healthcare Federation (hospitals, device producers, pharma firms,
etc.)

26
 Unit 2: Interdependence of Service Industries

There are similar associations for every service industry and all of them have been
formed to act as that particular industry representative in interacting with the
governments and participating in negotiations. This trend is continuing with
increasing rigor, as the healthcare sector is a critical service area.

Example: Federation of Indian Airlines (FIA) Opposes Proposed Hike of

Charges at Goa Airport Citing Post Covid Recovery of Airlines
Federation of Indian Airlines had major airlines like Indigo, SpiceJet as its
members. The federation worked for common causes of member airlines that
increased the bargaining capacity. Recently Goa Airport management got
approval to increase both the aeronautical fees paid by Airlines and User fee
directly borne by the passengers. With this move, the running costs for the
airlines were going to increase and the passengers had to pay more for air travel
specially generating a heavy burden on middle class passengers. The federation
opposed the move strongly citing the fate of middle-class passengers and fate
of airlines just recouping from Covid effect.
Source: https://timesofindia.indiatimes.com/city/goa/goa-flights-set-to-get-more-expensive-from-
next-month/articleshow/92114190.cms dated June 10, 2022. Accessed on 18/07/2022.

2.6 Retail Industry Dependence on Logistics and SCM Industries

Retailing industry’s profitability depends on how well they manage their supplies,
the effectiveness of the working capital management, the ability to respond to
changing phases of the customer expectations, responsiveness, management of
obsolete and non-moving stocks, etc. All these matters fall within the realm of
Supply Chain Management. Retailing is the last step in the supply chain, which
starts with customer demand and ends with the fulfilment of that demand.
Logistics management is a sub-set of the SCM and deals with movement, storage
and distribution of material---- raw materials, components, and finished products.
Only successful management of logistics and supply chain could ensure
significant savings in terms of interest saved, reduced loss due to obsolescence,
transit damages, assured service to customers, which would ensure repeat
purchase, etc.
Customer demands fluctuate based on the change of tastes, preferences, and a
host of unknown variables, which make forecasting demand difficult. SCM tools
for forecasting would be of great help for the retailer who would otherwise face
the following problems:
 Overstocking unwanted goods – locked up working capital
 Stock-out of some items and hence customer dissatisfaction
 Compulsion to liquidate unwanted stock by discount sales.
 Shortage of storage space and shelf space for fast-moving products
 Firefighting and emergency purchases at a higher cost, etc.
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Block 1: Understanding Service Operations

SCM systems enhance competitive performance through the process of

integrating not only the concerned departments/ functions in an organization but
also providing linkage with suppliers and customers through appropriate software
and technology applications like Radio Frequency Identification (RFID),
Electronic Data Interchange (EDI), Barcodes, Quick Response (QR) systems etc.
In large retail companies, the trigger for purchase and movement of the stock
starts immediately after a sale and integration ensures that vendors get to know
stocks online simultaneously.
Retailers can no longer work in isolation for their own performance and have to
adopt a collaborative approach with customers as well as suppliers. This is made
possible by SCM and Logistics systems working hand in glove.

Example: Amazon India Partners with Magenta Mobility to provide

Last Mile Connectivity through Electric Vehicles to Reduce Its Carbon
Footprint

Amazon, the retail giant, had a plan to use 100% electric vehicles for customer
deliveries and achieve zero emission by 2040. As part of this, it was working
with Magenta Mobility (an Electric Vehicle company) to go electric in the last
mile delivery in the Logistic chain. Magenta Mobility also took care of
charging stations. Amazon will add 25000 EVs by 2025.

Source: https://egov.eletsonline.com/2022/07/magenta-mobility-partners-with-amazon-india-to-
provide-ev-fleets-and-charging-stations/ dated July 15, 2022. Accessed on 18/07/2022.

2.7 Hospital Management depending on Inventory Management and

Hospitality Industry
In the early days, hospitals were welfare activities of governments and hence we
had only Government hospitals all over the world. Subsequently, some service
organizations started hospitals to increase the coverage of population and we had
charitable hospitals alongside government hospitals. Today we have corporate
hospitals that are run with both service and profit motives. These corporate
hospitals are run in the most efficient manner, with modern equipment and
methods and best-in-class medical professionals like doctors, surgeons, and
nursing staff. We find these hospitals are maintained very neat and clean and
following good housekeeping materials, staff, and schedules. Corporate hospitals
have all facilities like testing, CT scan, MRI scan, ECG, etc.
In the case of Government hospitals, they do not generally provide food even for
the in-patients leave alone the others who attend on the patients. At best there may
a canteen where food items are sold at specified timings. In government and
service organization-run hospitals, the change of bed linen does not follow any
specified frequency and consequently, patients sleep on same bed sheets, same

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 Unit 2: Interdependence of Service Industries

pillowcases for weeks together that actually make recovery harder due to
infections.
In the other hospitals which are better managed, hospitality industry concepts like
personal hygiene, cleanliness, spic and span maintenance of floors, restrooms,
wash areas, lobby management, well-appointed waiting areas, customer care
management, room service from the food court or canteen, courteous behavior of
staff, etc. are practiced.
The bed linen is changed with pre-determined frequency and also in case of need
if the linen is dirtied by the patients. Food for the in-patients are generally
prescribed by a qualified dietician and prepared and delivered in the rooms for
the patients by the hospital kitchen. The food service is such that food is warm
and packed in neat containers in hot-packs as in star hotels. The staffs in the
housekeeping section are trained specially in laying beds, changing clothes, wash
area cleaning, etc. by professional trainers like hospitality. These hospitals
endeavour to give a ‘pleasant stay’ experience to the patients and their attendants
and relatives. The ambiance in these hospitals is as good as a star hotel and the
sum-total experience facilitates early recovery.
Thus in the hospital industry, there is lot of dependence for the procurement of
medicines, equipment and other materials for patient and staff care and their
inventory management to ensure that there is no shortage of any material, as
healthcare is an emergency service.
Similarly, taking care of the patients, hospital staff and guests is essential for
ensure customer satisfaction management. This needs efficient relationship
management and facilities such as canteen, guest rooms etc.

Example: Medikaabazaar – An Online Marketplace for Hospital

Supplies, Enables Hospitals Reduce Operational Expenses by up to 30%

Traditionally hospitals procured their requirements in the age-old offline mode.

The company identified vendors, contacted them for product details and price
details, negotiated and then placed orders. This resulted in paying higher prices
especially for emergency supplies. This was passed onto patients who paid
higher prices for the inefficiencies of hospital procurement.
Medikaabazaar set up an online marketplace to bring hospitals and suppliers
on an online platform. About 1 lakh products were in the online catalogue. The
hospital quickly compared and decided to buy from the best vendors at the best
prices in turn saving up to 30% and able to pass it onto patients. Medikabazaar
also provided flexible payment options.

Source: https://www.medikabazaar.com/, Accessed on 18/07/2022

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Block 1: Understanding Service Operations

Activity 2.1
Indian services sector has become and will continue to be a destination for
employment- seekers.
In the context of the inter-dependent service sector:
 Identify the sector where employment opportunities are increasing
 Try to examine the skills required to grab such opportunities

Answer:

Check Your Progress - 1

1. Which of the following is the focus of Traditional trade theory?

a. Competitive advantage
b. Cost of production
c. Market attractiveness
d. Economy of scale
e. Transport cost & nearness to source
2. Which is the major concern of an agglomeration of industries?
a. Interests of a specific industry
b. Interests of industries whose fortunes are inter-linked
c. Interest of global economy
d. Interest of national economy
e. Interests of the community likely to be affected
3. Which is not the sector focused exclusively by CII in India?
a. Manufacturing industries
b. Service industries
c. International trade
d. Domestic trade
e. Agriculture

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 Unit 2: Interdependence of Service Industries

4. Which of the following is not the focus of Logistics industry?

a. Transportation of goods
b. Ware-housing
c. Inventory control
d. Project Management
e. Industrial relations
5. Which is the most inter-dependent sector for the Healthcare industry?
a. Hospitality
b. Manufacturing
c. Information Technology
d. Logistics
e. Retail

2.8 Supply Chain Industry and Software Industry

Supply chain management is concerned with making available the right material,
sourced from the right source, of the right quality, at the right price and at the
right time. A supply chain starts from a customer need and ends with the customer
need being satisfied. In order to perform their operations efficiently, SCM
depends on information that flows as per the needs of the industry and
transportation. Industry requires information to keep traveling about the material
required, how much is it required at different time points, the transportation cost
from different sources to different destinations, the balance between cost of
storage and the cost of procurement for each lot, etc. The information is required
as ‘real time’ information.
The users or customers of the SCM system do not want their working capital to
be locked up and at the same time do not accept stock-outs. The logistic service
providers have to necessarily implement systems that help integrate different
arms of the supply chain like user/ consumer, assembly facilities, component
manufacturing, raw material, transportation, warehouses, etc. so that the
information about the requirements, stock levels, consumption pattern, bottleneck
processes, etc. flows continuously. Traditional stock and bin-card systems cannot
provide accurate and real time information.
Logistic and supply chain management depends heavily on appropriate software
and networking systems, which enable the availability of information for the
customers and vendors as well as at every station in a supply chain.
All the suppliers cater to the needs of logistics service providers. The integration
is such that moment a product is sold to a customer, say in a retail store, a trigger
for moving a new item from stock is raised, a stock replenishment order is raised,
sometimes a purchase order is made and the stock moves from the vendor without
any delay.

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Block 1: Understanding Service Operations

SCM/logistics depends also on innovative data capturing and transferring systems

like barcoding, Radio frequency id, and a host of goods-tracking systems to make
information available to all stakeholders. Mobile tracking of people and
consignment with the help of GPS and mobile technology is nowadays common
in the logistics industry.
2.8.1 Logistics Industry Dependence on IT Applications, Software and
Development
India’s natural coastline and vast river network give it a competitive edge in
providing transportation and logistics services, both domestically and
internationally. These can be classified into ports and ports services,
warehousing, trans-shipment services, e-logistics, inland waterways for freight
and passengers, expressways and dedicated freight corridors. India’s logistics
service sector itself is expected to grow from $ 115 billion to $ 360 billion
by 2032.
Efficient logistics management calls for effective use of technology for tracking,
monitoring and controlling movements of men, materials and vehicles. If Amazon
is committing and delivering goods to anywhere from anywhere, it is because of
effective deployment of technologies, which are based essentially on IT and
communication technology. Thus the dependence of logistics industry on IT
applications is important. This calls for conceiving emerging requirements and
developing necessary software and application development.

Example: Amazon Wants to Address its Labour Shortage Crisis with

More Warehouse Automation
Amazon, the retail major, was facing labour shortage in its warehouses which
became a crisis affecting its customer deliveries. The company was taking the
automation route by deploying robots and other technologies to support its
supply chain management. It was not trying to address the human resource
issues. There were complaints that the staff was not provided even some basic
facilities in their warehouses. But experts believed automation was not a
replacement for human resources. At best it enabled the humans do their jobs
more efficiently. It was a harsh reality that in spite of enhanced automation,
Amazon’s human resource requirements were not coming down. Technology
had to be coupled with motivated workforce.
Source: https://www.modernretail.co/platforms/amazon-briefing-as-a-labor-shortage-looms-
amazon-faces-a-crisis/ dated July 7, 2022. Accessed on 18/01/2022.

2.9 Interdependence of IT and Communications Industries

IT and ITES industries depend on continuous contact with their customers. The
Business Process Outsourcing (BPO) industry in particular renders business
process services to customers who are spread all over the world. BPO employees
work on the timings of their clients and their response in general is ‘online’ and
in real-time.

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 Unit 2: Interdependence of Service Industries

IT and software industry has also to work as per customer timings as most of the
time their software is tested, established, and proved with customers’ real time
feedback and information. Trouble-shooting of software problems cannot be
delayed and most of the time, it depends on the interaction between customer and
trouble-shooter.
As such, IT industry performance is heavily dependent on network efficiency and
speed. Likewise, communications industry performance is dependent on the
fortunes of IT and ITES industries as they are the primary customers accounting
for the highest sales turnover. Communication industry managers have to
constantly work on speeds of their networks as well as make available trouble-
free and error-free service. All the major players like Airtel, Vodafone, etc.
compete aggressively to capture software company businesses and work with
these IT majors for improving service efficiency.
2.9.1 Dependence of e-commerce on Technology
Increasing dominance of e-commerce is due to its dependence on technology.
Whether it is B2B or B2C, IT and Communications technology superimposed on
the Internet, is the platform. Walmart’s use of technologies like Robots and RFID
are the basic reason for the efficiency of its service operations. Since the last 20
years, the e-commerce industry is growing significantly due to the higher
consumer interest, participation, and increased demand. In this time the B2C e-
commerce was gaining the speed with B2B e-commerce and this trend is
continuing all over the world. The technology is the main fuel behind the
evolution and existence of B2B and B2C E-commerce industry. As the
technology changing the transactions between the business and consumer, the
consumer is accessing various tools to estimate prices, find alternatives, stores
and obtain coupons.
The Rise of E-commerce Sites
The increase in e-commerce websites helped people a lot. Without going
anywhere, they like to buy online and they are also benefitted by getting various
offers and discounts.
Costumers get Better Shopping Experience
E-commerce industry has changed the process of business and cash transactions.
It has introduced a lot of new, modern and useful factors by which customers
enjoy easy and hassle-free shopping.
Faultless Payment Process
The most popular thing about E-commerce industry is its mode of
payments. Most of the cases, the payment is done digitally. By knowing the
convenience and other advantages of digital payment, people are adopting this
process. E-wallets and gift cards are increasing the business. The technological

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Block 1: Understanding Service Operations

advancements have gained the faith of people and they like to expend more on e-
commerce websites because of its transparency and the safety of money.
Give Personalized Information in B2B Sector
As companies changing to B2B e-commerce, increasing real-time procurement
data will be gathered. The B2B e-commerce competitors access this data to better
understand the actions of the customer and provide services according to the data.
Artificial Intelligence Improves the E-commerce Industry
Artificial Intelligence will find a huge transformation in B2B e-commerce. It is
different from B2C e-commerce as there are large numbers of users and use-cases.
But B2B e-commerce will have fewer numbers of users. B2B e-commerce will
apply AI and adopt it eagerly as it is very uncomplicated and powerful.
Businesses get efficient by doing effective decision making at purchases,
computerization of several routine tasks, offer important insights, release several
man-hours behind procurement and doing business purchases clear and low cost.
Thus the impact of technology on e-commerce is profound.

Example: Walmart Ensures Acceptance of 90% for Substitutes for Stock

Out Items using AI Technologies
During the Covid, online sales increased dramatically for Walmart. This
coupled with logistic issues, there were frequent stock outs leading to customer
dissatisfaction. Walmart suggested substitutes, but it was not that easy for
human beings as a large number of parameters were involved which decided
product substitution by the customer. Wrong substitution suggestion can do
more damage to customer satisfaction. Walmart R&D team came up with an
AI based solution for this which considered all relevant data and suggested an
alternative. The factors included size, price, customer past preferences etc.
After deploying the new solution, Walmart found the acceptance of suggested
substitutes rose to 90%.
Source: https://corporate.walmart.com/newsroom/2021/06/24/headline-how-walmart-is-using-a-
i-to-make-smarter-substitutions-in-online-grocery-orders Accessed on 18/07/2022.

2.10 Hotel & Tourism Industries

Hospitality & tourism industries are major players in the economic development
of India. Together they account for 10% of India’s GDP and are among the largest
employment generators. Economic surveys estimate performance of US$ 38
billion in 2014 and it is estimated that the sector has a growth potential to reach
US$ 71 billion in the next decade, i.e. by 2024, but there are hurdles to cross.
World Trade & Tourism Council (WTTC) points out that the slow growth of
India’s hotel and restaurant segment is a reason and impediment to tackling.
Airport infrastructure has to develop in a big way with better passenger amenities,

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 Unit 2: Interdependence of Service Industries

better arrival and departure lounges, restrooms, local transport facilities, inter-
terminal transit facilities, etc. GMR Infra, GVK, Siemens, L&T, Maytas, and
others are actively working on addressing these issues relating to infrastructure.
It is very common to see aviation companies investing in hotel chains or working
for hotel industry growth. Travel companies like MakeMyTrip, Thomas Cook,
Travelyari, Cleartrip, IRCTC, Yatra, Goibibo, etc. also have a hotel booking
business alongside the travel business.
Both the industries work together to promote each other and provide a one-stop
service to customers to reduce the hassles of travellers. Travel/Tourism and
Hospitality industries are dependent on each other for their individual growth and
hence collaborate well for mutual benefit.
Against the backdrop of a fast growing services sector, Indian private sector is
playing a major role.

Example: Ovolo Hotels Positions Itself as “The Place to Experience”

More Than Just “Place to Stay”
Ovolo Hotels, based out of Hongkong, was a chain of lifestyles hotels catering
to premium customers who were willing to pay up to 15% more for the unique
experience the group provided for stay and for food and beverages. The hotels
chain was known for its signature interiors, highly trained staff, excellent
choice in food and beverages. It was winning Best Hotel award for so many
years.
Source: https://www.hospitalitynet.org/news/4111106.html dated 20th June, 2022. Accessed on
18/07/2022.

Activity 2.2
The phenomenal growth of services sector across the world is essentially due
to the significant impact of technology.
 Taking tourism as an example, try to identify the inter-dependencies of
tourism sector and other sectors.
 Examine the role of technology is making the tourism sector more efficient
and attractive.
Answer:

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Block 1: Understanding Service Operations

Check Your Progress - 2

6. Corporate hospitals offer the following from the hospitality industry:

a. High cost of stay
b. High cost of food in food-courts
c. Good house-keeping practices
d. Customer care focus
e. Speedy recovery
7. Which is the main difference between government and corporate hospitals?
a. High costs
b. Better quality of service
c. Patient care
d. Speedy treatment and patient discharge
e. Expertise
8. Which of the following decide the supply chain efficiency of a firm?
a. Processes
b. Customers
c. Shareholders
d. Community around the firm
e. Government
9. Which is the approximate share of services sector towards Indian GDP?
a. 10-20%
b. 20-40%
c. 40-60%
d. 60-80%
e. 80-100%
10. Which of the following is mainly responsible for the inter-dependence of IT
and communications industries?
a. Growth of the IT industry
b. Speed of the network
c. Mobile apps
d. Government policies
e. Superior hardware

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 Unit 2: Interdependence of Service Industries

2.11 Summary
 Each industry has to depend on others like customers, vendors, raw material
and component producers, financial institutions, governments, and society at
large for their survival and growth.
 The society depends on industries for their supplies. Service industries have
these mutual dependence relationships.
 Agglomerations are the grouping of service industries whose fortunes are tied
together. Trade and industry associations are formed to represent their cases
in bilateral and multilateral negotiations with the government for issues like
taxes, tariffs, and non-tariff barriers, constraints, etc. which impact the
operational performance of the member industries.
 Two or more service industries can become dependent on each other for
technology transfer/ applications which will benefit the performance of the
members of the small groups.
 We have also seen instances of two industries collaborate for mutual survival
and growth. The software industry finds new concerns coming up in the
Logistics sector and develops new applications to improve their business and
also to help the Logistics sector to do better in operations.
 The aviation sector invests in improving hospitality so that tourism develops
which is beneficial for all the three sectors.

2.12 Glossary
Agglomeration: A grouping of industries whose performances are directly
related to each other.
Electronic Data interchange (EDI): It is the information and data exchange by
using electronic means.
IT Information Technology: IT refers to the use of computer hardware and
software to manage information resources.
ITES Information Technology enabled Services: These are the services
performed by deploying IT.
QR (Quick Response): It refers to the rapid replenishment of a
customer's stock by a supplier with direct access to data from the customer's
point of sale.

RFID: Radio Frequency Identification. It is a technology used to identify various

items for tracing them along the supply chain.
SCM Supply Chain Management: SCM is the process of planning, organizing,
controlling, directing and achieving the results of all the activities right from
receipt of the customer order to the execution of the order and after-sales service.

37
Block 1: Understanding Service Operations

UNCTAD: United Nations Conference on Trade and Development. It is an

organization under the United Nations to promote trade and development across
member countries.
WTO: World Trade Organisation. It is a global organization, replacing GATT to
promote business across the world.

2.13 Self-Assessment Test

1. Discuss the concepts of Agglomeration, Association and Coalition with
respect to service industries.
2. What operational aspects of the retail industry would improve with an
efficient implementation of Supply chain/Logistics systems?
3. What are the Hospitality management concepts adapted by corporate
hospitals? How would the hospital's performance improve by this?
4. Discuss the dependence of SCM systems on the technology sector. Who are
the major developers of dedicated SCM software?

2.14 Suggested Readings / Reference Material

1. Chase R. B., Ravi Shankar, Jacobs F. R. (2018), Operations and supply chain
management, McGraw Hill, 15th edition
2. Haskett J. L. (1986), Managing in the service economy, Harvard Business
School Press.
3. Nitin Joshi, S. Rajagopalan (2019), Service Operations Management:
Towards Excellence, Himalaya Publishing House, 1st edition
4. Mathur S. S., S Mathur and Kenyon A. (2017), Creating Value: Successful
Business Strategies, Routledge, 2nd edition
5. Robert Johnston, Michael Shulver, Nigel Slack and Graham Clark (2020),
Service Operations Management: Improving Service Delivery, Pearson, 5th
edition

2.15 Answers to Check Your Progress Questions

1. (a) Competitive advantage
Traditional trade theory focuses on competitive advantage. At that time,
migration of factors of production was very low and hence economists
believed that countries would concentrate on those sectors where they
have an advantage in terms of supply.
2. (b) Interests of industries whose fortunes are inter-linked
Agglomerations are concerned about mutual survival and growth.
3. (e) Agriculture
Agriculture is not the major concern of CII.

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 Unit 2: Interdependence of Service Industries

4. (e) Industrial relations

Industrial relations is not in the domain of logistics industry.
5. (a) Hospitality
Hospitality is the main inter-dependent sector for Healthcare sector.
6. (d) Customer care focus
Customer care is the benefit of the corporate hospital to offer from
hospitality sector.
7. (a) High costs
Cost is the main difference between corporate and government hospitals.
8. (a) Processes
Processes decide the supply chain efficiency.
9. (d) 60-80%
About 60-80% is the contribution of service sector to Indian GDP.
10. (b) Speed of the network
Speed of the network is responsible for the inter-dependence of IT and
Communication industries.

39
 Unit 3
Virtual Value Chain and Profit Chain
Structure
3.1 Introduction
3.2 Objectives
3.3 Physical Value Chain and Virtual Value Chain
3.4 Putting Profit Chain to Work
3.5 Case Study: Apollo Hospitals
3.6 Summary
3.7 Glossary
3.8 Self-Assessment Test
3.9 Suggested Reading / Reference Material
3.10 Answers to Check Your Progress Questions

“You can close more business in two months by becoming interested in other
people than you can in two years by trying to get people interested in you.”
- Dale Carnegie

3.1 Introduction
Understanding customers by knowing their requirements will generate more
business for an organization than trying to impress customers with your products
or services.
In the previous unit, we discussed the topic of the mutual dependence of service
industries for their operational survival, growth, and excellence.
This unit addresses the essentials of virtual value chain and profit chain, such as
new processes, new knowledge, new products and new relationships.

3.2 Objectives
After going through this unit, you will be able to
 Explain the concept of the virtual value chain
 Establish the importance of new processes and new knowledge
 Identify different strategies for developing new products and new
relationships
 Discuss how we can put the profit chain into work.
 Unit 3: Virtual Value Chain and Profit Chain

3.3 Physical Value Chain and Virtual Value Chain

Michel Porter’s generic value chain model consists of activities such as
procurement of raw materials, manufacturing operations, delivery, sales &
marketing, firm infrastructure, technology development, and human resource
management. However, in the last decade advancement of information
technology (IT) has changed the way one looks at the value chain. IT has helped
in the development of the concept of the virtual value chain. The virtual value
chain concept proposed by John Sviokla and Jeffrey Rayport is a business model
explaining the distribution of value-generating information services throughout
an extended supply chain (an extended enterprise), an organization that
cooperates closely with other organizations to provide products or services.
In the virtual value chain, information is treated as a dynamic element for
achieving a competitive advantage. The information is used for generating
innovative and new concepts. This translates to a new level of value for the
customer. The transfer of information between all actions and among all
stakeholders is the primary objective of using this model. The concept of a virtual
value chain was developed looking at current internet penetration. It provides
intensification to the existing value chain. IT also helps in getting a wider view
of the physical value and making it efficient and effective. Today’s IT systems
are proficient in capturing information from every component of the value chain.
This information could be used for optimizing performance at every stage of the
value chain. It can also be used to improve employee productivity, satisfaction
and customer loyalty at every stage leading the concept of “Service Profit Chain.”
Thus, the Service Profit Chain links employee satisfaction to customer loyalty
and profitability.
The advent of information technology, followed by the internet, has changed the
approach towards value chain. It is radically different from the traditional value
chain processes. A physical value chain consists of procurement, transformation
through planned operations, testing, delivery, and post sales service.
Virtual value chain consists of the following components:
Gathering: Organization gather relevant information through internet. This
information is usually in the form of text, data tables, videos etc.
Organizing: This information is organized in such a way as to easily retrieve
necessary information for further processing/analysis.
Selection: The captured information is used to add value to customers.
Organizations develop better strategies and processes to deal with customers,
product delivery, etc. using selected information.
Synthetisation: The relevant data is synthesized in the desired format to ensure
that it meets the end user requirements.
Distribution: The synthesized information is ultimately delivered to the end user.

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Block 1: Understanding Service Operations

In a traditional physical value chain, products are delivered to customers and in

the virtual value chain a digital product is delivered. For example, digital movie
streaming of movies instead of delivery of DVD.
3.3.1 New Processes
Just as is the case with new process design for manufacturing, the standard tool
used for new service process design is a flowchart. In recent times, different
service gurus have begun calling the flowchart as a “Service Blueprint” to
emphasize the importance of process design. A unique feature of the service
blueprint is the distinction made between the high customer contact aspects of the
service and those activities that the customer does not see. This distinction is
made with a “line of visibility” on the flowchart.
First, a clear delineation separates the front office or high-contact area from the
back office or low or no customer contact area. A “line of visibility” divides these
two functional areas and the processes occurring in each. When developing a new
service process, designers must consider who will perform that task, what
activities will happen in front of the customer and what is behind the scene, when
should the process occur and in what sequence, and why the process is placed in
that sequence and visibility area.
Figure 3.1 provides a glimpse at the value chain of Café Coffee Day. Cafe Coffee
Day - India's favorite coffee shop & hangout place, popularly known as CCD,
could pre-grind the espresso beans used for “Cappuccino” behind the scene, but
the act of grinding them within the customer’s view shows the customer the
freshness of the drink and creates a certain sensory experience.
Figure 3.1: Service Process for Cafe Coffee Day

Source: ICFAI Research Center

Second, designers can determine standards or maximum execution times,

materials, and the exact details of a particular step. The designer can also
incorporate the exact sequence in which the employee takes the customer’s
money and gives back the change during the purchase transaction. The diagram
addresses the materials required for each process and where the purchase and
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 Unit 3: Virtual Value Chain and Profit Chain

ordering responsibility occurs. The CCD uses coffee, flavoring ingredients, cups,
and lids as the materials in its process. The shop may sell other items such as
mugs, coffee-making machines, coffee powder, books, and CDs, but these items
belong to another design element, not the drink-making design.
Third, designers can examine potential failure points and come up with strategies
for preventing or recovering from failures. The mistake-proofing strategy, or
poka-yoke, can be an integral part of the design. Poka-yokes are generally
warnings- physical, or visual contact methods. They cover the task to be done,
the customer treatment, and the tangible or environmental features of the service.
The CCD example shows a fail point at drink delivery. Here the customer may
receive a drink that does not match what was ordered. Poka-yoke design aims to
prevent this failure. The steps in this regard include: the employee marks the drink
specifications on the paper cup as the customer orders, the employee then repeats
back what the customer ordered, the customer confirms or corrects the order at
this point, and when the drink is finished the employee again repeats the order
just completed.
3.3.2 New Knowledge
Many organizations have recognized that by improving the services provided by
them, they can make significant and sustainable gains in the marketplace.
Knowledge of services and service delivery can be, and increasingly are
becoming a competitive weapon for organizations. For manufacturing and
product-oriented organizations, service may be an important means for
differentiation, particularly if they are operating in markets where there is little
product differentiation or where product development is slow, difficult,
expensive, or short-lived. The nature of the services available and the way in
which services are delivered may provide a means to competitive success.
Service-oriented companies are recognizing that there is a real need to provide
high levels of customer service. Increasing competition, declining sales, and more
service-aware customers are putting pressure on service organizations to rethink
and improve the levels of service that they offer. Service knowledge on creating
valuable customer retention and loyalty, on attracting other customers, and on the
financial position of an organization is important. In addition, for organizations
that compete on cost, knowledge has a role to play in ensuring right-time delivery
at low operational costs.
3.4.1 Competing on Knowledge and Outcomes
Some service organizations compete on new knowledge whereas others on the
service outcomes, while some manage to compete on both (Figure 3.2). There are
a number of positions that the service organization may take up, when compared
with its competitors. This analysis can also be applied by public sector and
non-governmental organizations (NGOs) since they too are in competition for
different types of resources with other organizations. The different positions are
as explained below:

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Failing: These organizations’ outcomes are below industry specification, and

their knowledge level is also poor. Traditional services that have failed to move
with market trends find themselves in this position. Some years ago Indian Post,
the government-operated postal system in India, found that it was left behind by
different courier companies such as First Flight and DTDC in terms of
technology, higher standards, and faster service.
Complacent: In this kind of organizations, the new knowledge level is excellent
but the way customers are treated is poor. Professional services sometimes fall
into this category by being perceived as arrogant by their clients. They may be
experienced and know much better than their clients know but this cannot be an
excuse for an offensive service. Often, the medical profession comes in for
criticism for dealing with patients, not as human beings.
Retaining customers in the short term: It is possible to develop customer
loyalty through good service knowledge. However, if the total service outcome
falls below the standard, customers will only tolerate this for a relatively short
period. If the service experience is excellent, the emotional switching costs are
quite high for customers. Some computer companies have used this strategy to
retain customers in the period between phasing out an old product and launching
a new one.
Average: This is the position that many high-volume business-to-customer
services believe they occupy. In many traditional service sectors, there are often
a number of reasonably established competitors, all conducting business in a
similar fashion. The insurance service sector in India was a good example with
the presence of several players and little to choose between them. As the
competition has become tough, many have tried to differentiate themselves
through the way they deal with their customers.
World-class: These organizations are universally recognized as being the best in
all that they do. There are only a few of these in existence. The retailing service
practices by Walmart are universally known to be the best.
Competing on knowledge and outcomes scenario is shown in Figure 3.2.
Figure 3.2: Competing on Knowledge and Outcomes

Excellent Arrogant or
the competitors
compared with

Average World-Class
outcomes as

Complacent
Level of

Retaining
Failing customers in the
Poor short term
Poor Excellent
Level of knowledge as compared with the
competitors
Source: ICFAI Research Center

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Activity 3.1
What are issues involved in retaining a corporate client in a service industry
like courier service?
Answer:

Check Your Progress - 1

1. Which of the following is not an element of Michael Porter’s value chain?
a. Manufacturing operations
b. Procurement of raw material
c. Competitors’ Information
d. Sales and marketing
e. Delivery
2. In a virtual value chain, which of the following is treated as a dynamic
element for achieving competitive advantage?
a. Manufacturing operations
b. Sales and marketing
c. Data
d. Information
e. Knowledge
3. What is the name of the line that divides the high contact area from low
customer contact area?
a. Line of separation
b. Line of visibility
c. Line of control
d. Line of contact
e. Line of balance
4. Which of the following is not a position that may be taken by a service
organization when compared with its competitors?
a. Failing
b. Complacent
c. Average
d. World Class
e. Retaining customers in the short term

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5. Which is the method suited for new process designers to examine potential
failure points?
a. Analyzing competitors’ information
b. Gathering point of sales data
c. Studying service delivery methods
d. Inspecting the operations process
e. Using mistake-proofing strategy

3.3.3 New Products

In the past, service developers were not often used to follow any new product
development processes, but instead used to develop their own ad-hoc processes.
They followed this approach for several reasons. Due to the intangible nature of
services, it is difficult to prototype and field-test any new concept. Moreover,
most service firms do not have formal research and development departments.
Even though service providers are often slow in adopting formal new service
development processes, successful service providers are more likely to develop
new products. Nevertheless, designing and then developing new service products
is not an easy task. Products are as varied as the service organizations of which
they are a part. Some are extremely flexible and are able to meet a wide range of
customer requirements using the same set of resources. For example, some
management consultants are able to utilize a wide range of operations in
developing customized solutions for their clients. Other products, as in many call
center operations, are much more narrowly defined in order to achieve benefits
of consistency and efficiency. Similarly, some products depend a great deal on
the skill, knowledge, and expertise of individual employees, such as medical
doctors in general practice.
Usually, a formalized new product development process consists of four key
steps: design, analysis, development, and final launch. The process could be
conceptualized as a sequence from design through launch or a full cycle if a
continuous improvement approach is incorporated. In reality, the process tends to
be nonlinear and iterative. Design and analysis are planning activities, while
development and launch are execution activities. The design stage covers the
formulation of a new service objective and strategy, idea generation and
screening, and concept development and testing. The analysis stage includes
business analysis and project authorization. The development stage addresses the
complete service design and testing, process and system design and testing,
marketing program design and testing, personnel training, service testing, and
pilot run, and test marketing. The launch is the full-scale launch and post-launch
review.

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At the heart of the model sits the service delivery system: the people, technology,
and system that go into designing and delivering the product. Organizations that
continuously develop successful new products tend to organize their people into
cross-functional teams, provide them with appropriate tools and resources for
planning and execution, and develop an organizational context that facilities
testing the entire process so that products can be developed quickly and
effectively.
3.3.4 New Relationships
A service manager develops new relationships during the execution of tasks like
finding new staff to meet supply chain strategies, managing quality systems for
continuous improvement of service delivery system, selecting sites for the new
locations, stocking inventory for new services, etc. The impact of new
relationships should not be taken for granted. First, it is harder to develop a new
relationship than most people think. Second, as companies execute their strategic
vision, their competencies may change, their relationships along the supply chain
will definitely change, compelling them to build of some new relationships. Thus,
a critical component of the virtual value chain is to develop new strategic
relationships that ensure the company to be very efficient in producing and
delivering services of everyone’s interest.

Example: Deploying Predictive Analytics for Recruiting the Best Talent

Leading to Better “Service Outcomes”
Validus Senior Living was a Tampa based long term care company for seniors.
Taking care of mom and dad was at the core of the company operations.
The company believed in adopting the right people and technologies to derive
expected “service outcomes” for its customers. The nature of business
demanded that the selected employees should align with the culture of the
company in keeping the care of the residents uppermost in mind. Frequent
attritions affected the service outcomes badly. So, the company took the
services of an analytics company to develop a predictive analytics model to
select the right candidates who have a cultural fit with the company and stay
with the company long term to serve the senior residents.
Source: https://www.prnewswire.com/news-releases/validus-senior-living-partners-with-arena-
analytics-to-improve-employee-retention-through-cutting-edge-ai-and-data-science-
301585172.html dated July 13, 2022. Accessed on 19/07/2022.

3.4 Putting Profit Chain to Work

In the new service economy, front-office workers and customers need to be the
center of focus for any management. Successful service managers pay attention
to factors such as investment in people, technologies supporting front-office
workers, contemporary recruiting and training practices and performance-based
incentives for employees at every level. In recent times, companies such as
Southwest Airlines, ServiceMaster, Taco Bell, and MCI have realized that when

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they treat employees and customers supreme, then a far-reaching shift occurs in
the way they manage and measure success. The new economics of service
requires innovative measurement techniques. These techniques affect the impact
of employee loyalty, satisfaction, and productivity on the value of products and
services delivered to customers for developing loyalty and assess the subsequent
impact on profitability and organizational growth. The lifetime value of a loyal
customer can be enormous, especially when referrals by loyal customers are
studied and added to the economics of customer retention and repeat purchases
of related products. The service-profit chain is based on the lessons learnt from
successful service organizations. They help managers in targeting new
investments to develop services, and achieve customer satisfaction levels to
maximize the competitive impact.
3.4.1 The Service-Profit Chain
The service-profit chain binds profitability, customer loyalty, employee
satisfaction, and productivity together. The links in the chain are as follows: profit
and growth are inspired primarily by customer loyalty; loyalty is a direct outcome
of customer satisfaction; satisfaction is largely guided by the value of services
provided to customers; value is generated by satisfied, loyal, and productive
employees; employee satisfaction is achieved from high-quality support from
management and policies that enable employees to deliver quality service to
customers. Refer Figure 3.3.
Figure 3.3: Service Profit Chain

Source: ICFAI Research Center

Example: PulteGroup, an American Residential Home Construction

Company, follows “Service Profit Chain” Effectively to Drive Growth
and Profitability
PulteGroup, Inc. was an American residential home construction company
based in Atlanta, Georgia, United States. The company was the 3rd largest
home construction company in the United States based on the number of homes
closed. In total, the company built over 775,000 homes.
Contd….

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The company was named “one of the best places to work”. The company believed
that highly satisfied employees will stay with the company in both good and bad
times. When the employees were satisfied and put their hearts into the work, the
outcomes for the customers were very encouraging. The customers were loyal,
they spread the message about the company. The sales and profits increased, and
the company invested more in employee well-being. The service profit chain
sustained the growth. One example of its HR policies was allowing flexible timings
and work from home. The company also had individualized career growth plans.

Source: https://seekingalpha.com/article/4523059-pultegroup-an-exciting-buy-with-30-percent-
potential-annual-returns-to-2024 dated July 13, 2022. Accessed on 19/07/2022.

3.5 Case Study: Apollo Hospitals

Apollo Hospitals is considered as the pioneer of the private healthcare service
system in India and it was the country’s first corporate hospital. A forerunner in
integrated healthcare, Apollo has a robust presence across the healthcare
spectrum. The Group has emerged as a leading integrated healthcare service
provider in Asia, with a portfolio of companies that specialize in pharmacy,
insurance, super specialty hospitals, and outpatient clinics, etc.
Apollo Hospitals started its operations from Chennai, in the year 1983.
Apollo’s Founder Chairman, Dr. Prathap C Reddy was the driving force
behind the initiation. Endorsed as the architect of modern Indian healthcare,
Dr. Prathap C Reddy started Apollo with the mission of bringing world-class
healthcare to India in the private sector, at a price that Indians could afford. The
backdrop to this development was the totally inadequate healthcare infrastructure
prevailing in India at that time.
Apollo’s first innovation was its business model. Earlier, only the very privileged
people had access to quality treatment, as they could afford to travel abroad.
Apollo hospitals introduced healthcare that matched best-in-class outcomes, at a
fraction of the global healthcare prices. This brought in a revolution in health care
in India. The cost-consciousness continues to be a key “service winner” in
healthcare strategy. Some other service winners for the group are its value system
and its continuous drive with a steady focus on key objectives such as excellence,
expertise, empathy, and innovation.
One of Apollo's major contributions to the healthcare industry has been the
adoption of clinical excellence as an industry standard. Apollo pioneered this
concept. Apollo group was the first hospital to invest in the pre-requisites that led
to international quality accreditation such as JCI. Apollo also developed centers
of excellence in Cardiac Sciences, Orthopaedics, Neurosciences, Emergency
Care, Cancer, and Organ Transplantation, etc. Apollo’s expertise in excellence
comes from its habit of scrupulously re-evaluating and reinventing. Protocols are
built, taken apart, and built again to ensure that infection control is optimized to
extreme levels; stringent internal scoring systems were created with the sole
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objective of ensuring it matches the very best in the world. Apollo’s initiatives
such as ACE@25 and TASSC are indicators of its dedication to providing better
global benchmarks in clinical excellence.
Apollo healthcare system leveraged on technology for building its integrated
healthcare delivery models, which facilitate seamless electronic medical records,
hospital information systems, and telemedicine-based health outreach initiatives,
for superior access to medical care. Another critical manifestation of widespread
technology has been the amazing advancement in medical equipment and Apollo
has repeatedly pioneered the introduction of such innovations in India. Time and
again, Apollo has introduced revolutionary new therapies such as the Proton
Beam Therapy. From leveraging new age mobility to getting futuristic equipment,
Apollo has always been ahead of its competitors. Currently, the group is targeting
to harness tremendous potentials of the robotics and is investing heavily in
making it a real and major option in the healthcare industry.
3.5.1 Social Sustainability at Apollo
2
Apollo Hospitals has always strongly believed in social initiatives that help rise
above barriers. In keeping with this, the group has started several impactful
programs in this area. One of these initiatives is SACHi (Save a Child’s Heart
Initiative) - a community service initiative with the aim of providing quality
paediatric cardiac care to children suffering from heart diseases in
underprivileged sections of society. Apollo also runs the SAHI (Society to Aid
the Hearing Impaired) initiative to help poor children with hearing impairment,
and the CURE Foundation which is focused on cancer screening, cure, and
rehabilitation. In the area of Cancer care, Apollo has also joined hands with
cricketer Yuvraj Singh's YOUWECAN to organize large-scale cancer screenings.
Apollo regularly conducts comprehensive health screening camps across the
nation. The Group runs the incredible and successful Billion Hearts Beating
campaign – a nationwide program that has awakened India to heart healthiness.
The Group continues to break new ground in adopting new technology. From
leveraging new age mobility to getting futuristic equipment, Apollo has always
been ahead of the curve. Apollo pioneered Tender Loving Care (TLC) and it
continues to be the magic that inspires hope, warmth, and a sense of ease in the
patients.
The cost of treatment in Apollo was a tenth of the price in the western world.
Today as the group charts out its roadmap to take healthcare to a billion, the focus
on driving a strong value proposition remains constant. Apollo Hospitals has
taken the spirit of leadership well beyond the business metrics. It has embraced
the onus of keeping India healthy.

2
Source: www.apollohospitals.com

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Apollo's remarkable story has captured India's attention. For its service to the
nation, the Group was felicitated with the honour of a commemorative postage
stamp bearing its name. For his untiring pursuit of excellence in healthcare, Dr.
Pratap C Reddy was bestowed with the second-highest civilian award, the ‘Padma
Vibhushan’, by the Government of India.

Activity 3.2
What are the issues involved in social sustainability in corporate hospitals?
Answer:

Check Your Progress - 2

6. Which of the following services depends a great deal on the skill, knowledge,
and expertise of individual employees?
a. Tele-banking
b. Tele-medicine
c. Call center operations
d. Medical doctors in general practice
e. Banking operations
7. Which of the following is not a step in the new product development process?
a. Design
b. Analysis
c. Control
d. Development
e. Final launch
8. The analysis stage includes business analysis and what else?
a. Project Planning
b. Project Scheduling
c. Project Authorization
d. Project Control
e. Project Execution

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9. When does a service manager develop new relationships?

a. Providing training to existing employees
b. Selecting a site for the new location
c. While quality testing
d. Capacity planning
e. Scheduling
10. Which one of the following factors may not be a focus area for a successful
service manager?
a. Investment in technologies
b. Contemporary recruiting and training practices
c. Performance-based incentives for employees at every level
d. Channel integration
e. Investment in human resource

3.6 Summary
 John Sviokla and Jeffrey Rayport proposed a business model called the
virtual value chain, explaining the distribution of value-generating
information services throughout an extended supply chain.
 In the virtual value chain, information is treated as a dynamic element for
achieving a competitive advantage.
 In addition, organizations may compete on the excellence of their outcomes,
the excellence of their new knowledge, or both.
 Perceived user value offers a way of identifying current and future strategies.
 Many organizations have recognized that by gaining new knowledge they can
make significant and sustainable gains in the marketplace.
 There are a number of positions that the service organization may take when
compared to its competitors.
 This analysis can also be applied by the public sector and non-governmental
organizations (NGOs).
 Service providers are often slow in adopting formal new service development
processes. The job of a service manager is to develop new relationships
during executing tasks such as finding new staff, managing quality, selecting
sites, and stocking inventory for new services.
 The service-profit chain concept is based on the lessons learnt from different
successful service organizations. It helps managers target new investments to
develop services and customer satisfaction levels to maximize competitive
impact.

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3.7 Glossary
Front Office: The main administrative office of a business or other organization
having customer access
Non-governmental Organizations (NGOs): A non-governmental organization
is an organization that uses its surplus revenues to further achieve its purpose or
mission, rather than distributing its surplus income to the organization's
shareholders as profit.
Product Differentiation: Product differentiation is the process of distinguishing
a product or service from others, to make it more attractive to a particular target
market.
Profit Chain: The central idea behind the profit chain concept is that a direct
relationship exists between profit, growth, customer loyalty and satisfaction,
value delivered, and employee satisfaction, loyalty and productivity.
Public Sector Organizations: Public Sector organizations are organizations that
are owned and controlled by the government.
Strategic Vision: Strategic vision harnesses the various aspects of an
organization and ensures that they support each other and are consistent with the
direction indicated by the drivers of change.
Value Chain: A value chain is a set of activities that a firm operating in a specific
industry performs in order to deliver a valuable product or service for the market.
Value: Ratio of quality to the price paid. Competitive “happiness” is being able
to increase quality and reduce price while maintaining or improving the profit
margins.
Virtual Value Chain: The virtual value chain concept proposed by John Sviokla
and Jeffrey Rayport is a business model explaining the distribution of value-
generating information services throughout an extended supply chain (an
extended enterprise), an organization that cooperates closely with other
organizations to provide products or services.

3.8 Self-Assessment Test

1. Explain the virtual value chain concept.
2. Describe the importance of new process and new knowledge.
3. Select any four organizations in the same service sector, like four food outlets,
and assess their relative position in terms of their knowledge and outcomes.
4. Explain the new product development process for services.
5. Explain the service profit chain. What is the importance of a profit chain?

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3.9 Suggested Readings / Reference Material

1. Chase R. B., Ravi Shankar, Jacobs F. R. (2018), Operations and supply chain
management, McGraw Hill, 15th edition
2. Haskett J. L. (1986), Managing in the service economy, Harvard Business
School Press.
3. Nitin Joshi, S. Rajagopalan (2019), Service Operations Management:
Towards Excellence, Himalaya Publishing House, 1st edition
4. Mathur S. S., S Mathur and Kenyon A. (2017), Creating Value: Successful
Business Strategies, Routledge, 2nd edition
5. Robert Johnston, Michael Shulver, Nigel Slack and Graham Clark (2020),
Service Operations Management: Improving Service Delivery, Pearson, 5th
edition

3.10 Answers to Check Your Progress Questions

1. (c) Competitors’ Information
It is not an element of Michael Porter’s value chain. It consists of
activities such as procurement of raw materials, manufacturing
operations, delivery, sales & marketing, firm infrastructure, technology
development, and human resource management.
2. (d) Information
In virtual value chain, information is treated as a dynamic element for
achieving competitive advantage.
3. (b) Line of visibility
Line of visibility divides the high contact area from low customer
contact area.
4. (a) Failing
Failing is not a position that may be taken by a service organization
when compared with its competitors.
5. (e) Using mistake-proofing strategy
It is the method suited for new process designers to examine potential
failure points.
6. (d) Medical doctors in general practice
This service depends a great deal on the skill, knowledge, and expertise
of individual employees.
7. (c) Control
Control is not a step in the new product development process.

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8. (c) Project Authorization

It is the stage when a service manager develops new relationships.
9. (b) Selecting a site for the new location
It is the stage when a service manager develops new relationships.
10. (d) Channel integration
This may not be a focus area for a successful service manager.

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 Services Operations Management
Course Structure

Block 1: Understanding Service Operations

Unit 1 Introduction to Service Operations
Unit 2 Interdependence of Service Industries
Unit 3 Virtual Value Chain and Profit Chain
Block 2: Strategy Formulation
Unit 4 Business Strategy
Unit 5 Customer Retention Strategies
Unit 6 Global Service Strategy
Block 3: Designing Service Operations
Unit 7 Design and Development
Unit 8 Innovation and Service Development
Unit 9 Services Process Design
Unit 10 Designing a Service Delivery System
Unit 11 Front Office-Back Office Interface
Block 4: Monitoring Service Operations Performance
Unit 12 Performance Measurement and Monitoring Service Industry
Unit 13 IT as an Enabler for Service Excellence
Unit 14 Quality Management in Services
Unit 15 Meeting Global Standards of Quality
Unit 16 Managing Capacity and Demand
Block 5: Tools and Frameworks for Managing Services
Unit 17 Lean Management Concepts
Unit 18 Tools for Managing Services
Unit 19 Managing Service Projects
Unit 20 Application Domain in Services