Page 18 - DMGT522_SERVICES MANAGEMENT

Unit 1: Service Operation Management

Managing Service Capacity Notes

Some work exists in the management of service capacity in terms of staff scheduling. Strategies
for managing demand and supply in service operations have also been documented; however,
there has been little advancement since the first paper by Sasser in 1976. Yet this is an area which
is fundamental to the planning and control of service. Another issue, the subject of a preliminary
investigation, is the relationship between capacity levels and the level of service quality delivered.
Clark and James provide some conceptual models of intuitively-derived relationships between
resource utilisation and service quality is it now possible to derive empirically these functions
and assess strategies for effective resource utilisation linked to required quality levels:

What are appropriate capacity strategies? How does customer contact relate to types of
strategies?

What is the relationship of capacity levels and capacity strategies to the level of service
quality delivered, for example?

How can organisations best manage their quality-capacity relationships?
Manufacturing, service and agriculture are the major economic activities in any country. In
India, manufacturing and services together constitute nearly 75% of the GDP. Moreover, in
recent years the growth in GDP is primarily due to the growth in these sectors of the economy.
During the last ten years, the share of services in the GDP has grown steadily from about 40% to
about 51%. The Union Government began taxing three services in 1994-95. This has grown
steadily and as of 2004-05 the number of services taxed has gone up to 71.

All these indicate the growing importance of services in the Indian economy and the need to
apply management practices to plan and control operations in the service sector. In addition to
discussing the design and operational control of service operations, specific issues pertaining to
certain sectors of the service industry are also addressed.

Did u know? Service organisations respond to the requirements of customers to satisfy
some needs and leave certain experiences in the minds of the customer through a service
delivery system?

1.3 Paradigms in Service Marketing

Services have increasingly assumed an important role in the economic development of many
countries including India. Most countries in the western world have entered what is called a
service economy or service society or about to do so. An economy is called a service economy
when the contribution of the service sector to the GDP of the nation is more than 50%. USA was
the first economy to declare as service economy way back in 1948 with about 53 percent
contribution of service sector to the GDP of the nation. Almost all the developed countries and
many developing counties are emerging as service economies. There is an argument that the
statistics of service sector’s contribution in many countries is a gross underestimation of the
truth since services produced by manufacturers of goods in the industrial sector are not included.
As such, there is large ‘hidden service sector’ which is not classified under service sector.
Services are becoming a critical source of wealth in many ways to the economies. Economies
experienced increased in wealth and employment with the growth in service sector. While
employment in manufacturing sector is receding year by year the employment in service sector
is rising at a higher level. Even in times of economic recession unlike in manufacturing sector,

LOVELY PROFESSIONAL UNIVERSITY 13