Competition and Coordination in Two‐Tier Public Service Systems under Government Fiscal Policy

As a result of government budgetary limits and rapid market growth, many public service systems—such as health care—are characterized by extensive customer wait times that have become a serious problem. This problem might be solved by allowing private firms to enter these markets, which would provide customers with a choice between a free (governmental) public service provider (SP) and a fee‐charging (or “toll”) private SP. In such a two‐tier service system, the two SPs are differentiated by service quality and cost efficiency. This study focuses on the competition and coordination issues for two‐tier service systems with customers who are sensitive to both service quality and delay. The free system attempts to maximize its expected total customer utility with limited capacity, whereas the toll system attempts to maximize its profit. Neither goal is aligned with the social welfare goal of the public service. To achieve the social welfare goal, the government plays a crucial role in coordinating the two‐tier service system via the budget, the tradeoff of social members' goals, and tax‐subsidy policies. Using a mixed duopoly game, we establish Nash equilibrium strategies and identify the conditions for the existence of the two‐tier service system. We employ several interesting and counter‐intuitive managerial insights generated by the model to show that the public service can be delivered more efficiently via customer choice and SP competition. In addition, we show that a relatively low tax‐subsidy rate can almost perfectly coordinate the two SPs to achieve most of the maximum possible benefit of the two‐tier service system.     

An Exploratory Study of the Impact of e‐Service Process on Online Customer Satisfaction

Although extensive academic research has examined the dynamics of interpersonal interactions between service providers and customers, much less research has investigated customer service encounters through technological interfaces such as the Web in electronic commerce transactions. Corporate websites have become an important point of contact with customers for many companies. Service has been described as one of the most important attributes for online business to influence traffic and sales. However, more research is needed to understand how Web‐based technological capabilities of services affect customer satisfaction. In this paper, we propose viewing the interface between online buyers and sellers through the lens of service management to identify possible determinants of online customer satisfaction. A company's website is considered its electronic service delivery system. We look at this electronic service delivery system from its process point of view. Our findings indicate that as the electronic service delivery system process improves, a customer's perception of the website's ease of use increases, leading to increased service value and perceived control over the process, which increases customer satisfaction. The research provides evidence that the technological capabilities embedded in the website processes are an important factor in determining service quality and ultimately online customer satisfaction.     

A Staged Service Innovation Model*

Drawing from the new product development (NPD) literature, service quality literature (SERVQUAL), and empirically grounded research with 53 service innovation decision makers, we develop a staged service innovation model (SIM) for decision makers. We tested the model using empirical data from 329 firms across five industries. The empirical results show that integrating prelaunch service quality training into new service development process leads to successful service innovation. The model developed in this article can be used as a decision support tool and diagnostic model for assessing service innovation ideas, evaluating performance of ongoing service innovations, allocating resources, and improving success rate of service innovations. Decision makers can use the measures developed in this study as a checklist to identify their strengths in delivering service quality to their own customers as well as areas of improvement. This article extends service innovation research by combining NPD and service quality development into a single study and opens the door to further work that could help improve the success rate of service innovations. The model can serve as a base model for future research extensions in service innovation research. A major takeaway for the academic reader is that the SIM demonstrates the value of using the SERVQUAL literature to understand how best to provide excellent quality that results in more fully satisfied customers and, ultimately, improved service performance.     

Service Coproduction with Information Stickiness and Incomplete Contracts: Implications for Consulting Services Design

Drawing from three theoretical bases—“information stickiness” from the knowledge management literature, “service coproduction” from the service operations management literature, and “incomplete contract theory” from the transaction cost economics literature—we discuss a theoretical framework and develop models to study the efficiency of the service coproduction process in a knowledge‐intensive consulting environment. We apply, refine, and interpret these theories to determine how work should be allocated between the consultant and the client and the corresponding pricing under different contractual relationships that occur in this industry. We find that, with a pricing schedule that relates the fee adjustment to the self‐service level and one party's ownership of the residual right to specify the workload allocation, the client underinvests her efforts in the service coproduction process, whereas the consultant overinvests his efforts, resulting in an inefficient process. In addition, to improve overall process efficiency, we show that the more productive party should own the residual right to respecify the self‐service level when the final service need emerges. Our results, as well as interview data from experienced consultants, provide insights into the causes of inefficient service delivery processes and offer direction for achieving better efficiency through contract design and pricing schedules.     

The Emergence of Service Science: Toward Systematic Service Innovations to Accelerate Co‐Creation of Value

The current growth of the service sector in global economies is unparalleled in human history—by scale and speed of labor migration. Even large manufacturing firms are seeing dramatic shifts in percent revenue derived from services. The need for service innovations to fuel further economic growth and to raise the quality and productivity levels of services has never been greater. Services are moving to center stage in the global arena, especially knowledge‐intensive business services aimed at business performance transformation. One challenge to systematic service innovation is the interdisciplinary nature of service, integrating technology, business, social, and client (demand) innovations. This paper describes the emergence of service science, a new interdisciplinary area of study that aims to address the challenge of becoming more systematic about innovating in service.     

A Supply Chain with a Service Requirement for Each Market Signal

We study a single‐period two‐stage service‐constrained supply chain with an information update. The buyer has two procurement opportunities with the second one after observing a market signal, which updates the demand forecast. He also commits to a service level after observing the market signal. We derive his optimal ordering decisions and show that the critical market signal, the optimal first‐stage order quantity, and the optimal expected profit are monotone with respect to the target service level. We also discuss the impact of the forecast quality on the optimal decisions. We show that the optimal first‐stage order quantity may not be monotone with respect to information accuracy, as is in the case without the service constraint. In addition, we extend our analysis to the situation when an order cancellation is allowed upon the observation of the market signal. We also compare the results obtained for the problems with and without an order cancelation. Finally, we discuss the supply chain coordination issue and find that a buyback contract can also coordinate the supply chain in the presence of the service constraint.     

Schedule Recovery: Unplanned Absences in Service Operations*

The U.S. service sector loses 2.3% of all scheduled labor hours to unplanned absences, but in some industries, the total cost of unplanned absences approaches 20% of payroll expense. The principal reasons for unscheduled absences (personal illness and family issues) are unlikely to abate anytime soon. Despite this, most labor scheduling systems continue to assume perfect attendance. This oversight masks an important but rarely addressed issue in services management: how to recover from short‐notice, short‐term reductions in planned capacity. In this article, we model optimal responses to unplanned employee absences in multi‐server queueing systems that provide discrete, pay‐per‐use services for impatient customers. Our goal is to assess the performance of alternate absence recovery strategies under various staffing and scheduling regimes. We accomplish this by first developing optimal labor schedules for hypothetical service environments with unreliable workers. We then simulate unplanned employee absences, apply an absence recovery model, and compute system profits. Our absence recovery model utilizes recovery strategies such as holdover overtime, call‐ins, and temporary workers. We find that holdover overtime is an effective absence recovery strategy provided sufficient reserve capacity (maximum allowable work hours minus scheduled hours) exists. Otherwise, less precise and more costly absence recovery methods such as call‐ins and temporary help service workers may be needed. We also find that choices for initial staffing and scheduling policies, such as planned overtime and absence anticipation, significantly influence the likelihood of successful absence recovery. To predict the effectiveness of absence recovery policies under alternate staffing/scheduling strategies and operating environments, we propose an index based on initial capacity reserves.     

New Service Development Competence and Performance: An Empirical Investigation in Retail Banking

What can service firms do to improve their ability to offer new services? In this paper we argue that new service development success results from building a competence in the management of service development resources and routines. We conceptualize new service development competence as a multidimensional, second‐order latent construct that is represented by a system of four interrelated and complementary dimensions: (1) formalized new service development processes, (2) market acuity, (3) new service development strategy, and (4) information technology use and experience. We hypothesize that the growth of new service development competence is related to improved new service development performance. Using structural equations modeling, we analyze survey data from 166 retail banks and report three key empirical findings. First, we show that the four hypothesized dimensions are statistically significant in defining new service development competence. Second, contrary to conventional wisdom in new product development, we find that formalized processes play a lesser role in the success of new service development compared with the other three dimensions. Instead, market acuity—which captures the firm's ability to see the competitive environment clearly and to anticipate and respond to customers' evolving needs and wants—was the most important new service development competence indicator. Finally, we demonstrate the positive effect of new service development competence on new service development performance and show that new service development competence is also significantly related to business‐level performance. Together, our empirical results suggest that complementary benefits arise from the adoption of a more holistic approach to the management of new service development at the program level.     

Service and Price Competition When Customers Are Naive

We consider a system of two service providers each with a separate queue. Customers choose one queue to join upon arrival and can switch between queues in real time before entering service to maximize their spot utility, which is a function of price and queue length. We characterize the steady‐state distribution for queue lengths, and then investigate a two‐stage game in which the two service providers first simultaneously select service rates and then simultaneously charge prices. Our results indicate that neither service provider will have both a faster service and a lower price than its competitor. When price plays a less significant role in customers’ service selection relative to queue length or when the two service providers incur comparable costs for building capacities, they will not engage in price competition. When price plays a significant role and the capacity costs at the service providers sufficiently differ, they will adopt substitutable competition instruments: the lower cost service provider will build a faster service and the higher cost service provider will charge a lower price. Comparing our results to those in the existing literature, we find that the service providers invest in lower service rates, engage in less intense price competition, and earn higher profits, while customers wait in line longer when they are unable to infer service rates and are naive in service selection than when they can infer service rates to make sophisticated choices. The customers’ jockeying behavior further lowers the service providers’ capacity investment and lengthens the customers’ duration of stay.     

Focusing on Customer Time in Field Service: A Normative Approach

Although customer convenience should be rightfully considered a central element in field services, the customer experience suggests that service enterprises rarely take the customer's preferred time into account in making operational and scheduling decisions. In this paper we present the results of our exploratory research into two interrelated topics: the explicit inclusion of customer time in nonemergency field service delivery decisions and the analysis of trade‐off between the customer's convenience and field service provider's cost. Based on prior research in service quality we identify and illustrate two time‐based performance metrics that are particularly appropriate for assessing service quality in nonemergency field services: performance and conformance quality. To determine vehicle routes, we develop a hybrid heuristic derived from the existing and proven heuristic methods. A numerical example closely patterned after real‐life data is generated and used within a computational experiment to investigate alternate policies for promise time windows. Our experiment shows that over a reasonable range of customer cost parameters the policy of shorter promise time windows reduces the combined total cost incurred by the provider and the customers and should be considered a preferred policy by the field service provider. Managerial implications of this result are discussed.     

The Role of Contract Expirations in Service Parts Management

The majority of after‐sales service providers manage their service parts inventory by focusing on the availability of service parts. This approach, combined with automatic replenishment systems, leads to reactive inventory control policies where base stock levels are adjusted only after a service contract expires. Consequently, service providers often face excess stock of critical service parts that are difficult to dispose due to their specificity. In this study, we address this problem by developing inventory control policies taking into account contract expirations. Our key idea is to reduce the base stock level of the one‐for‐one policy before obsolescence (a full or partial drop in demand rate) occurs and let demand take away excess stock. We refer to this policy as the single‐adjustment policy. We benchmark the single‐adjustment policy with the multiple‐adjustment policy (allowing multiple base stock adjustments) formulated as a dynamic program and verify that for a wide range of instances the single‐adjustment policy is an effective heuristic for the multiple‐adjustment policy. We also compare the single‐adjustment policy with the world‐dependent base stock policy offered by Song and Zipkin (1993) and identify the parameter combinations where both policies yield similar costs. We consider two special cases of the single‐adjustment policy where the base stock level is kept fixed or the base stock adjustment is postponed to the contract expiration time. We find that the initial demand rate, contract expiration time, and size of the drop in demand rate are the three key parameters driving the choice between the single‐adjustment policy and its special cases.     

Dynamic Assignment of Flexible Service Resources

Resource flexibility is an important tool for firms to better match capacity with demand so as to increase revenues and improve service levels. However, in service contexts that require dynamically deciding whether to accept incoming jobs and what resource to assign to each accepted job, harnessing the benefits of flexibility requires using effective methods for making these operational decisions. Motivated by the resource deployment decisions facing a professional service firm in the workplace training industry, we address the dynamic job acceptance and resource assignment problem for systems with general resource flexibility structure, i.e., with multiple resource types that can each perform different overlapping subsets of job types. We first show that, for systems containing specialized resources for individual job types and a versatile resource type that can perform all job types, the exact policy uses a threshold rule. With more general flexibility structures, since the associated stochastic dynamic program is intractable, we develop and test three optimization‐based approximate policies. Our extensive computational tests show that one of the methods, which we call the Bottleneck Capacity Reservation policy, is remarkably effective in generating near‐optimal solutions over a wide range of problem scenarios. We also consider a model variant that requires dynamic job acceptance decisions but permits deferring resource assignment decisions until the end of the horizon. For this model, we discuss an adaptation of our approximate policy, establish the effectiveness of this policy, and assess the value of postponing assignment decisions.     

面向顾客模糊性要求的服务交互价值共创研究

服务接触中顾客所提出的模糊性要求,为服务交互管理带来诸多挑战。动态刻画面向模糊性要求的服务交互价值共创过程为理解和应对模糊性要求提供了具体的视角。本研究通过构建服务交互价值共创模型,模拟面向模糊性要求情景的单人单次和单人多次服务交互的价值共创过程。结果表明,三个核心判断条件识别出价值共创的四种典型情形;多次交互情境下,员工自由应对时平均能力提升方向不定,员工间个体能力差异也较大,而企业对员工的干预能有效提升员工能力和服务质量。该研究首次动态阐释了非常规波动下顾企价值共创的具体过程,也明确了企业对员工应对模糊性要求干预的必要性和有效性。     

Managing Quality in the E‐Service System: Development and Application of a Process Model

In this paper, we develop a process model for assessing and managing e‐service quality based on the underlying components of the e‐service system and, in turn, address the growing need to look in more detail at the system component level for sources of poor quality. The proposed process model is comprised of a set of entities representing the e‐service system, a network defining the linking between all pairs of entities via transactions and product flows, and a set of outcomes of the processes in terms of quality dimensions. The process model is developed using Unified Modeling Language (UML), a pictorial language for specifying service designs that has achieved widespread acceptance among e‐service designers. Examples of applications of the process model are presented to illustrate how the model can be use to identify operational levers for managing and improving e‐service quality.     

Assemble‐to‐Order Inventory Management via Stochastic Programming: Chained BOMs and the M‐System

We study an inventory management mechanism that uses two stochastic programs (SPs), the customary one‐period assemble‐to‐order (ATO) model and its relaxation, to conceive control policies for dynamic ATO systems. We introduce a class of ATO systems, those that possess what we call a “chained BOM.” We prove that having a chained BOM is a sufficient condition for both SPs to be convex in the first‐stage decision variables. We show by examples the necessity of the condition. For ATO systems with a chained BOM, our result implies that the optimal integer solutions of the SPs can be found efficiently, and thus expedites the calculation of control parameters. The M system is a representative chained BOM system with two components and three products. We show that in this special case, the SPs can be solved as a one‐stage optimization problem. The allocation policy can also be reduced to simple, intuitive instructions, of which there are four distinct sets, one for each of four different parameter regions. We highlight the need for component reservation in one of these four regions. Our numerical studies demonstrate that achieving asymptotic optimality represents a significant advantage of the SP‐based approach over alternative approaches. Our numerical comparisons also show that outside of the asymptotic regime, the SP‐based approach has a commanding lead over the alternative policies. Our findings indicate that the SP‐based approach is a promising inventory management strategy that warrants further development for more general systems and practical implementations.     

Intersectoral Labor Mobility and the Growth of the Service Sector

One of the most striking changes in the U.S. economy over the past 50 years has been the growth in the service sector. Between 1950 and 2000, service‐sector employment grew from 57 to 75 percent of total employment. However, over this time, the real hourly wage in the service sector grew only slightly faster than in the goods sector. In this paper, we assess whether or not the essential constancy of the relative wage implies that individuals face small costs of switching sectors, and we quantify the relative importance of labor supply and demand factors in the growth of the service sector. We specify and estimate a two‐sector labor market equilibrium model that allows us to address these empirical issues in a unified framework. Our estimates imply that there are large mobility costs: output in both sectors would have been double their current levels if these mobility costs had been zero. In addition, we find that demand‐side factors, that is, technological change and movements in product and capital prices, were responsible for the growth of the service sector.     

Service Systems with Experience‐Based Anecdotal Reasoning Customers

The existing queueing literature typically assumes that customers either perfectly know the expected waiting time or are able to form rational expectations about it. In contrast, in this article, we study canonical service models where customers do not have such full information or capability. We assume that customers lack full capability or ample opportunities to perfectly infer the service rate or estimate the expected waiting time, and thus can only rely on past experiences and anecdotal reasoning to make their joining decisions. We fully characterize the steady‐state equilibrium in this service system. Compared with the fully rational benchmark, we find that customers with anecdotal reasoning are less price‐sensitive. Consequently, with a higher market potential (higher arrival rate), a revenue‐maximizing firm may increase the price if the service rate is exogenous, and it may decrease the price if the service rate is at the firm's discretion. Both results go against the commonly accepted pricing recommendations in the fully rational benchmark. We also show that revenue maximization and welfare maximization lead to fundamentally different pricing strategies with anecdotal reasoning, whereas they are equivalent in the fully rational benchmark.     

国外物流服务质量研究述评

物流服务质量研究历时40年,在某些方面取得了一定的理论研究成果,但至今尚未形成完整的理论体系。系统地梳理和总结了国外物流服务质量研究的相关文献,认为物流服务质量研究具体可以划分为3个阶段:概念研究阶段、测量研究阶段、理论研究阶段,并着重对每一阶段的物流服务质量研究进行了分析和评论,进而提出了未来的研究展望。     

Providing Limited Local Electric Service During a Major Grid Outage: A First Assessment Based on Customer Willingness to Pay

While they are rare, widespread blackouts of the bulk power system can result in large costs to individuals and society. If local distribution circuits remain intact, it is possible to use new technologies including smart meters, intelligent switches that can change the topology of distribution circuits, and distributed generation owned by customers and the power company, to provide limited local electric power service. Many utilities are already making investments that would make this possible. We use customers' measured willingness to pay to explore when the incremental investments needed to implement these capabilities would be justified. Under many circumstances, upgrades in advanced distribution systems could be justified for a customer charge of less than a dollar a month (plus the cost of electricity used during outages), and would be less expensive and safer than the proliferation of small portable backup generators. We also discuss issues of social equity, extreme events, and various sources of underlying uncertainty.