4. How does the input function in services help in forecasting customer demands? Explain this with special reference to Information Technology (IT) in Service Sector.
IT in Service Sector:
Past investments in service sector information technology have been aimed primarily at productivity or efficiency gains, and this is the measure that most firms use to gauge the benefits. Service firms have followed the lead of manufacturers in making great strides in getting work done with fewer employees mainly because of advances in technology. Competitive pressure is making service companies eliminate costs (mostly people) and new easy-to-use software is allowing the full application of computer power. On the other hand, little attention has been given to using information technology to improve customer service and long-run business effectiveness. Perhaps this is because the benefits of improved service are often qualitative rather than quantitative. Standard accounting systems can measure labour costs, but not the costs of poor customer service. Consequently, managers must justify new investments in information technology on the basis of efficiency gains and labour savings (Berkley and Gupta, 1994).
Input information
The input function in services includes forecasting customer demands so that necessary service capacities can be planned. Once customers arrive, expected services must be specified by questioning customers or by relying on service histories or observations of market trends.
Most service firms have rush or peak periods and are not able to provide quality service unless they plan and prepare for these times. Unlike manufacturers, service firms cannot maintain inventory of their products as a hedge against fluctuations in demand. At any given time a service may have excess demand or excess capacity and service quality can suffer in both cases. When demand exceeds capacity some potential customers may be disappointed because they are turned away. There is also a risk that the accepted customers may receive inferior service. For many customers, even if it is good service, it is no good when it is late or slow. Armed with the proper information, service firms may be able to adjust capacity to match fluctuating demand levels. When peaks in demand are predictable, forecasting and capacity management systems can be used to construct detailed staff schedules that match capacities to demand.
In services, information must be secured from the buyer to specify the expected service. This is important because the more complete the information, the easier it will be to perform the other process functions. Customers also need to be made aware of the various services available and the likely costs of each alternative. Such information ensures that the needs and expectations of the customer are fulfilled and the organization's time and resources are not wasted in dealing with customers whose needs and expectations it cannot, or should not, fulfill.
Service errors are often caused by a misspecification of the service. For example, Federal Express found that wrong ZIP codes, wrong street addresses and even wrong names cause most of its routine mistakes. Often, a package misadventure begins when a clerk misreads a customer's handwriting. To improve service specification, Federal Express has introduced new self-serve kiosks, called FedEx Online, using bank automatic teller machine (ATM) technology. Each kiosk has a touch-screen video display for customers to price packages and print their own address labels (Ramirez, 1993). Major ocean shipping companies now use a Windows-based electronic data interchange software package called Ocean for customers to book and confirm their own orders. Ocean is expected to reduce data errors because the information keyed in by customers is fed directly into the carriers' systems (Radosevich, 1993a).
Service requires a long memory. With a computerized customer database, a firm can attach a detailed personal service history to the names of its customers. A record of each new service transaction can then be added to existing customer files. These updates help sketch an increasingly detailed profile of each customer's preference and expectation and create opportunities for more personalized and enhanced service. For example, Marriott's guest recognition system allows personnel to call up information about guests who have stayed at a Marriott hotel before. Marriott's system can predict that a particular guest will want a non-smoking room, a king-sized bed, an iron and a hair dryer. Customer service histories that are easily accessible allow frontline service providers to know on the spot which customers are first-time clients and which are loyal repeat customers. Such information allows service staff to acknowledge and personally reward the valued repeat customer and to solicit feedback and other important information from new customers.
Customer files enhance service consistency and server competence. Customer service records also ensure that service is personalized and consistent for repeat customers, even after their regular service-delivery person moves on to another job. The Nordstrom department store chain depends on its sales associates to provide individualized service to its loyal customers. Currently, individual customer preferences are resident only in the memory of a sales associate and the firm is working to convert this personal memory to corporate memory. An information system that allows customer files to be called up at many different locations would allow the firm to direct customers to different company stores providing individual sales or services of special customer interest. This in turn will help build a customer-company relationship that is stronger and more valuable than a simple customer-store or customer-employee relationship. Customer service histories can speed service. In the medical field, computerized patient records speed service, cut costs and save lives. For example, computerized systems can warn physicians of potential problems such as allergic reactions or duplicated tests.
Customer service expectations are a moving target. To deliver superior service, a company must monitor customer expectations and customer response to the services it offers. While market research can be used to determine customer expectations, often the required information can be obtained at a significantly lower cost by listening to customers and employees. Most of the good service providers have a communication process to ensure that customer suggestions and requests are communicated up and down the organization to the people who need this information.
Although customers are the best source of information, they will rarely volunteer the necessary information. In industries characterized by large numbers of relatively small transactions, such as financial services and retailing, computerized point-of-sale and bar-code scanning devices can now record every customer service encounter. For example, in supermarkets, scanners speed checkout and provide customers with detailed receipts. Moreover, scanner systems provide management with continuous inventory updates and a detailed analysis of performance by product, by department and by store. The intended result is fewer inventory stock outs of popular items and improved customer satisfaction.
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