The service bullwhip effect

Demand management approaches in services sector and influence on company performance

Purpose

The purpose of this paper is to empirically examine the impact of supply chain risks (SCRs) and demand management strategies (DMSs) on the company performance in order to study the use of DMSs in delivering improved results even in the presence of SCRs. The SCRs considered under the study are as follows: demand variability, constrained capacity and quality of services delivery, and competitive performance, customer satisfaction and financial performance are the measures considered for company performance.

Design/methodology/approach

This study is based on a survey of 439 businesses in India representing 10 groups of services industries (information technology/IT enabled services, business process outsourcing, IT infrastructure, logistics/transportation, healthcare, hospitality, personal services, consulting, education and training, consumer products and retail), using structural equation modeling (SEM) methods.

Findings

The findings reveal that presence of demand variability risk has significant influence upon the use of demand planning and forecasting, controlling customer arrival during peaks and shifting demand to future. Mismatch of capacity against demand (unused capacity) leads to the use of techniques to influence business during lean periods, thereby resulting in enhanced supply chain (SC) and financial performance. Controlling customer arrival during peaks to shift the demand to lean periods leads to enhanced financial performance. Presence of delivery quality risk does not significantly influence the use of DMS. Also, short-term use of customer and business handling techniques does not exert significant influence on company performance.

Research limitations/implications

The study has limitations as follows: (1) respondents are primarily from India while representing global organizations, (2) process/service redesign to relieve capacity as a DMS is not considered and (3) discussion on capacity management strategies (CMSs) is also excluded.

Practical implications

SC managers can be resourceful in shifting the peak demand to future with the application of techniques to control customer arrival during peaks. The managers can also help enhance business by influencing business through offers, incentives and promotions during lean periods to use available capacity and improve company performance.

Originality/value

This study is one of the first empirical works to explore how presence of SCRs influences the use of DMS and impacts the three types of company performance. The study expands current research on demand management options (DMOs) by linking three dimensions of company performance based on the data collected from ten different groups of service industry.

Two-stage supply chain inventory management based on system dynamics model for reducing bullwhip effect of sulfur product

Bullwhip effect is prevalent in supply chains, creating supply and inventory risks that affect marketing, supply and production. However, there are limited researches on the optimization of chemical supply chain inventory management. In order to solve the above problem, this paper took the sulfur product supply chain of a sulfur plant as an example, combined with the idea of system dynamics, and systematically studied the inventory control strategy in the distributor-retailer two-level inventory system constituted by the supply chain. Firstly, the causal loop diagram was drawn according to the system relationship between variables in the two-level supply chain, and then the system dynamics model of sulfur product supply chain was formed. Finally, problems existing in the supply chain were explored through simulation, and optimization suggestions were submitted. It can be concluded from the simulation results that there was bullwhip effect in the sulfur product supply chain, and the delay of transportation time and the change of inventory adjustment time would have an impact on the inventory level of each node enterprise in the supply chain. Therefore, the method of building an information sharing platform, implementing visual information management, and adopting logistics transportation service outsourcing could enhance the information exchange among node enterprises, so as to improve the operational efficiency of the entire product supply chain.

Organizing for permanent beta: performance measurement before vs performance monitoring after release of digital services

Purpose

Due to the complexity of digital services, companies are increasingly forced to offer their services “in permanent beta”, requiring continuous fine-tuning and updating. Complexity makes it extremely difficult to predict when and where the next service disruption will occur. The authors examine what this means for performance measurement in digital service supply chains.

Design/methodology/approach

The authors use a mixed-method research design that combines a longitudinal case study of a European digital TV service provider and a system dynamics simulation analysis of that service provider's digital service supply chain.

Findings

With increased levels of complexity, traditional performance measurement methods, focused on detection of software bugs before release, become fragile or futile. The authors find that monitoring the performance of the service after release, with fast mitigation when service incidents are discovered, appears to be superior. This involves organizational change when traditional methods, like quality assurance, become less important.

Research limitations/implications

The performance of digital services needs to be monitored by combining automated data collection about the status of the service with data interpretation using human expertise. Investing in human expertise is equally important as investing in automated processes.

Originality/value

The authors draw on unique empirical data collected from a digital service provider's struggle with performance measurement of its service over a period of nine years. The authors use simulations to show the impact of complexity on staff allocation.

Understanding the link between IS capabilities and cost performance in services: the mediating role of supplier integration

Purpose

The purpose of this study is to explore the link between information systems (IS) capabilities, supplier integration and cost performance in the service context. Specifically, it empirically investigates how supplier integration meditates the relationship between three dimensions of IS capabilities and cost performance in service firms.

Design/methodology/approach

A survey of 156 UK service firms was conducted and the data analyzed to determine the role of supplier integration in mediating the effects of IS capabilities on firms' cost performance. The research model was tested using structural equation modeling (SEM), and the neural network model was used to rank the relative influence of significant predictors obtained from SEM.

Findings

The results confirmed that supplier integration fully mediates the effects of information technology (IT) for supply chain activities and flexible IT infrastructure on cost performance and partially mediates the effect of operations manager's IT knowledge on cost performance. The results showed that operations manager's IT knowledge is the strongest predictor of supplier integration.

Originality/value

This study takes a step toward quelling concerns about the business value of IS, contributing to the development and validation of the measurement of IS capabilities in the service operations context. Additionally, it adds to the emerging body of literature linking supplier integration to the operational performance of service firms.

Operations-based classification of the bullwhip effect

Purpose

Present study deals with the most discussed rather than addressed yet still an unsolved problem of supply chain known as the bullwhip effect. Operational variables affecting the bullwhip effect are identified and their role in causing the bullwhip effect has been explored using artificial neural networks. The purpose of this study is to analyze the impact of identified operational reasons that affect the bullwhip effect and to analyze the bunch of variables that are more prominent in explaining the phenomenon of the bullwhip effect.

Design/methodology/approach

Ten major sectors of the Indian economy are analyzed for the bullwhip effect in the present study, and the operational variables affecting the bullwhip effect in these sectors are identified. The bullwhip metric is developed as the ratio of variance in production to the variance in the demand. The impact of identified operation variables on the bullwhip effect has been discussed using the artificial neural network technique known as multilayer perceptron. The classification is also performed using neural network, logistic regression and discriminant analysis.

Findings

The operation variables are found to be varying with respect to sectors. The study emphasizes that analyzing the right set of operation variables with respect to the sector is required to deal with the complex problem, the bullwhip effect. The operational variables affecting the bullwhip effect are identified. The classification result of the neural network is compared with those of the logistic regression and discriminant analysis, and it is found that the dynamism present in the bullwhip effect is better classified by neural network.

Research limitations/implications

The study used 11 years of observations to analyze the bullwhip effect on the basis of operational variables. The bullwhip effect is a complex phenomenon, and it is explained on the basis of an extensive set of operational variables which is not exhaustive. Further, the behavioral aspect (bullwhip because of decision-making) is not explored in the present study.

Practical implications

The operational aspect plays a gigantic role to explain and deal with the bullwhip effect. Strategies to mitigate the bullwhip effect must be in accordance with the operational variables impacting the sector.

Originality/value

The study suggests a novel approach to study the bullwhip effect in supply chain management using the application of neural networks in which operational variables are taken as predictor variables.

How improving access times had unforeseen consequences: a case study in a Dutch hospital

OBJECTIVES

To investigate the consequences of increasing capacity to reduce access times, and to explore how patient waiting times and use of physical capacity were influenced by variability.

DESIGN

A retrospective case study that combines both primary and secondary data. Secondary data were retrieved from a hospital database to establish inflow and outflow of patients, utilisation of resources and available capacity, realised access times and the weekly number of new patients seen over 1 year. Primary data consisted of field notes, onsite visits and observations, and semistructured interviews.

SETTING

A secondary care facility, that is, a rheumatology department, in a large Dutch hospital.

PARTICIPANTS

Analyses are based on secondary patient data from the hospital database, and the responses of the interviews with physicians, nurses and Lean Six Sigma project leaders.

RESULTS

The study shows that artificial variability was increased by managerial decisions to add capacity and to allow an increased inflow of new patients. This, in turn, resulted in undesirable and significant fluctuations in access times. We argue that we witnessed a new multiplier effect that typifies the fluctuations.

CONCLUSIONS

Adding capacity resources to reduce access times might appear an obvious and effective solution. However, the outcomes were less straightforward than expected, and even led to new artificial variability. The study reveals a phenomenon that is specific to service environments, and especially healthcare, and has detrimental consequences for access times.

Integrated approach for evaluation of service quality in multistage sequential utilitarian service process

Purpose

In the context of sequential multistage utilitarian service processes, the purpose of this study is to develop and validate propositions to study the impact of service quality (SQ) perceptions developed in intermediate stages, along with the impact of service gestalt characteristics, such as peak and end experiences, on quality perception at each stage and on overall service quality (OSQ) perception. The cascade phenomenon (interdependency between process stages) is considered in the evaluation of OSQ perception of customer, who experiences service through a series of planned, distinct and partitioned sequential stages.

Design/methodology/approach

In this paper, a conceptual framework is used to evolve the propositions. Subsequently, propositions are tested in three different utilitarian service contexts wherein customer survey was conducted for feedback on attributes at each stage, summary perception evaluations of each stage and OSQ evaluation of multistage process. Peak experiences, considered for OSQ evaluation, were defined by a suitable statistical technique. Ordinal logistic regression with nested models is the technique used for analyzing the data.

Findings

This work reveals significant cascade effect of summary evaluation of intermediate stages on the subsequent stage. Peak customer experience (negative or positive) is observed to be marginally significant on intermediate stage and OSQ evaluation. In addition, OSQ is observed to be influenced by summary perception evaluations of intermediate stages, which leads to better model adequacy. Finally, among all the stages, end stage performance is observed to have a significant impact on the overall multistage SQ.

Practical implications

The findings suggest that in view of the cascade effect of intermediate stages, managers need to allocate resources to ensure that all stages are performing at an adequate level instead of only focusing on improving peaks and end effects of customer experiences. The proposed approach is easy to implement and suitable for evaluating SQ and OSQ in varied multistage sequential utilitarian service environment.

Originality/value

An integrated approach for evaluation of SQ in sequential multistage utilitarian service processes is proposed from the perspective of cascade effect of intermediate stages and peak and end effects on OSQ perception.

The influence of dynamic capabilities on hospital-supplier collaboration and hospital supply chain performance

Purpose

The purpose of this paper is to explore the influence of hospital’s visibility for sensing (VFS), learning, coordinating and integrating on hospital-supplier collaboration. Second, it explored the influence of hospital-supplier collaboration on hospital supply chain performance. The author also explored how the technology orientation of the medical chain units influences the above linkages.

Design/methodology/approach

The study adopted a multi-unit study of different hospital supply chains. Consequently, perceptual data were gathered from seven dominant entities in a typical medical/hospital supply chain: hospitals and clinics, accommodation (i.e. hotels), chemistry and pharmaceutical, marketing/public relations/promotion, medical equipment manufacturers, food and beverage and insurance. The responses were gathered using e-mail survey and were analyzed using structural equation modeling.

Findings

Based on 192 completed responses, the author found positive influences of VFS, learning and integrating on hospital-supplier collaboration and a positive impact of hospital-supplier collaboration on hospital supply chain performance. An insignificant influence of hospital’s visibility for coordinating was noted on hospital-supplier collaboration. The study argued hospitals to invest more for enriching their dynamic capabilities to diagnose the changes in the environment so as to sustain their collaborative relationships leading to positive performance implications.

Originality/value

The study is the foremost to investigate the effects of hospital’s dynamic capabilities on its collaborative efforts with its key supplier and their influence on hospital supply chain performance. Also the study is foremost in exploring the importance of technology orientation on hospital dynamic capabilities and hospital-supplier collaboration. An important contribution of the research is the conceptualization of supply chain visibility core components (visibility of sensing, visibility of learning, visibility of coordinating and visibility of integrating) in the context of hospital supply chains.

Design vs practice

Purpose

– The purpose of this paper is to investigate how customer involvement in call routing affects the internal operations of the call centre service system by examining customer usability problems with the interactive voice response (IVR) system and the practices of agents used to redirect incorrectly routed calls.

Design/methodology/approach

– A qualitative case study combined direct observation of live calls through sit-bys with agents and semi-structured interviews conducted with coaches and managers within 13 separate teams across all four functional areas of a call centre operation.

Findings

– Customer use of the IVR system involved effort, capability, and arrival forms of customer-induced variability, which produced incorrect call inputs into the call centre. Shared norms and attitudes concerning knowledge, IT use, and responsibility for different call types within teams were associated with redirecting practices which lead to the problematic rerouting of calls. Problems with call routing and rerouting negatively affected operational efficiency and undermined customer satisfaction.

Research limitations/implications

– The paper is based upon a single case study so further research is required to examine how problems identified are manifest in call centre operations of different size and complexity. The qualitative approach develops rich insights but these findings would benefit from a quantitative focus in the future.

Practical implications

– The customer experience of IVR systems should be continually monitored to identify usability problems and ensure effective design, while call centre management should attempt to increase teams’ awareness of and ability to successfully redirect incorrectly routed calls.

Originality/value

– The paper conceptualises the mutual influence of macro-level service system design and the micro-level behaviour of customers and agents upon each other. In practice, formal design decisions such as input uncertainty, decoupling, and interdependence patterns are continually reproduced or modified. Shared attitudes and norms of teams and their behavioural influence upon agents’ call handling practices are identified as a cause of coordination problems in call centres service systems. Internal rerouting by agents is also identified as a crucial operational process and important area for future research.

Making a meaningful contribution to theory

Purpose

– The need to make a “theoretical contribution” is a presumed mandate that permeates any researcher’s career in the Social Sciences, yet all too often this remains a source of confusion and frustration. The purpose of this paper is to reflect on, and further develops, the principal themes discussed in the “OM Theory” workshop in Dublin in 2011 and the special sessions at the 2011 and the 2013 EurOMA Conferences in Cambridge and Dublin.

Design/methodology/approach

– This paper presents six short essays that explore the role and use of theory in management research, and specifically ask what is a good or meaningful contribution to theory. The authors comment on the current state of theory in Operations Management (OM) (Harry Boer), the type of theories the authors have in OM (Chris Voss), the role of theory in increasing the general understanding of OM problems (Roger Schmenner), whether the authors can borrow theories from other fields or actually have theory “of our own” (Matthias Holweg), the different ways in which a contribution to theory can be made (Martin Kilduff), and how to construct a theoretical argument (Mark Pagell).

Findings

– The authors argue that theory is fundamental to OM research, but that it is not the inevitable starting point; discovery and observation are equally important and often neglected avenues to contributing to theory. Also, there is no one right way to making a contribution, yet consistency between ontology, epistemology, and claimed contribution is what matters. The authors further argue that the choice of theory is critical, as a common mistake is trying to contribute to high-level theories borrowed from other fields. Finally, the authors recommend using theory parsimoniously, yet with confidence.

Originality/value

– The paper presents a collection of viewpoints of senior scholars on the need for, and use of, theory in OM research.