Category Archives: The Role of Technology in Operations

Reduced labor costs

Technology can reduce labor costs in services in two ways. First, it can be used as a total replacement for labor. In addition, technology can provide support to existing labor. thereby increasing labor productivity  As an example. automatic teller machines (ATMs) in banks are a total substitute for the traditional bank teller for many routine operations, but cost only a fraction of what a teller costs. Therefore. bank customers should be encouraged to use ATMs when conducting certain type or transactions.

Organizations also can use the Internet to reduce labor costs. The Massachusetts Registry of Motor Vehicles is now online, which allows motorists with speeding tickets to pay their fines over the Internet without having to appear in person, which was the previous norm. Increased u e of the Internet in this manner also will reduce long lines at Registry locations
and hopefully reduce its annual operating expenses ' A note of caution is necessary, however, when contemplating the introduction of totally automated services. First. as we have noted already, there are some segments of the market that are not totally comfortable with using automation. In addition, while automation can usually do a good job performing routine transactions, there are often complex and highly customized transactions that can be resolved only with the customer interacting directly with a knowledgeable employee. Technology in the form of automation also can be used in service operations to perform
repetitive, time-consuming tasks. The use of technology in this manner cannot only increase worker productivity, but also reduce or eliminate errors. At the same time, it ensures the delivery of a more consistent product to the customer. In some instances, technology also can increase performance in the form of faster service. For example, in many fast-food restaurants, the timed drink dispensers do not require servers to stand by the beverage machine holding the button. Instead, a quick push of the
button begins the flow of a specific amount of beverage, permitting the server to assemble the rest of the order while the drink is being poured. Other examples of technology being used in fast-food operations include a conveyor belt broiler at Burger King restaurants that ensures a consistently cooked hamburger, again without the worker being continuously present during the cooking operation. and deep fat fryers with timers that automatically lift the french fries out of the oil when they have finish head cooking. Technology in the form of computerized order-entry device es allow waiters and waitresses to place orders in the kitchen without having to walk across the restaurant. Instead of having to make two trips to the kitchen=-one to place the order and another to pick it up when it has been cooked-waitstaff are now only required to make a single trip to pick up
the food when it is ready.

Economies of scale

Advances in communication technology have allowed service companies
to reduce the number of locations for many types of activities. As an illustration, reservation operations for hotels, airlines, and car rental agencies have been consolidated to a few central locations. Economies of scale with these larger operations occur, in part, as a result of the ability to schedule a larger number of operators. For example, if the demand in a given hour (that is. the number of calls received) doubles, the number of operators necessary to provide the same level of service is less than double. Economies of scale also are reflected in the reduced overhead costs (as measured on a per-unit basis) that are typically associated with larger facilities. As stated earlier, an additional savings that frequently occurs
as a result of the firm's ability to locate its operation anywhere is the reduced cost associated with locating in a low-cost-of-living area. Citibank, as an example, has located its credit card operations in South Dakota for this very reason. Similarly, many hotel central reservation call centers are located in Nebraska. rather than on either the West Coast or the East Coast of the United States, where the cost of living is more expensive.

Increased Efficiency

A~ stated earlier. the unilateral  by services to nanotechnology
was driven primarily by the need to reduce operating cost This is still a major reason for purchasing new technology. Just a capital equipment often is used to reduce covet in a manufacturing company. technology can he ~similarly apply~d in a service em environment. The two primary ways in which the efficiency or productivity of the operation can be increased are (a) economies of scale and (b) reduced labor costs, recognizing that there is some degree of overlap between the two.

Improved Performance

 Service managers also must recognize that the decision to adopt technology is often driven by the need to not only to increase productivity but also to improve the existing performance of their operations. (Improved performance. as defined earlier, includes faster speed of delivery, more product variety, and improved customer responsiveness,
to name a few.) Often, however, with the proper technology, both performance and productivity can be improved. creating a win-win situation for the firm. Faster service. Technology has allowed service operations to significantly reduce and, in some cases, totally eliminate the need for customers to wait in line for service. In addition to providing faster service, technology can simultaneously reduce labor costs by entirely eliminating the customer-worker encounter. For example, many hotels now provide an in-room checkout option. Guests who want to
take advantage of this option simply follow the menu-driven instructions on the television in their room, leave their hotel keys in the room, and never have to wait in line at the front desk to check out. In this case, customer waiting time is totally eliminated and the requirement for
front desk personnel is also reduced when guests take advantage of this option. Car rental agencies have similar processes. As we saw in the opening \ vignette. customers are no longer required to go into the office to finalize their bills when returning their rental cars at an airport. A worker greets them at the car when they drive up and quickly

toners to go directly to the shuttle bus and the terminal .Pinter, thereby allowing the As another example. the use of bar code readers h .
markets has significantly reduced the amount of ti . at t e checkout counters In super line while also reducing labor co ts and errors' Kevin a ~. In crying .Chemotherapeutic may expect to stand in big also reduces the need to consistently  inventories which Performance. Barometer control. ' ,naggers With Improved knowledge about customers In ma . with detailed information  Another method of ruing technology for obtaining data on individual customers is through membership cards. Many retail operations now require membership cards or provide discount incentives to encourage the use of these cards. Such cards allow the retailer to track the buying patterns of individual customers. thereby providing management with in depth information about their customers that can be used for future planning purposes. For example.   Wholesale Club. Costco, and Sam' Club all require their customers to have membership cards. Shaw·s. Stop & Shop. and Price Chopper are examples of supermarket chains that also have introduced a similar type of card, the use of which entitles customers
to significant discounts on products. The proper use of technology thus can provide a service company with a competitive advantage through its ability to better understand the individual behavior patterns and past
experiences of each of its cu toner Increased product customization. Technology of allows service managers to provide their customer with a wider variety of options than the) could previously offer. The terms "micro machining" and "mass customization" have evolved. in part. as a direct result of advances in technology that now permit firms to identify and provide customized goods and services to meet the needs of individual customers. As an illustration, Levi Strauss now provide customers in it retail stores with the option of buying jeans that are made to the customer's exact size. The customer's specific measurement trans entered into the  computer and a few weeks later the jeans are delivered to the
customer's home. Additional pairs can be ordered with only a telephone call, thereby eliminating the need to Visit the store. Another example is L.L. Bean. the mail-order company in Free projection. which will
sew a cu toner's name or monogram on many products. Compute Riled wing machines allow operators to select the Is. size. and culvert: ) in a matter of second .. A monitor . screen located above the sewing machine show- the operator how the name will appear on the product before it is actually stitched on the article .

Strategic Planning

Strategic planning, .from an operations perspective, is typically concerned with the long-range view of how an organization conducts business. As we have seen, strategic planning within the operations function of a manufacturing company is concerned with-addressing such issues as (a) where do we locate our facilities? (b) how big do we make them? (c) when do we build them? and (d) what processes do we adopt to make our
products? I However, a service organization, because it deals directly with its customers, also must strategically evaluate how it will interact with them. Service managers also must recognize that technology can significantly alter the way in which a company does business. For example, most of the major airlines now have home pages on the Internet that provide information about special airfare promotions. As discussed earlier, these special fares that are available only on the Web encourage customers to buy through the website, which is more cost efficient from an operations perspective. By adopting the proper strategy and associated technology, a firm can substantially increase its revenues and market share. Failure to do so can result in losing customers to competitors.