What is Service Delivery? Factors, Making Location Decisions

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Service delivery, a part of service management, is the most important part of interaction between a customer and a service provider. A service may be in the form of information or action. After consuming a service, a customer can say whether he found the service beneficial and value adding or not. However, there are a lot of factors that affect service delivery and help in value-addition for the customer.

Factors Affecting Service Delivery

Management Focus

The employees of service providers are given clear instructions from their management regarding the value on which they have to focus while interacting with customers.

While some service providers focus on providing quality services, others focus on upselling their other products without providing any value-adding service. Excess focus on upselling may lead to poor service quality. Therefore, management focus helps in deciding the quality of service delivery.

Quality Assurance and Sales Targets

Employees have to fulfil their sales targets along with providing quality services to clients. At times, employees sacrifice quality to fulfil their targets. So, there is a trade-off between the quality and target achievement. This also affects service delivery.

Work and Time Pressure

Employees need to fulfil their targets within the stipulated time period which leads to increase in stress levels and exhaustion of employees. This further affects service quality negatively.

Organisational Structure and Support Processes

An organisation having a good culture supports its employees through various means such as timely training and appraisals, well-defined company policies, etc. Such organisations are able to maintain good service quality.

Employee Job Fit

If employees deployed by the service provider are fit for a particular service job, they will perform effectively. In contrast, if employees lack the required skills and competencies; it will negatively affect service delivery. Therefore, it is important that organisations train employees from time to time so that the employees can actively get involved in service delivery.

Customer Orientation

Service organisations can survive only if they are highly customer oriented or when there are noor very few competitors in the respective segment. In real world, it is observed that when a customer does not receive appropriate services, he/ she may quickly switch to other service providers.

Human Resource Practices

Service organisations that provide timely recognition, rewards and incentives; follow convenient shift timings and provide timely training to its employees are said to be following a humane approach. The employees of such organisations provide the best possible services to their clients. In this way, human resource practices followed by organisation also affect service delivery.

Team Members and Leaders

Teams that are closely knit and where members maintain amicable relations with each other tend to serve customers in a better manner.

Service Encounter

When employees interact with customers, the encounter may be pleasant or unpleasant. At times, employees also have to face hostile, unfriendly and irate customers. For this, management should devise a policy that should clearly state the rights of service employees in case of difficult situations which may occur while handling customers.

Managerial Approach and Ease of Communication

There should be a clear command of information within a service organisation. Moreover, managers in the organisation should be approachable and friendly so that employees can contact their managers in case of pressing needs.

Level of Motivation

It is an established fact that happy and motivated employees are more productive. Therefore, an organisation must endeavour to keep its employees happy and motivated as it would ultimately affect service delivery.


Now, with the expanding and ever-growing extent of technology, it has become imperative to use technology in providing services. For example, earlier fax machines were used to send certain documents using the fixed line telephone networks.

However, nowadays many fast modes of communication such as e-mail, MMS, WhatsApp, Messengers, etc. are available.

Making Location Decisions

After a prospective service provider decides to open up a service centre, he/she has to make an important decision regarding the location of his/herservice facility. Deciding the location of a service facility is crucial as it helps in attracting customers as a result ofconvenience or owing to its physical attributes.

There are various types of service organisations. Each organisation has its own location requirements. For example, a super speciality hospital should ideally be located at a busy and easily approachable residential location so that patients can be admitted on time and given proper treatment.

What if this hospital is built in the middle of a national highway? It would certainly not be good because it would be quite difficult for the hospital staff and patients to commute to.

While considering or making location decisions, a number of factors are considered. Some important factors to be considered are:


The location or the site ofservice outlet should ideally be situated at a place that would be responsive to future economic, demographic, cultural and competitive changes. The location should be such that the demand for service remains inelastic or not affected by any changes.

Competitive Positioning

A location should also be selected keeping in mind prospective competitors. A service provider should seize every opportunity and build a facility at every prime location so that it also creates an artificial entry barrier for competitors.

Demand Management

A service provider should choose a location where he/she can directly manage and control the quantity and timing of demand. The service provider must ensure the presence of market generators which help in maintaining a steady stream of demand.

Competitive Clustering

Service businesses that are of a similar nature should be located nearby to each other. For example, when a person wants to buy some furniture, he/she will visit a furniture market because such markets have the presence of a number of shops at a stretch.

The customers have an advantage of choosing a product or service from among a wide array of products/services.

Saturation Marketing

A service provider should open up as many outlets as possible in close proximity to each other. Using this method, service organisations realise a little cannibalisation effect. However, its advantages outweigh minor risks.

Concentrating an area with a large number ofoutlets leads to greater customer awareness, reduced advertising costs and easier supervision of outlets.

Substitution of Communication for Travel

There are certain services that can be provided over the telephone or through e-mail thus helping reducing the travelling time for customers. For example, a customer no longer needs to visit his financial consultant every time he/she wants to make an investment.

A customer can consult over a call or a video call and discuss whatever he/she wants. It will save the customer’s time and money.

Separation of Front and Back Offices

The nature of certain services is such that their front and back offices need not be located at the same place. For example, a beauty salon chain could receive service orders from mobile applications or through telephone calls sitting at a remote location.

The salon can have certain dedicated service centres or it may also offer home visits for customers. Therefore, here front and back office functions are separated.

Service Transportation and Delivery Systems – Concepts and Models

A service delivery system is the one through which the service concept, and the associated value is provided to target customers. According to Frei and Harker, (1999); Johnston and Clark, (2005); and Verma et al., (2002), “the competitiveness of service businesses is contingent, at least in part, on the design and configuration of the service delivery system.”

A service delivery system has three major components namely target market, service concept and service delivery system design. A service provider needs to ascertain ‘who’ the right customer is.

Service concept defines the mix of tangible and intangible components of the (‘what’) service to be delivered. This mix is also known as service package, service offering and service bundle. Lastly, the service delivery system design defines ‘how’ the service bundle is provided or delivered to the customer.

Researchers have suggested that for achieving effective service delivery, there must be a perfect alignment between the service concept and the service delivery system. In other words, a service provider must clearly define what service is to be offered and how it would be delivered. While making location decisions, the organisation may take the help of various tools and models. Let us study these briefly.

Regression Model

A service organisation that already has a certain number of service facilities and wants to expand by setting up other facilities can use regression analysis for determining a suitable location for the new facility. Regression analysis is a statistical modelling technique that helps in estimating the relationship among variables. These variables include dependent and independent variables.

The regression model can be constructed to estimate the performance of different candidate locations. This model may include various variables such as size of facility, number of competitors in nearby areas, traffic conditions, modes of commutation available, visibility of signs, local airport traffic, etc.

For example, a hotel may conduct regression analysis to find a suitable location for its next hotel facility. Assume that the hotel shortlists 20 important independent variables. In addition, the operating margin is fixed as the dependent variable Y.

Operating margin is obtained by adding profit, depreciation and interest expenses. The independent variables were grouped into five categories namely: competitive factors, demand generators, area demographics, market awareness and physical attributes.

Competitive factors included variables such as hotel prices, average price charged by competitors, etc. Demand generators included variables such as number of hospitals and colleges in nearby locations, annual number of tourists, traffic conditions, presence of airport, etc.

Area demographics included variables such as average population of the area, average family income, etc. Market awareness included variables such as the number of years the hotel has been in operation, distance from the nearest hotel, etc. Physical attributes included variables such as accessibility, presence of service lanes, parking facility, etc.

A statistical investigation of all variables can reveal variables which have the maximum impact on the location decision. For example, price, income and airport may be three important variables that significantly affect the location decision. The operating profit Y is dependent on these three independent variables.

Geographic Information System (GIS)

An Information System (IS) refers toa digital or computerised system for collecting, organising, storing and communicating information. A Geographic Information System (GIS) is a special type of IS. A GIS helps in capturing, storing, checking and displaying data related to position on Earth’s surface.

GIS basically maps the geographic and spatial data. Nowadays, GIS is being used increasingly by organisations in making location decisions, mapping customer databases, analysing demand, improving service delivery, etc. Various organisations that deal in different segments such as banking, health care, real estate, etc. use GIS for various reasons.

For example, you have collected a database on average income of one lakh households in a particular city. Now, how will you analyse the data if you want to open up a speciality store in an area that has a concentration of high income households. In such cases, GIS can help significantly.

The GIS may map households having incomes in different ranges onto a map using different colours. For example, there are three ranges of incomes viz. A( 0 – 1,00,000 p.a.), B ( 1,00,001 – 5,00,000 p.a.), and C 5,00,000 and above p.a.).

Now, each household’s income can be mapped onto a city map with the respective colours. The service provider can view the map and determine the area in which he should open the speciality store.

Modelling Considerations

While making service location decisions, a service organisation needs to consider various factors. Three most important factors being geographic representation, number of facilities and the optimisation criteria.

Factors Affecting Service Location Decisions

Graphic Representation

Location and travel distances can be represented graphically in two ways viz. plane and network representation. Facility on a plane can be identified using xy coordinates.

Number of Facilities

Models that are created and applied for locating a single facility are very easy to use. However, it is very difficult to modify and apply such a model for multiple locations. The problem becomes all the more complicated when demand variables are associated with each site and when the capacity of each site or the prospective facility is different.

In addition, the type of service that the service provider wants to offer also becomes a major variable in multiple location decisions. For example, a service organisation (say ABC) has a chain of five star hotels in a metro city X.

Now, it observes that a non-metro city, city Y is also growing rapidly and it wants to expand in city Y. However, research and study reveals that five star hotels would not be successful in city Y. Therefore, ABC decides that it would open a chain of three star budget hotels in city Y.

Optimisation criteria

Location decisions for public and private service organisations are based on different variables. Private sector location decisions are primarily dependent on the principles of cost minimisation or profit maximisation.

On the contrary, the public sector location decision is based on a mix of factors such as cost minimisation, societal benefit and optimum profits. It is quite difficult to quantify societal benefit.

Managing Service Operations

An organisation has to perform various operations to deliver a service. It is always quite challenging for an organisation to manage service operations along with fulfilling customers’ needs. Challenges involved in managing service operations include capacity and demand management, waiting line management, maintaining service supply relationships, expansion and globalisation of services and managing service projects.

It is almost impossible to exactly match the demand and supply levels of services required. This aspect explains why marketing and operations in service management are interrelated and inseparable. This is because when service operations are conducted in an effective manner, the marketing and advertising of service is done there and then itself.

A customer who receives services would have a satisfactory service experience and may also do word-of-mouth publicity for the service provider. On the other hand, assume that there is a customer who has to wait for long hours before getting a service will naturally feel disappointed and enraged even if he receives appropriate and friendly service.

When the service demand exceeds the service capacity, it results in creation of waiting lines or queues. Customers always feel satisfied if waiting lines are managed properly and the waiting time is not too long. Managing waiting lines is extremely important because long waiting times can create a perception of poorservice quality.

Maintaining service supply relations is also an important part of service operations management. In the manufacturing sector, it is very easy to delineate, present and understand the supply chain. Each member of the supply chain receives certain inputs from a supplier; the inputs are then processed by him/her and delivered to the next member of the supply chain who may be the end customer.

However, in case of services, customers themselves act as primary suppliers of inputs which are processed by service providers and finally deliv-ered to end customers. The inputs provided by customers include the knowledge, skills or information.

The concept that presents customers as suppliers is called the customer-supplier duality. Managing the service supply chain and customer/supplier relationships becomes difficult as a result of customer-supplier duality.

Another challenge related to the management ofoperations is the globalisation of services. Most big business houses tend to move out of their countries either in search of better opportunities or when the home market gets saturated.

Moving to unknown and new countries comes with their unique difficulties and complications. When companies move to new regions, they have to design and implement their operations as per the social, political, and general environment of the host country.

You must have also noted that when a successful business operating in one country moves to another country in order to expand, it modifies certain features of the service package.

For example, various multinational organisations choose India for outsourcing some of its processes. Processes are outsourced because of various associated benefits. Some benefits include: lesser pay-outs to employees, very limited or no government intervention, etc.

However, service providers need to design their policies such as work hours, meals, transportation, etc. in accordance with the general environment of India. There are certain countries that allow a maximum of 9 hours of work per day whereas some countries have fixed that no person shall work for more than 6 hours a day.

In addition, managing various operations involved in a service project is also critical for overall effective management of service operations.

Managing and Motivating Service Providers

Service managers are entrusted with an arduous task of managing and motivating service providers or employees who actually deliver services to customers. Service providers need to be motivated because they face pressure from two sides’ viz. customers and the organisation.

The various organisational pressures experienced by the service providers include:

  • Expected performance levels and the target to be achieved
  • Service design, processes and resources
  • Appraisal and performance management systems

In addition, various customer pressures experienced by service providers include:

  • Expectations of the customer regarding service quality, time of service delivery and friendly treatment

  • Mood and anxiety ofthe customer

  • Ability of the customer to understand the service concept and make full use of it.

Some methods used to motivate and manage service providers include:

  • Presenting exemplary leadership qualities

  • Motivating and extracting maximum work from work teams

  • Defining the roles and responsibility of work teams and service providers

  • Defining the areas of decision in which employees can use their discretion and the extent to which they can use it

  • Keeping all the channels of communication open for service providers

  • Involving employees in the process of performance measurement, appraisal and improvement

  • Increasing employee engagement

  • Creating a feeling of ownership and responsibility in the employees

  • Gaining the commitment and loyalty of employees thus helping in employee retention

  • Creating a work environment that is conducive for work
Article Source
  • Johnston, R., Clark, G., & Shulver, M. (2012). Service Operations Management (2nd ed.). Harlow, England: Pearson.

  • Fitzsimmons, J., Bordoloi, S., & Fitzsimmons, M. (2014). Service management operations, strategy, and information technology (7th ed.). New Delhi: Mc Graw Hill Education (India) Private Limited.

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