An Empirical Analysis of Management Challenges in Service
Factories, Service Shops, Mass Services and Professional
Services
Rohit Verma
Department of Management, DePaul University, Chicago, Illinois, USA
This study presents an empirical snapshot of management challenges among
different types of service industries (Service Factory, Service Shop, Mass Service, and
Professional Service). Based on data collected (sample size = 273; response rate 97.5
percent) from the managers of four services (Fast Food, Auto Repair, Retail Sales, Legal
Services) we show how management challenges change with customer
contact/customization and labour intensity. These results have important implications
for understanding ``real life'' service operations, for process improvement, and for
service design.
Introduction
As the post-industrial economy evolves, the service sector continues to increase in
importance, both in terms of its contribution to the gross domestic product (GDP) of all
advanced economies and in terms of the percentage of workforce employed in services.
Accordingly, the last decade has witnessed an increased emphasis on teaching and research on
service management issues by business schools and professional organizations (Chase, 1996;
Roth et al., 1997; Voss and Johnston, 1995). In response, numerous articles have appeared in
both academic and practitioner-based publications which provide guidelines for effective
management in services (for example, Chase and Hayes, 1991, Karmarker and Pitbladdo, 1995;
Lovelock, 1993). Several other articles present typologies/taxonomies and provide generalized
frameworks for analyzing service operations (for example, Chase, 1981; Kellogg and Nie, 1995;
Schmenner, 1986; Silvestro et al., 1992; Wemmerlov, 1990). Most of the published frameworks
classify different service industries in two-four categories and provide directions for improving
quality, productivity and operating efficiency.
Recent articles argue that service management research has moved beyond the
classification stage and therefore now it is necessary to validate the proposed service
management concepts and frameworks (Chase, 1996; Flynn et al., 1990; Meredith et al., 1989;
Swamidass, 1991). Even though service classification frameworks continue to evolve during the
1990s (for example – Wemmerlov, 1990; Silvestro et al., 1992; Kellog and Nie, 1995) there is
now an increased interest in empirically testing theoretical concepts proposed earlier. For
example, recently Kellogg and Chase (1995) empirically identified the three dimensions of
customer contact: contact time, intimacy, and, information. Similarly Silvestro, Fitzgerald,
Johnston and Ross (1992) gathered in-depth data from eleven service organizations and
identified the people-focused, people/equipment-focused and equipment-focused firms. More
recently, teams of international researchers have started collecting large scale empirical data
from senior executives from service firms in Europe and the USA (Roth et al., 1997; Voss and
Johnston, 1995).
This paper presents an empirical snapshot of the management challenges experienced
by the managers in four different types of services (classified by Schmenner, 1986): the service
factory (SF), the service shop (SS) the mass service (MS) and, the professional service (PS). Since
the publication of Schmenner's (1986) article, several introductory operations and service
management textbooks have included the service process matrix (SPM) as a framework for
analyzing service operations (for example, Fitsimmons and Fitsimmons, 1997). SPM has also
been cited in research articles as the basis for comparison and/or developing a new framework
for services (for example, Chase, 1996; Kellogg and Nie, 1995; Wemmerlov, 1990). In fact, it will
not be an exaggeration to say that a majority of the service management community regards
SPM as the primary service classification scheme (similar to Hayes and Wheelwright's (1984)
Product-Process Matrix for manufacturing operations).
We gathered data relating to management challenges experienced by managers of four
industries (fast food, auto repair, retail sales and legal services) representing SF, SS, MS, and PS
classifications (Schmenner, 1986). These services were chosen because they differ in terms of
various attributes of service delivery systems as suggested by the SPM. Based on empirical data
collected from 273 managers, we show how certain management challenges differ across four
types of services. We believe that the results provide valuable insight into the understanding of
service processes and also provide directions for service process improvement.
We choose Schmenner's (1986) SPM framework as a basis for our study for several
reasons. First, SPM classifies services based on the three dimensions commonly associated with
service operations: customer contact, customization and labour intensity. Second, SPM
provides a detailed and comprehensive list of management challenges associated with different
types of service operations. And third, the SPM framework expands Chase's (1978, 1981)
customer-contact approach that has received wide citation in both academic and practitioner
literature related to service management.
Service Typologies/Taxonomies: A Review
The diversity of the service sector makes it difficult to make useful generalizations
concerning the management of service organizations. Therefore, a considerable amount of
research has been focused on developing service classification schemes. For example, Judd
(1964) classified services according to three categories: rented goods, owned goods and non-
goods services. Similarly, Rathmell (1974) categorized services according to: type of buyer,
buyer motives, buying practices, type of seller, and degree of regulation. Even though these
classifications show how some services are different from the others, they do not provide much
useful insight into the design and management of service processes from an operational
perspective.
More recent classification schemes (Table I) have explored the complex nature of
service delivery systems with the goal of identifying differentiating characteristics, which affect
quality and process improvement, as well as service design. For example, Shostack (1977) and
Sasser et al. (1978) developed the concept of a ``product-service package'' based on the
tangible versus intangible nature of services. Based on similar ideas, Levitt (1972, 1976)
suggested that services are commonly thought of in humanistic terms and manufacturing is
thought of in technocratic terms. Accordingly, manufacturing is viewed as efficient and
forward-looking, whereas services are viewed as primitive and inefficient. In order to remedy
this pervasive yet inaccurate assessment, Levitt suggested that services should be viewed as a
type of manufacturing or production line.
More recent researchers believe in an integrated approach to service management.
Thomas (1978) argues that a large part of manufacturing experience is irrelevant to the
management of service operations because services are very different from manufacturing.
Sullivan (1981) and Bowen and Cummings (1990) also advocate an integrated approach to
service management and suggest that operations management researchers must include
organizational behavior and marketing constructs and techniques to address service operations
problems adequately.
In addition to the above-cited studies, a number of articles and books emphasize the
multifunctional nature of services. Therefore, recent service classification schemes build on
managerially useful service delivery system attributes. For example, Lovelock (1983) classifies
services in five different two-by-two matrices and examines how the specific nature of services
in a particular class affects operations and marketing. Lovelock's (1983) framework addresses
the following questions:
(1) What is the nature of the service act?
(2) What type of relationship does the service organization have with its customers?
(3) How much room is there for customization and judgment on the part of the service
provider?
(4) What is the nature of demand and supply for the service?
(5) How is the service delivered?
Lovelock (1983) proposed that his classification scheme addressing the above five questions can
help managers develop a better understanding of their business.
Chase (1978, 1981) proposed that if there is less direct customer contact in the service
system, then the service system is more likely to operate at its peak efficiency. Conversely, the
Table I. Service typologies/taxonomies
system is less likely to operate at its peak potential with high direct customer contact. Mersha
(1990) proposed a broadened definition of customer contact and differentiated between active
and passive contact. Based on these distinctions, Mersha (1990) extended the customer contact
model and addressed several earlier concerns about this classification scheme. Building on the
customer contact approach to services, Schmenner (1986) proposed the Service Process Matrix
(SPM), based on three characteristics of service delivery systems. The SPM expands the
customer contact model and categorizes services on two dimensions: labour intensity; and
customer contact and service customization. More recently, Wemmerlov (1990) proposed a
classification of service processes that included degree of customer contact, complexity and
divergence and Kellogg and Nie (1995) proposed a two-dimensional matrix which connected
the characteristics of service-products with service-processes.
The single common characteristic of all the cited studies is that they are primarily
conceptual or theoretical in nature. Each of the cited studies presents a typology of either ideal
service management or theoretically derived differences between services. As a result, each of
the studies provides important insights into important characteristics of services. Yet, many of
these studies are based on anecdotal or actual experience with a representative sample of
companies, and none has been empirically validated using a broad sample of quantitative data.
For example, even though North American Industry Classification System (NAICS) realizes the
difficulties in classifying services, it is still proposing that production processes-based
classification scheme should be used in service operations (US Department of Commerce,
1994). Our research is an attempt to empirically explore different aspects of one widely used
service classification scheme: the service process matrix.
During the recent years service taxonomies based on empirical research have started to
appear in academic literature. For example, based on in-depth data on six distinguishing
categories (equipment/people focus, customer contact time/transaction, degree of
customization, degree of discretion, value added back office/front office, and product/process
focus) collected from 11 different service industries Silvestro et al. (1992) developed a two-by-
two classification scheme. Their two axes represent number of customers processed by a
typical service unit/day and people/equipment focus. They observed that the service industries
follow the diagonal from people focus-low customers top-left corner (professional service) to
center representing medium people/equipment focus-medium number of customers (service
shop) to right-down corner equipment focus-high customers (mass service) (note that the
names of different service groups are similar to Kellogg and Nie (1995) and Schmenner (1986)
however the definitions are not necessarily the same). In another series of studies, teams of
international researchers have been collecting empirical data related to managerial practices
and performance from a large number of service industries in Europe and North America
(Chase and Voss, 1997; Voss and Johnston, 1995). Our study, although not as elaborate, is also
an attempt to study some unique characteristics of service industries using empirical data.
