Premium Essay

Service Profit Chain

In: Business and Management

Submitted By cheesy2015
Words 411
Pages 2
How does the Service Profit Chain article help us understand what resources are needed to be successful competitors within the service sector?
The Service Profit Chain article helps us understand that customer services costs real money. The Service-Profit Chain model emphasizes the circular relationship between shareholders, customers and employees. For instance, under-staffed and under-trained employees will not deliver good quality customer service driving customers away. This article emphasized that an equivalent effort must be made in attracting, motivating and retaining employees as in retaining loyal customers, resulting in improved shareholder returns. Southwest Airlines has been successful in establishing a Service-Profit Chain model. They have been ranked among the best companies to work for. Southwest Airlines hires for attitude and understand that every employee should share the goal of creating satisfied customers. They remain a leader in their industry.
The service-profit chain model tries to link all the components required to make an organization successful.
The Service Profit Chain article helps us understand what resources are needed to be successful competitors within the service sector. The links in the chain, also known as propositions, include:
• Profit and growth are stimulated primarily by customer loyalty
• Loyalty is a direct result of customer satisfaction
• Satisfaction is largely influenced by the value of service provided to customers
• Value is created by satisfied, loyal, and productive employees
• Employee satisfaction results primarily from high-quality support services and policies that enable employees to deliver results to customers
By following the chain, we observe a cause-and-effect relationship that links the end result of profit and growth with its origin. The very beginning of the link is where the...

Similar Documents

Premium Essay

Supply Chain in Construction

...Causeway’s Supply Chain Management (SCM) solutions provide companies in construction with the software and services to maximise profit margins throughout the entire tendering process. From estimating to procurement and beyond, our products provide an innovative and integrated approach to reducing risk, managing cost and ensuring compliance – all of which contribute to increased profitability. Estimating Causeway Estimating will help produce accurate bids, fast. Unlike other estimating systems which are nothing more than standalone pricing tools, Causeway provides estimating as part of an integrated supply chain management suite. Using Causeway Estimating will help your business log, assess and properly evaluate bid risks. It will improve your quality bid by demonstrating that you are serious about rationalising your supply chain to deliver best value and continuous improvement to your clients. Causeway Estimating will cut traditional tender enquiry costs by up to 50%. Sophisticated pricing tools will ensure consistent calculations, eliminate errors and significantly improve tender throughput, all resulting in improved tender win rate. Enquiry alerts Industry estimates the cost of issuing enquiry packages to subcontractors at between £50 and £100 each, with a quarter never being returned. The wastage associated with the tender phase of a construction project can be significant but in many cases is simply written off as......

Words: 7413 - Pages: 30

Premium Essay

Supply Chain Management

...1. What are the 4 “R’s” in supply chain management? Describe. The 4 “R’s” in supply chain management is Responsiveness, Reliability, Resilience and Relationships. Responsiveness: This is the need for your company to be flexible and nimble. To be able to change as necessary to met customer needs. This implies the company is listening to the customers. Reliability: This is the ability to focus on the reliability of the logistics process. The company has to be sure they are able to reduce inefficiencies wherever possible to increase reliability. Companies are able to use tools such as six sigma to help control processes. Resilience: The Company must have the ability to be resilient to unexpected happenings. The resilient supply chain is able to cope with uncertainties in the business environment. Relationships: The buyer and supplier relationship must be based upon partnership. Both parties should be looking for ways to partner and ensure a win for both parties. 2. List and describe the 4 most pressing issues in supply chain management currently. The most pressing challenges in supply chain management currently are the new rules of competition, globalization of industry, downward pressure on price and customers taking control. - New rules of competition: Organizations are competing more on their core processes rather than spending on ads and pushing their brands. By being more cost efficient in their processes than their competitors, the organization will...

Words: 1233 - Pages: 5

Premium Essay

International Business

...Flexibility 6. Innovation and Learning 7. Productivity and Operational Efficiency 8. Sustainability Exhibit 3.1 The Scope of Business and Operations Performance Measurement Measurement is the act of quantifying the performance criteria (metrics) of organizational units, goods and services, processes, people, and other business activities. Good measures provide a “scorecard” of performance, help identify performance gaps, and make accomplishments visible to the workforce, the stock market, and other stakeholders. Financial Measures • Often take top priority in for-profit organizations. • Traditional financial measures include revenue, return on investment, operating profit, pretax profit margin, asset utilization, growth, revenue from new goods and services, earnings per share, and other liquidity measures. Customer and Market Measures • Customer measures: Customer satisfaction, customer retention, gains and losses of customers and customer accounts, customer complaints, warranty claims, measures of perceived value, loyalty, positive referral, and customer relationship building. − A customer-satisfaction measurement system provides a company with customer ratings of specific goods and service features, and indicates the relationship between those ratings and the customer’s likely future buying behavior. • Market measures: Market share, business...

Words: 2129 - Pages: 9

Premium Essay

Introduction to Supply Chain Management

...Reflection on Handfield and Nichols In the text Introduction to Supply Chain Management Robert Handfield and Ernest Nichols Jr. focused on a range of topic surrounding and encompassing the understanding of supply chain management. In relation to supply chain management, the authors placed a huge emphasis on explaining the changes in supply chain management over time; more specifically its improvements. As identified in the reading, the cause for the improvements in supply chain management had everything to do with the inclusion of information technology systems in the interworking’s of the supply chain. For this reflection paper, the students and I were charged with reading the first four chapters of the text. These four chapters focused on the understanding of supply chain management, the use of information technology systems in supply chain management, managing the flow of materials within the supply chain, and managing the relationships within the supply chain. Primarily, Handfield and Nichols related their information on supply chain management and its recent advances to manufacturing settings and workplaces. Nonetheless, they did mention that all organizations regardless of size or sector have a use for supply chain management. “All organizations are part of one or more supply chains” (Handfield & Nichols, 1998; pg. 5). For the past year I have been working within the non-profit sector of Cincinnati, Ohio. Prior to beginning this course and embarking......

Words: 1362 - Pages: 6

Premium Essay


...Supply chain management is the process from suppliers to manufactures to wholesalers to retailers to customers with the requirement of finance, materials and information. This mainly involves coordinating the flows within the company. The main goal of any effective supply chain management system is to decrease inventory. Supply chain management is important for any business to operate efficiently. By implementing SCM it improves company success and customer satisfaction. So by this it helps to improve quality of the product. SCM plays an important role in the business. There are two ways of SCM affect business are to Boost the Customer Service and it also improve bottom line. There are activities for a supply chain management. The main key activities in the SCM process are purchasing, producing, storing, distribution and selling. So by using this process it increases the efficiency and overall success of the business. The purchasing activity will occur through out the Supply Chain. The main purchasing decision is the important to be considered. * Purchasing cost * Acquiring cost of the product * Lifecycle cost * Costs of disposal Producing stage of the SCM involves the product manufacturing and service. If the production stage of the SCM is effective, then the cost reduction and profits can be achieved. The distribution and storage stage in the SCM are inter linked to each other. The distribution mainly involves the transportation, product distribution and......

Words: 548 - Pages: 3

Premium Essay

The Unidentified Industries

...inventory. The revenue/total asset account is in good standing, along with total assets/net worth. Net profit/ total asset shows that the company is very profitable as well. The book store chain goes with firm B. The bookstore is keeping high inventory, high plant, and equipment and the profit from revenue is kept low. The book store retail chain will likely have a shorter RCP(less than 30 days). The book store has assets which are not less than 25%. The inventory turnover(cost of goods sold/inventory), shows how often the company sells and replaces its inventory! Revenue/total assets are showing the company has good profitability, as well as the total asset/net worth, and the net profit/net worth. The online direct factory to customer personal computer vendor goes with C. The majority of the business is sales to businesses, and the manufacturing are outsource. All of their business transactions are done online through credit transaction. The online direct factory will have a large account receivable, a large marketable securities because everything will be converted to cash quickly. The inventory should be considerably low because it will be outsourced, or done by orders. Their parts are ordered through other vendors. The online factory has a high inventory turnover rate, which shows that they are very profitable. Total asset/net worth backs this up and so does net profit/net...

Words: 1459 - Pages: 6

Premium Essay

The Distribution of Value in the

...The Distribution of Value in the Mobile Phone Supply Chain Jason Dedrick, Kenneth L. Kraemer, Greg Linden* Personal Computing Industry Center (PCIC) University of California, Irvine 4100 Calit2 Building 325, Suite 4300 Irvine, California 92697-4650 October 2010 *Authors are listed alphabetically. The Personal Computing Industry Center is supported by grants from the Alfred P. Sloan Foundation, the U.S. National Science Foundation, industry sponsors, and University of California, Irvine (California Institute of Information Technology and Telecommunications, The Paul Merage School of Business, and the Vice Chancellor for Research). Online at The Distribution of Value in the Mobile Phone Supply Chain Jason Dedrick, Kenneth L. Kraemer, Greg Linden* Personal Computing Industry Center, UC Irvine 4100 Calit2 Blgd. 325, Suite 4300 Irvine, CA 92697-4650 October 2010 Abstract The supply chains of the mobile phone industry span national and firm boundaries. To analyze how value is distributed among the participants, we apply a novel framework for analysis based on financial measures of value capture to three phone models introduced from 2004 to 2008. We find that carriers capture the greatest value (in terms of gross profit) from each handset, followed closely by handset makers, with suppliers a distant third. However, the situation is reversed in terms of operating profit. Carriers shoulder the burden of network......

Words: 9442 - Pages: 38

Premium Essay

Service Supply Chain - Service Management

...The service profit chain This case study sets out a simple and well-defined way to build profitability and growth in a service business. It’s focusing on how satisfied our customers must be in order to become profitable and to keep those customers, companies must manage all the aspect of the operation that affects customer satisfaction, which is determined by the service-profit chain as it helps managers target new investments to develop service and satisfaction levels to gain competitive advantage. As a result, companies that perform well on the service-profit chain aspect are probably doing well. The service profit chain starts with the internal service quality (selection, development, training), which is based on engagement and ownership (trust). Moreover, by engaging employees, you make them happy; as they will feel a part of the company they will be more productive, meaning the company gets ownership out of it, which turns in a high level of satisfaction and loyalty. Basically it emphasizes that that every part of the chain is very important, meaning if employees are satisfied but not productive, then it will not lead to value, which will not lead to satisfaction (we must take care of the value of the service as it based on perceptions of the way a service is delivered on customer expectations, the result they get out of the product or service) and so on etc. Second, it discusses a direct relationship within the chain, meaning that each level leads to the next level.......

Words: 744 - Pages: 3

Premium Essay

Distribution and Supply Chain Management

...Paper On Distribution & Supply Chain Management By – Ravindra Kumar Nidhi Jain Department of Management Department of Management Birla Institute of Technology, Mesra Birla Institute of Technology, Mesra Patna Campus Patna Campus Distribution & Supply Chain Management Abstract This study aims at distribution system of a goods and service and its supply chain management. It focuses on types and levels of distribution channel. It also includes emerging distribution channel and rapidly increasing electronic business and its unique channels. The study includes examples of few company and their production and distribution technique. It further demonstrates role of supply chain management and various factor that can affect the choice of channels. An important aspect is channel conflict and partnering is also covered. Advance computer technology can increase efficiency of distribution channel is mentioned as recommendation. 1. Introduction Every product or service need a distribution system to reach the ultimate customers. Distribution system is also known as Marketing Channels which works as Channel of Distribution of product and service and it is also known as intermediaries between producer and consumers. Marketing channel is a set of interdependent......

Words: 1398 - Pages: 6

Premium Essay

Essay How Supply Chains Create Shareholder Value by Dr. David Lascelles, Supply Chain Planning UK Limited S upply chain management is no longer a boring Cinderella of the business world. Not since the mid-nineties when enterprises as diverse as Amazon, Cemex, Cisco Systems, Dell Computers and Zara started to create dominant competitive positions, build huge market capitalisations and delight their shareholders through the brilliant management of their supply chains. No, supply chain management has become a hot topic in boardrooms worldwide. The case histories of Internet retailer, Amazon; web systems builder, Cisco; PC giant, Dell; and Spanish fashion retailer, Zara are well documented. But Cemex, a Mexican cement supplier? Well, you don’t need to be in hi-tech or high fashion to reap the benefits of supply chain excellence. The effects can be just as dramatic for a commodity supplier. As a result of its supply chain performance improvement efforts, Cemex enjoys the highest value-to-sales ratio of the world’s six largest cement manufacturers. These enterprises represent just the tip of the iceberg. More than one study indicates that superior performing supply chains increase free cash flows – the key driver of shareholder value – by up to 20% on average. Supply chain excellence is a crucial engine of economic growth. And yet, even though it represents one of the most exciting opportunities to create value and build market share, the supply chain remains one of the......

Words: 4557 - Pages: 19

Premium Essay

Finance in the Value Chain

...FINANCE IN VALUE CHAIN ANALYSIS—A SYNTHESIS PAPER microREPORT #132 OCTOBER 2008 This publication was produced for review by the United States Agency for International Development. It was prepared by DAI. FINANCE IN VALUE CHAIN ANALYSIS—A SYNTHESIS PAPER microREPORT #132 The authors’ views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States Government. CONTENTS INTRODUCTION ................................................................................. 1  OBJECTIVE ................................................................................ 1  DEFINITION ................................................................................ 1  IMPORTANCE ............................................................................. 1  REPORT STRUCTURE ................................................................. 1  THE VALUE CHAIN ANALYSIS (VCA) FRAMEWORK ..................... 3  ANALYTICAL VCF FRAMEWORK WITH CASE-STUDY ILLUSTRATIONS ................................................................................ 7  UNDERSTANDING THE CURRENT CASH FLOW AND CREDIT STRUCTURE (ANALYTICAL PHASE) ............................................ 7  Intra-firm Finance ......................................................... 8  Finance Services Provision .......................................... 9  Inter-firm Finance (Governance) ................................ 10 ......

Words: 7800 - Pages: 32

Premium Essay

Macro Economics Class Notes

...What is the right supply chain for your product? by Marshall L. Fisher Introduction Much technology and brain power has been applied to improve supply chains. Companies are able to capture customers’ voice by using sophisticated marketing tools. Their goal is the accurate and quick response to market demands. Mass customization, automated warehousing and agile manufacturing are the means leading to that goal. Despite these efforts, many supply chains have never been worse. Adversarial relationships among partners as well as lack of coordination have lead, in many cases, to an unpredictable rise of cost. The excess of one product and the shortage of another is a common symptom. Why companies are unable to improve their supply chain performance? How can you avoid these problems? Is your product functional or innovative? The most crucial issue is the comprehension of the connection between the nature of demand and the type of supply chain you need. The fundamental problem is the mismatch between the type of product and the type of supply chain. Therefore you have to specify, first, the type of your product. Experience has shown that there are two categories of products: functional and innovative. There are some criteria , such as life cycle and t unpredictability of demand, to make up your mind whether your product belongs to the first or the second category. Functional products Functional products are those which satisfy basic needs, such......

Words: 1971 - Pages: 8

Premium Essay

Differentiating Between Market Structures

...Between Market Structures Farming is the organization that will be discuss in the paper. Farming produces many goods that grown in the field for consumers to consume. All four-market structures will be discussed. Competitive strategies in how farming industry can maximize their profits. In addition, efficacy in the market structures and recommendation in how to maximize strategies in profits. Perfect competition is a market structure that gives a foundation for how the markets work in a capitalist economy. This has three conditions that are necessary in the market structure. The condition is the existence of many buyers and sellers, homogeneity of the products that sold in the farming industry, and the mobility of factors or resources of production ("Competition", 2013). The barriers to entry has no barrier to entry because with perfect competition only offers the importance of the product. The number of organization offers a very large number of small producers or sellers in the farming industry. Price of elasticity of demand is high due to be fluctuations in the supply and demand. This does not allow farmers to have any control over the prices of the products. There is a presence of economic profits by the firms and the markets are who control the prices of the product. Monopoly is another market structure that is opposite of perfect competition ("Competition", 2013). The barriers to farmers are that they must have special production equipment to take care of the......

Words: 1214 - Pages: 5

Premium Essay

Inventec Corporation

...gain high profits. Following are a few reasons why Inventec is not able to earn a handsome profit: * There is intense competition among ODM vendors such as Compal, Quanta, Mitac etc. All these firms manufacture similar products and hence there is very little differentiation. * Excessive fragmentation in the ODM market has caused lower bargaining power for the ODMs. In 2005 both Apple and Cisco split their contracts to multiple ODMs which lead to a drop in Inventec’s stock price. * Inventec had exclusive contracts with Compaq and Toshiba leading to customer lock in. Thus, when HP acquired Compaq, stocks of Inventec plummeted amidst speculation. However, other ODMs’ stocks were safe as they supplied to multiple OEMs. * Computer products greatly became commoditized in early 2000s. As a result, the OEMs had to squeeze their profits. In turn the OEMs used their bargaining power to squeeze the profits of the ODMs. Thus, for the ODMs profit plummeted from 10% in 2001 to 3-4% in 2004. * Since 2001 easing of Taiwan Government restrictions of high tech investment in China lead to huge cost saving to Taiwan ODMs. This reduced the entry barrier in the ODM industry fueling the already fierce competition in this industry. Q2: What are the drivers of the average profitability of the ODM industry? Ans: The ODM industry products are highly commoditized. Thus, minimizing cost and maximizing production output can lead to higher profits. The drivers of average profit......

Words: 766 - Pages: 4

Premium Essay

The Prie of Customer Service

...The Price of Customer Service Jessica Jo Jacobs 1352 West 5th St. #N27 Ontario, CA 91762 Southern Illinois University Carbondale AVM 450-3 Management Problems in the Aviation Industry Spring 2014 Mt. San Antonio Community College Assignment #3 Abstract The incredibly small profit margin that exists with the operations of airlines causes special attention to be paid to customer service. In order to decide how much money is to be spent of satisfying a customer, one must first discover how profitable a satisfied customer really is to an airline. Through the use of on-line journals, news articles, and case studies, information will be presented that will help develop an opinion. The end result will prove why customer service is an essential part of profitability. The Price of Customer Service In an industry where it is a constant balance to keep a profitable margin, customer service that can be expected at various airlines can vary extremely. From a management perspective the question is how much will the customer service cost and does the cost outweigh the profit that results from said services. Services to be considered include baggage fees, loyalty programs, available attendants, check-in services, in-flight services, and level of technology available to customers. Directly related to customer service and the profitability generated by it is the structure of operations and management theory in use at each individual airline. By evaluating management...

Words: 4318 - Pages: 18