Applying TOC to Services

R Raghavendra Ravi
2015

Classifying Services
Service Factory:
Airlines
Hotels
Resorts

Service Shop:
Hospitals
Auto Repairs
Appliance Repairs

Mass Service:
Retailing
Commercial Banking

Professional Service:
Doctors / Surgeons
Lawyers
Architects

Low Customization / Low

Labour Intensity
Service Factory:
Limited Variety, Infrequent changes
Competitive advantage Price, Speed, Personal
Touch
Capacity Decisions, Managing Demand Peaks and
promoting off peaks, On time delivery main
challenges
Typical Hierarchical structures / POLICY
CONSTRAINTS.

Service factory
High customization / Low labour
intensity
Inventory unused room, unused capacity.
PHYSICAL
Throughput Revenue
Operating expense same as mfg.
Similar to T configuration some part of
the service is prepared + some
customization in the end.
Apply DBR ( do not misallocate resources)

Mass Service
low customer interaction & high
labour intensity
Limited service mix eg. Retail banking,
retailing etc.
Service process rigid tied to equipment
Competitive adv based on price + choices
Management challenges scheduling
workforce, rigid hierarchy with standard op.
procedure.

Mass Service
As per TOC here we should look at wage
cost as op. expense.. This allows the co. to
look at true marginal cost.. Leading to
competitive pricing.
Constraint is typically PHYSICAL.
Subordinate everybodys work to serve the
constraint..(eg. Passport office)
To elevate the constraint add more capacity

Professional Service
High customization / High
Labour intensity
Doctor, Lawyer..
Basis of service Prof skills of a few
people.
BUT high skilled people also end up doing
low skilled activities eg doctor
measures blood pressure!

Professional Services
Recognize skilled person as constraint and
remove all low skilled jobs by bringing in
low skilled talent to take over low skilled
jobs eg Arvind eye Hospital
Subordinate every one elses work to
doctors schedule. Say nurses etc

Professional service
DBR and buffer management
Schedule doctor with equal time slots (even
though time required will vary).. Keep a
buffer of patients. If there are huge delays
call and reschedule patients.

Now
Please see the last page in the last article

High Customization, Low labour

intensity (skill levels)
High Variety & Mix
Time required varies eg. Time required for
dressing a patient with bandage can vary from one
patient to another to a LARGE extent.
Apply DBR schedule ONLY the Constraint..
This brings in flexibility and improves throughput.
( In many cases we need to design the
Constraint.. I.e. decide which will be the
constraint and where will it be)