Service Operations

Read this article. The author argues that services are key to success in supply chain and operations management. Can you identify what services are important in e-commerce?


The importance of service operations (SOs) has been growing significantly in the latest decade. SOs management focuses on how excellent services could be delivered effectively. To realize the correlated business value and achieve business success, the concept of SOs has become quite popular throughout the whole business process. It is well known that supply chain is the important areas in SOs management, which are the key to deliver values to consumers and, as a result, improve customer satisfaction and create great business value.

Supply chain management is pervasive and is creating the considerably huge values to both firms and customers. Many scholars claim that supply chain is the tool to guarantee the service quality. However, with the prevailing trend of electronic commerce, SOs management is increasingly critical in supply chain. For example, the attractive online advertising films provide consumers' psychological boost in purchasing intention; online retailers (e.g., Amazon and Taobao) attract millions of customers because they are able to not only purchase food, fashion products, toys, books, electronics, film tickets, optimal services, and nursery items in a one-stop integrated place, but also receive the products in a prompt way supported by efficient delivery services.

Optimal control approach is popularly adopted in SOs management. The theory of optimal control is a mature mathematical approach with numerous applications in science, engineering, and business. Optimal control has been applied to determine the optimal ways in controlling a dynamic system, such as the optimal decisions in SOs management system. In SOs literature, optimal control techniques are commonly adopted to manage the tradeoff strategies between service quality and operational cost. Providing good services could enhance the customers' satisfaction, and then customers are more willing to pay premium for the value-added experience. However, enhancing service quality incurs a large number of operational costs. Thus, in order to maximize profit, service providers have to manage the tradeoff between customer satisfaction and operational costs by the scientific optimization approaches.

In this study, we focus on investigating the recent development of SO optimization in supply chain management. Our objectives are to explore how firms sustain the excellent service and in the meanwhile gain business success. The main contributions of this paper are to (1) summarize the recent development of SOs in supply chain management by categorizing them into 4 different industries and 4 various features, (2) describe how SOs in supply chain are performed optimally, and (3) identify what types of challenges exist in the SOs optimization. The literature on operation management has explored a wide range of SOs areas. However, it is still new to discuss SOs optimization from the perspectives of supply chain management. Based on the theoretical optimization results, service managers should manage the tradeoff between operational costs and the provision of excellent service quality for attempting to maximize their payoff and the long-term market share. The analytical findings are able to be applied into the strategies of operation in practices and, as a result, help firms sustain the excellent service and gain business success. To the best of our knowledge, it is the first paper to discuss the recent development of SOs optimization from the perspectives of supply chain management.

This paper is organized as follows. We introduce SOs in Section 2. In Sections 3 and 4, we select four stylish topics in SOs management. Specifically, in Section 3, we review SOs with industries: e-commerce industry and consumer service industry; in Section 4, we review SOs with features: advertising and channel coordination. Section 5 concludes the paper with general implications and future research.