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?


SOs are defined as the way to carry out the activities and processes which aim at achieving business success. SOs are related to the whole process of business. Their characteristics are distinctive and are posing different challenges to SOs managers, who have to integrate and synchronize their joint activities in the whole business process related to supply chain management. In this section, we review the recent development of SOs. As shown in Figure 1, we classify the SOs into four different industries and four various features, respectively.

Figure 1 Recent development of supply chain in SOs.

First, the adoption of SOs can be classified into the following four major industries, which are all stylish in the use of SOs.

2.1. E-Commerce Industry

Many IT firms provide the web-based retail platform service where the seller can trade the products or services with consumers. Examples of B2B platforms include; B2C platforms include and; C2C platforms include and Millions of products are sold on the above web-based retail platforms. They enhance the service quality and manage the business process by the optimization approaches. Li and Lee examine the service quality of web-based retail platform. They find that competition affects the platform owners' service quality. Jiang et al. examine how the information of sellers' sales affects the strategic decisions made by a platform owner. They find that the platform owners may be worse off by retaining its option to sell the independent seller's product, but online sellers may be better off from the platform owner's threat of entry.

In addition, the platform of crowdsourcing is popular in e-commerce. Crowdsourcing helps designers make their innovative ideas feasible. Examples of crowdsourcing platforms include,, and Dell IdeaStorm Community. Based on the feature of fashion business in the crowdsourcing platform, Dai et al. examine the online designer trading platform, in which designers can post their design samples or sketches of products and consumers can preorder the products. They find that (1) the minimum production quantity should be determined by the platform and (2) the retail business is still profitable if the retail price is determined as low as possible to enlarge the market demand. As it is quite popular to launch the web-based retail platform in e-commerce, we provide a technical review on how the platform owners provide good service to consumers in Section 3.1.

2.2. Consumer Service Industry

In consumer service industry, time is an important criterion for the quality of service. Customers are increasingly depending on fast response, namely, less waiting service time. Service time thus is the key for business success. Boyaci and Ray suggest that firms can differentiate their products based on service time. So suggests that the competition could affect the equilibrium price and time guarantee decisions. Moreover, they find that when time attractiveness of the market increases, firms would compete less on market price. Xiao et al. examine the lead time problem in a single retailer and a single manufacturer supply chain. They find that in the decentralized supply chain lead time is decreasing in the unit remanufacturing cost, the unit production cost, and unit returning loss. Due to the importance in operation management, in Section 4.1, we provide a technical review regarding service time in consumer service industry.

2.3. Public Sector

Evaluating the quality of service is essential to public sector such as library and hospital. In library, users look for the prompt response of information feedback. Ahmed and Shoeb identify the four dimensions of service quality in university library website, which include effect of service (organizational), collection and access, library as a place, and effect of service (personal). In addition, service is an important part of healthcare system. For example, the service level of emergency department is the determinant for the quality of healthcare service. Green et al. assess the effectiveness of queuing model in the emergency department staffing and identify the staffing patterns to reduce the fraction of patients who leave without being seen.

2.4. Fashion Industry

Services are important in the fashion industry. Given the analytical tool for firms to make the best decisions, the intelligence decision support systems such as forecasting are critical in the fashion supply chain. A good forecasting service system can help increase the customer service level by avoiding the mismatch between supply and demand and increasing supply chain efficiency. In addition, in order to gain the business core value, many fashion firms start to not only outsource manufacturing, but also design innovation service to their suppliers. Shen et al. examine how design outsourcing service affects the performance of supply chain parties in the fashion supply chain. They find that under the wholesale price contract the supplier has no incentive to enhance the design innovation service.

Services are critically strategic decisions that could increase a company's profitability and enlarge its operational cost according to the features of services. In addition to the adoption of SOs in various industries, SOs can be categorized into the following major four features from supply chain perspective.

(i) Advertising. Advertising is one kind of services in marketing and plays a determinant role of building up brand image. To reach a wider range of consumers, firms adopt advertising strategies to influence the consumer behavior and enlarge market demand. However, in the meanwhile, firms have to burden high operational cost in advertising. Bass et al. suggest that the brand advertising is effective for the short-term market share and the generic advertising is more effective for the long-run market share. Zheng et al. examine the impact of social influence in advertising service and find that the budget of advertising should be separated into both fashion leaders and fashion followers, instead of fashion leaders only or fashion followers only.

Moreover, one of popular research directions in advertising SOs is the cooperative advertising. Norman et al. find that the advertising intensity would influence the market concentration. They find that when an advertising campaign is sufficiently costly, no advertising will occur regardless of the concentration level. Viscolani suggests that in the homogenous market advertising could influence the product demand. Due to the importance in business, we provide a technical review regarding how the advertising is adopted in SOs in Section 3.2.

(ii) Channel Coordination. Channel coordination is one of the top management objectives in supply chain. The supply chain parties can receive the benefits from achieving supply chain coordination when they provide the services to the customers. More importantly, the contemporary supply chain incorporates the modern approaches of SOs such as just-in-time, vendor managed inventory, and RFID to integrate the supply chain and increase the achievability of channel coordination. Desiraju and Moorthy study information asymmetry between supplier and retailer and they find that adjusting the price or service can improve supply chain performance. They also find that coordination is able to achieve through requiring service performance. Boyaci and Gallego examine the customer service competition in two competing supply chains. They find that the coordination is a dominant strategy and the first mover is able to take the advantages in providing better service. Channel coordination is an important topic in SOs; thus we technically review how coordination issues are managed by the optimization approach in SOs of supply chain in Section 4.2.

(iii) Pricing. Price plays an important role in SOs. Pricing information is one kind of services in the e-commerce environment and is affecting the decision making between retailers and suppliers regarding own prices. Bashyam argues that information service providers commit the service design based on the feasible pricing strategies. Lahiri et al. find that, in the wireless industry, the discriminatory pricing in SOs may harm social welfare and reduce profit.

(iv) Inventory. Service level is one of the determinant factors for the inventory holding cost and the service quality regarding inventory. Teunter et al. propose an optimal control approach to minimize inventory costs whilst maximizing service level. They find three important factors to enhance the service level in inventory: (1) inventory policies, (2) frequency of stock counts, and (3) frequency of orders. Moreover, service inventory is different from physical product inventory. Service inventory can help firms to offer better quality, faster response times, and more competitive prices. Service inventory is mainly based on information availability. The provision of information requires the cooperation and trust between service providers and users.