Operations Management
17th Edition
ISBN: 9781259142208
Author: CACHON, Gérard, Terwiesch, Christian
Publisher: Mcgraw-hill Education,
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Chapter 1, Problem 4PA
Summary Introduction
To determine: The dimension of the customer utility function.
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- During nearly four decades of business operations, Memphis-based FedEx has earned a reputation for reliable, on-time delivery of packages to homes and offices around the country. Founder Fred Smith originally focused on overnight deliveries, choosing Memphis as the company’s headquarters because the airport rarely closes due to bad weather. With FedEx’s planes departing and arriving on schedule nearly all the time, its express shipments usually remained on schedule, then and now. To reassure customers that delivery will take place when and where promised, the firm offers a money-back guarantee on time-sensitive express shipments, among other services. FedEx has steadily expanded its portfolio of services since the 1970s. Its original overnight express delivery is currently available to U.S. customers in various forms, including “first-overnight” delivery, next-morning delivery, next-afternoon delivery, and budget-pleasing two- or three-day delivery. The company’s services also include cost-effective ground delivery for parcels and extra-speedy same-day delivery for urgent deliveries within 1,800 cities. Over the years, FedEx has widened its delivery network to more than 220 countries. It has purchased more cargo jets and acquired specialized shipping firms, including Tiger International, Roberts Express, RPS, and TNT Express, to support global growth. For international business customers needing products, parts, or raw materials shipped across countries or continents, the company now offers time-saving services such as commercial freight forwarding and cross-border logistical support. To add the convenience of local drop-off and pickup points for U.S. consumers and small businesses, FedEx acquired the Kinko’s office services company in 2004 and later rebranded it as FedEx Office. This acquisition also added printing and copying to the menu of services offered. Then the company arranged for large U.S. retailers such as Walgreens, Albertsons, Kroger, and Safeway to accept packages for shipment and receive package delivery for customer pickup in thousands of store locations. This means people who want to send a package can head to a nearby retailer and ship where they shop, rather than making a separate trip to the FedEx location. It’s also a safe alternative for packages to be picked up by people who don’t want FedEx shipments left by the front door. Another service FedEx offers to small and mid-sized businesses, including retailers, is FedEx Fulfillment. The purpose is to expedite order fulfillment by having each business store its products in a FedEx warehouse. Then, when the business’s customers place orders, FedEx puts the products into boxes bearing the business’s own logo and ships directly to those customers. The business doesn’t need a separate warehouse or staff for fulfillment, and packages are on their way to customers more quickly because the products were in FedEx’s warehouse, ready to be packed and shipped. This service puts FedEx into direct competition with Amazon.com, which offers a similar service to merchants that sell through the online Amazon Marketplace. But it also gives businesses that don’t sell via Amazon a fast and professional fulfillment alternative. FedEx is careful to let customers know, through media and social-media announcements, when it anticipates that extreme weather or other conditions will cause delays or force it to halt pickups and deliveries. For the duration of Hurricane Irma, for example, FedEx said it would suspend deliveries in Florida. Some Florida customers who had ordered generators to be delivered via FedEx were unhappy, because they worried about being without power during and after the storm. But one FedEx employee loaded several generator orders into his car and took them to customers himself. When a customer posted a grateful compliment to FedEx on Facebook, the message generated thousands of likes, shares, and positive comments. The company also received positive comments for its donations of cash and transportation services to areas devastated by Hurricanes Irma, Harvey, and Maria. According to the American Customer Satisfaction Index (ACSI), FedEx often tops the list of U.S. shipping companies as ranked by customers surveyed. Every day, the company delivers 13 million packages—and during the busy year-end holiday season, it delivers many more. By meeting customers’ expectations for on-time deliveries, FedEx has increased annual revenues beyond $60 billion and positioned itself for continued growth in the future. How does FedEx’s money-back guarantee address customers’ concerns about heterogeneity?arrow_forwardA car manufacturer has designed a “special edition” version of its popular two-doorcoupe. This special edition has increased horsepower compared to the standard modeland a sports suspension. Which dimension of the customer utility function is particularly emphasized with the special edition coupe?a. Performanceb. Fitc. Priced. Timingarrow_forwardWhen the value of a loyal customer (VLC) market segment is high, should these customers be given premium goods and services for premium prices? If the VLC is low, should they be given less service? Explain.arrow_forward
- A customer survey concluded that timely departure of your buses is the number two priority of passengers, ahead of comfort, price, food, and other factors. Only safety was rated higher than timeliness. You believe that your bus company and your competitors are offering about the same level of service, safety, and price. Time seems to be the only competitive edge. As the general manager, you have just announced to your drivers, dispatchers, employees, and customers that all buses will depart on time. After one month of implementing this on-time policy, you notice that if the buses are not full, many drivers refuse to leave on-time in spite of the warnings they get from the dispatchers. The sales department is also lukewarm to your on-time program. Revenues have declined as a result of buses leaving on time but half full. Your drivers are protesting since the on-time policy is affecting their pockets. Their commissions are based primarily on the load factors of each trip. They find it…arrow_forwardThe customer are complaining to the hotel general manager about the service provided from front desk and restaurant how can the general manager reduce variability and increase consistencyarrow_forwardA copier is able to operate for an average of 200 hours between repairs, and the mean repair time is two hours. Determine the availability of the copier.arrow_forward
- In SERVQUAL, which attributive in service expectation includes apparent/visual confirmation of service availability? A-Assurance B- Reliability C- Responsiveness D- Empathy E- Tangibilityarrow_forwardBecause service organizations require high-touch relationships with customers, which of the following characteristics of the service organization is most important to meeting this requirement? Hiring and training Customized services Flexible systems Adjustable capacityarrow_forwardWhile performing a procedure, a surgeon accidentally cuts a patient's nerve causing permanent neurological damage. After reviewing the event, the hospital's risk management committee determined that the surgeon was not qualified to perform this procedure. Which action should the hospital implement to avoid this type of situation in the future? Ensure proper privileging prior to patient care Require pairing of surgeons to minimize risk Institute continuing education programs for surgeons Decrease scheduled surgeries per dayarrow_forward
- Four regional less-than-truckload (LTL) carriers handle shipments traveling from Lexington, Kentucky, to Springfield, Illinois. All four companies say that their normal service time to deliver these shipments is two business days. The four carriers compete with each other on the basis of price and service quality rating, as shown in the following table. The price reported in the table is the (nondiscounted) cost per hundredweight (cwt) of sending a 600-pound shipment from Lexington to Springfield at freight class 70. The service quality rating measures a carrier’s loss and damage record and goes from 0 (poor quality) to 100 (high quality). Carrier Price Service Quality Rating A $ 103.90 95 B $ 98.50 91 C $ 127.20 98 D $ 111.40 94 Which of these LTL carriers are on the efficient frontier?arrow_forwardWhat type of information system is shown in McDonald’s commercials where food ordering is done through a large touch screen?* Management Information System Executive Support System Decision Support System Transaction Processing Systemarrow_forwardConsider the order delivery system of Heartha Hardware and Construction Supplies:- Customers (whether by bulk or retail) would line up in a counter where sales representatives will entertain them. It would take about 15 minutes before a customer will be entertained due to the number of customers being served by the sales representative and only about 4 sales representatives are on duty every day.- The sales representative will take down the customer’s order in the order slip with corresponding prices. On some cases, she will ask the person in-charge in the warehouse if the items are available. She then forwards the order slip to the cashier.- The cashier would sum-up again manually the order slip from the sales representative to check the accuracy of the footing of the totals as well as the prices indicated. This would take about 10 minutes, depending on the bulk of the order being placed.- The official receipt will be printed and will be given to the…arrow_forward
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