Essays in Empirical Operations Management: Bayesian Learning of Service Quality and Structural Estimation of Complementary Product Pricing and Inventory Management

This dissertation contributes to the rapidly growing empirical research area in the field of operations management. It contains two essays, tackling two different sets of operations management questions which are motivated by and built on field data sets from two very different industries --- air cargo logistics and retailing.

The first essay, based on the data set obtained from a world leading third-party logistics company, develops a novel and general Bayesian hierarchical learning framework for estimating customers' spillover learning, that is, customers' learning about the quality of a service (or product) from their previous experiences with similar yet not identical services. We then apply our model to the data set to study how customers' experiences from shipping on a particular route affect their future decisions about shipping not only on that route, but also on other routes serviced by the same logistics company. We find that customers indeed borrow experiences from similar but different services to update their quality beliefs that determine future purchase decisions. Also, service quality beliefs have a significant impact on their future purchasing decisions. Moreover, customers are risk averse; they are averse to not only experience variability but also belief uncertainty (i.e., customer's uncertainty about their beliefs). Finally, belief uncertainty affects customers' utilities more compared to experience variability.

The second essay is based on a data set obtained from a large Chinese supermarket chain, which contains sales as well as both wholesale and retail prices of un-packaged perishable vegetables. Recognizing the special characteristics of this particularly product category, we develop a structural estimation model in a discrete-continuous choice model framework. Building on this framework, we then study an optimization model for joint pricing and inventory management strategies of multiple products, which aims at improving the company's profit from direct sales and at the same time reducing food waste and thus improving social welfare.

Collectively, the studies in this dissertation provide useful modeling ideas, decision tools, insights, and guidance for firms to utilize vast sales and operations data to devise more effective business strategies.

Linking the ecosystem service approach to social preferences and needs in integrated coastal land use management - a planning approach

Coastal zones with their natural and societal subsystems are exposed to rapid changes and pressures on resources. Scarcity of space and impacts of climate change are prominent drivers of land use and adaptation management today. Necessary modifications to present land use management strategies and schemes influence both the structures of coastal communities and the ecosystems involved. Approaches to identify the impacts and account for (i) the linkages between social references and needs and (ii) ecosystem services in coastal zones have been largely absent. The presented method focuses on improving the inclusion of ecosystem services in planning processes and clarifies the linkages with social impacts. In this study, fourteen stakeholders in decisionmaking on land use planning in the region of Krummhörn (northwestern Germany, southern North Sea coastal region) conducted a regional participative and informal process for local planning capable to adapt to climate driven changes. It is argued that scientific and practical implications of this integrated assessment focus on multifunctional options and contribute to more sustainable practices in future land use planning. The method operationalizes the ecosystem service approach and social impact analysis and demonstrates that social demands and provision of ecosystem services are inherently connected.

Service Quality in Arts Events: Operations Management Strategies for Effective Delivery

Recent debate on the quality of arts events has concentrated on the requirement to deliver against a complex range of political, social, and cultural criteria with an emphasis on the external partnerships that are forged. Yet those aspects of quality over which event organizers have more direct control have been accorded minor examination. The authors believe that operational effectiveness is key to service quality in the cultural context, and seek to demonstrate that a balanced consideration of both process and product is vital to fully deliver quality arts events. This article identifies areas of emergent research and practice and focuses on issues in the front-of-house environment where the breakdown of service quality is a real concern, using the experience of one UK not-for-profit arts organization as a case study to illustrate potential management responses.

Unifying Services Marketing and Operations with Service Experience Management

One of the pioneer firms in the leisure cruise industry embarked on a bold idea in 2000 to offer an unregimented experience unlike most cruises. Despite the appeal of the concept from a marketing perspective, the service innovation posed operational challenges, many of which continue to undermine the firm’s competitive position. Using a multi-method empirical approach and interdisciplinary views that draw on research from marketing and operations management, the authors analyze this business case to identify challenges that service firms face when services are developed and managed from siloed functional perspectives. Based on their research findings and guided by the literature, the authors derive a service-systems model to aid service planning and management. The authors further highlight a new organizational form and function for services under the domain of service experience management that is positioned as a means to unify service operations and marketing for delivering on service promises. The authors offer direction for further research on service operations systems and service experience management.

Care planning for aggression management in a specialist secure mental health service: user involvement

This paper describes an audit of prevention and management of violence and aggression care plans and incident reporting forms which aimed to: (i) report the compliance rate of completion of care plans; (ii) identify the extent to which patients contribute to and agree with their care plan; (iii) describe de-escalation methods documented in care plans; and (iv) ascertain the extent to which the de-escalation methods described in the care plan are recorded as having been attempted in the event of an incident. Care plans and incident report forms were examined for all patients in men's and women's mental health care pathways who were involved in aggressive incidents between May and October 2012. In total, 539 incidents were examined, involving 147 patients and 121 care plans. There was no care plan in place at the time of 151 incidents giving a compliance rate of 72%. It was documented that 40% of patients had contributed to their care plans. Thematic analysis of de-escalation methods documented in the care plans revealed five de-escalation themes: staff interventions, interactions, space/quiet, activities and patient strategies/skills. A sixth category, coercive strategies, was also documented. Evidence of adherence to de-escalation elements of the care plan was documented in 58% of incidents. The reasons for the low compliance rate and very low documentation of patient involvement need further investigation. The inclusion of coercive strategies within de-escalation documentation suggests that some staff fundamentally misunderstand de-escalation.

UNDERSTANDING CUSTOMER CHOICES IN SERVICE OUTSOURCING AND REVENUE MANAGEMENT

This dissertation investigates customer behavior modeling in service outsourcing and revenue management in the service sector (i.e., airline and hotel industries). In particular, it focuses on a common theme of improving firms’ strategic decisions through the understanding of customer preferences. Decisions concerning degrees of outsourcing, such as firms’ capacity choices, are important to performance outcomes. These choices are especially important in high-customer-contact services (e.g., airline industry) because of the characteristics of services: simultaneity of consumption and production, and intangibility and perishability of the offering. Essay 1 estimates how outsourcing affects customer choices and market share in the airline industry, and consequently the revenue implications from outsourcing. However, outsourcing decisions are typically endogenous. A firm may choose whether to outsource or not based on what a firm expects to be the best outcome. Essay 2 contributes to the literature by proposing a structural model which could capture a firm’s profit-maximizing decision-making behavior in a market. This makes possible the prediction of consequences (i.e., performance outcomes) of future strategic moves. Another emerging area in service operations management is revenue management. Choice-based revenue systems incorporate discrete choice models into traditional revenue management algorithms. To successfully implement a choice-based revenue system, it is necessary to estimate customer preferences as a valid input to optimization algorithms. The third essay investigates how to estimate customer preferences when part of the market is consistently unobserved. This issue is especially prominent in choice-based revenue management systems. Normally a firm only has its own observed purchases, while those customers who purchase from competitors or do not make purchases are unobserved. Most current estimation procedures depend on unrealistic assumptions about customer arriving. This study proposes a new estimation methodology, which does not require any prior knowledge about the customer arrival process and allows for arbitrary demand distributions. Compared with previous methods, this model performs superior when the true demand is highly variable.

Human resource management reform in the Indonesian civil service : towards strategic fit?

Studies of strategic HRM have dominated HRM research over the last three decades. Focusing on the HRM-organisation performance relationship, researchers take various themes and perspectives in their approach to strategic HRM. Among these themes, two contrasting approaches of strategic HRM continue to flourish: first, the best practice approach suggests that certain HRM practices will have the same effect irrespective of context and, second, the best fit approach suggests that the choice of HRM practices should be designed in accordance with an organisations’ specific context. While there is little consensus on what constitutes strategic HRM, the most common feature agreed in this field is the notion of the strategic integration; aligning HRM practices with organisations’ overall strategic objectives (vertical fit) and with each other (horizontal fit). Utilising the best fit approach as its theoretical framework, this study examines how vertical and horizontal fit is practised in the Indonesian civil service and what factors likely influence the prevalence of vertical and horizontal fit in the Indonesian civil service context. This study is significant for two important reasons. Firstly, the literature suggests that there are limited studies examining the best fit concept in the civil sector despite its implementation in the private sector positively contributing to organisational performance improvement. Secondly, the study provides enlightenment on how the best fit approach could contribute to performance improvement in the Indonesian civil service. This is in line with the fact that negative images of the Indonesian civil service are continuously highlighted although various HRM reform initiatives have been put in place. To achieve the objectives of the study, the qualitative case study approach accompanied by semi-structured interviews was employed involving 53 senior officials and one focus group discussion from eight Indonesian government agencies, consisting of three central agencies mandated to manage human resources, the National Bureaucratic Reform Team and four line agencies from both central and local governments. Thematic analysis was employed for data analyses and NVIVO software was used to manage the data. The study suggests three main findings. First, various HRM initiatives in relation to the HRM reform have been introduced in the Indonesian civil service differentiating them from the old HRM practices. However, the findings indicate that some HRM policies are still contradicting and hinder vertical and horizontal fit. Second, despite the contradictory policies, vertical and horizontal fit can be seen in the line agencies which have been acknowledged as ‘reformed agencies’. This demonstrates that the line agencies play an important role in aligning HRM practices with the line agencies’ goals and objectives and with one another although they are bounded by HRM policies that are unlikely to support the vertical and horizontal fit concept. Third, factors influencing the prevalence of vertical and horizontal fit include knowledge of contemporary HRM in both central agencies and line agencies, commitment from the line agencies’ leaders, devolvement of HRM to the line agencies and the socio-political and economic environments of the Indonesian civil service. The findings of the study raise policy, practical and theoretical implications. In terms of policy implications, the study highlights the importance of fit in HRM policies to support the achievement of the line agencies’ goals. Therefore, when formulating an HRM policy, the central agencies need to ensure that the HRM policy is linked to line agencies’ goals and to other HRM policies. This is to ensure synchronisation among the policies and thus maximising the achievement of the line agencies’ goals. From the practical perspectives, the study highlights important points which can be learned by the central agencies in carrying out their strategic role with regard to the formulation of HRM policies; by the line agencies in maximising the contribution of HRM to the achievement of the goals and objectives of the agencies through the implementation of the best fit concept, and by the leaders of the agencies in providing continuous support to each of the involved parties in the line agencies and involving the HRM department in all agency’s strategic decision-making. In relation to the theoretical implication, it is clear that the best fit approach is not thoroughly applied due to factors discussed previously. However, this does not mean that the best fit concept cannot be implemented. As argued by McCourt & Ramgutty-Wong (2003), instead of adopting the whole concept of best fit, a modulated approach reflecting the best fit concept, such as selecting individual HRM practices and experimenting with devolution, is possible for civil service organisations which still embrace centralised HRM systems. As demonstrated in the findings, some of the line agencies being studied seem to be ready to adopt the best fit approach given that they have knowledge of the best fit concept, strong support from the top leader, less political intervention and less corruption, collusion, and nepotism practices in their HRM practices.

The Impact of Internal Market Orientation on Staff Service Behaviours

The impact of service direction, service training and staff behaviours on perceptions of service delivery are examined. The impact of managerial behaviour in the form of internal market orientation (IMO) on the attitudes of frontline staff towards the firm and its consequent influence on their customer oriented behaviours is also examined. Frontline service staff working in the consumer transport industry were surveyed to provide subjective data about the constructs of interest in this study, and the data were analysed using structural equations modelling employing partial least squares estimation. The data indicate significant relationships between internal market orientation (IMO), the attitudes of the employees to the firm and their consequent behaviour towards customers. Customer orientation, service direction and service training are all identified as antecedents to high levels of service delivery. The study contributes to marketing theory by providing quantitative evidence to support assumptions that internal marketing has an impact on services success. For marketing practitioners, the research findings offer additional information about the management, training and motivation of service staff towards service excellence.

IT service desk process improvement : a narrative style case study

This paper is a detailed case narrative on how a Faculty of a leading Australian University conducted a rigorous process improvement project, applying fundamental Business Process Management (BPM) concepts. The key goal was to increase the efficiency of the faculty’s service desk. The decrease of available funds due to reducing student numbers and the ever increasing costs associated with service desk prompted this project. The outcomes of the project presented a set of recommendations which leads to organizational innovation having information technology as an enabler for change. The target audience includes general BPM practitioners or academics who are interested in BPM related case studies, and specific organisations who might be interested in conducting BPM within their service desk processes.

The impact of service orientation on relationship quality and future intentions

This paper examines the impact of service orientation (SO) on relationship quality, and its consequences for consumer behaviour in the travel industry. Specifically consumers' positive behavioural intentions, perceptions of switching costs, and consumer activism are examined as consequences of relationship quality (RQ). A sample of leisure and business travellers on a cross sea ferry were surveyed using a consumer intercept methodology. We find that SO has a significant and positive impact on RQ and that RQ has a positive impact on positive behavioural intentions and perceptions of switching costs. Both RQ and switching costs were found to reduce consumer activism. The implications of these findings for service managers and academics are discussed and directions forfuture research presented.