Servicesim

This paper will discuss the various aspects of running a small business. The concepts and ideas presented is based on the experience of participating in ServiceSim, a computer simulation in which the user is presented with the task to run FastLane - a small car dealership. Specifically, the paper deals with the aspects of customer satisfaction, profitability, and how decisions regarding HR affect the performance of a company.

Customer satisfaction is based on and influenced by a multitude of factors. While some of these factors are impossible to control (weather, accidents etc), most factors are indeed a direct function of the management's and the employee's abilities and performance. Every customer has a unique set of expectations. Therefore, satisfaction is not a fixed parameter but rather a subjective measurement based on each customer's own perception of the service quality. In service industries, this becomes even more evident as the satisfaction depends on more variables; because services involve and depend upon the performance of humans, it becomes difficult to ensure consistent quality over time. This heterogeneity makes it difficult for service managers to know for sure that the service is being delivered in a satisfactory manner. Another problem facing service managers is intangibility. From the customer's point of view, the lack of tangibles often makes it harder to determine if the service was performed satisfactorily. With respect to ServiceSim, I believe the most important factor for customer satisfaction was 'Fixed 1st time'. One of the first decisions I made in January was therefore to replace a Tech1 with a Tech2 since Tech1s generated a higher number of comeback hours. I also hired another Tech3 in order to raise the overall quality level.

During the simulation, I found three main areas where the decision making became a balance act between trying to achieve customer satisfaction on the one hand, and profitability on the other. The three areas were: inventory, staffing, and pricing.

At the beginning of the simulation, the inventory levels were quite high in almost every category. Therefore, cutting back on inventory purchases was necessary. However, as time passed by, customers began complaining about having to wait for parts. This is where it got tricky. How much do you order every month? What level of emergency purchases is acceptable? I do not think there is a patent solution to this problem. I simply tried to balance it out, adjusting purchases after considering the market fluctuations index and current inventory levels.

Staffing was another major area in which profitability and customer satisfaction became an issue. To some extent, the two variables actually have a direct relationship, but only as long as the current staff does not meet the work load. Beyond this point, hiring more staff increases overhead, and it will eventually hurt your profits. Besides the constant management of Tech1s (hiring or firing occurred almost every month), there was also a demand for analyzing the individual tasks performed by each employee. At one point, for instance, it was apparent that the service advisor and service manager were doing a lot of warranty paperwork. In fact, their combined efforts justified the hiring of a new Warranty Clerk.

Pricing was yet another area in which decisions affected profits and customer satisfaction. In retrospect, I think my pricing