Growth and Challenges in Service Sector: Literature Review, Classification and Directions for Future Research

Service sector constitutes more than 70 percent of the GDP in many developed economies. According to the 1999 Statistical Yearbook (United Nations, 1999) service sector employment is more than 80% in United States and more than 70 percent in Canada, Japan, France, Israel, and Australia. There is no such thing as a service industry. There are only industries whose service components are greater or less than those of other industries. Everybody is in service. Many of the jobs in manufacturing are actually disguised as service jobs. The largest component of internal lead-time for a manufacturer is often in a service department. With the increasing volume of service organizations and their important role in all major industrialized economies, it was imperative for Service Operations Management (SOM) to evolve as a separate field addressing productivity and quality issues in service organizations. Consequently, a considerable body of research was built in SOM within the past decade. This paper reviews and classifies the literature on growth and challenges in service operations management and identifies some research directions for future work. The service sector is expanding very rapidly. The extraordinary growth of the service sector has focused attention on challenges of effective management of service organization and operations vastly different from the challenges faced in manufacturing settings. Due to rapid developments in information technology, globalization, changing customer needs/preferences, and the changes in relative wealth between the developed and newly developing economies, the effective management of service systems addressing productivity and quality issues will become even more important in the coming years. The management and marketing systems in the services sector continue to suffer from lack of adequate systemization. The techniques for effective service operations management are not fully developed as in manufacturing. This paper reviews the literature addressing the issues/problems related to service sector, and literature is suitably classified and some research directions are identified. II. Literature Review Literature is suitably classified as (i) Issues/problems related to service sector (ii) Manufacturing like approach to service sector In this section, first the literature related to the issues/problems facing the service industry is reviewed. Next the literature suggesting the tools and techniques used in manufacturing industry that can be applied in service industry in addressing above issues is reviewed. A lot of papers have been reported in healthcare sector. Therefore, literature on how health sector can be benefited from such an approach is reviewed separately. A. Issues Related to Services Wright & Mechling (37), reported on the research to empirically determine which operations management problems are the most important to small service organizations. A survey was conducted to determine the relative importance of operations -related service problems. The authors asked managers of service organizations to rank a set of operations problems according to their relative importance using Q- methodology. In this article Q method is explained, significant factors are analyzed, and explanations are offered for the ranking of the operations problems. Fifty-four service organizations responded to the survey, three responses were not usable. The results indicated that ' determining how utilize resources most effectively', 'monitoring and measuring quality of services', ' predicting future events, conditions, customer demand, price/cost levels', etc are important operational issues for service organizations. However, the results also indicated that facility location and layout, waiting line systems, and distribution requirements planning were for the most unimportant to the respondent service organizations.