Chapter $3$ New Service Development

$89$

TABLE $3\mathrm{.}5$ Commuter Cleaning Economic Analysis

$\backslash$table$[[$Expense Item,Monthly Amount,Assumptions$],[$Transit station rent,$$2,800,7$ locations at $$400$ each$],[$Delivery van,$500,1$ minivan $($includes lease payment and insurance$)],[$Station customer service representatives,$5,544,7$ locations, $2$ shifts averaging $3$ hours per shift at$],[,,$$$15$ per hour$],[$Driver$,528,1$ driver, $2$ shifts averaging $2$ hours per shift at$],[,,$$$15$ per hour$],[$Fuel$,165,30$ miles per shift at $12$ mpg and $$2\mathrm{.}75$ per gallon$],[$Business insurance,$100,],[$Office customer service representatives,$4,000,2$ office workers each paid $$24,000$ a year$],[$Laundry bags,$167,$Cost of $1,000$ laundry bags at $$2$ each, amortized$],[,,$over one year$],[$Total monthly expenses,$$13,804,22-$day month$]]$

credit cards billed automatically. Each month, statements will be sent to all customers with transactions to verify the bill and request payment from those who do not use a credit card. If a customer is late in paying, a customer service representative will call and ask if he or she would like to begin paying with a credit card. Repeatedly delinquent customers will be required to pay at the time of pickup, a stipulation that will be included in the customer's initial agreement for service. The customer service representatives will be responsible for answering all customer inquiries, including the initiation of service, and one customer service representative will be responsible for customer billings. Each day, the laundry delivered to the plant will be entered into a database that accumulates each customer's transactions for the month.

A smooth demand throughout the week is desirable to create a stable workload; however, actions likely will be needed to control fluctuations in demand and to avoid imbalances in the workload. One method of controlling demand is through price specials and promotions. Offering a discount on certain days of the week is common practice for dry cleaners, and one approach would be to offer special prices to different customer segments to entice them to bring in their laundry on

a certain day. For example, Friday might be the busiest day of the week and Monday and Tuesday the slowest. In this case, the customer base could be divided $($e$.$g$.,$ alphabetically$)$ and each segment offered a discount price on a particular day. Other ideas include providing a complimentary cup of coffee to anyone bringing in laundry on Monday. These promotions can be implemented once demand fluctuations are observed. Attention also must be given to holidays, which might create temporary surges or lulls in business.

Questions

Prepare a service blueprint for Commuter Cleaning.

What generic approach to service system design is illustrated by Commuter Cleaning, and what competitive advantages does this design offer?

Using the data in Table $3\mathrm{.}5,$ calculate a break$-$even price per shirt if monthly demand is expected to be $20,000$ shirts and the contract with a cleaning plant stipulates a charge of $$0\mathrm{.}50$ per shirt.

Critique the business concept, and make suggestions for improvement.