service technology – The OM Blog by Heizer, Render, & Munson

Video Tip: Self-Checkout Lines–Growing or Shrinking?

Is the honeymoon period with the self-checkout register officially over? What once was a convenient alternative, quickly became the only option in many retail stores, as it was sold as an efficient, cost cutting solution meant to move customers in and out of stores quickly.

No doubt the age of the self-checkout register, which began in the 1980’s but exploded in the 2000’s in supermarkets and convenience stores is here to stay. But now even some of the largest retailers are re-evaluating the actual use of them. This includes chains like Booths supermarkets in the United Kingdom as well as Walmart, Wegman’s, Five Below, and Costco in the U.S.

Coping with criticisms from annoyed customers is one key reason. Another one is theft by way of checking oneself out of the store. This is occurring, either directly or indirectly, as thieves know exactly how to use checkouts. For example, Costco had discovered that customers who were not members of the club were using membership cards that were not theirs to ring up their own purchases.

Costing large retailers and small retailers their profits is typically the trigger for stores to change their ways. In the case of the big box stores like Costco, they can absorb the “shrink,” known as the loss of inventory. They still have the bandwidth to figure out a better approach to utilizing self-checkout registers.

A study of stores in the U.S., Britain, and some other European countries, discovered that shops that offered self-checkout suffered a 4% loss, which is more than twice the rate in the retail industry. This type of loss is the reason Booth supermarkets announced “that it is going back to old-fashioned human beings to check people out,” according to CNN Business in this 2.5 minute video. It is also the reason Walmart removed these registers from some stores in New Mexico as well as modified the self-checkout lanes in other stores to accommodate more employee attendees.

Classroom discussion questions:

What are the advantages and disadvantages of retail self-checkout?
How does this differ from self-checkout in restaurants and hotels?

OM in the News and Video Tip: Amazon and the Death of the Cashier?

In Seattle, writes The Financial Times (Dec. 9, 2016), Amazon has just opened a futuristic convenience store that does away with checkout lines and cashiers. Amazon has portrayed its first grocery store as the retail equivalent of a self-driving car. Bristling with sensors and equipped with sophisticated software, it tracks customers’ movements as they lift items off the shelves, so there is no need to ring up the bill when they are done.

OM in the News: Japanese Hotel Lets Robots do the Heavy Lifting

A receptionist robot, accompanied by two other robots, greets a hotel guest demonstrating how to check in the new hotel — A receptionist robot, accompanied by two other robots, greets a guest checking in at the new hotel

The English-speaking receptionist is a vicious-looking dinosaur, and the one speaking Japanese is a female humanoid, writes The Guardian (July 15, 2015). “If you want to check in, push one,” the dinosaur says. The visitor punches a button on the desk, and types in information on a touch panel screen. From the front desk to the porter that’s an automated trolley taking luggage up to the room, the Henn na Hotel in southwestern Japan, is manned almost totally by robots to save labor costs. The hotel uses facial recognition technology, instead of the standard electronic keys, to register the digital image of the guest’s face during check-in. The reason? Robots aren’t good at finding keys if people happen to lose them.

A giant robotic arm, usually seen in manufacturing, is encased in glass quarters in the corner of the lobby. It lifts one of the boxes stacked into the wall and puts it out through a space in the glass, where a guest can place an item in it to use as a locker. The arm will put the box back into the wall until the guest wants it again. The system is called “robot cloak room.” The concierge is a robot with voice recognition that prattles breakfast and event information.

Japan is a world leader in robotics technology, and the government is trumpeting robotics as a pillar of its growth strategy. Robots have long been used here in manufacturing. But interest is also high in exploring the potential of robots in human interaction, including helping care for the elderly. Robotics is also key in the decommissioning of the three reactors in Fukushima.

Classroom discussion questions:

1. What are the advantages and disadvantages of this robot-driven approach?

2. What can’t the robots do at the hotel?

OM in the News: Hotels Turn to Text Messaging

As a well-traveled businessman, James Linn felt silly during a trip this month, when he forgot to pack dress socks. In the past, he would have rushed to a store to buy an extra pair. Instead, he texted the Hyatt Regency. The front desk texted back within minutes, saying it would have socks waiting for him in the lobby.

Today, having a concierge ready at the tap of a thumb is an amenity offered mostly at luxury hotels, reports The New York Times (June 30, 2015). But more hotels of all types are beginning to accommodate guests unwilling to call a concierge — increasingly relying on text messages to keep smartphone-wielding guests happy and spending money. At the beginning of last year, Zingle, a start-up running the technology to connect hotel customers to concierge by text, ran a pilot program at a handful of Four Seasons and Loews hotels. Today, it works with about 300 individual hotels, including Hyatt Regency.

Hotels hope to encourage guests accustomed to ordering from Seamless and GrubHub to rely more on room service, where business has slid nationwide. In 2010, American hotels made $2.33 per room from room service requests. By 2014, that average fell to $1.61. But even more important is saving a hotel from a bad review on TripAdvisor or Expedia. For picky travelers, little things like a broken light or a leaky faucet can shave a star or two off an online review. But if guests can air grievances more easily and hotels respond quickly, it could lead to more positive reviews.

When a guest sends a text to a hotel that uses the Zingle app, the message is delivered to the phones, tablets and desktops of dozens of hotel employees. When a staff member begins to type a reply, the app lets the others know someone else is on it, so the guests do not receive more than one response. Hotel staff members say the system helps them keep requests organized and respond quickly. Hotels aim to answer all texts within 3 minutes.

Discussion questions:

1. How else can hotels use apps to increase service quality?

2. What other technologies are being introduced by hotels?

OM in the News: OM Technology Makes for Happier Diners

Making the list of “Most Innovative Companies” at FastCompany (March, 2015) are two firms whose goals are to make for happier diners. Here is how E la carte and Panera Bread won the recognition:

E la Carte

For selling restaurants on an upselling machine.

E la Carte offers a quick tech solution for any restaurant: a tablet at each table, which it sells or charges a fee to operate. Johnny Rockets, Applebee’s, Genghis Grill, and other chains embraced it after they saw happy customers tapping away and ordering more. (1) Tap to eat. Customers order food on the tablet–and then some. Checks are an average of 25% higher. (2) Wait and play. Diners can play trivia or memory games, or add music to the restaurant’s communal queue. (3) Pay and leave. No checks. Johnny Rockets says the tablets helped cut bill paying from 8 to 2 minutes.

Panera Bread

For using tech to improve everything–including the food. The $4.5 billion soup-and-sandwich chain is rolling out what it calls Panera 2.0 to all of its 1,845 North American locations. It’s an Internet of Things reboot, with new ways to order and a kitchen that’s updated to manage more customized orders. (1) Order in advance. Place an order via app up to 5 days in advance, then grab the food from a designated shelf. (2) Food finds you. An RFID system identifies where diners are seated, so employees can easily deliver food to them. (3) Make a meal. Order at kiosks (or Panera’s app), where food is customizable and preferences are stored.

Classroom discussion questions:

1. How do these two technologies differ? Are similar?

2. In what other ways can technology be used in restaurants?

OM in the News: Newest Workers at Lowe’s are Robots

Meet OSHbot, Lowe's newest sales associate — Meet OSHbot, Lowe’s newest sales associate

Lowe’s is introducing the OSHbot robotic shopping assistants next month, the first retail robot of its kind in the U.S., writes The Wall Street Journal (Oct. 28, 2014). The OSHbot will greet customers, ask if they need help and guide them through the store to the product. Besides natural-language-processing technology, the 5-foot tall white robot houses two large rectangular screens—front and back—for video conferences with a store expert and to display in-store specials. The head features a 3-D scanner to help customers identify items. OSHbot speaks English and Spanish, but other languages will be added. OSHbot is “solving a big problem,” says a Lowe’s executive. “It is a way to bring more shopping convenience and some of the benefits of e-commerce into a physical store.”

As customers follow OSHbot to the correct aisle, they will see ads for in-store specials on its back screen as they pass various departments, communicated through in-store beacons. Customers who need help with, say, a specific type of plumbing project can initiate a video conference on OSHbot’s front screen with available experts at any store. OSHbot also can help customers match a certain-size nail or hinge with a 3D-scanner and determine immediately if the part is in stock. In the future, OSHbot may be able to create the part with a 3-D printer.

To navigate the store, OSHbot uses lasers to sense its surroundings, the same light detection and ranging system (called Lidar) used by Google’s autonomous cars. OSHbot creates a map of its surroundings using technology called simultaneous localization and mapping that it can refer to later. By matching the map it creates to the store map of where products are located in the store, it can lead a customer to a specific hinge or hammer.

The bottom line: There haven’t been more robots in stores to date because the technology hadn’t matured enough, but that is changing.

Classroom discussion questions:

1. How feasible is the use of robots like OSHbot throughout the retail sector?

2. Provide other examples of the use of service robots. (See our blog on room service robots).

OM in the News: The Bellhop Robot

A touch screen on Botlr allows guests to give the robot a review

“Think of it as the Terminator’s human-friendly sibling,” writes The New York Times (Aug.12, 2014). In the Aloft hotel lobby in Cupertino CA, a desk clerk places a razor in the bin of a 3-foot-high robot and taps in a room number on a display. The robot, “Botlr,” chirps an R2-D2-style acknowledgment and rolls off to an elevator and its final destination. On the move, it can reach speeds of up to 4 miles per hour, adequate for Botlr to hustle razors, toothbrushes, smartphone chargers, snacks and the morning paper to any of the hotel’s 150 rooms in 2-3 minutes.

When the robot reaches the guest’s door, the system calls the room, alerting the guest to the delivery. The robot, which has a camera and other sensors, can recognize that the room door has been opened and then lift the lid on the storage bin that holds the delivery. A flat panel display at the top of the robot is used for the guest to enter a “review” rather than giving a tip. In return for a positive review, the robot will do a small dance before it departs.

Perhaps the most impressive capability of the new robot is its ability to independently make its way to upper floors. When it reaches the elevator, it wirelessly sends a command for the door to open and then maneuvers into the elevator car, taking care to stay out of the way of any human passengers. When it returns to the lobby, Botlr can plug itself into a recharging station while it awaits its next errand. As a hotel application, the robot can free up the hotel desk clerk from having to run up to the room, giving the staff more time with the guests.

Classroom discussion questions:

1. How else can service robots be used in hotels?

2. What are the advantages and disadvantages of Botlr, from an OM perspective?

OM in the News: Hi, I’m a Tablet and I’ll Be Your Waiter Tonight

The CEO of Panera Bread, who once declared that “the food business is not a technology business” has spent just $42 million to update Panera. “The goal is to eliminate friction points so that customers have a better experience,” he says.

Restaurants have been late to the tech party, writes The New York Times (June 21, 2014), and many are now scrambling to incorporate tablets, apps, computerized kitchen equipment and data analysis capabilities. Chili’s has added 1,200 computerized ovens that use conveyor belts, infrared technology and hot air to prepare food — at a cost of $100,000 per oven. Together with tableside tablets that allow customers to order desserts and alcoholic drinks as well as pay their bills and play games without the help of a waiter, new technology has helped Chili’s address one of its customers’ biggest complaints — slow service — and add higher-margin items to its menu. The Chili’s system is so sophisticated that it can ask different questions to customers based on their orders, soliciting opinions on a new special or dessert item. A customer who has a coupon can opt to switch on a camera that will read it.

At Panera, orders roll in from kiosks in the front of the store where customers peruse a broader menu than can be displayed on boards above cash registers. Customers can add or subtract ingredients, save their preferences for the next visit, swipe credit cards and move on to pick up their meals. Says an industry exec, “Remembering how a customer likes his favorite meal helps create stickiness among guests — and that’s what this is all about, increasing retention, frequency and average check size.” Panera’s customers also can order directly from their tables, using their mobile phones, and have the meals delivered to the table. Panera has installed the new technology in about 20 company-owned restaurants so far, at a cost of about $125,000 each. Profits are up in all of them, and orders have increased. At Applebee’s, orders placed using the chain’s new online systems were $5 higher than regular orders.

Classroom discussion questions:

1. Why is technology an important operations issue for restaurants?

2. What are the advantages of tablet computers at Chili’s and Applebee’s tables?

OM in the News: The Credit Card of Tomorrow

SINCE the 1970s, paying with plastic has been pretty standard everywhere: Customers swiped their cards, signed receipts and took home their purchases. But after security breaches at Target last year led to the loss of personal data from as many as 110 million customers, the financial industry is racing to adopt technologies that will alter that decades-old ritual. To many, it is about time. The roots of the magnetic strip on credit cards extend back to World War II, ample time for thieves to learn to hack and steal those black lines of account information.

Credit card fraud totaled $5.3 billion in the U.S. alone in 2012, reports The New York Times (April 2, 2014), giving the industry plenty of incentive to devise a better system. The amount lost to fraud continues to grow 30-50% a year. Europe and parts of Asia have already used the system for the better part of a decade, while American merchants and issuers have balked, largely because of cost. Chip-equipped cards (called “E.M.V.” technology for “Europay, MasterCard, VISA”) cost $1.30 each to make, while a standard plastic card with a magnetic stripe on the back costs 10 cents. Retailers, too, have been loath to update their systems to accept chip technology because of the added cost.

“E.M.V. is going to cost billions of dollars to implement in this country,” says one analyst. But the system works. In 2005, when Britain fully phased in the E.M.V. technology, credit counterfeit card fraud was 25%; such fraud plummeted to 11% seven years later.

Visa, MasterCard and American Express all recently announced road maps for adopting smart chips, with the aim of forcing retailers and issuers to put E.M.V. in place by October 2015 in the U.S. By then, the liability for any counterfeit fraud will fall on whoever has not adopted the chip technology. From 17 million to 20 million chip cards have been issued in the U.S. But that represents just 2% of the 1 billion cards in use.

Classroom discussion questions:

1. Why is this an OM issue?

2. Why have the Europeans led in accepting the chip-equipped cards?

OM in the News: Advances in Technology Are Shaking Up The Workplace

Schneider National drivers are tracked to see if they are breaking too hard

Dennis Gray suspected that workers in his pest-control company were spending too much time on personal issues during the workday. So the general manager of Accurid Pest Solutions in Virginia quietly installed a piece of GPS tracking software on the company-issued smartphones of its 18 drivers. The software allowed Gray to log onto his computer to see a map displaying the location and movement of his staff. One employee, he discovered, was visiting the same address a few times a week for a few hours during the workday. At that point, Gray told the driver he was being tracked.

“Blue-collar workers have always been kept on a tight leash,” writes The Wall Street Journal (Oct.23, 2013), “but there is a new level of surveillance available to bosses these days. Thanks to mobile devices and inexpensive monitoring software, managers can now know where workers are, eavesdrop on their phone calls, tell if a truck driver is wearing his seat belt and intervene if he is tailgating”.

A 2012 report found that 37% of companies that send employees out on service calls track the real time location of workers via their hand held devices or vehicles. High tech monitoring feels like a violation of privacy to some workers, but employers say such measures improve workplace safety and productivity while also helping to reduce theft, protect secrets and investigate harassment or discrimination claims. No federal statutes restrict the use of GPS by employers, nor force them to disclose whether they are using it.

Companies that keep quiet about tracking efforts may miss out on the benefits of deterrence. A recent study of NCR’s theft-monitoring software used in 392 restaurants found a 22% reduction in server theft after the software was installed and staffers were told about it. Drink sales, meanwhile, rose 10%. Being watched, researchers found, made waitstaff work harder. This is a great example of service technology to use when teaching Chapter 7.

Classroom discussion questions:

1. What are the ethical issues involved in monitoring employees?

2. What are the OM advantages of tracking?

OM in the News: When Technology Fails

We are certainly a technology driven society, with our ATMs and EFTs, on-line newspapers and e-books, robotic surgery and robotic butchering, and optical scanners– not to mention our text’s MyOMLab software. So what happens when something as simple as a phone app for navigation fails?

If you are headed for the Fairbanks, Alaska, Airport, just don’t ask your iPhone for help. The Detroit News (Sept. 27, 2013) reports that Apple has disabled driving directions to the Fairbanks International Airport after a glitch in its maps app guided drivers to the edge of a runway instead of a terminal. Two times, drivers continued on and cut across an active runway to reach the terminal. Now, when someone puts in the airport as their final destination, a message pops up and says, “Directions not available, direction cannot be found between these locations.”

Previous directions on newer iPhones and iPads guided drivers to the edge of the tarmac instead of the correct route to the terminal. In incidents Sept. 6 and Sept. 20, drivers went through a gate, past warning lights and signs, and then across an active runway, to reach the terminal. The first mishap involved an out-of-state visitor trying to return a rental car before a flight, and the second was an Alaska resident trying to get to the airport.

The airport has since barricaded that entrance to the taxiway. A sign posted there gives a phone number for people to call to get the correct directions to the airport. After the first incident, airport authorities immediately contacted Apple requesting a fix.

Classroom discussion questions:

1. Can you provide other examples where technology has failed in a service application?

2. What is the responsibility of the drivers in this story?

OM in the News: Cockpits Go Paperless

Airline pilots, who fly some of the world’s most technologically advanced machines, have long relied on paper navigation charts and manuals, which clutter the cockpit and have to be lugged around in cases that can weigh as much as a small child. Now, however, airlines are catching up with the tablet era, reports The Wall Street Journal (June 27, 2013).

JetBlue Airways just received FAA clearance to provide its 2,500 pilots with Apple iPads that will store digital copies of the heavy paper manuals they refer to during flights. American Airlines said its 8,000 pilots had largely gone paperless now that the carrier has completed the rollout of its own iPad program. By storing manuals and navigation charts on iPads, American figures it has eliminated 3,000 pages of paper per pilot. In April, United started requiring its 10,000 pilots to carry iPads. Southwest started an iPad trial with 150 pilots this month and expects to expand it to an additional 550 pilots in the third quarter.

The volume of paper traditionally required by cockpit crews is almost overwhelming in the confines of a cockpit. American estimates that removing the bags from all its planes saves about 400,000 gallons of fuel annually, worth $1.2 million at current prices. One Alaska Airlines pilot said having the approach plates, arrival charts and runway diagrams available at the touch of a tablet is a lot quicker and more user-friendly. “It’s about information management, the human factors of managing charts,” he said. The change helps pilots be “safe and compliant” and helps the airline run a “better business.”

This is a great article to share with your class when you are discussing Technology in Services in Chapter 7.

Discussion questions:

1. What are the advantages and disadvantages of the paperless cockpit?

2. What are the operations issues involved here?

OM in the News: How Technology Helps Kroger Reduce Queues

QueVision monitors tell how many lanes need to be open now and in 30 min.

Supermarket giant Kroger, reports The Wall Street Journal (May 2, 2013), is winning the war against lengthy checkout lines with a powerful weapon: infrared cameras long used by the military and law-enforcement to track people. These cameras, which detect body heat, sit at the entrances and above cash registers at most of Kroger’s roughly 2,400 stores. Paired with in-house software that determines the number of lanes that need to be open, the technology has reduced the customer’s average wait time to 26 seconds. That compares with an average of four minutes before Kroger began installing the cameras in 2010.

Reducing wait times is becoming a top priority for retailers, from high-end department stores to hardware chains to fast-food outlets. Battling both online rivals that offer at-home convenience and intensifying competition among fellow brick-and-mortar outlets, many companies see enhancing the shopping experience as a way to build loyalty. Kroger’s system, dubbed QueVision, is now in about 95% of its stores. The system includes software developed by Kroger’s IT department that predicts for each store how long those customers spend shopping based on the day and time. The system determines the number of lanes that need to be open in 30-minute increments, and displays the information on monitors above the lanes so supervisors can deploy cashiers accordingly.

The company says surveys show customer perception of its checkout speed has improved markedly since 2010. “The bottom line is we want our checkout experience to be the best, and it’s our goal that our customers will enjoy the experience so much that they’ll want to return,” says Kroger’s senior VP.

Discussion questions:

1. What other new technologies are being used in service industries to speed up checkout lines (see the WSJ article and Chapter 7)?

2. How can QueVision help boost orders?

OM in the News: RFID Tags Ensure Hospital Hygiene Practices

Wristband contains RFID reader and motion sensors to measure hygiene

My wife was so disturbed with yesterday’s post about hospital quality problems, that I decided to provide a positive hospital story today. RFID Journal (April 1, 2013) reports that IntelligentM has developed a hospital solution that employs RFID readers built into wristbands to identify tags on soap dispensers, intravenous (IV) solution packaging, surgical drains and ID badges–thereby alerting users if they fail to wash their hands, or need to do so more thoroughly.

Users’ wristbands incorporate very small readers that interrogate RFID tags installed on sinks, disinfectant dispensers and other objects. IntelligentM also sends weekly hand-hygiene “report cards” to employees. In developing the system, the firm wanted to be able to provide alerts that would lead to corrective action being taken before a patient was exposed to potentially infectious materials. The wristband is small enough so as not to be cumbersome to users who may also be wearing and removing rubber gloves.

When the nurse places her hand under a sanitizer or soap dispenser, the wristband reader interrogates the tag mounted there. The reader vibrates once, reminding the wristband bearer to indeed wash her hands, and indicating that it has read the dispenser’s tag. If the band detects that she has stopped washing before the proper amount of predetermined scrubbing time has elapsed, it vibrates three pulses, thereby prompting her to wash her hands a second time using the proper procedure.

When the nurse meets with a patient and begins a procedure, such as opening an IV package, a tag on that package is read and the system again identifies the action based on the tag’s ID number. The wristband’s software checks its database to determine the last time this worker had washed her hands. If it was not recent enough, the tag vibrates three times to indicate she must wash her hands before continuing the procedure.

Discussion questions:

1. What other uses for RFID can you envision in hospitals?

2. What prevents this system from being universally applied?

OM in the News: Replacing the Postal Service With Digitized Mail

Just because the USPS isn’t making mail a profitable business doesn’t mean it can’t be done, reports CNN Tech (Feb.26, 2013), as it describes the driver of a white Prius with a giant, red plastic flag affixed to its side, undelivering mail from mailboxes. The driver and the car are part of Outbox, a company that is picking up where the embattled Postal Service leaves off — by digitizing physical mail. The driver visits Outbox subscribers’ homes three times a week, collecting the letters, bills, magazines and advertisements that were deposited there by official postal workers and delivers them to a warehouse. There they are opened and photographed, and the resulting digital files are sent electronically to the recipient.

For $5 a month, this makes physical mail disappear. Using a mobile device or computer, Outbox customers can ask to be unsubscribed from junk mail, have unwanted items destroyed or request that important mail be re-delivered to their home. Not surprisingly, Outbox has met resistance from the USPS, which has refused to collaborate. “The Postal Service is focused on providing an essential service in our mission to serve the American public and does not view Outbox as supporting that mission,” says the USPS.

The USPS has been slow to innovate and adapt to new technology on its own. It also faces serious financial issues, with $15.9 billion in losses last year –and it just announced plans to cease Saturday mail delivery in an attempt to save $2 billion. Technology has steadily eaten away at its core business for years. The volume of mail handled by the USPS dropped from 203 billion pieces a year in 2002 to 160 billion in 2012, as bill payments, statements and marketers migrate online.

After its first two cities, Austin and San Francisco are fully staffed, Outbox plans to bring its service to New York, Boston, Chicago, Los Angeles and Washington. This is a great example of service technology (Chapter 7) that your class will enjoy.

Discussion questions:

1. What can the USPS do to compete in an increasingly digital world?

2. What are some major operations issues Outbox faces in its business?