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Question 495 - CSCP discussion

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In a service environment, a decrease in demand over the long term will most likely result in:

A.
decreased cost of service.
Answers
A.
decreased cost of service.
B.
increased cost of service
Answers
B.
increased cost of service
C.
decreased cycle time.
Answers
C.
decreased cycle time.
D.
Increased cycle time.
Answers
D.
Increased cycle time.
Suggested answer: B

Explanation:

In a service environment, a long-term decrease in demand can lead to increased costs of service due to several factors:

Fixed Costs: Many service environments have high fixed costs (e.g., facilities, equipment) that do not decrease with lower demand, leading to higher per-unit costs.

Economies of Scale: Lower demand can result in the loss of economies of scale, as the cost per unit increases when services are spread over a smaller number of customers.

Resource Utilization: Decreased demand can lead to underutilization of resources (e.g., staff, infrastructure), further driving up the cost per service unit.

Fitzsimmons, J. A., Fitzsimmons, M. J., & Bordoloi, S. (2014). Service Management: Operations, Strategy, Information Technology. McGraw-Hill Education.

Heskett, J. L., Sasser, W. E., & Schlesinger, L. A. (2015). The Service Profit Chain: How Leading Companies Link Profit and Growth to Loyalty, Satisfaction, and Value. Free Press.

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asked 16/09/2024
Joe Pardee
46 questions
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