Quality-driven profitability analysis in service operations

Abstract Service quality is one of the crucial factors for service providers to improve on their performance and enhance competitiveness in service operations. Service providers have been investing significant financial, material, and human resources to enrich service quality with an aim to promote profit generation. This study presents a two-stage network DEA model employing the relations among costs, service quality, and profit in evaluating performance. It also shows how efficiently costs contribute to performance in favor of service quality and how efficiently service quality provision contributes to performance in favor of profit generation. This study also demonstrates a case study involving 32 Korean university hospitals with real-world data and provides rich experiment results to address the effectiveness and applicability of the proposed model incorporating service quality in the service operations industry.