Operations management and production

Difference between service and manufacturing sector

Manufacturing sector: Manufacturing is the use of machines, tools and labor to produce goods for use or sale. The term may refer to a range of human activity, from handicraft to high tech, but is most commonly applied to industrial production, in which raw materials are transformed into finished goods on a large scale. Such finished goods may be used for manufacturing other, more complex products, such as aircraft, household appliances or automobiles, or sold to wholesalers, who in turn sell them to retailers, who then sell them to end users the consumers. The industries which do manufacturing falls into the manufacturing sector. Service sector: The portion of the economy that produces intangible goods. The service sector primarily consists of truck transportation, messenger services and warehousing; information sector services; securities, commodities and other financial investment services; rental and leasing services; professional, scientific and technical services; administrative and support services; waste management and remediation; health care and social assistance; and arts, entertainment and recreation services. Individuals employed in this sector produce services rather than products. Examples of service sector jobs include housekeeping, psychotherapy, tax preparation, guided tours, nursing and teaching. By contrast, individuals employed in the

industrial/manufacturing sector might produce goods such as cars, clothing and toys. Let me attempt to highlight how a service sector is different from a manufacturing sector. Service Business Manufacturing Business simultaneous production and consumption and production at consumption (co-creation between different stages producer and consumer) many critical aspects are many critical aspects are intangible tangible concept of inventory may not be usually has inventory and material, but can be virtual such buffers as requests and, in healthcare, patients waiting for service can be considered a type of inventory considerable variability in service some variation delivery open universe in variety of service closed set in variety in product cases manufacturing substantive and peripheral mainly substantive product benefits benefits

The first difference Ill explain in this post: Simultaneous Production and Consumption.

Simultaneous Production and Consumption

Production and Consumption in Service Operations: In service businesses, you typically have simultaneous production and consumption of the service. For example in a restaurant, production and consumption of the service are taking place at the same time. Indeed, this is clearly true of most fast food operations, such as Starbucks.

Production and Consumption in Manufacturing Operations: This is very different from a manufacturing situation. In most manufacturing operations, there are inventories between each stage of production, and a finished goods inventory which can be increased or decreased as demand fluctuates. Take, for example, a production process that involves three stages. We start with our raw materials and begin our production process. When we get to the end of stage one we have semifinished goods that go into an inventory. We would then do more production of these semi-finished goods (or sub-assemblies). At the end of this stage, they would become finished goods and would go into the finished goods inventory. They would then go to a retail inventory, onto a shelf in a retail outlet, and finally to the consumer. The semi-processed and finished goods might be in inventories for a considerable amount of time. There would be a considerable lag between the time the product was produced and the time it was consumed. In a Service operation, there are no lags as there are in Manufacturing. Indeed, there is almost a co-creation of the product between the manufacturer and the customer.

Intangible Aspects in Service Operations Management

When we buy something that is manufactured, it has a size, shape, weight, and texture. We can touch it, see it, and it is very tangible in nature. In a service business the atmosphere, the attitude and the feelings that are part of the whole experience are intangible AND are critical aspects of the service. How you are treated in a restaurant, how you are treated on an airline these

are all important parts of the service delivery, which is part of the product and are not tangible.

Service Examples These examples will ring true to you. The quality of and the speed at which you receive your coffee is important, but how you are treated by the barista is equally important. 2. At a restaurant, restaurant operations are often focused on efficiency but peoples smiles and kind words and thoughtfulness in how service is provided makes a big positive difference in the experience.
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Inventory Management: Service versus Manufacturing

Now, we discuss the one key difference between service and manufacturing, Previously, we discussed how production and consumption is different in service versus manufacturing; we also covered the intangible differences between service and manufacturing. In this post, well discuss the topic of Inventory and how that might be understood in a service context and a manufacturing context. What is Inventory in Manufacturing? In Manufacturing, Inventory is typically understood as (1) the components used to build the finished product and (2) the finished product themselves. Inventory has the unique property of cash sitting in product in other words, inventory does nothing for the business until it is sold in exchange for a more liquid asset, such as cash. Until then, inventory is a cost. What is Inventory in Service?

The concept of inventory in a service context is a little difficult to explain and can take on different forms, depending on context. But in general, inventory in a service context, is not to be equated with inventory in a manufacturing context inventory in service is quite intangible and sometimes it is not a real good. Here are some examples Inventory in an emergency room might be the people waiting; in this context, increasing patient flow means that we reduce inventory (people) and, in other words, we serve more patients in a more timely manner. But, who wants to call people inventory its not appropriate, but one could misapply the term and reduce people to inventory. Inventory in a service context often has the property of intangibility that is, its not often a real good that one could point to in a moment of time. For example, seats at a movie theater could be considered inventory, but there are other more creative labels for unused capacity, such as occupancy rate, and others. But, it is basically inventory. Back to the movie theater example, unused seats in a movie theater could be considered inventory for which there is no demand this means it is cash left on the table. Notice that how we understand the concept of inventory determines how we approach it. In the above examples, on the one hand inventory should be reduced but, on the other hand, inventory ought to be satisfied or filled up.

No Inventory or Buffers Here are a few examples to illustrate the concept of intangible in service versus manufacturing. Manufacturing Parts: If we manufacture widgets, those parts may go to a retail outlet to be placed in inventory. If the demand suddenly decreases, that inventory is the buffer between production and the demand. The goods will stay in inventory and can be sold later.

Airline Management: Or, if you have too many seats on an airline, or if the airplane is too large for the demand for traveling from point A to Point B, you cannot save those seats for later. When that flight takes off without passengers, those seats are gone.

Service and Manufacturing: Variation and Variability

Previously, we discussed how production and consumption is different in service versus manufacturing, we also covered the intangible differences between service and manufacturing and the concept of Inventory and how the concept of inventory might be understood in a service context and a manufacturing context. What is Variation in Manufacturing? In a manufacturing context, we understand variation to be the non-standard or not-expected experience of a product. For example, suppose you manage a tire manufacturing operation; in that operation, variation might refer to the exact thickness of the tire tread; or the exact spaces between the treads on the tire; or, variation might refer to the height in which the tire bounces when it undergoes fault testing. All of these measures of variation is often captured mathematically by the term sigma, or the average distance from the mean. Because of the exactness of this measurement, variation can often be mathematically modeled in manufacturing.
What is Variation in Service?

Because many important aspects of service are intangible, defining the concept of variation can be difficult. How does that person waiting on tables serve you today? How does the lawyer or accountant serve you today versus how they served you yesterday? How is the doctors treatment of you today different from last week? While we might feel variation in the above examples, they are very difficult to actually model, capture in the form of numbers, or mathematically explain them.

Because variation in a service context is often intangible. Quality Control Because many services include intangible aspects, it is difficult to quantify and measure. With a physical product like a stereo system that comes off the production line, we can look at it, subject it to testing, examine it for defects, and easily measure whether or not it meets the specifications. How do we measure whether or not a person had a positive experience in a restaurant or other service business?

From a managers point of view, clearly this is important, but unlike with a manufacturing business, it is much more difficult to know if you are meeting customer expectations. As a consequence of our inability to accurately measure what we are accomplishing in the delivery of our service, quality control is a much greater challenge. In service businesses, it is much more difficult to achieve quality control and maintain consistency because of the measurement problems that exist. What Can We Do?

What are you trying to achieve in the service business? Depending on the kind of service package you are offering the consumer, there are certain things that are vital to the service and they have to be emphasized in its delivery. For example, Federal Express emphasizes speed and reliability these are often the key drivers of customer satisfaction. There can be considerable variability due to human nature and how people are feeling at different points in time, the pressure they are under or how they are treated by their employer. It is much more difficult to get consistency in delivering a service than in producing a physical product in a manufacturing system where there are detailed specifications and tight quality control. Often, our attempts to mathematically model variation in a service context takes on the form of customer satisfaction surveys and the like, but those often fail to actually model the variation that happened in the service itself. Instead, it is a measurement on whether we subjectively feel happy with the service or not, not whether the service was consistent.

Service and Manufacturing: The Concept of Variety

Previously, we discussed how production and consumption is different in service versus manufacturing; we also covered the intangible differences between service and manufacturing, the topic of inventory and inventory in service versus inventory in manufacturing; then, we discussed the concept of variation in service versus variation in manufacturing. Now we would discuss the concept of variety in service and manufacturing. Variety refers to the many different outcomes a process can have. For example, in a manufacturing environment, variety could be understood as the following: This stereo is available in black, white, and blue. These coffee tables are available in these 4 sizes and in these 5 colors.

The products above have variety or options, but they are a closed set of options. The stereo is only available in 3 colors. The coffee table is only available in 4 sizes and 5 colors. No more; no less. That is a key aspect of variety in a manufacturing context: variety is discrete and has a closed set of options. Variety in Service On the other hand, variety in a service context has a universe of options. Here are some examples: The flight attendant gave me peanuts for my snack and tossed them to me; but last week when I flew on the same airline, the flight attendant gently handed me my peanuts and treated me very well. I wonder how the flight attendant will treat me next week when I go on a business trip? In our last software development project, my boss happily led our daily standups he was on time, happy, and inspirational and held us all accountable in a healthy way. But since he and his wife divorced, our daily standups are sometimes good and sometimes bad. It just depends on his mood that morning.

An open set of responses are possible in the context of a service operation; but, a closed set of options are available in a manufacturing operation. Again, we are dealing with intangible aspects in service; whereas in manufacturing, were dealing with tangible aspects that can be counted and explained easily.

Substantive and Peripheral Benefits in Service versus Manufacturing

Previously, we discussed how production and consumption is different in service versus manufacturing; we also covered the intangible differences between service and manufacturing, the topic of inventory and inventory in service versus inventory

in manufacturing; then, we discussed the concept of variation in service versus variation in manufacturing. Most recently, we discussed the concept of variety in service versus variety in manufacturing. Now, we would hit upon the benefits we gain upon the service operations compared to the manufacturing operations. Substantive Benefits and Peripheral Benefits Service usually consists of substantive and peripheral components. Let me explain. In the service business, the product being offered has both substantive and peripheral components. For example, in the restaurant, the substantive components would be the food. The peripheral components would include such things as the comfort, the ambiance, etc. when we consider the service business, we have to take into account both substantive and peripheral aspects. Did you enjoy the ambiance in that restaurant? Was it pleasant? Was the dcor nice? Did it suit the theme of the restaurant? Did the server treat you well? How so?

Put another way, we gain benefit from the actual good which is sometimes tangible (such as food), but we gain benefit from how that good was rendered to us (not tangible). One could even say that a product is a package of benefits as perceived by the consumer. In a service operation, a bundle of goods and services that are sold to the consumer have a relative importance. We have to put ourselves in the minds of the consumer and understand how the consumer perceives the importance of each both substantive and peripheral. For example, the food might be the best food ever, but we might gain zero peripheral benefit because we were treated very poorly.

CONCLUSION In my opinion, above six differences are the most important and fundamental differences in a service and a manufacturing sector. The service sector basically consists of intangible aspects and its efficiency should be improved with the changing worlds and people demands while the manufacturing sector consists of tangible products and aspects and its quality should also be improved to meet the demands of the consumers in order to succeed.