Unit 1 Discussion Board 2
There are several key differences between a manufacturing organization and one that operates largely as a service delivery organization.
Firstly, manufacturing organizations are physical sites where service delivery organizations do not require a physical site. Service delivery sites are intangible and can be located anywhere in the world (Linton, 2018).
Key differences are: tangibility or intangibility of goods, demand production or inventory, customer-specific production, whether labor intensive or operations are automated and the need for a physical site (Linton, 2018).
Physical goods: Service organizations provide intangible goods such as consultancy, training or maintenance. Examples of service organizations are: air transportation, consulting and dentistry. Manufacturers product physical goods that customers can ‘see and touch’.
Inventory needs: Service firms do not hold inventory, services are created when customers require it. Manufacturers make goods for stock depending on demand forecasts.
Customer demand: Manufacturers product goods without a customer order or knowing the customer demand. Service firms produce goods only customer require it with services tailored to the customer needs. This can be X amount of hours for consultant work or X amount of hours for installation (Linton, 2018). An example of service firm producing goods tailored to a customer need can be an IT consultant accessing the network capability for a new office (Linton, 2018).
Labor requirements: Service delivery is labor intensive and not easily automated. Service firms recruit people with a knowledge skill level in services it offers. Manufacturers can automate many of their production processes to reduce labor needs (Linton, 2018).
Physical location: Service firms do not require a physical location site; people delivering the service can be located anywhere in the world. One example are global consultant firms using communication networks to access the most appropriate service skills from offices throughout the world. Manufactures require physical locations for their production and inventory (Linton, 2018). Car manufacturers, home building companies, food process plants are several that come to mind.
An example of a manufacturing organization and the service it provides is General Motors; one of the largest car manufacturers in the world. One of their plants; the Arlington Assembly plant alone produces 1200 automobiles daily. They run three production shifts with over 4100 employees. Their current facility is 4.3 million square feet in Arlington TX. The Arlington facility is the only General Motors facility in the world to produce and export all of their full-size sport utility vehicles (Arlington Assembly, n.d.)
One example of a service industry model is the consulting business. Consulting businesses provide a wide range of services to its consumers. One business – Citta Partnership – is a small woman and minority-owned consulting firm located in Chicago. The company tailors its services to create innovative approaches and plans for increasing profitability, streamlining practices, reducing waste and – effective marketing. The company helps businesses enhance their brand and make the best use of internet tools for success and growth (Best Business Consultants in Chicago, 2018). On a personal note; it all begins with proper marketing and this service industry provides the service to an area that may need it most.
Overall; both service delivery and manufacturing organizations also share similarities; as both models have a process of locating, obtaining and transporting inputs needed to reach the end goal – a satisfied customer. Service and manufacturing industries require an input of labor to processing necessary to satisfy promises made to the end customer. Companies in both industries also require certain inputs from supplier of various types. As well, both industries require capital investment in equipment that allows employees to perform the job (Taylor, 2018)
When considering the primary differences between manufacturing organizations and service delivery organizations, one key difference relates to the consumer. In manufacturing organizations, there is little to no direct interaction with the consumer, whereas service delivery organizations provide services directly to the consumer (M.U.S.E., 2018). Manufacturing organizations typically engage in the production of a tangible product that is then sold by a retailer or wholesaler to the final consumer. Service organizations, on the other hand, may not have a tangible product to offer, rather a service such as computer software development and financial management services. Furthermore, while both manufacturing organizations and service organizations rely on demand, service organizations must deal with simultaneity which occurs when service occurs simultaneous with demand. Manufacturing organizations can produce products and warehouse them in anticipation of demand and even during low demand. Service organizations cannot and thus, when demand is low excess capacity or time perishable capacity becomes an issue and when demand is high, insufficient capacity may become an issue (Foster, Sampson, Wallin, & Webb, 2016).
Manufacturing organizations rely on production processes, materials and resources to produce a final product. Within the manufacturing organization are processes that support the organization and can include purchasing, warehousing, inventory control, assembly, quality control, capacity planning and maintenance (M.U.S.E., 2018). Additionally, manufacturing organizations can fall under two operating models, the classic model and the Lean model. The classic model is typically characterized by procurement of raw materials, high volume production, warehousing and distribution in an automated environment (M.U.S.E., 2018). Finally, the classic model includes the human operation of equipment. The lean model is primarily characterized by waste reduction through the optimization of people, product, processes and technology (M.U.S.E., 2018). Where the classic model relies heavily on automation and mechanization, the lean model relies equally as much on information technology in addition to automation (M.U.S.E., 2018). To achieve the highest levels of efficiency while minimizing waste, information technology such as an Enterprise Resource Planning system (ERP) is used to support and manage inventory, scheduling and production.
Service organizations rely on the customer/consumer to perform a given service. The service itself is comprised of tangibles and intangibles bundled together as a service offering (Foster, Sampson, Wallin, & Webb, 2016). Operating models within service organizations include customer-centric and project-based (M.U.S.E., 2016). Establishing service levels, providing exceptional customer service and enhancing the overall customer experience is the objective of a customer-centric service operating model (M.U.S.E., 2016). This process is a cyclical process whereas feedback from customers is used to improve the service offering which is then provided in enhanced form back to the customer (M.U.S.E., 2016). A project-based service operating model involves a cross-functional team of service providers whose purpose is to provide service and support for a “specific program, product or project”(M.U.S.E., 2016). Service Delivery organization processes include some of the same processes as manufacturing organizations such as order fulfillment, maintenance, planning, shipping, receiving, inventory and engineering (M.U.S.E., 2016). One key process that differs from manufacturing organizations is the implementation process which signifies the actual delivery of the service.
Whether a service delivery organization or manufacturing organization, both have very distinct differences, as well as some similarities. Both exist to satisfy demand and maximize revenue supply chain surplus and both are capable of business to business (B2B) or business to consumer (B2C) operations. Many of the processes are similar and both are subject to process improvements and waste minimization. Overall, as stated earlier, the greatest difference is the direct, indirect interaction with the customer.
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