Service and Manufacturing Operations Consider

¶ … Service and Manufacturing Operations

Consider the differences between these two companies in the same industry. One company manufactures vacuum cleaners. The other company provides maid service to residential and commercial facilities, using vacuum cleaners, amongst other cleaning implements. Although both entities are examples of cleaning companies, by virtue of the product they provide their customers the optimization challenges these companies present for their respective operations managers are quite distinct.

First of all, a service industry tends to face much more volatile product turnover and its products have a shorter lifecycle than their counterparts in the manufacturing sector. A durable good such as a vacuum cleaner has a much longer ability to be used by a customer. In contrast, to take an example from the service industry, the company must continue to provide cleaning services to the home. Even if the homeowner is under contract to the company, the contract's terms of use are less likely to be as long as the use of an actual, manufactured implement. Throughout the duration of the contract, the company must employ enough employees to provide the desired service, and once the contract ends, the company must strive to generate demand anew.

Secondly, a service, whether provided by cleaning service or a food service, must continually prove itself to the customer, to justify the customer's continued expenditure. In contrast, once a product is bought, the profit is cleared for the company and will help pay for the organization's operations. The purchase no longer detracts from the profits accumulated by the company, in contrast to the continuous drain of a service-based product.

Thirdly, the renewable nature of the costs pertaining to a service-based product means that it is often easier for consumers to budget services out of their weekly salary. It is hard to do without food, or a vacuum cleaner, but buying restaurant or take-out, or hiring a service seems like less of a necessity. This is another contributing factor to the greater volatility of the service sector, as profits may be harder to predict, given that consumer behavior is harder to predict.

A fourth critical factor pertaining to operating costs is that in costs in manufacturing tend to be more stable as well as incoming profits. Once a factory is built, and the raw goods of production are calculated, the operations manager has an idea of the costs of production over a projected length of time. In the service sector, raw materials are also continuously required on a daily basis, and often in greater variety, in greater amounts. There is also often more wear and tear upon the equipment and greater risk of eccentric injury to a kitchen oven or to a cleaning device, for example that cannot be budgeted for or predicted. Operations costs such as keeping a restaurant open, gas mileage to transport cleaners, etc. must be factored into the equation of how much it will cost to operate the business.

Finally, because human beings are one of the primary resources of the service sector, employee attrition is always a problem. Poor employee training results in poor customer service, and a loss of critical demand. In manufacturing, a behind-the-scenes employee can be retrained with greater alacrity, and his or her personality and ability to provide good customer service is less critical to the survival of the business.

From an operation manager's perspective, the most frustrating difference between the two sectors lies in the fourth area of expense, the greater overhead costs of the service sector. It is often more difficult to pinpoint where needless waste is occurring, in the service industry, because it is often due to human factors, or incorrect use of the equipment by employees. In the manufacturing sector, a manager can quantitatively track how raw materials are used to make the final product, and target inefficient methods of production or overly expensive raw materials, or critical areas of lag in the production line. But in the service sector, personnel who demoralize the operation, come in late, or otherwise result in a less clearly quantifiable lag time of production speed and loss of consumer demand, can go unnoticed. A manager must keep careful track of employee hours, and ensure that regular performance reviews demand that employees follow the regulations of the company regarding employee duties and relations with customers.

However, a second area of difference operations manager cannot entirely ignore the first aforementioned point one, or greater volatility and shorter lifecycle of service-based industries. Cutting costs in areas such as employee methods, perhaps encouraging cleaning staff to clean with better efficiency, by using different cleaning techniques when approaching a home can allow the company to take on more houses, and reduce the costs of production. Finding cheaper raw materials that allows the company to pass on this lessened expense to the consumer can generate more consumer demand, and thus more profits overall as a whole for the service, and can act against the greater instability of demand.