MANUFACTURING AND SERVICES

Manufacturing and service operations answer different questions and

formulate different strategies when it comes to planning and managing the way in
which their organizations operate and grow revenue.
Manufacturing Industries engage in the production of goods (finished
products) that have value in the marketplace. These fall under either Process
Industries (flow production or continuous process production industries) or
Discrete Manufacturing Industries.
In manufacturing, the contact with the customer/client/actual user is rather
low in terms if visibility and interactions.
In general, manufacturers have a standardized way of producing goods.
Goods are produced en masse in a factory or warehouse-type environment. One
finished product is generally the same as the next.
Service Industries include those industries that do not produce goods and
instead provide services. Often in service industries, consumption of the service
takes place while it is in generation. Service operations provide certain intangible
services that may not be easily identifiable. Service operations can be classified
into many industries, such as banking, insurance, hospitality, advertising, logistics
and consultancy.
There are more opportunities to customize the services they provide. Even in
service operations where you receive a tangible product, the service you receive
from workers may not always be the same.
It gets more complicated when a service based company adds products or
when a manufacturing company begins to sell services. While there are potential
revenue opportunities, a different sales approach and a new sales compensation
plan might be required.
Other considerations occur when a service company provides services to a
manufacturing company. There might be confusion with expectations as they both
look at the world with a different perspective. This can also be true for a
 manufacturer who delivers products to a service company. Each might have a
different world view and definition of “excellence”.
Consider the differences between manufacturing and service organizations as you
create a revenue plan:
Service Providers:

 Sell intangible products

 Products can’t be inventoried
 There is high customer contact
 Requires a short response time
 More labor intensive
 More customization is possible

Manufacturing Companies:

 Sell tangible products

 Products can be inventoried
 Lower customer contact is typical
 Longer response time is acceptable
 Capital intensive
 Standardization – Generally have a standardized way of producing goods

What they both have in common:

 Use of technology
 Quality, productivity and response issues
 The need to forecast demand
 Capacity, layout and location issues
 Customer, supplier, scheduling and staffing issues.

Manufacturing Operations
The term "manufacturing operations" refers to a framework in which man,
machine and material come together to produce a tangible product. It deals with
all the supply chain activities such as gathering requirements from customers,
procuring raw materials, allocating resources, scheduling the production,
maintaining the inventory, and delivering end products to customers.
Manufacturing operations are classified into process manufacturing and
discrete manufacturing. Process manufacturing is an operational method that
produces goods by following a specified sequence of steps or a predefined
formula. Discrete manufacturing emphasizes producing individual finished goods
that are distinct from one another. While pharmaceutical and food and beverage
industries adopt the process manufacturing method, automobiles and smartphone
manufacturers adopt a discrete manufacturing method.
Service-Providing Organizations
Services are intangible and non-physical products offered by one party to another
in exchange for money. As reported in the Harvard Business Review , service-
providing operations aim to deliver an experience that leads to customer
satisfaction. Service operations engage a wide range of teams to deliver services,
including professional service teams, customer support teams and customer
experience teams. Organizations that engage in hospitality, travel, media, sports,
health care and entertainment are service-providing organizations. Service-
providing operations send employees to their customers' locations or meet the
customers at the company's premises to facilitate the service provision.
The important components of service-providing operations are labor,
service model and service environment. Labor could be a skilled workforce or
semi-skilled workforce that directly engages with customers to provide services.
The service model is the approach that the organization adopts to deliver
intangible value to customers. SAAS (Software-As-A-Service) is a perfect
example of a service operations model adopted by software firms. A restaurant
drive-in option is another service operations model that lets customers remain in
parked vehicles while they eat. Service environment refers to the ambiance of the
premises where the service provision takes place.
Similarities of Goods Production and Service Operations
Goods production and services operations look similar to an extent. Both goods
production and service operations engage human and physical resources to
deliver the desired output. For example, the goods production environment of an
automotive company uses human resources such as mechanical engineers,
production labor and physical resources like fabrication, welding and drilling
machinery to deliver finished goods. Similarly, service operations at a beauty
salon engage human resources, including haircutting experts and beauticians, and
physical resources, such as conditioners, straighteners, clippers, wands and
combs, to offer the desired services.
Differences Between Goods Production and Service Operations
While manufacturing operations focus on producing goods and storing them at a
warehouse before delivering them to customers, service-providing operations
facilitate simultaneous production and consumption of services. For example, an
automobile company makes a car and keeps it in the warehouse until a customer
comes forward to purchase it. A beauty salon needs to provide haircutting
services in the presence of the customer.
Services cannot be stored for later use. When there is a high demand for
services, service operations should engage additional human resources and
modify operational activities accordingly to manage the supply-demand equation.
Due to their nature of producing and storing finished goods, manufacturing
operations don't need to engage additional resources and modify operational
activities when there is a high demand for products.
Manufacturing and service are two very important sectors of the economy.
They contribute to the development of economy, infrastructure and the quality of
life in a country. Manufacturing, as the name implies, pertains to production of
goods that are used and consumed by the people. On the other hand, services refer
to industries that do not produce goods but provide invaluable services to the
people such as health services, hospitality, aviation, banking, and so on. On the
looks of it, manufacturing and services look poles apart and indeed they are despite
having commonalities in HR, their environments, and the end results they seek.
There are many other differences between manufacturing and service industries
that will be talked about in this article.
Manufacturing
All consumer products and machinery used in manufacturing of products fall
within the manufacturing sector. In general, it is to be remembered that goods or
products that have a value in the marketplace are considered to have come from
manufacturing industries. We can see what is the outcome or output of
manufacturing and the raw materials, machinery, and labor that goes into
manufacturing. In manufacturing, there is no direct contact with the end users of
products and the participation of consumers in manufacturing is also minimal, if
any. Standardized technical processes are used in manufacturing, and resources,
both material and human, are used in the production of goods.
Manufacturing industry is also characterized by heavy investments of
capital, men, and machinery. In manufacturing, production and productivity are
measurable, and the top management is all the time looking for ways to improve
both production and productivity.
Service
Service sector is that important cog in the wheels of an economy that has
always been there since time immemorial. There is no production of goods in
service industries, and there are no tangible outputs. There are only intangible
outputs and those are used and consumed very quickly by the customers.
Let us see this by an example. A person, when he catches a disease or meets
an accident needs hospitalization, where doctors use their expertise to treat him
after diagnosis. He is given medicines and doctors operate upon him, to bring relief
to his symptoms. Thus, it is clear that no goods are being produced, and the
tangible products like drugs are quickly consumed by the customer. However, the
main focus is on the expertise of the doctors which is integral to the entire
treatment procedure. There is a direct contact between the professional and the
customer, and the consumer has active participation in the industry.
 Similarly, when a person hires the services of an attorney, he is not getting a
product but the consultancy from an expert that is instrumental in getting a
decision from the jury or a court of law in his favor.
What is the difference between Manufacturing and Service?
• Manufacturing has very little contact with the end consumer whereas there is an
active and crucial participation of customer in the service industry
• The focus is on technology, machinery, and labor in manufacturing where the
focus in service is on expertise or knowledge of the service provider
• There is a tangible output in manufacturing whereas there is no tangible output in
the form of a product in service
• There are differences in strategies, planning, core competencies, technologies,
environments, and the welfare measures used in manufacturing and service.
A full scale manufacturing service is any business that uses components,
parts, or raw materials to make a finished good. Fields involved with
manufacturing services range anywhere from pharmaceutical companies to
aerospace firms.
These manufacturing businesses use a number of computer programs, robots
and manual labor, to ensure they all work as a group to complete the process as
quickly as possible. After production, these goods can be either be shipped to you,
sold to another business, or even sold to another manufacturing businesses.
If you have a prototype that is ready to go, have done all your homework and
can answer, in extreme detail, “am I ready for production,” then yes, a
manufacturing service would be right for you. However, if you still have some
questions, need prototypes, or want some guidance when it comes to bringing your
product from idea to reality, you may want to consider a Contract Manufacturing
Service.
A Contract Manufacturing Service tends to be more flexible than a
Manufacturing Service, and allows a designer to fabricate one component of their
product, or take a concept and turn it into a reality. These Contract Manufacturing
Services may specialize in one service area, or like Pivot International, specialize
in a variety of industries, from foodservice to circuit board and electronics
manufacturing.
If you just have an idea, Contract Manufacturing can assist with research and
development, suggestions for improved design, and assembly material options.
Once you’ve worked with this service, they will then complete a full, or partial run,
depending on your needs.
The answer to this question depends greatly on your product, and the people
around you. If you have a tested prototype and a team of well-respected
professionals who know your field and the product’s design, a Manufacturing
Service could be all you need to get your product off the ground. However, if you
need more feedback, are a very small scale operation, or are looking to get a
prototype in the hands of potential investors and professionals, a Contract
Manufacturing Service may be your best bet.
When talking about “manufacturing” and “services,” there is first an important
distinction to be made regarding whether the discussion is about products or firms
(or activities). Following the System of National Accounts (SNA) 2008, which is
the basis for national accounts and GDP statistics, there are two types of
“products”: goods and services.1 Firms can produce both goods and services. They
are then classified into different industries and into generic categories such as
“manufacturing” or “services” based on their “principal activity.”
A manufacturing firm is simply a firm that produces mostly goods or that
derives most of its income from sales of goods. Service firms are then the ones that
sell mainly services. The distinction between manufacturing and services is
therefore based on the difference between goods and services. The SNA has the
following definitions:
• Goods are “physical, produced objects for which a demand exists, over
which ownership rights can be established and whose ownership can be transferred
from one institutional unit to another by engaging in transactions on markets.”
• Services are “the result of a production activity that changes the conditions
of the consuming units, or facilitates the exchange of products or financial
assets.”2 There is some debate about whether these definitions are consistent and
operational, which is beyond the scope of this paper. However, it should be noted
that the definition of services has evolved between the 1993 and 2008 versions of
the SNA to take into account criticisms about the identification of services as
“intangibles” and the fact that – particularly with the digital economy – there are
also “intangible goods” (Hill, 1999).
Services are now defined on the basis of a change in the condition of the
consumer or the facilitation of an exchange, which is a definition broad enough to
encompass all sorts of services.
Manufacturing itself is not defined in the SNA. One has to look at industry
classifications and, in particular, the International Standard Industrial
Classification (ISIC) to identify manufacturing industries. In such classifications,
there is also a primary sector (with agriculture and mining activities) which is
understood as separate from manufacturing. In ISIC Rev. 4, manufacturing
corresponds to Section C (Section A being “agriculture, forestry and fishing” and
Section B “mining and quarrying”). But within manufacturing, one can find
activities that are services, such as “repair and installation of machinery and
equipment” (division 33). Other categories, such as Section D (“Electricity, gas,
steam and air conditioning supply”) are a mix of activities involving the production
of goods and services.
There is also a question about whether “construction” (Section F) should be
part of services. Since services are not defined, one will tend to include in services
all the sections beyond A, B, and C (with a gray area for D and F). The
measurement of manufacturing and services output or employment based on
national accounts is therefore based on the determination of the principal activity
of the firm for which data are collected and the way this activity is classified in the
list of industries used to aggregate the data.
But a manufacturing firm can produce services (as a secondary activity) and
a service firm can produce goods. This criterion of principal activity is easy to
implement when the goods and services are produced and sold separately. But it
becomes more difficult when they are bundled together. First, many services are
provided embedded in goods (knowledge-capturing products). For example, the
information in a newspaper or a book – whether in paper or electronic form – is
regarded as a service despite the use of a physical object on which ownership
rights can be established.
Then, with the servitization and digital technologies, goods (such as electric
machines, home appliances, and cars) increasingly incorporate software and
complementary services that are no longer “secondary” but part of the core
product. This tends to increase the approximation in any measurement of
manufacturing and services. The purpose of GVC analysis is precisely to address
some of the shortcomings of traditional economic analysis at the industry level by
looking at all the firms (from different industries) involved in the production of a
specific product, from its conception to the consumer’s hands (Gereffi and
Fernandez-Stark, 2016). National statistics that list the output of different
industries somehow provide a very artificial decomposition of production since
any good (or service) is the result of the combination of inputs from these different
industries. By starting from a final product, the GVC framework introduces some
consistency into the analysis by linking together all the industries involved to
produce an actual good or service. In such a framework, there is no reason to
distinguish manufacturing from services since any good (or service) is produced by
both activities. In a stylized GVC as in Figure 1, activities at the beginning (R&D
and design) and the end of the value chain (distribution, marketing, and services)
are typically services, while the core manufacturing (raw materials, processed
inputs, final assembly) takes place in the middle of the value chain. But logistics
services are needed for the core production activity (and other services such as
maintenance and repair of the production infrastructure or financial services), so
there is no clear distinction between the manufacturing and service production
stages.
One could then suggest moving from a distinction between manufacturing and
service industries to manufacturing and service value chains, defined on the basis
of the final product (a good or a service). Stabell and Fjeldstad (1998) suggest that
service value chains look a bit different from manufacturing value chains (Figure
2). They propose two additional models, the “value network,” which is the
business model in both physical network (transport, telecoms, electricity, etc.) and
virtual network industries (banking, insurance, social media, etc.), and the “value
shop,” which is the model for all consulting, business supporting, and personal
services. In the value network, value is created by linking customers, while in the
value shop, the origin of value creation is in the solution brought to the consumer.
However, these value chains also include some manufacturing (e.g., the physical
network in value networks) or are typically dedicated to providing solutions for
manufacturing firms (consulting, engineering, etc.).
Some services (such as food catering and restaurants) also follow the
traditional model of Figure 1 with a sequential value chain in which the end
product is a service. Finally, the servitization suggests that many final products are
bundles of goods and services, or “solutions” for customers. Therefore, it would
also be quite artificial to try to distinguish manufacturing from service value
chains. They are intertwined.