Kirkpatrick_Scott_Journal_1-2_QSO-600

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1 1-2 Journal: Operation Manufacturing and Operation of Services: A Comparison Scott R. Kirkpatrick Southern New Hampshire University QSO 600: Operations Management Professor Timothy Harris July 9, 2023

2 In the world of operations management there are numerous areas to watch and attempt to improve. One of these areas which is crucial, is the supply chain. Supply chains are necessary for both manufacturing operations and service operations. In many ways supply chains in these two sectors are similar. However, each has its own unique characteristics. According to Russell, supply chain management is “managing the flow of information, products, and services across a network of customers, enterprises, and supply chain partners. (2016) Manufacturing operations has been studied since pioneers like Eli Whitney and Frederick Taylor used a standardized and systematic approach to the sector in the early 1900s. The study of services has lagged. However, in recent years the study of services management and services supply chain management in particular have gained attention. (Zhou et al., 2009) This journal entry will compare and contrast service operations and manufacturing operations. The commonalities and differences of operations management for these two sectors will be broken up into four sections: Customer involvement, production and consumption, supplier relation to the supply chain, and delivery of products and services. Customer Involvement The ultimate goal of most companies is financial profitability. This is true for both manufacturing, good-producing industries and for non-good producing industries in the services sector. One important aspect of operations management in both sectors is order qualifiers, the characteristics of a product or service that qualify it to be considered for purchase. Another is order winners, the characteristic of a product or service that wins orders in the marketplace. (Russell, 2016) Since it is ultimately the customer that decides which product or service is going to be purchased, they are involved in both sectors.

3 However, the level of direct customer involvement in services is usually much higher when compared to that in manufacturing. In manufacturing a good might be produced with no face-to-face involvement of the customer at all. On the other hand, in the service industry face- to-face interactions with customers are common. Production and Consumption In manufacturing operations products are produced with the idea that a certain number must be produced ahead of time in order to build up an inventory so they have a supply on hand that will cover the forecasted demand for the product. This means that forecasting the demand accurately is very important. They must produce enough to meet demand but not so much that supply drastically exceeds demand. Although in recent years the risk of forecast errors and surplus material has been reduced drastically by some companies by implementing pre-orders. This allows the company to purchase materials only after orders are placed. This approach saves costs and lets the company look for other ways to add value. (Russell, 2016) On the other hand, services are often produced on an as-needed basis. It is nearly impossible to build up an inventory for a service. Supplier Relation to the Supply Chain In 2006 Demirkan and Cheng showed that it is possible and more likely to generate more profits for everyone involved in a supply chain if the entity that is closest to the demand is the party responsible for coordinating the supply chain in a service industry. One aspect of supply chain management that has long caused problems for many industries is the bullwhip effect. Ungvarsky states, “The bullwhip effect is a phenomenon experienced by businesses involved in any aspect of producing or selling products. The phenomenon refers to the way small changes in demand by the consumer result in increasingly larger changes up the supply chain, affecting even

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4 those suppliers that provide the raw materials needed in production.” (2023) The sharing of end- user demand information throughout the supply chain can greatly reduce the impact of the bullwhip effect in both manufacturing and service sectors. (Russell, 2016) Delivery of Products and Services Service and manufacturing operations both seek to provide an acceptable end-product to consumers in way that is as efficient as possible. However, unlike manufacturing operations, service operations are much more customer-based and require far more direct interaction with the end-consumer.

5 References Demirkan, H. and H. K. Cheng, “The risk and information sharing of application services supply chain,” European Journal of Operations Research, Vol. 187, 2008, 765 – 784. Russell, R. S., Taylor, B. W. (2016-10-17). Operations and Supply Chain Management, 9th Edition. [VitalSource Bookshelf 10.3.2]. Retrieved from vbk://9781119320975 Ungvarsky, J. (2023). Bullwhip effect. Salem Press Encyclopedia . Zhou, M., Park, T. & Yi, J. (2009, February 1). Commonalities and Differences between Service and Manufacturing Supply Chains: Combining Operations Management Studies with Supply Chain Management. Web. http://web.archive.org/web/20171209215730/http://www.csupom.org:80/ PUBLICATIONS/2009/2009-16.pdf

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