Introduction
Operations management for manufacturing
operations have advanced systematically over time with the focus being on
efficiency and the cost effectiveness of the supply chains. The progress stages
in operations management have advanced from craft production through division
of labour, scientific management, mass production and to lean production
(Johnston, 1999). Service operations have lagged their manufacturing
counterparts in terms of the level of attention given to ensure the improvement
of their efficiency. Scholars are slowly turning to service operations with
evidence suggesting that some of the approaches and systems used in
manufacturing operations are applicable to them (Barnes, 2008). However, such
application would need to consider the differences between service and
manufacturing operations. This paper discusses these differences and seeks to
illustrate how service operations can benefit from the application of
manufacturing approaches and systems.
Differences between service
operations and manufacturing operations
Service operations have certain
characteristics that make them stand different from manufacturing operations.
These characteristics can be described as intangibility; customer-supplier
duality; customer involvement and service heterogeneity; labour intensiveness;
and the simultaneity of production and consumption (Zhou, Park and Yi, 2009). Labour
intensive characteristic refers to the fact that most service operations
involve manual processes that are characterised by the interaction of humans.
This makes it difficult to pursue the standardisation agenda as is common in
manufacturing processes. Customer involvement and service heterogeneity refers
to the fact that customers largely influence the nature and quality of service
(Zhou, Park and Yi, 2009). For instance, a customer seeking electronics repair
services would need to clearly illustrate the problem with a certain device for
the repairer to diagnose with speed. The unique needs of different customers
influence the kind of service to be offered hence services provided to a
customer are not likely to be similar to others (Barnes, 2008). Manufacturing
processes on the other hand require little or no customer involvement. The
manufacturers concentrate on producing goods that are in line with the
researched customer preferences and supply them to the customers at a different
time and place. With standardisation, it is also easy to ensure homogeneity of
products. The use of technology enables manufacturers to ensure that each
product bears features similar to other products.
Most services are
intangible. This leads to three subsequent difficulties: difficulty to store,
difficulty to identify supplier, and difficulty to account for (Zhou, Park and
Yi, 2009). This means that the buffering of inventory as is common with the
manufacturing processes cannot be implemented. Instead, focus has to be on the
management of capacity with organisations being keen to match capacity to
demand levels at any particular point. The control of capacity flexibility
therefore becomes crucial to success in service operations. Intangibility also causes difficulty in the
identification of suppliers (Bettley, Mayle and Tantoush, 2005). The
procurement process therefore becomes quite cumbersome. Unlike the manufacturing
processes where products procured are well defined, the procurement of services
is riddled with uncertainties as one is never sure of the quality of service
being procured. Service specification and quality are the two qualities that
bear greatest significance when it comes to the evaluation of potential
suppliers and this poses a great problem for service operations (Bettley, Mayle
and Tantoush, 2005). These difficulties are absent in the case of manufacturing
processes. To begin with, the tangible products can be stored with ease. This
means that organisations can maintain high production during times of low
demand and store the excess products for release to the market when market
demand surges. It is also quite easy to monitor and establish whether the
products manufactured are of the desired quality (Arandi, 2003). The supply
side of the supply chain is also easy to manage with higher levels of certainty
in terms of the specification and quality of raw materials needed.
Simultaneity of
production and consumption refers to the fact that services are consumed at the
same time as they are produced (Bettley, Mayle and Tantoush, 2005). There’s no
lead time hence fewer options when it comes to buffering to provide for
uncertainties. This makes capacity flexibility very crucial to any service
operations management system. The need for capacity flexibility in the
manufacturing sector is important – but not mandatory (Barney, 2008). The
decision on whether to produce and store finished products should factor in the
need to control the cost of warehousing and contrast it with the cost
implication of altering production capacities. The two options can therefore be
embraced with most manufacturers embracing a combination of the two. The aim is
to come up with a production system that is most acceptable in terms of cost
effectiveness with customer preference and nature of the products being the
additional factors to be considered (Slack, Johnston and Chambers, 2007). The
customer supplier duality refers to the fact that in many services the customer
supplies the item on which the service is to be conducted. For instance, for
electronics repair, the customer should provide the electronics before the
required service can be provided. The implication of this characteristic is
that service delivery cannot commence until the supplies are brought in by the
customer with the service often always being heterogeneous and labour intensive
(Slack, Johnston and Chambers, 2007).
The differences between
services and goods also have an implication on the options available when it
comes to capacity and demand management. For instance, a manufacturing firm
could attempt to manage demand by getting customers to buy products at times
that they would ordinarily not choose to do so. For instance, making offers
that are time bound could encourage customers to buy the goods in question for
use at a later time. This option is not tenable in service operations: their
management options are restricted only to capacity management.
Rationale for implementing
manufacturing systems and approaches to the service industry
Manufacturing operations have progressed
with time to reach high levels of sophistication with focus being on ensuring
quality, timely delivery and cost effectiveness. Among the main systems in
manufacturing operations management are the resources planning systems, quality
management systems and the JIT/lean operations systems. Resource planning
systems are aimed at ensuring efficient production by identifying the inputs
needed and planning to have them made available at the right time (Monk and
Wagner, 2006). The manufacturing resource planning (MRPII) considers
operational planning according to operational units, financial planning and the
generation of simulations to prepare organisations to cope with arising
uncertainties (Monk and Wagner, 2006). The system involves the use of
appropriate software and people skills. MRPII is used in isolation or in
conjunction with the material requirements planning MRP. The application of the
two concepts culminates into the enterprise resource planning system ERP. The
aim of the resource planning systems is to ensure the efficiency of the
manufacturing operations.
The JIT/ lean
operations on the other hand concentrate on the elimination of wastages with
the aim of ensuring that manufacturing processes are as cost effective as
possible (Pettersen, 2009). JIT is about ensuring that the manufacturing
systems processes flow smoothly. JIT is known to provide organisations with the
avenue through which quality problems can be identified and dealt with (Monk
and Wagner, 2006). It does this by exposing the problems that would normally be
hidden by buffer stocks. Lean operations deals with the identification of
wastages and eliminating them while ensuring that the quality of the products
manufactured is maintained. It is about preserving value with less work.
Accordingly, the lean manufacturing systems goals are two fold: to improve
quality, and to eliminate waste. Scholars have identified the main sources of
wastage as transport inefficiencies, inventory, motion of people and equipment,
waiting, over production, over processing, and defects (Zhou, Park and Yi,
2009). Lean operations therefore focus on these aspects and seek to eliminate
such wastages with an aim to improve the cost effectiveness of the
manufacturing process.
These approaches for
improving efficiency and cost effectiveness in the manufacturing sector can be
modified and applied to services operations. Most service operations involve
the use of various tangible assets (Barnes, 2008). For instance, an electronics
repairer would need various electrical devices to do their work. Similarly, a
banker would need a computer and the appropriate computer software to serve
customers effectively. This means that the MRP, MRPII and the ERP systems of
resource planning can be very useful in the service organisations. The
identification of the necessary resources and ensuring that they are availed at
and when needed is very important towards ensuring effectiveness and efficiency
are achieved (Zhou, Park and Yi, 2009). Human resources are considered to be
the most important resources in the service industry. This is due to the fact
that most services are labour intensive with employees expected to use their
unique capabilities to serve customers. Where services require to be offered in
stages, different employees may be suited for different stages. The application
of resource planning systems would enable organisations to match the right
employees to the different segments hence ensuring that the quality of service
is assured. Capacity management is more about identifying the amount of
resources needed to produce the desired services required to meet the
forecasted demand (Heineke and Davis, 2006). Resource planning is therefore the
most important tool in capacity management with organisations expected to avail
such resources in time for service delivery to be done.
Lean operations
strategies that help in limiting wastages can be very useful when applied to
service operations (Mathias, 2007). Where service delivery involves various
stages, organisations can enhance efficiency by cutting down on the time that a
customer would need to move from one service centre to the next (Zhou, Park and
Yi, 2009). This can be done by positioning employees work stations in close
proximity to one another. This could also help in limiting the wastage
associated with the need for staff to move from one point to another. The
approach often taken to avoid overproduction in the manufacturing sector can be
applied to the services sector as well. As opposed to tangible products where
excess products can be stored for later consumption, overcapacity in services
leads to a total loss: no storage is possible (Slack, Johnston and Chambers,
2007). The lean production strategy in relation to capacity would therefore
entail having ensuring that the right capacity level is matched to the demand
levels. Little capacity would translate into dissatisfaction with customers
forced to wait for long to be served; while excess capacity would be a loss to
the firm (Barnes, 2008). As has been noted, lean production strategies
emphasise the elimination of processes that do not add value to the product or
service. Its application in the service industry could help organisations
identify which aspects of the service production process add little or no value
and therefore a good target for elimination. Such a move would leave the
employees with fewer procedures hence allowing them to serve even more customers
at any particular time.
Conclusion
Services operations differ from
operations in a number of ways. To begin with, services are intangible and can
therefore not be stored in the conventional storage practices. Services are
also consumed at the same time as they are produced. Other differences include
the customer-supplier duality and heterogeneity and customer involvement of
services. The differences have far reaching implications on the manner in which
operations management can be done. For instance, while manufacturing operations
have the option of storing products and inventory in readiness for future
demand, service operations only have the option of managing capacity to ensure
that surges in demand are accompanied by the involvement of additional resources
to cater for them. Despite these differences, service operations can benefit
greatly from some of the approaches taken to improve efficiency and cost
effectiveness in the manufacturing centre. Resource planning and JIT/lean
operation strategies are applicable in the services operations albeit with
crucial modifications.
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