Organizations can be placed into two categories namely manufacturing and service organizations where each has its unique operational challenges. The differences between manufacturing and service organization cannot be clear cut as there are significant overlaps. Some of the manufacturing organizations offer services whereas many service organizations are also engaged in the manufacture of physical goods which are usually delivered to the consumers when the service is being offered.
The primary distinctions between the two types of organizations are manufacturing produce physical and tangible goods which can be included in inventory until such a time they are needed. Service organizations, on the other hand, produce intangible products that cannot be stored for future use (Heizer, Render & Munson, 2016). Another significant distinction is the fact that customers do not have to maintain direct contact with a manufacturing organization as such contact is maintained with the distributors and retailers. In service organizations, the customer must be present when the service is being offered.
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The differences between manufacturing and service organizations can be seen by focusing on the dimension of tangibility of the products as well as the degree of customer contact. This criterion helps to identify the extremes of pure manufacturing or service organizations including the overlap between the two. Reid & Sanders (2007) identified the characteristics of the two types of organizations using the degree of customer contact and the degree of tangibility of product offering.
According to Reid & Sanders (2007), manufacturing organizations produce tangible products and have a low degree of customer contact. Service organizations, however, have a high degree of customer contact and produce intangible products. The authors, therefore, identified the following characteristics that can be attributed to manufacturing products; they produce physical products, the products can be inventoried, low customer contact, capital intensive and long response time. On the contrary, service organizations produce intangible products, the products cannot be inventoried, there is high customer contact, short response time and labor intensive. The above characteristics show the extremes of pure manufacturing and pure service organizations. There are however overlaps in them.
Some companies have characteristics of manufacturing and service organizations and it is difficult to determine whether they are actually manufacturing or service. Such companies are therefore known as quasi-manufacturing organizations. Stevenson (2014) compares manufacturing and service using the degree of customer contact where services are characteristic of high customer contact but some like internet providers, mail services, and utilities do not. The server and customer maintain a moment of truth when they interact. Services also have a high degree of labor compared to manufacturing but automation creates exemptions. Services are also exposed to the variability of inputs due to the unique situations in each case. Manufacturing, on the other hand, can control the variability of inputs leading to uniform job requirements. It is also difficult to measure productivity in service organizations due to the variations of input.
It is difficult to assure quality in services due to the variations in inputs and also due to the fact that delivery and consumption happen simultaneously whereas mistakes in manufacturing can be corrected. Services use fewer inventories than manufacturing and therefore the costs are expected to be lower. Manufacturing jobs are also high paying compared to service jobs. It is easier to patent product designs than service designs. Service organizations also do not require a physical location as the service provider can be located at any place accessible by the clients. Manufacturers need a physical location for their operations (Heizer, Render & Munson, 2016).
Manufacturing and service organizations are exposed to the same issues for example cost control where manufacturers have to identify reliable suppliers who can deliver quality supplies at reasonable prices. Similarly, the cost of offering a service must also be maintained at a low level to ensure that the company offers its services at reasonably low prices and still report a profit. Both organizations must forecast demand and also remain competitive in the market.
References
Heizer, J., Render, B., & Munson, C. (2016). Operations Management . Pearson Australia Pty Ltd.
Reid, R., & Sanders, N. (2007). Operations Management: An Integrated Approach, 3rd Edition . John Wiley & Sons.
Stevenson, W. (2014). Operations management (12th ed.). New York, N.Y.: McGraw-Hill/Irwin.
