Monday, May 23, 2011

Manufacturing and Service Processes



First step in the analysis is to define the economic terms:
 
   Goods:
   This is a physical product that can be held, relocated, and possibly inserted into a larger assembly. A legal definition also exists, where a good can be granted a title, offering the notion of ownership.
 
   Services:
   This is a non-tangible product that cannot be held and is impossible to relocate. Also, it is not possible to provide title or ownership for a service. There is a temporal quality about a service, in that it has value only if consumed immediately, and quickly losses value when not consumed immediately. Taking this temporal concept further, a service is actually deployed to effect a change of some sort. Frequently, this change will be imposed upon a physical item.
 
  Now we add our systemic definitions:
 
   Product:
   This is the outcome of a business process, which is itself the result of one or more systems interacting with each other. The outcome may include a physical item, only non-tangibles, or a combination of both. Note that this term was used in the definitions for goods and services above.
 
   Manufacturing Operation:
   This is where a venture is underway that seeks to create Goods.
 
   Service Operation:
   This is where a venture is underway that seeks to create Services.
 
  There is no physical law that says that a Manufacturing Operation cannot provide Services, nor that a Service Operation cannot create any manufactured Goods. In addition, a Manufacturing Operation may require Services in order to create its Goods, using resources that may be provided for internally or acquired externally, while a Service Operation may consume Goods, which it may create itself internally or acquire from external sources. A venture can offer any combination of product types and produce them as it sees fit.
 
  From the above definitions one can gather that there are a few categories of process types available for one to consider the difference between manufacturing and service processes with. One category has to do with tangibility, whether a product is tangible or not. There is the method category, whether the individual task will alter a physical good or not. Then there is the organization category, whether its main objective is to create tangible items or to provide services. When discussing manufacturing and service processes, one should be aware of these categories, and confine the discussion to the category. Crossing boundaries between categories will confuse the issues being discussed, as was pointed out in the previous paragraph.
 
  Now onto the topic of why the Artige Company does not make much of the difference between manufacturing and service processes when working on their design. From our work with systems, we have found that deploying services and manufacturing processes to be pretty much the same. If anything, we have found that a service is a subset of a process that creates goods. What is missing in a service process is the desire to create physical goods. This does not mean that a service process is not modifying physical items. Repair shops are typically fixing items, car rental facilities are delivering cars to their customers, and computer programmers are typing on keyboards. These are just a few examples of the physical interaction that is taken on in a service industry.
 
  The main difference we have seen in between manufacturing and service processes is in the accounting end of things, where a goods oriented firm has to deal with inventory, while inventory is a minimal concern for a service organization. It just so happens that inventory brings a lot of non-trivial resource concerns with it, including physical storage, movement, financing of inventory not sold, legal concerns over ownership and whose balance sheet the inventory appears on, plus all of the record keeping and accounting requirements. A service operation can avoid most of the inventory hassles. Of course, the inability to store a service brings other concerns that a service organization will need to handle.
 
  Finally, one should take another look at the tangibility category. A service process is not designed to deliver a physical product, but rather a non-tangible product. That is not much of a definition to go on. So what does a service product consist of? The best answer would be change. The idea here is that one exists at an initial state and has a desire to shift to a new state. The act of shifting means a change has to be made, and that this change will occur over a period of time. This is what a service product consists of, the act of changing an item from one state to another.
 
  It just so happens that this act of shifting from one state to another is the purpose of a system. So it should be apparent to the reader that designing a service process will be simpler than that of a manufacturing process, as it does not have to concern itself will the creation of goods. A service process has to use all of the other methods that a manufacturing process will use. This is why we claim a service process to be a subset of a manufacturing process.
 
 
 
Conclusion This article provided definitions for manufacturing and service processes, in various contexts. It then went on to explain that manufacturing processes focused on creating goods, while service processes focused on providing a change of state. It was also shown that a service process is a subset of a manufacturing process.