Page 17 - DMGT501_OPERATIONS_MANAGEMENT

Unit 1: Introduction to Operations Management

Services also include 'back-office' support for internal customers of an organization, such as IT Notes
support, training, and legal services. Services take place in direct contact between a customer
and representatives of the service function.
Customer contact is a key characteristic of services. A high quality of customer contact is
characteristic of a good service organization. This is vital to retain current customers as well as
for attracting new ones. Most service organizations, though they seldom carry finished inventory,
do have supporting inventory. Hospitals keep drugs, surgical supplies, emergency supplies and
equipment spares; banks have forms, cheque books, and other supplies.
Services require more attention and better planning than manufacturing. A manufacturing
defect can always be reworked before dispatch. Service, however, occurs in the presence of the
service provider, making it difficult to manage capacity and control quality since inventory
cannot be stored and inspected prior to the service encounter.
Table 1.1: Comparison between Goods and Services

Operations Goods Services
Factors
Value Value is provided by physical Value is provided by availability of
processing during manufacturing. the service, leading to sensory or
psychological satisfaction.
Tangibility Goods are tangible; specifications are Services are intangible; operational
easily defined; and goods can be characteristics are difficult to specify;
inspected for quality. and services cannot be inspected for
quality prior to consumption.
Process design Manufacturing can be isolated from The service process must be
the customer and designed for designed to occur in the presence of
efficiency. the customer.
Inventory Products can be stored for later Services are consumed as they are
consumption created.
Capacity Manufacturing capacity can be Capacity must be designed for
designed for average demand. maximum demand.
Quality Manufacturing processes can achieve Consistency of human performance
a high level of precision and is more difficult to maintain;
repeatability. customer perceptions are subjective
Location Facilities can be located to minimize Service facilities must be located
operations and transportation costs. near the customer.

Many recent thinkers have suggested that most manufacturing firms are better off thinking of
their output in terms of the service bundle they provide to the customer.

Example: Mercedes has announced that it is developing a system that will connect the
car's software via the Internet to a customer assistance center. This system will be able to detect,
diagnose and repair the problem.
Today, organizations are increasingly trying to grow their presence in the market and earn a
competitive edge over competition by mixing goods, and services. This brings in a number of
permutations and combination, significantly changing the landscape of operations.

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