Lecture 12 Manufacturing and Service Industries
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Chapter 13: MANUFACTURING & MANUFACTURING & SERVICE INDUSTRIES SERVICE INDUSTRIES
Transcript of Lecture 12 Manufacturing and Service Industries
Chapter 13:MANUFACTURING &MANUFACTURING &SERVICE INDUSTRIESSERVICE INDUSTRIES
Manufacturing Defined - Technological Definition
Application of physical and chemical processes to alter the geometry, properties, and/or appearance of a given starting material to make parts or products
Manufacturing also includes the joining of multiple parts to make assembled products
Accomplished by a combination of machinery, tools, power, and manual labor.
Almost always carried out as a sequence of operations
Manufacturing Defined - Technological Definition
Manufacturing Defined - Economic Definition
Transformation of materials into items of greater value by means of one or more processing and/or assembly operations
Manufacturing adds value to the material Examples:
Converting iron ore to steel adds value Transforming sand into glass adds value Refining petroleum into plastic adds value
Manufacturing Defined -Economic Definition
Classification of Industries
1. Primary industries – cultivate and exploit natural resources Examples: agriculture, mining
2. Secondary industries – convert output of primary industries into products Examples: manufacturing, power generation,
construction3. Tertiary industries – service sector
Examples: banking, education, government, legal services, retail trade, transportation
Manufacturing Industries
Food, beverages, tobacco Textiles, apparel, leather and fur products Wood and wood products, cork Paper, printing, publishing, bookbinding Chemicals, coal, petroleum and their products Ceramics, glass, mineral products Basic metals, e.g., steel, aluminum Fabricated products, e.g., cars, machines, etc. Other products, e.g., jewelry, toys
More Industry Classifications
Process industries, e.g., chemicals, petroleum, basic metals, foods and beverages, power generation Continuous production Batch production
Discrete product (and part) industries, e.g., cars, aircraft, appliances, machinery, and their component parts Continuous production Batch production
Process Industries and Discrete Manufacturing Industries
Manufacturing Operations
There are certain basic activities that must be carried out in a factory to convert raw materials into finished products
For discrete products:1. Processing and assembly operations2. Material handling3. Inspection and testing4. Coordination and controlA processing operation transforms a work material from one state of completion to a more advanced state using energy to alter its shape, properties or appearance to add value to the material.
Classification of manufacturing processes
Processing Operations
Shaping operations1. Solidification processes2. Particulate processing3. Deformation processes4. Material removal processes
Property-enhancing operations (heat treatments) Surface processing operations
Cleaning and surface treatments Coating and thin-film deposition
Assembly Operations
Joining processes Welding Brazing and soldering Adhesive bonding
Mechanical assembly Threaded fasteners (e.g., bolts and nuts, screws) Rivets Interference fits (e.g., press fitting, shrink fits) Other
An assembly operation joins two or more components to create a new entity which is called an assembly, subassembly, etc.
Other Factory Operations
Material handling and storage Inspection and testing Coordination and control
Material Handling
A means of moving and storing materials between processing and/or assembly operations
Material transport Vehicles, e.g., forklift trucks, AGVs, monorails Conveyors Hoists and cranes
Storage systems Unitizing equipment Automatic identification and data capture (AIDC)
Bar codes RFID Other AIDC equipment
Time Spent in Material Handling
Inspection and Testing
Inspection – examination of the product and its components to determine whether they conform to design specifications Inspection for variables - measuring Inspection of attributes – gaging
Testing – observing the product (or part, material, subassembly) during actual operation or under conditions that might occur during operation
Coordination and Control
Regulation of the individual processing and assembly operations Process control Quality control
Management of plant level activities Production planning and control Quality control
Production Facilities
A manufacturing company attempts to organize its facilities in the most efficient way to serve the particular mission of the plant
Certain types of plants are recognized as the most appropriate way to organize for a given type of manufacturing
The most appropriate type depends on: Types of products made Production quantity Product variety
Production Quantity
Number of units of a given part or product produced annually by the plant
Three quantity ranges:1. Low production – 1 to 100 units2. Medium production – 100 to 10,000 units3. High production – 10,000 to millions of units
Product Variety
Refers to the number of different product or part designs or types produced in the plant
Inverse relationship between production quantity and product variety in factory operations
Product variety is more complicated than a number Hard product variety – products differ greatly
Few common components in an assembly Soft product variety – small differences between
products Many common components in an assembly
Product Variety vs. Production Quantity
Fig. 2.5
Low Production Quantity
Job shop – makes low quantities of specialized and customized products
Also includes production of components for these products
Products are typically complex (e.g., specialized machinery, prototypes, space capsules)
Equipment is general purpose Plant layouts:
Fixed position Process layout
Fixed-Position Layout
Process Layout
Medium Production Quantities
1. Batch production – A batch of a given product is produced, and then the facility is changed over to produce another product Changeover takes time – setup time Typical layout – process layout Hard product variety
2. Cellular manufacturing – A mixture of products is made without significant changeover time between products Typical layout – cellular layout Soft product variety
Cellular Layout
High Production (mass production)
1. Quantity production – Equipment is dedicated to the manufacture of one product Standard machines tooled for high production (e.g.,
stamping presses, molding machines) Typical layout – process layout
2. Flow line production – Multiple workstations arranged in sequence Product requires multiple processing or assembly
steps Product layout is most common
Product Layout
Relationships between Plant Layout and Type of Production Facility
Product/Production Relationships
Total number of product units = Qf = Product variety
Hard product variety = differences between products
Soft product variety = differences between models of products
Product and part complexity Product complexity np = number of parts in product Part complexity no = number of operations per part
P
jjQ
1
Factory Operations Model
Simplified for purposes of conceptualization: Total number of product units Qf = PQ Total number of parts produced npf = PQnp
Total number of operations nof = PQnpno
Limitations and Capabilities of a Manufacturing Plant
Manufacturing capability - the technical and physical limitations of a manufacturing firm and each of its plants
Three dimensions of manufacturing capability:1. Technological processing capability - the available set
of manufacturing processes2. Physical size and weight of product3. Production capacity (plant capacity) – max production
quantity that can be made in a given time under assumed operating conditions
Lean Production
Operating the factory with the minimum possible resources and yet maximizing the amount of work accomplished
Resources include workers, equipment, time, space, materials
Also implies completing products in the minimum possible time and achieving a very high quality level to completely satisfy the customer
In short, lean production means doing more with less, and doing it better
Lean Production and Manufacturing Activities
Manufacturing activities can be divided into three categories:1. Value-adding activities - contribute real value to the work
unit2. Auxiliary activities - support the value-adding activities but
do not contribute value to the product3. Wasteful activities - do not add value nor do they support
the value adding activities If not performed, there would be no adverse effect on
the product “ELIMINATE !”
Programs Associated with Lean Production
Just-in-time delivery of parts Worker involvement Continuous improvement Reduced setup times Stop the process when something is wrong Error prevention Total productive maintenance
Porter’s Value Chain
Firm InfrastructureHuman Resource Management
Technology Development
Procurement
SupportActivities
InboundLogistics
PrimaryActivities Operations Outbound
LogisticsMarketingand Sales Service
Upstream value activities Downstream value activities
Interactive Role of Services
Service Definitions
A Service is a Time-perishable, Intangible Experience Performed for a Customer Acting in the Role of a Coproducer.
- James Fitzsimmons Services are deeds, processes, and performances.
- Valarie Zeithaml & Mary Jo Bitner
Service Enterprises are Organizations that Facilitate the Production and Distribution of Goods, Support Other Firms in Meeting Their Goals, and Add Value to Our Personal Lives.
- James Fitzsimmons
The Service Revolution
“There are no such things as serviceindustries. There are only industries
whose service components are greater or less then those of other
industries. Everybody is in service”!
- Theodore Levitt
0
10
20
30
40
50
60
70
80
90
1850 1880 1910 1935 1960 1975 1995 2007
Farming
Services
Industry
Global Employment, % Share
0
10
20
30
40
50
60
70
80
1980 1989 1998 2007
Canada
US
Australia
Belgium
Israel
France
Finland
Italy
Japan
UK
Percent Employment in ServiceJobs, by Nation, 1983-1997
Growth In Employment
0
20
40
60
80
100
120
1980-2007
Legal
Business
Health
Recreat.
Hotels
Education
Retail
Financial
Wholesal
Transport
Global Private Sector Services, 1980-1997, %
0
10
20
30
40
50
60
70
80
1970 1996 2007
U. S.
Canada
Italy
U. K.
Japan
W. Ger.
Services as % of GDP
Services Defined
Service Industry Customer Service Field Service
Why Services Are Important
Increased Competition Manufacturing Support Makes Economic Sense
“When the quality and price of competingproducts are similar or nearly identical,
service activities can ‘differentiate’undifferentiated products in the mind of
the customer” - Glaskowsky et al.
Relative Importance of Service Activities
Relative Importance
of Marketing Variables
ProductPrice
ServiceSales Effort
TOTAL
All
Indu
strie
sAl
l Man
ufac
turi
ng
Chem
icals
&Pl
astic
s Mfg
.
Food
Mfg
.
36232318
100
38242018
100
38261818
100
36271522100
Elec
troni
cs M
fg.
Pape
r Mfg
.
All O
ther
Man
ufac
turin
g
48142216
100
29262421
100
38252215
100
All M
erch
andi
sing
Cons
umer
Goo
dsM
erch
andi
sing
Indu
stria
l Goo
dsM
erch
andi
sing
30222721
100
31232323
100
28173916
100
National Council of Physical Distribution Management
Parallel Product/Service Design
Product
Concept
Product Design
ProductDeliver
y
ServiceConcept
ServiceDesign
ServiceDelivery
SuppliersTier 2
SuppliersTier 1
ManufacturingInbound Logistics
Operations
Outbound Logistics
CUSTOMERS
Distributors Retailers
The Supply Chain
Information
Manufacturing
ServiceIntermediary
CommercialServices User(Self-Service)
Consumer(Self-
Service)
R & D
ProductDesign
DistributionServices
WholesalingRetailingRepairing
Service IndustriesCommunications, Transportation,
Utilities, Health Care, Banking, etc.
Private Business ServicesSupporting Manufacturing,
Accounting, Legal, Consulting, Software, Maintenance
Government Support ServicesWaste Disposal Services, Road Maintenance,
Education, Health Support, Standards,Police and Fire Protection, etc.
Services Inside theCompany--Design, Legal, AccountingAdvertising, etc.
Service and Profitability
Reduced operating expenses Competitive differentiation Increased quality Increased efficiency Increased responsiveness Increased market Share Increased customer loyalty
Contributors to Market Share
MarketShare
Time
Market ShareDue to
Product Features
Market ShareDue to
Captive Markets
Market ShareDue to
Service Activities
1 2 3 4 5
20%40%60%
80%100%
Verydissatisfied
Dissatisfied Neutral Satisfied Very satisfied
Loya
lty
(Ret
enti
on)
Satisfaction
zone of defection
zone of indifference
zone of affection
Satisfaction and Loyalty
“terrorist”
“friends”
The New Experience Economy
Economy Agrarian Industrial Service Experience
Function Extract Make Deliver Stage
Nature Fungible Tangible Intangible Memorable
Attribute Natural Standardized Customized Personal
Method of supply
Stored in bulk
Inventoried Delivered on demand
Revealed over time
Seller
Trader
Manufacturer
Provider
Stager
Buyer
Market
User
Client
Guest
The Four Realms of an Experience
Customer Participation
Passive Active
EnvironmentalAbsorption Entertainment
(Movie)Education(Language)
Relationship Immersion Esthetic(Tourist)
Escapist(Skydiving)
Role of the Service Manager
Entrepreneurial Innovation Capitalizing on Social Trends Management Challenges
Economies of Scale (MRI scanner)Economies of Scope(Convenience store)Complexity (Yield Management)Boundary Crossing (Bank vs Brokerage)International Competitiveness(Diversity)
Profits are the result of attention to quality and customer
satisfaction, while the reverse is rarely true.
- Edwards Deming
Differences Between Sales and Goods
“a good is an object, a device, a thing;”
“a service is a deed, a performance, an effort.”
Links Between Services and Goods
Services may complement goods; at other times, goods may complement services.
Stand-Alone ServicesServices Can Compete Against
Goods
Types of Offerings: Communication services, reservations, car rentals, etc.
Food and drink, cars, books, etc.
Intangible
Tangible
How Services Differ From Goods
Services are difficult to inventory.
For services offerings, the time of production is close to the time of consumption.
Services are more often intangible.
Services are often custom-made.
Services often require new forms of distribution.
The Role of Global Services in the World Economy
The rise of the service sector is a global phenomenon.
Economies of developing countries generally first establish agricultural and manufacturing sectors before entering into the services sector.
As more countries enter the sector, the global services business will become more competitive.
Global Transformations in the Services Sector
The rise in services trade is due to changes in the environment and in technology.
Global Transformations in the Services Sector
Reduction of government regulation.
Technological advancement.
Problems in Service Trade
New problems have emerged in the service sector together with the increase in the importance of service trade.
Problems in Service Trade
Data Collection Problems. Data is often sketchy. Service transactions are often statistically
invisible. Global Regulations of Services.
National and economic security issues result in barriers to entry.
Additional problems in the performance of services abroad—tradition, regulation, etc.
Corporations and Services TradeServices and E-Commerce
Easy access to global markets. Little-known firms can become known. Electronic business media occurs at different rates in different countries.
Corporations and Services TradeTypical International Services
Banking and consulting services can become internationally competitive.
Insurance services can be sold internationally.
Communication services have excellent success in international operations.
Institutions successfully offer international teaching services.
Tourism is a major service export.
Starting to Offer Services Internationally
Novices follow the path of the good, if the service is delivered in support of a good.
New marketers search for similar market situations abroad if the service is independent from goods.
Strategic Indications
Will the service be directed at people or things?
Will the service act result in tangible or intangible actions?
Strategic IndicationsServices Aimed at People
Directed at People’s Minds: Arts Religion Consulting
Directed at People’s Bodies: Healthcare Fitness Restaurants
Strategic IndicationsServices Aimed at Things
Directed at physical possessions: Laundry Landscaping Refueling
Directed at intangible assets: Banking Research Investments
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Strategic IndicationsGaining Credibility Abroad
Providing objective verification of their capabilities.
Providing personal guarantees of performance.
Cultivating a professional image.
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The Role of Personnel in International Service
Customer interface is intense. Proper provisions must be
made for training of personnel. Major emphasis must be placed
on appearance. The person delivering the
service communicates the overall attitude/value of the service corporation.
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Pricing and Financing inInternational Strategy
Because services cannot be stored, there is greater responsiveness to demand fluctuations.
Greater pricing flexibility must be maintained.
The intangibility of services makes financing more difficult.
