Mark M. Davis Janelle Heineke
OPERATIONS MANAGEMENT INTEGRATING MANUFACTURING AND SERVICES FIFTH EDITION
PowerPoint Presentation by Charlie Cook, The University of West Alabama Copyright ©2005, The McGraw-Hill Companies, Inc.
CHAPTER
5
Integrating Manufacturing and Services
PowerPoint Presentation by Charlie Cook The University of West Alabama Copyright © 2005 The McGraw-Hill Companies. All rights reserved.
CHAPTER OBJECTIVES • Demonstrate the importance of aligning the goods and services components of the product bundle. • Present several frameworks that provide insights for integrating manufacturing and services. • Introduce alternative approaches for using services to create value for manufacturing firms. • Illustrate how services can add value to goods.
Copyright © 2005 The McGraw-Hill Companies. All rights reserved.
McGraw-Hill/Irwin 5– 5–3
Managerial Issues • Trend toward a single global economy – Increased availability and quality of products
• Shorter product life cycles – Rapid commoditization of products
• Products are now a bundle of benefits – Services in support of its goods has become a means of differentiating a firm’s products.
Copyright © 2005 The McGraw-Hill Companies. All rights reserved.
McGraw-Hill/Irwin 5– 5–4
Managerial Issues • Bundle of Benefits – The overall product offering that includes goods and services. – Order Qualifiers • The minimum characteristics of a firm or its products that a firm must have to be considered as a source of purchase. – Order Winners • The characteristics of a firm that distinguish it from its competition so that it is selected as the source of purchase.
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The Increasing Role of Service in Manufacturing • Examples of Services – Warranties – Customer support – Leasing, licensing, and rentals
• Service adds value (and profitability) – Service margins can be greater than associated product margins
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Increased Emphasis on Services
Exhibit 5.1 Copyright © 2005 The McGraw-Hill Companies. All rights reserved.
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Defining Levels of Added Service: Little “s” • Little “s,” or Operational, Services – Services from primarily within the firms’ operations that are applied to existing products function to make them more attractive to customers. • Availability: speed of delivery is an important factor in buying a product. • Customization: modifying the standard product offering to meet the needs of each individual customer is now possible due to advances in manufacturing technologies. Copyright © 2005 The McGraw-Hill Companies. All rights reserved.
McGraw-Hill/Irwin 5– 5–8
Defining Levels of Added Service: Big “S” • Big “S,” or Strategic, Services – Services that require coordination across organizational (functional) boundaries that exist between within a strategic business unit (SBU), between SBUs, or even between independent organizations.
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The Service Factory’s Roles • Consultant – Utilizing the expertise of factory workers to address customer-related issues, especially with respect to problem solving.
• Showroom – Using the factory floor to demonstrate to customers the technical expertise and the quality of the processes used to manufacture goods or components.
• Dispatcher – Using the factory for after-sales service support, especially in solving problems with new products. Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 5– 5–10
Customer’s Activity Cycle
Source: Reprinted from From Tin Soldiers to Russian Dolls: Creating Added Value through Services Sandra Vandermerwe (Oxford, England: Butterworth-Heinemann), © 1993, with permission Elsvier. Copyright © by 2005 The McGraw-Hill Companies. All rights reserved.
Copyright © 2005 The McGraw-Hill Companies. All rights reserved.
Exhibit 5.2 McGraw-Hill/Irwin 5– 5–11
Integration of Manufacturing and Services • The Customer’s Activity Cycle (CAC) Component
Actions
Pre-purchase activities
Being responsive to customer inquires and the ability to demonstrate technical expertise.
Purchase activities
Actual sale and delivery of the product and collecting payment.
Post-purchase activities
After-sales service and product warranties
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Examples of Activities within the Customer’s Activity Cycle
Exhibit 5.3 Copyright © 2005 The McGraw-Hill Companies. All rights reserved.
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Downstream Activities (Wise and Baumgartner) Service Strategy
Function
Embedded Services
Specific functions that are a part of the product itself.
Comprehensive Services
The manufactured product is “married” to additional services.
Integrated Solutions
Combining product and services into a seamless offering that addresses a specific customer requirement.
Distribution Control
Manufacturing goes downstream to assume responsibility for product distribution.
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McGraw-Hill/Irwin 5– 5–14
Additional Approaches for Integrating Manufacturing and Services • Demonstration of Knowledge and Expertise – Reassuring customers by allowing them to view the production process and to have access to production employees.
• Improved Product Performance – Using technology to anticipate and correct problems before they occur or to reduce response time.
• Customer Training – Providing product training to customers to build product loyalty and increased use of products. Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 5– 5–15
Additional Approaches for Integrating Manufacturing and Services (cont’d) • Customer Training – Providing product training to customers to build product loyalty and increased use of products.
• Expanded Product Capabilities – Providing services in the form of additional product capabilities that go beyond the primary function of the product itself.
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Focusing on Core Capabilities • Core Capabilities – Specific strengths that allow a company to achieve its competitive priorities. – The skill or set of skills that the operations management function develops that allows the firm to differentiate itself from its competitors.
• Focusing is achieved by: – Divesting non-critical activities. – Subcontracting ancillary activities and services.
Copyright © 2005 The McGraw-Hill Companies. All rights reserved.
McGraw-Hill/Irwin 5– 5–17
The Impact of Technology • The Internet – Helps firms offer services that replace goods. – Allows firms to offer 24 × 7 service while at the same time being cost effective. – Has reduced the cost of transmitting information while increasing the speed and the amount of data that can be sent between individuals.
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McGraw-Hill/Irwin 5– 5–18