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

Integrating Manufacturing
5 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.

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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.

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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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5–5
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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5–6
 Increased Emphasis on Services

Exhibit 5.1
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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.
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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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5–9
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.
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 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 Exhibit 5.2
permission
Copyright © by Elsvier.
2005 The McGraw-Hill Companies. All rights reserved.
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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
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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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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.
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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.

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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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