DIFFERENCES BETWEEN GOODS & SERVICES
Services => those economic activities that typically produce an intangible
product, e.g. education, entertainment, lodging, government, financial services &
health services, repair & maintenance, food, transportation, insurance, trade, real
estate, legal & entertainment.
Attributes of Goods
(Tangible product)
-tangible
-stored inventory
-not often unique
-not have high customer interaction
- (often difficult to standardize, automate
have consistent product definition
-automated
-not dispersed
-product can be resold
-product can be inventoried
-some aspects of quality are
measurable
-selling is distinct from production
-product is transportable
-site of facility is important for cost
-often easy to automate
-revenue is generated from the tangible
product
Attributes of Services
(Intangible product)
-intangible
-often produced& consumed
simultaneously e.g. beauty salon
produces a haircut that is “consumed”
simultaneously
-often unique
-have high customer interaction
& make as efficient as we would like
because customer interaction on
demands uniqueness
-have inconsistent product definition,
e.g. auto insurance policy (policy
holders change cars & nature)
-often knowledge-based, e.g.
educational, medical & legal services
-frequently dispersed (dispersion
occurs because services are frequently
brought to the client/customer via a
local office, a retail/outlet)
-reselling a service is unusual
-many services cannot be inventoried
-many aspects of quality are difficult to
measure
-selling is often a part of the service
-provider, not product, is often
transportable
-site of facility is important for customer
contact
-often difficult to automate
-revenue is generated primarily from
the intangible services
 CHARACTERISTICS OF MANUFACTURING & SERVICES OPERATIONS

More like a manufacturing More like a service organization

organization
1. physical, durable product
2. output can be inventoried
3. low customer contact
4. long response time
5. regional, national, or
international markets
6. large facilities
7. capital intensive
8. quality easily measured
•intangible, perishable product
•output cannot be inventoried
•high customer contact
•short response time
•local markets
•small facilities
•labor intensive
•quality not easily measured

1) Manufactured goods– are outputs that can be produced, stored &

transported in anticipation of future demand creating inventories allows to cope
with fluctuations in demand by smoothing output levels

Services– can’t be reproduced; don’t have the luxury of using finished goods
inventories as a cushion against erratic customer demand

2) Manufactured goods– have little or no contact with the production system

–primary customer contact is left to distributors and
retailers

Services–customers themselves are inputs & active participants in the process

e.g. college-student studies, attends lectures, take exams & receives
diploma
hospitals, jails & entertainment
Note: Some service operations have low customer contact at one level of the
organization & high customer contact at other levels
e.g.- branch offices of parcel delivery, banking & insurance organizations
deal with customers daily, but their central offices have little direct customer
contact
-back room operations of a jewelry store require little customer contact
whereas sales counter operations involve a high degree of contact

3) Manufacturer– generally have days or weeks to meet customers demand

Services–within must be offered minutes of customer arrival
e.g. grocery store customer may grow impatient after waiting five minutes
in a checkout line
 –Customer usually arrive at times of their choosing––have difficulty
matching capacity with demand; arrival patterns may fluctuate daily or even
hourly, creating even more short-term demand uncertainly

4) Manufacturing –facilities often serve regional, national, or even international

market & generally require larger facilities, more automation & greater capital
investment than for service

Service– generally can’t be shipped to distant locations

–require direct customer contact & must locate relatively near their
customers

5) Manufacturing– relatively easy to measure because have tangible products

customer contact

Services–hard to measure; objective measurement is difficult because individual

preferences affect assessments of service quality
e.g. one customer might value a friendly chat with the sales clerk during a
purchase whereas another might assess quality by the speed & efficiency of a
transaction

SIMILARITIES BETWEEN MANUFACTURING & SERVICES

1) both normally provide a package of g/s

e.g. customers expect both good service & good food at a restaurant &
both good service & quality goods from a retailer
2) Despite that service provides can’t inventory their outputs, they must
inventory the inputs for their products. These inputs must undergo further
transformations during provision of the service
e.g. hospitals– must maintain on adequate supply of medications.
Manufacturing firms that make customized products or limited shelf-life
products can’t inventory their outputs

3) Everyone in an organization has some customers––outside or inside––

whether in services or in manufacturing

Note ‫ ٭‬Manufacturing & service are often similar in terms of what is done but
different in terms of how it is done, i.e. both involve design & operating decisions
e.g. manufacturing- decide what size factory is needed
service(hospitals)- decide what size building is needed
--both must decide on:
location control operating
schedule allocate scarce resources
 DIFFERENCES

1) Customer Contact
Service- by nature; involves a much higher degree of customer contact;
performance of service typically occurs at the pt. of consumption e.g.
surgery requires the presence of surgeon and patient; cant build up
inventories of time and are much more sensitive to demand viability (bank,
supermarket alternate between lines and customer waiting for service and
idle sellers or cashiers waiting for customers.

Mftg-allows a separation between production and consumption so that

mftg may occur away from the consumer; this permits a fair degree of
latitude in selecting work methods, assigning jobs, scheduling work and
exercising control over operations.
- can build inventories of finished goods ( cars, nags) enabling
them to absorbs some of the stocks caused by varying demand.
2) Service –subject to greater variability of inputs; each patient, each lawn,
and each lawn and each auto repair presents a specific problem that often
must be diagnosed before it can be remedied.

Mftg- often have the ability to carefully control the amount of variability of
inputs and achieve low variability in outputs; consequently; job regents for
mftg are generally more uniform than those for services.
3) Services- require a higher labor content because of the on the
consumption of services & high degree of variation of inputs
Mftg- with exceptions, can be more capital-intensive

4) Services- sometimes appear to be slow & awkward & output is more

variable
Mftg- tends to be smooth & efficient because of high mechanization &
such would generate low variability

5) Service- variations in demand intensity & in requirements from job to job

make productivity measurement considerably more difficulties e.g.
compare productivity of two doctors-one may have large number of
routine cases while the other does not—their productivity appears to differ
unless a very careful analysis is made.
Mftg- measurement of productivity is more straight forward due to high
degree of uniformity of most manufactured items

6) Quality at the point of creation is typically more important for services than
for manufacturing, where errors can be corrected before the customer
receives the output
Characteristics Manufacturing Service

Output Tangible Intangible

Customer contact Low High
Uniformity of input High Low
Labor content Low High
Uniformity of output High Low
Measurement of Easy Difficult
productivity
Opportunity to correct High Low
quality problem before
delivery to customer