National Textile University

Operation Management

MGT-4084

Assignment No. 1

TITLE : Similarities and difference between manufacturing and

service industry

Muhammad Sagheer

19-NTU-TT-1504

Semester 4th

Submitted to Sir Farooq Azam

Operation Management
What is operation management ?
Operations management (OM) is the administration of business practices to
create the highest level of efficiency possible within an organization. It is
concerned with converting materials and labor into goods and services as
efficiently as possible to maximize the profit of an organization. Operations
management teams attempt to balance costs with revenue to achieve the
highest.

Manufacturing

What is manufacturing industry ?

Manufacturing is the process of transforming materials or components into
finished products that can be sold in the marketplace. Every physical product that
you buy in a store or online is manufactured somewhere. The transformational
process can be physical, chemical, mechanical. Manufacturers often have plants,
mills or factories that produce goods for public consumption. Machines and
equipment are typically used in the process of manufacturing. Although, in some
cases, goods can be manufactured by hands. An example of this would be baked
goods, handcrafted jewelry, other handicrafts and art.

Services

What is service industry ?

A business that does work for a customer, and occasionally provides goods, but is
not involved in manufacturing.

A service industry is an industry such as banking or insurance that provides a

service but does not produce anything.
The service sector produces intangible goods, more precisely services
instead of goods, and according to the US Census Bureau, it comprises
various service industries including warehousing and transportation
services; information services; securities and other investment services;
professional services; waste management; health care and social
assistance; and arts, entertainment, and recreation. Countries with
economies centered around the service sector are considered more
advanced than industrial or agricultural economies.

The service or tertiary sector is the third piece of a three-part economy.

The first economic sector, the primary sector, covers the farming,
mining and agricultural business activities in the economy. The
secondary sector covers manufacturing and business activities that
facilitate the production of tangible goods from the raw materials
produced by the primary sector. The service sector, though classified as
the third economic sector, is responsible for the largest portion of the
global economy’s business activity.

Operations is a core functional area of an organization, along with

marketing, human resources and accounting. Operations management
plays a crucial role in enhancing the quality of products and efficiency
of the production environment. According to the Corporate Finance
Institute, operations management is the process of administering
business practices to maximize the efficiency of operations and
enhance the quality of output. Operations management involves
activities such as planning, organizing and overseeing operational
activities to reduce costs and improve profitability.
 Manufacturing operations are classified into process
manufacturing and discrete manufacturing. Process manufacturing is an
operational method that produces goods by following a specified a
sequence of steps or a predefined formula. Discrete manufacturing
emphasizes producing individual finished goods that are distinct from
one another. While pharmaceutical and food and beverage industries
adopt the process manufacturing method. Automobiles and
Smartphone manufacturers adopt a discrete manufacturing method.

Similarities between Manufacturing and Service

Industries/Organizations

 Manufacturers do not just offer products, and service

organizations do not just offer services. Both types of
organizations normally provide a package of goods services.
 Generally, service organization cannot inventory their outputs,
but manufacturing firms that make customized product also
cannot inventory their output.
 Everyone in an organization has some customers, whether in
service or manufacturing. Both have a very good return on
investment.
 Both have huge marketing potential.
 Both have forecasting and capacity planning to match supply and
demand.
 Both require skilled people.
 Both manufacturing and service operations engage human and
physical resources to deliver the desire product. For example, the
goods production environment of an automotive company uses
human resources such as mechanical engineers, production labor
and physical resources like fabrication, welding and drilling
machinery to delivery finished goods. Similarly, service operations
at a beauty salon engage human resources, including haircutting
experts and beauticians, and physical resources, such as
conditioners, straighteners, clippers, wands and combs, to offer
the desired services.

Difference between Manufacturing and Service

industries/Organizations

The difference between manufacturing and service operations fall into

the eight categories as follows:

Key point Manufacturing Service

Physical nature of the Manufacturing Service organization
product organizations provides provides the
physical and durable intangible and
products. perishable product.
Inventory Output can be Output cannot be
inventoried. inventoried.
Customer contact It involves low It involves high
customer contact. customer contact.
Response time It requires a long It requires a short
response time to meet response time to meet
customer demand. the customer’s
demand.
Location and size of It serves the regional, It serves in the local
the operation even international market.
market.
Facilities It requires a large It requires small
facility, more facilities.
automation, and
greater capital
investment.
Intensive It is capital intensive It is a labor-intensive
organization. organization.
Quality Quality can be easily Quality can’t be easily
measured. measured.
Nature Manufactured goods Services are
are physical, durable intangible, perishable
products. products often being
ideas, concepts, or
information.
Facility Manufactured goods By contrast, service
are output that can be cannot be produced.
produced, stored and
transported in
anticipation of future
demand.
Contact Most customers for However, in many
manufactured service organizations,
products have little or the customer is input
 no contact with the and active
production system. participation.
Time While manufacturers Many services must be
generally have days or offered within minutes
weeks to meet of customer arrival.
customer demand.
Transport Manufacturing Service cannot be
facilities often serve shipped to distant
regional, national, or locations.
even international
markets.
Quality As manufacturing By contract, the
systems tend to have quality of service
tangible products and system which
less customer contact, generally produces
quality is relatively intangible is harder to
easy to measure. measure.

Manufacturing operations focus on producing goods and storing them

at a warehouse before delivering them to customers, service-providing
operations facilitate simultaneously production and consumption of
services. For example, an automobile company makes a car and keeps it
in the warehouse until a customer comes forward to purchase it. A
beauty salon needs to provide haircutting services in the presence of
the customer.

Services cannot be stored for later use. When there is a high demand
for services, service operations should engage additional human
resources and modify operational activities accordingly to manage the
supply-demand equation. Due to their nature of producing and storing
finished goods, manufacturing operations don’t need to engage
additional resources and modify operational activities when there is a
high demand for products.