Product vs. Service Supply Chain
Whether tangible products or intangible services, both manufacturing and service industries use different inventory strategies to deliver quality end results to consumers. Supplying a service or a product impacts forecasting and resourcing decisions in different ways. The objectives of the service industry remain similar to the manufacturing industry, fulfilling wants or demands of customers are impacted by the strategies that organizations choose to follow.
In the manufacturing industry, raw material, work in progresses, sub-components and finished goods are stored at the company’s expense to meet the demands of its customers. Stock that is held to meet demands is also knows as cycle stock. An example may be a company who purchases coffee from a supplier. The coffee that is supplied is used every day; therefore the company may want to purchase a month’s worth of coffee that will satisfy their demand for roughly thirty days. To avoid any uncertainties in demand as well as shortages or delays, a safety stock can be purchased in addition. Although this scenario sounds ideal, situations do not always turn out to be perfect. One thing that can be a problem with supplying too much coffee to this company would be an issue of quality in the coffee. Keeping coffee stored away and unused for too long may cause the coffee to become stale and unsatisfying. In addition, a variety of associated costs and good customer service are a few challenges that may arise when dealing with variable demands.
In the service industry, although products may be intangible, they are ultimately vital in the development and success of the organization. The United States, among many other countries are devoting a greater portion of the GDP to services rather that to goods. The repercussion of this movement for logistics is important. Supplying a service rather