By Ian Linton Updated March 07, 2019
There are five main differences between service and manufacturing organizations: the tangibility of their output; production on demand or for inventory; customer-specific production; labor-intensive or automated operations; and the need for a physical production location. However, in practice, service and manufacturing organizations share many characteristics. Many manufacturers offer their own service operations and both require skilled people to create a profitable business.
Tangibility of Output
The key difference between service firms and manufacturers is the tangibility of their output. The output of a service firm, such as consultancy, training or maintenance, for example, is intangible. Manufacturers produce physical goods that customers can see and touch.
Production on Demand
Service firms, unlike manufacturers, do not hold inventory; they create a service when a client requires it. Manufacturers produce goods for stock, with inventory levels aligned to forecasts of market demand. Some manufacturers maintain minimum stock levels, relying on the accuracy of demand forecasts and their production capacity to meet demand on a just-in-time basis. Inventory also represents a cost for a manufacturing organization.
Customer Specific Production
Service firms do not produce a service unless a customer requires it, although they design and develop the scope and content of services in advance of any orders. Service firms generally produce a service tailored to customers’ needs, such as 12 hours of consultancy, plus 14 hours of design and 10 hours of installation. Manufacturers can produce goods without a customer order or forecast of customer demand. However, producing goods that do not meet market needs is a poor strategy.
Labor Requirements and Automated Processes
A service firm recruits people with specific knowledge and skills in the service disciplines that it offers. Service delivery is labor intensive and cannot be easily automated, although knowledge management systems enable a degree of knowledge capture and sharing. Manufacturers can automate many of their production processes to reduce their labor requirements, although some manufacturing organizations are labor intensive, particularly in countries where labor costs are low.
Physical Production Location
Service firms do not require a physical production site. The people creating and delivering the service can be located anywhere. For example, global firms such as consultants Deloitte use communication networks to access the most appropriate service skills and knowledge from offices around the world.
Manufacturers must have a physical location for their production and stock holding operations. Production does not necessarily take place on the manufacturer's own site; it can take place at any point in the supply chain.
FAQs
There are five main differences between service and manufacturing organizations: the tangibility of their output; production on demand or for inventory; customer-specific production; labor-intensive or automated operations; and the need for a physical production location.
What is the difference between a service organization and a manufacturing organization? ›
Difference between manufacturing and service operations The major difference between manufacturing organizations and service organizations is that one is a physical product that is being produced (manufacturing) and the other (service) is a non-produced product that has ideas, information, and assistance.
What are five 5 important differences between goods production and service operations? ›
Services Meaning
| Basis of Comparison | Goods | Services |
|---|
| Nature | Tangible | Intangible |
| Transfer of Ownership | Possible | Not Possible |
| Separable | Goods can be separated from the seller | Services cannot be separated from the service provider |
| Storage | Goods can be stored | Services cannot be stored |
2 more rowsLet's focus on three of them:
- Intangibility. Manufacturers produce tangible products—things that can be touched or handled, such as automobiles and appliances. ...
- Customization. ...
- Customer contact.
The key difference between service firms and manufacturers is the tangibility of their output, the output of a service firm, such as consultancy, training or maintenance, for example is intangible. Manufacturers produce physical goods that customers can see and touch.
What are the 5 differences between manufacturing and services? ›
There are five main differences between service and manufacturing organizations: the tangibility of their output; production on demand or for inventory; customer-specific production; labor-intensive or automated operations; and the need for a physical production location.
What is the difference between a service firm and a manufacturer? ›
The main difference between the two relates to the output tangibility. The output of a service firm is generally intangible such as consultation services, etc. In contrast, the output of a manufacturer has physical existence.
What are the five 5 common differences between products and services? ›
Difference Between Product and Service
| Parameters | Product | Service |
|---|
| Tangibility | Tangible | Intangible |
| Purchase | One-time | Recurring |
| Return | Returned | Cancelled |
| Ownership | Transferable and storable | Non-transferable and non-storable |
2 more rowsFeb 9, 2024
A manufactur- ing economy is driven by the mass production of products [4], whereas a service economy is based on knowledge- intensive industries and services in economic production, well-educated workers in the occupational market, and innovating firms in business [5].
What are three key differences between goods and services industries organizations? ›
Difference Between Goods And Services
| Goods | Services |
|---|
| Tangible | Intangible |
| Materialistic | Process or activity |
| hom*ogenous | Heterogenous |
| Transferable | Non-transferable |
3 more rowsOct 13, 2023
Here's the biggest one: Products are generally tangible items — something that your customers can physically hold in their hands. EXAMPLE: Your company sells branded swag and merchandise to other businesses. Services are typically intangible — something that you provide or perform for another person.
Which is not a significant difference between manufacturing and service? ›
Answer and Explanation:
The answer is (e) Cost per unit. Manufacturing and service operations both account for the cost for each unit. Outside of that, providing a service and providing a tangible product is largely the same.
What is one difference between manufacturers and service providers quizlet? ›
Service providers are more labor intensive, having to deal with customers. Manufacturing is more capital intensive because of the machinery and technology used.
What is the difference between manufacturing merchandising and service organization? ›
Manufacturing, Merchandising and Service Companies
A manufacturing company uses labor and other inputs to transforms raw materials into finished product and then sells the product, like a merchandising company. A service company, on the other hand, does not produce/sell products, instead it provides service.
What is the difference between a product organization and a service organization? ›
A product-basedcompany focuses on selling physical goods to customers. A service-basedcompany offers intangible services to clients. Products have a tangible form and can be stored, while services are intangible and performed on-demand.
What is a manufacturing organization? ›
ensure that the manufacturing organization has established and can maintain a quality system or a production inspection system such as to guarantee that each aircraft or aircraft part produced by the organization or by sub-contractors and/or suppliers is airworthy.
What is the difference between service management and manufacturing management? ›
Differences Between Goods Production and Service Operations
While manufacturing operations focus on producing goods and storing them at a warehouse before delivering them to customers, service-providing operations facilitate simultaneous production and consumption of services.
