1. OPERATIONS MANAGEMENT INTEGRATING MANUFACTURING AND SERVICES FIFTH EDITION Mark M. Davis Janelle Heineke Copyright ©2005, The McGraw-Hill Companies, Inc. PowerPoint Presentation by Charlie Cook, The University of West Alabama

2. CHAPTER PowerPoint Presentation by Charlie Cook The University of West Alabama Copyright © 2005 The McGraw-Hill Companies. All rights reserved. Integrating Manufacturing and Services 5

3. Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 5–3 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.

4. Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 5–4 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.

5. Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 5–5 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.

6. Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 5–6 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

7. Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 5–7 Increased Emphasis on Services Exhibit 5.1

8. Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 5–8 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.

9. Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 5–9 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.

10. Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 5–10 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.

11. Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 5–11 Customer’s Activity Cycle Exhibit 5.2 Source: Reprinted from From Tin Soldiers to Russian Dolls: Creating Added Value through Services Sandra Vandermerwe (Oxford, England: Butterworth-Heinemann), © 1993, with permission by Elsvier.

12. Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 5–12 Integration of Manufacturing and Services The Customer’s Activity Cycle (CAC)

13. Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 5–13 Examples of Activities within the Customer’s Activity Cycle Exhibit 5.3

14. Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 5–14 Downstream Activities (Wise and Baumgartner)

15. Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 5–15 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.

16. Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 5–16 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.

17. Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 5–17 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.

18. Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 5–18 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.