One important difference between service companies and manufacturing companies is that

Manufacturing and service operations answer different questions and formulate different strategies when it comes to planning and managing the way in which their organizations operate and grow revenue.

Manufacturing Industries engage in the production of goods (finished products) that have value in the marketplace. These fall under either Process Industries (flow production or continuous process production industries) or Discrete Manufacturing Industries.

In manufacturing, the contact with the customer/client/actual user is rather low in terms if visibility and interactions.

In general, manufacturers have a standardized way of producing goods. Goods are produced en masse in a factory or warehouse-type environment. One finished product is generally the same as the next.

Service Industries include those industries that do not produce goods and instead provide services. Often in service industries, consumption of the service takes place while it is in generation. Service operations provide certain intangible services that may not be easily identifiable. Service operations can be classified into many industries, such as banking, insurance, hospitality, advertising, logistics and consultancy.

There are more opportunities to customize the services they provide. Even in service operations where you receive a tangible product, the service you receive from workers may not always be the same.

It gets more complicated when a service based company adds products or when a manufacturing company begins to sell services. While there are potential revenue opportunities, a different sales approach and a new sales compensation plan might be required.

Other considerations occur when a service company provides services to a manufacturing company. There might be confusion with expectations as they both look at the world with a different perspective. This can also be true for a manufacturer who delivers products to a service company. Each might have a different world view and definition of “excellence”.

Consider the differences between manufacturing and service organizations as you create a revenue plan:

Service Providers:

• Sell intangible products
• Products can’t be inventoried
• There is high customer contact
• Requires a short response time
• More labor intensive
• More customization is possible

Manufacturing Companies:

• Sell tangible products
• Products can be inventoried
• Lower customer contact is typical
• Longer response time is acceptable
• Capital intensive
• Standardization – Generally have a standardized way of producing goods

What they both have in common:

• Use of technology
• Quality, productivity and response issues
• The need to forecast demand
• Capacity, layout and location issues
• Customer, supplier, scheduling and staffing issues.

Does your organization need to change your message, and sales processes to be more effective?  Let me know, I can help you make the changes happen.

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Businesses tend to take one of two forms – manufacturing or service-oriented. As the names suggest, manufacturing businesses manufacture something where service businesses offer a service. Certainly, there are some businesses that do a little of both, like selling a product but also providing repair and leasing services. However, there are important differences between these business types, differences that span from the product sold to the way the company keeps its books.

Product

Manufacturing businesses sell a different product than service businesses do. A manufacturing business creates and sells a physical product where a service business sells a service. For instance, a soap company is a manufacturing business. In contrast, a service business could be an accounting or a legal firm. In both cases, an action is for hire. The accountant will do taxes or the lawyer will prepare a brief. There is no physical product to sell; instead, the customer requires the service provider's involvement.

Location

The difference between a manufacturing business and a service business carries over into the company’s site. In a manufacturing business, the company needs a reasonable proximity to customers, be they retail customers, distribution centers or other companies. Service businesses have far more latitude. While the best place for a service business does depend on the scope of the service company’s operations, some people run successful service businesses out of homes or from warehouses because, for the most part, the client does not visit the business, such as in the case of a pest control company or a ghostwriting business.

Accounting

Manufacturing businesses and service businesses also differ in the way the company handles its accounting. Obviously, there is no inventory to track in a service business but there are greater accounting differences. Service businesses have to levy a cost on the hours their service providers work. These figures are offset by the income the company receives; this is the cash method of accounting. Manufacturing businesses typically use an accrual method, meaning that the company counts an invoice as income. Further, any returns of allowances the company has to make offset this income; it is then further reduced by the cost of goods sold to find the company’s net profit.

Forecasting

When forecasting, a manufacturing business counts its inventory first. Next, it estimates the number of units that it can produce in a given period; this number depends on the capabilities of the equipment the manufacturing company owns as well as the predicted sales. Then, the company calculates the cost of the goods sold. In a service business, forecasting is completely different. There are no costs of goods sold other than the company’s overhead, there is no inventory and there is no way to economize equipment to develop efficiency gains. A service business bases its forecasts entirely on what the company’s service providers can manage.

What important difference between service companies and manufacturing companies is that?

How are manufacturing companies and service companies alike they both produce products?

Which statement is true regarding differences between service and manufacturing organizations?

How do merchandising manufacturing and service organizations differ in cost accounting?