How Supply Chain Works Out for A Service Industry?

Supply chain management is how a company handles the flow of procedures so that their products or services can go from the point of raw materials, then stored, and shipped or shared with the end customers. Everything that happens in between makes up the supply chain management, which will include the designing, planning, execution and monitoring of that process, and at the end of the day every single process that is involved in creating and maintain the flow going will be included as well. This, whether run on a local or global scale, will require sound logistic and optimization strategies. Now, providing an optimal supply chain management can be a service offered by companies ensuring that companies can get the most out of the process and increase their revenues. Now, besides being useful for products, a strategic supply chain management can also be useful in the service industry. If you consider, that a supply chain will in fact simply implement strategies that will reduce spending, increase quality and timely delivery of the service, along with an end result of increased profitability. If the quality is increased in the input, then it will also be evident in the service itself, which will lead to more customers recognizing the quality and buying the service.

The supply chain management has historically gotten many different changes and upgrades along the years, including using The Internet of Things to its advantage, which you can read more about on the David Kiger WordPress blog, but all of these have allowed the processes used to manage the supply chain to become more effective and efficient. As for supply chains for the services industry, they hold many differences from the supply chain of manufacturing of goods and products. Although they both have inputs, in the manufacturing industry and the service industry there must be labor completed to process everything required to give the end consumer what they need or want. Besides doing internal labor, they will both require suppliers to carry out various roles to help obtain the end result. There is one main difference and it lies in the costs of manufacturing industry that include transporting, storing and manipulating a physical material. In most cases, the service industry will include the manipulation of information and networking. This will change greatly the capital investments in physical equipment and machinery that the manufacturing industry will have, as opposed to a software and hardware infrastructure.

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Image courtesy of tec_estromberg at Flickr.com

Logistics for the manufacturing industry will involve literally moving objects from one place to another and of course taking into consideration the cost based on size and weight. In the service industry, this will not have any consequence at all, since it does not concern itself with moving objects around, but rather information. This will not require the same needs as moving around products, but instead finding the best channels to distribute the information. So, on the manufacturing side of things, it is essential to find the best rates for shipping, containers or warehouses so as to reduce costs, while the service industry finds ways to upgrade their servers and maximize invested labor and reduce costs.

The end product in the manufacturing industry is when the raw materials have been completely transformed to the state in which the end customer will purchase it. This physical product is what will be given and shipped to the customer and will be the evidence of what was once transformed from raw materials. This will require a place to manufacture it, to assemble it, to store it and a process of shipping to take it to the location where it will be sold. In the service industry, the service provided will be a completed task or delivered knowhow. There will be no physical evidence of the transaction but a few papers. When the transactions are completed in either industry, the goal is to have a satisfied client who is willing to pay for the end product or service.

Finally, the optimization process in the manufacturing industry and the service industry does vary since in the manufacturing industry it will involve mainly increasing the speed of delivery, which Amazon is a great example of, and reducing costs. They will need to analyze different strategies that can and will allows these two things to happen like solving bottlenecks, inventory stocks running dry, or innovations in terms of manipulating materials. As for the service industry, optimization will be at its core in its networking capabilities and the information flow. The partnerships built by a service company will determine how the company can become more effective and reduce costs. Bottlenecks can also occur in this industry, same as the manufacturing one, but here there will be information bottlenecks caused by too many approvals or unnecessary procedures. The goal for both industries will be the same, which is to obtain the end result at a lower cost and delivery time.

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