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The Question to ask yourselves IS How much of a service company are you??? You/You/YOU/YOu/YOU/YOU/YOU/----------- We all are involved in the service sector No one is immune from it’s effects AND shouldn&apos;t be (thats why you are here) As manufacturing becomes more automated streamlining operations outsourcing more functions----service is growing Recent studies show that ; **The service component of a typical manufacturer is growing rapidly 30-70% of value Added are attributable to service functions 70% of total costs----WHY do we still push for shop floor improvements as world economies/businesses evolves preindustrial industrial post industrial a new combination of labor/capital/organization is taking place fewer employees etc.. A few stats
1st glance data may be disturbing /BUT manufacturing Peeked ~~1950 and has been declining ever since WHY/ we are being more productive and efficient a different mix, BUT with this new mix there is an INCREASE reliance on Services as the #;s show!!! Acct/Finance/transportation/healthcare/P.M. etc ( all of these activities that we do not concentrate on) AS well as pure services
No country is immune from the growth in the service sector Some more then others Whats causing this Italy/Japan are flat UK way up
All services have shown dramatic increases especially legal and business!!!! Business services= What services does your firm outsource!!!! Sears has Integrated backward and forward into insurance and finance--- Service Master (1.4 billion in revenues) 3.5 billion Guilders--- By lowering Manufacturing costs by managing complete equipment and plant maintenance, It will also design—layout, operate your facility (while sharing in the revenues!!!) Johnson Controls---Engineering/Plant design/operations ----
The US is not alone in our increasing reliance and importance of services WE do lead the charge But we lead most other stats as well US =72%Germany 57% while MFG GDP is falling US = 23%&gt;20% Britain and Canada This change is not only Domestic BUT________&gt; GDP—Gross Domestic product The value of all production within a country A SINGLE CATEGORY FINANCE IS ALMOST AS LARGE AS ALL MANUFCTURING
Definition is Ambiguous at best APICS E&R Newsletter June 1996/Vol 2/Jim Pope not in APICS dictionary 3 uses: 1. One where no final goods inventory exists (maybe raw/wip) but no finished goods inv. PRODUCED AND CONSUMED AT THE SAME TIME 2. Cust. Service--relationship during delivery time/price/quality 3. Field--relationship after delivery warranty service/parts avail/follow-up **any function that does not directly contribute to the production of the product. Defined as what it’s not US Gov’t defines it as a residual non-farming, non-manufacturing employment so whats IBM what about General Motors In: BCBS out: Financial(gmac) must begin to think as ourselves as not just a manufacturer but a SERVICE ORG. and accept there new VIEW Massive Hidden Service sector Pre & Post services--- Acct/legal/utilities/health care/waste disposal/maintenance PROBLEM AREA How measured: --product/process design --R&D --Mkt. Research --Acct/Data Analysis *** captured as Mfg. Costs if preformed WITHIN mfg. Concerns *** Captured as services if preformed EXTERNLY
The ability to differenate an undifferanted product/commodity etc. Mfg. Cannot exist without the functions services provide 3. Customers want to be treated well and do repeat business with the firms that emphasize quality 4. The life blood of any company is repeat business Service recovery etc. customer loyalty create apostles for your firm Increased relationships between Mfg. And service functions 5. President of Hienkien has been quoted as saying: “we are just a Marketing company with a production facility as a service” richard Wagnor President of GM--- we just manufacture vechiles so we can finance them
Your ability to SERVICE your customers will be the key between Success and Failure Whats counts most is the SERVICE built into the product way it is designed/delivered billed/bundled explained and installed repaired/renewed SERVICE is not A competitive edge it is THE competitive edge
SERVICE ranks right alongside price in perceived importance by industrial customers Profitability & Market share
If Services have this much input Design In service systems from the beginning Only when we begin to put service on the same level as Mfg will we begin to see the gains in productivity that have long alluded us!!
---Managing the numerous service functions within the supply chain ---At every stage ----At every level Especially Information Service IS a major Organizational function along the supply chain----^^
Components of SERVICE Interactions Among Manufacturing and Service Activities Purchaser of automated equipment requires more then delivery -installation services -application aids -parts/ post purchase repair maintaence etc. WITH this increasing interdependencies it is now time to give the level of attention to SERVICE functions that has always been reserved formanufacturing Sectors of economy’s are becoming increasingly interdependent
A service focus will lead to pro=actively managing the service function as a profit center because it will generate future revenues as the product becomes a commodity. Differentiation and Lower costs Improved transportation /Materials handling CAN/WILL cut costs as effectively as cutting direct labor or material inputs CAD and MFG software can increase quality and Reduce costs as easily as can new equipment Product Quality once the compeitive Advantage is now just the Ante’ Service is not A competitive edge IT IS THE Competitive edge Improved transportation ands materials handling can cut costs as effectively as cutting direct labor or materials. In most mfg. industries service costs out way direct labor costs by a factor of 3-10 to 1, YET we only look at labor and cautiously look at service functions planning/Q.C./Distribution accounting /Transportation/Advertising inventory/Design
A Service focus will not only reduce current operating expenses and thereby exert considerable leverage on profits, IT will increase customer satisfaction which will increase long-term profitability ---drives customer loyality WHy become service driven!!! 1. To differentiate your company from it’s competitors 2. To build Market Share & customer loyality Over the long-run you can’t maintain market share with unique features alone----your competitors will catch you!!! Only through service and loyal customers will you increase market share. Also: you can’t build market share by cutting price or cutting quality, studies show that in the long run that approach is doomed for failure Service profit chain-----^^^ It is now obvious that a service focus will not only reduce current operating expenses & thereby exert a considerable amount of leverage on profits, but will increase customer satisfaction which will increase market share----which will in turn Increase long-term profitability Lost market share mauy be regained through service---
Profit growth is stimulated by loyalty A score of 5 is 6X more likly Loyalty is a direct result of satisfactionto repurchase then a score of 4 Satisfaction is driven by valueneed to create Apostles!!! To max Profits we need to go beyond being #1 or #2 in our Industry which has been the holy grail for nearly 2 decades * New measures show that Customer Loyality may be a more important determinat of profit Studies show that a 5% increase in loyality can produce Profit increases fron 25 to 85% Quality of Market (measures in terms of customer loyalty) deserves as much attention as Quantity of shareDepth of relationship So what drives loyality??? Service and customer service = satisfaction