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INTRODUCTION: Business environments are drastically changing in today's world. Now days, major economies have been changing from manufacturing based to service based. It is really important for businesses to adapt new changes in order to keep pace with rapidly changing business processes.
The problem that is going to be discussed in this essay is regarding different management theories that have been presented from time to time after World War II. The critical concern is that almost all the post-war management approaches have been related to the manufacturing industries and there is a small scope of these approaches in service sectors of the economies. As the economies have been changing quite rapidly from manufacturing based to the services based, it is really important to address this issue and to discuss options to implement these theories in the service sector as well. In the report ahead, we are going to discuss a number of issues related to this problem. In the first section, the difference between manufacturing and services industries has been discussed in order to understand the unique needs of management perspectives in each case. Second section is related to the issue that why it is necessary to have more focus on services industry in contemporary era. In the third section, the possibilities in implementing different management theories in services concerns have been discussed.
DIFFERENCE BETWEEN MANUFACTURING AND SERVICE BASED INDUSTRIES
Defining Service Sector: The service industry can be defined as an industry where intangible goods are produced rather than the production of tangible goods. Service can also be taken as "a deed, a performance, or an effort". (Berry,1980).
The service industry deals with those parts of the economy that can not be seen or measured on a scale. The examples of businesses in service sector are like distribution, transportation or sales of end products to the consumers. It also includes the supply of such services like entertainment, cleaning, hospitality, medical services, banking, teaching, consultancy etc. So, the above definitions typically mean that the service industry needs labour and knowledge skills.
Principle characteristics of a service sector business are given below: First, the service is mainly an intangible product. Second, the service sector has a one to one contact between people to people. The one party is service providers and the other is consumers. For example, in teaching service, there is one to one contact between teacher and student at the spot. In medical service, doctor and patient has one to one contact, similarly almost all the service based businesses have people to people contact on the spot and the feed back is received quite soon as compared to manufacturing based business. Third, as the services are provided to the customers only when they are called for, one cannot check the quality of the services before they are delivered, as can be done in manufacturing sector through quality control systems.
Defining Manufacturing Sector: Manufacturing organizations have a primary objective of being producers and developers of end products that are solid and tangible such as a motor vehicle produced by a motor business. The manufacturing businesses manufacture things that are to be sold out in future. Manufacturing businesses are inclined towards use of capital and advance manufacturing technologies for mass production and continuous processes. The feedback for manufacturing concerns is received quite late as compared to services sector. It comes only after the product is delivered to the customers while in service sector, feedback comes during the execution of services. The quality of services is perceived and cannot be directly measured and compared in the same way that the quality of a product can.
In contemporary era, a number of organizations are based on a combination of manufacturing and services based businesses. They provide services as well as end products in order to add value to their products. So it is necessary for almost all the organizations to adopt such kind of management approaches that would cater for the needs of their service based businesses as well.
MANAGEMENT APPROACHES AFTER WORLD WAR
The reason why nearly all the management approaches were related to the manufacturing concerns after World War II is that at that time there was an unending demand for the consumer goods such as cars, electronics, fabrics etc. So the business industry mainly consisted of production and manufacturing units. The theorists and researchers at that time focused on finding new ways and opportunities to manage the workforce at the place of production and to enhance the productivity. They did not think about the other important part of the business i.e. provision of services in order to add value to the products. Quality was not considered as important as the number of units produced i.e. output rate of the businesses.
The management approaches such as JIT, Lean manufacturing, Total Quality management and Theory of contingencies are all about manufacturing businesses.
RELEVANCE OF MANUFACTURING BASED THEORIES TO SERVICES BASED INDUSTRIES
The need of the hour for businesses is to adapt with the drastically changing environment and structures of businesses. Organizations cannot survive and prosper if they lack behind in adapting new ways of methods being introduced in industries. Today's business world is converting from production based to services based. Today, all the largest economies of the world are dominated by services, in which services generate a major part of the GNP. This is the case with countries like America, Japan, India etc. it can be said that no economy can survive without a large service base.
After an extensive research and thorough study of existing literature about management theories, we have come to know that many theorists have been working to implement the manufacturing based theories in services sector as well.
In the next section we are going to discuss many theories and their relevance to service based economies. These theories are; JIT (Just in Time), Lean Manufacturing, Total Quality Management (TQM) and Theory of contingencies (TOC).
JIT and Its Relevance to Service Based Organizations
Just-in-time is a process that is formalized to reduce any kind of wastes that can be a part of production units. JIT has been recognized as a popular approach among manufacturing based organizations. It was first introduced by Toyota Motors in order to have high efficiency with minimum input. But in this era, the services sector has also come to know the importance of implementing this approach in their businesses. The service based concerns have recognized the true potential of JIT system in their processes and how it can add value to their basic inputs. The main aspect of JIT is that its major emphasis is on the process that is being used in manufacturing; so it has become easy to convert it according to the needs of the processes in services based businesses. Benson (1986) presented the guidelines to apply the Just In Time (JIT) approach to the services industry. According to him, the implementation of JIT can be done by taking these measures at the time of processing of services.
â€¢ harmonizing and balancing information and workflow in order to reduce waste of time
â€¢ having all the components of service execution process in complete visibility
â€¢ Continuously improving the process
â€¢ having a holistic approach towards eliminating the
â€¢ being flexible in using resources
â€¢ showing respect for people whether they are customers or service providers.
A number of service sector organizations have been successful in achieving their goals by implementing JIT systems in their processes. A few of these organizations are Citibank, FedEx, Domino's, McDonalds and Wal-Mart etc.
Lean Manufacturing and Its Applicability in Service Based Organizations
Lean Manufacturing is another management approach that is related to the manufacturing based organizations. Service industries have not been so sure about implementing Lean manufacturing approach in their businesses. They have not embraced this approach as JIT in service sector. But still researchers have been working to make this approach suitable for service sector organizations as well. The lean manufacturing has been renamed as Lean Services in order to make it more appropriate for services sector. It is important to modify the approach of Lean manufacturing according to service sector before its implementation. The training sessions should be conducted for the users of this approach before making them implement it in their business. The training would allow them to better understand its implications in the service sector. When implementing lean manufacturing in a service industry, it is important to modify the training to the business. People can easily understand the processes by seeing them and to avoid wastage of resources that is the basic aim of lean services approach. Many service based organizations have been using different principles of lean services. One of them is continuous improvement and respect for people. Call centers have been applying these principles. Other service organizations for example, health care, public and professional services, higher education and software development companies are using methods and principles based on lean services. As a result, these implications are almost similar to those in manufacturing concerns. Often, the same tools and techniques are used as in manufacturing concerns. So, lean services are not mostly recommended to be used in service sector organizations because of their limitations in applicability.
Bicheno and Holweg (2009) gave the definitions of wastes that can be a part of services sector organizations and that can be covered by lean services applicability. These wastes are given below:
Wastage of time on the part of customers:
Duplication in re-entering data, for example repetitive nature of form filling, copy information and answer queries from many sources.
Another type of wastage is the queuing up of service encounters.
Wastage of clear responses due to unclear and poor communication skills. Wastage of time in finding locations that ultimately are found duplicates.
Wastage of inventory because of lack of information about the correct inventory.
Wastage of an opportunity in retaining a potential customer and failing to establish good reputation among customers of the specific services.
Errors and wastage in products due to defects or lost goods.
Scientific Management Theory Applicability in Service Based Organizations
Scientific management theory was first presented by Frederick Winslow Taylor for assembly line production. The theory was presented after World War II when there was a great supply of unskilled workers who were unemployed as well as uneducated to do sophisticated jobs. The conventional principles of management are still based on the theory of scientific management. But as the structure of organizations is changing rapidly from manufacturing oriented to services oriented the Scientific Management principles are not as much applicable to this industry as was to production industry. Most of the firms and businesses have been facing the challenge of service competition and hence, the theories and principles of management should be in accordance with the services industry needs and requirements as well.
Total Quality Management in Services Based Organizations
Total Quality Management (TQM) is considered to be the theory about the services sector . it is applicable in customer oriented and services based organizations. This theory is about the efficient way to utilize maximum human resources by combining together the talents and abilities of managers and employees in a very systematic and efficient manner. This way of managing human resources helps in stimulating creativity and problem-solving abilities, helps in promoting employee motivation and this ultimately leads to improved quality and effective communication together with higher level of productivity that ultimately works towards reduced costs and increased level of satisfaction among customers. A service sector organization applying TQM will follow these steps in implementing this approach
Reduce the time required for processing of major products and services
Reduce the time required to wait in queue and down time etc.
Managing complaints from customers, whether they are in written form or in verbal form
Showing friendly attitude and efficiency on the behalf of staff
Having an accurate manner in keeping documents and accounts so as to reduce tension
Promptly responding to the inquiries of customers through the means of immediately answering the phone
Reducing the number of turn over of customers by retaining them
Theory of Constraints and Its Applicability in Services Sector
After reviewing the literature that has been published from time to time about the usage of TOC in service sector organizations we have come to know that TOC is mostly applied to industry than services. In fact, TOC was made up to deal with unending problems in manufacturing sector. From its applicability in operations of a business, TOC has also been used in other business functions that are related to services e.g. distribution, marketing, strategy and change management. But, now days, it has been accepted in many service organizations as well. The period of past 15 years is the time when TOC was expanded to the non manufacturing concerns. According to Blackstone (2001), the ideas and principles of TOC can be adopted in order to implement and improve change in any function of business. A branch of Theory of Constraints that has been mostly used in services organizations is known as Thinking Process. This procedure is applicable in problem-solving. Thinking process is then used to figure out the applications of theory of constraints that might be applied to services sector. Today, many case studies and empirical evidence shows the applicability of TOC principles in various service sector organizations. Some of the services where TOC is mostly applicable are; agriculture sector services, hiring process in security services, medical services in hospitals, and managing software developing services. The case studies of these sectors show the applicability of TOC in services.
Management by Objectives and It Applicability to Service Sector
Management by objectives (MBO) is a theory of management system that identifies the common aim of the organizations; it defines the areas of responsibilities of each employee, the expected results from employees, and taking these steps as guides for working in organizational units and the contributions of employees in achievement of goals. So, by this discussion it is obvious that Management by Objectives is a result-oriented principle approach. Its focus is always on attainment of goals. Because of this specialty of this approach, it is considered to be difficult to apply in service based organizations where goals are not very much clearly defined. But the empirical evidence and different case studies show that all such assumptions are just weightless.
These reports cite knowledge and applicability of MBO in such organizations and finally present conditions for its being effective in organizations.
All the above theories of management that have been discussed with regard to the service sector organizations have been found to be applicable in service sector as well. The management principles such as JIT, Lean manufacturing, Total Quality Management, Scientific management theory, Management by Objectives and Theory of constraints have been discussed to be applicable in services. Although, some of these theories are difficult to be implemented in services but the researchers are working towards modifying these theories according to the needs of service organizations.