The Product Service System - Essay Example

OPERATIONS AND PROCESS MANAGEMENT By + Operations and Process Management Management operations and processes refer to the activities involved in the production as well as delivery of goods and services. This concept is of the essence in that the decisions made herein have monumental effects on the cost of production of a company, efficiency in conveyance of output which in turn affects revenue (Slack, 1995). Product servitisation refers to the stratagem of value creation through the addition of services to products or rather, instilling a service in the place of a product. For instance, when a company decides to sell maintenance contracts for capital goods, this is a form of an amenity getting added to a product. As manufacturing companies head towards the delivery of service propositions, employees; existing and potential, are increasingly expected to comprehend the components of services that are controllable for the purpose of increasing efficiency (Vandermerwe et al., 1988). Manufacturers are adopting the concept of servitisation whereby they deliver services in line with their original product. Besides the provision of value added to clientele, they are able to secure orders and boost their profitability. They are also putting themselves in a better position to possess the ability to produce at extremely high standards as well as respond and maximize on all service propositions that arise from the usage of their products.Studies reveal that more than sixty per cent of large manufacturing corporations all around the world are servitised. There are five steps to take when servitising a company. The first involves considering the possible service value proposalsaround the particular product. The aim here is not ownership of one’s product but rather the achievement of an alternative objective. Secondly, it is important to assess whether it is possible to achieve the set goal without having to sell the product. Thirdly, consider whether or not it is feasible to deliver the services through the use of internal resources and whether there would be need for external partnership or collaboration. Correspondingly, the company should assess its enthusiasm for and aptitude to cope with the implications of potential risks involved in the provision of the amenities. Last but not least, the firm must consider forming skills plus technology approaches that will convey the business infrastructure needed for the task (Vandermerwe et al., 1988). The process of servitisation necessitates supply chain and procurement professionals to adapt quite a large number of variables within their occupations coupled with their operating environments. In the conventional manufacturing environment, the variables have already been identified and it is possible to efficiently manage them for the production of the desired output. In a real service environment however, the output and input are less defined. As a result, the complexity along with the variables increases. The planning needed to convey efficient amenities calls for a grander comprehension of the variables related to the service. The Product Service System is an innovation strategy whereby the firm focuses on the worth of the utility of goods and amenities all through the life of the product as opposed to concentrating on the sale of physical goods. This approach enables firms to offer their customers deals that continue to deliver value besides creating a robust competitive advantage. PSS tries to rise above the ancient industrial doctrine that value is entrenched in products and considering the cost quality time is related to tangible objet dart. Supply Chain Management refers to the control of how goods flow. It is inclusive of raw material transfer as well as storage, inventory of work in process along with finished products from the origin point to consumption point. In a supply chain, channels as well as node businesses and networks that are interlinked or interconnected are involved in goods and serviced provision essential for the end users. SCM can also be understood to mean design, scheduling, execution, regulation and tracking of activities in the chain of supply with the aim of creation of net worth, leveraging global statistics, developing viable infrastructure, bringing supply and demand into line in addition to measuring the global performance of the company (Mentzer, 2001). The link that exists between the designs of products coupled with services and the scheming of the processes making them is of the essence in the concept of process design models. Although it is possible to isolate process design and product design in the department of manufacturing, it is not practically feasible to do the same when it is a question of process and service design.The reason for this is that most services, particularly the high visibility ones, are such that service and product is one and the same thing. The manufacturing sector too has put a considerable amount of effort to analyse the overlay between both dimensions of design. Product design has major implications on the cost incurred in their making.Most decisions made during the design process, for instance, materials to be used or how to put the elements together, all provide a definition of the total cost. The Volvo Car Company is among global leaders in the manufacture of construction equipment, buses, trucks, drive systems for both industrial and marine use and all that. It also provides comprehensive solutions for service and finance. It is a publicly-held entity with its headquarters at Goteborg in Sweden. Volvo is also a servitised company in that it devises constructs as well as conveys integrated output offering, which deliver worth in use. It is impossible for the company to compete in a developed economy on the mere basis of expenditure. Because of this the corporation has taken up a servitisation approach in its operations so as to compete favourably. This is evident in the use of technological advancements that make is possible to add innovative essential services. For instance, the embedded primary argument is that for every new truck sold, thirteen are already in operation. Buses have a ratio of fifteen to one whereas the construction equipment ratio is twenty two to one. This is to ensure that there is stability in the service versus product revenues. The strategic raison dêtre for manufacturing servitising is to lock in the market. This involves selling original products at cost price and making profits on spares. The Volvo Group also looks to lock out competition and escalate their levels of product differentiation. For example, the company offers to incur the risks of the customer and provide them with an anticipated cost of maintenance. Last of all, Volvo also intends to meet the customers’ demand to contract for purposes of capability (Neely, 2011). The servitisation policy is not without its challenges. First of all, the company is forced to shift mind sets; from sale of multi-million dollar goods to the sale of service capability and contracts. The firm also shifts form transactional to relational marketing. Clients shift from wanting ownership of the product to simply being content with amenities. Further, it is forced to manage, control and be exposed to long term risks. Taking up all these measures could cost the business entity both time and money, both of which are crucial to maintain its viability (Slack, 1995). One strength of the operations and process approach is that it helps the organization implement its strategic goals, lines of attack, processes, controlling and planning to mention but a few. It ensures that the resources of the firm are also effectively managed to enable the firm optimize output potential. Such as in this case, manufacturing industries are able to use the strategy to manage its human resources, information, materials, inventory production, logistics, transportation et cetera. The weakness with this approach is that it is dependent upon too many varying elements within the firm that are made to work together for the achievement of success. Albeit the tactic implements a plan that is effective, failure to properly execute it causes it to fail drastically. If individual components fail to cooperate then the organization is walking on broken glass in terms of success achievement. Another demerit of the MOP approach is that it is extremely simplistic. Every element is at most, an approximation. In spite of that, each portion of the index is increased by the rest of the parts thus amplifying errors of every factor. The study of MOP influences the thinking and approach to management in that it provides an insight into the management, design as well as the modification of systems that form the products and services of the company. The better part of the resources (both human and financial) of many firms is capitalized in the actions that are involved in either the delivery of services or the designing of products. MOP is therefore indispensable to the success of the business entity. To sum up, a comprehension of the doctrines of MOP is of great magnitude to all managers for the reason that they are the providers of a methodical manner of examining the processes of an organization. The requirement of managing operations in manufacturing plus service effectively and in an efficient way opens up the door for increased interest in MOP in the recent years. Although the concept has been around long, it has had dramatic changes in the manufacturing industry. Reference ListTop of Form Top of Form Bottom of Form Top of Form Top of Form Bottom of Form Mentzer, J. T. (2001). Supply chain management. Thousand Oaks, Calif, Sage Publications. Neely, A. (2011). Exploring the financial consequences of the servitisation of manufacturing. Springer Science Business Media. Available at: http://dx.doi.org/10.1007/s12063-009-0015-5. [Accessed 17/3/2014] Slack, N. (1995). Operations management. (3rd ed). London, Pitman. Vandermerwe, S., & RADA, J. (1988). Servitisation of business: Adding value by adding services. European Management Journal. 6, 314-324. Bottom of Form Bottom of Form Read More