What is the difference between a manufacturing and a service economy?
What Is the Service Sector?The service sector produces intangible goods, more precisely services instead of goods, and according to the U.S. Census Bureau, it comprises various service industries including warehousing and transportation services; information services; securities and other investment services; professional services; waste management; health care and social assistance; and arts, entertainment, and recreation. Countries with economies centered around the service sector are considered more advanced than industrial or agricultural economies. Show
Key Takeaways
Understanding Service SectorThe service sector, also known as the tertiary sector, is the third tier in the three-sector economy. Instead of product production, this sector produces services maintenance and repairs, training, or consulting. Examples of service sector jobs include housekeeping, tours, nursing, and teaching. By contrast, individuals employed in the industrial or manufacturing sectors produce tangible goods, such as cars, clothes, or equipment. Among the countries that place heavy emphasis on the service sector, the United States, the United Kingdom, Australia, and China rank among the top. In the United States, the Institute for Supply Management (ISM) produces a monthly index that details the general state of business activity in the service sector. This index is regarded as a metric for the overall economic health of the country because approximately two-thirds of U.S. economic activity occurs in the service sector. The Service Sector in the Three-Part EconomyThe service or tertiary sector is the third piece of a three-part economy. The first economic sector, the primary sector, covers the farming, mining, and agricultural business activities in the economy. The secondary sector covers manufacturing and business activities that facilitate the production of tangible goods from the raw materials produced by the primary sector. The service sector, though classified as the third economic sector, is responsible for the largest portion of the global economy’s business activity. Technology in the Service IndustryTechnology, specifically information technology systems, is shaping the way businesses in the service sector operate. Businesses in this sector are rapidly placing more focus on what is becoming known as the knowledge economy, or the ability to surpass competitors by understanding what target customers want and need, and operate in a way that meets those wants and needs quickly with minimal cost. In nearly all industries within the sector, businesses adopt new technology to bolster production, increase speed and efficiency, and cut down on the number of employees required for operation. This cuts down on costs and improves incoming revenue streams. Tangible output: Service operations are typically found in banking, hospitality, advertising, consultancy and the public sector. The output of a service firm, such as consultancy or training, is intangible.
Manufacturers produce tangible goods, which are physical products that can be held and seen and stored. Inventory: Service firms, unlike manufacturers, do not hold inventory; they create a service when a client requires it, it cannot be stored. Manufacturers produce goods for stock, with inventory levels aligned to forecasts of demand. Inventory also represents a cost. Customisation vs. Standardisation: Manufacturers have a standardised way of
producing goods en-masse in a factory. One finished product is defined, fixed and the same as the next. They can also produce for stock in advance of any orders. Service firms do not produce a service unless a customer requires it, although they design and develop the scope and content of services in advance of any orders. Service operations have more opportunities to customise the services they provide tailored to customers’ needs. E.g. beauticians and hairdressers must customise the styling
and treatments to match the customer’s hair, shape of face etc. Labour: A service firm recruits people with specific knowledge and skills in the disciplines that it offers. Service delivery is labour intensive and cannot be easily automated, although knowledge management systems enable a degree of knowledge capture and sharing. Manufacturers can automate many production processes to reduce their labour requirements or relocate to countries where labour costs are low. Location: Service firms do not require a physical production site. The people creating and delivering the service can be located anywhere. For example, global consulting firms use communication networks to access the most appropriate service skills and knowledge from offices around the world. Manufacturers must have a physical location for their production and stock holding operations. Production Environment: Manufacturing and service operations both plan the environment in which work takes place, but they focus on different elements. Manufacturing operations consider the manufacturing layout and its affect on the flow of work: fixed, process-focused or product-focused (assembly line). In a service operation managers schedule workers to handle customer demand. They must coach and train employees to provide optimal services to customers when they arrive. Service operations also plan the environment according to how it affects customers. They are concerned about the atmosphere for customers, layout of furnishings, arrangement of signs and colours and sounds designed to enhance the customer experience. Extract from articles by Ian Linton and Matthew Schieltz, Demand Media What is difference between manufacturing and service?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.
What is the difference between manufacturing and service industry explain with an example each?The key difference between service firms and manufacturers is the tangibility of their output. The output of a service firm, such as consultancy, training or maintenance, for example, is intangible. Manufacturers produce physical goods that customers can see and touch.
What is the relationship between service and manufacturing?Manufacturing companies rely heavily on services to coordinate their integrated production sites and move intermediate goods from one production location to another in value chain structures around the world before finalization.
What is the meaning of service economy?an economy based on providing services rather than manufacturing or producing goods: The UK is a major service economy.
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