Documentos de Académico
Documentos de Profesional
Documentos de Cultura
The Authors
Abstract
The research reported examines the role of service in manufacturing. Focuses on the degree to which
Chase′s “Service Factory” concept is applicable in the UK. Also examines the role of service in four
manufacturing companies. It was found that the roles reported by Chase in the USA are also used by a
number of UK companies, and it is concluded that the service-factory concept is robust and is not
necessarily embedded in some of the cultural norms of the USA, as are some TQM practices. The case
data indicated that the source of customer service may be in customers being served by various parts of
the organization, that customer service is complex and that service levels are a function of both
manufacturing and distribution. This would seem to point to the distribution view of customer service,
the field-service view and/or the service-factory view being too narrow in terms of the company as a
whole.
Article Type:
Keyword(s):
Journal:
Volume:
12
Number:
Year:
1992
pp:
93-99
Copyright ©
MCB UP Ltd
ISSN:
0144-3577
Chris Voss
London Business School, UK
93
Much of the writing on service in the operations management literature has focused
on the application of manufacturing-based concepts in a service environment[1,2,3,4].
There has been a limited amount of consideration of the service element of
manufacturing companies such as field-service operations[5], but only recently
has the reverse begun to take place. A key contribution to this reverse trend is
the "service factory" concept developed by Richard Chase[6]. The research reported
in this article focuses on this concept and its application in a UK environment.
The Value of Service to a Manufacturing Firm
Heskett et al.[7] in their study of "Breakthrough" service firms argue that
it is necessary to develop intense customer loyalty. The reasons given for this
were:
● There is a start-up cost associated with new customers.
● It costs less to serve repeat customers.
● Loyal customers are more vocal in telling others about the excellent
service that they are receiving.
● Holding on to existing customers is less costly than attracting new ones.
The longer a customer is retained, the greater the profit impact. Heskett et
al. quote a paper by Richeld and Sasser[8] which shows that the impact of a
5 per cent point retention rate on various services ranged from 25 to 125 per
cent. As a result, they argue that retaining customers should be a strategic
focus of most service firms.
Does this argument also apply to manufacturing companies? It is the contention
of this article that it does. There is evidence that "service" has a similar role
in manufacturing. In a study by the Forum Corporation[9] companies who had
switched their purchases from one company to another were asked why they
had done so. Their responses were:
● poor service — 40 per cent
● inferior product — 7 per cent
● too expensive — 7 per cent
The Research
The objectives of the research were:
● to identify the use of service-factory models by UK factories; and
● to develop a methodology whereby companies could review the service
needs of their customers and develop appropriate service responses.
Factory as a showroom
Service
Concepts in
Manufacturing uses its facilities to support sales through showing off its:
Manufacturing
● products and processes;
● people;
● quality commitment
Factory as a despatcher 95
The ability of manufacturing to support customer delivery needs, to support the distribution
function, and to support other customer needs after the sale, such as status tracking and
feedback and engineering-change order management
Factory as a laboratory
Manufacturing's ability to furnish critical data on processes and their costs, for example
through providing fast accurate process feedback to R&D and providing fast product-build
feedback to marketing
Factory as a consultant
Manufacturing's ability to assist internal and external groups in problem solving in areas
such as:
● quality improvement;
● cost reduction;
● new uses for the firm's products
Table I.
Source: [6]
Service-factory
Roles
The methodology was in two parts. The first was a one-day workshop attended
by representatives from 20 UK companies. Prior to the workshop, they reviewed
service within their own companies on a standard format. During the workshop,
they discussed the service-factory concepts and then identified their service-
factory activities.
The second part of the research was to develop a methodology for identifying
customer service needs and translating these into service development. Three
companies participated fully in this part of the research and a fourth had partial
involvement. The results reported here are primarily from the first part of this
research.
Results
Workshop Data
Analysis of the workshop results showed that all four roles were found in the
UK. Examples are given as follows:
Showroom. This was widely used. ICI Films stated that it had invested £1
million extra in developing a new plant into a showroom. The company felt that
it had paid back this investment in one year. Both Raychem and ICL had used
plant visits to demonstrate their quality systems and quality commitment.
Another company had found that plant visits by its representatives had resulted
in feedback which had led to product-mix changes and increase in sales volume.
Perhaps the most interesting use of this role was by Disctronics, which manu-
IJOPM manufactures compact disc (CD) records. It used plant visits to shape customer
12,4 expectations on response times. Disc purchasers' expectations had been shaped
by vinyl recording technology, which was simple and fast. Their expectations
were thus much higher than the capability of CD production. Plant visits
effectively lowered these to a more realistic level and increased customers'
perceptions of level of service.
Despatcher. The UK response in this area was dominated by two sets of
96 actions. A number of companies, such as British Steel, ICI Paints and DEC,
had introduced electronic data interchange (EDI). This was designed both to
shorten lead times and to lock customers into the supplier through use of the
system. A second set of approaches could be described as JIT. For example,
Knowles electronics had introduced kanban links between it and its customers,
with the result that lead times had been drastically reduced. Another company
had dedicated customer service representatives at each plant, whose job it was
to manage the customer plant interface and maximize service in this area.
Consultant. There was a very wide variety of approaches. One company had
set up a complete production plant using the technology of its major customer
so as to provide effective technical service. Lucas Engineering and ICI Films
both set up teams to solve customer problems, ICI using joint quality teams.
Klix and DEC both involved people from production in installation of their products.
A consultancy role observed in the USA, but not found in the UK, was the
factory outreach programme, where employees routinely contact customers.
This programme was seen as very attractive by UK companies and plans are
under way to experiment with such programmes in a number of companies,
particularly in conjunction with TQM programmes.
Laboratory. This was the role least reported by the sample of companies.
However, there were a number of examples. ICI was using the plant to
experiment with cleaning solvents to identify appropriate use for products. TI
Apollo was doing the same in experimenting with complexity to achieve the
desired characteristics for golf-club shafts.
Case Data
In each of the four cases, the role of service was studied. The results are as
follows.
Company 1
This was a small company with one European factory, which served the market
directly. It sought to use service to gain an advantage over its competitors.
Company 2
This company had two parallel manufacturing and distribution chains, one for
large products, the other for small. It used service primarily to differentiate
themselves from competitors. In addition, there was considerable overlap in
the products of the two chains, which in turn led to internal rivalry. Both were
trying to use service to differentiate themselves from the other internal
competitor so as to gain more corporate resource and reward.
Company 3 Service
This was a multinational manufacturer and distributor of consumer products. Concepts in
It had a multilayered distribution chain. The factory supplied the distribution Manufacturing
function which in turn serviced field representatives, a chain of home sales
persons and finally the ultimate customer. Each of these four sets of customers,
three internal and one external, was considered important by manufacturing.
Indeed it was found that for manufacturing, internal marketing had become
important, because the distribution department had the power to buy from 97
outside the company. It had been doing this on an increasing basis and
manufacturing was using service as one of the means to persuade distribution
to purchase more internally manufactured goods.
Company 4
This was a major multisite process-industry company. The factories in this
organization sold both directly to the ultimate customer and to a wholly owned
distribution and stockholding company. The factory tended to serve larger users
and the stockholder the smaller users. Both factory and stockholder were trying
to respond to customer service needs. The factory had a reputation for strong
technical support for its users. As with Company 2, there was strong rivalry
between the two separate channels of distribution and, as in Company 3, the
stockholder was able to buy from outside if internal price or service were too
poor. The result was a strong focus on customer service by the factories.
References
1. Sasser, W.E., Olsen, P. and Wyckoff, D., Management of Service Operations, Allyn and
Bacon, Boston, MA, 1978.
98 2. Voss, C.A., Armistead, C., Johnston, B. and Morris, B., Operations Management in Service
Industries and the Public Sector, John Wiley & Sons, Chichester, 1985.
3. Lovelock, C., Managing Services, Prentice-Hall International, London, 1988.
4. Bateson, J., Managing Services Marketing, Dryden Press, Chicago, IL, 1989.
5. Voss, C.A., "Field Service Management", in Voss et al.[2].
6. Chase, R. and Garvin, D.A., "The Service Factory", Harvard Business Review, July/August
1988, pp. 61-9.
7. Heskett, J.L., Sasser, W.E., and Hart, C.W.L., Service Breakthroughs, Free Press, New
York, 1990.
8. Richeld, F. and Sasser, W.E., "Customer Retention: A New Star to Steer By", working
paper, Bain and Co, 1989, quoted by Heskett, et al.[7].
9. Forum Corporation, "Customer Focus Research", executive briefing quoted in Chase,
R., Kumar, K.R. and Younghandl, W.E., "Service Based Manufacturing, the Service
Factory", Research Paper DS-90 39, University of Southern California, 1990.
10. Hill, T., Manufacturing Strategy, Macmillan, London, 1985.
11. Christopher, M. and Yallop, R., Audit Your Customer Service Quality, Cranfield School
of Management, 1991, p. 6.
12. Chase, R., Presentation at the London Business School, 1990.
UK Examples
Knowles Electronics: Uses Kanban links (tokens, empty trays) to reduce LT from 8 weeks to
British Steel: Uses EDI to shorten order LT. Locks competitors out.
ICI Paints: Uses EDI to dispatch up to 50 per cent of volume. Instant despatch of standard
Digital: EDI reducing order LT from 40 days to 4 days. Breakthrough will be when all customers
Laboratory
US Examples
Chapparral Steel: "Our factory is our lab for testing new processes".
UK Examples Service
ICL: Link with digital to develop equipment to drive robots.
Concepts in
ICI: Experiment with cleaning solvents to identify appropriate use for products.
Manufacturing
TI Apollo: Work on complexity to achieve desired characteristics for golf-club shafts.
Showroom
US Examples
Allen-Bradley: Showcasing its products in its factory-within-a-factory CIM operation in Milwaukee.
UK Examples
ICI Films: Elm extra investment in new plant: payback less than one year. "Using problems
Disctronics: Show customers how difficult it is to make CDs. Modify their expectations.
Consultant
US Examples
ACH: Factory technicians help doctors to customize Angioplasty equipment at the factory.
Tektronix: Each product has card inviting customers to phone the shopfloor on a free "800"
number. Customers typically:
● want to talk to someone who made the product;
● discuss other uses of product;
● discuss problems, seek clarification;
● find out about other products.
Customers called every 6 months as part of "factory outreach" programme.
Conner Peripherals: Factory gives advice at the selling stage. "We will lower your costs for you".
UK Examples
ICI Chemical & Polymers: Installed telephone number for Japanese supplier to call direct with
queries over materials. Acts as consultant on health and safety and environment.
Klix: Manufacturing operatives carry out installation and service on vending machines.
Digital: Developed relationship between account team and plants — use plant managers as
ICI Film+s: Quality team partnership with major customer. Focus on waste reduction.