By Dick Crandall, Ph.D., CFPIM, CIRM

A fter more than 40 years of developing a body of knowledge directed primarily at manufacturing operations, APICS is launching a new initiative to extend the application of this body of knowledge to services operations. On Oct. 28, the Society announced the formation of the new APICS Services (SVC) SIG. The SIG will focus on the application of the APICS body of knowledge not only into the service sector, but also into service functions and processes within manufacturing itself.

"Service" is a term that covers a wide range of activities. Many classification systems, including the government's Standard Industrial Classification (SIC) code, attempt to segregate businesses and governmental agencies into agriculture, manufacturing and service groupings. However, the fact is that almost all businesses are a combination of manufacturing and service.

• A restaurant transforms (manufactures) the raw materials of meat and vegetables into meals which, when combined with other services, provide the total dining experience for the customer.

• A magazine publisher manufactures a magazine but, through content selection, layout, advertising, distribution, and administrative services, transforms an uninformed reader into an informed reader.

• A hospital transforms an untreated patient into a treated patient by moving the patient through a series of steps, much as products move through a manufacturing process.

• A customer order for a manufactured product moves through order entry, engineering design, credit approval and other "service" activities in a manufacturing company.

• An electric utility manages inventory, not of electricity, but of spare parts for their equipment. They also plan capacity requirements in much the same manner as manufacturing companies.

• Many government agencies, such as immigration, must maintain records of their applicants who move through a series of steps or a process, a la manufacturing, to become naturalized citizens.

Similarities between manufacturing and service can be found in almost every type of business activity. Both are concerned with transforming inputs into outputs. In manufacturing, the inputs are raw materials, such as steel, wood or chemicals. The outputs are tangible goods, and the quality is definable. In service, the inputs are often people, such as a customer waiting at a checkout line in a supermarket, and the outputs are those same people after they complete the checkout. The quality in a service process is often difficult to define and may be unique to the product. In both manufacturing and service, however, the goals are similar — to develop a process that will produce a good or a service of value to the customer.


Service functions within manufacturing companies
As international competition has increased, customer demands for manufactured goods have increased. A couple of decades ago, customers were concerned with product availability and price, both product-oriented features. During the past decade, the emphasis on quality has become paramount, and there has been an increasing demand for faster response, on-time deliveries, and flexibility in both product volume and selection. These latter features are more customer-oriented than product-oriented. In order to compete, manufacturing companies must not only manufacture (transform raw materials into finished goods) but also provide a service (transform unsatisfied customers into satisfied customers). See Figure 1.

Thus, customers have become the focal point of most manufacturing companies. Improving customer service, whether with faster deliveries or higher product quality, is of paramount importance. Reducing response time to the customer depends every bit as much on faster processing of customer orders through engineering, credit approval and production planning as through the factory. Many companies already schedule orders and apply techniques such as the theory of constraints to the nonvalue-added areas of factory overhead, but many do not. Reducing lead times from suppliers through the use of electronic data interchange helps just as much as reducing queue time on the shop floor.

The time has come to extend the APICS body of knowledge to all functions within manufacturing companies. Many companies need to improve their internal service activities and should seize the opportunity and encouragement to develop or use newly developed applications of familiar techniques. Order scheduling, capacity planning, and demand forecasting are but a few of the methodologies that offer possibilities in this service area. Many other concepts developed in the APICS Certified in Production and Inventory Management (CPIM) program are equally applicable.


Service processes along manufacturing's supply chain
Distribution of a manufactured product is becoming more competitive and complex as global markets become the rule, not the exception. Vertical integration, once considered desirable, has given way to strategic partnerships. A more limited factory focus makes manufacturers more dependent on the wholesale and retail processes that get the product to the customer. The field service process may be handled by either the manufacturer or a third party. Inventory management, improved scheduling, and resource allocation offer excellent improvement opportunities. The APICS Certified in Integrated Resource Management (CIRM) program provides applicable concepts.


Service industries separate from manufacturing
A number of service industries have a different, but equally important relationship with manufacturing — they are customers who buy computers, medical equipment, material handling equipment, office furniture, and the like. They may also be suppliers to manufacturers, such as insurance companies, software developers, medical service and rehabilitation units, and even local, state and federal governments. The manufacturing world is dependent on these industries. APICS should provide its body of knowledge to these industries and, in turn, expand its body of knowledge by what it learns from working more closely with these industries.

In this arena, we have already discovered a number of examples where the APICS body of knowledge applies to seemingly unrelated situations.

•  A member of the task force that helped develop the APICS Service SIG has used CPIM training materials for more than 130 employees in a major retail company, with significant success.

•  A state governmental unit is using production activity control techniques in scheduling and monitoring the progress of immigration cases. This unit plans capacity requirements in terms of product families and is working to reduce the processing time from the initial application to the final awarding of citizenship.

•  A study found that demand management (matching of capacity to demand in a zero-inventory environment) is important in a variety of industries — wholesale, retail, hospitals, utilities, banks and professional firms. Yet, most of the companies interviewed agreed that they did not have an organized approach to this need, at either the strategic or operational level.

In 1997, we developed basic communication tools to be made available to more than 3,000 APICS members who are already working in service areas. The tools include a quarterly newsletter, a book of readings from published APICS materials, recommended books available through the APICS Bookstore and, through the APICS E&R Foundation, a collection of service case studies. In the coming years, we will:

1) support the use of the existing educational materials available from APICS by:

•  providing additional networking opportunities through published materials and expanded use of the Internet

•  applying production and inventory management education (e.g., workshops, seminars and courseware) within customer service-related manufacturing operations — processing customer orders through order entry, engineering design, credit approval and customer service

2) applying integrated resource management education (e.g., workshops, seminars and courseware) to wholesale and retail processes within the manufacturing supply chain

3) adapt the existing educational materials for use in new application areas, such as:

•  translate the terminology used by APICS to the terminology used in specific service industries, such as retailing, distribution, banking, utilities and hospital management

•  adapt current certification programs and in-house training programs for use in service industries

4) develop new educational materials through a series of strategic partnerships with "key account" companies, in such applications as:

•  care paths in hospitals

•  demand management in electric utilities and banks

•  order processing and scheduling in service maintenance operations

•  project management and employee staffing in professional firms (e.g., consulting and legal)

•  customer service in hospitals and banks

For example, the APICS CPIM and CIRM programs have already been adapted to specific service industry needs by such retail establishments as Starbucks and Kmart, consulting groups such as Grant Thornton, and hospitals such as the Jewish Hospital in Cincinnati and the Family Medical Center, Highland Hospital, in Rochester, N.Y.

In addition, APICS has developed a supply management training outline with specific application potential to the utilities industry. If the project moves forward as hoped, the learning resources produced could help electric and gas utility companies save millions in inventory expense.

In many ways, we have only scratched the surface as far as potential in adapting the APICS body of knowledge to service processes, functions and industries. In the coming months and years, APICS and the SVC SIG will continue to seek out new ideas and leading-edge applications in this area.

Copyright © 2020 by APICS — The Educational Society for Resource Management. All rights reserved.

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