{"id":8172,"date":"2011-04-05T06:07:41","date_gmt":"2011-04-05T13:07:41","guid":{"rendered":"https:\/\/staging.opexlearning.com\/resources\/?p=8172"},"modified":"2014-10-18T13:04:08","modified_gmt":"2014-10-18T18:04:08","slug":"inventory-management-service-manufacturing","status":"publish","type":"post","link":"https:\/\/staging.opexlearning.com\/resources\/inventory-management-service-manufacturing\/8172\/","title":{"rendered":"Inventory in Service Industry versus Manufacturing"},"content":{"rendered":"<div class=\"a296a24fa2fc69ef5487857f02f111e8\" data-index=\"9\" style=\"float: none; margin:10px 0 10px 0; text-align:center;\">\n<script async src=\"\/\/pagead2.googlesyndication.com\/pagead\/js\/adsbygoogle.js\"><\/script>\r\n<!-- Single Post readerboard -->\r\n<ins class=\"adsbygoogle\"\r\n     style=\"display:inline-block;width:728px;height:90px\"\r\n     data-ad-client=\"ca-pub-8207522353004717\"\r\n     data-ad-slot=\"1144967431\"><\/ins>\r\n<script>\r\n(adsbygoogle = window.adsbygoogle || []).push({});\r\n<\/script>\n<\/div>\n<p>In this post, we discuss the one key difference between inventory in service industry and manufacturing, Previously, we discussed how <a title=\"production and consumption in service and manufacturing\" href=\"https:\/\/staging.opexlearning.com\/resources\/lean-in-service-manufacturing-production-consumption\/8032\/\">production and consumption is different in service versus manufacturing<\/a>; we also covered the <a title=\"intangible aspects in service and manufacturing\" href=\"https:\/\/staging.opexlearning.com\/resources\/intangible-aspects-in-service-operations-management\/8171\/\">intangible differences between service and manufacturing<\/a>. In this post, we&#8217;ll discuss the topic of &#8220;Inventory&#8221; and how that might be understood in a service context and a manufacturing context.<\/p>\n<h2>What is Inventory in Manufacturing?<\/h2>\n<p>In Manufacturing, Inventory is typically understood as (1) the components used to build the finished product and (2) the finished product themselves. Inventory has the unique property of &#8220;cash sitting in product&#8221; &#8211; in other words, inventory does nothing for the business until it is sold in exchange for a more liquid asset, such as cash. Until then, <a title=\"How Much Does Inventory Really Costs?\" href=\"https:\/\/staging.opexlearning.com\/resources\/inventory-carrying-costs-equation\/5368\/\">inventory is a cost<\/a>.<\/p>\n<h2>Series on Difference Between Service Versus Manufacturing<\/h2>\r\nGo here for details on applying <a title=\"lean for service operations articles and case studies\" href=\"https:\/\/staging.opexlearning.com\/resources\/lean-services\/\">Lean for Service Operations<\/a>. For other posts in this series, please refer to the table below:\r\n<BR><br>\r\n<div align=\"center\">\r\n<table border=\"1\" cellpadding=\"5\">\r\n<tbody>\r\n<tr>\r\n<td style=\"text-align: center;\" align=\"middle\" valign=\"top\" width=\"52%\">\r\n<h3><strong>Service Business <\/strong><\/h3>\r\n<\/td>\r\n<td style=\"text-align: center;\" align=\"middle\" valign=\"top\" width=\"47%\">\r\n<h3><strong>Manufacturing Business<\/strong><\/h3>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"text-align: center;\" valign=\"top\"><a title=\"lean, simultaneous production and consumption\" href=\"https:\/\/staging.opexlearning.com\/resources\/lean-in-service-manufacturing-production-consumption\/8032\/\">simultaneous production and consumption (co-creation between producer and consumer)<\/a><\/td>\r\n<td style=\"text-align: center;\" valign=\"top\"><a title=\"lean, production and consumption at different stages\" href=\"https:\/\/staging.opexlearning.com\/resources\/lean-in-service-manufacturing-production-consumption\/8032\/\">consumption and production at different stages<\/a><\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"text-align: center;\" valign=\"top\"><a title=\"service operations lean six sigma\" href=\"https:\/\/staging.opexlearning.com\/resources\/intangible-aspects-in-service-operations-management\/8171\/\">many critical aspects are intangible<\/a><\/td>\r\n<td style=\"text-align: center;\" valign=\"top\"><a title=\"service operations, lean service\" href=\"https:\/\/staging.opexlearning.com\/resources\/intangible-aspects-in-service-operations-management\/8171\/\">many critical aspects are tangible<\/a><\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"text-align: center;\" valign=\"top\"><a title=\"inventory in service versus manufacturing\" href=\"https:\/\/staging.opexlearning.com\/resources\/inventory-management-service-manufacturing\/8172\/\">concept of inventory may not be material, but can be virtual such as requests and, in healthcare, patients waiting for service can be considered a type of inventory<\/a><\/td>\r\n<td style=\"text-align: center;\" valign=\"top\"><a title=\"inventory in service, inventory in manufacturing\" href=\"https:\/\/staging.opexlearning.com\/resources\/inventory-management-service-manufacturing\/8172\/\">usually has inventory and buffers<\/a><\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"text-align: center;\" valign=\"top\"><a title=\"variability, variation in service\" href=\"https:\/\/staging.opexlearning.com\/resources\/service-and-manufacturing-variation-and-variability\/8389\/\">considerable variability in service delivery<\/a><\/td>\r\n<td style=\"text-align: center;\" valign=\"top\"><a title=\"variation, variability in manufacturing\" href=\"https:\/\/staging.opexlearning.com\/resources\/service-and-manufacturing-variation-and-variability\/8389\/\">some variation<\/a><\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"text-align: center;\" valign=\"top\"><a title=\"variety in service operations\" href=\"https:\/\/staging.opexlearning.com\/resources\/service-and-manufacturing-the-concept-of-variety\/8392\/\">open universe in variety of service cases<\/a><\/td>\r\n<td style=\"text-align: center;\" valign=\"top\"><a title=\"variety in manufacturing operations\" href=\"https:\/\/staging.opexlearning.com\/resources\/service-and-manufacturing-the-concept-of-variety\/8392\/\">closed set in variety in product manufacturing<\/a><\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"text-align: center;\" valign=\"top\"><a title=\"customer benefits from service operations\" href=\"https:\/\/staging.opexlearning.com\/resources\/substantive-peripheral-benefits-service-manufacturing\/8395\/\">substantive and peripheral benefits<\/a><\/td>\r\n<td style=\"text-align: center;\" valign=\"top\"><a title=\"customer benefits from manufacturing\" href=\"https:\/\/staging.opexlearning.com\/resources\/substantive-peripheral-benefits-service-manufacturing\/8395\/\">mainly substantive product benefits<\/a><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\n<BR>\n<h2>What is Inventory in Service?<\/h2>\n<p>The concept of inventory in a service context is a little difficult to explain and can take on different forms, depending on context. But in general, inventory in a service context, is not to be equated with inventory in a manufacturing context &#8211; inventory in service is quite intangible and sometimes it is not a &#8220;real good&#8221;. Here are some examples,<\/p>\n<ul>\n<li>Inventory in an emergency room might be the people waiting; in this context, increasing patient flow means that we reduce inventory (people) and, in other words, we serve more patients in a more timely manner. But, who wants to call people &#8220;inventory&#8221; &#8211; it&#8217;s not appropriate, but one could misapply the term and reduce people to inventory.<\/li>\n<li>Inventory in a service context often has the property of intangibility &#8211; that is, it&#8217;s not often a &#8220;real good&#8221; that one could point to in a moment of time. For example, seats at a movie theater could be considered &#8220;inventory&#8221;, but there are other more creative labels for &#8220;unused capacity&#8221;, such as &#8220;occupancy rate&#8221;, and others. But, it is basically inventory. Back to the movie theater example, unused seats in a movie theater could be considered inventory for which there is no demand &#8211; this means it is &#8220;cash left on the table&#8221;.<\/li>\n<\/ul>\n<p>Notice that how we understand the concept of &#8220;inventory&#8221; determines how we approach it. In the above examples, on the one hand &#8220;inventory&#8221; should be reduced but, on the other hand, inventory ought to be satisfied or &#8220;filled up&#8221;.<\/p>\n<h2>No Inventory or Buffers<\/h2>\n<p>Here are a few examples to illustrate the concept of &#8220;intangible&#8221; in service versus manufacturing.<\/p>\n<h3>Manufacturing Parts<\/h3>\n<p>If we manufacture widgets, those parts may go to a retail outlet to be placed in inventory. If the demand suddenly decreases, that inventory is the buffer between production and the demand. The goods will stay in inventory and can be sold later.<\/p>\n<h3>Airline Management<\/h3>\n<p>Or, if you have too many seats on an airline, or if the airplane is too large for the demand for traveling from point A to Point B, you cannot save those seats for later. When that flight takes off without passengers, those seats are gone.<\/p>\n<!--CusAds0-->\n<div style=\"font-size: 0px; height: 0px; line-height: 0px; margin: 0; padding: 0; clear: both;\"><\/div>","protected":false},"excerpt":{"rendered":"<p>In this post, we discuss the one key difference between inventory in service industry and manufacturing, Previously, we discussed how production and consumption is different in service versus manufacturing; we also covered the intangible differences between service and manufacturing. In this post, we&#8217;ll discuss the topic of &#8220;Inventory&#8221; and how that might be understood in [&hellip;]<\/p>\n","protected":false},"author":12327,"featured_media":8388,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","footnotes":""},"categories":[613],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v23.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Concept of Inventory in Service Industry and Manufacturing<\/title>\n<meta name=\"description\" content=\"How should we understand the concept of inventory in 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