The basic functions and concepts of management are common to all types of organizations including manufacturing and service organization. However, because of some fundamental differences in the the nature of products created and marketed by these two types of organizations, the relative importance of different management concepts an approaches differ for them.
During the earlier days of development of management thought, the the difference between nature of operations of manufacturing and service organizations was not very much appreciated. The management concept, tools and techniques were developed primarily with manufacturing organizations in mind. The special nature of service organizations and the need to develop management approaches for their specific requirements, as opposed from requirements of manufacturing organizations was recognized for the first by some management thinkers in mid-nineteenth century. Subsequent to that interest in management of service organization developed. This increased interest in management of service organization was considerably fanned by increasing percentage of their contribution to GDP of developing countries.
The major cause of difference between the operations of manufacturing and service organizations arises from the difference between nature of products they create and market. While manufacturing organizations sell physical goods that are tangible, service organizations provide services that are intangible. Because of their intangibility creation and marketing of services display some characteristics not applicable to physical goods.
Unlike physical goods, services cannot be manufactured and stored for customers to by and use at some later date. Services must be received and consumed by customers as these are produced. Services created and not consumed simultaneously perish for ever. Management implication of this characteristics is that the supply of service must be closely matched with the demand.
Simultaneous creation and consumption of services also means that services cannot be inspected before these are supplied to the customers. Physical goods of manufacturing companies can be inspected and defective goods, if any, can be sorted out before supply to the customers. This is not possible for service organization. This inability to inspect and sort out sub standard services creates additional management challenges of maintain high standards of quality without inspection. Also, when there is a quality failure, it becomes important to find way of recovering from negative effects of failure to provide satisfactory service to customers.
The problem of ensuring quality in service organizations is further compounded by the fact that there are many variables that affect the quality of service delivered. These factors include the unpredictability of human behavior and the impact of external environment not within the control of service provider.
Finally, the quality of service provided covers in addition to the basic service other factors such as the service provider, the service process, and the physical environment. Thus management must give close attention to all these factors.
The most important services management task is management of the service personnel. Many of the most important services management concepts are concerned with motivating and training the employees to provide good quality service and to become an effective marketers for the organization's services.