Differences Between Goods and Services

IOM1 Differences between Goods and Services

[20 pts] Explain differences between goods and services in terms of:

• Customer contact for goods is low because a customer buying goods will never come in contact where the goods are being produced. Versus for services its high because the customer is usually present during the formation of the service.

• Opportunity to correct problems for goods is high because they may be exchanged or tailored versus for a service low because you can’t reconstruct a service that has already been performed.

• Variability of input is low because you can always fix or change the goods being produced and output is high because you can’t change the finished product.

• Measurement of productivity for goods is simple because you can count the amount of finished goods and inventory, and for services difficult because you can’t keep track of all the services being given.

• Evaluation of employees for goods is easy as you can monitor the outcome but for services it is difficult because you can’t supervise all services performed.

IOM2 Customization

[10 pts] Discuss the impact of higher customization on complexity of manufacturing or service processes, level of worker skills, and productivity.

The impact of higher customization compared to standardized products and services is that it is more labor-intensive, and more time-consuming resulting in a slower workflow. In addition customization requires highly skilled worker skills, more flexible equipment, much lower volume of output, and higher price tags.

IOM3 Trade-offs in Services

[10 pts] Discuss the trade-offs that might arise in a fast-food restaurant when the number of cashiers is increased or decreased.

In a fast food restaurant having more cashiers will be a greater expense but the level of customer service will increase. In contrast decreasing the number of cashiers is more affordable but can result in a loss of revenue. This may result in not being able to take as many orders per day that can lead to angry customers.

IOM4 Mini-Case: Zara - Fast Fashion

Amancio Ortega Gaona, the founder of Inditex, thought that consumers would regard clothes as a perishable commodity just like yogurt, bread, or fish to be consumed quickly, rather than stored in cupboards, and he has gone about building a retail business that provides “freshly baked clothes.” Getting locally targeted designs quickly onto store shelves is where Zara excels. One telling example is: “When Madonna played a set of concerts in Spain, teenage girls arrived to the final show sporting a Zara knock-off of the outfit she wore during her first performance.”