What’s the difference between a product and a service?
A product is an item of value that benefits a user.
A service is an activity that leads to the benefits for those availing of it.
Products are tangible, i.e., as in solid, liquid, gas, or energy, or as virtual (e.g. software, streaming videos, speeches, images).
Services are intangible; we can’t see, hear, smell, taste, or touch them.
Products are things which when used provide specific experiences or add value to activities such as materials for manufacturing.
Services are not only activities which also result in experiences but also are those that provide value to other activities such as freight services for deliveries.
Products are mostly straightforward items we can easily identify with: soap, food, metals, books, toys, cars, and movies.
Services are not as obviously straightforward. To experience a service, the service provider has to make us aware of it.
Products and services aren’t mutually exclusive, that is, they both can work as a tandem in what enterprises offer. An appliance like a refrigerator (product) may come with a warranty (service). A hotel offers rooms (products) and dining & housekeeping (services). Shipping lines transport (services) containers of merchandise (products).
Services are value-added experiences aimed at people for them to appreciate. A fine-dining restaurant, for instance, would invest in air-conditioning and interior décor, and train waiters to be polite and formal to provide a service of ambience for patrons.
Products offer value-added experiences from their usage. The food of the fine dining restaurant, for instance, is the product that gives patrons that experience of excellence in taste.
Supply chain managers sometimes swing their focus from service to product and vice-versa. SCMs can sometimes become so process-oriented about the product and end up sacrificing service.
A supply chain manager of an enterprise that makes floor tiles, for example, instils a policy in which freight trucks must be fully loaded before they will deliver to customers. A customer who doesn’t order a full load of tiles would have to wait for the floor tile company to process other customer orders that would fully load the delivery truck. The waiting customer wouldn’t appreciate the delay and wouldn’t rank the service as satisfying, never mind that she likes the product.
It may not be beneficial if the SCM decides to put more stress on service than the product. If the floor tile enterprise delivers less-than-truckload (LTL) to customers, the customers would no doubt be thrilled by the service but the enterprise would lose more from the cost and not turn a desired profit margin. The enterprise may then raise prices which may erode their customers’ appreciation of the product.
It is therefore important to have policies that consider both products and services. Policies for products and services should govern the scope of supply chains, that is, they shouldn’t be limited to just deliveries or purchases. The policies should be shared and owned by all who plan, buy, make, and deliver the products and provide the services.
SCMs have to take care that the policies are people-oriented as much as they would be customer-oriented. Airlines have made strides to avoid forcing passengers out of planes because of overbooking of flights; it doesn’t look good when one sees uniformed security personnel hauling a hapless passenger off a plane. On the other hand, airlines also have made progress in supporting their pilots and attendants such as ensuring the latter have rest days between flights and the authority to discipline misbehaving passengers. Policies are for people, whether customer, employee, or stakeholder.
The overall value of products and services, whether done individually or in tandem, is always a result of people (workers) doing their jobs and people (customers) appreciating (and paying for) them.
Products and services are different from each other but both add value for the enterprise. Supply chain managers play an essential role in how products and services become realities. They should take care that the policies they develop for each not only cover the scope of all activities behind them but also are centred on the people who are instrumental in bringing and appreciating value to those activities.
Ellery's Essays 