Production planning and management - Agribusiness Management - page 326

Issues in operations management
Whereas cost and effi ciency were once the main issues of operations managers, fi ve issues
concern operations management for the food and agribusiness sectors:

1. The growing service sector

2. Time-based competition

3. Productivity improvement

4. Global competition

5. Quality

The growing service sector

Operations management was once simply known as production management because of its
focus on the manufacturing sector. However, the service sector is now the fastest growing
sector of the U.S. economy, comprising roughly 62 percent of U.S. GDP (U.S. Department
of Commerce 2011). There are, of course, differences between manufacturing and service
organizations, but the differences are shrinking as techniques for managing manufacturing
fi rms fi nd their way to service fi rms and vice versa. Some characteristics that distinguish the
two sectors are shown in Table 14.2 .
Goods producers are distinguished from service producers because their products are
physical, durable, and can be inventoried. Service fi rms produce intangibles—ideas, infor-
mation, performances, etc. Some service organizations like restaurants typically produce a
good and a service—food and service. Many farm supply retailers not only provide quality
products, but also services such as product information, delivery, product assembly, and
credit. Service providers, unlike manufacturers, tend to have high levels of customer contact,
and response time to customers is often measured in minutes, rather than days and weeks for
goods producers.
Goods producers tend to serve regional or even international markets whereas services
tend not to be able to be shipped. Rather, service producers tend to locate near the customer
(although this is changing with web services like Amazon). Quality is more easily measured

Table 14.2 Characteristics of goods producers and service providers

More Like a Goods Producer More Like a Service Provider

Physical, durable product Intangible, perishable product

Output can be inventoried Output cannot be inventoried

Low customer contact High customer contact

Long response time Short response time

Large facilities Small facilities

Capital intensive Labor intensive

Quality easily measured Quality not easily measured