What are the key differences between manufacturing and service organisations in regards to decisions in “capacity management” area? Please discuss and give examples. (100 words)
Second, in case of manufacturing, if the firm has a capacity less than the demand at a particular period, it is only a cost risk to the firm because it can be managed with a merely high cost of holding extra inventory. For service, however, this does not hold good because in that case, the capacity less than the demand means loss of customers. So the implication of having less capacity in service organization can be much serious.
Third, there is a lot of customer interaction happening during service which is not the case for manufacturing. Due to this interaction, the management never knows, with a satisfactory level of certainty, the time taken to serve a particular customer. As a result, the cycle time is not deterministic and it is thus very difficult to manage the capacity of a service facility with stochastic nature of cycle time for the service delivery process.