A Service‐oriented Manufacturing Strategy

Abstract

Introduces the concept of a manufacturing strategy based on a service orientation. Traditional manufacturing strategies have often been driven by cost minimization decisions and have encouraged the over‐reliance by managers on inventories to satisfy demand. In today′s business environment, a reliance on inventory is often not feasible. Suggests a reliance on capacity available to meet demand, as used by the service industry. Such a strategy is in direct conflict with most cost‐accounting systems because of the absorption of overhead costs based on direct labour. Proposes two alternatives for changing the accounting system, to enhance the move towards the service‐based strategy. Lastly, presents a case study of a US plant to illustrate the results that a company adopting this approach should expect.