In this post, we discuss another key difference between service and manufacturing. Previously, we discussed how production and consumption is different in service versus manufacturing; we also covered the intangible differences between service and manufacturing, the topic of “inventory” and inventory in service versus inventory in manufacturing; then, we discussed the concept of variation in service versus variation in manufacturing. Most recently, we discussed the concept of variety in service versus variety in manufacturing.
Series on Difference Between Service Versus ManufacturingGo here for details on applying Lean for Service Operations. For other posts in this series, please refer to the table below:
Today, we’ll hit on the topic of benefits we gain from service operations versus manufacturing operations.
Substantive Benefits and Peripheral Benefits
Service usually consists of “substantive” and “peripheral” components. Let me explain.
In the service business, the product being offered has both substantive and peripheral components. For example, in the restaurant, the substantive components would be the food. The peripheral components would include such things as the comfort, the ambiance, etc. when we consider the service business, we have to take into account both substantive and peripheral aspects.
- Did you enjoy the ambiance in that restaurant? Was it pleasant?
- Was the décor nice? Did it suit the theme of the restaurant?
- Did the server treat you well? How so?
Put another way, we gain benefit from the actual good – which is sometimes tangible (such as food), but we gain benefit from how that good was rendered to us (not tangible).
One could even say that a product is a package of benefits as perceived by the consumer. In a service operation, a bundle of goods and services that are sold to the consumer have a relative importance. We have to put ourselves in the minds of the consumer and understand how the consumer perceives the importance of each – both substantive and peripheral.
For example, the food might be the best food ever, but we might gain zero peripheral benefit because we were treated very poorly.
The Soup Nazi Returns
In the 1990’s, there was a popular television show in America called “Seinfeld”. It was a comedy about nothing – yeah, nothing. But, it was funny.
As part of the story based in New York, there is a restaurant that serves amazing soup, leading to patrons waiting in long lines to get a bowl of the famous soup. But, even thought the soup was good, the chef of the restaurant was mean. So, he came to be called the “Soup Nazi”.
This is an example where the food was great (substantive benefit), but the service stunk (peripheral). Despite that, patrons were willing to suffer with bad service because the soup was so good (watch soup nazi video below).