Supply Chain: Service Model

This is a series on Supply Chain Basics looking at the discipline from the Society of Operations Management perspective. Supply chain is also essential to project management as PMs are typically trained in world class contracting. The Defense Acquisition Workforce Improvement Act, DAWIA, certification highlights the combination of project management and supply chain. In this post, we will explore Supply Chain Service Model adding some additional support as well.

Supply Chain:  Service Model

The traditional supply chain model was developed in support of manufacturing of finished goods.     The APICS dictionary defines the service industry in the most narrowest sense an organization that provides an intangible product. As we move from an industrialize economy more into a service economy, there is a need for a service industry supply chain model, Figure 1.

Figure 1:  Supply Chain Service Model

Service oriented supply chains require sophisticate management and can become complex too. For example, electrical power service providers purchase fuel sources (coal, oil, natural gas, radiological) via a wholesaler then convert the energy into electric power for transmission to the consumer.  The electrical power providers also purchase finished goods in terms of equipment and materials as well as the services to maintain the equipment.  A datacenter is similar as they provide computational power, long term data storage, and virtualization services. They must purchase equipment and supplies as finished goods from a materiel supplier as well as maintenance and production services from a host of service providers.  Healthcare is another service industry that has complex supply chain concerns.

Similar to the other models, the service supply chain model also has cash, service, and information flows. Unique to the service industry, warranty and returns are handled differently. In the service industry perception is a greater actor in quality than any measures due to the intangibility of the service.

In the service industry, many influences burden the supply chain. For example, labor contracts, regulations, the profit models operating, and competition all weigh on the supply chain and perhaps more on the service industry than others due to the intangibility and perceptive nature of the service.

Reference:

(2011). APICS Certified Supply Chain Professional Learning System. (2011 ed.). Version 2.2.