The Pendulum Shifts

It has been puzzling me for sometime now that two industries are kind of aping each other, yet finding it too a challenge. The case in point being the Services Industry and the Manufacturing Industry.

Before I dwell upon my explanation and experience, here’s a glossary:

MTS: Make to Stock. Pre-built with standard specifications to be picked by the customer. Pretty much anything from soaps to cars.

BTO: Built to Order. Built based on customer specifications. Such as furniture, hair cut, etc.
ATO: Assemble to Order. Somewhere in between MTS and BTO. Here pre-fabricated parts are available and based on customer’s order they are configured/ assembled. Case in point being the Dell’s laptops, Homeopathy medication or say pizza.

So now that we have some familiarity with these three letter acronyms, let me propose my point.

The Manufacturing industry that we have known for past 100 years now has evolved to become a MTS one. Courtesy Frederick Winslow Taylor and Henry Ford, both of whom have preached and to an extent perfected the principles of Standardization and Mass Production. Assembly Line, Work Breakdown, and several such innovations in this space ensured that there isn’t any dissimilarity between various parts manufactured. Hence high volume, hence lower price, yet better sales and profits! Toyota took these methods one step further by perfecting Just in Time (JIT) manufacturing and the Americans, especially GE and Motorola added their Six Sigma flavor to it. Not deviations, (even if desired)!

Now let’s talk about the Services Industry. Here due to an overt dependency on people and various other (uncontrollable) factors, there’s very little control or standardization for both process and outcome. Experience and expertise yield better results. Take for instance- surgeons, cooks, aircraft pilots, and many others in the services space. The Moment of Truth, for the make or break of services is what defines the outcome- good or bad (it’s binary) and highly variable.

In the recent years, the Manufacturing Industry has started moving towards BTO through ATO. Designer wears, modular furniture, custom built cars and more recently On Demand Software Applications have shown the promise as well difficulties in moving from a much matured MTS model to the BTO model.

Similarly in the Services Industry the transition is happening from BTO to MTS, again through ATO. For instance organized retailing, bank ATMs, self-service kiosks, etc. Automation and the Internet has played a leading role in enabling such a standardization and cost containment.

So here we are: The Manufacturing industry is fast moving from the matured MTS model to BTO and an exact reverse traverse for the Service Industry. Which means that there are things worth cross-leveraging. Such as Factory Model in Service Delivery and Studio Model in Manufacturing, etc.

Keep watching the space.