Service Factory

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Service Factory

The term service factory, coined in 1989 by Richard B. Chase and Warren J. Erikson, represents the idea that the factory can be a source of customer service in addition to a place where products are manufactured. Since those who make products (factory workers) are often more knowledgeable about them than those in field service, it stands to reason that they can contribute to sales and marketing efforts. In addition, factory workers can be a resource for installation, maintenance, and troubleshooting issues involving the products they had a hand in producing.


As Chase and Garvin noted in another 1989 article that first developed the service factory concept, Manufacturers that thrive into the next generation will compete by bundling services with products. The factory will be the hub of their efforts to get and hold customers. Chase and Garvin identify four roles that the service factory can play in strengthening a firm's marketing efforts: laboratory, consultant, showroom, and dispatcher.

Laboratory. The service factory can easily serve as a laboratory for testing new products and processes thereby enhancing potential quality and manufacturability of the new products. In addition, the laboratory can serve as a test site for traditional to high-risk experiments to modify or improve existing operations. Chaparral Steel claims that their research and development is done right on the factory floor.

Consultant. The service factory can also serve as a consultant, solving problems out in the field. Since they have worked extensively with both the firm's products and processes, factory workers are a natural source of technical

expertise when problems arise. Tektronix serves as a service factory consultant by providing a postcard with a toll-free number to a phone on the shop floor. In addition, factory floor workers can also serve as trainers for use of the product and quality control.

Showroom. As a showroom, the service factory can serve as a working demonstration of the systems and processes the firm uses to manufacturer products as well as a showcase for the factory's products themselves. Nissan in Smyrna, Tennessee offers weekly tours, open to the public, where visitors ride a small train, complete with a tour guide, through the manufacturing facility. Throughout the tour the train stops at points of interest, such as robots painting car bodies, where the tour guide emphasizes the quality and superiority of Nissan's processes. Frito-Lay's Vancouver, Washington, plant offers three different factory tours, one for wholesalers, one for retailers, and one for the public.

Dispatcher. As a dispatcher the service factory serves as the linchpin of after-sales support. The service factory can help their customers avoid stock-outs and the resulting downtime by quickly providing replacement parts. This responsiveness can then be emphasized by the company's sales force. Of course, this requires that the dispatcher firm be able to anticipate demand surges.


In order to make the service factory work, manufacturing and marketing personnel must work well together; this might mean, for instance, that shop floor employees will need to be trained in communication skills. In addition to marketing personnel, factory managers and workers must understand customer needs. In their original article, Chase and Garvin discuss how a maker of electronic equipment put the service factory concept into practice by setting up an 800 number that goes directly to a phone on the shop floor: Every day the factory gets several calls from customers the six people working in the repair area who answer them have all received telephone training. Workers and managers meet daily to discuss these calls; if necessary, further conversations with the customer follow up the meetings. Although the term does not have wide use in management discussions in the twenty-first century, the concept has been embraced in a number of industries.


The term service factory has been adopted in two other business contexts. The first context is when service industries look to manufacturing to improve productivity and efficiency in service operations. Although not all manufacturing processes can be borrowed successfully, service industries have benefited from considering the methods employed in manufacturing.

The second context is software development. In the mid-2000s, Microsoft introduced the Service Factory development process for certain kinds of software. This process is a transparent development approach that involves developers shipping regular drops to an online community to receive feedback. As an article published by Microsoft states: This adds significant value to developers who want to get involved and ultimately improves the quality of the deliverables, which is a benefit to all.

SEE ALSO Service Industry; Service Operations; Service Process Matrix


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