Supply Chain Management in the Service Industry

It is unclear as to whether most nonprofit organizations are aware of the term service chain management--a concept coined from the management science of supply chain management. The concepts of supply chain management in for-profit manufacturing companies focusing on centralized and coordinated sourcing and procurement are not fully leveraged by the service sector.


However, nonprofit organizations in the service industry do apply strategies that reflect similar dynamics and priorities that a for-profit manufacturing company would apply for operations planning and supply chain management. The concept and practice of service chain management are concerned with not only manufacturing and delivering a service or line of services, it also deals with the challenges and opportunities to establishing thriving services.

It is important to note that although there are differences in their priorities and dynamics, both not-for-profit service entities and a for-profit manufacturing companies want to reach almost the same optimal goal which is to satisfy their respective customers (or end users).


The process involved in reaching the end goal of satisfying customers are similar for both industries. Service chain management enables service organizations to improve customer satisfaction and reduce operational costs through smart and optimized forecasting, planning and scheduling of the service chain, and its associated resources such as people, networks and other assets. Central to this system are frontline workers and customers.


On the other hand, supply chain management involves locating, obtaining, and making accessible the inputs needed to bring about customer satisfaction in the most cost saving way possible. While a manufacturing company is concerned about inputs, logistics, finished products and optimization through approaches that reduces expenditure and improve savings, not-for-profit service organization handles these same components but with different level of concentration on building relationships between service outcomes, service utilization by clients, employee capacity and productivity. Chain management in the service industry links service outcomes and growth stimulated by inputs from stakeholders.


Nonprofit organizations require labor as input to design and implement its services as promised to both funders and clients alike. Another form of input that these organizations manage is the investments in equipment, service designs, relationship building, as well as the manpower necessary to carry out their missions. The context of service chain management unfolds through the implementation of strategies that adequately maintains the service provider's supply of labor as necessary to manipulating information and developing human-centric development relationships that are paramount to its operations.


Through service chain management, nonprofits improve information flow, develop and improve client relations and satisfaction, as well as implement activities that optimally cut down operational costs of services. Service chain management is concerned with optimizing all of the resources that are associated with a service design and provision including people (both client, and staff), networks (both IT, and volunteers and funders), information (policy, regulations, assessments, and development) and other tangible or intangible assets.


Unlike the focus on incorporating cost of purchasing, and moving raw and physical materials from one location to another into the line of finished products in a manufacturing company, a service organization mostly needs to improve upon its IT infrastructure to improve the flow of communication necessary to process clients’ applications, benefits, advocacy, representation, and follow ups.


For nonprofit service organizations, a finished product is a closed or completed case of service, a petition, and other intervention on behalf of the clients. As a client transitions from one service to the other or completes the intervention components of a service, that client case is closed because the client’s being or his/her relationship with or need for the service has been resolved or no longer exists. This is different for the manufacturing industry, in which the finished product is a good that has been transformed from a raw material to some other forms as needed by the end users.

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