Front Line: Service Is Not a Bad Word

April 1, 2009
Material handling and logistics functions are vital in a service-based economy.

Next time you attend an industry event, don’t skip the cocktail hour. There’s something about a casual environment with an open bar that turns ordinary professionals into philosophers. And you can learn a lot.

Lately, I’ve heard some interesting theories about why the economy took a nose dive. Politics aside, the most common hypothesis I’ve heard is that it was just a matter of time before we reached our current predicament. Since the 1970s, people say, we’ve been steadily moving from a goods-producing society to a service economy, and that’s been our undoing. They say we’ve outsourced all our important jobs to other countries, leaving us with nothing to contribute to the global economy.

A quick glance at Bureau of Labor Statistics data confirms the trend. BLS divides the economy into goods-producing industries—which include natural resources and mining, construction and manufacturing—and service-providing industries, a sweeping category that includes everything else. Although both groups have been clobbered lately, the historical trend is obvious. BLS expects serviceproviding employment to continue outpacing goods-producing jobs through 2016.

Facts are facts, but when did “service” become a bad word? Some have quipped that the U.S. employs more choreographers than factory workers. Their attitude is that service jobs have little economic value, and an economy based on services is not viable in the long run.

Sure, artistic vocations are part of the BLS service category, but so are jobs in education and healthcare. And hang on to your hat because transportation, warehousing and material-moving occupations are also considered service jobs. According to BLS, material handling and logistics are services, and they are expected to grow as companies continue to outsource distribution and logistics to focus on core competencies.

As you’ll see in this issue of MHM, world-class distribution is a strategic advantage, whether you make product or distribute it. For distributors, getting undamaged product to the right place at the right time and in the right quantity is a service that keeps customers ordering. Distribution serves both businesses and consumers.

Those who oversee material handling in manufacturing provide a vital service to their own companies. Where would manufacturing be without the service of material handling? Strategic, well planned material handling keeps costs down and maintains product quality throughout the production process. The efficient production of product becomes a competitive advantage, and manufacturers become both producers of goods and consumers of services.

Intangibles like these are difficult to measure, but that shouldn’t diminish their value. In fact, more manufacturers are acknowledging the revenue-generating potential of services, and that’s blurring the line between manufacturing and services. IBM is one example. The computer manufacturer views its physical product as a small part of its offerings, and more than half of its revenue now comes from its service businesses. As more companies acknowledge that value, we could start to see manufacturers selecting locations for their well developed service infrastructures.

Often, the way you look at things determines the way things are. If you see material handling as a commodity function, then that’s what it is, and it will have little value. If you see it as a vital service that helps companies compete and builds the economy in the process, then a different picture emerges. You create a positive self-fulfilling prophesy for material handling and logistics services.

Mary Aichlmayr, Editor in Chief
[email protected]

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