Integral Logistics Management — Operations Management and Supply Chain Management Within and Across Companies

1.1.1 Important Terms of the Working Environment and of Business Life

Intended learning outcomes: Produce an overview on terms of the working environment, such as work, task, process, method, object, etc. Explain terms of business life, such as value-added, business process, material, product, service, classical (or conventional) industry, etc. Present terms of the service domain such as customer service, service in the originary sense, service industry, etc.

With designing of organizations, there is (too) frequent confusion among the terms task, function, and process (as well as task orientation, function orientation, and process orientation). By referring to etymological dictionaries, such as [MeWe18], and dictionaries of related words and meanings, we can find out how people normally understand the terms. While some branches of science traditionally give terms their own definitions, such definitions are arbitrary. However, a company best takes its orientation from everyday understanding, and uses definitions of terms that will be generally understood.

Figure defines the basic terms of the working environment.

Term Word origin, definition Related terms
work old: travail, toil, drudgery, exertion of strength
new: employment, activity that leads to an achievement
but also: something produced by mental effort or physical labor
job, task
task a piece of work that needs to be done regularly function; order; assignment
functionthe particular purpose for which a person or thing is specially fitted or used or for which a thing exists task; purpose
order a direction to buy or sell goods task
procedure a series of steps followed in a regular order process
processa series of actions or operations directed toward a particular result procedure; course of action
methoda procedure or process for achieving an end
also: orderly arrangement
objectsomething that may be seen or felt;
also: something that may be perceived or examined mentally
business something to be dealt with; task; concern;
new: a commercial or industrial activity or organization

Fig.         Basic terms used in the working environment.

The most important finding here is that the word work contains both the character of a process and of content and result. This dualityseems to be fundamental. The content of work, that is, its purpose or objective, is often expressed as task. The term function is clearly related to task. Function more strongly refers to the result of work, while task is more work’s content and purpose, whereby each term includes the other. An order arises when a task is assigned to someone else.

Procedure and process are practically synonymous and stand in dualityto the terms task and function. In most cases, a task or function can be structured as a sequence or as a net of subtasks, or subfunctions, and thus thought of as a process. Turned around, a process is usually seen as various works progressing in a certain sequence. Each of these works may be seen as a task or function, or as a part of such. Of course, there exist tasks and functions that finally are “nuclear” — they cannot be broken down further. In the area of company strategy, but also in R&D, we find tasks that are difficult to break down.

Note that business refers to the central term work, whereby in today’s usage, business means tradable work according to its new definition.

Figure presents additional basic terms that are used in business life. The first four (composed) terms have been defined by the author, as [MeWe18] does not give a definition.

(or value creation)
(1): a company’s own output, including overhead; purchased products or services may complement this
(2): value and usefulness of design and production as seen by the customer
business process process of a company, performed to achieve a potentially tradable outcome that is value added as seen by the customer — internal or external — and that the customer is willing to pay for
business method an important method in connection with business
business object an important thing, or a content of thought, in connection with business
good something that has economic utility or satisfies an economic want
goods something manufactured or produced (or bought and sold in business)
investment goods machinery, tools, factories and commodities used in the production of goods (also called capital goods)
consumer goods goods that directly satisfy human needs
item a separate particular in a list, account, or series
part a division or portion of a whole
component one of the parts that make up a whole
material (1): the elements or substance of which something is composed or made
(2, usually plural): items needed for the performance of a task or activity
productsomething produced by physical or intellectual effort of humans
artifact something made or modified by humans usually for a purpose
serviceperformance of official or professional duties;
the act, fact, or means of serving
management(1): the act or art of managing: the conducting or supervising of something
(2): judicious use of means to accomplish an end

Fig.         Additional basic terms used in business life.

Value added varies in meaning according to the standpoint of either producer or customer. From the traditional perspective, that of the manufacturer, for example, the expense of keeping inventory or work in process is always value-adding. The customer, however, does not normally view such processes as value-adding. With the trend toward customer orientation, it has become increasingly important to take the customer’s point of view.

Linked with a business process is its order processing. The order fulfilling unit carries responsibility for and performs not only the value-adding process itself, but also the necessary planning & control of the process. Business methods — e.g., methods of order processing — describe how tasks are performed or functions within the company can be achieved. Familiar business objects are, for example, customers, employees, products, equipment, and — particularly — orders.

In general, the term material is not perceived synonymous to component. Material generally refers to rather simple initial resources, such as raw material, or information such as documents, evidence, certificates, or similar things, whereas component as a business object can also refer to semifinished products.

For the matters covered in this book, the nuances of meaning between the terms product and artifact are of minor importance. We thus use both terms synonymously.

The definition of service refers to the beneficiary of the service, generally referred to in the commercial world as the customer. With firms, service often means customer support.

<em>Customer service or customer support</em> is the ability of a company to address the needs, inquiries, and requests from customers ([<abbr class='c2c-text-hover' title='Pittman, P. et al., APICS Dictionary, 15th Edition, APICS, Chicago, IL, 2016'>APIC16</abbr>]).
A <em>service in the originary sense</em> is a process involving a service object, that is, an object belonging to the customer that must be brought together with the provider of the service (or vice versa), potentially along with additional customer input. 

In many cases, the object, thus the recipient of the service is the customer himself. In other cases, it is technical support and maintenance of machines or plants. Further examples include services in relation to information products, such as correction of software.

The <em>service industry</em> is, according to [<abbr class='c2c-text-hover' title='Pittman, P. et al., APICS Dictionary, 15th Edition, APICS, Chicago, IL, 2016'>APIC16</abbr>], in the narrowest sense, an organization  that provides <em>intangibles</em> (e.g. medical or legal advice). In the broadest sense, all organizations except farming, mining, and manufacturing. It includes retail trade, wholesale trade, transportation and utilities, finance, insurance and real estate; construction; professional, personal, and social services; and local, state, and federal governments and also provides intangible<em> goods</em> such as information.
Using this definition, examples of a <em>classical (or conventional) industry</em> would include organizations like farming, mining, and manufacturing. Companies working in this sector mainly produce <em>tangible goods</em>, or <em>tangibles</em>.

Interestingly, [Levi81] points out that “distinguishing between companies according to whether they market services or goods has only limited utility”. The author suggests that it is more useful to speak instead of intangibles and tangibles. He states that “everybody sells intangibles in the marketplace, no matter what is produced in the factory.” Remarkably, based on the above mentioned definitions goods, products, and materials can be either tangible or intangible. On the other hand, the author notes that often “intangible products must be tangibilized. Hotels wrap their drinking glasses in fresh bags or film, put on the toilet seat a sanitized paper band, and neatly shape the end piece of the toilet tissue into a fresh-looking arrowhead”. This is particularly important when an otherwise intangible service is part of a more comprehensive service (e.g. a guest's stay in a hotel) and this specific (partial) service can be provided earlier, i.e. before the customer uses the (entire) service.

The following animation presents the basic term work, to which all other terms refer, as well as the terms task, function, order, course of action (procedure), and process .
To get more informations roll over the terms.

Course section 1.1: Subsections and their intended learning outcomes

  • 1.1 Basic Definitions, Issues, and Challenges

    Intended learning outcomes: Produce an overview on terms of the working environment and of business life. Explain service orientation in the classical industry, product orientation in the service industry, and the industrial product-service system. Disclose the product life cycle, the synchronization of supply and demand, and the role of inventories. Produce an overview on supply chain management, the role of planning and control as well as the SCOR model.

  • 1.1.1 Important Terms of the Working Environment and of Business Life

    Intended learning outcomes: Produce an overview on terms of the working environment, such as work, task, process, method, object, etc. Explain terms of business life, such as value-added, business process, material, product, service, classical (or conventional) industry, etc. Present terms of the service domain such as customer service, service in the originary sense, service industry, etc.

  • 1.1.2 Service Orientation in the Classical Industry, Product Orientation in the Service Industry, and the Industrial Product-Service System (IPSS)

    Intended learning outcomes: Differentiate between a (primary, ore core) product, a product in a broad sense, and a product in the most comprehensive sense. Produce an overview on industrialization of service. Present the industrial product-service system. Explain product-oriented, use-oriented, and result-oriented services as well as their degree of intangibility.

  • 1.1.3 The Product Life Cycle, Logistics and Operations Management, the Synchronization of Supply and Demand, and the Role of Inventories

    Intended learning outcomes: Produce an overview on the product life-cycle. Differentiate between terms such as logistics, operations, logistic management, operations management, and value-added management. Describe supply, demand, lead time, and costomer tolerance time. Explain the problem of temporal synchronization between supply and demand as well as the role of various kinds of inventories in solving this problem.

  • 1.1.4 The Supply Chain, Supply Chain Management, and Integral Logistics Management

    Intended learning outcomes: Differentiate between a logistics network, a production network, a procurement network, a distribution network, and a service network. Describe the concept of the supply chain. Produce an overview on supply chain management and on integral logistics management.

  • 1.1.5 The Role of Planning and Control and the SCOR Model

    Intended learning outcomes: Produce an overview on planning, in partcular on supply chain planning. Differentiate between production planning and control (PPC) and a PPC system. Present the Supply Chain Operations Reference (SCOR) model. Describe levels 1 and 2 of the actual SCOR model.