Beyond the service factory: Service innovation in manufacturing supply networks

This paper is concerned with the nature of the connection between services and manufacturing in manufacturing-oriented supply networks. The existing literature on manufacturing shifting into service is reviewed and, although such moves are seen as a way to increased revenue and profit, there are concerns that firms do not understand how the capabilities that underpin manufacturing may be extended to enable effective service delivery. Inspired by Chase's concept of the ‘service factory’, which sees the factory as a repository of knowledge and a platform for services, the paper applies Edith Penrose's conception of services as emanating from firms' resources to examine an advanced component manufacturing firm in the course of a number of service-oriented projects. This leads to a model of service development in manufacturing firms, consisting of a network trigger, an opportunity to change the ‘productive opportunity’, the ‘revelation’ of resources and Penrose-services, a reconfiguration of the network, leading to an expanded productive opportunity and hence a platform for marketing new service capabilities. In this sense a network is seen as an inter-connected set of productive opportunities. It also draws attention to the importance in theory and practice of understanding both the institutional and the ontological connection between service offerings and the products, factories, firms and networks with which they are associated.

► Manufacturers shift to service along multiple dimensions.
► It is of fundamental importance to understand how ‘product-related’ services are linked to their associated products.
► Service capabilities rely on a deep understanding of manufacturing technology.
► Services do not infuse but inhere in manufacturing.
► Firms engage in network reconfiguration; they don't just move downstream.