What is Service-Oriented Manufacturing and Why is China Promoting it?
Ian Wright posted on August 02, 2016 |
Production capacity is the primary good for service-based manufacturers.
China’s Ministry of Industry and Technology Information along with the National Development and Reform Commission recently released an action plan to promote the development of Chinese service-oriented manufacturing.

This is yet another part of the country’s “Made in China 2025” (MiC2025) program, which aims to improve the overall production efficiency and quality of Chinese manufacturing. The aggressive expansion of automation is one aspect of MiC2025; the emphasis on service-oriented manufacturing is another.

So what is service-oriented manufacturing?

In contrast to product-based manufacturing—currently the dominant paradigm in China—service-based manufacturing integrates products with services to provide customers with comprehensive solutions. Companies which adopt this product service system (PSS) tend to be more narrowly focused and so provide producer services for one another, forming a service-oriented manufacturing network.

“Service-oriented strategy means a development toward the high end in the value chain.” said Zuo Shiquan, director of the China Center for Information Industry Development.

In other words, whereas the primary value proposition of a product-based manufacturer is a tangible product, service-based manufacturers treat their production capacity as their primary good. This approach has certain advantages, especially for a country like China.

For example, product-oriented manufacturing is often burdened by an over-reliance on inventories to satisfy demand. Maintaining these inventories is expensive. For this reason, having the available capacity to meet demand via a service-oriented manufacturing network may be the better option.

The increasing interconnectivity between manufacturers—another pillar of the MiC2025—also lends itself to establishing service-oriented manufacturing networks. Cloud computing can enable new ecosystems of manufacturing services by allowing companies to communicate their respective needs and capacities automatically.

“This new type of manufacturing, as an important measure of supply-side reform, could become a new economic growth engine, benefiting the quality and profits of the supply system and complying with the demand of upgrades in consumption,” stated a release from China’s State Council.

The Chinese government has stated that the country should reach the development stage of service-oriented manufacturing by 2018.

For a different take on the future of manufacturing, check out “Is 3D Printing the Catalyst for True On-Demand Manufacturing?”

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