In a service process, output can be inventoried.
The correct answer and explanation is :
Correct Answer:
False
Explanation:
In a service process, the output cannot be inventoried because services are intangible, perishable, and produced and consumed simultaneously. Unlike physical goods, which can be stored in warehouses and used later, services exist only at the moment they are delivered.
1. Intangibility
Services are not physical objects; they cannot be seen, touched, or stored. For example, a doctor’s consultation, a haircut, or a taxi ride cannot be stored for future use. Once the service is delivered, it ceases to exist.
2. Perishability
Services perish if not consumed at the right time. If a hotel room remains empty for a night or an airline seat goes unsold on a flight, the opportunity to generate revenue from that service is lost forever.
3. Simultaneous Production and Consumption
Unlike goods, which can be manufactured, stored, and sold later, services are typically produced and consumed at the same time. For example, when a customer watches a live concert, the performance happens in real-time and cannot be stored for future use in the same way a product can.
4. Implications for Service Businesses
Since services cannot be inventoried, businesses must carefully manage capacity and demand. They use strategies like:
- Demand Management: Airlines and hotels adjust prices based on demand through dynamic pricing.
- Capacity Planning: Restaurants and hospitals hire more staff during peak hours to meet demand.
- Service Reservations: Booking systems help service providers ensure capacity is allocated efficiently.
In contrast, manufacturing firms can build up stock during low-demand periods and sell later. But in service industries, the inability to inventory output makes balancing supply and demand crucial.