Operations Management

Design of Goods and Services Chapter 5

5-1

Outline
Product Strategies & Selection.

Life Cycle.

Product Development Stages.

Concurrent design. Quality Function Deployment (QFD).

Design Issues.

Documents.
Service Design.
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Goals
Find new products to design, develop and market. Develop and implement a product strategy that:

Meets demands of the marketplace. Provides a competitive advantage.

Differentiation. Low cost. Rapid response.

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Product Strategy
Product strategy includes:

Selection - What good or service should be offered.

Development - From product concept to introduction. Design (and redesign) - To define and redefine product.

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Product Selection
Deciding which products (goods and services) to provide. Customers buy satisfaction, not parts.

What is a Product?

Need-satisfying offering of an organization. Example: Procter & Gamble (P&G)

P&G does not sell laundry detergent.
P&G sells

the benefit of clean clothes.

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Product Components
Product

Brand (Name)

Product Idea

Package

Physical Good

Features

Quality Level

Service (Warranty)

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Product Life Cycle

Sales Revenue Sales

Introduction

Growth

Maturity

Decline

Time
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Product Life Cycle, Sales, Cost, and Profit

Cost of Development & Manufacture

Sales, Cost & Profit .

Sales Revenue

Profit Loss
Growth
Cash flow Time

Introduction

Maturity
5-8

Decline

Product Life Cycle Introduction

Initial designs. Product development. Process modification and enhancement. Supplier development.
Increasing costs and revenues.

Generally cost>revenue.

5-9

Idea Generation
Provides basis for entry into market. Sources of ideas.

Market need (60-80%). Engineering & operations (20%). Technology; competitors; inventions; employees.

Very few ideas become marketable products.

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Number 2000 1500 1000 500 0

Need Very Many Ideas for Successful New Products

Ideas 1750 Market requirement Design review, Testing, Introduction

1000

Functional specifications

500

Product specification

100

25

One success!

Development Stage
5-11

Assess Abilty to Offer Product

Can the firm provide the product/service?

Should the firm provide the product/service?

Make vs. Buy

A firm may be able to purchase the product as a standard item from another manufacturer.
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Product Development Stages

Customer Requirements. Functional Specification. Product Specifications.

Design Review.
Test Market. Transition to Production.

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Customer Requirements
Identifies & positions key product benefits. Example: Long lasting with more power . (Sears Die Hard Battery) Identifies detailed list of product attributes desired by customer. Customer focus groups or interviews.

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Functional Specification
Defines product in terms of how the product would meet desired attributes.

Identifies products engineering characteristics.

Example: printer noise (dB).

Prioritizes engineering characteristics.

May rate product compared to competition.

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Product Specifications
Determines how product will be made. Gives products physical specifications.

Example: Dimensions, material etc.

Defined by engineering drawing. Done often on computer.

Computer-Aided Design (CAD).

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Design Review
Review design from multiple perspectives. Evaluate in terms of:

Customer requirements. Ability to produce product or deliver service.

Revise design if needed.

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Quality Function Deployment - QFD

Technique to help:
Identify customer requirements. Translate these into functional specifications and product specifications. Also helps focus quality efforts.

Involves creating 4 tabular Matrices or Houses.

Breakdown product design into increasing levels of detail.

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House of Quality Sequence

Quality Plan Production Process Specific Components Design Characteristics Production Process

Specific Components

House 3

House 4

Design Characteristics Customer Requirements

House 2

House 1

5-19

Test Marketing & Transition to Production

Test market product to assess design and market. Transition to production.

Use a trial period to work the bugs out and revise product and process design. Refine supplier selections.

Transfer responsibility from design group to production group.

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Design Issues
Concurrent design. Manufacturability & Value Engineering. Modular Design.

Robust Design.
Computer-aided design.

Environmentally friendly design.

Time-based competition.
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Traditional Design
Design is a separate activity.

Nearly independent of production, engineering, etc.

Traditional
Design Production

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Concurrent Design
Design product using cross-functional teams.

Production, engineering, marketing, customers, etc.

Traditional
Design Production

Concurrent design
Design & Production & other units

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Manufacturability and Value Engineering

Key is to simplify.
Minimize parts. Use common components in different products.

Use standard off-the-shelf components.

Simplify and mistake-proof assembly. Use modules to add variety. Design for robustness.
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Modular & Robust Design

Modular design.

Design in easily segmented components. Modules add flexibility to both production and marketing.

Design for robustness.

Design so small variations in production or assembly do not adversely affect the product.
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Computer Aided Design (CAD)

Designing products at a computer work station.

Design engineer uses computer to draw product.

Often used with CAM (Computer Aided Manufacturing).

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Environmentally Friendly Design

Make products recyclable.
Use recycled materials. Use less harmful (toxic) ingredients.

Use lighter components.

Less weight lowers transportation cost.

Use less energy and material.

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Time-based Competition
Product life cycles are becoming shorter.
Faster developers of new products gain on slower developers and obtain a competitive advantage.

First to market is often market leader.

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Product Documents
Engineering drawing.

Shows dimensions, tolerances, & materials.

Bill of Material.

Lists components, quantities & where used. Shows product structure.

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Engineering Drawing Example

13/16 diameter 2-1/2 1

13/32 diameter

1/4 R 2-1/4

45 3/8 1-5/8 13/16

13/16 5/16

Bracket

Scale: FULL Drawn: J. Thomas

A- 435-038

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Bill of Material Example

Bill of Material P/N: 1000 Name: Bicycle P/N Desc Qty 1001 Handle Bars 1 1002 Frame Assy 1 1003 Wheels 2 1004 Frame 1
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Units Level Each 1 Each 1 Each 2 Each 2

Production Documents
Assembly drawings. Assembly chart. Route sheet. Work order.

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Assembly Drawing and Assembly Chart

5-33

Route Sheet
Lists all operations.
Route Sheet for Bracket
Sequence 1 2 3 4 Machine Shear # 3 Shear # 3 Drill press Brake press Operation Shear to length Shear 45 corners Drill both holes Bend 90 Setup Time 5 8 15 10 Operation Time/Unit .030 .050 3.000 .025

5-34

Work Order
Authorizes producing a given item, usually to a schedule.

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Service Design Principles

Simplify!

Minimize number of steps.

Minimize repetition. Reduce waiting time for customer. Example: Hospital, University certificate programs. Accommodate large variation, since all people are different.
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Use modularity to create variety.

Design for robustness.

Service Design Principles

Consider range of services offered.

Customized vs standard services (Medical clinics).

Full service vs. self service (Gasoline station). Gourmet restaurant vs. fast food.
Use appointments.
Provide distractions to ease waiting.
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Manage expectations.

Schedule staff to match demand.

Decision Trees for Product Design

Useful with a series of decisions and outcomes. Example: Select design from several options that produces largest expected profit.
Different costs. Different benefits: Benefits depend on future (unknown) market.

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