Product Design & Process Selection: Reid & Sanders, Operations Management © Wiley 2002

C H AP T E R
Product Design
& Process Selection
Reid & Sanders, Operations Management

Wiley 2002
Product & Service Design

The process of deciding on the unique characteristics
of a companys product & service offerings
Serves to define a companys customer base, image,
competition and future growth

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Products versus Services

Products:
Tangible offerings
Dimensions, materials, tolerances & performance
standards
Services:
Intangible offerings
Physical elements + sensory, esthetic, & psychological
benefits
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Strategic Importance
Products & service offerings must support the
companys business strategy by satisfying the target
customers needs & preferences
If not, the company will lose its customer base and its
market position will erode

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Stepby-Step
Idea Development:
Product Screening:
Initial ideas are evaluated for difficulty & likelihood of success
Preliminary Design & Testing
A need is identified & a product idea to satisfy it is put together
Market testing & prototype development
Final Design
Product & service characteristics are set

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Idea Development
Existing & target customers
Customer surveys & focus groups
Benchmarking
Studying best in class companies from your industry or others and
comparing their practices & performance to your own
Reverse engineering
Disassembling a competitors product & analyzing its design
characteristics & how it was made
Suppliers, employees and technical advances

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Product Screening
Operations:
Are production requirements consistent with existing capacity?
Are the necessary labor skills & raw materials available?
Marketing:
How large is the market niche?
What is the long-term potential for the product?
Finance:
What is the expected return on investment?

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Preliminary Design & Testing

General performance characteristics are translated
into technical specifications
Prototypes are built & tested (maybe offered for sale
on a small scale)
Bugs are worked out & designs are refined

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Final Design
Specifications are set & then used to:
Develop processing and service delivery instructions
Guide equipment selection
Outline jobs to be performed
Negotiate contracts with suppliers and distributors

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Break-Even Analysis

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Break-Even Analysis
Total cost = fixed costs + variable costs (quantity):
TC F VC Q
Revenue = selling price (quantity)
R SP Q
Break-even point is where total costs = revenue:
TC R or
or
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F VC Q SP Q
F
Q
SP VC
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Example
A firm estimates that the fixed cost of producing a line
of footwear is $52,000 with a $9 variable cost for each
pair produced. They want to know:
If each pair sells for $25, how many pairs must they sell to
break-even?
If they sell 4000 pairs at $25 each, how much money will
they make?

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Example Solved
Break-even point:
F
$52,000
Q
3250 pairs
SP VC $25 $9
Profit = total revenue total costs

P SP Q F VC Q
$25 4000 $52,000 $9 4000
$12,000
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Design for Manufacture (DFM)

Guidelines:
Minimize the number of parts
Use common or standardized parts
Use modular design
Avoid the need for tools (e.g.: snap together components)
Simplify operations

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DFM Example

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DFM Benefits
Lower costs:
Lower inventories (fewer, standardized components)
Less labor required (simpler flows, easier tasks)
Higher quality:
Simple, easy-to-make products means fewer opportunities
to make mistakes

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Product Life Cycle

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Concurrent Engineering
A design approach that uses multifunctional teams to
simultaneously design the product & process
Replaces a traditional over-the-wall approach where
one group does their part & then hands off the design
to the next group

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Sequential Design

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Concurrent Engineering

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Concurrent Engineering Benefits

Representatives from the different groups can better consider
trade-offs in cost & design choices as each decision is being
made
Development time is reduced due to less rework (traditionally,
groups would argue with earlier decisions & try to get them
changed)
Emphasis is on problem-solving (not placing blame on the
other group for mistakes)
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Process Selection
Intermittent operations:
Capable of producing a large variety of product designs in
relatively low volumes
Continuous operations:
Capable of producing one (or a few) standardized designs
in very high volumes

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Intermittent versus Continuous

Decision
I ntermittent Operation
Continuous Operation
Product variety
Great
Small
Degree of standardization
Low
High
Organization of resources
Grouped by Function
Line flow
Path of products
Varied, depends on product
Line flow
Factor driving production
Customer orders
Forecast of demand
Critical resource
Labor
Capital
Type of equipment
General purpose
Specialized
Degree of automation
Low
High
Throughput time
Longer
Shorter
Work-in-process inventory
More
Less

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Intermittent Operations
Pros:
Very flexible
Cons:
Material handling & variable costs are high
Work scheduling is difficult

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Continuous Operations
Pros
Highly efficient to produce large volumes (low variable
costs)
Cons
Inflexible to design changes
Susceptible to component failure
High fixed costs for capital equipment
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Continuum of Process Types

Projects
Used for one-at-a-time products made exactly to customer specifications
Batch processes:
Used for small quantities (batches) with a high level of customization
Line processes:
Used for relatively high volumes with little customization
Continuous processes:
Used for very high volume standardized products (often commodities)

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Continuum of Process Types

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Vertical Integration
How much of the supply chain is owned by a
company?
A supply chain is the series of linked activities from raw
material extraction to the final customer (Chapter 4)
Consider the direction of integration:

Forward (toward customers)
Backward (toward suppliers)
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Make-or-Buy
Outsourcing decisions should consider:
Long-term strategic impact
Existing capacity available
Expertise required & available
Quality issues
Ramp up speed & delivery issues
Total costs
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Process Flowcharting
Graphically defines the operation, step-by-step
Used to help visualize the flow of work & information:
Can help identify potential problem areas
Format can be as simple or detailed as needed

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Example

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Process Technology
Automation
Automated Material Handling:
Automated guided vehicles (AGV)
Automated storage & retrieval systems (AS/RS)
Computer-Aided Design (CAD) software

Robotics & Numerically-Controlled (NC) equipment
Flexible Manufacturing Systems (FMS)
Computer-Integrated Manufacturing (CIM)

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Page 32

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C H AP T E R

Reid & Sanders, Operations Management

Product & Service Design

Reid & Sanders, Operations Management

Products versus Services

Reid & Sanders, Operations Management

Initial ideas are evaluated for difficulty & likelihood of success

Preliminary Design & Testing

A need is identified & a product idea to satisfy it is put together

Market testing & prototype development

Product & service characteristics are set

Reid & Sanders, Operations Management

Suppliers, employees and technical advances

Reid & Sanders, Operations Management

Preliminary Design & Testing

Reid & Sanders, Operations Management

Reid & Sanders, Operations Management

Reid & Sanders, Operations Management

Revenue = selling price (quantity)

Reid & Sanders, Operations Management

Profit = total revenue total costs

Design for Manufacture (DFM)

Reid & Sanders, Operations Management

Reid & Sanders, Operations Management

Reid & Sanders, Operations Management

Product Life Cycle

Reid & Sanders, Operations Management

Reid & Sanders, Operations Management

Reid & Sanders, Operations Management

Reid & Sanders, Operations Management

Concurrent Engineering Benefits

Reid & Sanders, Operations Management

Intermittent versus Continuous

Varied, depends on product

Factor driving production

Reid & Sanders, Operations Management

Reid & Sanders, Operations Management

Continuum of Process Types

Reid & Sanders, Operations Management

Continuum of Process Types

Reid & Sanders, Operations Management

Consider the direction of integration:

Reid & Sanders, Operations Management

Reid & Sanders, Operations Management

Computer-Aided Design (CAD) software

Reid & Sanders, Operations Management

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