Operations Management Design of Goods and Services Chapter 5

Outline Product Strategy. Selection. Product Development Stages. Design Issues. Documents. Service Design.

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. This slide provides an opportunity to introduce the complex nature of a product. There are a number of examples one can discuss here: McDonald’s/ Burger King/Wendys (their product is more than hamburgers); your particular college or university; Microsoft; auto manufacturers.

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. This slide provides an opportunity to introduce the complex nature of a product. There are a number of examples one can discuss here: McDonald’s/ Burger King/Wendys (their product is more than hamburgers); your particular college or university; Microsoft; auto manufacturers.

Product Selection Deciding which products (goods and services) to provide. Product includes: Physical good or service, including features, quality, durability, reliability, etc. Brand. Packaging. Service & Warranty. This slide provides an opportunity to introduce the complex nature of a product. There are a number of examples one can discuss here: McDonald’s/ Burger King/Wendys (their product is more than hamburgers); your particular college or university; Microsoft; auto manufacturers.

Product Life Cycle Growth Decline Introduction Maturity Sales Revenue Time Introduction Maturity Sales Revenue Sales This slide gave a reasonable depiction of the growth stage for these products when it was created. Does it still? Ask students to consider the length of the lifetime of each of the products listed. Are the lifetimes similar? What ranges of lifetime would they estimate for these products?

Product Life Cycle, Sales, Cost, and Cash Flow Cost of Development & Manufacture Sales Revenue Sales, Cost & Profit . Profit Loss Previous slides have related the product life cycle to various management issues. This is the first to relate it to cash flow. Ask students for suggestions as to how one might eliminate the loss occurring toward the end of the product’s life cycle. Cash flow Time Introduction Growth Maturity Decline

Product Life Cycle Introduction Initial designs. Product development. Process modification and enhancement. Supplier development. Increasing costs and revenues. Generally cost>revenue, so negative cash flow!

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 & few marketed products are successful! One notion which might be discussed at this stage is the attempts by manufacturers to add information to an existing good rather than develop a new good.

Need Very Many Ideas for Successful New Products 500 1000 1500 2000 Development Stage Number Market requirement Design review, Testing, Introduction 25 Ideas 1750 Product specification 100 Functional specifications One success! This slide suggests the relatively small number of product concepts that actually become successful. Ask students to suggest reasons for such a poor success rate. Can they also suggest ways by which the success rate might be improved?

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. One notion which might be discussed at this stage is the attempts by manufacturers to add information to an existing good rather than develop a new good.

Product Development Stages Customer Requirements. Functional Specification. Product Specifications. Design Review. Test Market. Transition to Production. This slide indicates the stages in the product development process. It also attempts to indicate organizational teams assigned to accomplish specific elements. Students might be asked to consider the utility of having the process broken down among several work groups. Would success be improved if all these activities were carried out by a single “project team” from start to finish, rather than sequentially by teams of specialists?

1. Customer Requirements Identifies & positions key product benefits. Example: Quiet, fast, low cost color printer. Identifies detailed list of product attributes desired by customer. Use customer focus groups or interviews. Here begins the attempt to link the product directly with the customer. You might specify a product and ask students to identify first the attributes of interest to the customer, and second the “benefits” to the customer.

2. Functional Specification Defines product in terms of how the product would meet desired attributes. Identifies product’s engineering characteristics. Example: Printer noise (dB), pages per minute. Prioritizes engineering characteristics. May rate product compared to competition. At this point we have to start adding precision to our specifications. If we want a product to be “easy to use,” what exactly does that mean? To use by whom? With what level of preparation? Etc.

3. Product Specifications Determines how product will be made. Gives product’s physical specifications. Example: Dimensions, material, amount of insulation, technology, etc. Defined by engineering drawing. Done often on computer. Computer-Aided Design (CAD). At this point, we have to develop the information necessary to actually produce the product - and, to know that it has been produced appropriately.

4. Design Review Revise design if needed. Review design from multiple perspectives. Evaluate in terms of: Customer requirements. Ability to produce product or deliver service. Revise design if needed. At this point, we have to develop the information necessary to actually produce the product - and, to know that it has been produced appropriately.

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.

House of Quality Sequence Plan Production Process House 4 Production Process Components Specific House 3 Specific Components Characteristics Design House 2 Design Characteristics Requirements Customer House 1

5. & 6. 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. This slide introduces the problem of transitioning a product from design and development to production. It would probably be helpful to use this slide as the basis for a discussion of each of the issues. Points to be made might include: - the point in time at which to transition must be chosen by consensus of both design/development and production staff - while we should view product development as evolutionary, we may be required to view the transition as iterative - where, as unforeseen problems develop in production, design changes may be required. - product design/development teams must expect to contribute to problem solving in production - product design/development staff must recognize that once the transition to production has taken place, the main responsibility for the project has also shifted

Design Issues Concurrent design. Manufacturability & Value Engineering. Modular Design. Robust Design. Computer-aided design. Environmentally friendly design. Time-based competition. This slide introduces some of the issues of product development.

Traditional Design Design is a separate activity. Nearly independent of production, engineering, etc. Traditional Design Production

Concurrent Design Design product using cross-functional teams. Production, engineering, marketing, customers, etc. Traditional Concurrent design Design Production Design & Production & other units

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. Manufacturability and value engineering encompass many issues. You may wish to stress the point that we consider in detail not only what the product is, but how it is to be produced and maintained - the best design is optimized across all these activities, not just one or another.

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. Ask your students to suggest examples of products that are produced in modular fashion. Certainly microcomputers provide a good example; also cars, motorcycles, and hamburgers.

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). CAD can be viewed both as a sophisticated design tool, and as the first step in developing a completely integrated production process. CAD=>CAM=> ... CIM.

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.

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 the market leader. Ask the students to consider the effect of time-based competition not only on the producer, but also on the customer. Assume that you order two computers, through a catalog, directly from the factory. If you place one order today, and a second two days from now (for the same model, etc.), you may well receive two machines sufficiently different that the installation procedure for one will not work on the second. The producer has to deal with the issue of producing a constantly evolving product, but you also have to manage the problem created by the increasingly short and perhaps in a sense, artificial, product lifetimes.

Product Documents Engineering drawing. Bill of Material. Shows dimensions, tolerances, & materials. Bill of Material. Lists components, quantities & where used. Shows product structure. This slide introduces the concept of “product documents.” Examples will be found in subsequent slides.

Engineering Drawing Example You might note to the students that the engineering drawing contains all dimensions necessary to produce the product - but specifies nothing about the production process.

Bill of Material Example Remind students that the Bill of Material indicates all parts or kits required to assemble a unit of the product and that bills of materials at multiple levels are required to fully specify each and every individual part contained in the finished unit. (The bill of material portrayed on the slide specifies a “frame assembly,” but does not tell us what pieces are required to produce the assembly. This information would be contain in a lower level bill of materials.)

Production Documents Assembly drawings. Assembly chart. Route sheet. Work order. This slide introduces the notion of production documents.

Assembly Drawing and Assembly Chart This slide depicts both an Assembly Drawing and and Assembly Chart. Note that the Chart depicts both the relationship of the pieces and the sequence of assembly.

Route Sheet Lists all operations. Note that the Route Sheet depicts both operations and timing.

Work Order Authorizes producing a given item, usually to a schedule. Dept Oper Date Work Order Approved: JM Manufacturing

Service Design Principles SIMPLIFY! Minimize number of steps. Minimize repetition. Reduce waiting time for customer. Use modularity to create variety. Example: Hospital, University certificate programs. Design for robustness. Accommodate large variation, since all people are different. This illustrates some of the considerations in service design.

Service Design Principles Consider range of services offered. Customized vs standard services (Medical clinics). Full service vs. self service (Gasoline station). Manage expectations. Gourmet restaurant vs. fast food. Schedule staff to match demand. Use appointments. Provide distractions to ease waiting. This illustrates some of the considerations in service design.

Decision Trees for Product Design Useful with a series of decisions and outcomes. Example: Select design of product of service from several options. Different costs. Different benefits: Benefits depend on future (unknown) market. This slide should probably be used simply to provide a reason for studying decision trees at a later time (Module A)

Decision Tree for Design Coffee only Coffee & Dessert High Demand (0.7) Low Demand (0.3) High pm Demand (0.6) Low pm Demand (0.4) Add dessert Do nothing Do not offer dessert Dessert popular (0.7) Dessert Unpopular (0.3) $5.5 -$0.5 $3.5 -$2.0 $6.0 $1.0 -$3.0 1 3 2