Designing Goods and Services Chapter 3, Part 1

MGMT 326 Foundations of Operations Introduction Strategy Quality Assurance Capacity, Facilities, & Work Design Planning & Control Products & Processes Product Design Process Design Managing Projects

Designing Goods and Services Service Design Service package Approaches to service design Designing Goods Product Characteristics Form design Functional design Learning from other companies Design Methods Design for manufacture Concurrent engineering Basic Concepts Design and strategy Feasibility study Operations issues

Strategy and Product Design The core product may be a good or a service Product design should support the business strategy Product design should meet the needs of a target market. Product design should give the company a competitive advantage.

Feasibility Study Purpose is to determine whether the company can make a product that  Meets the needs of customers in a target market  Can be made by the company with the required level of quality and delivery schedule  Can be sold at a price that customers are willing to pay  While allowing the company to meet its profit targets. This depends on costs estimated by Accounting and revenue estimated by Marketing

Operations Issues in Product Design Product design and technology  Product design is a joint responsibility of marketing, operations, and engineering (in manufacturing) Process technology (along with engineering) Would we need a new or modified facility? Can the firm make this product with consistent quality? How many workers will we need?  What skills will they need?

Designing Services – Service Package Physical elements: facility, equipment and furnishings, inventories Sensory and aesthetic aspects Psychological benefits Quality standards

Approaches to Service Design Design for efficiency:  Compete on consistency, cost, speed  High standardization  Limited variety  Automation may be used  High-volume services purchase at low cost.  Example: fast food

Approaches to Service Design (2) Customer involvement in producing the service  The customer does part of the work  Reduces costs and may allow the customer to do some customization  Example: self-service salad bar

Approaches to Service Design (3) High customer attention  Highly customized service, provided by highly trained people  Used in professional services (medical care, legal services, high-end tax preparation services)  Also used by luxury retailers, hotels, restaurants

Designing Goods Form design: Sensory aspects of the product (aesthetics)  Size, color, shape, sound  "Look and feel"  Form design contributes to customer's impressions of quality Functional design: how the product performs

Functional Design of Goods (2) How the Product Performs Fitness for use: product performs as intended Durability: how long the product lasts Reliability: consistent performance Maintainability: ease and cost of repairs

Learning from Other Companies Benchmarking: comparing your operations with those of a "best in class" firm  Product benchmark – compare your product with competing products  Process benchmark  How competing products or services are produced  How other companies perform business functions  Cost benchmark – what your competitors spend to make comparable products

Learning from Other Companies (2) Reverse engineering: taking your competitor's products apart and figuring out how it is made  Physical products  Software Market research on competitor's products: customer needs and satisfaction

Design for Manufacture (DFM) Designing a product that can be made easily and at a reasonable cost Do not take away features or product characteristics that are important to customers.

Design for Manufacture (2) DFM techniques  Value engineering  Reduce the number of parts  Modular design  Use standard parts

Design for Manufacture (3) Value engineering: Eliminate product features that add cost but do not add value to the customer. Reduce the number of parts.  Reduces the cost of ordering, purchasing, and storing parts.  Reduces the space required to hold inventory  Reduces the number of tools and operations required (by eliminating bolts, screws, etc.)  Reduces the time required to make the product

Design for Manufacture (4) Example of reducing the number of parts, operations, and tools.

Design for Manufacture (5) Modular design: Design products to be assembled from standard components.  Example: Dell buys standard video cards, processors, power supplies, hard drives, etc., and assembles computers Use standard parts to reduce design costs and purchasing costs.  Examples: Computer makers often buy standard power supplies.

Sequential vs. Concurrent Design

Concurrent Engineering Design the product and the process at the same time. Use a design team that includes marketing, operations, engineering, operations, and suppliers.  Stay in touch with customers during the design process. Requires good project management and coordination among all groups involved.

Advantages of Concurrent Engineering Increases the chances of a successful product. Shorter design time  Shortens time to market.  Reduces design costs Supplier expertise can help design a product that meets customer needs at lower cost Reduces the need to make expensive changes in the product and the process later