1. 1 OPERATIONS MANAGEMENT for MBAs Second Edition Prepared by Scott M. Shafer Wake Forest University Meredith and Shafer John Wiley and Sons, Inc.

2. Chapter 4: Product/Service Design2 Chapter 4 Product/Service Design

3. Chapter 4: Product/Service Design3 Introduction

4. Chapter 4: Product/Service Design4 Progressive Corp. 4 Prior to 1988, carved our profitable niche serving high-risk drivers 4 In 1988 two major events occurred –Allstate overtook it in high-risk niche –California Passed Proposition 103 4 Round-the-Clock Immediate Response program adopted

5. Chapter 4: Product/Service Design5 Progressive Corp. continued 4 Special vans equipped with air- conditioning, comfortable chairs, desk, and two cell phones. 4 Often settlement check offered on spot 4 80% of accident victims contacted within 9 hours of learning of accident 4 70% of vehicles inspected within one day 4 Typically claim wrapped up with a week

6. Chapter 4: Product/Service Design6 Thermos 4 In 1992 had 25% share of $1 billion barbecue grill market 4 Product becoming a commodity 4 CEO believed consumers where too intelligent to be tricked by clever advertising and slick packaging 4 Survival dependent on constant innovation, high quality, at right price

7. Chapter 4: Product/Service Design7 Thermos continued 4 Interdisciplinary team with representatives from marketing, manufacturing, engineering, and finance to design new grill 4 Team used to reduce project completion time 4 As example, initially designers opted for tapered legs

8. Chapter 4: Product/Service Design8 Thermos continued 4 Manufacturing noted that tapered legs would have to be custom made 4 Design changed to straight legs 4 Under previous system, manufacturing would not have found out about legs until design completed

9. Chapter 4: Product/Service Design9 Thermos continued 4 Team developed revolutionary electric grill 4 Technology used to give food barbecued taste 4 Burns cleaner than gas or charcoal 4 Grill won four design awards in its first year

10. Chapter 4: Product/Service Design10 Caterpillar 4 Used virtual-reality system called CAVE (cave automatic virtual environment) to take large earthmoving equipment for test drive before it was actually built 4 Surround-screen and surround sound cube with 10-foot sides 4 Super-computer projects 3D graphics onto the walls

11. Chapter 4: Product/Service Design11 Caterpillar continued 4 Inside CAVE, people can walk around and operate imaginary controls 4 System responds to movements 4 Provides many perspectives 4 Backhoe and wheel loader recently introduced incorporate visibility and performance improvements based on data collected from virtual test-drives

12. Chapter 4: Product/Service Design12 Themes Illustrate in Examples 4 Two examples related to design of products and one to the design of a service 4 Importance of product and service design to an organization’s competitiveness –Progressive –Thermos

13. Chapter 4: Product/Service Design13 Themes continued 4 Technology –In Progressive’s case, new technology such as cellular phones made new service possible –In Caterpillar’s case, new technology used to enhance design process 4 Design Teams

14. Chapter 4: Product/Service Design14 Impacts of Selection/Design Decisions 4 Fit 4 Materials 4 Labor 4 Equipment 4 Process 4 Financing

15. Chapter 4: Product/Service Design15 Three Stages in Output Selection and Design 4 Selection Stage –Idea generation –Screening and selection 4 Product and Service Design Stage –Preliminary design –Prototype testing –Final Design 4 Process Design

16. Chapter 4: Product/Service Design16 Steps in Product-Service Selection and Design

17. Chapter 4: Product/Service Design17 The Selection Stage

18. Chapter 4: Product/Service Design18 Generation of Ideas 4 Employees with customer contact play a key role in generating new ideas 4 Can imitate proven new idea 4 Purchase new idea 4 Marketing Pull Versus Technology Push 4 Product Versus Process Research

19. Chapter 4: Product/Service Design19 The Development Effort

20. Chapter 4: Product/Service Design20 Mortality Curve of Chemical Product Ideas from Research to Commercialization

21. 21 Service Gap Identifier

22. Chapter 4: Product/Service Design22 Product-Process Innovations Over Time

23. Chapter 4: Product/Service Design23 Screening and Selection 4 Assessing technical feasibility 4 Determining up-front capital needs 4 Evaluation may include calculation of payback period, return on investment, or net present value

24. Chapter 4: Product/Service Design24 Analysis of Organizational Fit 4 Experience with particular output 4 Experience with production system required for the output 4 Experience in providing an output to the same target recipients 4 Experience with the distribution system for the output

25. Chapter 4: Product/Service Design25 Typical Checklist for Organizational Fit

26. Chapter 4: Product/Service Design26 The Aggregate Project Plan 4 Project Portfolio –Derivative projects –Breakthrough projects –Platform projects –R&D projects

27. Chapter 4: Product/Service Design27 The Aggregate Project Plan

28. Chapter 4: Product/Service Design28 An Example Aggregate Project Plan

29. Chapter 4: Product/Service Design29 Using the Aggregate Project Plan 4 Identify gaps in portfolio 4 Evaluate resource requirements 4 Employee development

30. Chapter 4: Product/Service Design30 The Product/Service Design Stage

31. Chapter 4: Product/Service Design31 The Product Design Stage 4 Preliminary Design 4 Prototype Testing 4 Final Design

32. Chapter 4: Product/Service Design32 Preliminary Design 4 Tradeoff Analysis 4 Standardization 4 Modularity 4 Computer-Aided Design

33. Chapter 4: Product/Service Design33 Tradeoff Analysis Factors to Consider 4 Function 4 Cost 4 Size and shape 4 Appearance 4 Quality 4 Reliability 4 Environmental impact 4 Producability 4 Timing 4 Accessibility 4 Recipient input requirements

34. Chapter 4: Product/Service Design34 Using QFD to Link Customers’ Attributes to Technical, Component, and Operation Requirements

35. Chapter 4: Product/Service Design35 The House of Quality for a Car Door

36. Chapter 4: Product/Service Design36 Advantages of Standardization 4 Minimizes number of parts needed to stock 4 Minimizes number of equipment setups 4 Simplified operations procedures 4 Quantity discounts due to larger purchases 4 Minimized service and repair problems

37. Chapter 4: Product/Service Design37 Disadvantages of Standardization 4 Possible lower quality because standard parts used rather than specially made parts 4 Inflexible production

38. Chapter 4: Product/Service Design38 Modularity computer 5 hard drive sizes 5 choices for amount of RAM 5 choices for CPU 4 modem choices 5 x 5 x 5 x 4 = 500 possible computer configurations with only 19 different parts

39. Chapter 4: Product/Service Design39 Computer-Aided Design 4 Develop drawings on computer screen 4 Can retrieve old designs and changes as necessary rather than creating new designs from scratch 4 Computer-aided engineering (CAE) 4 Computer-aided process planning (CAPP) 4 Computer-aided manufacturing (CAM)

40. Chapter 4: Product/Service Design40 Prototype Testing 4 Design concept developed in preliminary stage tested 4 Physical models 4 Computer simulation 4 Rapid prototyping (RP) 4 Actual product or service 4 Accept, extend, modify, or reject preliminary design

41. Chapter 4: Product/Service Design41 Final Design 4 Simplification and value analysis 4 Safety and human factors 4 Reliability 4 Manufacturability

42. Chapter 4: Product/Service Design42 Methods to Speed New Output Introduction 4 Contract R&D 4 Product/process teams 4 Overlap development stages 4 Combine/eliminate stages 4 Incremental emphasis 4 More extensive application 4 Use new technologies

43. Chapter 4: Product/Service Design43 Commercialization

44. Chapter 4: Product/Service Design44 Commercialization Process of moving an idea for a new product or service from concept to market

45. Chapter 4: Product/Service Design45 History of the Typewriter 4 Mechanical typewriter dominated market for 25 years 4 Then the electromechanical typewriter dominated market for 15 years 4 Electric typewriter dominated for the next 7 years 4 First generation microprocessor based machines dominated for next 5 years

46. Chapter 4: Product/Service Design46 Characteristics of Companies with Superior Commercialization Capabilities 4 Commercialize two to three times as many new products and processes as their competitors 4 Two to three times as many technologies incorporated into products 4 Get product to market in half time 4 Compete in twice as many product and geographic markets

47. Chapter 4: Product/Service Design47 Example - Assume Following Applies to Laser Printer Industry 4 Market growing 20% annually 4 Prices declining 12% annually 4 Five year life cycle As a project leader, would you choose between incurring a 30% cost overrun to finish project on schedule or miss deadline by six months?

48. Chapter 4: Product/Service Design48 Laser Printer Example continued 4 Incurring the 30% cost overrun will reduce cumulative profits by 2.3% 4 Launching printer six months late will reduce cumulative profits by 33%

49. Chapter 4: Product/Service Design49 To Improve Commercialization Capability Must Measure It 4 Time to market 4 Range of markets 4 Number of markets 4 Breadth of technologies

50. Chapter 4: Product/Service Design50 Improving Commercialization Capability 4 Make it a priority 4 Set goals and benchmarks 4 Build cross-functional teams 4 Promote hands-on management to speed actions and decisions

51. Chapter 4: Product/Service Design51 Disruptive Technologies 4 Disruptive Technologies 4 Sustaining Technologies

52. Chapter 4: Product/Service Design52 Performance Trajectories: Traditional Versus Online Distance Education Learning Programs

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