1. Bangalore 1 MBA, Semester 2 Operations Management Module 2 : Strategic Decisions Ms. Aarti Mehta Sharma

2. Bangalore 2 PRODUCT / service product life cycle product design & planning Process Design Module II

3. Bangalore 3 Product “thing produced by labor or effort" or the "result of an act or a process" A product is anything that can be offered to a market that might satisfy a want or need. Products are purchased as raw materials and sold as finished goods.

4. Bangalore 4 Product Life Cycle Every product has a certain marketable life period. Depending upon the product life span will vary

5. Bangalore 5 –PLC determines revenue earned and capacity planning –Contributes to strategic marketing planning –May help the firm to identify when a product needs support, redesign, reinvigorating, withdrawal, etc. –May help in new product development planning –May help in forecasting and managing cash flow

6. Bangalore 6 Product Life Cycle Analysis Time Introduction Growth Maturity Saturation Decline Deman d

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8. 8 Introduction – sales begin, production and mktg are developing and profits are negative - Third generation mobile phones - E-conferencing - iris-based personal identity cards

9. Bangalore 9 Growth – sales grow, mktg intensifies, production concentrates on expanding capacity fast enough to keep up with the demand, profits begin -Portable DVD Players -Email -Smart cards

10. Bangalore 10 Maturity – production concentrates on high volume, efficiency and low costs; mktg shifts to competitive sales promotion or maintaining market share -Personal Computers -Faxes -Cotton t-shirts -Credit cards

11. Bangalore 11 Decline - Sales and profits start to decline, the organisation may try to change their pricing strategy to stimulate growth, however the product will either have to be re-modified, or replaced within the market. -Typewriters -Handwritten letters -Cheque books

12. Bangalore 12 SPAN The cycle may vary from as little as 90 days, as in the case of “Krissh” products Shortened PLC’s (computers) As long as 100 or more years, as for gasoline-powered automobiles.

13. Bangalore 13 Why is Product Development Important? 1.To satisfy consumers (Demand) - Product items, no matter how successful have a certain lifespan (product mortality) - Replacement products need to be constantly planned - True across all industries especially IT eg Microsoft’s new versions, Window’s XP, PS-2 etc)

14. Bangalore 14 2.To create new jobs (Irish Economy) 3.To maintain margins (Market share) 4.Government Directives 5.To expand the business (Growth)

15. Bangalore 15 different kinds of new products Generic – mkt opp - sporting, furniture, tools Technology Push – new tech, finds mkt – gore-tex(artificial veins) Platform products ( estd product line ) – consumer electronics Process intensive = foods, chemicals

16. Bangalore 16 Product design New product Improve existing one

17. Bangalore 17 Service design Service design is the activity of planning and organizing people, infrastructure, communication and material components of a service in order to improve its quality and the interaction between service provider and customers.

18. Bangalore 18 The purpose of service design methodologies is to design according to the needs of customers or participants, so that the service is user-friendly, competitive and relevant to the customers. The backbone of this process is to understand the behavior of the customers, their needs and motivations

19. Bangalore 19 New Product/ Service Development Process Phases Idea Generation / Idea Screening Concept Testing Business Analysis Product Development ( concurrent engg ? ) Test Marketing Production Ramp up Introduction to market Customer feedback

20. Bangalore 20 Design 21 st century demands : - New innovative products & services / improving existing products & s/ designing products & services for ease of prod -Flexible production Systems ( lean/ assembly lines/ cellular)

21. Bangalore 21 Innovation Customers, marketing, production Basic research / applied research -Technical and economic feasibility studies -Protoype design -Performance testing -Market testing -Design for mfg -Market, performance, process testing, and economic evaluation of model -Continual modification of production model

22. Bangalore 22 getting new products to market faster Use Autonomous design and development teams (GM, IBM, Motorola, GE, Nissan…) CAD / CAM Concurrent Engg - design the product and the accompanying production process simultaneously ( No throwing over the wall…)

23. Bangalore 23 Boeing 787- Feb 2012

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26. Bangalore 26 boeing … Computer simulation Different groups of engrs design diff parts(plumbing, air circulation systems) Software reads all files simultaneously; combines them 3 dimensionally; Thus, designers of one system can check for design interference with other systems Speeds up product development, reduces design and developmental cost

27. Bangalore 27 improving the design of existing products Modifying and improving existing products Improve performance, quality and cost in order to maintain or improve mkt share of maturing products For eg : At Toyota, improvements were made -Taillights hooked up with single connector instead of two; savings = $ 0.42 -Underside coated only where needed; savings= $2 Continuous design improvements (value analysis)

28. Bangalore 28 Ferrari --- limousine

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36. Bangalore 36 Designing for production Specifications : Detailed descriptions of material, or part, physical descriptions Tolerances : a minimum and maximum of each product; eg :4 ± 0.001 inch Standardization : reduces variety among a group of products or parts -- higher volume Simplification :is the elimination of complex features for higher customer satisfaction / reduced costs

37. Bangalore 37 Designing for Quality Products of superior quality TQM Costs Of Quality Detecting Defects Preventing Defects Toyota, Intel, Motorola(6σ)

38. Bangalore 38 contract manufacturers Companies that manufacture for others Automobile industry – interiors, taillights, GPS systems Pharma – clinical trials

39. Bangalore 39 Product Failure The failure rate of new products remains high despite product-planning processes A recent survey of industrial and consumer goods’ firms revealed a failure rate of 35% Product Failure can be defined in two ways: Absolute Failure occurs if a company incurs a financial loss Relative Failure occurs if a company makes a profit but does not attain profits or image objectives

40. Bangalore 40 Why New Products Fail There are several reasons for absolute or relative new-product failure, including – Lack of differential advantage – Poor planning – Poor timing – Unrealistic expectations and enthusiasm by product sponsor

41. Bangalore 41 New Products/Services

42. Bangalore 42 Identify

43. Bangalore 43 services revisited Intangible items that cannot be inventoried Close customer contact Short lead times High labor costs relative to capital costs Subjectively determined quality Great diversity in service jobs 5: 1 2: 1 (non retail : retail ) AT& T, Wal Mart, ICICI, Fullerton ….

44. Bangalore 44 design Quasi Mfg : prodn occurs; - back room operations at banks, aircraft maintenance etc Customer as participant : customer involvement is high – retailing Customer as product : medical clinics, beauty parlors Not mutually exclusive – Mc Donalds, Air India

45. Bangalore 45 scheduling.. Services are produced and delivered by people Demand is non uniform ( non peak incentives, advance appointments,,waiting lines, part time personnel ) Taco Bell – computer simulation programme- how many employees are needed in a day

46. Bangalore 46 Activity Organise into groups Choose one of these industries : generate an idea for a new product / service (feasible) – name the product - mobile phones - education - travel - textiles - restaurant - movie promotions

47. Bangalore 47 Make a role play / presentation to bring out all the steps involved in new product development ( 20 mins).

48. Bangalore 48 Product design – the process of defining all of the companies product characteristics Product design must support product manufacturability (the ease with which a product can be made)

49. Bangalore 49 Product design defines a product’s characteristics of: appearance, materials, dimensions, tolerances, and performance standards. Process Selection – the development of the process necessary to produce the designed product

50. Bangalore 50 Product design and process selection are directly linked Type of product selected defines type of operation required Type of operation available defines broader organizational aspects such as –Equipment required –Facility arrangement –Organizational structure

51. Bangalore 51 Service design Service design is unique in that the service and entire service concept are being designed –must define both the service and concept - Physical elements, aesthetic & psychological benefits e.g. promptness, friendliness, ambiance –Product and service design must match the needs and preferences of the targeted customer group

52. Bangalore 52 Process A process is any part of an organization that takes inputs and transforms them into outputs, that is of greater value than the inputs. Inputs Outputs Resources Activities

53. Bangalore 53 Types of processes Process focussed Product Focussed - continuous - discrete / assembly line / production line / Repetitive Focussed / Cellular processes

54. Bangalore 54 Factors affecting Process Expected demand No. of different products to be made Made to stock / order

55. Bangalore 55 Process Focus Facilities are organized by process Similar processes are together –Example: All drill presses are together Low volume, high variety products ‘Jumbled’ flow Operation Product A Product B 112233 Other names –Intermittent process/batch shop –Job shop –Example : machine, print, carpentry

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57. Bangalore 57 Process-Focused - Examples Bank © 1995 Corel Corp. Machine Shop © 1995 Corel Corp. Hospital © 1995 Corel Corp.

58. Bangalore 58 Operations of a Health Center D T RP B D:Doctor (examination rooms) R:Radiology (X-ray) T:Triage (assess severity of illness) B:Blood (lab test) P:Pharmacy (fill prescriptions)

59. Bangalore 59 Health Center - Physical Exam Physical exam D T RP B D:Doctor (examination rooms) R:Radiology (X-ray) T:Triage (assess severity of illness) B:Blood (lab test) P:Pharmacy (fill prescriptions) Physical exam

60. Bangalore 60 Health Center - Broken Arm Physical exam Broken arm D T RP B D:Doctor (examination rooms) R:Radiology (X-ray) T:Triage (assess severity of illness) B:Blood (lab test) P:Pharmacy (fill prescriptions) Broken arm Physical exam

61. Bangalore 61 Health Center - Flu Physical exam Broken arm Flu D T RP B D:Doctor (examination rooms) R:Radiology (X-ray) T:Triage (assess severity of illness) B:Blood (lab test) P:Pharmacy (fill prescriptions) Broken arm Flu Physical exam

62. Bangalore 62 Pros & Cons Advantages –Greater product flexibility –More general purpose equipment –Lower initial capital investment Disadvantages –More highly trained personnel –More difficult production planning & control –Low equipment utilization (5% to 25%)

63. Bangalore 63 Product Focussed - Repetitive / Discrete Facilities often organized by assembly lines Characterized by modules –Parts & assemblies made previously Modules combined for many output options Other names –Assembly line –Production line

64. Bangalore 64 Repetitive Focused Strategy - Considerations More structured than process-focused, less structured than product focused Enables quasi-customization Using modules, it enjoys economic advantage of continuous process, and custom advantage of low-volume, high- variety model Example : autos, motorcycles - Harley Davidson

65. Bangalore 65 Repetitive-Focused Strategy - Examples Truck © 1995 Corel Corp. Clothes Dryer © 1995 Corel Corp. Fast Food McDonald’s over 95 billion served © 1984-1994 T/Maker Co.

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67. Bangalore 67 Automobiles, toys, computers - Repetitive (discrete) flow – products are discrete

68. Bangalore 68 Product-Focused Strategy - Continuous Facilities are organized by product High volume, low variety products Example : commercial baked goods, steel, glass - Tata Steel Operation Products A & B 1 1 2 2 3 3 Other names –Line flow production –Continuous production

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70. Bangalore 70 Operations of an Automobile Assembly Plant A:Front-end body-to- chassis assembly H:Hood attachment F:Fluid filling S:Start-up testing ASHF

71. Bangalore 71 AAP - Mid-sized 6 cylinder AAP - Mid-sized 6 cylinder A:Front-end body-to- chassis assembly H:Hood attachment F:Fluid filling S:Start-up testing Mid-sized 6 cylinder ASHF Mid-sized 6 cylinder

72. Bangalore 72 AAP - Compact 4 cylinder AAP - Compact 4 cylinder A:Front-end body-to- chassis assembly H:Hood attachment F:Fluid filling S:Start-up testing Mid-sized 6 cylinder Compact 4 cylinder ASHF Mid-sized 6 cylinder Compact 4 cylinder

73. Bangalore 73 Advantages –Lower variable cost per unit –Lower but more specialized labor skills –Easier production planning and control –Higher equipment utilization (70% to 90%) Disadvantages –Lower product flexibility –More specialized equipment –Usually higher capital investment Product-Focused Strategy - Pros & Cons

74. Bangalore 74 Product-Focused Examples Paper (Continuous) © 1984-1994 T/Maker Co. © 1995 Corel Corp. Soft Drinks (Continuous, then Discrete)

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76. Bangalore 76 Process FocusRepetitive FocusContinuous Focus 1. Product: Small quantity, large variety 1. Product: Long runs, usually standardized 1. Product: Large quantities, small variety 2. Equipment: General purpose 2. Equipment: Special; assembly line 2. Equipment: Special-purpose 3. Operators broadly skilled 3. Employees modestly trained 3. Operators less broadly skilled 4. Many job instructions 4. Repetitive operations4. Few work orders and job instructions; standardization

77. Bangalore 77 Using technology and imagination to rapidly mass-produce products that cater to sundry unique customer desires. Under mass customization the three process models become so flexible that distinctions between them blur, making variety and volume issues less significant. Mass Customization

78. Bangalore 78 Cellular Manufacturing / Group Technology _ Parts with similar characteristics are grouped into part families – Parts in a part family are typically made on the same machines with similar tooling –Each part produced receives a multi-digit code that describes the physical characteristics of the part.

79. Bangalore 79 –Some part families (those requiring significant batch sizes) can be assigned to manufacturing cells. –The organization of the shop floor into cells is referred to as cellular manufacturing. –Flow of parts within cells tend to be more like product-focused systems

80. Bangalore 80 –Process changeovers simplified –Variability of tasks reduced (less training needed) –More direct routes through the system –Quality control is improved –Production planning and control simpler –Automation simpler Advantages

81. Bangalore 81 –Duplication of equipment –Under-utilization of facilities –Processing of items that do not fit into a family may be inefficient Disadvantages

82. Bangalore 82 Continuum Repetitive- Focused Product- Focused Process- Focused

83. Bangalore 83 Product Process Matrix Product structure Product Life Cycle Process structure Low vol – low stdardn Multipl prods,l ow vol Few maj prods,hig her vol Hi vol,hi std Effective ness measure Job shopComm printer, french rest Flex high, unit cost-high BatchHeavy eqpt Assembl y Line Automobile, mc donalds Continuo us Sugar refinery Flex- low unit cost -lo

84. Bangalore 84 Process chart State exact materials Time required at every step Spatial movement patterns Transformations – input --- output Conformance standards( rejection / acceptance) Applicable for services & mfg