Chapter 3 – Design of Goods

and Services

MBA-2018-OM 1
 Product Design and Process Selection
• Product Design and Process Selection –
Manufacturing

• Product Design and Process Selection -

Service

MBA-2018-OM 2
 Product Design

What is a Product?
• Need-satisfying offering of an organization
• Customers buy satisfaction, not parts

• May be a good or a service

MBA-2018-OM 3
Generation of New Product Opportunities
• Economic change
• Sociological and demographic change
• Technological change
• Legal/political change
Changes in:
• Market practice
• Professional standards
• Distributors /suppliers

MBA-2018-OM 4
 Product Life Cycle
Introduction
• Fine tuning
– research
– product development
– process modification and enhancement
– supplier development
Growth
• Product design begins to stabilize
• Effective forecasting of capacity becomes necessary
• Adding or enhancing capacity may be necessary

MBA-2018-OM 5
 Product Life Cycle
Maturity
• Competitors now established
• High volume, innovative production may be
needed
• Improved cost control, reduction in options,
paring down of product line
Decline
• Unless product makes a special contribution,
OM must plan to terminate offering

MBA-2018-OM 6
 Product Life Cycle, Sales, Cost, and Profit

Cost of
Development
& Manufacture
Sales, Cost & Profit .

Sales Revenue

Net Revenue

Loss
Time
Introduction Growth Maturity Decline

MBA-2018-OM 7
 Product Development Stages

• Idea generation
• Assessment of firm’s ability to carry out
• Customer Requirements
• Functional Specification
• Product Specifications
• Design Review
• Test Market
• Introduction to Market
• Evaluation
MBA-2018-OM 8
 Idea Generation Stage
• Provides basis for entry into market
• Sources of ideas
– Market need (60-80%); engineering & operations
(20%); technology; competitors; inventions;
employees
• Follows from marketing strategy
– Identifies, defines, & selects best market
opportunities

MBA-2018-OM 9
 Functional Specification Stage
• Defines product in terms of how the product
would meet desired attributes
• Identifies product’s engineering characteristics
– Example: printer noise (dB)

• Prioritizes engineering characteristics

• May rate product compared to competitors’

MBA-2018-OM 10
 Product Specification Stage
• Determines how product will be made
• Gives product’s physical specifications
– Example: Dimensions, material etc.
• Defined by engineering drawing
• Done often on computer
– Computer-Aided Design (CAD)

MBA-2018-OM 11
 Value Analysis/Value Engineering
 Achieve equivalent or better performance at a
lower cost while maintaining all functional
requirements defined by the customer
 Does the item have any design features that

are not necessary?

 Can two or more parts be combined into

one?
 How can we cut down the weight?

 Are there nonstandard parts that can be

eliminated?
 VA focuses on precondition design
improvement.
MBA-2018-OM 12
 Design for Manufacturability

 Traditional Approach
 “We design it, you build it” or “Over the
wall”

 Concurrent Engineering
 “Let’s work together simultaneously”

MBA-2018-OM 13
 Manufacturability and Value Engineering
• Benefits:
– Reduced costs
– Reduced complexity of products
– Additional standardization of products
– Improved functional aspects of product
– Improved job design and job safety
– Improved maintainability of the product
Manufacturability and Value Engineering activities
may be the best cost-avoidance technique available
to OM
Robust design: the product design so that small
variation in prodn/assemly do not adversely affect
the product
MBA-2018-OM 14
 Few Successes
Number
Ideas
2000 1750
Market requirement Design review,
1500 Testing, Introduction
1000 Functional
1000 specification
500 Product
500 specification
100 25
0
Development Stage
MBA-2018-OM 15
 Product Documents
• Engineering drawing
– Shows dimensions,
tolerances, & materials
• Bill of Material
– Lists components,
quantities & where used
– Shows product structure

MBA-2018-OM 16
Engineering Drawing Example
2-1/2
13/16
1
diameter

13/32
1/4 R
diameter
2-1/4

45° 13/16

3/8 13/16 5/16

1-5/8

Scale: FULL
Bracket Drawn: J. Thomas A- 435-038

MBA-2018-OM 17
 Bill of Material Example

Bill of Material
P/N: 1000 Name: Bicycle
P/N Desc Qty Units Level
1001 Handle Bars 1 Each 1
1002 Frame Assy 1 Each 1
1003 Wheels 2 Each 2
1004 Frame 1 Each 2

MBA-2018-OM 18
Production Documents

• Assembly Drawings
• Assembly chart
• Route sheet
• Work order

MBA-2018-OM 19
 Assembly Drawing
• Shows exploded view of product

Head Neck

End
Cap
Handle

MBA-2018-OM 20
Assembly Chart: shows in schematic form how a
product is assembled
Tuna Fish
1
Tuna
SA1 A1
Assy
2 Sandwich
Mayonaise
FG

Bread
3 A2

MBA-2018-OM 21
 Route Sheet
• Lists all operations necessary to produce the
component
Route Sheet for Bracket
Sequence M achine Operation Setup Operation
Tim e Tim e/Unit
1 Shear # 3 Shear to 5 .030
length
2 Shear # 3 Shear 45° 8 .050
corners
3 Drill Drill both 15 3.000
press holes
4 Brake Bend 90° 10 .025
press

MBA-2018-OM 22
 Work Order

Authorizes producing a given item, usually to a schedule

Work Order
a n u fa ct u ri ng
M Date
Dept O per

ed : JM
A pprov

MBA-2018-OM 23
Difference between Product design and
service design

MBA-2018-OM 24
 Factors to be considered when designing a
product
1.Manufacturing facility: Product design should
appropriate with the facilities available in the factory
regards to equipment, labor & layout.
2.Function: the new design must properly meet the
recipients need and perform the function for which it
is designed.
3. Cost: the total cost incurred in producing the new
design should not be excessive; else that will affect its
demand.
4. Quality: the quality of the new design should be as
high as possible, within the constraints of the cost.
MBA-2018-OM 25
Ctd…
5. Aesthetic: The product should be good in appearance and
should have attractive colors.
6. Reliability: the new design should function normally
without failures for the expected duration.
7. Environmental Impact: the new design should not degrade
the environment.
8. Product Safety: the new design should not pose a hazard
to the recipient.
9. Productivity: the new design should be producible with
ease and speed.
10. Designing for Operations: taking into account the
capabilities of the organization in designing goods and
services.
MBA-2018-OM 26
Ctd….
11. Ergonomics – it should be easy to use, operate and
should cause minimum possible fatigue and provide
comfort.
12. Maintenance- should easily be maintained and
serviced
13. Legal factors need to be considered from two
aspects. These are from Product liability: A
manufacturer is liable for any injuries or damages
caused by a faulty product and Uniform commercial
code: Products carry an implication of
merchantability and fitness.
14. Ethical issue: Releasing products with defects
MBA-2018-OM 27
 Process Strategies
 Involve determining how to produce a product
or provide a service
 Objective
 Meet or exceed customer requirements & product
specification
 Meet cost & managerial goals
 Has long-run effects
 Product & volume flexibility
 Costs & quality

MBA-2018-OM 28
 Types of Process Strategies
¨ Process strategies follow a continuum

Continuum
¨ Within a given facility, several strategies may
be used

MBA-2018-OM 29
 Types of Process Strategies
 The strategies are often classified as:
Process- Repetitive- Product-
Focused Focused Focused

Continuum

MBA-2018-OM 30
Process-Focused Strategy Examples

Bank

Hospital

Machine
Shop

MBA-2018-OM 31
Process Focused Strategy - Pros(advantage) &
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%)
 High variable cost

MBA-2018-OM 32
 Repetitive Focused Strategy
 Facilities often organized by assembly lines
 Characterized by modules
 Modules are Parts & assemblies made previously
 Modules combined for many output options
 Other names
 Assembly line
 Production line

MBA-2018-OM 33
 Repetitive Focused Strategy
 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

MBA-2018-OM 34
Repetitive-Focused Strategy -
Examples
Fast
Clothes
Food
Dryer
McDonald’s
over 95 billion served

Truck

MBA-2018-OM 35
 Product-Focused Strategy
¨ Facilities
Products A are
& B organized by product
¨ High volume, low variety products
¨ Where found
Discrete unit manufacturing
¨
¨ Continuous process manufacturing
¨ Other names Operation
¨ Line flow
production 1 2 3
¨ Continuous
production

MBA-2018-OM 36
 Product-Focused Examples
Soft Drinks
(Continuous,
then Discrete)

Light Bulbs
Paper (Discrete)
(Continuous)
MBA-2018-OM 37
Product-Focused Strategy Pros & Cons
 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

MBA-2018-OM 38
 Mass Customization
 Usingtechnology and imagination to rapidly
mass-produce products that satisfy unique
customer desires.

 Under mass customization the process models

become so flexible that distinctions between
them blur, making variety and volume issues
less significant.

MBA-2018-OM 39
 Process Analysis and Design
When analyzing &designing process to transform
resources in to goods & services, we ask
questions :
 Is the process designed to achieve competitive
advantage?
 Does the process eliminate steps that do not add
value?
 Does the process maximize customer value as
perceived by the customer?
 Will the process win orders?

MBA-2018-OM 40
 Process Reengineering
 The fundamental rethinking and radical redesign
of business processes to bring about dramatic
improvements in performance
 Relies on reevaluating the purpose of the
process and questioning both the purpose and
the underlying assumptions
 Requires reexamination of the basic process and
its objectives
 Focuses on activities that cross
boundaries/cross-functional lines.
MBA-2018-OM 41
 Product Design and Process Selection - Service
Consideration

• Consider special features of services

– The customer participates in the production
process
– Provision cannot be made to stock a service
– There is a tendency for production and
consumption of the service package to occur
simultaneously

MBA-2018-OM 42
 The Nature of Services
1.Services are idiosyncratic ->unusual/
strange

2. Quality of work is not quality of service

3. Most services contain a mix of tangible

and intangible attributes

4.High-contact services are experienced,

whereas goods are consumed
MBA-2018-OM 43
 Ctd…
6. Effective management of services
requires an understanding of marketing
and personnel, as well as operations
7. Services often take the form of cycles of
encounters involving face-to-face,
phone, Internet, electromechanical,
and/or mail interactions

MBA-2018-OM 44
 Service Strategy: Performance Priorities
1. Treatment of the customers
2. Speed and convenience of service delivery
3. Price
4. Variety
5. Unique skills that constitute the service
offering

MBA-2018-OM 45
The design of any service operation is
dependent on the following factors:
(a) What is the ‘service package’?
(b) Who are the customers for the ‘service
package’?
(c) What are the standards for the ‘service
package’?
(d) How can the ‘service package’ be given to the
customers?

MBA-2018-OM 46
 Service Blueprinting Steps
1. Identify processes

2. Isolate fail points

3. Establish a time frame

4. Analyze profitability
MBA-2018-OM 47
 Service Recovery (Just in case)
• A real-time response to a service failure.

• Blueprinting can guide recovery planning (fail

points).

• Recovery planning involves training front-line

workers to respond to such situations as
overbooking, lost luggage, or a bad meal.

MBA-2018-OM 48
Characteristics of a Well-Designed Service System

1. Eachelement of the service system is consistent

with the operating focus of the firm.

2. It is user-friendly.

3. It is robust.

4. It is structured so that consistent performance

by its people and systems is easily maintained.
MBA-2018-OM 49
 Ctd..
5. It provides effective links between the back
office and the front office so that nothing falls
between the cracks.

6. It manages the evidence of service quality in

such a way that customers see the value of the
service provided.

7. It is cost-effective.

MBA-2018-OM 50
 The Ethical Approach
 View product design from a systems
perspective

 Inputs, processes, outputs

 Costs to the firm/costs to society

 Consider the entire life cycle of the product

MBA-2018-OM 51
 Goals for Ethical and Environmentally Friendly Designs

1. Develop safe and more environmentally sound

products
2. Minimize waste of raw materials and energy
3. Reduce environmental liabilities
4. Increase cost-effectiveness of complying with
environmental regulations
5. Be recognized as a good corporate citizen

MBA-2018-OM 52
Guidelines for Environmentally Friendly Designs

1. Make products recyclable

2. Use recycled materials
3. Use less harmful ingredients
4. Use lighter components
5. Use less energy
6. Use less material

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 Legal and Industry Standards

For Design …
 Drug Administration Authority
 Consumer Products Safety Commission
 National Highway Safety Administration
 Children’s Product Safety Act

MBA-2018-OM 54
 Legal and Industry Standards
For Manufacture/Assembly …
 Occupational Safety and Health Administration
 Environmental Protection Agency
 Professional ergonomic standards
 State and local laws dealing with employment
standards, discrimination, etc.

MBA-2018-OM 55
 Legal and Industry Standards

For Disassembly/Disposal …

 Vehicle Recycling Partnership

 Increasingly rigid laws worldwide

MBA-2018-OM 56
 Transition to Production
 Know when to move to production
 Product development can be viewed as
evolutionary and never complete
 Product must move from design to production in
a timely manner
 Most products have a trial production period to
insure producibility
 Develop tooling, quality control, training
 Ensures successful production

MBA-2018-OM 57
 Ctd..

 Responsibility must also transition as the

product moves through its life cycle
 Line management takes over from design
 Three common approaches to managing
transition
 Project managers
 Product development teams
 Integrate product development and
manufacturing organizations
MBA-2018-OM 58
END!!!!

MBA-2018-OM 59