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Product Decision and Analysis/ Product Development
N.K.Agarwal
Major Classification of Products
• Consumer and Industrial Products– Consumer products are those which are destined to be used
by the ultimate consumers or households without any further processing / personal use
• Soaps, toothpastes, wrist watches etc– Industrial products are those which are destined to be used
by buyers as inputs in producing other products and for further commercial processing / business use
• Machine tools, computers, trucks etc.– However some products could be a consumer product as
well as industrial product• Oil when used by the housewife is a consumer product
but when purchased by a hair oil or soap manufacturer can be industrial product
• Durable and Non-durable Products– Durable products are those tangible products which normally
survive many uses• Machinery, cars, scooters etc
– Non-durable products are those tangible products which normally survive a few uses or consumed in one use itself
• Toffees, lubricating oils, etc
• Convenience, Shopping and Specialty Products– Consumer products have been divided into three categories– Convenience products
• Those consumer products which a customer usually purchases frequently, immediately and within the minimum effort
– Soaps, toothpaste, bread etc
Major Classification of Products
– Shopping products• Those consumer products which the customer in the
process of selection and purchase characteristically compares on such criteria as suitability, quality, price etc
– Refrigerator, suiting, etc– Specialty products
• Those consumer products with unique brands identification for which significant group of people are habitual & willing to make a special purchasing effort
– Ice cream, special eating items, fancy goods etc
Major Classification of Products
Classification of product
• Further classification is done based on nature of the product
• Custom built products Products especially designed to specifications and needs of
customers. Example: an aircraft, construction etc. Not available from inventory Emphasis on uniqueness, on-time delivery, quality etc. Cost / price is a secondary consideration
Strategy: obtain high profit margin
• Standardised product Products available off-the-shelf from inventory Ready availability and cost are important. Examples: standard
shapes in steel and aluminum, sugar etc. Very little Product differences between producers and limited
options available in the product
Purchase decisions based on dependability of supply & lower cost
Classification of product
• Between these two extremes there are products that are sensitive to
– Variety,– Flexibility, – Cost, and – Reliability of supply
• Quality of products in such cases is important but not as much as in custom built products
• Multiple sizes and type of products available– From inventory or by order
• Some products are available in low volumes whereas others like automobiles, TVs are available in high volumes
,
Classification of product
• Majority of products available fall in this middle category• Most consumer products are available from inventory• Producer goods are available by order, and
– May be subject to special design modifications to meet customer’s needs
• Although the basic designs are quite standard
Classsification of product
Design of a Product
• Defined as determining its shape, specifications and pattern of the product
• Types of design• Product design may be divided into four groups
– Functional– Developing an idea: a sketch of the product gives an
idea of its overall shape and parts necessary to accomplish the task
– Drafting specifications: to draft the correct dimensions of the product
– Experimental Model: proposed and tested thoroughly starting actual production
– Aesthetic design• The product design must appeal to the customers’ eyes
and induce them to buy the product– Production design
• Functional design has to be translated to Production design without sacrificing the functional efficiency
• Design of jigs and fixtures needed in production should be done simultaneously
– Packaging design• Design of package and labels must be aesthetically
pleasing • Must be sturdy so that the product does not get
damaged• Special packing for export consignments• Should attract the customer and meet his requirement
Design of a Product
Product Development
• Devising the product to meet market or customer requirement
• Two aspects are involved– Introduction of new products confirming the demands of
customer– Improvement in existing product in order to satisfy the needs
of the customer
• Need for product development– Immediate objectives include
• Stimulation of sales function• Offer of new look; quality advantage to public• Utilisation of existing equipment and skilled men• Fulfillment of immediate requirement of the customer
– Ultimate objectives include• Monopolisation of the market• Making possible its manufacture on quality basis• Persuasion of the person to only branded product• Reduction of the cost of production by creating demand
and producing on large scale• Supply of goods at lower price
Product Development
• Factors responsible for product development– Are the customers satisfied with the size, colour etc and
other characteristics of the product?– Reduction in price for the consumer– Chances and scope for the product protection– How does it affect other products in line?– Durability of the product– Chances of increasing demand due to improvement in
quality– Ease of handling during transportation or in use– Scope for using waste during production for some other by
product of the utility– Convenience to stock– New product to have an edge over existing competitive
products
Product Development
Product Standardisation
• Fixation of standard dimensions for the product with a view to having large production of only limited number of varieties
• Object is to measure, to identify: to compare, to describe product process, activities and performance in an organisation
• It helps in controlling function of the organisation• Advantages
– Facilitates large scale production– Eliminates the wastage in designing and purchasing– Helps in introducing mechanisation
– Helps in assisting the controlling function of the production system
– Gives incentives to management for producing new styles– Loan on standard commodities easier– Service and maintenance costs reduced– Higher productivity – Easier purchasing and selling
• Disadvantages– Standardisation promotes rigidity– Not suitable for small entrepreneurs– Excessive standardisation has deleterious effects
Product Standardisation
Simplification
• Elimination of superfluous varieties, sizes, dimensions etc.
• Advantages : To Producers– Reduction in the manufacturing costs– Use of specialised plants– Reduction in inventories– Increase in efficiency– Better market control– Increased profit– Use of skilled labour– Reduction of cost after sales– Saving in storage costs– Makes supervision and production planning easier
• Advantages: to Consumer– Quality products at cheaper rates– Greater repair and service facilities– Steady supply of products
• Disadvantages – Effects of seasonal fluctuations– Low competitive position is especially in complementary
products
Simplification
Product Life Cycle
• Demand for a product generally tends to follow a predictable pattern called the Product Life Cycle (PLC)
• PLC is defined as – An attempt to recognise different distinct stages in the sales
history of the product, and– A generalised model of sales and profit trends for a product
class or category over a period of time
• The various stages through which a product passes are– Introduction – Growth – Maturity– Saturation– Decline
• Introduction– First stage which begins with launching of a product – Product entry into the market requires a large investment
which gradually comes down as sales pick up– Sales at this stage are fairly low and the competitors are
already there in the field
• Growth– Both sales and profit begins to rise and arrangement of
distribution is likely to get completed at the end of this stage
Product Life Cycle
• Maturity– Manufacturers introduce new models or adopt new
techniques for production of products with a view to retaining their position in the market
– Stage marked by stiff competition and the rate of growth could be quite low
• Decline ( Decay)– Last stage during which the sales decline and profits reduce
down as the new competitors appear in the market with newer and better products
– Customers start using them
Product Life Cycle
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STAGES OF DEVELOPMENT
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PRODUCT LIFE CYCLE
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Process focused systems
• Production systems for custom built products – Should be flexible, and– Able to accommodate requirements
• As per customer specifications
• Typical machine shop can have a number of types of machines to do various jobs
• Nature of demand on the production system results in intermittent demand on the production system’s facilities
• This physical arrangement of departments by generic types is Job Shop
Product focused systems
• High volume, standardised products call for continuous use of facilities as in a flow shop
• Special processing equipment and dedicated production systems justified
• Mechanisation & automation to achieve standardisation & low cost are the main features
Production systems
• In between these two extremes are systems that deal with– Low-volume multiple products,– Or/and relatively high volume multiple products
• The former usually involves a process- focused system – Products are produced in batches to give some economies of
scale in comparison to the job shop system
• The high volume multi-product situation employs a mixed production strategy– That combines both the process- focused and product-
focused systems
• Parts fabrication in manufacturing is often organised on a batch-intermittent basis – Parts produced in economical batches & resulting investment
provides an important production strategy
• Final assembly is organised on a line or continuous basis– Nature of assembly makes possible continuous lines dedicated to
certain products
Production systems
Production - To - Order
• Offers – Product design flexibility to customers, – Minimise risk of inventories,– Closer quality control ,etc.
• Offers benefits of– Better service in terms of availability, – To reduce variable costs, and – To increase market share by making items available off-
the-shelf when customer wants to buy
Production - To - Stock
EXAMPLES OF 2-DIMENSIONS OF POSITIONING
PRODUCT FOCUSED
PROCESS FOCUSEDTY
PES
OF
SYST
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TO STOCK TO ORDERFINISHED GOODS INVENTORY POLICY
PRODUCT FOCUSED / TO STOCK
PRODUCT FOCUSED / TO ORDER
PROCESS FOCUSED / TO STOCK
PROCESS FOCUSED / TO ORDER
Production strategy
PRODUCTION SYSTEMTO STOCK TO ORDER
PRODUCT FOCUSSED-TO STOCK
PRODUCT FOCUSSED-TO ORDER
OFFICE COPIERCONSTRUCTION EQUIPMENTS
TV SETS BUSES/TRUCKS
CALCULATORSEXPERIMENTAL CHEMICALS
GASOLINE TEXTILESCAMERAS CABLES
PROCESS FOCUSSED-TO STOCK
PROCESS FOCUSSED-TO ORDER
MEDICAL INSTRUMENTS
MACHINE TOOLS
TEST EQUIPMENTSNUCLEAR COMPONENTS
SPARE PARTS AEROPLANESSTEEL PRODUCTS-SPECIAL SECTIONS
CONSTRUCTION PROJECTS
FINISHED GOODS INVENTORY POLICY
PRODUCT FOCUSSED
PROCESS FOCUSSED
References
• Production and Operations Management: R.C. Manocha
• Production & operations management: Aswathappa / Bhat
• Modern production / operations management: Buffa / Sarin
Thank You
PRODUCT LIFE CYCLE
• FOR A PRODUCT, AS IT DEVELOPS THROUGH ITS LIFE CYCLE, THE PRODUCTION SYSTEM GOES THROUGH A LIFE CYCLE OF ITS OWN – A PROCESS FOCUSSED, TO-ORDER JOB SHOP SYSTEM (IN THE
INITIAL STAGE) – INTERMEDIATE STAGE OF PROCESS FOCUSSED, TO ORDER
BATCH PRODUCTION– PRODUCT FOCUSSED , TO STOCK BATCH PRODUCTION, AND
ULTIMATELY– A PRODUCT FOCUSSED TO-STOCK CONTINUOUS PRODUCTION
SYSTEM • WHEN THE PRODUCT IS DEMANDED IN LARGE VOLUMES
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PROCESS FOCUSSED,TO ORDER, JOB SHOP
PROCESS FOCUSSED,TO ORDER, BATCH
PRODUCT FOCUSSED,TO STOCK, BATCH
PRODUCT FOCUSSED, TO STOCK, CONTINUOUS
STAGES OF DEVELOPMENT
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PRODUCT LIFE CYCLE AND PRODUCTIVE SYSTEM TYPES
LOW VOL-LOW STANDARDISATION, ONE OF A KIND
LOW VOL-MULTIPLE PRODUCTS
HIGHER VOL-FEW MAJOR PRODUCTS
HIGHER VOL-HIGH STANDARDISATION,COMMODITY PRODUCTS
JOB SHOP
JOB SHOP- BATCH PROCESS
ASSEMBLY LINE
CONTINUOUS /FLOW SHOP
PRODUCT CYCLE
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PRODUCT- PROCESS MATRIX
NONE
NONE
