44

Product and Service Design

4-2

Major factors in design strategy Cost Quality Time-to-market Customer satisfaction Competitive advantage

Product and Service DesignProduct and Service Design

Product and service design – or redesign – should be closely tied to an organization’s strategy

4-3

1. Translate customer wants and needs into product and service requirements

2. Refine existing products and services3. Develop new products and services4. Formulate quality goals5. Formulate cost targets6. Construct and test prototypes7. Document specifications

Product or Service Design ActivitiesProduct or Service Design Activities

4-4

Reasons for Product or Service Reasons for Product or Service DesignDesign

Economic

Social and demographic

Political, liability, or legal

Competitive

Cost or availability

Technological

4-5

Objectives of Product and Objectives of Product and Service DesignService Design

Main focus Customer satisfaction Understand what the customer wants

Secondary focus Function of product/service Cost/profit Quality Appearance Ease of production/assembly Ease of maintenance/service

4-6

Taking into account the capabilities of the organization in designing goods and services.

Failure to take this into account can: Reduce productivity Reduce quality Increase costs

Designing For OperationsDesigning For Operations

4-7

Legal FDA, OSHA Product liability Uniform commercial code

Ethical Releasing products with defects

Environmental EPA

Legal, Ethical, and Environmental Legal, Ethical, and Environmental IssuesIssues

4-8

Regulations & Legal ConsiderationsRegulations & Legal Considerations

Product Liability - A manufacturer is liable for any injuries or damages caused by a faulty product.

Uniform Commercial Code - Products carry an implication of merchantability and fitness.

4-9

Designers Adhere to GuidelinesDesigners Adhere to Guidelines

Produce designs that are consistant with the goals of the company

Give customers the value they expect Make health and safety a primary

concern Consider potential harm to the

environment

4-10

Other Issues in Product and Other Issues in Product and Service DesignService Design

Product/service life cycles How much standardization Mass customization Product/service reliability Robust design Degree of newness Cultural differences

4-11

Life Cycles of Products or ServicesLife Cycles of Products or Services

Time

Introduction

Growth

Maturity

Saturation

Decline

Dem

and

Figure 4.1

4-12

StandardizationStandardization

Standardization Extent to which there is an absence of

variety in a product, service or process

Standardized products are immediately available to customers

4-13

Advantages of StandardizationAdvantages of Standardization

Fewer parts to deal with in inventory & manufacturing

Design costs are generally lower

Reduced training costs and time

More routine purchasing, handling, and inspection procedures

Quality is more consistent

4-14

Advantages of Standardization Advantages of Standardization (Cont’d)(Cont’d)

Orders fillable from inventory

Opportunities for long production runs and automation

Need for fewer parts justifies increased expenditures on perfecting designs and improving quality control procedures.

4-15

Disadvantages of StandardizationDisadvantages of Standardization

Designs may be frozen with too many imperfections remaining.

High cost of design changes increases resistance to improvements.

Decreased variety results in less consumer appeal.

4-16

• Mass customization: A strategy of producing standardized

goods or services, but incorporating some degree degree of customization

Delayed differentiation Modular design

Mass CustomizationMass Customization

4-17

• Delayed differentiation is a postponement tactic Producing but not quite completing a

product or service until customer preferences or specifications are known

Delayed DifferentiationDelayed Differentiation

4-18

Modular DesignModular Design

Modular design is a form of standardization in which component parts are subdivided into modules that are easily replaced or interchanged. It allows:

easier diagnosis and remedy of failures

easier repair and replacement

simplification of manufacturing and assembly

4-19

ReliabilityReliability

Reliability: The ability of a product, part, or system to perform its intended function under a prescribed set of conditions

Failure: Situation in which a product, part, or system does not perform as intended

Normal operating conditions: The set of conditions under which an item’s reliability is specified

4-20

Improving ReliabilityImproving Reliability

• Component design

• Production/assembly techniques

• Testing

• Redundancy/backup

• Preventive maintenance procedures

• User education

• System design

4-21

Product DesignProduct Design

Product Life Cycles

Robust Design

Concurrent Engineering

Computer-Aided Design

Modular Design

4-22

Robust Design: Design that results in products or services that can function over a broad range of conditions

Robust DesignRobust Design

4-23

Taguchi Approach Robust DesignTaguchi Approach Robust Design

Design a robust product Insensitive to environmental factors either in

manufacturing or in use. Central feature is Parameter Design. Determines:

factors that are controllable and those not controllable

their optimal levels relative to major product advances

4-24

Degree of NewnessDegree of Newness

1.Modification of an existing product/service

2.Expansion of an existing product/service

3.Clone of a competitor’s product/service

4.New product/service

4-25

Degree of Design ChangeDegree of Design Change

Type of Design Change

Newness of the organization

Newness to the market

Modification Low Low

Expansion Low Low

Clone High Low

New High High

Table 4.3

4-26

Cultural DifferencesCultural Differences

Multinational companies must take into account cultural differences related to the product design.

Notable failures: Chevy Nova in Mexico Ikea beds in U.S.

4-27

Global Product DesignGlobal Product Design

Virtual teams Uses combined efforts of a team of designers

working in different countries Provides a range of comparative advantages

over traditional teams such as: Engaging the best human resources around the world Possibly operating on a 24-hr basis Global customer needs assessment Global design can increase marketability

4-28

Phases in Product Development Phases in Product Development ProcessProcess

1. Idea generation

2. Feasibility analysis

3. Product specifications

4. Process specifications

5. Prototype development

6. Design review

7. Market test

8. Product introduction

9. Follow-up evaluation

4-29

Idea GenerationIdea Generation

Ideas Competitor based

Supply chain based

Research based

4-30

Reverse EngineeringReverse Engineering

Reverse engineering is the

dismantling and inspecting of a competitor’s product to discover product improvements.

4-31

Research & Development (R&D)Research & Development (R&D)

Organized efforts to increase scientific knowledge or product innovation & may involve: Basic Research advances knowledge about

a subject without near-term expectations of commercial applications.

Applied Research achieves commercial applications.

Development converts results of applied research into commercial applications.

4-32

ManufacturabilityManufacturability

Manufacturability is the ease of fabrication and/or assembly which is important for:

Cost

Productivity

Quality

4-33

Designing for ManufacturingDesigning for Manufacturing

Beyond the overall objective to achieve customer satisfaction while making a reasonable profit is:

Design for Manufacturing(DFM)

The designers’ consideration of the organization’s manufacturing capabilities when designing a product.

The more general term design for operations encompasses services as well as manufacturing

4-34

Concurrent EngineeringConcurrent Engineering

Concurrent engineering is the bringing together of engineering design and manufacturing personnel early in the design phase.

4-35

Computer-Aided DesignComputer-Aided Design

Computer-Aided Design (CAD) is product design using computer graphics. increases productivity of designers, 3 to 10

times

creates a database for manufacturing information on product specifications

provides possibility of engineering and cost analysis on proposed designs

4-36

Design for manufacturing (DFM) Design for assembly (DFA) Design for recycling (DFR) Remanufacturing Design for disassembly (DFD) Robust design

Product designProduct design

4-37

Recycling: recovering materials for future use

Recycling reasons Cost savings Environment concerns Environment regulations

RecyclingRecycling

4-38

RemanufacturingRemanufacturing

Remanufacturing: Refurbishing used products by replacing worn-out or defective components. Remanufactured products can be sold for 50% of

the cost of a new producer Remanufacturing can use unskilled labor Some governments require manufacturers to

take back used products Design for Disassembly (DFD): Designing

products so that they can be easily taken apart.

4-39

Component CommonalityComponent Commonality

Multiple products or product families that have a high degree of similarity can share components

Automakers using internal parts Engines and transmissions Water pumps Etc.

Other benefits Reduced training for assemble and installation Reduced repair time and costs

4-40

Quality Function Deployment Voice of the customer House of quality

Quality Function DeploymentQuality Function Deployment

QFD: An approach that integrates the “voice of the customer” into the product and service development process.

4-41

The House of QualityThe House of Quality

Correlation matrix

Designrequirements

Customerrequire-ments

Competitiveassessment

Relationshipmatrix

Specificationsor

target values

Figure 4.3

4-42

Customer Requirements

Importance to Cust.Easy to close

Stays open on a hill

Easy to open

Doesn’t leak in rain

No road noise

Importance weighting

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Correlation:Strong positivePositiveNegativeStrong negative

X*Competitive evaluation

X = UsA = Comp. AB = Comp. B(5 is best)

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Relationships:Strong = 9Medium = 3Small = 1Target values

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House of Quality ExampleHouse of Quality ExampleFigure 4.4

4-43

Service DesignService Design

Service is an act Service delivery system

Facilities Processes Skills

Many services are bundled with products

4-44

Service DesignService Design

Service design involves The physical resources needed The goods that are purchased or consumed

by the customer Explicit services Implicit services

4-45

Service DesignService Design

Service Something that is done to or for a customer

Service delivery system The facilities, processes, and skills needed to

provide a service Product bundle

The combination of goods and services provided to a customer

Service package The physical resources needed to perform

the service

4-46

Tangible – intangible Services created and delivered at the same

time Services cannot be inventoried Services highly visible to customers Services have low barrier to entry Location important to service Range of service systems Demand variability

Differences Between Product Differences Between Product and Service Designand Service Design

4-47

Service SystemsService Systems

Service systems range from those with little or no customer contact to very high degree of customer contact such as: Insulated technical core (software development) Production line (automatic car wash) Personalized service (hair cut, medical service) Consumer participation (diet program) Self service (supermarket)

4-48

Service Demand VariabilityService Demand Variability

Demand variability creates waiting lines and idle service resources

Service design perspectives: Cost and efficiency perspective Customer perspective

Customer participation makes quality and demand variability hard to manage

Attempts to achieve high efficiency may depersonalize service and change customer’s perception of quality

4-49

Phases in Service DesignPhases in Service Design

1.Conceptualize

2.Identify service package components

3.Determine performance specifications

4.Translate performance specifications into design specifications

5.Translate design specifications into delivery specifications

4-50

Service BlueprintingService Blueprinting

Service blueprinting A method used in service design to describe

and analyze a proposed service

A useful tool for conceptualizing a service delivery system

4-51

Major Steps in Service Major Steps in Service BlueprintingBlueprinting

1. Establish boundaries

2. Identify sequence of customer interactions

• Prepare a flowchart

3. Develop time estimates

4. Identify potential failure points

4-52

Characteristics of Well Designed Characteristics of Well Designed Service SystemsService Systems

1. Consistent with the organization mission

2. User friendly

3. Robust

4. Easy to sustain

5. Cost effective

6. Value to customers

7. Effective linkages between back operations

8. Single unifying theme

9. Ensure reliability and high quality

4-53

Challenges of Service DesignChallenges of Service Design

1. Variable requirements

2. Difficult to describe

3. High customer contact

4. Service – customer encounter

4-54

Guidelines for Successful Service Guidelines for Successful Service DesignDesign

1. Define the service package2. Focus on customer’s perspective3. Consider image of the service package4. Recognize that designer’s perspective is different

from the customer’s perspective5. Make sure that managers are involved6. Define quality for tangible and intangibles7. Make sure that recruitment, training and rewards

are consistent with service expectations8. Establish procedures to handle exceptions9. Establish systems to monitor service

4-55

1. Increase emphasis on component commonality

2. Package products and services3. Use multiple-use platforms4. Consider tactics for mass

customization5. Look for continual improvement6. Shorten time to market

Operations StrategyOperations Strategy

4-56

Shorten Time to MarketShorten Time to Market

1. Use standardized components

2. Use technology

3. Use concurrent engineering

4-57

Break-Even Analysis: Graphical Approach Break-Even Analysis: Graphical Approach

Compute quantity of goods that must be sold to break-even

Compute total revenue at an assumed selling price

Compute fixed cost and variable cost for several quantities

Plot the total revenue line and the total cost line

Intersection is break-even Sensitivity analysis can be

done to examine changes in all of the assumptions made

4-58

Break-Even AnalysisBreak-Even Analysis

Total cost = fixed costs + variable costs (quantity):

Revenue = selling price (quantity)

Break-even point is where total costs = revenue:

QVCFTC

QSPR

VCSP

FQor

QSPQVCForRTC

4-59

ExampleExample

A firm estimates that the fixed cost of producing a line of footwear is $52,000 with a $9 variable cost for each pair produced. They want to know: If each pair sells for $25, how many pairs

must they sell to break-even? If they sell 4000 pairs at $25 each, how much

money will they make?

4-60

Example SolvedExample Solved

Break-even point:

Profit = total revenue – total costs

pairsVCSP

FQ 250,3

9$25$

000,52$

000,12$

000,49$000,52$000,425$

QVCFQSPP

4-61

Break-even calculationBreak-even calculation: A company is planning to establish a chain of movie theaters. : A company is planning to establish a chain of movie theaters. It estimates that each new theater will cost approximately $1 Million. The theaters will It estimates that each new theater will cost approximately $1 Million. The theaters will hold 500 people and will have 4 showings each day with average ticket prices at $8. hold 500 people and will have 4 showings each day with average ticket prices at $8.

They estimate that concession sales will average $2 per patron. The variable costs in They estimate that concession sales will average $2 per patron. The variable costs in labor and material are estimated to be $6 per patron. They will be open 300 days each labor and material are estimated to be $6 per patron. They will be open 300 days each

year. What must average occupancy be to break even?year. What must average occupancy be to break even?

Break Even Point Total revenues = Total costs @ break-even point Q Selling price*Q = Fixed cost + variable cost*Q ($8+$2)Q= $1,000,000 + $6*Q Q = 166,667 patrons (28% occupancy) What is the gross profit if they sell 300,000 tickets

Profit = Total Revenue – Total Costs P = $10*300,000 – (1,000,000 + $6*300,000) P = $200,000 If concessions average $.50/patron, what is break-even Q

now? (sensitivity analysis) ($8.50)Q = 1,000,000 - $6*Q Q = 400,000 patrons (67% occupancy)

4-62

Other Product Design FactorsOther Product Design Factors

Need to Design for

Manufacturing – DFM Minimize parts

Design parts for

multiply applications

Use modular design

Avoid tools

Simplify operations

4-63

Other Design FactorsOther Design Factors

Consider product

life cycle stages Introduction Growth Maturity Decline

Facility & process investment depends on life cycle

4-64

Other Design factorsOther Design factors

Old “over-the –wall” sequential design process should not be used

Each function did its work and

passed it to the next function

Replace with a Concurrent Engineering process

All functions form a design

team working together to

develop specifications, involve

customers early, solve potential

problems, reduce costs, &

shorten time to market

4-65

Process SelectionProcess Selection

Process selection is based on five considerations Type of process; range from intermittent to continuous Degree of vertical integration Flexibility of resources Mix between capital & human resources Degree of customer contact

Process types can be:Project ProcessBatch ProcessLine ProcessContinuous Process

4-66

Underlying Process Relationship Underlying Process Relationship Between Volume and Between Volume and

StandardizationStandardization

4-67

Volume and Process ChoiceVolume and Process Choice

Low Volume typically means Project or Batch processes Less vertical integration More resource flexibility Less capital intensity Higher skilled labor More customer involvement

More customized products Make or assemble to order

strategy

High Volume typically means Line/continuous processes More vertical integration Less resource flexibility More capital intensity More specialized labor Little to no customer

involvement Standardized products Make to stock strategy

4-68

Differences between Intermittent Differences between Intermittent and Continuous Operationsand Continuous Operations

Decision Intermittent Operation Continuous Operation

Product variety Great Small

Degree of standardization Low High

Organization of resources Grouped by Function Line flow

Path of products Varied, depends on product Line flow

Factor driving production Customer orders Forecast of demand

Critical resource Labor Capital

Type of equipment General purpose Specialized

Degree of automation Low High

Throughput time Longer Shorter

Work-in-process inventory More Less

4-69

Facility Layouts and Process ChoiceFacility Layouts and Process Choice

4-70

Process Design ToolsProcess Design Tools Process flow analysis is

a tool used to analyze and document the sequence of steps within a total process. Usually first step in Process Reengineering.

Process Re-engineering is a structured approach used when major business changes are required as a result of: Major new products Quality improvement

needed Better competitors Inadequate

performance

4-71

Intermittent VS. Repetitive LayoutsIntermittent VS. Repetitive Layouts

4-72

Product and Service Strategy Product and Service Strategy OptionsOptions

4-73

Process Decisions-Vertical Process Decisions-Vertical Integration & Make or BuyIntegration & Make or Buy

Vertical integration refers to the degree a firm chooses to do processes itself- raw material to sales Backward Integration means moving closer to primary

operations Forward Integration means moving closer to customers

A firm’s Make-or-Buy choices should be based on the following considerations: Strategic impact Available capacity Expertise Quality considerations Speed Cost (fixed cost + variable cost)make = (fixed cost + Variable cost)buy

Business are trending toward less backward integration, more outsourcing

4-74

Manufacturing Technology DecisionsManufacturing Technology Decisions

Simplify first then apply appropriate technology

Automation

Automated Material Handling: Automated guided vehicles (AGV)

Automated storage & retrieval systems (AS/RS)

Computer-Aided Design (CAD) software

Robotics & Numerically-Controlled (NC) equipment

Flexible Manufacturing Systems (FMS)

Computer-Integrated Manufacturing (CIM)

4-75

Designing ServicesDesigning Services Service Characteristics

Pure services Quasi-Manufacturing Mixed services

Service Package The physical goods The sensual benefits The psychological

benefits Differing designs

Substitute technology for people

Get customer involved High customer attention