Operations
Management
Design of Goods and Services
Chapter 5
5-1
Outline
Product Strategies & Selection.

Life Cycle.
Product Development Stages.

Concurrent design.

Quality Function Deployment (QFD).
 Design Issues.
 Documents.
 Service Design.
5-2
Goals
Find new products to design, develop and
market.
Develop and implement a product strategy
that:


Meets demands of the marketplace.
Provides a competitive advantage.



Differentiation.
Low cost.
Rapid response.
5-3
Product Strategy
 Product strategy includes:
 Selection - What good or service should be
offered.
 Development - From product concept to
introduction.
 Design (and redesign) - To define and redefine
product.
5-4
Product Selection
Deciding which products (goods and
services) to provide.
Customers buy satisfaction, not parts.
What is a Product?

Need-satisfying offering of an organization.

Example: Procter & Gamble (P&G)
 P&G does not sell laundry detergent.
 P&G sells
the benefit of clean clothes.
5-5
Product Components
Product
Brand
(Name)
Physical
Good
Product
Idea
Quality
Level
Features
5-6
Package
Service
(Warranty)
Product Life Cycle
Sales
Sales Revenue
Introduction
Growth
Maturity
Decline
Time
5-7
Sales, Cost & Profit .
Product Life Cycle, Sales, Cost,
and Profit
Cost of
Development
& Manufacture
Sales Revenue
Profit
Cash flow
Loss
Time
Introduction
Growth
Maturity
5-8
Decline
Product Life Cycle
Introduction
Initial designs.
Product development.
Process modification and enhancement.
Supplier development.
Increasing costs and revenues.

Generally cost>revenue.
5-9
Idea Generation
 Provides basis for entry into market.
 Sources of ideas.



Market need (60-80%).
Engineering & operations (20%).
Technology; competitors; inventions; employees.
 Very few ideas become marketable products.
5-10
Need Very Many Ideas for
Successful New Products
Number
2000
1500
1000
500
0
Ideas
1750
Design review,
Testing, Introduction
Market
requirement
1000
Functional
specifications
500
Product
specification
100
Development Stage
5-11
25
One
success!
Assess Abilty to Offer Product
 Can the firm provide the product/service?
 Should the firm provide the product/service?
 Make vs. Buy

A firm may be able to purchase the product as a
“standard item” from another manufacturer.
5-12
Product Development Stages
 Customer Requirements.
 Functional Specification.
 Product Specifications.
 Design Review.
 Test Market.
 Transition to Production.
5-13
Customer Requirements
 Identifies & positions key product benefits.
 Example: Long lasting with more power .
(Sears’ Die Hard Battery)
 Identifies detailed list of product attributes
desired by customer.
 Customer focus groups or interviews.
5-14
Functional Specification
 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 competition.
5-15
Product Specifications
 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).
5-16
Design Review
 Review design from multiple perspectives.
 Evaluate in terms of:

Customer requirements.

Ability to produce product or deliver service.
 Revise design if needed.
5-17
Quality Function Deployment - QFD
Technique to help:
Identify customer requirements.
 Translate these into functional specifications and
product specifications.
 Also helps focus quality efforts.

Involves creating 4 tabular ‘Matrices’ or
‘Houses’.

Breakdown product design into increasing levels of
detail.
5-18
House of Quality Sequence
Quality
Plan
Customer
Requirements
Design
Characteristics
House
1
Specific
Components
Design
Characteristics
Specific
Components
House
2
5-19
House
3
Production
Process
Production
Process
House
4
Test Marketing & Transition to
Production
Test market product to assess design and
market.
Transition to production.

Use a trial period to work the bugs out and revise
product and process design.

Refine supplier selections.

Transfer responsibility from design group to
production group.
5-20
Design Issues
Concurrent design.
Manufacturability & Value Engineering.
Modular Design.
Robust Design.
Computer-aided design.
Environmentally friendly design.
Time-based competition.
5-21
Traditional Design
 Design is a separate activity.

Nearly independent of production, engineering, etc.
Traditional
Design
Production
5-22
Concurrent Design
 Design product using cross-functional teams.

Production, engineering, marketing, customers, etc.
Traditional
Design
Concurrent design
Production
Design & Production
& other units
5-23
Manufacturability and
Value Engineering
Key is to simplify.
 Minimize parts.
 Use common components in different products.
 Use standard off-the-shelf components.
 Simplify and mistake-proof assembly.
 Use modules to add variety.
 Design for robustness.
5-24
Modular & Robust Design
Modular design.

Design in easily segmented components.

Modules add flexibility to both production and
marketing.
Design for robustness.

Design so small variations in production or
assembly do not adversely affect the product.
5-25
Computer Aided Design (CAD)
 Designing products at a
computer work station.

Design engineer uses
computer to draw product.
 Often used with CAM
(Computer Aided
Manufacturing).
5-26
Environmentally Friendly Design
Make products recyclable.
Use recycled materials.
Use less harmful (toxic) ingredients.
Use lighter components.

Less weight lowers transportation cost.
Use less energy and material.
5-27
Time-based Competition
Product life cycles are becoming shorter.
Faster developers of new products gain on
slower developers and obtain a competitive
advantage.

First to market is often market leader.
5-28
Product Documents
 Engineering drawing.

Shows dimensions, tolerances, &
materials.
 Bill of Material.


Lists components, quantities &
where used.
Shows product structure.
5-29
Engineering Drawing Example
2-1/2
13/16
diameter
1
13/32
diameter
1/4 R
2-1/4
13/16
45°
3/8
13/16
5/16
1-5/8
Bracket
Scale: FULL
Drawn: J. Thomas
5-30
A- 435-038
Bill of Material Example
Bill of Material
P/N: 1000
Name: Bicycle
P/N
Desc
Qty
1001
Handle Bars
1
1002
Frame Assy
1
1003
Wheels
2
1004
Frame
1
5-31
Units Level
Each
1
Each
1
Each
2
Each
2
Production Documents
Assembly drawings.
Assembly chart.
Route sheet.
Work order.
5-32
Assembly Drawing and Assembly
Chart
5-33
Route Sheet
 Lists all operations.
Route Sheet for Bracket
Sequence
Machine
Operation
1
Shear # 3
2
Shear # 3
3
Drill
press
Brake
press
Shear to
length
Shear 45°
corners
Drill both
holes
Bend 90°
4
5-34
Setup
Time
5
Operation
Time/Unit
.030
8
.050
15
3.000
10
.025
Work Order
Authorizes producing a given item, usually to a schedule.
5-35
Service Design Principles
 Simplify!

Minimize number of steps.

Minimize repetition.

Reduce waiting time for customer.
 Use modularity to create variety.

Example: Hospital, University certificate programs.
 Design for robustness.

Accommodate large variation, since all people are
different.
5-36
Service Design Principles
 Consider range of services offered.

Customized vs standard services (Medical clinics).

Full service vs. self service (Gasoline station).
 Manage expectations.

Gourmet restaurant vs. fast food.
 Schedule staff to match demand.

Use appointments.

Provide distractions to ease waiting.
5-37
Decision Trees for Product Design
Useful with a series of decisions and
outcomes.
Example: Select design from several options
that produces largest expected profit.
Different costs.
 Different benefits: Benefits depend on future
(unknown) market.

5-38