Product, Process, and
Service Design
PRODUCT/SERVICE DESIGN
When a product/service is designed:
• The detailed characteristics of the product/service are
established.
• The characteristics of the product/service directly affects how
the product/service can be produced/ delivered.
• How the product/service is produced/delivered determines the
design of the production/delivery system.
PRODUCT/SERVICE DESIGN
Product/service design directly affects:
• Product/service quality
• Production/delivery cost
• Customer satisfaction
PRODUCT/SERVICE DESIGN AND DEVELOPMENT
• Sources of Product Innovation
• Developing New Products/Services
• Getting Them to Market Faster
• Improving Current Products/Services
• Designing for Ease of Production
• Designing for Quality
• Designing and Developing New Services
The First iPhone
was invented in
1983!
•
Naturally, this wasn’t anything like the rectangular
cell phone we know today. It was a land line phone
with, instead of a touch screen, a built in stylus
controlled interface.
•
It was designed by Apple computer developer
Hartmut Esslinger, and foreshadows the
touchscreen designs used by the iPad and iPhone
today. He had also developed the Apple IIc, the first
“portable” computer by Apple. It was never released
to the public, but was kept in the Apple archives
until the design was released in 1997 after Steve
Jobs rejoined the company.
•
This “iPhone” isn’t the only prototype of Apple that
never saw the light of day. Apple had toyed around
with the iPad design for years before its launch.
What’s interesting is that the 1983 iPhone device
resembles an iPad with a phone, but iPads still lack
this conventional phone call technology despite
everything else they do. Perhaps the iPad appliance
will enter that direction in its next iteration.
SOURCES OF PRODUCT/SERVICE INNOVATION
• Customers
• Managers
• Marketing
• Operations
• Engineering
• Research and Development (R&D)
• Basic research
• Applied research
STEPS IN DEVELOPING NEW PRODUCTS
1. Technical and economic feasibility studies
2. Prototype design
3. Performance testing of prototype
4. Market sensing/evaluation and economic evaluation of the
prototype
5. Design of production model
6. Market/performance/process testing and economic evaluation of
production model
7. Continuous modification of production model
STEPS IN DEVELOPING NEW PRODUCTS
1.
Technical and Economic Feasibility Studies
• Determine the advisability of establishing a project for
developing the product
• If initial feasibility studies are favorable, engineers prepare
an initial prototype design
STEPS IN DEVELOPING NEW PRODUCTS
2.
Prototype Design
• This design should exhibit the basic form, fit, and function of
the final product
• It will not necessarily be identical to the production model
Peugeot
RENAULT
STEPS IN DEVELOPING NEW PRODUCTS
3. Performance Testing of Prototype
• Performance testing and redesign of the prototype continues
until this design-test-redesign process produces a
satisfactorily performing prototype
STEPS IN DEVELOPING NEW PRODUCTS
4. Market Sensing/Evaluation and Economic Evaluation of the
Prototype
• Accomplished by demonstrations to potential customers,
market test, or market surveys
• If the response to the prototype is favorable, economic
evaluation of the prototype is performed to estimate
production volume, costs, and profits
• If the economic evaluation is favorable, the project enters
the production design phase.
STEPS IN DEVELOPING NEW PRODUCTS
5. Design of Production Model
• The initial design of the production model will not be the final
design; the model will evolve
STEPS IN DEVELOPING NEW PRODUCTS
6. Market/Performance/Process Testing and Economic Evaluation
of Production Model
• The production model should exhibit:
• low cost
• reliable quality
• superior performance
• the ability to be produced in the desired quantities on the
intended equipment
STEPS IN DEVELOPING NEW PRODUCTS
7. Continuous Modification of Production Model
• Production designs are continuously modified to:
• Adapt to changing market conditions
• Adapt to changing production technology
• Allow for manufacturing improvements
MANAGING PRODUCT DEVELOPMENT
PROJECTS
• About 5% of all new-product ideas survive to production, and
only about 10% of these are successful.
• It is best to cancel unpromising new-product/service
development projects early!
• Employees often become emotionally caught up in these
projects and are overly optimistic
• An impartial management review board is needed for periodic
reviews of the progress of these projects.
GETTING NEW PRODUCTS TO MARKET FASTER
• Speed creates competitive advantages
• Speed saves money
• Tools to improve speed:
• Autonomous design and development teams
• Computer-aided design/computer-aided manufacturing
(CAD/CAM)
• Simultaneous (concurrent) engineering
TOOLS TO IMPROVE SPEED TO MARKET
• Autonomous Design and Development Teams
• Teams are given decision-making responsibility and more
freedom to design and introduce new products/services
• Time-to-market has been slashed dramatically
• Enormous sums of money have been saved
• Teams do not have to deal with the bureaucratic red tape
ordinarily required to obtain approvals
TOOLS TO IMPROVE SPEED TO MARKET
• Computer-Aided Design/Computer-Aided Manufacturing
(CAD/CAM)
• Engineers, using CAD/CAM, can generate many views of
parts, rotate images, magnify views, and check for
interference between parts
• Part designs can be stored in a data base for use on other
products
• When it is time for manufacturing, the product design is
retrieved, translated into a language that production
machinery understands, and then the production system can
be automatically set up.
TOOLS TO IMPROVE SPEED TO MARKET
•
Simultaneous
(Concurrent)
Product/
Service Ideas
Engineering
Economic and Technical
Feasibility Studies
Product/Service Design
Continuous
Interaction
Production Process Design
Produce and Market
New Product/Service
IMPROVING THE DESIGN
OF EXISTING PRODUCTS/SERVICES
• Focus is improving performance, quality, and cost
• Objective is maintaining or improving market share of maturing
products/services
• Little changes can be significant
• Small, steady (continuous) improvements can add up to huge
long-term improvements
• Value analysis is practiced, meaning design features are
examined in terms of their cost/benefit (value).
DESIGNING FOR EASE OF PRODUCTION
• Ease of Production (Manufacturability)
• Specifications - Precise information about the characteristics of the
product
• Tolerances - Minimum & maximum limits on a dimension that
allows the item to function as designed
• Standardization - Reduce variety among a group of products or
parts
• Simplification - Reduce or eliminate the complexity of a part or
product
VARIANTS OF GENERIC PRODUCT
DEVELOPMENT PROCESS
Process Type: Generic (market-pull products)
Description
The team begins with a market opportunity
and selects appropriate technologies to meet
customer needs.
Distinct Features Process generally includes distinct planning,
concept development, system-level design,
detail design, testing and refinement, and
production ramp-up phases.
Examples
Sporting goods, furniture, tools
Process Type: Technology-Push Products
Description
The team begins with a new technology, then
finds an appropriate market.
Distinct Features Planning phase involves matching
technology and market; concept
development assumes a given technology.
Examples
Tyvek Envelopes by DuPont, Gore-Tex
Products
Process Type: Platform Products
Description
The team assumes that the new product will
be built around an established technological
subsystem.
Distinct Features Concept development assumes a proven
technology platform
Examples
Toyota Prius
Process Type: Process-Intensive Products
Description
Characteristics of the product are highly
constrained by the production process.
Distinct Features Either an existing production process must
be specified from the start or both product
and process must be developed together
from the start.
Examples
Snack foods, breakfast cereals
Process Type: Customized Products
Description
New products are slight variations of existing
configurations.
Distinct Features Similarity of projects allows for a streamlined
and highly structured development process.
Examples
Motors, switches, batteries, containers
Process Type: High-Risk Products
Description
Technical or market uncertainties create high
risks of failure.
Distinct Features Risks are identified early and tracked
throughout the process Analysis and testing
activities take place as early as possible.
Examples
pharmaceuticals
Process Type: Quick-Build Products
Description
Rapid modelling and prototyping enables
many design-build-test cycles
Distinct Features Detail design and testing phases are
repeated a number of times until the product
is completed or time/budget runs out
Examples
Software, cellular phones
Process Type: Complex Systems
Description
System must be decomposed into several
subsystems and many components
Distinct Features Subsystems and components are developed
by many teams working in parallel, followed
by system integration and validation
Examples
Automobiles,
DESIGNING FOR QUALITY
• Crucial element of product design is its impact on quality
• Quality is determined by the customer’s perception of the
degree of excellence of the product/service’s characteristics
DESIGNING AND DEVELOPING NEW SERVICES
Three general dimensions of service design are:
• Degree of Standardization of the Service
• Custom-fashioned for particular customers or basically the same
for all customers?
• Degree of Customer Contact in Delivering the Service
• High level of contact (dress boutique) or low level (fast-food
restaurant)?
• Mix of Physical Goods and Intangible Services
• Mix dominated by physical goods (tailor’s shop) or by intangible
services (university)?
DESIGNING AND DEVELOPING NEW SERVICES
• Differences Between New Service and New Product
Development
• Unless services are dominated by physical goods, their
development usually does not require engineering, testing,
and prototype building.
• Because many service businesses involve intangible
services, market sensing tends to be more by surveys rather
than by market tests and demonstrations.
PROCESS
PLANNING AND DESIGN
PROCESS PLANNING AND DESIGN SYSTEM
Inputs:
• Product/Service Information
• Production System Information
• Operations Strategy
Process Planning & Design:
• Process-Type Selection
• Vertical Integration Studies
• Process/Product Studies
• Equipment Studies
• Production Procedures Studies
• Facilities Studies
Outputs:
• Process Technology
• Facilities
• Personnel Estimates
MAJOR FACTORS AFFECTING PROCESS
DESIGNS
• Nature of product/service demand
• Degree of vertical integration
• Production flexibility
• Degree of automation
• Product/Service quality
NATURE OF PRODUCT/SERVICE DEMAND
• Production processes must have adequate capacity to produce
the volume of the products/services that customers need.
• Provisions must be made for expanding or contracting capacity
to keep pace with demand patterns.
• Some types of processes are more easily expanded and
contracted than others.
• Product/service price affects demand, so pricing decisions and
the choice of processes must be synchronized.
DEGREE OF VERTICAL INTEGRATION
• Vertical integration is the amount of the production and
distribution chain that is brought under the ownership of a
company.
• This determines how many production processes need to be
planned and designed.
• Decision of integration is based on cost, availability of capital,
quality, technological capability, and more.
• Strategic outsourcing (lower degree of integration) is the
outsourcing of processes in order to react quicker to changes in
customer needs, competitor actions, and technology.
PRODUCTION FLEXIBILITY
• Product flexibility -- ability of the production (or delivery) system
to quickly change from producing (delivering) one product (or
service) to another.
• Volume flexibility -- ability to quickly increase or reduce the
volume of product( or service) produced (or delivered).
DEGREE OF AUTOMATION
• Advantages of automation
•
Improves product quality
•
Improves product flexibility
•
Reduces labor and related costs
• Disadvantages of automation
• Equipment can be very expensive
• Integration into existing operations can be difficult
PRODUCT/SERVICE QUALITY
• Old viewpoint – high-quality products must be made in small
quantities by expert craftsmen
• New viewpoint – high-quality products can be mass-produced
using automated machinery
• Automated machinery can produce products of incredible
uniformity
• The choice of design of production processes is affected by the
need for superior quality.
TYPES OF PROCESS DESIGNS
• Product-Focused
• Process-Focused
• Group Technology/Cellular Manufacturing
PRODUCT-FOCUSED
• Processes (conversions) are arranged based on the sequence
of operations required to produce a product or provide a service
• Also called “Production Line” or “Assembly Line”
• Two general forms
• Discrete unit – automobiles, dishwashers
• Process (Continuous) – petrochemicals, paper
PRODUCT-FOCUSED
Raw Material
Components
4
2
Assemblies
1
Raw Material
3
Components
1
Product/Material
Flow
Production Operation
5
7
Subassem.
Purchased
6
Components,
Subassemblies
Fin. Goods
PRODUCT-FOCUSED
• Advantages
• Lower labor-skill requirements
• Reduced worker training
• Reduced supervision
• Ease of planning and controlling production
• Disadvantages
• Higher initial investment level
• Relatively low product flexibility
PROCESS-FOCUSED
• Processes (conversions) are arranged based on the type of
process, i.e., similar processes are grouped together
• Products/services (jobs) move from department (process group)
to department based on that particular job’s processing
requirements
• Also called “Job Shop” or “Intermittent Production”
• Examples
• Auto body repair
• Custom woodworking shop
PROCESS-FOCUSED
Custom Woodworking Shop
Cutting Planing Shaping Assembly Sanding Finishing
1
Job A
Job B
1
2
5
6
5
6
3
2
4
3
4
Drilling Turning
7
PROCESS-FOCUSED
• Advantages
• High product flexibility
• Lower initial investment level
• Disadvantages
• Higher labor-skill requirements
• More worker training
• More supervision
• More complex production planning and controlling
GROUP TECHNOLOGY/CELLULAR
MANUFACTURING
• Group Technology
• Each part produced receives a multi-digit code that
describes the physical characteristics of the part.
• Parts with similar characteristics are grouped into part
families
• Parts in a part family are typically made on the same
machines with similar tooling
GROUP TECHNOLOGY/CELLULAR
MANUFACTURING
• Cellular Manufacturing
• 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 productfocused systems
GROUP TECHNOLOGY/CELLULAR
MANUFACTURING
• Advantages (relative to a job shop)
• 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
GROUP TECHNOLOGY/CELLULAR
MANUFACTURING
• Disadvantages
• Duplication of equipment
• Under-utilization of facilities
• Processing of items that do not fit into a family may be
inefficient
GROUP TECHNOLOGY/CELLULAR
MANUFACTURING
• Candidates for GT/CM are job shops having:
• A degree of parts standardization
• Moderate batch sizes
PRODUCT/PROCESS DESIGN & INVENTORY
POLICY
• Standard Products and Produce to Stock
• Sales forecasts drive production schedule
• Maintain pre-determined finished-goods levels
• MRP forecast drives material ordering
• Custom Products and Produce to Order
• Orders set production schedule and drive material deliveries
• Design time (preproduction planning) may be required
before production can be scheduled
PROCESS DESIGN IN SERVICES
• Some of the factors important in process design for products are
also important in services:
• Nature (level and pattern) of customer demand
• Degree of vertical integration
• Production flexibility
• Degree of automation
• Service quality
PROCESS DESIGN IN SERVICES
• Three schemes for producing and delivering services
• Quasi-Manufacturing
• Customer-as-Participant
• Customer-as-Product
PROCESS DESIGN IN SERVICES
• Quasi-Manufacturing
• Physical goods are dominant over intangible service
• Production of goods takes place along a production line
• Operations can be highly automated
• Almost no customer interaction
• Little regard for customer relations
• Example – bank’s checking encoding operation
PROCESS DESIGN IN SERVICES
• Customer-as-Participant
• Physical goods may be a significant part of the service
• Services may be either standardized or custom
• High degree of customer involvement in the process
• Examples: ATM, self-service gas station
PROCESS DESIGN IN SERVICES
• Customer-as-Product
• Service is provided through personal attention to the
customer
• Customized service on the customer
• High degree of customer contact
• There is a perception of high quality
• Customer becomes the central focus of the process design
• Examples: medical clinic, hair salon
PROCESS REENGINEERING
• The concept of drastically changing an existing process design
• Not merely making marginal improvements to the process
• A correctly reengineered process should be more efficient
• A smaller labor force is often the result
DECIDING AMONG PROCESSING ALTERNATIVES
• Batch Size and Product/Service Variety
• Capital Requirements
• Economic Analysis
• Cost Functions of Alternative Processes
• Break-Even Analysis
• Financial Analysis
Product
Focused,
Dedicated
Systems
Product
Focused,
Batch
System
Cellular
Manufacturing Process-Focused,
Job Shop
Small
Batch Size
Large
PROCESS DESIGN DEPENDS
ON PRODUCT DIVERSITY AND BATCH SIZE
Few
Number of Product Designs
Many
OPERATIONS STRATEGY:
PRODUCTS AND SERVICES
• Make-to-order
• products and services are made to customer specifications
after an order has been received
• Make-to-stock
• products and services are made in anticipation of demand
• Assemble-to-order
• products and services add options according to customer
specifications
PRODUCTION STRATEGY:
PROCESSES AND TECHNOLOGY
• Project
• one-at-a-time production of a product to customer order
• Batch production
• systems process many different jobs at the same time in groups
(or batches)
• Mass production
• large volumes of a standard product for a mass market
• Continuous production
• used for very high volume commodity products
PRODUCT-PROCESS MATRIX
Source: Adapted from Robert
Hayes and Steven Wheelwright,
Restoring the Competitive
Edge: Competing Through
Manufacturing (New York: John
Wiley & Sons, 1984), p. 209
Continuous Production
A paper manufacturer produces a
continuous sheet paper from wood
pulp slurry, which is mixed, pressed,
dried, and wound onto reels.
Mass Production
Here in a clean room a worker performs
quality checks on a computer assembly line.
Batch Production
At Martin Guitars bindings on the guitar frame are
installed by hand and are wrapped with a cloth
webbing until glue is dried.
Project
Construction of the aircraft carrier USS Nimitz was a huge
project that took almost 10 years to complete.
SERVICE STRATEGY:
PROCESSES AND TECHNOLOGY
• Professional service
• highly customized and very labor intensive
• Service shop
• customized and labor intensive
• Mass service
• less customized and less labor intensive
• Service Factory
• least customized and least labor intensive
SERVICE-PROCESS MATRIX
Source: Adapted from Roger
Schmenner, “How Can Service
Businesses Survive and
Prosper?” Sloan Management
Review 27(3):29
Service Factory
Electricity is a commodity available
continuously to customers.
Mass Service
A retail store provides a standard array of
products from which customers may choose.
Service Shop
Although a lecture may be prepared in advance, its
delivery is affected by students in each class.
Professional Service
A doctor provides personal service to each patient based
on extensive training in medicine.
Capital Requirements




The amount of capital required tends to differ for
each type of production process
Generally, the capital required is greatest for productfocused, dedicated systems
Generally, the capital required is lowest for processfocused, job shops
The amount of capital available and the cost of capital
are important considerations
ECONOMIC ANALYSIS
• Cost Functions of Processing Alternatives
• Fixed Costs
• Annual cost when production volume is zero
• Initial cost of buildings, equipment, and other fixed assets
• Variable Costs
• Costs that vary with production volumes
• Labor, material, and variable overhead
COST FUNCTIONS OF PROCESSING
ALTERNATIVES
Annual Cost of Production ($000)
2,000
1,500
1,000
500
Job
Shop
Preferred
100,000
Cellular
Manufacturing
Preferred
Automated
Assembly Line
Preferred
Units
Produced
Per Year
250,000
COST FUNCTIONS OF PROCESSING
ALTERNATIVES
•
Example
Three production processes (A, B, and C) have the following cost structure:
Process
A
B
C
Fixed Cost
Variable Cost
Per Year
$120,000
90,000
80,000
Per Year
$3.00
4.00
4.50
What is the most economical process for a volume of 8,000 units per year?
COST FUNCTIONS OF PROCESSING
ALTERNATIVES
•
Example
TC = FC + v(Q)
A: TC = 120,000 + 3.00(8,000) = $144,000 per year
B: TC = 90,000 + 4.00(8,000) = $122,000 per year
C: TC = 80,000 + 4.50(8,000) = $116,000 per year
The most economical process at 8,000 units is Process C, with the lowest annual
cost.
ECONOMIC ANALYSIS
• Break-Even Analysis
• Widely used to analyze and compare decision alternatives
• Can be displayed either algebraically or graphically
• Disadvantages:
• Cannot incorporate uncertainty
• Costs assumed over entire range of values
• Does not take into account time value of money
BREAK-EVEN ANALYSIS
•
Example
Break-Even Points of Processes A, B, and C, assuming a $6.95 selling price per unit
Q = FC / (p-v)
A: Q = 120,000 / (6.95 - 3.00) = 30,380 units
B: Q = 90,000 / (6.95 - 4.00) = 30,509 units
C: Q = 80,000 / (6.95 - 4.50) = 32,654 units
Process A has the lowest break-even point.
ECONOMIC ANALYSIS
• Financial Analysis
• A great amount of money is invested in production
processes and these assets are expected to last a long time
• The time value of money is an important consideration
• Payback period
• net present value
• internal rate of return
• Profitability index
DECIDING AMONG PROCESSING ALTERNATIVES
• Assembly Charts
• Macro-view of how materials are united
• Starting point to understand factory layout needs, equipment
needs, training needs
• Process Charts
• Details of how to build product at each process
• Includes materials needed, types of processes product flows
through, time it takes to process product through each step
of flow