4

Product and
Service Design
 Product and Service Design

 Major factors in design strategy

 Cost
 Quality
 Time-to-market
 Customer satisfaction
 Competitive advantage

Product and service design – or redesign – should be

closely tied to an organization’s strategy

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Product or Service Design Activities
1. Translate customer wants and needs
into product and service requirements
2. Refine existing products and services
3. Develop new products and services
4. Formulate quality goals
5. Formulate cost targets
6. Construct and test prototypes
7. Document specifications

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 Reasons for Product or Service
Design

 Economic
 Social and demographic
 Political, liability, or legal
 Competitive
 Cost or availability
 Technological

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 Objectives of Product and
Service 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

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 Designing For Operations
 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

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 Legal, Ethical, and Environmental
Issues
 Legal
 FDA, OSHA
 Product liability
 Uniform commercial code
 Ethical
 Releasing products with defects
 Environmental
 EPA

4-7
Regulations & 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.

4-8
Designers 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

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 Other Issues in Product and
Service Design
 Product/service life cycles
 How much standardization
 Mass customization
 Product/service reliability
 Robust design
 Degree of newness
 Cultural differences

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 Life Cycles of Products or Services
Figure 4.1

Saturation

Maturity
Demand

Decline
Growth

Introduction

Time

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 Standardization
 Standardization
 Extent to which there is an absence of
variety in a product, service or process
 Standardized products are immediately
available to customers

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 Advantages 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

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 Advantages of Standardization
(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.

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 Disadvantages 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.

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 Mass Customization

• Mass customization:
 A strategy of producing standardized
goods or services, but incorporating some
degree degree of customization
 Delayed differentiation
 Modular design

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 Delayed Differentiation

• Delayed differentiation is a
postponement tactic
 Producing but not quite completing a
product or service until customer
preferences or specifications are known

4-17
 Modular 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

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 Reliability

 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

4-19
 Improving Reliability

• Component design
• Production/assembly techniques
• Testing
• Redundancy/backup
• Preventive maintenance procedures
• User education
• System design

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 Product Design

 Product Life Cycles

 Robust Design
 Concurrent Engineering
 Computer-Aided Design
 Modular Design

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 Robust Design

Robust Design: Design that results in

products or services that can function
over a broad range of conditions

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 Taguchi 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

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 Degree 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

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 Degree of Design Change
Table 4.3

Type of Design Newness of the Newness to the

Change organization market
Modification Low Low

Expansion Low Low

Clone High Low

New High High

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 Cultural 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.

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 Global 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

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 Phases in Product Development
Process
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

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 Idea Generation

Supply chain based

Ideas Competitor based

Research based

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 Reverse Engineering

Reverse engineering is the

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

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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.

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 Manufacturability

 Manufacturability is the ease of

fabrication and/or assembly which is
important for:
 Cost
 Productivity
 Quality

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 Designing 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
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 Concurrent Engineering

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

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 Computer-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

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 Product design

 Design for manufacturing (DFM)

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

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 Recycling

 Recycling: recovering materials for future

use
 Recycling reasons
 Cost savings
 Environment concerns
 Environment regulations

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 Remanufacturing
 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.
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 Component 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

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 Quality Function Deployment
 Quality Function Deployment
 Voice of the customer
 House of quality

QFD: An approach that integrates the

“voice of the customer” into the
product and service development
process.

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 The House of Quality
Figure 4.3

Correlation
matrix

Design
requirements

Customer
Relationship Competitive
require-
matrix assessment
ments

Specifications
or
target values

4-41
 House of Quality Example
Figure 4.4
Correlation:
X Strong positive
Positive
X X
X X X Negative
Strong negative

Water resistance
*

Accoust. Trans.
Energy needed
Energy needed
Im

to close door
Engineering

to open door
Check force
po

resistance
Competitive evaluation

Door seal
rta Characteristics

Window
X = Us

on level
nc

ground
A = Comp. A
e to B = Comp. B
Customer Cu (5 is best)
Requirements st. 1 2 3 4 5

X AB
Easy to close 7
Stays open on a hill X AB
5
Easy to open 3 XAB

A XB
Doesn’t leak in rain 3
No road noise 2 X A B

Importance weighting 10 6 6 9 2 3 Relationships:

level to 7.5 ft/lb

Strong = 9
Reduce energy

Reduce energy
Reduce force
current level

current level
current level
to 7.5 ft/lb.
Medium = 3
Target values
Maintain

Maintain
Maintain
Small = 1
to 9 lb.

5 B
BA BA
B B BXA X
Technical evaluation 4
A
X
A X
3
(5 is best) 2 X
X A
1

4-42
 Service Design

 Service is an act
 Service delivery system
 Facilities
 Processes
 Skills
 Many services are bundled with products

4-43
 Service Design

 Service design involves

 The physical resources needed
 The goods that are purchased or consumed
by the customer
 Explicit services
 Implicit services

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 Service 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
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 Differences Between Product
and Service Design
 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
4-46
 Service 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)

4-47
 Service 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
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 Phases 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

4-49
 Service 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

4-50
 Major Steps in Service
Blueprinting
1. Establish boundaries
2. Identify sequence of customer
interactions
• Prepare a flowchart
3. Develop time estimates
4. Identify potential failure points

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Characteristics of Well Designed
Service 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

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 Challenges of Service Design

1. Variable requirements
2. Difficult to describe
3. High customer contact
4. Service – customer encounter

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 Guidelines for Successful Service
Design
1. Define the service package
2. Focus on customer’s perspective
3. Consider image of the service package
4. Recognize that designer’s perspective is different
from the customer’s perspective
5. Make sure that managers are involved
6. Define quality for tangible and intangibles
7. Make sure that recruitment, training and rewards
are consistent with service expectations
8. Establish procedures to handle exceptions
9. Establish systems to monitor service
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 Operations Strategy

1. Increase emphasis on component

commonality
2. Package products and services
3. Use multiple-use platforms
4. Consider tactics for mass
customization
5. Look for continual improvement
6. Shorten time to market

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 Shorten Time to Market

1. Use standardized components

2. Use technology
3. Use concurrent engineering

4-56
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
4-57
 Break-Even Analysis

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

TC = F + (VC )Q
 Revenue = selling price (quantity)

R = ( SP ) Q
 Break-even point is where total costs = revenue:

TC = R or F + ( VC ) Q = ( SP ) Q
F
or Q=
SP − VC
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 Example

 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?

4-59
 Example Solved

 Break-even point:
F $52,000
Q= = = 3,250 pairs
SP − VC $25 − $9
 Profit = total revenue – total costs
P = ( SP ) Q − ( F + (VC ) Q )
= ( $25) 4,000 − ( $52,000 + ( $9) 4,000)
= $12,000
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Break-even calculation: 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
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
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?

 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)

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Other Product Design Factors

 Need to Design for

Manufacturing – DFM
 Minimize parts
 Design parts for
multiply applications
 Use modular design
 Avoid tools
 Simplify operations

4-62
 Other Design Factors

 Consider product
life cycle stages
 Introduction
 Growth
 Maturity
 Decline
 Facility & process
investment
depends on life
cycle

4-63
 Other 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

4-64
 Process 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 Process
Batch Process
Line Process
Continuous Process

4-65
Underlying Process Relationship
Between Volume and
Standardization

4-66
 Volume 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
4-67
 Differences between Intermittent
and 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
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Facility Layouts and Process Choice

4-69
 Process 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

4-70
Intermittent VS. Repetitive Layouts

4-71
Product and Service Strategy
Options

4-72
 Process Decisions-Vertical
Integration & 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
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Manufacturing 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)

4-74
 Designing 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

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