PBO - Lecture 06 - Goods and Services

Lecture 6 – Goods and Services Principles of Business Operations
Principles of Business
Operations
Lecture 6:
Goods and Services
V1.0 © NCC Education Limited
Goods and Services Lecture 6 - 6.2
Learning Objectives
On completion of this unit, students will be able to:
• Understand how goods and services are designed

• Understand how processes that produce goods and
services are designed
• Appreciate the need to design goods/services and
processes to create them simultaneously
Part One: Designing Goods and Services
V1.0 Visuals Handout – Page 1

Introduction
• Organisations design goods and services to meet

the needs and wants of their customers
• Designing goods (manufacturing) requires a

different set of skills to designing services …
Designing Goods and Services 1

• Organisations build products and services as part of the
“Customer Benefit Package” (CBP) we discussed in an
earlier lecture
• Concept development is the process of taking ideas and

assessing them for feasibility
- Will this meet customer needs?
- What combination will best give us competitive advantage?
- Do we have the capability to produce this?
- Etc.
• If a proposal survives initial scrutiny (and many

don’t) each CBP is designed in more detail
• In addition, the process that creates them must be

designed – with manufacture this can be done
independently, with services this is not possible

• After design, the final bundle of goods and services

(the CBP) is advertised, marketed and offered to
customers
• Organisations must then constantly evaluate how

well customers react to the CBP to remain
competitive
Designing in Manufacturing 1
• Potential goods usually need to go through several

rounds of prototyping before the final version is
released
• High quality (robust) goods should perform

consistently at (or very near to) their performance
target throughout their life span
• Quality engineering ensures potential quality
problems are reduced (ideally eliminated) prior to
production
• The simpler the design – the less prone goods are
to errors and hence they are more reliable than
more complex goods.
• Organisations try to keep designs as simple as
possible to improve reliability (even for complex
goods) to increase quality and hence improve
customer satisfaction

• In the last few years it has become increasingly
important for organisations to design goods that are
environmentally friendly, with high degrees of
recyclability, disassembly, etc.
• Goods need to be reliable – that is, they need to

meet expectations for a stated period of time under
specified operating conditions
Service Delivery System Design 1

Service Delivery System Design includes the following:
• Facility location and layout – correct location is paramount to

success. Layout of the services is also important (remember
the OM Spotlight from the last lecture … )
• Servicescape – this includes all the physical evidence a

customer might use to form an impression: design,
packaging, employee uniforms, buildings, etc. All form a part
of the overall customer experience
Service Delivery System Design 2

Service Delivery System Design continued …
• Process and job design – involves developing an
efficient sequence of activities to satisfy customer
requirements
• Technology and information support systems – both
hard and soft technologies are important factors to
meet customer expectations of a quality service
• Organisational structure – determines how work is
organised to meet customer needs

Service Encounter Design 1

Service Encounter Design includes the following:
• Customer contact behaviour and skills – designing
how employees interact with customers during the
service delivery
• Service provider selection, development and
empowerment – involves finding, developing and
keeping good customer-contact employees with
service management skills
Service Encounter Design 2

• Recognition and rewards – includes how to
motivate and keep staff
• Service recoveryy and guarantee

g – designing
g g how to
react to a “service upset”, i.e. a dissatisfied
customer.
- How to correct mistakes to satisfy the customer
- How to compensate a customer, etc.
Design Speed
• Time taken from the conception of an idea until it is
available for customers
• Fast design speed requires intra-organisational and
inter-organisational co-operation
• Increased use of design technologies can reduce
design time
• Concurrent engineering (involving all parties in the
development process at all times) can streamline
the process and reduce design speed

Class Activity
• Work in groups of about 5
• Think of any “service” that you have received in the last few
days…
- What are the immediate “service encounter” aspects that you
remember? How would you rate the service encounter? Why did you
come to this decision? Anything else important?
• 15 minutes
• Feedback to the class

• 5 minutes
Part Two: Designing Processes
Introduction
Goods and services can either be:
- Custom – made to order
- Option – assembled to order
- Standard – made to stock
• This involves using four basic types of process to

build goods and services

Process Types 1
• Projects – large scale and customised – involve
many smaller tasks that need co-ordination to
complete on-time and in budget, e.g. house
construction
• Job-Shop – organised around particular general

purpose equipment – subject to customisation, e.g.
restaurant
Process Types 2
• Flow-Shop – organised around a fixed sequence of

activities, e.g. an assembly line
• Continuous – highly standardised, high volume,

usually 24/7, e.g. credit card authorisation systems
Process Choice in Manufacturing
• Process choice must match the type of goods being

created
• The basic rule is the higher the volume the lower

the level of customisation and visa versa. This is
called the “volume/variety mix”

Product/Process Matrix
Projects Job Shops Flow Shops Continuous Flow
Demand
(volume)
Low Moderate High
Customisation High Moderate Low
Number/Range
of Products
Low Many/Multiple Several
Type of good Made to order Assemble to order Made to stock
Process Choice in Services 1

• Service processes use “pathways”
• Pathways are unique routes through a service
system
• Customer routed services offer customers broad
freedom of their pathway
path a through
thro gh the service,
ser ice e.g.
eg a
theme park visit
• Provider routed services constrain customers by
offering a very small number of pre-determined
routes through a service, e.g. ATM (bank cash point
machine)
Process Choice in Services 2

• Service pathway design is based on two key
criteria:
- Degree of customer discretion allowed/required and
number of possible unique pathways – more pathways
lends itself to customer routed
- Degree of repeatability of the service – more repeatability
lends itself to provider routed

Product Life Cycle

• All products/services go through the same stages
over time:
- Growth
- Maturity
- Decline
• The time to move through the stages depends on
the nature of the good or service
• Operation managers need to understand where on
the time line their products/services reside, as this
has several implications for the organisation
Process Design
• Goal is to create the right combination of
equipment, methods, environment, etc. to deliver
goods and services that meet customer
requirements
• Focus on why, what, who, when, where and how

questions
Process Analysis and Improvement

Improving performance can be through several
means:
• Increasing revenue
• Increasing flexibility
• Increasing product and/or service quality
• Decreasing process flow time – thus speeding up
the value chain

Process Design and Resource

Utilisation
• Idle machines, people, computers, etc. are a drain
on profit
• Understanding g utilisation of resources is important
p
for process design and improvement
• High resource utilisation is important – but may not
always be possible for service facilities
• Poor utilisation of resources can cause bottlenecks
and queues in other parts of the system
Class Activity
• Work in groups of about 5
• Think of any time recently when you have had to queue for a
service …
- What caused the queue? How did you personally feel? What could
the organisation responsible for the service have done better to have
stopped the queue from forming (if anything)? Anything else
important worth mentioning?
• 10 minutes
• Feedback to the class

• 5 minutes
Conclusions
• All organisations have to carefully design their
products and services – including designing the
processes to produce the goods and services
• Organisations have to carefully consider the

volume/variety mix and choice of process types
when designing their portfolio of products/services

References
• Evans & Collier (2007) “Operations Management:
An Integrated Goods & Services Approach”,
Thomson
Lecture 6 – Goods and Services
Any Questions?

PBO - Lecture 06 - Goods and Services

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

PBO - Lecture 06 - Goods and Services

Uploaded by

Copyright:

Available Formats

Lecture 6 – Goods and Services Principles of Business Operations

V1.0 © NCC Education Limited

Goods and Services Lecture 6 - 6.2

• Understand how goods and services are designed

V1.0 © NCC Education Limited

Goods and Services Lecture 6 - 6.3

Part One: Designing Goods and Services

V1.0 © NCC Education Limited

V1.0 Visuals Handout – Page 1

Goods and Services Lecture 6 - 6.4

• Organisations design goods and services to meet

• Designing goods (manufacturing) requires a

V1.0 © NCC Education Limited

Goods and Services Lecture 6 - 6.5

Designing Goods and Services 1

• Concept development is the process of taking ideas and

V1.0 © NCC Education Limited

Goods and Services Lecture 6 - 6.6

Designing Goods and Services 2

• If a proposal survives initial scrutiny (and many

• In addition, the process that creates them must be

V1.0 © NCC Education Limited

V1.0 Visuals Handout – Page 2

Goods and Services Lecture 6 - 6.7

Designing Goods and Services 3

• After design, the final bundle of goods and services

• Organisations must then constantly evaluate how

V1.0 © NCC Education Limited

Goods and Services Lecture 6 - 6.8

• Potential goods usually need to go through several

• High quality (robust) goods should perform

V1.0 © NCC Education Limited

Goods and Services Lecture 6 - 6.9

V1.0 © NCC Education Limited

V1.0 Visuals Handout – Page 3

Goods and Services Lecture 6 - 6.10

• Goods need to be reliable – that is, they need to

V1.0 © NCC Education Limited

Goods and Services Lecture 6 - 6.11

Service Delivery System Design 1

• Facility location and layout – correct location is paramount to

• Servicescape – this includes all the physical evidence a

V1.0 © NCC Education Limited

Goods and Services Lecture 6 - 6.12

Service Delivery System Design 2

V1.0 © NCC Education Limited

V1.0 Visuals Handout – Page 4

Goods and Services Lecture 6 - 6.13

Service Encounter Design 1

V1.0 © NCC Education Limited

Goods and Services Lecture 6 - 6.14

Service Encounter Design 2

• Service recoveryy and guarantee

V1.0 © NCC Education Limited

Goods and Services Lecture 6 - 6.15

V1.0 © NCC Education Limited

V1.0 Visuals Handout – Page 5

Goods and Services Lecture 6 - 6.16

• Feedback to the class

V1.0 © NCC Education Limited

Goods and Services Lecture 6 - 6.17

Part Two: Designing Processes

V1.0 © NCC Education Limited