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Mark M.

Davis
Janelle Heineke

OPERATIONS MANAGEMENT
INTEGRATING MANUFACTURING AND SERVICES
FIFTH EDITION

PowerPoint Presentation by
Charlie Cook, The University of West Alabama
Copyright 2005, The McGraw-Hill Companies, Inc.

CHAPTER

New Product and


Service Development,
and Process Selection

PowerPoint Presentation by Charlie Cook


The University of West Alabama
Copyright 2005 The McGraw-Hill Companies. All rights reserved.

CHAPTER OBJECTIVES
Illustrate the importance of developing new products and
services to a firms competitiveness.
Identify the types of new products that companies
develop.
Introduce the new product design process and the
concept of a products life cycle.
Demonstrate the necessity of concurrent product and
process design as a new product or service is developed.
Present a framework for understanding how new services
are developed and introduced into the marketplace.
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Managerial Issues
Competition in globalized markets
Pursuing a product differentiation strategy.

Product life cycles becoming shorter.


Engaging in continuous product development as
new products become a majority of sales and
profits.
Having flexibility in manufacturing processes

Increasing demand for services


Increasing the efficiency and reducing the costs of
delivering services.
Effectively using the Internet to deliver extend
current services and offer new services.
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Continued Emphasis on
New Goods and Services
Increased Competition
Improved worldwide telecommunications
Better logistics; faster transportation of goods
Lower trade barriers (import duties and tariffs)
and the creation of trade organizations (NAFTA
and European Union)

Advances in Technology
Products are becoming obsolete faster.
Improved manufacturing processes: CAD, CAM,
industrial robots, and rapid prototyping.
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The Benefits of Introducing


New Products Faster
Greater Market Share
Early entry captures large initial market share.

Price Premiums
Ability to initially charge more for new products.

Quick Reaction to Competition


Rapid response to competitors new products.

Set Industry Standards


Initial product sets market/industry standards.
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The Impact of Speed to Market


on Sales

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Exhibit 6.1a

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The Impact of Speed to Market


on Profit Margins

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Exhibit 6.1b

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The Impact of Speed to Market


on Gross Profits

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Exhibit 6.1c

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Categories of New Products


Incremental or Derivative Products
Are hybrids or enhancements of existing
products.
Require minimal changes in design or process,
allowing for quick development.
Require fewer resources to develop new features
or functions.
Help ensure near-term cash flows by maintaining
current market share.

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Categories of New Products


Next Generation or Platform Products
Represent new system solutions for customers.
Require more resources to develop.
Are key to continued product revenue growth.

Breakthrough or Radical Products


Create new product categories as core
businesses.
Require substantial design and process change.
Render existing products obsolete in long-term.
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The New Product Development (NPD)


Process
New Product Development Process
The method by which new products evolve from
conceptualization through engineering to
manufacturing and marketing.

Market Success Depends on NPD


Continuously generate new product ideas.
Convert ideas to reliable functional designs.
Ensure that the designs are readily producible.
Select the processes most compatible with
customer needs.
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Sequential Flow of Activities in Product Design


and Process Selection

Source: Reprinted with the permission of The Free Press, a Division of Simon & Schuster Adult
Publishing Group, from Fast Cycle Time: How to Align Purpose, Strategy, and Structure for
Speed by Christopher Meyer. Copyright 1993 by Christopher Meyer. All rights reserved.

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Exhibit 6.2

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The New Product


Development (NPD) Process
Concurrent Engineering
The simultaneous and coordinated efforts of all
functional areas which accelerates the time to
market for new products.

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Concurrent Engineering Approach to NPD

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Exhibit 6.3

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The New Product Development


(NPD) Process (contd)
Idea Generation
Market pull: the voice of the customer in
providing feedback to determine product
specifications.
Technology push: a product developed by the
firms R&D is pushed into the market.

Concept Development
Initial product design developed and tested.
Analysis of the market and customer requirements.
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The New Product Development


(NPD) Process (contd)
Quality Function Deployment (QFD)
The process for translating customer
requirements into a products design.
Customer feedback is used in the QFD process
to determine product specifications.
Customer attributes:
Product needs
Product preferences

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The New Product Development


(NPD) Process (contd)
House of Quality
The part of the QFD process that uses customer
feedback for product design criteria.
Use of QFD teams
Identify important customer attributes.
Design superior product.
Shorten product design time.
Facilitate interfunctional cooperation.

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Completed
House of
Quality Matrix
for a Car Door

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Exhibit 6.4

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The New Product Development


(NPD) Process (contd)
New Product Planning
Build models of new product.
Test new elements and components.
Conduct detailed investment and financial
analyses of products anticipated life cycle.
Get project/program approved by management

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The New Product Development


(NPD) Process (contd)
Early Design Collaboration
Benefits of partnering with suppliers and
customers
Reduced engineering costs of product design.
Reduced costs for later engineering changes
Increased efficiencies in choosing most effective production
processes

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Comparing Traditional and Collaborative Approaches


to Bringing New Products to Market

Source: Adapted from Navi Radjou, Deconstruction of the Supply Chain, Supply Chain Management
Review, November/December 2000, pp. 3038. Copyright 2000, Reed Business Information. Used
with permission.

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Exhibit 6.5

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The New Product Development


(NPD) Process (contd)
Design for Manufacturability (DFM)
Choosing manufacturing methods and
materials.
Minimizing the number of individual parts:
Reduces assembly time.
Increases reliability.

Setting product specifications.


Output from the design activity that states all criteria for
building a product.
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Design Change to Reduce


the Number of Parts in a Bracket

Source: Bart Huthwaite. Managing at the Starting Line: How to Design Competitive
Products, Workshop at the University of Southern CaliforniaLos Angeles, January 14,
1991, p. 7.

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Exhibit 6.6

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Process Selection in Manufacturing


Types of Processes
Project process
Process that focuses on making one-of-a-kind products.

Intermittent process
Process that produces products in small lot sizes (e.g., job and
batch operations).

Line-flow process
Continuous process that produces high volume, highly
standardized products (e.g., assembly-line and continuous
operations).

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Types of Processes

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Exhibit 6.7

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Process Selection in Manufacturing


The Product-Process Matrix
High production volumes and narrow product
lines make specialized equipment and
standardized materials economically feasible.
Remaining in a process niche after the product cycle has
advanced to its next stage dooms a firm to market failure.

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Matching Major Stages of Product and Process Life Cycles

Source: Adapted from Robert Hayes and Steven Wheelwright, Restoring Our Competitive Edge:
Competing through Manufacturing (New York: John Wiley & Sons, 1984). Copyright 1984,
John Wiley & Sons, Inc. This material is used by permission of John Wiley & Sons, Inc.

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Exhibit 6.8

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Product and Process Life Cycles

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Exhibit 6.9

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Types of Incremental and Radical Services

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Exhibit 6.10

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Categories of New Services


Incremental services
Service line extensions
New services that augment current services.

Service improvements
New services in which features have changed relative to
existing services.

Style changes
Modest forms of new services that change only the appearance
of the service.

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Categories of New Services (contd)


Radical
Major innovations
New services in markets not fully defined.

Start-up services
New services in established markets already served by existing
services.

New services for current markets


Added services to current customers.

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A Framework for Categorizing New Services

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Exhibit 6.11

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Categories of New Services


Service Category

Content Change

Window Dressing

Not significantly different from other


services
Delivered in similar fashion

Breadth of Offering

Significant design change in content of


service
Delivered in similar fashion

Revolutionary

New in both content and delivery


method

Channel Development

Delivery of same/existing service


through a different/new channel

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The New Service Development (NSD) Process


New Service Development (NSD) Process
The method by which new services evolve from
conceptualization through to marketing and
delivery to the customer.

Design
Analysis
Development
Full launch

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The New Service Development (NSD) Process


Stage

Activity

Design

Formulating the objectives and strategy of the


new service.

Analysis

Considering the financial implications of the


new service.
Examining supply chain issues for delivery of
service.

Development

Testing the service design, training


personnel, conducting pilot runs.

Full Launch

Releasing the service to the market place.

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The Customer Contact Approach to


Designing Service Processes
Customer Contact
The presence of the customer in the system.

Extent of Contact
The percent of time the customer is involved
relative to the time required to deliver the
service.

Creation of the Service


The work process involved in providing the
service.
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The Customer Contact Approach to


Designing Service Processes

High
HighDegree
Degree
of
ofCustomer
Customer
Contact
Contact

High

Low
LowDegree
Degree
of
ofCustomer
Customer
Contact
Contact

Percentage of customer contact


(customer influence on the system)
Difficulty in managing system

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Low

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Major Differences between High- and LowContact Systems in a Bank

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Exhibit 6.12

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Major Differences between High- and LowContact Systems in a Bank (contd)

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Exhibit 6.12 (contd)

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Service Process Matrix: Categories of Services


Service factory
Low degree of labor intensity and a low degree of
customer interaction and customization.

Service shop
Low degree of labor intensity; a higher degree of
customer interaction and customization.

Mass service
A high degree of labor intensity; has a relatively low
degree of customer interaction.

Professional service
A high degree of labor intensity and a high degree of
customer interaction and customization.
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The Service Process Matrix

Source: Roger W. Schmenner, How Can Service Businesses Survive and Prosper?
Sloan Management Review 27, no. 3 (Spring 1986), pp. 2132, by permission of
publisher. Copyright 1986 by Massachusetts Institute of Technology. All rights reserved.

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Exhibit 6.13

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Designing a New Service Organization


Service Vision (Heskett)
Identification of the target market
Who is our customer?

Defining the service concept


How do we differentiate our service in the market?

Developing the service strategy


What is our service package and its operating focus?

Creating the service delivery system


What processes, staff, and facilities are needed?
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Designing a New Service Organization


(contd)
Differences in service design and manufacturing
product development:
Service design and process development are
simultaneous.
Service operations cannot be copyrighted to protect
them from imitation by competitors.
The service package is the major output of NSD.
Prior training strongly influences the service package.
Service organizations can change their service
offerings very rapidly.

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Service-System Design Matrix

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Exhibit 6.14

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Strategic Uses of the Matrix


1. Enabling systematic integration of operations and
marketing strategy.
2. Clarifying exactly which combination of service
delivery the firm is actually providing.
3. Permitting comparison with other firms in the way
specific services are delivered.
4. Indicating evolutionary or life cycle changes that might
be in order as the firm grows.
5. Providing flexibility.

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Process Selection in Services


Types of Service Organizations
Service businesses
Facilities-based services that provide assistance to customers
who come to the service facility.
Field-based services that provide on-site services to customers.

Customer support services


Provide product information and services to current external
customers.

Internal services
Provide services for other internal organizational units.

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Process Selection in Services (contd)


The Production Line Approach
Orientation is toward the efficient production of
resultsprecisely controlled execution of the
central function.

The Customer Involvement Approach


Having the customer take a greater participatory
role in the production of the service.

The Personal Attention Approach


The central focus is complete customer attention
and satisfaction at all times.
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Common Characteristics of
Well-Designed Service Systems
1. Each element of the service system is consistent with
the operating focus of the firm.
2. It is user-friendlycustomers can interact easily.
3. It is robustcapable of coping with variations in
demand and resources availability
4. It is structured so that consistent performance by its
people and systems is easily maintained.
5. It provides effective links between the back office and
the front office so that nothing falls between the cracks.
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Common Characteristics of
Well-Designed Service Systems (contd)
6. It manages the evidence of service quality in such a
way that customers see the value of the service
provided.
7. It is cost-effectivethere is a minimum waste of time
and resources in delivering the service.

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