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Product- life cycle

i. This phase is the most expensive and risky stage.
ii. To get customer acceptance of the product: the firm will usually spend heavily on advertising
Introduction phase:
and sales promotion, hoping these costs will be recovered in future sales.
iii. If the introduction fails the firm loses money, so it’s very important to researching a new product
before introducing it.

i. Sales of a successful product increase at a rapid rate.

ii. Production increases and the unit cost of the product drops.
Growth phase: iii. The increased sales volume and the lower unit cost cause profits to increase rapidly.
iv. The success of the product usually attracts the attention of competitors. Their entrance into the
market forces prices down, possibly reducing the firm’s sales. At this point profits are squeezed

i. Everyone interested in the product has sampled or owns the product and sales begin to level off.
Maturity phase
ii. The market is saturated.
(saturation phase): iii. Price competition is often severe and profits start to decline.

i. Sales drop as customers begin to lose interest in the product or to buy improved versions from
ii. As profits decline; companies will look for ways to maintain profitability.
Decline phase: iii. There are three ways in which this can be done:
 Introduce new products.
 Improve existing products. 4
 Improve the methods of production.
Product development principles:
A few organizations supply a single product, but most supply a range of similar or related products.
There are two conflicting factors to be considered in establishing the range of products to supply.
i. If the product line is too narrow, customers may be lost.
ii. If the product line is too wide, customers may be satisfied, but operating costs will
increase because of the lack of specialization.
With a limited range of products, productivity can be increased and
costs reduced by:
i. Allowing the development of machinery and equipment
specially designed to make the limited range of products
quickly and cheaply.
ii. Reducing the number of setups because of fewer task changes.
iii. Allowing labor to develop speed and dexterity because of
fewer task changes.

The needs of sales and the economics of production must be balanced. And this
balance can be obtained with good programs of:
 It’s the process of making something easier to do or make. It seeks to cut out waste by getting rid of
needless product varieties, sizes, and types.
Simplification  The emphasis is not in cutting out products simply to reduce variety but to remove unnecessary
products and variations.
 It’s a carefully established specification covering the product’s material, configuration,
Standardization measurements, and so on.
 All products made to a given specification will be alike and interchangeable.
 Uses standardized parts for flexibility and variety.
 Modularization also permits the practice of postponement where the components to manufacture
Modularization the final product for the customer are made ahead of time.
 The final product is then configured to customer specifications once the order is placed.
 This reduces the lead time to the customer without the need for final product inventory.
 It’s concentration of effort in a particular area or occupation. Electricians, doctors, and lawyers
specialize in their chosen fields.
 In product specialization, a firm may produce and market only one or a limited range of similar
Specialization products.
 This leads to process and labor specialization, which increases productivity and decreases costs.
 Specialization is sometimes called focus and can be based either on product and market or on process.
Product specification and design
• Product design is responsible for producing a set of specifications that manufacturing can use to make the product.
Products should be designed to be
i. Functional.
ii. Capable of low-cost processing.
iii. Environmentally sensitive.

 The product will be designed to perform as specified in the marketplace.

 The marketing department produces a market specification laying down
the expected performance, sales volume, selling price, and appearance
values of the product.
Functional  Product design engineers design the product to meet the market
 Engineers establish the dimensions, configurations, and specifications so
the item, if properly manufactured, will perform as expected in the

Product specification and design (cont.):

 The product must be designed so it can be made at least cost.

Low-cost processing  The product designer specifies materials, tolerances, basic shapes, methods of joining parts, and
so on and, through these specifications, sets the minimum product cost.
 Usually, many different designs will satisfy functional and appearance specifications.

 There are several issues that should be included or considered. One of these issues concerns the
materials and processes used.
Environmental or  Specifically, consideration should be given as to whether materials are recyclable or renewable.
If not, one should question if they are harmful to the environment or not.
“green” sensitivity  Some consideration should be made as to how easy it is to recycle or reuse the materials.
 Many of these environmental concerns can be listed under the overall term sustainability.
 Sustainability also can include issues of being a responsible community “citizen” and being
ethical in your approach to business.

Process design:
 Operations management is responsible for producing the products and services the customer wants, when
wanted, with the required quality, at minimum cost and maximum effectiveness and productivity.

 Processes are the means by which operations management reaches these objectives.

 A process is a method of doing something, generally involving a number of steps or operations. Process
design is the developing and designing of the steps.

i. Nesting
Another way of looking at the hierarchy of processes is the concept of
nesting. Small processes are linked to form a larger process
Level zero shows a series of steps, each of which may have its own
series of steps. One of the operations on level zero is expanded into its
component parts and shown on level one.
The nesting can continue to further levels of detail.

Process design (cont.):
ii. Mass customization
Recent changes in process flexibility have allowed for the
development of a concept called mass customization.
If the operation is designed to be flexible and efficient enough, it will
allow the production of customized products (specific to customer
demand) at virtually the same cost as mass-produced product.

Factors influencing process design:
 Six basic factors must be considered when designing a process.
 Product design and quality level
• The product’s design determines the basic processes needed to convert the raw materials and
components into the finished product.

 Demand patterns and flexibility needed

• If there is variation in demand for a product, the process must be flexible
enough to respond to these changes quickly.
• Flexible processes require flexible equipment and personnel capable of
doing a number of different jobs.

 Quantity/capacity considerations
• Product design, the quantity to produce, and process design are closely
related. Both product and process design depend on the quantity needed.

Factors influencing process design (cont.):
 Customer involvement
• The five manufacturing strategies and the extent of customer involvement in each. Process design will
depend on which strategy is chosen.

i. Engineer-To-Order
ii. Make-To-Order
iii. Assemble-To-Order
iv. Make-To-Stock
v. Configure To Order
 Environmental concerns
• The process design should have minimal impact on the environment, if at
all possible. In addition concern should be taken to minimize the amount
of energy utilized.
 Make or buy decision
• A manufacturer has the alternative of making parts in-house or of buying
them from an outside supplier. 12
Selecting the process:
• The larger the volume (quantity) to be produced, the greater the opportunity to use special-
purpose processes, the more special purpose an operation, the faster it will produce.

• Often the capital cost for such machinery or for special tools or fixtures is high. Capital
costs are called fixed costs and the production, or run, costs are called variable costs

Continuous process improvement (CPI):
 People have always been concerned with how best to do a job and the time it should take to
do it.
 Process improvement is concerned with improving the effective use of human and other
resources. Continuous implies an ongoing activity; improvement implies an increase in the
productivity or value of quality or condition and from here we have the name of continuous
process improvement (CPI).

“Continuous process improvement consists of a logical set of steps and

techniques used to analyze processes and to improve them.”
It’s include:
I. People involvement
II. Improving productivity

The Six Steps in Continuous Process Improvement:

• The CPI system is based on the scientific method. This general method is
used to solve many kinds of problems. The six steps are as follows:
a. Select the process to be studied.
b. Record the existing method to collect the necessary data in a useful form.
c. Analyze the recorded data to generate alternative improved methods.
d. Develop the best method of doing the work by evaluating the alternatives.
e. Install the method as standard practice by training the operator.
f. Maintain the new method.

Pareto diagrams:
1. Select the Process
 The first step is to decide what to study. This depends on the ability to recognize situations that have good potential for
improvement. Observation of existing methods comes first.
2. Record
 The next step is to record all the facts relating to the existing process. To be able to understand what to record, it is
necessary to define the process being studied. Recording defines the process.
3. Classes of activity
 Before discussing some of the charts used, we should look at the kinds of activities recorded. All activity can generally be
classified into one of six types.
4. Operations process charts
 It’s record in sequence only the main operation and inspections. They are useful for preliminary investigation and give a
bird’s-eye view of the process.
5. Process flow diagram
 It shows graphically and sequentially the various steps, events, and operations that make up a process. It provides a
picture, in the form of a diagram, of what actually happens when a product is made or a service performed.

6. Analyze
• Examination and analysis are the key steps in continuous process improvement.
• This step involves analyzing every aspect of the present method and evaluating all proposed possible methods.

Pareto diagrams (cont.):

• The steps in making a Pareto analysis are as follows:

a. Select the unit of measure. This is usually dollars but may be the frequency of
b. Collect data for an appropriate time interval, usually long enough to include all
likely conditions.
c. Summarize the data by ranking the items in descending order according to the
selected unit of measure.
d. Calculate the total cost.
e. Calculate the percentage for each item.
f. Construct a bar graph showing the percentage for each item and a line graph of the
cumulative percentage

Cause-and-effect diagram:
• Sometimes called a fishbone or an Ishikawa diagram, the
cause-and-effect diagram is a very useful tool for identifying
root causes.
Find the root cause
 Frequently it is difficult to separate symptoms from the root causes of problems.
 Often symptoms are what we see and it is difficult to trace back to the root cause.
 To find root causes you must have a questioning attitude.
 For the analyst, “why” is the most important word. Every aspect of the existing method
should be questioned.

• In “The Elephant’s Child,” from The Just-So Stories, Rudyard Kipling wrote: “I keep six
honest serving-men (They taught me all I know); their names are What and
Why and When And How and Where and Who.”

Cause-and-effect diagram (cont.):

The fishbone diagram is best used by a group or team working together. It can be constructed by discussion and
brainstorming. The steps in developing a fishbone diagram are as follows:
1) Identify the problem to be studied and state it in a few words. For example, the reject rate on machine A is
2) Generate some ideas about the main causes of the problem. Usually all probable root causes can be
classified into six categories.
 Materials. For example, from consistent to inconsistent raw materials.
 Machines. For example, a well-maintained machine versus a poorly maintained one.
 People. For example, a poorly trained operator instead of a well-trained one.
 Methods. For example, changing the speed on a machine.
 Measurement. For example, measuring parts with an inaccurate gauge.
 Environment. For example, increased dust or humidity.
3) Brainstorm all possible causes for each of the main causes.
4) Once all the causes have been listed, try to identify the most likely root causes and work on these.

Learning curve :

Over time, as the operator does the tasks repetitively, speed will
increase and errors decrease. This process is known as the
learning curve.
Depending on the task, a worker may progress through the
learning curve in a few minutes or, for high-skill jobs, several
months or years.

1. Products and the processes used to make them are continually being
redesigned to create products more appealing to customers, to improve
productivity or to make the products and their associated processes
friendlier to the environment.
2. With information easy to share in today’s environment product design and
process design can work simultaneously to bring better quality products to
market faster and with reduced costs.
3. As the design of the product is being established the process is also being
designed based on: the quality level desired, the ability of the process to
react quickly to changes in customer demand (flexibility), the overall
volume of demand and how much the customer wants to be involved in the
production of the product.

Summary (cont.):
4. Depending on the volume the decision may be made to buy the product
rather than make it, or, to use one process rather than another. This is
best determined with the cost equalization point CEP which determines a
volume below which we use the low fixed cost high variable cost
alternative and above which we invest in the high fixed cost and low
variable cost alternative.
5. Continuous Process Improvement CPI applies to all processes to make
them more cost effective and competitive. It is done on an ongoing basis
not just when new products are introduced.
6. CPI uses the traditional tools of the scientific methods in six steps: select,
record, analyze, develop, install and maintain. All the steps have one
thing in common and that is the involvement of people.
7. With improvements to product and process design goods tend to flow
quickly and smoothly resulting in lower costs and improved profits.
8. Continuous improvement leads to the next chapter in this text on just in
time and lean production. 22