Production and

Operations Management
Ataklty Adugna (Ass. Professor)
Mekelle University
College of Business and
Economics
Department of Management
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Product and Service Design

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 Meaning of Product Development
New Product Development can mean:
development of original products
 product improvements
 product modifications
and new brands through the firm’s
own R & D efforts.

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 Product Design
Introduction
New-product development is a crucial part of
business.
New products serve to provide growth opportunities
and a competitive advantage for the firm.
Operations are greatly affected by new product
introduction.
It is a prerequisite for production to occur.

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 Cont’d
New products must be defined with not
only the market in mind but the
production process that will be used to
make the product.
 Through close cooperation between
operations, marketing, and other
functions, the product design can be
integrated with decisions regarding
process, quality, capacity, and inventory.
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 cont…
New products serve to provides a firm

with:

I. Growth opportunities and

II. Competitive advantage.

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 Reasons for Product or Service Design
For competing with no or less competitive
pressure.
The need for growth and expansion.
As an alternative against downsizing.
To entertain customer complaints
To minimize or avoid excessive warranty
claims,
As tool or means of remarketing an existing
product.

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Importance of New Product Introduction
New product is important in that it can:
Create differential advantages
Enhance the firm’s image
Support continued growth
Limit risk through diversification
Capitalize on technological breakthroughs- for
customers
Improve the firms’ productivity or be responsive to
recycling issues
Help firms respond to changing demographics and
lifestyles
Help the firm respond to government mandates 8
 Strategies for New Product
Introduction
There are three fundamentally different ways to
introduce new products.
I. Market Pull
II.Technological Push
III.Inter-functional approach : This is the most appealing
of the three views but also the most difficult to
implement.

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New Product Development Process
1. Idea generation
Sources:
a) Internal Sources
 Research and development unit
 Employees
b) ii. External Sources
 Customers
 Competitors- reverse engineering
 Distributors
 Suppliers

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 Cont…
2) Idea Screening
 Method: Screening by check-list; Factor Rating
 Factors against which each ideas has to be rated include:
 Market Size
 Stability of demand
 Sustainability of demand
 Product Price
 Development Time
 Manufacturing Costs
 Rate of Return
 Operations compatibility
 Financial feasibility
 Operational feasibility
Fitness to the overall strategy

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 Cont…
Product characteristics Poor Fair Good Very Excellent Weight
Good

Selling price  15
Product quality  10
Sales volume  20
Operations compatibility  10

Competitive advantage  10
Technical capability  15
Fit with strategy  20
100%

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 Cont…
3) Business Analysis

4) Preliminary product design

5) Prototype construction

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 6. Prototype testing
.
Daimler is currently road-testing its
prototype NECAR 5 (New Electric Car)

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Cont..
7) Final product design

8) Production and Commercialization

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 Value Analysis
There is a need to improve constantly the
products and services we produce in order to stay
competitive
Value analysis (or value engineering)–is a method
for improving the usefulness of a product without
increasing its cost or reducing the cost without
reducing the usefulness of the product.
Usefulness can be described by such terms as
product features, performance, or reliability of
the product.

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 Cont’d
 Typical questions that are asked during value
engineering studies include:
What are the functions of a particular component?
Are they necessary?
Can they be accomplished in a different way?
What materials are used?
 Can a less costly material be substituted?
 How much material is wasted during
manufacturing?
 Can waste be reduced by changing the design?

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 Types of Product Design
 Product Lifecycle

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Cont…
2. Manufacturing Design
3. Remanufacturing
4. Robust Design
5. Concurrent Engineering
6. Computer Aided Design
7. Product variety
8. Modular Design

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 Service Design
A service is any primary or complementary
activity that does not directly produce a
physical product.
Simultaneous production and
consumption is a critical aspect of service,
because it implies that the customer must
be in the production system while
production takes place.

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 Similarities between Goods and Services
Goods and services provide value and
satisfaction to customers who purchase and
use them.
They both can be standardized and
customized to individual wants and needs.
A process creates and delivers each good or
service, and therefore, OM is a critical skill.

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 Differences between Goods and Services

Goods are tangible while services are

intangible.
Difficulty of measuring productivity
Difficulty of measuring and controlling
quality
Degree of customer involvement
Customers participate in many service
processes, activities, and transactions.

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 Cont…
The demand for services is more difficult to predict
than the demand for goods.
Services cannot be stored as physical inventory.
Service management skills are paramount to a
successful service encounter.
Service facilities typically need to be in close
proximity to the customer.
Patents do not protect services.
Functional Separation of sales and production units
Mode of contact between producers and customers

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Framework of services
The framework (the service triangle) shown below,
assumes there are four elements, which must be
considered in producing services: the customer,
people, strategy, and the system.

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 The service triangle
.
The
service
strategy

The
customer
The The
systems people

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 The Service Product Bundle
The service product bundle consists of three

elements:
The physical goods (facilitating goods)

The sensual service provided (explicit service)

The psychological service (implicit service)

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 The service system
Service recovery
Service guarantee
Service cycle
Moment of truth
Perceived service = f (all previous moments of
truth)
Potential inefficiency =f (degree of customer
contact)

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Characteristics of high-and low-contact services:
Low-contact services are used when face-to-face
interaction is not required.
 High-contact operations are used for changing or
uncertain customer demand.
Low-contact services require employees with technical
skills, efficient processing routines, and
standardization of the product and process.
High-contact services require employees who are
flexible, personable, and willing to work with the
costumer (the smile factor).
High-contact services generally require higher prices
and more customization due to the variable nature of
the service required.
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