Operations Management

MBA/III, MGPOM 592

Faculty of Management and Law
Nepal Open University

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Product / Service Development
Unit 2

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Content
• Product and service development stages,
• Quality function deployment, Value engineering,
• Operational issues in product life cycle,
• Strategic capacity planning for product and services

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Source: Slack, N., Brandon-Jones, A., & Johnston, R. (2013). Operations management (7th ed.) Harlow, UK: Pearson
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Goods and Services Selection
• Organizations exist to provide goods or services to society
• Great products are the key to success
• Top organizations typically focus on core products
• Customers buy satisfaction, not just a physical good or particular
service
• Fundamental to an organization's strategy with implications
throughout the operations function
• Goods or services are the basis for an organization's existence
• New products generate substantial revenue

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What is Product / Service?
• Product/service Design – The characteristics or features of a product
or service that determine its ability to meet the needs of the user.

• Product Development Process – A disciplined and defined set of tasks,

steps, and phases that describe the normal means by which a
company repetitively converts embryonic ideas into salable products
or services.

© Product Development and Management Association

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What is designed in Product and service?
• Product / Service Concept
• Understanding the nature, use and value of the service or product
• A set of expectation
• https://www.youtube.com/watch?v=RRr_GyD1fqY&feature=youtu.be
• Product / Service Package
• Group of components that provide benefits defined in concept
• Product / Service Process
• the way in which the component products and services will be created and
delivered

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Product decision
• The objective of the product decision is to develop and implement a
product strategy that meets the demands of the marketplace with a
competitive advantage (Heizer, et. al., 2013)

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The product and service design innovation
activity as a process

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Product development process/stages
• https://www.youtube.com/watch?v=jS-rD6HuxIk&feature=youtu.be
• Stages of product and service design
Competitor
Customers

Evaluation Prototyping
Concept Open Sourcing
Concept -
Preliminary and and final
generation screening design
crowdsourcing improvement design

R&D
Staff
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 Product development process/stages
• Stages of product and service design

The FEASIBILITY of the design option – can we do it?

• Do we have the skills (quality of resources)?
The ACCEPTABILITY of the design
• Do we have the organizational capacity (quantity of resources)?
option – do we want to do it?
• Do we have the financial resources to cope with this option?
• Does the option satisfy the
performance criteria which
the design is trying to
Concept Concept Preliminary Evaluation Prototyping
achieve? (These will differ for The VULNERABILITY of each design
andoption – do we and
wantfinal
to take the
generation
different designs.)
screening risk? design improvement design
• Will our customers want it? • Do we understand the full consequences of adopting the option?
• Does the option give a • Being pessimistic, what could go wrong if we adopt the option?
satisfactory financial return? What would be the consequences of everything going wrong? (This is
called the ‘downside risk’ of an option.)
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The design funnel – progressively reducing the number of possibilities until the final design is reached

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 Product development process/stages
• Stages of product and service design

Reducing design complexity

• Standardization
• Commonality
• Modularization

Specifying the COMPONENT service and Evaluation Prototyping

Concept Concept Preliminary and and final
product in the package and defining the
generation screening
PROCESS to create package
design improvement design

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Product development process/stages
• Stages of product and service design
• https://www.youtube.com/watch?v=X1KONQw02H8
• https://www.youtube.com/watch?v=NTC8gEtxxRI

QFD

Concept Concept Preliminary Evaluation Prototyping

and and final
generation screening design improvement design

VE
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 QFD: House of Quality

Low electricity requirements

Aluminum components

High number of pixels

Ergonomic design
Auto exposure

Company B
Company A
Auto focus
Lightweight 3 G P
Easy to use 4 G P
Reliable 5 F G
Easy to hold steady 2 G P
High resolution 1 P P
Our importance ratings 22 9 27 27 32 25

Failure 1 per 10,000

Source: Heizer, J., Render, B. Munson, C., & Sachan,
Target values

Panel ranking
A. (2017). Operations management: Sustainability (Technical
and supply chain management (12th ed.). Uttar attributes)

2 circuits
2’ to ∞
Pradesh, India: Pearson

0.5 A
75%
Company A 0.7 60% yes 1 ok G
Technical
evaluation Company B 0.6 50% yes 2 ok F
Us 0.5 75% yes 2 ok G
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Product development process/stages
• Stages of product and service design

Concept Concept Preliminary Evaluation Prototyping

and and final
generation screening design improvement design

CAD

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 Product Development Stages
Concept

Feasibility

Customer Requirements

Functional Specifications

Product Specifications Scope for

Scope of design and
product Design Review engineering
development teams
team Test Market

Introduction

Evaluation

Source: Heizer, J., Render, B. Munson, C., & Sachan, A. (2017). Operations management: Sustainability and
supply chain management (12th ed.). Uttar Pradesh, India: Pearson
Service is differed from three dimensions….
• Nature of the service package
• Degree of customization
• Degree of customer contact

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 Organizing product development
• Sequential development / Traditional approach
• Concurrent engineering

Image Source:
https://prgnpi.com/managing-hardware-development-risk-7-b
est-practices/
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 Product Life Cycle
Cost of development and production
Sales, cost, and cash flow Sales revenue
Net revenue (profit)

Cash
flow

Negative
cash flow Loss

Introduction Growth Maturity Decline

Source: Heizer, J., Render, B. Munson, C., & Sachan, A. (2017). Operations management: Sustainability and
supply chain management (12th ed.). Uttar Pradesh, India: Pearson 20
 Life Cycle and Strategy
Introductory Phase
 Fine tuning may warrant unusual
expenses for
 Research
 Product development
 Process modification and enhancement
 Supplier development

Source: Heizer, J., Render, B. Munson, C., & Sachan, A. (2017). Operations management: Sustainability and
supply chain management (12th ed.). Uttar Pradesh, India: Pearson 21
 Product Life Cycle

Growth Phase
 Product design begins to stabilize
 Effective forecasting of capacity
becomes necessary
 Adding or enhancing capacity may be
necessary

Source: Heizer, J., Render, B. Munson, C., & Sachan, A. (2017). Operations management: Sustainability and
supply chain management (12th ed.). Uttar Pradesh, India: Pearson 22
 Product Life Cycle
Maturity Phase
 Competitors now established
 High volume, innovative production may
be needed
 Improved cost control, reduction in
options, paring down of product line

Source: Heizer, J., Render, B. Munson, C., & Sachan, A. (2017). Operations management: Sustainability and
supply chain management (12th ed.). Uttar Pradesh, India: Pearson 23
 Product Life Cycle

Decline Phase
 Unless product makes a special
contribution to the organization, must
plan to terminate offering

Source: Heizer, J., Render, B. Munson, C., & Sachan, A. (2017). Operations management: Sustainability and
supply chain management (12th ed.). Uttar Pradesh, India: Pearson 24