Topic 6:

Product and Service

Design

5-1
 Learning Objectives
When you complete this chapter you should
be able to :

1. Define product life cycle

2. Describe a product development system
3. Describe how time-based competition is
implemented
4. Describe how products and services are
defined by operations management

5-2
 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

5-3
 Product Decision
 The good or service the organization
provides society
 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
5-4
Product Strategy Options

 Differentiation
 Apple, Rolex
 Low cost
 Ikea, Tesco
 Rapid response
 Dell, Toyota

5-5
 Product Life Cycles

 May be any length from a few

hours to decades
 The operations function must
be able to introduce new
products successfully

5-6
 Product Life Cycles
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

Figure 5.1

5-7
 Product Life Cycle
Introductory Phase
 Fine tuning may warrant
unusual expenses for
1. Research
2. Product development
3. Process modification and
enhancement
4. Supplier development

5-8
 Product Life Cycle

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

5-9
 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

5 - 10
 Product Life Cycle

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

5 - 11
New Product Opportunities
1. Understanding the
customer
2. Economic change
3. Sociological and
demographic change g
o r m i n
i ns t
4. Technological change Bra fu l t o ol
u s e
5. Political/legal change is a
6. Market practice, professional
standards, suppliers, distributors
5 - 12
Importance of New Products
Percentage of Sales from New Products
50%

40%

30%

20%

10%

Industry Top Middle Bottom

leader third third third
Position of Firm in Its Industry Figure 5.2a
5 - 13
 Product Development
Ideas
System
Ability Figure 5.3

Customer Requirements

Functional Specifications

Product Specifications Scope for

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

Introduction

Evaluation

5 - 14
 Organizing for Product
Development
 Team approach
 Cross functional – representatives
from all disciplines or functions
 Product development teams, design
for manufacturability teams, value
engineering teams
 Japanese “whole organization”
approach
 No organizational divisions
5 - 15
 Manufacturability and
Value Engineering
 Benefits:
1. Reduced complexity of products
2. Reduction of environmental impact
3. Additional standardization of products
4. Improved functional aspects of product
5. Improved job design and job safety
6. Improved maintainability (serviceability) of
the product
7. Robust design

5 - 16
Cost Reduction of a Bracket
via Value Engineering

Figure 5.5
5 - 17
 Issues for Product
Development
 Robust design
 Modular design
 Computer-aided design (CAD)
 Computer-aided manufacturing (CAM)
 Virtual reality technology
 Value analysis
 Environmentally friendly design

5 - 18
 Robust Design

 Product is designed so that small

variations in production or
assembly do not adversely affect
the product
 Typically results in lower cost
and higher quality

5 - 19
 Modular Design

 Products designed in easily

segmented components
 Adds flexibility to both production
and marketing
 Improved ability to satisfy customer
requirements

5 - 20
 Computer Aided Design
(CAD)
 Using computers to
design products and
prepare engineering
documentation
 Shorter development
cycles, improved
accuracy, lower cost
 Information and
designs can be
deployed worldwide
5 - 21
 Computer-Aided
Manufacturing (CAM)
 Utilizing specialized computers
and program to control
manufacturing equipment
 Often driven by the CAD system
(CAD/CAM)

5 - 22
 Benefits of CAD/CAM

1. Product quality
2. Shorter design time
3. Production cost reductions
4. Database availability
5. New range of capabilities

5 - 23
 Virtual Reality Technology
 Computer technology used to
develop an interactive, 3-D model of
a product from the basic CAD data
 Allows people to ‘see’ the finished
design before a physical model is
built
 Very effective in large-scale designs
such as plant layout

5 - 24
 Ethics, Environmentally
Friendly Designs, and
Sustainability
 It is possible to enhance productivity
and deliver goods and services in an
environmentally and ethically
responsible manner
 In OM, sustainability means ecological
stability
 Conservation and renewal of resources
through the entire product life cycle

5 - 25
Ethics, Environmentally
Friendly Designs, and
Sustainability

5 - 26
 The Ethical Approach
 Goals
1. Developing safe end environmentally
sound practices
2. Minimizing waste of resources
3. Reducing environmental liabilities
4. Increasing cost-effectiveness of
complying with environmental
regulations
5. Begin recognized as a good
corporate citizen
5 - 27
Guidelines for Environmentally
Friendly Designs
1. Make products recyclable
2. Use recycled materials
3. Use less harmful ingredients
4. Use lighter components
5. Use less energy
6. Use less material

5 - 28
Environmentally friendly design
 Time-Based Competition
 Product life cycles are becoming
shorter and the rate of
technological change is
increasing
 Developing new products faster
can result in a competitive
advantage

5 - 30
 Product Development
Continuum
EXTERNAL DEVELOPMENT STRATEGIES
Figure 5.6
Alliances
Joint ventures
Purchase technology or expertise
by acquiring the developer

INTERNAL DEVELOPMENT STRATEGIES

Migrations of existing products
Enhancements to existing products
New internally developed products

Internal Cost of product development Shared

Lengthy Speed of product development Rapid and/
or Existing
High Risk of product development Shared

5 - 31
 Acquiring Technology
 By Purchasing a Firm
 Speeds development
 Issues concern the fit between the acquired
organization and product and the host
 Through Joint Ventures
 Both organizations learn
 Risks are shared
 Through Alliances
 Cooperative agreements between
independent organizations
5 - 32
 Service Design
 Service typically includes direct
interaction with the customer
 Increased opportunity for customization
 Reduced productivity
 Cost and quality are still determined at
the design stage
 Delay customization
 Modularization
 Reduce customer interaction, often
through automation
5 - 33
Service Design

Figure 5.12
5 - 34
Service Design

Figure 5.12
5 - 35
 Transition to Production
 Know when to move to production
 Product development can be viewed as
evolutionary and never complete
 Product must move from design to
production in a timely manner
 Most products have a trial production
period to insure producibility
 Develop tooling, quality control, training
 Ensures successful production

5 - 36
 Recap Session
1. A product/service typically goes through a 4-stage life
cycle which is:
A.Introduction, maturity, decline, growth
B.Introduction, growth, maturity, decline
C.Decline, maturity, growth, introduction
D.Introduction, growth, decline, maturity

2. Below are factors that influence the development and

introduction of new products/services EXCEPT:
A.Economic change
B.Technological change
C.Political change
D.Weather change

5 - 37
 Recap Session
3. The introduction of cell-phone model from 2 years to
under 6 months is the result of:
A.Time-based competition
B.Life cycle assessment
C.Design for manufacturability
D.Value analysis

4. Products or services designed in easily segmented

components that can be mixed and matched are known as:
A.Robust design
B.Modular design
C.Virtual reality design
D.Green manufacturing design

5 - 38
 Recap Session
5. In the _____ phase of the product life cycle, the product
design has begun to stabilize.
A.Introduction
B.Decline
C.Growth
D.Maturity

6. Modern ATM machines are an automated example of a

service design that:
A.Reduces customer interaction
B.Delays service customization
C.Modularizes the service
D.Maximize labour dependence

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 Recap Session
7. Products are more environmentally friendly when they
are made:
A.Using cheaper materials
B.Using less energy
C.More difficult to assemble
D.According to industry standards

8. Below are ways to shorten new product development

and launching lead time EXCEPT:
A.Joint venture
B.Alliance
C.Acquisition
D.Build own R&D capability

5 - 40
 Recap Session
9. Apple that continuously come up with innovative product
offerings is adopting ________ product strategy.
A.Low cost
B.Rapid response
C.Differentiation
D.Short time

10. A customer who customized and went for a cosmetic

surgery in an example where the customer is involved in
the service _______ process.
A.Design
B.Design and delivery
C.Delivery
D.Strategy
5 - 41