Goods and Service Design: David A. Collier and James R. Evans

GOODS AND SERVICE DESIGN
CHAPTER 6
DAVID A. COLLIER AND JAMES R. EVANS
©2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or 1
duplicated, or posted to a publicly accessible website, in whole or in part.
CHAPTER 6 GOODS AND SERVICE DESIGN
6-1 Describe the steps involved in designing goods and

services.
6-2 Explain the concept and application of quality function
deployment.
6-3 Describe how the Taguchi loss function, reliability, design
for manufacturability, and design for sustainability are
used for designing manufactured goods.
6-4 Explain the five elements of service delivery system
design.
6-5 Describe the four elements of service encounter design.
6-6 Explain how goods and service design concepts are
integrated at LensCrafters.
©2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or
2
Every design project—a new automobile or

cell phone, a new online or financial service,
and even a new pizza—is a series of trade-
offs: between technology and functionality,
between ambition and affordability,
between the desires of the people creating
the object and the needs of the people
using it.
3
Exhibit 6.1 An Integrated Framework for Goods and Service Design (slide 1)
4
Exhibit 6.1 An Integrated Framework for Goods and Service Design (slide 2)
5
Designing Goods and Services

CBP design and configuration choices revolve around a
solid understanding of customer needs and target markets,
and the value that customers place on attributes, such as:
• Time: Reduce waiting time, be more responsive to
customer needs.
• Place: Select location for customer convenience.
• Information: Provide product support, user manuals.
• Entertainment: Enhance customer experience.
• Exchange: Multiple channels used for purchases.
• Form: How well the physical characteristics of a good
address customer needs.
6

The design of a manufactured good focuses on its
physical characteristics—dimensions, materials,
color, and so on.
The design of a service, however, cannot be done

independently from the “process” by which the
service is delivered. The process by which the
service is created and delivered (that is,
“produced”) is, in essence, the service itself!
7

• Prototype testing is the process by which a
model (real or simulated) is constructed to test
the good’s physical properties or use under
actual operating conditions, as well as consumer
reactions to the prototype.
8
Customer-Focused Design
• Customer requirements, as expressed in the
customer’s own terms, are called the voice of the
customer.
• Quality function deployment (QFD) is an

approach to guide the design, creation, and
marketing of goods and services by integrating the
voice of the customer into all decisions.
• QFD translates customer wants and needs into

technical requirements of a product or service.
9
The House of Quality

Building the House of Quality:
1. Determine customer requirements through the voice of

the customer (VOC).
2. Define technical requirements of the product.
3. Determine interrelationships between the technical
requirements.
4. The relationship matrix defines what technical
requirements satisfy VOC needs.
5. Customer priorities and competitive evaluation help
select which VOC requirements the product should focus
on.
10
Exhibit 6.2 The House of Quality
11
Exhibit Extra A House of

Quality for
Building a
Better Pizza
12
Tolerance Design and the Taguchi Loss Function

• For most manufactured goods, design
blueprints specify a target dimension (called
the nominal), along with a range of permissible
variation (called the tolerance). For example,
0.500  0.020 cm.
• The nominal dimension is 0.500 cm, but may
vary anywhere in the range from 0.480 to
0.520 cm.
• This is sometimes called the “goal post
model.”
13
Exhibit 6.3 Traditional Goal Post View of Conforming to Specifications
14

Genichi Taguchi, a Japanese engineer,
maintained that the traditional practice of
setting design specifications is inherently
flawed. Taguchi argued that the smaller the
variation about the nominal specification, the
better is the quality. In turn, products are more
consistent, would fail less frequently, and thus,
be less costly in the long run.
15

Taguchi loss function:
L(x) = k(x – T )2 [6.1]
Where:
L(x) is the monetary value of the loss associated
with deviating from the target, T;
x is the actual value of the dimension;
k is a constant that translates the deviation into
dollars.
16
Exhibit 6.4 Nominal-Is-Best Taguchi Loss Function
17
Solved Problem
Suppose that the specification on a part is 0.500 ± 0.020 cm. A detailed
analysis of product returns and repairs has discovered that many failures
occur when the actual dimension is near the extreme of the tolerance
range (that is, when the dimensions are approximately 0.48 or 0.52) and
costs $50 for repair.
Thus, in Equation 6.1, the deviation from the target, x – T , is 0.02 and
L(x) = $50. Substituting these values, we have:
50 = k(0.02)2
or
k = 50/0.0004 = 125,000
Therefore, the loss function for a single part is L(x) = 125000(x – T)2.
This means when the deviation is 0.10, the firm can still expect a loss per
unit of: L(0.51) = 125,000(0.10)2 = $12.50 per part
18
Design for Reliability

• Reliability is the probability that a
manufactured good, piece of equipment, or
system performs its intended function for a
stated period of time under specified operating
conditions.
19

• Reliability is a probability, that is, a value
between 0 and 1.
- Example: A reliability of 0.97 means that on
average, 97 of 100 times the item will perform
its function for a given period of time under
specified operating conditions.
• Many designs have components arranged in
series; others consist of parallel components
that function independently of each other.
20

In a series system, if one component fails, the entire
system fails. The reliability of a series system is the
product of the individual probabilities of each process in
a system.
Rs = (p1)(p2)(p3). . . (pn) [6.2]
Exhibit 6.7 Structure of a Serial System
21
Design for Reliability Exhibit 6.8 Structure of a Parallel System
In parallel systems,
functions are
independent and the
entire system will fail
only if all components
fail. The reliability of a
parallel system is
computed as:
Rp = 1 – (1 – p1)(1 – p2)(1 – p3). . . (1 – pn) [6.3]

22

Example: The reliability of this series system is:
Rs = (.98)(.91)(.99) = .883 or 88.3%
Exhibit 6.9 Subassembly Reliabilities
23

Series-Parallel Systems: The reliability of the parallel system for
subassembly B is: Rp = 1 – (1 – .91)(1 – .91) = 1 – 0.0081 =
0.9919.
Exhibit 6.10 Modified Design
Thus, the reliability of the
entire system is:
Rs = (.98)(.9919)(.99)
= .962 or 96.2%.
24

• Design failure-mode-and-effects analysis
(DFMEA) is a technique for identifying how a
product may fail; the effect of a failure on the
customer; seriousness, likelihood of occurrence,
and ability to detect a potential failure; cause of
failure, and how it can be corrected by
improving the design.
25
Design for Manufacturability

• Design for manufacturability (DFM) is the
process of designing a product for efficient
production at the highest level of quality.
• Product simplification is the process of trying

to simplify designs to reduce complexity and
costs and thus improve productivity, quality,
flexibility, and customer satisfaction.
26
Design for Sustainability

• Many products are discarded simply because the
cost of maintenance or repair is too high when
compared with the cost of a new item. One aspect
of designing for sustainability is designing products
that can easily be repaired and refurbished or
otherwise salvaged for reuse.
• Design for Environment (DfE) is the explicit
consideration of environmental concerns during the
design of goods, services, and processes and
includes such practices as designing for recycling
and disassembly.
27
Service Delivery System Design

Service delivery system design includes the
following:
• Facility location and layout
• The servicescape
• Process and job design
• Technology and information support systems
• Organizational structure
28
Service Delivery System Design

Facility Location and Layout
• Location creates customer’s convenience.
• Great store layout, process design, and service
encounter design are meaningless if the store is
in the wrong location.
• The Internet is making physical locations less
important for some information-intensive
services such as Charles Schwab, Vanguard,
and Scottrade.
29
Service Delivery and System Design

Servicescape
• All of the physical evidence a customer might
use to form an impression.
• The servicescape provides the behavioral setting
where service encounters take place.
• Standardization of the servicescape and service
processes enhances efficiency, especially for
multiple site organizations.
30
Three Dimensions of a Servicescape

• Ambient conditions—manifest by sight, sound,
smell, touch, and temperature; five human senses;
e.g., leather chairs in the lobby, cartoon characters in
children’s hospital, music at a coffee shop.
• Spatial layout and functionality—how furniture,
equipment, and office spaces are arranged; also
streets, parking lots, stadiums, etc.
• Signs, symbols, and artifacts—explicit signals that
communicate an image of the firm; e.g., diplomas
hanging on the wall in a medical clinic, company
logos and uniforms, artwork, mission statements.
31
Types of Servicescapes
• Some servicescapes, termed lean servicescape
environments, are very simple.
- Examples: Ticketron outlets, FedEx drop-off
kiosks
• More complicated designs and service systems
are termed elaborate servicescape
environments.
- Examples: Hospitals, airports, universities
32
Service Process and Job Design

Service process design is the activity of
developing an efficient sequence of activities to
satisfy internal and external customer requirements.
Develop procedures to ensure that:

• Things are done right the first time.
• Interactions between customers and service
providers are simple and quick.
• Human error is avoided.
33

Technology and Information Support Systems
• What technology does each job require?
• What information technology best integrates all

parts of the value chain?
• Technology ensures speed, accuracy,

customization, and flexibility.
34

Organizational Structure
• Pure functional organization requires more
handoffs between work activities and results in
increased opportunity for error and slower
processing times.
• Process-based organization leverages cross-

functionality of service processes.
35
Service Encounter Design

Service encounter design focuses on the
interaction, directly or indirectly, between the
service provider(s) and the customer.
Principal elements:
• Customer contact behavior and skills
• Service provider selection, development, and
empowerment
• Recognition and reward
• Service recovery and guarantees
36

Customer Contact Behavior and Skills
• Customer contact refers to the physical or virtual
presence of the customer in the service delivery
system during a service experience.
• Customer contact is measured by the percentage of
time the customer must be in the system relative to
the total time it takes to provide the service.
• Systems in which the percentage is high are called
high-contact systems; those in which it is low are
called low-contact systems.
37

• Customer-contact requirements are
measurable performance levels or expectations
that define the quality of customer contact with
representatives of an organization.
• Examples:
– Answering a telephone within two rings
– Using a customer’s name whenever possible
38

Service Provider Selection, Development and
Empowerment
• Recruit and train employees to exceed customer
expectations.
• Empowerment simply means giving people authority to
make decisions based on what they feel is right, to have
control over their work, to take risks and learn from
mistakes, and to promote change.
– Ritz-Carlton Hotel employees can spend up to $2,000
to resolve customer complaints with no questions
asked.
39

Recognition and Reward
• Key motivational factors:
- Recognition
- Advancement
- Achievement
- Nature of the work
40

Service Guarantees and Recovery
• A service upset is any problem a customer
has—real or perceived—with the service
delivery system and includes terms such as
service failure, error, defect, mistake, or crisis.
• A service guarantee is a promise to reward

and compensate a customer if a service upset
occurs during the service experience.
41

Service Guarantees and Recovery
• Service recovery is the process of correcting
a service upset and satisfying the customer.
- Begin immediately after a service upset.
- Document the process and train employees.
- Listen to the customer and respond.
sympathetically.
- Resolve the problem quickly, provide an
apology, offer compensation.
42
An Integrative Case Study of LensCrafters

• LensCrafters’ (www.lenscrafters.com) mission
statement suggests that time and service quality
are the most important competitive priorities and
potential order winners.
• CBP is the integrated set of goods (eyewear) and

services (accurate eye exam and one-hour
service).
43
An Integrative Case Study of LensCrafters

• Eyewear is produced in “store backroom factory”
in rapid response without sacrificing quality,
efficient production procedures.
• Service delivery system design:
- Located in high-traffic areas for convenience.
- Servicescape of quality and professionalism.
- 11 different in-store job roles.
- Customers can see glasses being made in the
optical lab.
44
Exhibit 6.11 One Example View of LensCrafters’ Customer Benefit Package
45
Exhibit 6.12
A Schematic View of a
Typical LensCrafters
Store Layout
46

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GOODS AND SERVICE DESIGN

DAVID A. COLLIER AND JAMES R. EVANS

6-1 Describe the steps involved in designing goods and

Every design project—a new automobile or

Designing Goods and Services

Designing Goods and Services

The design of a service, however, cannot be done

Designing Goods and Services

• Quality function deployment (QFD) is an

• QFD translates customer wants and needs into

The House of Quality

1. Determine customer requirements through the voice of

Exhibit 6.2 The House of Quality

Exhibit Extra A House of

Tolerance Design and the Taguchi Loss Function

Exhibit 6.3 Traditional Goal Post View of Conforming to Specifications

Tolerance Design and the Taguchi Loss Function

Tolerance Design and the Taguchi Loss Function

Exhibit 6.4 Nominal-Is-Best Taguchi Loss Function

Design for Reliability

Design for Reliability

Design for Reliability

Exhibit 6.7 Structure of a Serial System

Design for Reliability Exhibit 6.8 Structure of a Parallel System

Rp = 1 – (1 – p1)(1 – p2)(1 – p3). . . (1 – pn) [6.3]

Design for Reliability

Exhibit 6.9 Subassembly Reliabilities

Design for Reliability

Design for Reliability

Design for Manufacturability

• Product simplification is the process of trying

Design for Sustainability

Service Delivery System Design

Service Delivery System Design

Service Delivery and System Design

Three Dimensions of a Servicescape

Service Process and Job Design

Develop procedures to ensure that:

Service Process and Job Design

• What information technology best integrates all

• Technology ensures speed, accuracy,

Service Process and Job Design

• Process-based organization leverages cross-

Service Encounter Design

Service Encounter Design

Service Encounter Design

Service Encounter Design

Service Encounter Design

Service Encounter Design

• A service guarantee is a promise to reward

Service Encounter Design

An Integrative Case Study of LensCrafters

• CBP is the integrated set of goods (eyewear) and

An Integrative Case Study of LensCrafters

Exhibit 6.11 One Example View of LensCrafters’ Customer Benefit Package

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