Discussion Outline

Product and Service Design Definition Trends in Product and Service Design Reasons for Product and Service Design Product and Service Design Process Sources of New Product Ideas Factors Impacting Design Process Selection

Product/Service Design Defined

The process of defining all of the companies product characteristics

appearance, materials, dimensions, tolerances, and performance standards Service industries must define both the service and concept - Physical elements, aesthetic & psychological benefits e.g. promptness, friendliness, ambiance

Product and service design must match the needs and preferences of the targeted customer group and must support product manufacturability (the ease with which a product can be made)

Product and Service Design

Product design and process selection affects

Product quality Product cost Customer satisfaction Overall manufacturability the ease with which the product can be made (DFM)

Trends in Product and Service Design

Increased emphasis on or attention to:

Customer satisfaction Reducing time to introduce new product or service Reducing time to produce product

Trends in Product and Service Design contd.

Increased emphasis on or attention to:

The organizations capabilities to produce or deliver the item
Environmental concerns Designing products & services that are user friendly

Designing products that use less material

Reasons for Product and Service Design

Be competitive
Increase business growth & profits Avoid downsizing with development of new products Improve product quality Achieve cost reductions in labor or materials

Major Factors to Consider in Product and Service Design Strategy

Cost Quality Time-to-market Customer satisfaction Competitive advantage

Product or Service Design Activities-William Stevenson

Translate customer wants and needs into product and service requirements Refine existing products and services Develop new products and services Formulate quality goals Formulate cost targets Construct and test prototypes Document specifications

The Product Design Process-John Wiley

Step 1 - Idea Development

- Someone thinks of a need and a product/service design to satisfy it e.g. customers, marketing, engineering, competitors, benchmarking, reverse engineering

Step 2 - Product Screening - Every business needs a formal/structured evaluation process

e.g. fit with facility and labor skills, size of market, contribution margin, break-even analysis, return on sales

Step 3 Preliminary Design and Testing

- Technical specifications are developed, prototypes built, testing starts

Step 4 Final Design

- Final design based on test results, facility, equipment, material, & labor

skills defined, suppliers identified

Design and Testing: The Case of Honda Accord

Video

New Product Development Process-Byron Finch

Phase 1: Product Planning determines customer wants and needs and translates them into a description of a product or service in technical language Phase 2: Part Deployment determines the technical parameters needed to develop the product or service Phase 3: Process Planning translates goals to process requirements Phase 4: Production Planning translates process requirement into a system that controls processes and maintain target goals

Developing New Products and Services

Newness can be defined in two senses: New to the company, in the sense that the firm has never made or sold this type of product before, but other firms may have New to the market or innovative; the product is the first of its kind in the market

Developing New Products and Services

New products account for a staggering 40% of company sales on average For every 7 new product ideas, about 4 enter development, 1.5 are launched, and only 1 succeeds

Brainstorming Activity
Think of at least 10 new product ideas (anything under the sun) Write them in a piece of paper

Lets see some new product ideas from the net

www.businesspundit.com/25-mostpromising-new-products-for-2010/ www.strangenewproducts.com/

Sources of New Product Ideas

Internal
Employees Marketing department R&D department

External
Customers (QFD) Competitors Suppliers Internet

Quality Function Development (QFD)

An approach that integrates the voice of the customer into the product and service development process

QFD Methodology

Product Planning Using QFD

Success Stories on New Product Development using QFD

Nokia studies consumer needs, emerging technologies and changing business environment within the mobility and communications space GE Health Care encourages active involvement of their lead users mostly doctors and research scientists. GE brings them together for regular medical advisory board sessions

Success Stories contd.

HP defines 10 factors that made them successful in their new product projects: understanding user needs, strategic alignment, competitive analysis and product superiority, regulation compliance, priority decision criteria list, risk assessment, product positioning, product channel and support, project endorsement by upper management, and total organization support

Use of QFD

Hyundai Video

Reverse Engineering
The dismantling and inspecting of competitors product to discover product improvements TED Video

Research & Development (R&D)

Organized efforts to increase scientific knowledge or product innovation & may involve:
Basic Research advances knowledge about a subject without near-term expectations of commercial applications. Applied Research achieves commercial applications. Development converts results of applied research into commercial applications

FACTORS IMPACTING DESIGN

Design for Manufacturing DFM

The process of proactively designing products to: 1. Optimize all manufacturing functions: fabrication, assembly, test, procurement, shipping, delivery, service and repair 2. Assure the best cost, quality, reliability, regulatory compliance, safety, time-tomarket, and customer satisfaction

Design for Manufacturing DFM

Series of guidelines for producing a product easily and profitably
Simplification - Minimize parts Standardization Design parts for multiple applications Use modular design Simplify operations
See http://www.citeman.com/4995-dfm-principles-dfm-design-for-manufacturing/

Design for Manufacturing DFM

Design for Manufacturing DFM

Design for Manufacturing DFM

Product Life Cycle (PLC)

According to Kotler and Keller, the PLC indicates that products have four things in common:
1.

2.

3.

4.

they have a limited lifespan; their sales pass through a number of distinct stages, each of which has different characteristics, challenges, and opportunities; their profits are not static but increase and decrease through these stages; and the financial, human resource, manufacturing, marketing and purchasing strategies that products require at each stage in the life cycle varies

Stages in the PLC

Introductory characterized by low sales/profits, high production/marketing costs, few competitors 2. Growth increase in sales/profit due to market awareness, low costs due to economies of scale and experience, growth in competition
1.

Stages in the PLC cont.

Maturity slow growth, rising costs, competition most intense during this stage 4. Decline sales continue to deteriorate, profits erode, increase in promotional activities to induce sales
3.

Product Life Cycle

Saturation
Maturity

Demand

Decline Growth

Incubation

Time

Product Life Cycle

Facility and process investment depends on product life cycle Consider product life cycle stages Introduction Growth Maturity Decline

Product Life Cycle Management (PLM)

Product Lifecycle Management is the process by which manufacturing companies develop, describe, manage and communicate information about their products from their conception to their disposal, both internally and among their supply chain partners.

Concurrent Engineering

The proactive practice of designing products to be built on standard processes while developing new products

Concurrent Engineering
Old over-the wall sequential design process should not be used
Each function did its work and passed it to the next function

Replace with a Concurrent Engineering process

All functions form a design team working together to develop specifications, involve

customers early, solve potential problems,

reduce costs, & shorten time to market

Remanufacturing

The concept of using components of old products in the production of new ones

Manufacturing Technology Decisions

Simplify first then apply appropriate technology

Information Technology: ERP, GPS, RFID

Automation Automated Material Handling:

Automated guided vehicles (AGV)

Automated storage & retrieval systems (AS/RS)

Flexible Manufacturing Systems (FMS) Robotics & Numerically-Controlled (NC) equipment

2007 Wiley

E-manufacturing

Web-based environment creates numerous business opportunities to include;

Product design collaboration Process design collaboration

Computer-aided design uses computer graphics to design new products Computer-integrated manufacturing integration of product design, process planning, and manufacturing using an integrated computer system

2007 Wiley

Product Screening Tool BreakEven Analysis

Break-even analysis also includes calculating

Total cost sum of fixed and variable cost Total cost = F + (VC)*Q Revenue amount of money brought in from sales Revenue = (SP) * Q Q = number of units sold

Product Screening Tool BreakEven Analysis

Computes the quantity of goods company needs to sell to cover its costs QBE = F/ (SP - VC)
QBE Break even quantity F Fixed costs SP selling price/unit VC Variable cost

Problem-Solving

Break-even calculation: A company is planning to establish a chain of movie theaters. It estimates that each new theater will cost approximately $1 Million.The theaters will hold 500 people and will have 4 showings each day with average ticket prices at $8. They estimate that concession sales will average $2 per patron.The variable costs in labor and material are estimated to be $6 per patron.They will be open 300 days each year.What must average occupancy be to break-even?

Break-Even Point
Total revenues = Total costs @ break-even point Q Selling price*Q = Fixed cost + variable cost*Q ($8+$2)Q= $1,000,000 + $6*Q Q = 250,000 patrons (42% occupancy) What is the gross profit if they sell 300,000 tickets Profit = Total Revenue Total Costs P = $10*300,000 (1,000,000 + $6*300,000) P = $200,000 If concessions only average $.50/patron, what is break-even Q now? (sensitivity analysis) ($8.50)Q = 1,000,000 - $6*Q Q = 400,000 patrons (67% occupancy)

PROCESS SELECTION

Process Selection

Product design considerations must include the process

Process selection is based on five considerations

Type of process; range from intermittent to repetitive

Degree of vertical integration

Flexibility of resources
Mix between capital & human resources

Degree of customer contact Two broad process classifications include: Intermittent operations Repetitive operations

Intermittent Operations
Produce a variety of products with different processing requirements in lower volumes (e.g. auto body shop, tool and die shop, health care facility) Labor-intensive rather than capitalintensive

Intermittent Operations contd.

Think about a health-care facility. Each patient, the product, is routed to different departments as needed. One patient may need to get an X ray, go to the lab for blood work, and then go to the examining room. Another patient may need to go to the examining room and then to physical therapy.

Repetitive Operations
Used to produce one or more standardized products in high volume (e.g. cafeteria, automatic carwash) Capital intensive rather than laborintensive

Other Examples of Intermittent and Repetitive Operations

An assembly line is an example of a repetitive operation. Designing a custommade cake is an example of an intermittent operation.

Process Types

Process types can be:

1. Project process make a one-at-a-time product exactly to customer specifications (e.g. construction, shipbuilding, medical procedure, interior design) 2. Batch process small quantities of product in groups or batches based on customer orders or specifications (e.g. Bakeries, education, printing shops) 3. Line process large quantities of a standard product (e.g. cars, computers, TVs, food items such as candies,) 4. Continuous process very high volumes of a fully standard product (e.g. oil refineries, water treatment plants, paint facilities)

Underlying Process Relationship Between Volume and Standardization

Process Decisions-Vertical Integration & Make or Buy

Vertical integration refers to the degree a firm chooses to do processes itself- raw material to sales
Backward Integration means moving closer to primary operations Forward Integration means moving closer to customers

A firms Make-or-Buy choices should be based on the following considerations:

Strategic impact Available capacity Expertise Quality considerations Speed Cost Business are trending toward less backward integration, more outsourcing

DESIGNING PROCESS

Process Design Tools

Process flow analysis is a tool used to analyze and document the sequence of steps within a total process. Process flowchart is used for viewing the sequence of steps involved in producing the product and the flow of the product through the process Process Re-engineering is a structured approach used when major business changes are required as a result of major new products, quality improvement needed, better competitors, inadequate performance

Process Flow Chart Example for a Pizza Company

Flowchart Symbols Purpose and Examples

Tasks or operations
Examples: Giving an admission ticket to a customer, installing a engine in a car, etc.

Decision Points

Examples: How much change should be given to a customer, which wrench should be used, etc.

Source: Chase, Jacobs & Aquilano, Operations Management for Competitive Advantage, 11/e

Flowchart Symbols Purpose and Examples

Storage areas or queues
Examples: Sheds, lines of people waiting for a service, etc.

Flows of materials or customers

Examples: Customers moving to a seat, mechanic getting a tool, etc.

Source: Chase, Jacobs & Aquilano, Operations Management for Competitive Advantage, 11/e

Process Strategy

Make-to-stock - produces standard products and services for immediate sale or delivery (e.g. most popular pizza that are always available upon demand) Assemble-to-order produces standard components that can be combined to customer specifications (e.g. pizza standard crust prepared ahead of time but are assembled based on specific customer requests)

Process Strategy contd.

Make-to-order produces products to customer specifications after an order has been received (e.g. pizza order based on specific customer requirements, allowing choices of different crusts and toppings)

Facility Layout and Process Choice

Process Performance Metrics

Metrics Example: At Zelles Dry Cleaning, it takes an average of 3 hours to dry clean & press a shirt, with value-added time estimated at 110 min. Workers are paid for a 7-hour workday but work 5 hr/day, accounting for breaks and lunch. Zelles completes 25 shirts per day, while the industry standard is 28 for a comparable facility. Process Velocity = (Throughput Time)/(Value-added time)

= (210 minutes/shirt)/(110 minutes/shirt) = 1.90 Labor Utilization = (Time in Use)/(Time Available) = (5 hr)/(7 hr) = .786 or 78.6%
Efficiency = (Actual Output)/(Standard Output)

= (25 shirts/day)/(28 shirts/day) = .89 or 89%

References

http://www.innosupport.net/uploads/media/6_4_Product_Lifecycle_Manag ement.pdf
http://books.google.com.ph/books?id=9stHiYJhwcC&printsec=frontcover&dq=design+manufacturability+concurrent +engineering&source=bl&ots=a0YuNalTPZ&sig=YlXJvo9xW1QKZKuaHb Z7yLoLpDs&hl=en&ei=PPtATPGiAYPcvQPW7JToDA&sa=X&oi=book_res ult&ct=result&resnum=5&ved=0CDIQ6AEwBA#v=onepage&q&f=false

http://media.wiley.com/product_data/excerpt/48/04713472/04713472484.pdf www.businesspundit.com/25-most-promising-new-products-for-2010/
www.strangenewproducts.com/

http://www.npd-solutions.com/qfd.html
Finch, Byron J. (2007) Operations Now. McGraw Hill Publications

Videos courtesy of Marketing Department : Honda & Hyundai shared by Reyes, E. & Technology by Awayan, A.