Chapter III: Product and Service Design

CHAPTER III
3.1 PRODUCT AND SERVICE DESIGN
Introduction
Product and Service Design together form the very basis of design aspect of operations. Note
that, Products and services are found in combination and a service organization can also provide
products or a manufacturing organization can also provide a service. Thus, when a firm is trying
to design a product it has to give attention to its service too. Put in mind the following two major
frameworks in design before discussing anything in this topic:
1. Design aspect requires strategic planning and may fall under the domain of
Organizational strategy and senior management, also
2. Design aspect requires the existing system to be improved or replaced by a better system
for this you should always focus on the word Productive. This word reflects the idea of
adding value either to the manufacturing or the services System or to be more precise
improving the operation system.

What is Design?
Design is the process of structuring component parts/activities of a product so that as a unit it can
provide specified value for the one who purchase it. The product will be designed in terms of
size, color, and other related dimensions.

Thus, Product/Service design plays a strategic role in helping an organization achieve its goals.
A good product/service design can ensure customer satisfaction, quality and production costs.
The customer connection is obvious i.e., the product or service is the main concern of the
customer, and becomes the ultimate basis for judging the organization. The quality connection is
twofold. Quality is obviously affected by design, but also, during production, by the degree to
which production conforms to the intent of design. A key factor is the manufacturability, which
refers to the ease with which design features can be achieved by production. Similarly, design
affects cost, both the cost of materials specified by design and the cost required to achieve the
intent of design (example, labor and equipment costs). A poor product or service can endanger
the customers or consumers life. For this it is necessary for us as Operations Manager to question
the safe operations of the product or service, our organization offers to its customers and thus
safe guard our organization from product or service liability.

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Objectives of Product and Service Design

The objective of product service design may vary somewhat from situation to situation. Generally,
however, the objectives are:
 to bring new or revised products or services to the markets as quickly as possible
 to design products and/or services that have customer appeal
 to increase the level of customer satisfaction
 to increase quality
 to reduce costs
In competitive environment, getting new or improved products or services to the market ahead of
competitors gives an organization a competitive advantage that can lead to increased profits as
well as increased market share, and can create an image of the organization as a leader. In the not
for profit sector, getting new or improved products or services to the market as quickly as
possible enables organizations to increase their level of customer service.
Successful product design must reflect a creative and intimate knowledge of the market
environment. And the processes used to produce or deliver them must make effective use of the
firm’s resources and available levels of technology.
Notice here that, production/operation is not the sole responsibility of operations department or
division. What to produce is rather an interactive decision of marketing, finance, engineering,
purchasing/procurement and further involves customers, suppliers, creditors, and other related
parties.
Reasons for Product or Service Design
An organization takes into account both external and internal reasons in order to design a new
product or service or redesign an existing product or service. The reasons listed below have often
been the primary reason for the design process.
1. Economic
2. Social and demographic
3. Political, liability, or legal
4. Competitive
5. Technological
What is important is to realize that whether it’s a single reason or multiple reasons for a design
strategy, the end result should always be an improved, safe and reliable product which should
bring revenue and competitive advantage to the organization. New-product development is a

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crucial part of business. 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. Product design is prerequisite for production,
along with a forecast of production volume.
3.2. Strategies for New-Product Introduction
There are three fundamentally different ways to introduce new products.
1. Market pull- According to this view, the market is the primary basis for determining the
products a firm should make, with little regard to existing technology.
- A firm should make what it can sell.
- The customer needs are determined, and processes needed to supply the customer.
The market will “pull” through the products that are made.
2. Technology push- In this view, technology is the primary determinant of the products
that the firm should make, with little regard for the market.
- This approach suggests that “you should sell what you can make”. The firm
should pursue a technology based advantage by developing superior technologies
and products.
- The products are then pushed into the market, and the marketing’s job is to create
demand for these superior products.
- Since the products have superior technology, they will have a natural advantage in
the market and the customers will want to buy them.
3. Inter-functional View- This view holds that the product should not only fit the market
needs but have a technical advantage as well.
- To accomplish this, all functions (e.g., marketing, engineering, operations, and
finance) should cooperate to design the new products needed by the firm.
- Often this is done by forming cross functional teams that are responsible for
development of the new product.
- This is the most appealing of the three views but also the most difficult to
implement.
- Cross-functional rivalry and friction must be overcome to achieve the degree of
cooperation required for inter functional product development to succeed.

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The Design Process

The design process begins with the motivation for design. For a new business or a new product,
the motivation may be obvious: to achieve the goals of the organization. For an existing
business, in addition to that general motivation, there are more specific factors
to consider, such as government regulations, competitive pressures, customer needs,
and the appearance of new technologies that have product or process applications.

Ultimately, the customer is the driving force for product and service design. Failure to satisfy
customers can result in customer complaints, returns, warranty claims, and so on. Loss of market
share becomes a potential problem if customer satisfaction is not achieved.

For the design process to occur, a business must have ideas for new or improved designs. These
come from a variety of sources, most obviously the customer. Marketing can tap this source of
ideas in a number of ways, such as the use of focus groups, surveys, and analyses of buying
patterns.

Some organizations have research and development departments that also generate ideas for new
or improved products and services

Competitors are another important source of ideas. By studying competitor’s products or

services, and how the competitor operates (e.g., pricing policies, return policies, warranties), an
organization can learn a great deal about achieving design improvements. Beyond that, some
companies buy a competitor’s newly designed product the moment it appears on the market.
Using a procedure called reverse engineering; they carefully dismantle and inspect the product.
This may uncover product improvements that can be incorporated in their own product.
Sometimes reverse engineering can lead to a product that is superior to the one being examined;
that is, designers conceive an improved design, which enables them to “leapfrog” the
competition by quickly introducing an improved version of a competitor’s product.

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3.3. New-Product Development Process

The new product development process consists of the following steps.
1. Idea Generation- Ideas for new products can arise from a variety of sources
within and external to the firm. There are two principal sources for generating
ideas:
 User needs, and
 Technological developments.
Manufacturers are always trying to develop new products that meet the needs of consumers, e.g.
development of small cars.
Identification of market needs can lead to the development of new technologies and products to
meet those needs. New innovations can replace products based on older technologies. Research
and development (R&D) plays an important role in developing new products and advancing
technology. The purpose of R&D is to generate new ideas and concepts and to develop these
ideas and concepts into useful products.
2. Screening- The purpose of screening is to eliminate ideas that do not appear to
have a high potential for success and thus avoid expensive development costs.
Three major criteria are used in initial screening:
 Product development –technical and operational feasibility
 Market criteria – current market and potential to grow
 Financial feasibility – contribution to overall profitability and cash flow.
Before a new product idea is put into preliminary design, it should be subjected to analysis
organized around these three tests. The purpose of screening is not to reach a conclusive decision
to produce and market the product. After initial development, more extensive analysis may be
conducted through test markets and pilot operations before a final decision is made to introduce
the product.
To assist in product analysis, several methods have been developed. One is a checklist scoring
method that involves developing a list of factors along with a weight for each.
If the total score is above a certain minimum level the new product idea
may be selected for further development. Alternatively, the method may
be used to rank products in priority order for selection.

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Screening by Checklist

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%
Poor = 1
Fair = 2
Good = 3 Total weighted product score
Very good = 4 = .15(2)+ .10(4)+ .20(3)+ .10(1) + .10(4)+ .15(2)+ .20(4)
Excellent = 5 = 2.9

A new product idea may also be subjected to standard financial analysis by computing an
approximate return on investment. To do this, cash flows must be estimated for
investments, revenues, and costs for future product sales.

3. Preliminary product design- This process is concerned with developing the best
design for the new product idea. Preliminary product design must specify the
product completely. At the end of the product design phase, the firm has a set of
product specifications and engineering drawings (or computer images) specified
in sufficient detail that production prototypes can be built and tested.

If the preliminary design is approved, a prototype or prototypes may be built for further testing
and analysis. In the preliminary design, trade offs between cost, quality, and product
performances are considered. The result should be a product design, which is competitive in the
market place and produce able by operations.
4. Prototype construction– Several prototypes which closely resemble the final
product may be made.
5. Prototype testing- A model is tested for its physical properties or use under
actual operating conditions. Such testing is important in uncovering any problems

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and correcting them prior to full-scale production. Road-testing an automobile or

using a consumer panel to test a new pizza are some examples.
6. Final product design – As a result of prototype testing certain changes may be
incorporated into the final design. Drawings and specifications for the product are
developed. If the changes are made, the product may be tested further to ensure
final product performance. An information package should be developed to
ensure that the product is produce able. A great many ideas originate at the
beginning but only a few are successfully introduced to the market as products.

Approaches to product design and development

There are specific types of product design techniques to speed up the design process and create
product service bundles (i.e., new product development). This includes:

3.4. 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. It can result is great cost savings or a better product for the customer, or both. Value is
defined as the ratio of usefulness to cost. Cost is an absolute term and measures the amount of
resources used to produce the product. Usefulness, on the other hand, is a relative term
describing the functionality that the customer ascribes to the product. Usefulness can be
described by such terms as product features, performance, or reliability of the product.

Value engineering or value analysis is an attempt to see if any materials or components can be
substituted or redesigned in such a way as to continue to perform the desired function, but at a
lower cost. 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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Value analysis /engineering-is an organized way for improving the usefulness of a product
relative to its cost. Value analysis is like a zero base budgeting in that each product function is
carefully examined for possible elimination.

Product Design
This section provides an overview of various approaches to product design, including product
life cycles, manufacturing design, remanufacturing, robust design, concurrent engineering,
computer-aided design, and modular design.

Product Life Cycle

Many new products go through a product life cycle in terms of demand. In the last stage of a life
cycle, some firms adopt a defensive research posture whereby they attempt to prolong the useful
life of a product or service by improving its reliability, reducing costs of producing it (and,
hence, the price), redesigning it, or changing the packaging.

Manufacturing Design
The term design for manufacturing (DFM) is also used to indicate the designing of products that
are compatible with an organization’s capabilities. A related concept in manufacturing is design
for assembly (DFA). A good design must take into account not only how a product will be
fabricated, but also how it will be assembled. Design for assembly focuses on reducing the
number of parts in an assembly, as well as the assembly methods and sequence that will be
employed.

Environmental regulations and recycling have given rise to another concern for designers, design
for recycling (DFR). Here the focus is on designing products to allow for disassembly of used
products for the purpose of recovering components and materials for reuse.

Remanufacturing
Remananufacturing refers to removing some of the components of old products
and reusing them in new products. This can be done by the original
manufacturer, or another company. Among the products that have

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remanufactured components are automobiles, printers, copiers, cameras, computers, and

telephones.

Robust Design
Some products will perform as designed only within a narrow range of conditions, while other
products will perform as designed over a much broader range of conditions. The latter have
robust design. The more robust a product, the less likely it will fail due to a change in the
environment in which it is used or in which it is performed.

Concurrent Engineering
To achieve a smoother transition from product design to production, and to decrease product
development time, many companies are using simultaneous development, or concurrent
engineering. In its narrowest sense, concurrent engineering means bringing design and
manufacturing engineering people together early in the design phase to simultaneously develop
the product and the processes for creating the product.

Computer-Aided Design (CAD)

Computers are increasingly used for product design. Computer-aided design (CAD) uses
computer graphics for product design. The designer can modify an existing design or create a
new one by means of a light pen, keyboard, a joystick, or a similar device. Once the design is
entered into the computer, the designer can maneuver it on the screen. The designer can obtain a
printed version of the completed design and file it electronically, making it accessible to people
in the firm who need this information (e.g., marketing). A major benefit of CAD is the increased
productivity of designers. No longer is it necessary to laboriously prepare mechanical drawings
of products or parts and revise them repeatedly to correct errors or incorporate revisions.

Product Variety
The issue of product variety must be considered from both marketing and an operations point of
view. From a marketing point of view, the advantage of a large number of products is the ability
to offer customer more choices. Sales may drop if the firm does not offer as many products as its

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competitors. From an operations point of view, high product variety is seen as leading to higher
cost, greater complexity, and more difficulty in specializing equipment and people.

The ideal operations situation is often seen as a few high volume products with stabilized
production configurations. Operations managers often prefer less product variety. There is an
optimum amount of product variety which results in maximum profits. Both too little and too
much product variety will lead to low profits.

Modular Design
Modular design makes it possible to have relatively high product variety and low component
variety at the same time. The basic idea is to develop a series of basic product components, or
modules that can be assembled into a large number of different products. To the customer, it
appears there are a great number of different products. To operations, there are only a limited
number of basic components and processes.

Controlling the number of different components that go into products is of great importance to
operations, since this makes it possible to produce more efficiently for large volumes while also
allowing standardization of processes and equipment. A large number of product variations
greatly increase the complexity and cost of operations.

Modular design offers a fundamental way to change product design thinking. Instead of
designing each product separately, the company designs products around standard component
modules and standard processes. Common modules should be developed that can serve more
than one product line, and unnecessary product frills should be eliminated. This approach will
still allow for a great deal of product varieties but the number of unnecessary product variations
will be reduced.

The usual way to develop products is to design each one separately without much attention to the
other products in the line. Each product is optimized, but the product line as a whole is not.
Modular design requires a broader view of product lines, and it may call for changes in
individual products to optimize the product line in its entirety.

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Service Operations Design

Service is the dominant economic force in the industrialized world today, and growth projections
indicate this trend will continue. Yet, service production receives far too little emphasis in
operations Management courses and business course in general.

Defining Service

Service is an intangible product, which is produced and consumed simultaneously. Therefore, a

service never exists, only the results of the service can be observed. If you get a haircut, the
effect is obvious, but the service itself was produced and consumed at the same time.

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. The simultaneity of
production and consumption indicate that service cannot be stored or transported; it must be
produced at the point of consumption. For operations this means that capacity must be located at
or near the customer’s location and that the service cannot be produced now and placed into
inventory for later consumption.
Service consists of acts and interactions that are social contacts. The interaction between the
producer and customer at the time of production is a critical attribute of service. There are
professional services such as medicine, law, education and architecture; and capital-intensive
services; such as airlines, electric utilities; mass services such as retailing, wholesale, and fast
food.
Differences between manufacturing and service
Manufacturing Service
1. The product is tangible 1. The service is intangible
2. The product can be resold 2. No resale is possible
3. The product can be demonstrated before 3. The product does not exist before purchase
purchase 4. The product cannot be stored
4. The product can be stored in inventory
5. Production precedes consumption 5. Production and consumption are
simultaneous
6. Production and consumption can be 6. Production and consumption must occur at
spatially separated the same location

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7. The product can be transported 7. The product cannot be transported (though

producers can be)
8. Indirect contact is possible between the 8. In most cases direct contact is needed
company and the customer
9. The product can be exported 9. The service cannot normally be exported,
but the service delivery system can be
10. Sales and production cannot be separated
10. Business is organized by functions, with functionally
sales and production separated

Framework for 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.

The service
strategy

The customer

The systems
The people

Figure 3.2. The service triangle

 The customer is (or should be) the focal point of all decisions and actions of the service
organization.
 People are the employees of the service firm who serve the customer.

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 The strategy is the vision or philosophy, which is used to guide all aspects of service
delivery.
 The service system includes procedures, equipment, and facilities.
The line from the customer to the strategy indicates that the strategy should put the customer
first, by meeting the true needs of the customer. Management should ask what goes in the
customer’s mind.
How does the customer think? What does the customer really want? Also, the company must
communicate the service strategy to the customer. What does the company provide that is
unique? Why should the customer buy from this company?

The line from customer to system indicates that the system (procedures and equipment) should
be designed with the customer in mind.
 crowded seats in airplanes
 forms that cannot be understood, and
 uncomfortable restaurants do not lead to good customer service

The customer-to-people line indicates that everyone should be customer driven, not only the
operations people who deliver the service, but all people in the organization. People are the most
important element in delivering superior service.

The people-to-system line indicates that people depend on the system to deliver good service.
Service systems should be designed to be simple, fast and efficient to operate.

The strategy-to-people line indicates that everyone in the organization should be aware of the
strategy. The front-line people who deliver the service are often divorced from the strategy.
Management views them as “cog in the wheel” and not in need of knowing service strategy. As a
result poor service is delivered.

Service–product bundle

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Most services come bundled with facilitating goods in a service-goods package. For example
when customers go to a restaurant, they receive not only the food but the service, which they
hope is fast, courteous, and pleasant.
 The service product bundle consists of three elements:
1. The physical goods (facilitating goods)
2. The sensual service provided (explicit service)
3. The psychological service (implicit service)

Service recovery
Service recovery is an important part of the product design. When there is a service failure,
service recovery is the ability to quickly compensate for the failure and restore, if possible, the
service required by the customer. For example, when there is a power failure, service recovery is
the time it takes for the electric company to restore power. The service recovery must be swift
and appropriate in the customer’s eyes.

Service guarantees
Many companies are now beginning to offer service guarantees as a way to define service and
ensure its satisfactory delivery to the customer. A service guarantee is like its counterpart the
product guarantee, except for one thing: the customer cannot return the service if he or she does
not like it. For example, if you didn’t like your haircut, you have to live with it that way, until it
grows out.

The advantage of a service guarantee is it builds customer loyalty and clarifies exactly what the
service process must provide.

Cycle of service
The service provided must be considered not only in light of a single service encounter but in
terms of the entire cycle of service delivery. Every service is delivered in a cycle of service
beginning with the point of initial customer contact and proceeding through steps or stages until
the entire service is completed.

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Each contact with a service system can be defined as a moment of truth. A moment of truth is
any time that the customer comes in contact with the service system during the cycle of service
delivery. It is the cumulative effect of all of the moments of truth that defines the service
provided. A bad moment of truth can cancel out many positive moments. Even where service
recovery is provided, it is better to prevent service failure at each moment of truth than to recover
from service failures. As a result, the entire cycle of service should be managed.

Perceived service = f (all previous moments of truth). Managing the moments of truth to achieve
a positive experience is the essence of service process design.

Customer contact
With a low customer contact process, it is possible to buffer the customer from the actual process
of production. Separating the customer from the service production system allows for more
efficiency and greater standardization of processes. Examples of low-contact systems are catalog
order processing and automatic bank teller transactions.

If customer contact is high, the customer can disrupt the production process by demanding
certain types of services or special treatment. Therefore, high customer contract can lead to
inefficient production process. A customer could require special consideration or more
processing time and may impose unique requirements on the service provider like in dentistry
and haircut.

High-contact systems have the customer in the system during the production of the service. In
these systems, the customer can introduce uncertainty into the process with a resulting loss of
efficiency. High-contact systems can lead to a loss of efficiency as follows:
Potential inefficiency =f (degree of customer contact)
The measure of degree of contact is the amount of time that the customer is in the system while
the service is being produced. A highly efficient system is one with no customer contact, where
the order can be processed away from the customer.

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Characteristics of high-and low-contact services:

1. Low-contact services are used when face-to-face interaction is not required. High-contact
operations are used for changing or uncertain customer demand.
2. 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).
3. High-contract services generally require higher prices and more customization due to the
variable nature of the service required.

Design guidelines
A number of simple but highly effective rules are often used to guide the development of service
systems. The key rules are the following:
1. Have a single, unifying theme, such as convenience or speed. This will help personnel to
work together rather than at cross-purposes.
2. Make sure the system has the capability to handle any expected variability in service
requirements.
3. Include design features and checks to ensure that service will be reliable and will provide
consistently high quality.
4. Design the system to be user-friendly. This is especially true for self-service systems.

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