Product Design and

Process Selection
Part 1
 Content
Part 1:
Define product design and explain its strategic impact on the organization.

The steps used to develop a product design.

Use break-even analysis as a tool in deciding between alternative products.

Identify different types of processes and explain their characteristics.

How to use a process flowchart.

Part 2:
How to use process performance metrics.

Current technological advancements and how they impact process and

product design.
Issues of designing service operations.
 Product & Service Design
 Most of us might think that the design of a product is not that
interesting. After all, it probably involves materials, measurements,
dimensions, and blueprints.

 When we think of design, we usually think of car design or computer

design, but product design is much more than that.
 Product design is the process of deciding on the unique
characteristics of a company’s product & service offerings

 Serves to define a company’s customer base, image, competition and

future growth
Humor in Product Design
As Marketing
interpreted it.
As the customer wanted it.

. .

As Engineering
As Operations made it.
designed it.

.
.
 Product & Service Design
 Product design is the process of defining all the features
and characteristics of just about anything you can think
of:

 Starbucks’ cafe latte

 Jimmy Dean’s sausage
 WV Golf or
 HP’s Desk Jet printer.
 Why Companies Design New Products
and Services?
 To be competitive

 To increase business growth and profits

 To avoid downsizing with development of new products

 To improve product quality

 To achieve cost reductions in labor or materials

 Product & Service Design
 Product design brings together
 marketing analysts,

 art directors,

 sales forecasters,

 engineers,

 finance experts, and other members of a company to

think and plan strategically.

 It is exciting and creative, and it can spell success or disaster

for a company.
 Product & Service Design
 Product design also includes the design of services,
 Ice cream store
 Beauty Salon,
 Day Care Center,
 Postal Services.
 Service design puts ………center of the design.
 Consumers respond to a product’s appearance, color, texture, and
performance.
 Effective product and service design can help the organization achieve
competitive advantage and as a result it increases sales and therefore in the
long run it helps to a company to achieve it’s mission.
 Product & Service Design
 Someone came up with the idea of what this product will look like, taste
like, or feel like so that it will appeal to you.
 This is the purpose of product design.

 Product design defines a product’s characteristics, such as its

appearance, the materials it is made of, its dimensions and tolerances,
and its performance standards.

 Process selection is the development of the process necessary to

produce the designed product.
 Product design and process selection decisions are typically
made together.
Design of products / services and design of processes
are interrelated and should be treated together

Designing the Designing the

product or service process

Processes should be
Products and services Product / service designed so they can
should be designed in design has an create all products
such a way that they impact on the and services which
can be created process design and the operation is likely
effectively vice versa to introduce
 Service design
 The process of establishing all the characteristics of the service,
including physical, sensual, and psychological benefits.
 For service industries, where the product is intangible, the design

elements are equally important, but they have an added

dimension.
Differences Between Product and Service Design
 Tangible – intangible
 Services created and delivered at the same time
 Services cannot be inventoried

 Services highly visible to customers

 Location important to service
 Characteristics of Well Designed
Service Systems

1. Consistent with the organization mission

2. User friendly
3. Robust
4. Easy to sustain
5. Cost effective
6. Value to customers
7. Effective linkages between back operations
8. Single unifying theme
9. Ensure reliability and high quality
Product design of cell phones
combines portability,
features, and aesthetics.
 Strategic Importance
 Products & service offerings must support the company’s
business strategy by satisfying the target customers’ needs &
preferences

 If not, the company will lose its customer base and its market
position will erode

Product and service design – or redesign –

should be
closely tied to an organization’s strategy
 Steps in Product Design
1. Idea Development:
 A need is identified & a product idea to satisfy it is
put together
2. Product Screening:
 Initial ideas are evaluated for difficulty & likelihood of
success
3. Preliminary Design & Testing
 Market testing & prototype development
4. Final Design
 Product & service characteristics are set
Steps in Product Design
 1. Idea Development
 All product designs begin with an idea. The idea might come from a
product manager who spends time with customers and has a sense of
what customers want, from an engineer with a flare for inventions, or
from anyone else in the company.
 To remain competitive, companies must be innovative and bring out
new products regularly.
 In some industries, the cycle of new product development is
predictable.
 We see this in the auto industry, where new car models come out every
year, or the retail industry, where new fashion is designed for every
season.
 1. Idea Development
 Existing & target customers (the first source of ideas)
 Customer surveys & focus groups

 Suppliers
 Competitors

 Benchmarking
 Studying “best in class” companies from your industry or others
and comparing their practices & performance to your own
 We can benchmark against a company in a completely different
line of business and still learn from some aspect of that
company’s operation.
 1. Idea Development
 Reverse engineering also called back engineering
 Disassembling a competitor’s product & analyzing its design

characteristics & how it was made

 Suppliers, employees and technical advances

 Another way of using competitors’ ideas is to buy a competitor’s new

product and study its design features.

 Using a process called reverse engineering, a company’s engineers

carefully disassemble the product and analyze its parts and features.
 1. Idea Development
 Reverse engineering example:
 Ford Motor Company used this approach to design its Taurus
model. Ford engineers disassembled and studied many other car
models, such as BMW and Toyota, and adapted and combined their
best features.

 Product design ideas are also generated by a company’s R & D

(research and development) department, whose role is to
develop product and process innovation.
 2. Product Screening
 After a product idea has been developed, it is evaluated
to determine its likelihood of success.

 This is called product screening.

 The company’s product screening team evaluates the

product design idea according to the needs of the major
business functions.
 2.Product Screening
 Operations:
 Are production requirements consistent with existing
capacity?
 Are the necessary labor skills & raw materials available?
 Marketing:
 How large is the market niche?
 What is the long-term potential for the product?
 Finance:
 What is the expected return on investment?
 2.Product Screening
 Unfortunately, there is no magic formula for deciding whether or not
to pursue a particular product idea.
 Managerial skill and experience are key.
 Companies generate new product ideas all the time, whether for a
new brand of cereal or a new design for a car door.
 Approximately 80 % of ideas do not make it past the screening stage.
 Management analyzes operations, marketing, and financial factors
and then makes the final decision.

 Fortunately, we have decision-making tools to help us evaluate new

product ideas.
 A popular one is break-even analysis
 Break-Even Analysis
 Break-even analysis is a technique that can be useful when evaluating a
new product.
 It computes the quantity of goods a company needs to sell just to cover its
costs, or break even, called the “break-even” point.

 When evaluating an idea for a new product, it is helpful to compute its break-
even quantity.

 An assessment can then be made as to how difficult or easy it will be to cover

costs and make a profit. A product with a break-even quantity that is hard to
attain might not be a good product choice to pursue.

 Next we look at how to compute the break-even quantity.

 Break-Even Analysis
 The total cost of producing a product or service is the sum of its fixed
and variable costs.

 A company incurs fixed costs (F) regardless of how much it

produces. Fixed costs include overhead, taxes, and insurance.

 For example, a company must pay for overhead even if it produces

nothing (materials and labor).
 Break-Even Analysis
 Variable costs (VC), on the other hand, are costs that
vary directly with the amount of units produced and
include items such as direct materials and labor.

 Together, fixed and variable costs add up to total cost:

Total cost = Fixed costs (F) + Variable costs (VC)Q

F = fixed cost
VC = variable cost per unit
Q = number of units sold
Break-Even Analysis
Break-Even Analysis
 Total cost = fixed costs + variable costs (quantity):

TC  F  VC  Q
 Revenue = selling price (quantity)

R   SP  Q
 Break-even point is where total costs = revenue:

TC  R or F  VC  Q   SP  Q
F
or Q
SP  VC
 Break-Even Analysis Example
 A firm estimates that the fixed cost of producing a line of footwear is
$52,000 with a $9 variable cost for each pair produced. They want to
know:

 If each pair sells for $25, how many pairs must they sell to break-
even?

 If they sell 4000 pairs at $25 each, how much money will they make
(profit)?
 Example Solved
 Break-even point:

F $52,000
Q   3250 pairs
SP  VC $25  $9
 Profit = total revenue – total costs

P   SP  Q   F  VC  Q 
  $25 4000   $52,000   $9 4000
 $12,000
 Example
Question: Joe Jenkins, owner of Jenkins Manufacturing, is considering
whether to produce a new product. Joe estimates the fixed costs per year
to be $40,000 and variable costs for each unit produced to be $50.

If Joe sells the product at a price of $70, how many units of product does
he have to sell in order to break even? Use both the algebraic and
graphical approaches.

If Joe sells 3000 units at the product price of $70, what will be his
contribution to profit?
 3. Preliminary Design & Testing
 Once a product idea has passed the screening stage, it is time to
begin preliminary design and testing.

 At this stage design engineers translate general performance

specifications into technical specifications.

 Prototypes are built and tested.

 Changes are made based on test results, and the process of revising,
rebuilding a prototype
 3. Preliminary Design & Testing
 Testing continues for service companies this may entail testing the
offering on a small scale and working with customers to refine the service
offering.

 Fast-food restaurants are known for this type of testing, where a new
menu item may be tested in only one particular geographic area.

 Product refinement can be time-consuming, and the company may want

to hurry through this phase to rush the product to market.

 However, rushing creates the risk that all the “bugs” have not been
worked out, which can prove very costly.
 4. Final Design
 Following extensive design testing, the product moves to the final
design stage. This is where final product specifications are drawn
up

 The final specifications are then translated into specific processing

instructions to manufacture the product, which include
 selecting equipment,

 outlining jobs that need to be performed,

 identifying specific materials needed

 suppliers that will be used,

 and all the other aspects of organizing the process of product

production.
Factors Impacting Product Design
 Design for Manufacture

 Product Life Cycle

 Concurrent Engineering
 Design for Manufacture (DMF)
 Design for manufacture (DFM) is a series of guidelines that
we should follow to produce a product easily and profitably.

1. When we think of product design, we generally first think of how

to please the customer.

2. However, we also need to consider how easy or difficult it is to

manufacture the product.

 Otherwise, we might have a great idea that is difficult or too

costly to manufacture.
 DFM guidelines
DFM guidelines focus on two issues:
1. Design simplification means reducing the number of parts and features
of the product whenever possible.

A simpler product is easier to make, costs less, and gives higher

quality.

2. Design standardization refers to the use of common and

interchangeable parts.

By using interchangeable parts, we can make a greater variety of products

with less inventory and significantly lower cost and provide greater flexibility.
 Design for Manufacture (DMF)

 Minimize parts
 Design parts for multiply
applications
 Use modular design
 Avoid tools
 Simplify operations
 DFM Benefits
 Lower costs:
 Lower inventories (fewer, standardized components)

 Less labor required (simpler flows, easier tasks)

 Higher quality:
 Simple, easy-to-make products means fewer

opportunities to make mistakes

 Product life cycle
 Another factor in product design is the stage of the life
cycle of the product.

 Product life cycle: A series of stages that products pass

through in their lifetime, characterized by changing product
demands over time.
 Product life cycle
 Most products go through a series of stages of changing
product demand called the product life cycle.

 There are typically 4 stages of the product life cycle:

 introduction,
 growth,

 maturity, and

 decline.
 Product life cycle
 Products in the introductory stage are not well defined, and neither is
their market. Often all the “bugs” have not been worked out, and
customers are uncertain about the product.

 In the growth stage, the product takes hold and both product and market
continue to be refined.

 The third stage is that of maturity, where demand levels off and there are
usually no design changes: the product is predictable at this stage and so
is its market. Many products, such as toothpaste, can stay in this stage for
many years.
 Finally, there is a decline in demand, because of new technology, better
product design, or market saturation.
The first two stages of the life cycle can collectively be called the early
stages because the product is still being improved and refined and the
market is still in the process of being developed.

The last two stages of the life cycle can be referred to as the later
stages because here both the product and market are well defined.
 Slow down in
Rapid
sales and Sales fall off and
Sales starts to grow market
profits level off profits drop
and profits are acceptance
nonexistent or decline
and profits
Sales are zero are starting
and investment to increase
costs are mount
 Concurrent Engineering
 A design approach that uses multifunctional teams to simultaneously
design the product & process

 Replaces a traditional ‘over-the-wall’ approach where one group does

their part & then hands off the design to the next group
 Concurrent Engineering
 There are many problems with the old approach. First, it is very
inefficient and costly.

 For example, there may be certain aspects of the product that are not
critical for product success but are costly or difficult to manufacture,
such as a dye color that is difficult to achieve.

 Since manufacturing does not understand which features are not

critical, it may develop an unnecessarily costly production process
with costs passed down to the customers.
 Concurrent engineering allows everyone to work together so these
problems do not occur.
 Concurrent Engineering
 A second problem is that the “over-the-wall” approach takes a longer
amount of time than when product and process design are performed
concurrently.

 when product and process design are done together, much of the work is
done in parallel rather than in sequence.

 In today’s markets, new product introductions are expected to occur faster

than ever. Companies do not have the luxury of enough time to follow a
sequential approach and then work the “bugs” out.

 They may eventually get a great product, but by then the market may not
be there!
 Concurrent Engineering
 The third problem is that the old approach does not create a team
atmosphere, which is important in today’s work environment.

 Rather, it creates an atmosphere where each function views its role

separately in a type of “us versus them” mentality.

 With the old approach, when the designers were finished with the designs,
they considered their job done.

 If there were problems, each group blamed the other.

 With concurrent engineering, the team is responsible for designing and

getting the product to market. Team members continue working together
to resolve problems with the product and improve the process
Sequential Design
 Concurrent Engineering Benefits
 Representatives from the different groups can better consider trade-offs
in cost & design choices as each decision is being made

 Development time is reduced due to less rework (traditionally, groups

would argue with earlier decisions & try to get them changed)

 Emphasis is on problem-solving (not placing blame on the ‘other group’

for mistakes)
 Types of Processes
1. Intermittent operations:
 Capable of producing a large variety of product designs

in relatively low volumes

2. Repetitive operations:
 Capable of producing one (or a few) standardized

designs in very high volumes

 Intermittent operations
 Processes used to produce a variety of products with different
processing requirements in lower volumes.

Designing a
custom-made cake is an
example of an intermittent
operation.
 Repetitive Operations
 Repetitive operations are used to produce one or a few standardized
products in high volume.
 Examples are a typical assembly line, cafeteria, or automatic car
wash.
 Differences between Intermittent and
Repetitive Operations

Decision Intermittent Continuous

Product Variety Large Small
Degree of Standardization Low High
Path through Facility Varied pattern Line Flow
Critical Resource Labor Equipment
Importance of Work Skills High Low
Type of Equipment General Purpose Specialized
Degree of Automation Low High
Throughput Time Longer Shorter
Work-in-Process Inventory More Less
 Continuum of Process Types
 We can further divide each category according to product volume
and degree of product standardization, as follows.

 Intermittent operations can be divided into project processes and

batch processes.

 Repetitive operations can be divided into line processes and

continuous processes.
Continuum of Process Types

1. Intermittent operations 2.Repetitive operations

Project processes Line processes

Batch processes Continuous processes

 Continuum of Process Types
Project process: A type of process used to make a one-at-a-time product
exactly to customer specifications.

These processes are used when there is high customization and low
product volume, because each product is different.

 construction, shipbuilding, medical procedures, creation of artwork,

custom tailoring,

With project processes the customer is usually involved in

deciding on the design of the product.
 Continuum of Process Types
Batch process: A type of process used to produce a small quantity of
products in groups or batches based on customer orders or
specifications.

They are also known as job shops. The volumes of each product
produced are still small, and there can still be a high degree of
customization.

 Examples can be seen in bakeries, education, and printing shops.

The classes you are taking at the university use a batch process.
 Continuum of Process Types
Line process: A type of process used to produce
a large volume of a standardized product.
They are also known as flow shops, flow

lines, or assembly lines.

With line processes the product that is produced

is made in high volume with little or no
customization.

Think of a typical assembly line that produces

everything from cars, computers, television sets,
shoes, candy bars, even food items.
 Continuum of Process Types
Continuous process: A type of process that operates
continually to produce a high volume of a fully standardized
product.
Examples include oil refineries, water treatment plants, and certain paint
facilities.

The products produced by continuous processes are usually in continual

rather than discrete units, such as liquid or gas.

They usually have a single input and a limited number of outputs. Also,
these facilities are usually highly capital intensive and automated.
Continuum of Process Types
 Designing Processes
 Process flow analysis is a technique used for evaluating a process in
terms of the sequence of steps from inputs to outputs with the goal of
improving its design.

 One of the most important tools in process flow analysis is a process

flowchart.

 A process flowchart is used for viewing the sequence of steps involved

in producing the product and the flow of the product through the process.

 It is useful for seeing the totality of the operation and for identifying
potential problem areas.
There is no exact format for
designing a flowchart. It can
be very simple or
highly detailed.

arrows :flows
triangles :decision points
inverted triangles:storage of
goods
rectangles: tasks

Buffers: multiple stages have

storage areas or “buffers”
between them for placement of
either partially completed (work-
in-process) or fully completed
(finished goods) inventory

This enables the two stages to

operate independently
of each other.
 Designing Processes
 Make-to-stock strategy
Produces standard products and services for immediate sale
or delivery.
 Assemble-to-order strategy

Produces standard components that can be combined to

customer specifications.
 Make-to-order strategy

Produces products to customer specifications after an order

has been received.
Product Strategies and Process Choice