Chapter Three

Design of the operations system

By:
Dinkisa K. (PhD)
 Content
1. Product design
2. Product design and product life cycle
3. Quality function deployment
4. Phases of product design and development
5. Service design
6. Process selection
 Goods and Services Selection
► Organizations exist to provide goods or
services to society
► Great products are the key to success
► 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
 Goods and Services Selection
► Goods or services are the basis for an
organization's existence
► Limited and predicable life cycles requires
constantly looking for, designing, and
developing new products
► New products generate substantial
revenue
 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
 Design starts with conceptualization which has to
have a basis.

 The basis of product design effort comes from:

 Providing value to the customer,
 The return on investment to the company,
 The competitiveness of the company
 Purpose of a Product Design Cont’d

 A product’s design has tremendous impact on:

 what materials and components would be used,
 which suppliers will be included,
 what machines or what type of processes will be used
to manufacture it,
 where it will be stored, and
 how it will be transported.
 Aesthetic considerations come normally at an advanced
stage, but may sometimes be a dominant factor in
design, especially with consumer goods.

 Product development and design must be also carried

out with close liaison with the production departments,
in order to ensure that the right materials and
processes are utilized and that their implications are
considered at a fairly early stage.
 Product Analysis
 Many factors have to be analyzed in connection with
development and design of product. Some of these may be
grouped as follows:
1. Marketing aspect
2. Product characteristics
(i) Functional aspect,
(ii) Operational aspect,
(iii) Durability and dependability aspects, and
(iv) Aesthetic aspect.
3. Economic analysis
(i) The profit consideration,
(ii) The effect of standardization, simplification, and specialization, and
(iii) The break-even analysis.
4. Production aspect
 1. Market Analysis
 First, it is necessary to establish that the proposed
product will satisfy a demand in the market, that what it
is supposed to do and the services it can offer are both
desirable and acceptable.
 Market analysis consists of evaluating the product
concept with potential customers through interviews,
focus groups and other data collection methods.
 If no positive reaction is envisaged, there is no point in
proceeding with product design.
 2. The Product Characteristics

1. Functional Aspect:
 When the marketing possibilities have been explored, the
functional scope of the product has to be carefully
analyzed and properly defined.
 The definition of the objective itself rarely tells us very
much about the functional scope envisaged.
 For example: A washing machine has a clearly defined objective: to
wash clothing. This does not state, however, how the washing should
be carried out, whether the machine should be capable of heating
the water prior to washing, whether drying, or both, are to be done
by the machine, and if so by what method, and what should the
proportion be between automatic functioning and manual
supervision.
 Product Characteristics Cont’d

2. Operational aspect:
 After determining the functional aspect, the operational
aspect has then to be considered.
 Not only must the product function properly, it must be
easy to handle and simple to operate.
 Sometimes it has to be adaptable to various operational
conditions, and very often it is subjected to varying
degrees of skill of potential operators.
 Product Characteristics Cont’d

3. Durability and Dependability:

 Quality is not always a simple characteristic to define,
but durability and dependability are two factors that
often determine quality and have to be carefully
considered by the designer.
o Durability is defined mainly by the length of the active life, or
endurance, of the product under given working conditions.

o Dependability is the capability of the product to function

when called upon to do its job.
 Product Characteristics Cont’d

 Another aspect of durability is that of maintenance and

repair.
 The amount of repair and preventative maintenance
required for some products is closely related to quality
and design policy.

 This is of particular importance when the equipment is

supposed to operate continuously and when any repair
involves a loss of running time.
 Product Characteristics Cont’d

4. Aesthetics:
 The aesthetics are mainly concerned with molding the
final shape around the basic skeleton.

 In extreme cases, aesthetics are the governing factor in

design and completely dominate it. This is especially
true for many consumer goods, such as automobiles and
household equipment, or fashion goods.
 3. Economic Analysis
 An economic analysis is the key to management decision
in product design policy.
 The economic analysis can proceed by seeking an
answer to the following questions:
o What capital expenditure is required for manufacturing the
new product?
o What total production costs per piece are envisaged?
o What is the reasonable margin of profit that can be expected?
o Do the price (= total costs + profit) and the features of the
product render it competitive in the market?
o In what numbers is the product expected to be sold?
 4. Production Aspect
 “Design for production” has become a motto among designers. The following
three aspects of production engineering have to be weighed:
1. Selection of processes that will be the most suitable and economical for the
purpose. Such a selection will have to consider:
(i) The production quantities involved. Some processes are very expensive to
operate unless used for a suitable production run.
(ii) Utilization of existing equipment. Such considerations may override
acquisition of equipment for an ideally more suitable process.
(iii) Selection of fixtures and other production aids, the use of which
may affect the design of components.
(iv) Sequence of operations and methods for sub-assembling and assembling.
(v) Limitation of skill. The selection of a process must be compatible with
available skill and sometimes may be solely governed by it. Mechanized and
push button equipment is particularly suitable to non-skilled or semiskilled
operators, but it is usually expensive to install and must be justified by long
runs.
(vi) Application of new production processes. The designer has to consider not
only conventional techniques but also the latest developments and research into
newer production methods.
2. Utilization of materials and components with the
view of:
(i) Selection of materials having appropriate
specifications.
(ii) Selection of method or design to reduce waste and
scrap.
(iii) Using standard components and assemblies.
(iv) Having interchangeability of components and
assemblies with in the product.
3. Selection of appropriate workmanship and
tolerances that satisfy quality requirements, but
which are at the same time compatible with the
precision and quality that can be attained through the
available processes.
 Strategic Importance of Product Design:
 Products and 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 Life Cycles

► May be any length from a few

days to decades
► The operations function must be
able to introduce new products
successfully
 Product Life Cycle:
 Product life cycle
stages
o Introduction
o Growth
o Maturity
o Decline
 Facility & process
investment depends on
life cycle
 Product Life Cycle
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

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

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

Decline Phase
► Unless product makes a special
contribution to the organization,
must plan to terminate offering
 Steps in Product Design

 Idea Development:
o A need is identified & a product idea to satisfy it is put
together
 Product Screening:
o Initial ideas are evaluated for difficulty & likelihood of
success
 Preliminary Design & Testing
o Market testing & prototype development
 Final Design
o Product & service characteristics are set
 Idea Development

 Existing & target customers

o Customer surveys & focus groups
 Benchmarking
o Studying “best in class” companies from your industry or
others and comparing their practices & performance to your
own.
 Reverse engineering
o Buying a competitor’s product & analyzing its design
characteristics & how it was made.
 Suppliers, employees and technical advances
 Product Screening

 Operations:
o Are production requirements consistent with existing
capacity?
o Are the necessary labor skills & raw materials
available?
 Marketing:
o How large is the market niche?
o What is the long-term potential for the product?
 Finance:
o What is the expected return on investment?
 Product Screening

 Break-Even Analysis
 Preliminary Design & Testing

 General performance characteristics are

translated into technical specifications.

 Prototypes are built & tested (maybe offered for

sale on a small scale).

 Designs may be refined

 Final Design

Specifications are set & then used to:

o Develop processing and service delivery
instructions
o Guide equipment selection
o Outline jobs to be performed
o Negotiate contracts with suppliers and
distributors
 Designing Factors

Factors to be considered in process of product

design include:
1. Design for Manufacture
2. Product Life Cycle
3. Concurrent Engineering
 1. Design for Manufacture (DMF)

• Minimize parts
• Design parts for
multiply applications
• Use modular design
• Simplify operations
 1. Design for Manufacture (DMF)
 DFM Benefits:
 Lower costs:
oLower inventories (fewer, standardized
components)
oLess labor required (simple flows, easier
tasks)
Higher quality:
o Simple, easy-to-make products means
fewer opportunities to make mistakes
 Design for Manufacture (DFM)
 DFM is an effort to modify the existing product’s
(and/or its components’) design or have a new product
designed in such a way that the processes to manufacture
the same are easier, quicker and or less expensive.

 Reducing the manufacturing time is a major

consideration. This has to be achieved without
compromising on quality.
 Design for Manufacture (DFM)

 A good product design would facilitate the

manufacturing functions by making manufacturing
related functions to be done in:

o Less time,
o Less effort, and
o With less cost
 Design for Manufacture (DFM)

 The manufacturing related operation include:

o Material procurement,
o Material handling,
o Product conversion (e.g. machining processes),
o Changeovers and set-ups, and
o Quality control procedures.
 Design for Excellence

 The designer/team should look beyond its own

organization to other associated organizations in the
value chain.
 Design being a strategic activity, the design effort
should not only improve the present efficiencies but
should also keep the future in view while making the
design and other changes.
 Customer service should be the motto that should
drive the product design effort in any organization.
 Product design should be an all-round exercise,
contributing to the overall excellence of the
organization.
 Design for Excellence

 Design for Excellence (DFX) includes the initiatives such

as:
o Design for Assembly,
o Design for Cost,
o Design for Manufacturing,
o Design for Test,
o Design for Logistics,
o Design for Performance, etc.
 2. Product Life Cycle

The product life cycle helps to understand:

o The limited life of products,
o Product sales that pass through distinct stages and the
related challenges to the seller,
o At what stage profits can rise and fall in the product
life cycle,
o The products’ requirement for different marketing,
human resource, finance, production strategies in each
stage of their life cycle.
 3. 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.
 3. Concurrent Engineering
 Sequential Design:
 3. Concurrent Engineering
 Concurrent Design:
 3. Concurrent Engineering
 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).
 Quality Function Deployment
• A Quality Function Deployment diagram is a
matrix used to depict customer requirements.
 QFD
• A QFD is used to capture the voice of the
customer and translate it into technical
information that an organization can use in
order to create or improve a product.
– Developed in Japan in the 1970s
– Dr. Akao
 QFD
• It is often called a House of Quality because:
– Customer information is
shown horizontally
– Technical information is
shown vertically

Customer
Information

Technical
Information
 QFD
• QFD’s are planning and communication tools:
– Used for new product development
– Used to conform to customer demands
– Used any time you have customers and you need
to identify their expectations and turn that
information into workable technical specifications.
 QFD
• QFDs are planning and communication tools:
– Used to help set strategic targets
– Used to help determine priority issues
– Used for analysis
– Used to estimate what the competition is doing
– Used to integrate complex information
 QFD
• Determine the Voice of the Customer
– Capture the Voice of the Customer
– Organize the Voice of the Customer
 QFD
• Determine the Voice of the Customer: Four
types of customers
– Those customers we already have and can’t lose
– Those customers we could lose easily
– Those customers we could gain with minor
product changes
– Those customers we can’t get.
House of quality
 Service Design

 Approaches to Service Design:

1. Differing designs
o Substitute Technology for People
o Get the Customer Involved
o Provide High Level of Customer Attention
 Service Design

2. Service Package:
 The physical goods
 The sensual benefits
 The psychological benefits
 Service Design

3. Service Characteristics
o Pure services
o Quasi-Manufacturing
o Mixed services
 Product and Service Strategy

Type of operation is directly related to product

and service strategy.
Three basic strategies include:
1. Make-to-stock; in anticipation of demand
2. Assemble-to-order; built from standard
components on order
3. Make-to-order; produce to customer specification
at time of order.
Degrees of Vertical Integration & Make or
Buy
 Vertical integration refers to the degree a firm chooses to do
processes itself- raw material to sales.
o Backward Integration means moving closer to primary
operations
o Forward Integration means moving closer to customers
 A firm’s Make-or-Buy choices should be based on the
following considerations:
o Strategic impact
o Available capacity
o Expertise
o Quality considerations
o Speed
o Cost (fixed cost + variable cost)make = Cost (fixed cost +
Variable cost)buy
 Process Strategy

The objective is to create a process

to produce products that meets
customer requirements within cost
and other managerial constraints
 Process Strategies
► How to produce a product or provide a
service that
► Meets or exceeds customer requirements
► Meets cost and managerial goals
► Has long term effects on
► Efficiency and production flexibility
► Costs and quality
 Process, Volume, and Variety
Volume
Low Repetitive Process High
Volume Volume
High Variety
one or few units Process Focus Mass Customization
per run, projects, job shops (difficult to achieve, but huge
(allows (machine, print, hospitals, rewards)
customization) restaurants)

Changes in
Modules
modest runs, Repetitive
standardized (autos, motorcycles, home
modules appliances)

Changes in
Attributes (such as
grade, quality, size, Poor Strategy Product Focus
thickness, etc.) (Both fixed and (commercial baked goods,
long runs only variable costs steel, glass, beer)
are high)
 Process Strategies
Four basic strategies
1. Process focus
2. Repetitive focus
3. Product focus
4. Mass customization
Within these basic strategies there are
many ways they may be implemented
 Process Focus
► Facilities are organized around specific
activities or processes
► General purpose equipment and skilled
personnel
► High degree of product flexibility
► Typically high costs and low equipment
utilization
► Product flows may vary considerably making
planning and scheduling a challenge
Process Focus Many inputs
(surgeries, sick patients,
baby deliveries, emergencies)

(low-volume, high-variety,
Many departments and
intermittent processes) many routings
Eg. Hospital

Many different outputs

(uniquely treated patients)
 Repetitive Focus
► Facilities often organized as assembly
lines
► Characterized by modules with parts and
assemblies made previously
► Modules may be combined for many
output options
► Less flexibility than process-focused
facilities but more efficient
 Raw materials and
Repetitive module inputs
(multiple engine models,

Focus wheel modules)

Few
modules

(modular)

Modules combined for many

Output options
(many combinations of motorcycles)
 Product Focus
► Facilities are organized by product
► High volume but low variety of
products
► Long, continuous production runs
enable efficient processes
► Typically high fixed cost but low
variable cost
► Generally less skilled labor
Product Focus Few Inputs
(corn, potatoes, water,
seasoning)

(high-volume, low-variety,
continuous process)
Frito-Lay

Output variations in size, shape,

and packaging
(3-oz, 5-oz, 24-oz package
labeled for each material)
 Mass Customization
► The rapid, low-cost production of
goods and service to satisfy
increasingly unique customer desires
► Combines the
flexibility of a
process focus
with the efficiency
of a product focus
 Mass Many parts and
component inputs
(chips, hard drives, software,
Customization cases)

Many modules
(high-volume, high-variety)
Dell Computer

Many output versions

(custom PCs and notebooks)
 Mass Customization
► Imaginative product design
► Flexible process design
► Tightly controlled inventory
management
► Tight schedules
► Responsive supply-chain partners
Comparison of Processes
 Comparison of Processes
Comparison of the Characteristics of Four Types of Processes

MASS
PROCESS FOCUS PRODUCT FOCUS CUSTOMIZATION
(LOW-VOLUME, REPETITIVE FOCUS (HIGH-VOLUME, (HIGH-VOLUME, HIGH-
HIGH-VARIETY) (MODULAR) LOW-VARIETY) VARIETY)

3. Instructions for 3. Few changes in 3. Standardized 3. Custom orders

each job the instructions job requiring many
instructions job instructions

4. High inventory 4. Low inventory 4. Low inventory 4. Low inventory

relative to the
value of the
product
 Comparison of Processes
Comparison of the Characteristics of Four Types of Processes

MASS
PROCESS FOCUS PRODUCT FOCUS CUSTOMIZATION
(LOW-VOLUME, REPETITIVE FOCUS (HIGH-VOLUME, (HIGH-VOLUME, HIGH-
HIGH-VARIETY) (MODULAR) LOW-VARIETY) VARIETY)

5. Finished goods 5. Finished goods 5. Finished goods 5. Finished goods

are made to are made to are made to a are build-to-
order and not frequent forecast and order (BTO)
stored forecasts stored

6. Scheduling is 6. Scheduling is 6. Scheduling is 6. Sophisticated

complex routine routine scheduling
accommodates
custom orders
 Comparison of Processes
Comparison of the Characteristics of Four Types of Processes

MASS
PROCESS FOCUS PRODUCT FOCUS CUSTOMIZATION
(LOW-VOLUME, REPETITIVE FOCUS (HIGH-VOLUME, (HIGH-VOLUME, HIGH-
HIGH-VARIETY) (MODULAR) LOW-VARIETY) VARIETY)

7. Fixed costs 7. Fixed costs 7. Fixed costs 7. Fixed costs

are low and are dependent are high and tend to be high
variable costs on flexibility of variable costs and variable
high the facility low costs low
 Focused Processes
► Focus brings efficiency
► Focus on depth of product line
rather than breadth
► Focus can be
► Customers
► Products
► Service
► Technology
 Selection of Equipment

▶ Decisions can be complex as alternate

methods may be available
▶ Important factors may be
► Cost ► Quality
► Cash flow ► Capacity
► Market stability ► Flexibility
Equipment and Technology

► Possible competitive advantage

► Flexibility may be a competitive
advantage
► May be difficult and expensive and
may require starting over
► Important to get it right
Special Considerations for Service
Process Design
► Some interaction with customer is
necessary, but this often affects
performance adversely
► The better these interactions are
accommodated in the process design, the
more efficient and effective the process
► Find the right combination of cost and
customer interaction
 Service Process Matrix
Degree of Customization
Low High
Mass Service Professional Service
Private Traditional
banking orthodontics
Commercial
banking
High General-
Full-service purpose law firms
stockbroker
Degree of Labor

Digital
Boutiques orthodontics
Retailing

Service Factory Law clinics Service Shop

Limited-service Specialized
stockbroker hospitals
Warehouse and Fast-food Fine-dining
catalog stores restaurants Hospitals
Low restaurants
Airlines

No-frills
airlines
 Service Process Matrix

Mass Service and Professional Service

► Labor involvement is high
► Focus on human resources
► Selection and training highly
important Low
Degree of Customization
High

Mass Service Professional Service

► Personalized services
Private Traditional
banking orthodontics
Commercial
banking
High General-
Full-service purpose law
stockbroker firms
Digital

Degree of Labor
Boutiques orthodontics
Retailing
Law clinics
Service Factory Service Shop
Limited-service Specialized
stockbroker hospitals
Warehouse and Fast-food
catalog stores Fine-dining
Low restaurants restaurants Hospitals

Airlines

No-frills
airlines
 Service Process Matrix

Service Factory and Service Shop

► Automation of standardized services
► Restricted offerings
► Low labor intensity responds well to
process technology and Degree of Customization

scheduling
Low High

Mass Service Professional Service

Private Traditional
banking orthodontics
Commercial
banking
High General-

Tight control required to

Full-service purpose law

► stockbroker firms
Digital

Degree of Labor
Boutiques orthodontics
Retailing

maintain standards
Law clinics
Service Factory Service Shop
Limited-service Specialized
stockbroker hospitals
Warehouse and Fast-food
catalog stores Fine-dining
Low restaurants restaurants Hospitals

Airlines

No-frills
airlines
Improving Service Productivity
 Improving Service Productivity
Techniques for Improving Service Productivity
STRATEGY TECHNIQUE EXAMPLE
Modules Modular selection of service Investment and insurance
Modular production selection
Prepackaged food modules in
restaurants
Automation Separating services that Automatic teller machines
may lend themselves to
some type of automation
Scheduling Precise personnel Scheduling ticket counter
scheduling personnel at 15-minute
intervals at airlines
Training Clarifying the service Investment counselor,
options funeral directors
Explaining how to avoid After-sale maintenance
problems personnel
 Process Redesign
► The fundamental rethinking of business
processes to bring about dramatic
improvements in performance
► Relies on reevaluating the purpose of the
process and questioning both the purpose
and the underlying assumptions
► Requires reexamination of the basic process
and its objectives
► Focuses on activities that cross functional
lines
► Any process is a candidate for redesign
Any questions?
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