The design of products and services

Prepared by Muhammad Bilal Lecturer

IMStudies
Introduction
Products and services are often the first thing that
customers see of a company, so they should have an
impact. And although operations managers may not have
direct responsibility for product and service design, they
always have an indirect responsibility to provide the
information and advice upon which successful product or
service development depends.
But, increasingly, operations managers are expected to take
a more active part in product and service design. Unless a
product, however well designed, can be produced to a high
standard, and unless a service, however well conceived, can
be implemented, the design can never bring its full benefits
What is designed in a product or service?
All products and services can be considered as having
three aspects:
● a concept, which is the understanding of the nature,
use and value of the service or product;
● a package of ‘component’ products and services that
provide those benefits defined in the concept;
● the process defines the way in which the component
products and services will be created and delivered.
The stages of design – from concept to
specification
First, comes the concept generation stage that develops
the overall concept for the product or service.
The concepts are then screened to try to ensure that, in
broad terms, they will be a sensible addition to its
product/service portfolio and meet the concept as defined.
The agreed concept has then to be turned into a
preliminary design that then goes through a stage of
evaluation and improvement to see if the concept can be
served better, more cheaply or more easily.
An agreed design may then be subjected to prototyping
and final design
1. Concept generation:
Ideas from customers
Focus group
Listening to customers
Ideas from competitor activity
Ideas from staff
Ideas from research and development
2. Concept Screening:
Three broad categories of design criteria:
1. Feasibility
2. Acceptability
3. Vulnerability
3. Preliminary design
 Reducing design complexity:
A. Standardization : Operations sometimes attempt to
overcome the cost penalties of high variety by standardizing
their products, services or processes. This allows them to
restrict variety to that which has real value for the end-
customer. Often it is the operation’s outputs which are
standardized
B. Commonality : Using common elements within a product or
service can also simplify design complexity
C. Modularization : The use of modular design principles
involves designing standardized ‘sub-components’ of a
product or service which can be put together in different ways
4. Design evaluation and improvement
The purpose of this stage in the design activity is to
take the preliminary design and see if it can be
improved before the product or service is tested in the
market. There are a number of techniques that can be
employed at this stage to evaluate and improve the
preliminary design.
Quality function deployment (QFD):
 The key purpose of quality function deployment (QFD) is to try
to ensure that the eventual design of a product or service
actually meets the needs of its customers.
 Customers may not have been considered explicitly since the
concept generation stage, and therefore it is appropriate to
check that what is being proposed for the design of the product
or service will meet their needs.
 It is a technique that was developed in Japan at Mitsubishi’s
Kobe shipyard and used extensively by Toyota, the motor
vehicle manufacturer, and its suppliers. It is also known as the
‘house of quality’ (because of its shape) and the ‘voice of the
customer’ (because of its purpose).
 The technique tries to capture what the customer needs and
how it might be achieved
The QFD matrix is a formal articulation of how the
company sees the relationship between the
requirements of the customer (the whats) and the
design characteristics of the new product (the hows).
The matrix contains various sections, as explained
below:
. The whats, or ‘customer requirements’, is the list of
competitive factors which customers find significant.
Their relative importance is scored, in this case on a 10-
point scale, with accurate scoring the highest.
. The competitive scores indicate the relative performance
of the product, in this case on a 1 to 5 scale. Also indicated
are the performances of two competitor products.
. The hows, or ‘design characteristics’ of the product, are
the various ‘dimensions’ of the design which will
operationalize customer requirements within the product
or service.
 The central matrix (sometimes called the ‘relationship matrix’)
represents a view of the interrelationship between the whats and the
hows. This is often based on value judgements made by the design
team. The symbols indicate the strength of the relationship – for
example, the relationship between the ability to link remotely to the
system and the intranet compatibility of the product is strong. All the
relationships are studied, but in many cases, where the cell of the
matrix is blank, there is none.
 The bottom box of the matrix is a technical assessment of the
product. This contains the absolute importance of each design
characteristic. [For example, the design characteristic ‘interfaces’ has
a relative importance of (9 × 5) + (1 × 9) = 54.] This is also translated
into a ranked relative importance. In addition, the degree of technical
difficulty to achieve high levels of performance in each design
characteristic is indicated on a 1 to 5 scale.
 The triangular ‘roof ’ of the ‘house’ captures any information the
team has about the correlations (positive or negative) between the
various design characteristics.
Taguchi methods:
The main purpose of Taguchi methods, as advocated
by Genichi Taguchi, is to test the robustness of a
design. The basis of the idea is that the product or
service should still perform in extreme conditions. A
telephone, for example, should still work even when it
has been knocked onto the floor. Although one does
not expect customers to knock a telephone to the floor,
this does happen, and so the need to build strength into
the casing should be considered in its design.
5. Prototyping and final design:
At around this stage in the design activity it is
necessary to turn the improved design into a prototype
so that it can be tested.
It may be too risky to go into full production of the
telephone, or the holiday, before testing it out, so it is
usually more appropriate to create a prototype. Product
prototypes include everything from clay models to
computer simulations.
Service prototypes may also include computer
simulations but also the actual implementation of the
service on a pilot basis
Many retailing organizations pilot new products and
services in a small number of stores in order to test
customers’ reaction to them.
 Location
 Location plays an important role for every business whether new or
existing.. The airport is not only crowded but fails to separate the
different services it provides to different categories of individuals
present at the airport. The airport may need to explain its existing
facility. In Pakistan too, we have seen new airports set up at
 Karachi, Lahore and Islamabad which cater to greater traffic of the
aero planes and more passengers.
 Location decisions play an integral part of the strategic planning
process of every organization. It is important to learn about the
need and nature of location decisions.
 As a part of his routine responsibilities a senior Operations
Manager often carries out the evaluation of different available
locations.
Making Location Decisions
1. Decide on the criteria
2. Identify the important factors
3. Develop location alternatives
4. Evaluate the alternatives
 5. Make selection
Factors Affecting Location Decisions
Favorable Labor Climate
 Proximity to markets.
 Quality of Life
 Proximity of Suppliers and Resources.
 Proximity to the Parent Company’s facilities.
 Utilities, Taxes and Real estate costs.
 Other factors ( expansion, construction costs, and
location near the highway or main railways)
Managing Global Operations

When organizations become global they often end up

paying a heavy price in terms of managing complex
managerial issues and challenges.
Host country languages
Host Country Norms and Customs.
 Workforce management
 Unfamiliar laws and regulations.
 Unexpected Cost mix.
Globalization
 Globalization has affected Pakistan tremendously. A
number of Multi National Corporations are operating
and functioning in Pakistan.
 It is important to spend some time in understanding how
globalization makes it necessary and pertinent for a MNC to
disperse and spread its scope and function of Operation.
 It would be more correct if try to understand the philosophy
of MNC’s not operating in certain regions or certain
particular countries.
 The western worlds call these the disadvantages of
Globalization, if an organization decides to pack up its
business and leave a host company
Disadvantages to Globalization
The common disadvantages which lead to a MNC
forgoing globalization includes.
Handing over proprietary Technology to host
countries.
 Political risks.
 Poor Employee (Managers and worker) skills.
 Slow customer response time.
 Effective communication between interfaces difficult
FORECASTING
Forecasting demand is like forecasting
weather .Sometimes the forecast or prediction fails
completely and sometimes its near the predicted value
but still not the exact value. Often scientists call
forecasting as an educated guess, but even then
forecasting helps us to plan our trips and journeys and
most importantly we as farmers make use of forecasting
to plant, harvest and take precautionary measures.
Forecasting in business forms the basis for budgeting
and planning for capacity, sales, production, inventory,
manpower, purchasing and more.
Requirements of a Good Forecast
Timely. The forecast should be timely. Indicating that
forecasting horizon should provide enough time to
implement possible changes. Capacity cannot be
expanded instantly it requires some time to plan,
coordinate and increase the required resources.
Reliable. Forecasts should be reliable meaning that it
should work consistently. A forecast that is partially
correct will succeed at sometime and sometime fail
making the end users question the purpose and intent
of forecasting.
Accuracy. Forecasts should be accurate. In fact it should
carry the degree of accuracy, so the users are aware of
the limitations of the forecast. This will also help the end
users to plan for possible errors and provide a basis for
comparing the forecast with other alternative forecasts.
Meaningful Forecast should be expressed in
meaningful units. Financial Planners will use Rupees to
show how much capital would be required; Mechanical
Project Schedulers would require Forecasts to carry the
type of machines and crafts of technicians required
Fundamental Types of Forecasts

Qualitative Techniques which use subjective inputs and

no numerical data. It relies solely on soft information like
human factors, personal opinion, hunches. Thus Qualitative
Forecasts are often biased and tilted towards what the
management wants to predict.
Quantitative Forecast involves the extension of the
historical data. It sometimes makes use of forecasting
technique that uses explanatory variables to predict future
demands. Quantitative techniques are favored where
quality attributes can’t be quantified. In reality both need to
be used together to develop a judicious and realistic
forecast.
Finer Classification of Forecasts

 Judgmental - uses subjective inputs meaning that a judgmental

forecast rely on analysis of subjective inputs obtained from
various sources, such as consumer surveys, the sales staff,
managers and executives, and panels of experts. These insights
are not available publicly.

 Time series - uses historical data assuming the future will be

like the past and depend on developing relationships between
variables that can be expressed to predict future values. Some
time series forecast try to smoothen out random variations in
historical data. There are some time series forecast which
identify specific patterns and then may even extrapolate those
patterns into the future.
Judgmental Forecasts
. Executive opinions: normally consist of a group of senior level
managers from different interfaces, used for long range planning and new
product development. Advantage being the collective pool of information
from all divisions and departments, disadvantage being that one person
will dominate other interfaces, which can lead to erroneous forecasts.
 Sales force opinions: have the advantage of being in direct contact with
customers. The sales force can detect the customers’ change of plan,
However it suffers from the fact that it can not differentiate between what
the customer can do and will do. Current data of sales can often lead to
over pessimistic and overly optimistic forecasts, which then results in
incorrect sales projections.
 Consumer surveys: are based on sample taken from potential customers.
These type of surveys require skill to develop, administer and interpret
the results. Often fall victim of the consumers irrational behavior of
buying.
Outside opinion: which is a mix of consumer and potential
customers. This kind of opinion is now a days readily
available through internet, telephonic surveys and
newspapers. Its biggest limitation is a fixed format which
often fails to quantify the exact demand forecast.
Delphi method: Managers and staff complete a series of
questionnaires, each developed from the previous one, to
achieve a consensus forecast. Commonly used for
Technological forecasting, when to introduce a new
technology. It’s a long term one time activity and has the
same issues like expert opinion type of judgmental
forecast.
Time Series Analysis
 Time series forecasting models try to predict the future
based on past data. We as Managers can pick models based
on:
1. Time horizon to forecast
2. Data availability
3. Accuracy required
4. Size of forecasting budget
5. Availability of qualified personnel
Time Series Forecasts
 Trend - long-term upward or downward movement in data often relates to
population shifts, changing incomes, and cultural changes.
 Seasonality - short-term fairly regular variations in data related to factors
like weather, festive holidays and vacations. Mostly experienced by
supermarkets, restaurants, theatres, theme parks.
 Cycle – wavelike variations of more than one year’s duration these occurs
because of political, economic and even agricultural conditions
 Irregular variations - caused by unusual circumstances such as severe
weathers, earthquakes, worker strikes, or major change in product or
service. They do not capture or reflect the true behavior of a variable and
can distort the overall picture. These should be identified and removed
from the data.
 Random variations - caused by chance and are in reality are the residual
variations that remain after the other behaviors have been identified and
accounted for. Forecast Variations
Thanks…