Designing Goods and Services Chapter 3, Part 1

Operations and Operations Strategy Designing an Operations System Managing an Operations System Done We are here Overview of Management 326

Designing an Operations System Project management: A design tool Product design Process design Quality system Lean systems Capacity planning Facility location Facility layout Work design Done This week: Product and process design

Lecture Outline Product design concepts  Strategy and product design  Operations issues in product design Designing goods  Form design and functional design  Examples

Lecture Outline (2) Techniques for designing goods  Design for the environment  Benchmarking and reverse engineering  Technical specifications for goods  Design for manufacture  Concurrent engineering  Lands' End adapted concurrent engineering to services

Lecture Outline (3) Designing services  Service package  Classifying services  Approaches to service design

Strategy and Product Design The core product may be a good or a service Product design should support the business strategy Product design should meet the needs of a target market. Product design should give the company a competitive advantage.

Operations Issues in Product Design Product design and technology Process technology Would we need a new or modified facility? Can the firm make this product with consistent quality at a price that customers are willing to pay? Does our labor force have the needed skills?

Designing Goods Form design: Sensory aspects of the product (aesthetics)  Size, color, shape, sound  "Look and feel" – "smoothness", quality impression Functional design: how the product performs

Form Design: How the Product Looks

Functional Design of Goods Fitness for use: performs as intended Durability: how long the product lasts Reliability: consistent performance Maintainability: ease and cost of repairs

Steelcase Wide Chair Adapt old technology to a new market

Berkline Chairlift Recliners Regular and Large Versions Adapt a product for a new market Adapt technology from another industry

Rectangular Watermelons

Toyota Prius, Version 2 New Product Technology New Process Technology

Learning from Other Companies Benchmarking: comparing your operations with those of a "best in class" firm  Product benchmark  Process benchmark  Cost benchmark In services, the product and the process often overlap.  You may benchmark the product and the process at the same time.

Learning from Other Companies (2) Reverse engineering: taking your competitor's products apart and figuring out how it is made  Physical products  Software Market research on competitor's products

Design for the Environment: Materials Make the product recyclable. Make the product from recycled materials. Use renewable materials. Make products from safer materials  Example: lead-free paint Use less material in the product and packaging.

Design for the Environment Recyclable Parts in a BMW

Design for the Environment: Energy Make products that require less energy. Make products that use alternative energy sources – wind, solar, etc.  Wind power  Solar power Make products that use renewable energy sources  Example: Ethanol from corn

Technical Specifications for Goods Dimensions  Examples: length, diameter  Target value: ideal or desired value for a dimension  Tolerance: how much can the actual dimension vary from the target value without affecting performance or aesthetics?

Design for Manufacture Value engineering: Eliminate product features that add cost but do not add value to the customer. Reduce the number of parts.  Reduces the cost of ordering, purchasing, and storing parts.  Reduces the space required to hold inventory  Reduces the number of tools and operations required  Reduces the time required to make the product

Design for Manufacture (2) Example of reducing the number of parts, operations, and tools.

Design for Manufacture (3) Modular design: Design products to be assembled from standard components.  Example: Dell buys standard video cards, processors, power supplies, hard drives, etc., and assembles computers Use standard parts to reduce design costs and purchasing costs.  Examples: Manufacturers use standard screws.

Concurrent Engineering Design the product and the process at the same time. Use a design team that includes marketing, operations, engineering, operations, and suppliers.  Stay in touch with customers during the design process. Requires good project management and coordination among all groups involved.

Advantages of Concurrent Engineering: Marketing Increases the chances of a successful product. Shortens time to market. Supplier expertise can help design a product that meets customer needs

Advantages of Concurrent Engineering: Finance and Operations Reduces design costs. Reduces the need to make expensive changes in the product and the process later. The product can be made consistently, in a quality manner, at a price that customers will pay.

Product Design Teams at Lands' End Buyer Quality specialist Inventory manager Copywriter Catalog artist Administrative support

Designing Services – Service Package Physical elements: facility, equipment and furnishings, inventories Sensory and aesthetic aspects Psychological benefits Quality standards

Classifying Services (1) Pure services  High, face-to-face customer contact  Low standardization  Examples: medical care, law offices, accounting firms, universities, schools, health clubs  Employees must have technical job skills and customer relations skills  Facility must be adapted to customer needs.  Meet customer needs and be as cost-effective as possible.

Classifying Services (2) Quasi-manufacturing services:  Contact with customers is limited to telephone, mail, or Internet  Examples: Internet retailers, distribution centers  Employees who have phone contact with customers need both technical job skills and customer service skills  Other employees need technical job skills.  Manage for efficiency.  Design facility for efficiency.

Classifying Services (3) Mixed services:  "Front office": high customer contact. May have low standardization  Manage like a pure service.  "Back office": Little customer contact.  Manage for efficiency but meet customer service deadlines.  Examples: car repair shop, retail banks.

Approaches to Service Design Design for efficiency:  High standardization  Limited variety  Automation  High-volume services purchase at low cost. Customer involvement in producing the service  Self-service salad bar High customer attention: pure services, high-end hotels and retailers