1. Product and Service Design McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

2. You should be able to: 1. Explain the strategic importance of product and service design 2. Identify some key reasons for design or redesign 3. Recognize the key questions of product and service design 4. List some of the main sources of design ideas 5. Discuss the importance of legal, ethical, and sustainability considerations in product and service design 6. Explain the purpose and goal of life cycle assessment 7. Explain the phrase “the 3 Rs” 8. Briefly describe the phases in product design and development 9. Name several key issues in manufacturing design 10. Recognize several key issues in service design 11. Name the phases in service design 12. List the characteristics of well-designed service systems 13. Assess some of the challenges of service design Instructor Slides 4-2

3.  The essence of an organization is the goods and services it offers  Every aspect of the organization is structured around them  Product and service design – or redesign – should be closely tied to an organization’s strategy Instructor Slides 4-3

4. 1. Translate customer wants and needs into product and service requirements 2. Refine existing products and services 3. Develop new products and services 4. Formulate quality goals 5. Formulate cost targets 6. Construct and test prototypes 7. Document specifications 8. Translate product and service specifications into process specifications Involve Inter-functional Collaboration Instructor Slides 4-4

5.  The driving forces for product and service design or redesign are market opportunities or threats:  Economic  Social and Demographic  Political, Liability, or Legal  Competitive  Cost or Availability  Technological Instructor Slides 4-5

6. 1. Is there a demand for it? Market size Demand profile 2. Can we do it? Manufacturability - the capability of an organization to produce an item at an acceptable profit Serviceability - the capability of an organization to provide a service at an acceptable cost or profit 3. What level of quality is appropriate? Customer expectations Competitor quality Fit with current offering 4. Does it make sense from an economic standpoint? Liability issues, ethical considerations, sustainability issues, costs and profits Instructor Slides 4-6

7.  Ideas can come from anywhere in the supply chain:  Customers  Suppliers  Distributors  Employees  Maintenance and repair personnel Instructor Slides 4-7

8.  By studying how a competitor operates and its products and services, many useful ideas can be generated  Reverse engineering  Dismantling and inspecting a competitor’s product to discover product improvements Instructor Slides 4-8

9.  Research and Development (R&D)  Organized efforts to increase scientific knowledge or product innovation  Basic research  Has the objective of advancing the state of knowledge about a subject without any near-term expectation of commercial applications  Applied research  Has the objective of achieving commercial applications  Development  Converts the results of applied research into useful commercial applications. Instructor Slides 4-9

10.  Legal Considerations  Product liability  The responsibility a manufacturer has for any injuries or damages caused by as faulty product  Some of the concomitant costs  Litigation  Legal and insurance costs  Settlement costs  Costly product recalls  Reputation effects  Uniform Commercial Code  Under the UCC, products carry an implication of merchantability and fitness Instructor Slides 4-10

11.  Designers are often under pressure to  Speed up the design process  Cut costs  These pressures force trade-off decisions  What if a product has bugs?  Release the product and risk damage to your reputation  Work out the bugs and forego revenue Instructor Slides 4-11

12.  Sustainability  Using resources in ways that do not harm ecological systems that support human existence  Key aspects of designing for sustainability  Cradle-to-grave assessment (Life-Cycle assessment)  End-of-life programs  The 3-Rs  Reduction of costs and materials used  Re-using parts of returned products  Recycling Instructor Slides 4-12

13.  Cradle-to-Grave Assessment  aka Life-Cycle Assessment (LCA)  The assessment of the environmental impact of a product or service throughout its useful life  Focuses on such factors as  Global warming  Smog formation  Oxygen depletion  Solid waste generation  LCA procedures are part of the ISO 14000 environmental management proceduresISO 14000 Instructor Slides 4-13

14.  EOL programs deal with products (business and consumer) that have reached the end of their useful lives  The goal of such programs is to reduce the dumping or incineration of products (e.g., electronics) which may pose hazards to the environment Instructor Slides 4-14

15.  Value analysis  Examination of the function of parts and materials in an effort to reduce the cost and/or improve the performance of a product  Common questions used in value analysis  Is the item necessary; does it have value; could it be eliminated?  Are there alternative sources for the item?  Could another material, part, or service be used instead?  Can two or more parts be combined?  Can specifications be less stringent to save time or money?  Do suppliers/providers have suggestions for improvements?  Can packaging be improved or made less costly? Instructor Slides 4-15

16. Remanufacturing Refurbishing used products by replacing worn-out or defective components Can be performed by the original manufacturer or another company Reasons to remanufacture: Remanufactured products can be sold for about 50% of the cost of a new product The process requires mostly unskilled and semi-skilled workers In the global market, European lawmakers are increasingly requiring manufacturers to take back used products Design for disassembly (DFD) Designing a product to that used products can be easily taken apart Instructor Slides 4-16

17.  Recycling  Recovering materials for future use  Applies to manufactured parts  Also applies to materials used during production  Why recycle?  Cost savings  Environmental concerns  Environmental regulations  Companies doing business in the EU must show that a specified proportion of their products are recyclable  Design for recycling (DFR)  Product design that takes into account the ability to disassemble a used product to recover the recylcable parts Instructor Slides 4-17

18.  Strategies for product or service life stages  Standardization  Product or service reliability  Product or service robustness  Degree of newness Instructor Slides 4-18

19. Instructor Slides 4-19

20.  Standardization  Extent to which there is an absence of variety in a product, service, or process  Products are made in large quantities of identical items  Every customer or item processed receives essentially the same service Instructor Slides 4-20

21. Advantages 1. Fewer parts to deal with in inventory and in manufacturing 2. Reduced training costs and time 3. More routine purchasing, handling, and inspection procedures 4. Orders fillable from inventory 5. Opportunities for long production runs and automation 6. Need for fewer parts justifies expenditures on perfecting designs and improving quality control procedures Disadvantages 1. Designs may be frozen with too many imperfections remaining. 2. High cost of design changes increases resistance to improvements 3. Decreased variety results in less consumer appeal Instructor Slides 4-21

22.  Mass customization  A strategy of producing basically standardized goods or services, but incorporating some degree of customization in the final product or service Instructor Slides 4-22

23. Reliability The ability of a product, part, or system to perform its intended function under a prescribed set of conditions Failure Situation in which a product, part, or system does not perform as intended Reliabilities are always specified with respect to certain conditions Normal operating conditions  The set of conditions under which an item’s reliability is specified Instructor Slides 4-23

24. Robust design A design that results in products or services that can function over a broad range of conditions The more robust a product or service, the less likely it will fail due to a change in the environment in which it is used or in which it is performed Pertains to product as well as process design Consider the following automobiles:  Ferrari Enzo  Toyota Avalon  Which is design is more robust? Instructor Slides 4-24

25.  Quality Function Deployment (QFD)  An approach that integrates the “voice of the customer” into both product and service development  The purpose is to ensure that customer requirements are factored into every aspect of the process  Listening to and understanding the customer is the central feature of QFD Instructor Slides 4-25

26. Service Something that is done to, or for, a customer Service delivery system The facilities, processes, and skills needed to provide a service Product bundle The combination of goods and services provided to a customer Service package The physical resources needed to perform the service, accompanying goods, and the explicit (core features) and implicit (ancillary features) services included Instructor Slides 4-26

27.  Begins with a choice of service strategy, which determines the nature and focus of the service, and the target market  Key issues in service design  Degree of variation in service requirements  Degree of customer contact and involvement Instructor Slides 4-27

28. 1. Products are generally tangible, services intangible 2. Services are created and delivered at the same time 3. Services cannot be inventoried 4. Services are highly visible to consumers 5. Some services have low barriers to entry and exit 6. Location is often important to service design, with convenience as a major factor 7. Service systems range from those with little or no customer contact to those that have a very high degree of customer contact 8. Demand variability alternately creates waiting lines or idle service resources Instructor Slides 4-28

29.  Effective product and service design can help the organization achieve competitive advantage:  Packaging products and ancillary services to increase sales  Using multiple-use platforms  Implementing tactics that will achieve the benefits of high volume while satisfying customer needs for variety  Continually monitoring products and services for small improvement opportunities  Reducing the time it takes to get a new or redesigned product or service to the market Instructor Slides 4-29

30. Establishing Operations

31. 8.1 Discuss the use of a critical path chart 8.2 Describe how location can be used as a competitive advantage 8.3 Discuss the important issues in the financing considerations of new firms 8.4 Distinguish between the various methods which a new firm establishes legitimacy in the market 8-31

32. 8.5 Explain the importance of production management in start-up ventures 8.6 Explain how production charting is accomplished 8.7 Describe the importance of quality as a competitive tool 8.8 Discuss the type and condition of equipment needed at start-up 8-32

33. 8.9 Explain how timing is a competitive advantage 8.10 Recognize the issues related to time management in the starting of a new business 8-33

34. Critical Path Chart is a chart that demonstrates how the activities necessary to start the firm fit together and build on each other and allows you to understand which activities can occur concurrently and which must already be in place before the next activity can occur. 8-34

35.  One of the most important steps in the critical path chart will be the identification and purchase/lease of a location for the new business.  Strip Shopping Center-A small retail center located typically along a major road  Anchor Stores-major stores, such as department stores in a mall 8-35

36. The new organization has to be in a position to make initial payments for: 1. Security Deposits 2. Utility set-up fees 3. Purchase/lease of initial equipment and installation 4. All licenses and inspections 5. All initial supplies 8-36

37. 6. Hiring and training of initial staff 7. Initial advertising expenses 8. Bank set-up fees 8-37

38. Legitimacy-the acceptance by key stakeholders such as customers and suppliers that you are a genuine business that will still be in operation next year. 8-38

39. 1. A business checking account, start the numbering higher than 101 2. A business credit card 3. A bank line of credit 4. Professional business cards 5. Professional letterhead, billing slips, envelopes, etc. 6. Professional advertising material 8-39

40. 7. The prestige of the business address 8. Job titles—they cost little, use them liberally 9. Telephone answering support 10. A high-quality Web page 11. A Board of Advisors/Directors with excellent community visibility 12. Endorsements from well-recognized and respected individuals 8-40

41.  A production management system is a fancy name for defining the steps that are involved in moving from your product/service offering to the point where you actually receive money. 8-41

42. Production Chart- a chart that provides a detailed understanding of a firms production process. 8-42

43.  New business owners need to be clear about the expectations for quality in whatever business they pursue  According to Dr. W. Edwards Deming, quality needs to be constantly and consistently improved 8-43

44.  When considering initial equipment for the business consider:  New Equipment vs. Old Equipment  Purchasing vs. Leasing  Long-term Impacts 8-44

45.  The potential entrepreneur should select the time to enter the market based on when it provides the greatest competitive advantage based upon: 1. The general environment 2. Competitor moves 3. Cycles in purchasing/supply patterns 4. Lifestyle issues 8-45

46. 1. Write down what has to be accomplished 2. Prioritize critical tasks 3. Segment items—long term or short term 4. Allocate time that is strictly for dealing with operational issues 5. Write tasks down and mark them off when they are accomplished 8-46

47. Intellectual Property and Other Legal Issues for the Entrepreneur McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.

48.  Patents, trademarks, copyrights, or trade secrets held by the entrepreneur  Important assets to the entrepreneur  Need for lawyer  Solicit legal advice in accordance with the type of venture

49.  A lawyer can:  Work on a retainer basis  Be hired for a one-time fee  Be offered stock in exchange of services

50.  Contract between the government and an inventor  Grants protection from others making, using, or selling a similar idea  Issued by the Patent and Trademark Office (PTO)  Utility patent- For duration of 20 years

51.  Design patent  For duration of 14 years  Reflects appearance of an object  Plant patent

52.  International patents  Patent Cooperation Treaty (PCT) - Facilitates patent filings in multiple countries  Administered by the World Intellectual Property Organization (WIPO) in Geneva

53.  The provisional application  Provides evidence of being first to market  Establishes date of conception of invention  Determines rights to the patent based on the concept of first to file  The patent application  Complete history and description of the invention  Lists claims for the product’s usefulness

54.  Must constitute of:  Introduction  Background and advantages of the invention  Problems that it overcomes  How it differs from existing offerings  Description of invention  Claims  Criteria by which any infringements will be determined

55.  Distinguishing word, name, or symbol used to identify a product  Can last indefinitely  Can be filed solely on the basis intent to use  Registering the trademark  Completion of the written form  A drawing of the mark  Five specimens showing actual use of the mark  The fee

56.  Prevent others from printing, copying, or publishing any original works of authorship  Increasingly relevant due to growth in use of Internet  Registered with the Library of Congress  Applicable for duration of 70 years

57.  Protection against disclosing information that could be damaging to business  Applicable as long as the idea or process remains a secret  Not covered by federal law but recognized under a governing body of common laws

58.  To protect competitive information employers should:  Train employees to refer sensitive questions to one person  Provide escorts for all office visitors  Control information presented by employees in public

59.  Use simple security procedures  Have nondisclosure agreements  Debrief departing employees on any confidential information  Avoid faxing and e-mailing any sensitive information

60.  Contractual agreement giving rights to others to use intellectual property in return for a royalty or fee  Useful when firms:  Intend to grow their business in new markets but lack resources  Need permission to copy or incorporate the patent, trademark, or copyright with their ideas

61.  Types of licensing  Patent license agreements - Specify how the licensee would have access to the patent  Trademark license agreements - Involve a franchising agreement  Copyright license agreements - Involve rights to use or copy books, software, music, photographs, plays

62.  Factors to be considered  Customers’ recognition of licensed property  Whether licensed property complements existing products or services  Entrepreneur’s experience with the licensed property

63.  Long-term outlook for the licensed property  Kind of protection provided by the agreement  Commitments in terms of payment of royalties and sales quotas  Renewal options

64.  Responsibility of a company to meet legal specifications regarding a new product  The Consumer Product Safety Act - Created a commission responsible for:  Prescribing safety standards  Regulating labeling and advertising  Determining fines as well as product recalls

65.  Means of managing risk in the new business  Depending on the type, an insurance:  May be legally mandatory  May be necessary to protect the financial net worth of the venture

66.  Property  Casualty  Life  Workers’ compensation  Bonding

67.  Provides a mechanism for greater control over the financial activities of public companies  Under this law:  CEOs vouch for financial statements through internal control mechanisms and reports  Directors must meet certain criteria regarding internal auditing and control

68.  Attempts to influence or impede the internal auditing process are regarded criminal  Private companies are subject to control if they:  Consult with a public company  Influence that public company in any wrongdoing

69.  Legally binding agreement between two parties  Courts insist on a written contract for all transactions over $500