Product and Service Design Companies continuously bring new products and services to market based upon business strategies and the changing wants and needs of consumers. Product design is integral to the success of these new product introductions. A generic product or service design process might include three phases: Idea Development: Product or service ideas might be from customers, competitors, suppliers, or internal sources. Product Screening: Evaluate product and service ideas with consideration of Operations, Marketing, and Finance requirements. Preliminary Design and Testing: This design phase includes definition of the product or service and its breakdown into systems and subsystems with its assembly scheme. The prototypes are built, tested, and refined. Final Design Detail: The complete specification of the product or service, complete with parts and other input specifications. Due to the changing conditions during the design process, it is advisable to have an ongoing economic analysis of the product or service. This economic plan ties the timing of the various product design activities to the project budget and is essential to making good decisions as the design progresses. Many organizations use "benchmarking" in their design process. This is the process of comparing a company's products and services against those of other companies considered to the "standard" or the "best in class" within the industry. Another common tool in product design and screening is the mathematical "break even analysis. This is a technique used to compute the volume of a product or service that a company would have to sell in order to recover its costs. it is a very valuable method for the student to understand as it combines product quantity, selling price, revenue, variable costs, fixed costs, and total costs in a single model. Students should take a moment before continuing to review the break-even analysis method and become familiar with it. When thinking about product design, we might initially consider how to please the customer or the marketplace, but we also need to think about how easy or difficult it is to manufacture. The concept of design for manufacture or DFM is a series of guidelines to follow to produce a product easily and profitably. Key to this approach of product or service design are design simplification and design standardization. Another factor in the design process is the product life cycle. This is a series of stages that products and services pass through in their lifetime, characterized by changing product and service demands. Typical stages to consider are the introduction, the growth phase, the maturity phase, and the declining phase. The product design may change due to specific requirements of the current product or service stage. Moving ahead we will consider how the products or services, that we have just designed, will be produced. This introduces the concept of manufacturing and services transformational "processes" and their characteristics, similarities, and differences. The student will learn that the selection of the manufacturing process is tied to both the business strategy of the organization and the product design that we just completed. Production and Service Processes When considering various types of manufacturing and service producing processes it is common to use the following two categories: Intermittent processes: Commonly called batch processes, are flexible processes that are used to produce wide product types in low volumes. Repetitive processes: Commonly called continuous processes, are processes used to produce one of a few highly standardized products in large volumes. Each of these two different types of manufacturing processes has both advantages and disadvantages for production. Consider the differences that are illustrated by table 3-2 from our textbook. Decision points are very different depending upon the choice of intermittent or repetitive operations processes. Expanding the types of processes to be more detailed gives us the following process distinctions: Project Process - process used to make one- of-a-kind products exactly to customer specifications. In this arrangement, the product generally remains in a fixed location and materials are brought to it. Examples are a highway bridge or a large building. Batch Process - process used to make a small quantity of products in groups or batches based on customer orders or specifications. A typical batch process is a work center or job shop layout is where similar machines are arranged together and product flows from one work station to another. Examples are machine shops and fast food assembly. Line Process - process used to make a large volume of a standardized product. It would contain progressive steps that all products take as they work their way toward completion. Example is automobile assembly. Continuous Process - process that operates continuously to produce a high volume of a fully standardized product. Flow is continuous as compared to the steps in an assembly line. Example is an oil refinery. But how does an operations manager select one of these processes over the others to produce their product? Since most products could be produced using any or all of these processes, the decision of which one to choose is generally based on the desired competitive priority or focus dimension that we learned about in unit 1. For example, for high volume of a standardized product a continuous process or line process would be chosen. Likewise, for low volume and the flexibility to customize products, a batch or project process is the best. This is illustrated in the Product-Process matrix below (figure 3-6 in the textbook). Establishing this process strategy is critical for operations to maintain a strategic fit with the overall business strategy of the organization. Unit 2 Lecture.jpg Process design is a method used to evaluate the specific processes that raw materials, parts, subassemblies, and finished goods follow as they move through a facility. Methods used in process flow design include assembly drawings, assembly charts, route sheets, formulations, and flow process charts. These are used individually and in combination to define and specify how a product is produced and to analyze the overall process for its efficiency and effectiveness. Process flow analysis is a technique used for evaluating the process in terms of the sequence of steps from inputs to outputs with the goal of improving its design. The process flowchart is a tool that shows the sequence of steps in producing the product or service. Examples of process flowcharts are shown in figure 3-7, 3-8, and 3-9 in the textbook. Much of process analysis centers upon measuring processing performance. Understanding the standards of the performance calculations, or benchmarking the metrics, is required to eliminate confusion when considering concepts like utilization or efficiency in processes. Consider the following common performance measures (metrics) among others: Utilization or the ratio of time that the resource is used versus the time that it is available to be used. Productivity or the ratio of output to input. Efficiency, the actual output of a process as compared to some standard output level. Run time, the time required to produce a set quantity or batch of output. Set up time, the time required to prepare a machine for operation or to change the machine from producing one type of product to another type of product. Throughput rate, the production rate that the process is expected to produce over a period of time. Decisions concerning process selection are directly linked to many operations alternatives and cannot be make independently of one another. Table 3-4 in the textbook shows the relationship between product design, competitive priorities (focus dimensions), facility layout, product strategy, and vertical integration. So a decision between an intermittent operations process or a repetitive operations process firmly sets limitations in all of these factors. Students should recognize that product characteristics and product design is only one of many factors that must be considered in process selection by operations managers. Unique Service Process Characteristics A necessary condition for service processes is that the customer is the focal point for all decision and activities within the operations process. It follows that service systems with a high degree of customer contact are more difficult to control and more difficult to rationalize than typical manufacturing systems with a low degree of customer contact. When considering the design of service organizations the most distinctive characteristic is that service products cannot be inventoried. Waiting line modeling, a powerful spreadsheet analysis method, and other tools provide a way to analyze these situations that are unique to service processes. Another visual tool for classifying service processes is the Service-System Design Matrix, shown in figure 3-12 in our textbook. This tool compares sales opportunities, production efficiency, and the characteristics of workers, operations, and examples relative to the degree of customer/service contact. Services are very different compared to manufacturing, considering the high degree of personalization needed, the speed of delivery required, the direct customer contact, and the variability introduced by the customer contact. Buffering and scheduling mechanisms, available to manufacturing process, are not available to service providers. Therefore, service processes generally require a much higher level of capacity relative to demand. Additionally, a higher degree of flexibility on the part of managers and workers is needed for efficiency and effectiveness. Supply Chains Visualize the chain of activities that are necessary to procure raw materials, bring them to factories, convert them into products, and then transport them to distribution facilities or the customer. This is the modern operations supply chain. It is a network of all the activities involved in bringing a completed product or service to the customer. Supply chain managers are responsible for coordinating and managing all of the activities along the supply chain: Coordinating the movement of goods through the supply chain from suppliers to manufacturers to distributors to the final customers. Sharing relevant information such as sales forecasts, sales data, and promotional campaigns among members of the chain. At the beginning of the supply chain are activities to acquire resources as inputs for its processes. These raw materials and ingredients often constitute the major cost of the finished product or service. Strategic sourcing is the development and management of global supplier relationships. Far beyond the concept of "purchasing," sourcing implies a more complex process where a firm acquires the products and capabilities that are available globally to complement those held internally. A key activity in supply chain management resolves around the decisions related to logistics. These are the activities involved in distributing varying volumes of materials and products from different sources to different locations. Both traffic management and distribution management are involved in these decisions and activities. One tool that can be used to optimize costs within the logistics function is the transportation method of linear programming. It is a matrix method that calculates the minimum cost alternative from a number of sources and destination alternatives and allows for variable transport costs between sources and destinations. The bullwhip effect or the magnification of variability as products move through the supply chain indicates a lack of synchronization among supply chain partners. Even a slight change in downstream demand results in backward ripples in the form of magnified quantity oscillations upstream, causing inventory accumulations in some points and stock outages at others. Outsourcing is the practice of transferring some of the firm's internal activities or functions to outside providers. It goes beyond the more common purchasing and contracting activities in that not only the activities are transferred, the resources that make the activities occur such as people, facilities, technology, and other assets are also transferred. Generally, the decision to outsource is made to allow the firm to focus upon its core competencies. Thus decision makers can choose which activities are strategic or critical and should be held, and which may be outsourced like commodities. Companies can shed noncore activities, shed balance sheet assets, and boost their return on capital by using third-party service providers. Being environmentally responsible has influenced many companies to evaluate their supply chains to deliver "green" results. Experiences indicate that this practice of looking for opportunities to save money and benefit the environment is not a trade-off proposition. Financial results can often be improved through both cost reductions and boosting revenues. In some cases, green sourcing has allowed entirely new lines of business to serve environmentally conscious customers. The concept of total cost of ownership (TCO) is an estimate of the cost of an item that includes all the costs related to procurement and use of an item, including any related costs of disposing of the item after it is no longer useful. Overemphasis of acquisition cost or purchase price frequently results in failure to address other significant ownership and post ownership costs. TCO is a philosophy of identifying all the costs of doing business with a particular supplier for a good or a service. Companies that face diverse sourcing, production, and distribution decisions need to weigh the costs associated with materials, transport, production, warehousing, and distribution to develop a comprehensive network designed to minimize costs and preserve the environment