Design of Operation System Product and Service Design

CHAPTER THREE

DESIGN OF THE OPERATION SYSTEM

3.1. Product and Service Design

3.1.1 WHAT IS DESIGN?

Design is the process of structuring of components parts /activities of

products so that as a unit it can provide value for the customer. Product is
designed in terms of size, color, shape, content and other related
dimensions. Design greatly affects operation by specifying the products that
will be made and it is the prerequisite for operations to occur.

3.1.2 OBJECTIVES OF PRODUCT AND SERVICE DESIGN

The objectives of product design and service design differ somewhat, but not
as much as you might imagine. The overall objective for both is to satisfy the
customer while making a reasonable profit. It is important to note that
although profit is generally the overall measure of design effectiveness,
because the time interval between the design phase and profit realization is
often considerable, more immediate measures come into play. These
typically include development time and cost, the product or service cost, and
the resulting product or service quality.

WHO IS RESPONSIBLE FOR DEVELOPING DESIGN?

It is generally true that design decision is not the sole responsibility of

operations department. What to produce rather is an interactive decision of:
marketing, purchasing, finance, engineering, etc. and involves active
participations of customers, suppliers, creditors, government agencies and
other stakeholders. For example, the financial division must raise capital
and prepare budgets for research and development of new products and
processes as well as for the other large expenditures that may be necessary.
Design of Operation System Product and Service Design

The legal department must review warranty information and assess potential
product liability during the product design process. The purchasing
department must interact with the engineering groups to determine what
materials are required to produce the products so that appropriate vendors
are selected. All these activities require good communication and
coordination from initial product design stage through the introduction of the
product in to the market.

Generally, new product decisions affect not only the production system, but
other functional units in the organization as well. Through close cooperation
between operations, marketing and other functions, the design can be
integrated with dimensions regarding process, quality, capacity and
inventory. Design should be developed by considering many dimensions.

Why product design is needed?

Reasons for Product and Service Design or Redesign

Product and service design has typically had strategic implications for the success and prosperity
of an organization. Furthermore, it has an impact on future activities. Consequently, decisions in
this area are some of the most fundamental that managers must make.

Organizations become involved in product and service design or redesign for a variety of
reasons. The main forces that initiate design or redesign are market opportunities and threats.
The factors that give rise to market opportunities and threats can be one or more changes:

• Economic (e.g., low demand, excessive warranty claims, the need to reduce costs).
• Social and demographic (e.g., aging baby boomers, population shifts).
• Political, liability, or legal (e.g., government changes, safety issues, new regulations).
• Competitive (e.g., new or changed products or services, new advertising/promotions).
• Infrastructure availability (e.g., of raw materials, components, labor, water, energy).
• Technological (e.g., in product components, processes).

While each of these factors may seem obvious, let’s reflect a bit on technological changes. An
obvious way is new technology that can be used directly in a product or service (e.g., a faster,
Design of Operation System Product and Service Design

smaller microprocessor that spawns a new generation of personal digital assistants or cell
phones). Technology also can indirectly affect product and service design: Advances in
processing technology may require altering an existing design to make it compatible with the
new processing technology.

Modern trends in product/service design.

1. Increased emphasis on customer satisfaction by designing products & services that are “user
friendly”

2. Designing products that use less material

3. Reduction of time needed to introduce new products or services.

4. Reduced production times (usually results in reduced cost and increased quality).

5. Greater attention to the capabilities of the organization to produce or deliver the item.

6. Environmental concerns.

3.1.3 FACTORS INFLUENCING PRODUCT DESIGN

1. Customer requirements: The designers must find out the exact

requirements of the customers to ensure that the products suit the
convenience of customers for use. The products must be designed to be
used in all kinds of conditions.
2. Convenience of the operator or user: The industrial products such as
machines and tools should be designed that they are convenient and
comfortable to operate or use.
3. Tradeoff between function and form: The design should combine
both performance and aesthetics or appearance with a proper balance
between the two.
4. Types of materials used: Discovery of new and better materials can
improve the product design. Designers keep in touch with the latest
developments taking place in the field of materials and components and
make use of improved materials and components in their product
designs.
5. Work methods and equipment’s: Designers must keep abreast of
improvements in work methods, processes and equipment’s and design
the products to make use of the latest technology and manufacturing
processes to achieve reduction in costs.
Design of Operation System Product and Service Design

6. Cost/Price ratio: In a competitive market, there is lot of pressure on

designers to design products which are cost effective because cost and
quality are inbuilt in the design. With a constraint on the upper limit on
cost of producing products, the designer must ensure cost effective
designs.
7. Product quality: The product quality partly depends on quality of
design and partly on quality of conformance. The quality policy of the
firm provides the necessary guidelines for the designers regarding the
extent to which quality should be built in the design stage it by deciding
the appropriate design specifications and tolerances.
8. Process capability: The product design should take into consideration
the quality of conformance, i.e., the degree to which quality of design is
achieved in manufacturing. This depends on the process capability of the
machines and equipment’s. However, the designer should have the
knowledge of the capability of the manufacturing facilities and specify
tolerances which can be achieved by the available machines and
equipment’s.
9. Effect on existing products: New product designs while replacing
existing product designs, must take into consideration the use of
standard parts and components, existing manufacturing and distribution
strategies and blending of new manufacturing technology with the
existing one so that the costs of implementing the changes are kept to,
the minimum.
10. Packaging: Packaging is an essential part of a product and packaging
design and product design go hand in hand with equal importance.
Packaging design must take into account the objectives of packaging
such as protection and promotion of the product. Attractive packaging
enhances the sales appeal of products in case of consumer products
(nondurable).

3.1.3. Steps in Product Design

Product development is not a single step, but rather, it is the result of sequential activities. The
following explanation introduces the basic steps that one should pass through while developing
new product.

1st Step; Idea Generations: - The first step to develop new product is to generate as much
ideas as one can. All product designs begin with an idea. The idea might come from a product
Design of Operation System Product and Service Design

manager who spends time with customers and has a sense of what customers want, from an
engineer with a flair for inventions, or from anyone else in the company. To remain competitive,
companies must be innovative and bring out new products regularly. The ideas for new product
or service concepts can come from sources outside the organization, such as customers or
competitors, technology and from sources within the organization, such as staff (for example,
from sales staff and front-of-house staff) or from the R&D department.

A. Customer: customers are the principal source to generate new ideas. A product is useless
if nobody wants it. Manufacturers are always trying to develop new products that meet
the needs and demands of customers. Marketing can tap this source of ideas in a number
of ways, such as the use of focus group, surveys, and the analysis of buying patterns.
B. Competitors: One of the strongest motivators for new and improved products or services
is competitors’ products and services. By studying a competitor’s products or services
and how the competitor operates (pricing policies, return policies, warranties, location
strategies, etc.), an organization can glean many ideas that can help to achieve design
improvement. Studying the practices of companies considered “best in class” and
comparing the performance of our company against theirs is called benchmarking.
Beyond that, some companies purchase a competitor’s product and then carefully
dismantle and inspect it, searching for ways to improve their own product. This is called
reverse engineering. Sometimes reverse engineering can enable a company to leapfrog
the competition by developing an even better product.
C. New technology: another source of new ideas is new technology. In 1970s, for example,
the development of semiconductors, microchips, and microprocessors revolutionized the
electronic industries. This leads to many improvements in the design and functions of
numerous items such as television sets and business machines. These new innovations
replaced products based on older technologies. Also, entirely new products such as home
video equipment’s, electronic games, and many others were created.
D. Suppliers; are still another source of ideas, and with increased emphasis on supply chains
and supplier partnerships, suppliers are becoming an important source of ideas.
E. Research and Development (R&D): Research is another source of ideas for new or
improved products or services and plays an important role in developing new products
and advancing technologies. Research and development (R&D) refer to organized
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efforts that are directed toward increasing scientific knowledge and product or process
innovation. The purpose of R&D is to generate new ideas and concepts to develop these
ideas and concepts in to useful products. Research usually means attempting to develop
new knowledge and ideas in order to solve a particular problem or to grasp an
opportunity. Development is the attempt to try to utilize and operationalize the ideas that
come from research. Most of the advances in semiconductors, medicine,
communications, and space technology can be attributed to R&D efforts at colleges and
universities, research foundations, government agencies, and private enterprises.
F. Ideas from staff: The contact staff in a service organization or the salesperson in a
product-oriented organization could meet customers every day. These staff may have
good ideas about what customers like and do not like. They may have gathered
suggestions from customers or have ideas of their own as to how products or services
could be developed to meet the needs of their customers more effectively

2nd Step; Screening: - not all new ideas should be developed in to new products and hence the
second step is screening. The purpose of screening is to eliminate ideas that do not appear to
have a high potential for success and there for avoid expensive development costs. The purpose
of the concept-screening stage is to take the flow of concepts and evaluate them. Generally, three
major criteria (feasibility study) are used in initial screening. Market feasibility, financial
feasibility and technical feasibility

a. Market feasibility: Evaluate the new ideas in terms of whether the product has market or
not as the market feasibility proposed,

b. Technical feasibility: availability of technology and skilled labor

c. Financial feasibility: how well the product quality performance and costs confirm to the
design objectives.

To assist in product analysis, several methods have been developed.

I. Screening by check list: One is a check list scoring method that involves developing a list
of factors along with a weight for each. If the total score is above a certain minimum level
the new product idea may be selected for further development. Alternatively, the method
may be used to rank product ideas in priority order for selection.
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II. Break-Even Analysis: A Tool for Product Screening it is a technique that can be useful
when evaluating a new product. This technique computes the quantity of goods a company
needs to sell just to cover its costs, or break even, called the “break-even” point. When
evaluating an idea for a new product it is helpful to compute its break-even quantity. An
assessment can then be made as to how difficult or easy it will be to cover costs and make a
profit.

The total cost of producing a product or service is the sum of its fixed and variable costs. A
company incurs fixed costs regardless of how much it produces. Fixed costs include overhead,
taxes, and insurance. Variable costs, on the other hand, are costs that vary directly with the
number of units produced, and include items such as materials and labor. Together, fixed and
variable costs add up to total cost:

we have the following equation:

Total cost = FC + (VC) Q

Where: FC = Fixed cost

VC = Variable cost per unit

Q = Number of units sold

The quantity produced is shown on

the horizontal axis and dollars are
shown on the vertical axis. Fixed cost is represented by a horizontal line and is the same
regardless of how much is produced. The diagonal line above fixed cost is total cost, which is the
sum of fixed and variable costs. When Q = 0, total cost is only equal to fixed cost. As Q
increases, total cost increases through the variable cost component. The upper diagonal in the
figure is revenue. Revenue is the amount of money brought in from sales:

Revenue = (SP) Q Where: SP = selling price per unit.

When Q = 0, revenue is zero. As sales increase, so does revenue. Remember, however, that to
cover all costs we have to sell the break-even amount. This is the quantity QBE, where revenue
equals total cost. If we sell below the break-even point, we will incur a loss, since costs exceed
revenue. To make a profit, we have to sell above the break-even point. Since revenue equals total
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cost at the break-even point, we can use the above equations to compute the value of the break-
even quantity:

Total cost = total revenue FC + (VC) Q = (SP) Q

Algebraically solving for Q, we get the following equation:

FC
QBE =
SP−VC

Note that we could also find the break-even point by drawing the graph and finding where the
total cost and revenue lines cross. Break-even analysis is an excellent tool for more than simply
deciding between different products. It can be used to make many other decisions, such as
evaluating different processes or deciding whether it is better to make or buy a product.

3rd Step; Initial (Preliminary) Product Design: - Once a product idea has passed the screening
stage, it is time to begin preliminary design and testing. At this stage, design engineers translate
general performance specifications into technical specifications. Prototypes are built and tested.
Changes are made based on test results and the process of revising, rebuilding a prototype, and
testing continues. For service companies this may entail testing the offering on a small scale and
working with customers to refine the service offering. Fast-food restaurants are known for this
type of testing, where a new menu item may be tested in only one particular geographic area.
Product refinement can be time consuming and there may be a desire on the part of the company
to hurry through this phase to rush the product to market. However, rushing creates the risk that
all the “bugs” have not been worked out, which can prove very costly. In the preliminary design
tradeoffs between cost, quality and product performances are considered. The result should be a
product design which is competitive in the market place and produce able by operations.

4th Step; Final Product Design: - Following extensive design testing the product moves to the
final design stage. This is where final product specifications are drawn up. The final
specifications are then translated into specific processing instructions to manufacture the product,
which include selecting equipment, outlining jobs that need to be performed, identifying specific
materials needed and suppliers that will be used, and all the other aspects of organizing the
process of product production.

Generally, Product Design and Development proceeds in a series of phases explained below…
Design of Operation System Product and Service Design

 Feasibility analysis. Feasibility analysis entails market analysis (demand), economic

analysis (development cost and production cost, profit potential), and technical analysis
(capacity requirements and availability, and the skills needed). Also, it is necessary to
answer the question, does it fit with the mission? It requires collaboration among
marketing, finance, accounting, engineering, and operations.
 Product specifications. This involves detailed descriptions of what is needed to meet (or
exceed) customer wants, and requires collaboration between legal, marketing, and
operations.
 Process specifications. Once product specifications have been set, attention turns to
specifications for the process that will be needed to produce the product. Alternatives must
be weighed in terms of cost, availability of resources, profit potential, and quality.
 Prototype development. With product and process specifications complete, one (or a few)
units are made to see if there are any problems with the product or process specifications.
 Design review. At this stage, any necessary changes are made or the project is abandoned.
Marketing, finance, engineering, design, and operations collaborate to determine whether to
proceed or abandon.
 Market test. A market test is used to determine the extent of consumer acceptance. If
unsuccessful, the product returns to the design review phase. This phase is handled by
marketing.
 Product introduction. The new product is promoted. This phase is handled by marketing.
 Follow-up evaluation. Based on user feedback, changes may be made or forecasts refined.

3.1.4. Product Life Cycle

Another factor in product design is the stage of the life cycle of the product. Most products go
through a series of stages of changing product demand called the product life cycle. Many new
products and services go through a life cycle in terms of demand. When an item is introduced, it
may be treated as a curiosity. There are typically four stages of the product life cycle:
introduction, growth, maturity, and decline.

Stage 1 Introduction: Demand is generally low because potential buyers are not yet familiar
with the item. Products in the introductory stage are not well defined and neither is their market.
Often all the “bugs” have not been worked out and customers are uncertain about the product.
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Stage 2 Growth: In the growth stage, the product takes hold and both product and market
continue to be refined. With the passage of time, design improvements usually create a more
reliable and less costly product. Demand then grows for these reasons and because of increasing
awareness of the product or service. Higher production volume will involve different methods
and contribute to lower costs.

Stage 3 Maturity: where demand levels off and there are usually no design changes. The
product is predictable at this stage and so is its market. Many products, such as toothpaste, can
stay in this stage for many years. The product or service reaches maturity: there are few, if any,
design changes, and demand levels off. Eventually, the market becomes saturated, which leads to
a decline in demand.

Stage 4 Decline: is because of new technology, better product design, or market saturation.
Some firms adopt a defensive research posture whereby they attempt to prolong the useful life of
a product or service by improving its reliability, reducing costs of producing it (and, hence, the
price), redesigning it, or changing the packaging.

The first two stages of the life cycle can collectively be called the early stages of the product life
cycle because the product is still being improved and refined, and the market is still in the
process of being developed. The last two stages of the life cycle can be referred to as the later
stages because here the product and market are both well defined.

3.1.5. Designing for Production/Operation

1. Design for Manufacture (DFM)

Design of Operation System Product and Service Design

Design for manufacturability (DFM) is a product development approach that explicitly considers
the effectiveness with which an item can be made during the initial development of the product
design. This approach is based on the belief that the cost of developing and running the value
adding system is as important as the functionality and aesthetics of the product service bundles.
Manufacturability refers to the ease with which the product can be manufactured. Three
concepts are closely related to designing for easy of production. These are:

a. Simplifications: is a design or redesign strategy that improves the manufacturability,

serviceability, or reliability of a product or service by reducing the complexity of its
design. Often a product or parts may be needlessly complex because of a designers or
product engineer’s bias toward technological sophistication or perhaps because of
incremental design changes that have been made over a period of years.

b. Specifications: is a detail description of material, parts, or products including physical

dimensions. These specifications profiled production department with precise
information about the characteristics of products to be produced.

c. Standardization: refers to a design activity that reduce variety amount a group of

product or parts. Standardization of groups of products or parts usually results in higher
volume for each product or part model which can leads to lower production costs, higher
product quality, greater ease of automation, and lower inventory investment.

DFM Benefits

Lower costs:

o Lower inventories (fewer, standardized components)

o Less labor required (simpler flows, easier tasks)

Higher quality:

o Simple, easy-to-make products means fewer opportunities to make mistakes

2. Concurrent Engineering

To achieve a smoother transition from product design to production, and to decrease product
development time, many companies are using simultaneous development, or concurrent
engineering. Concurrent engineering; is an approach that brings many people together in the
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early phase of product design in order to simultaneously design the product and the process. This
type of approach has been found to achieve a smooth transition from the design stage to actual
production in a shorter amount of development time with improved quality results.

The old approach to product and process design was to first have the designers of the idea come
up with the exact product characteristics. Once their design was complete, they would pass it on
to operations who would then design the production process needed to produce the product. This
was called the “over-the-wall” approach, because the designers would throw their design “over-
the-wall” to operations then had to decide how to produce the product. There are many problems
with the old approach.

 First, it is very inefficient and costly. Since manufacturing does not understand which
features are not critical, it may develop an unnecessarily costly production process with
costs passed down to the customers. Because the designers do not know the cost of the
added feature, they may not have the opportunity to change their design or may do so
much later in the process, incurring additional costs. Concurrent engineering allows
everyone to work together so these problems do not occur.
 A second problem is that the “over-the-wall” approach takes a longer amount of time
than when product and process design work together. Companies do not have the luxury
of enough time to follow a sequential approach and then work the “bugs” out. They may
eventually get a great product, but by then the market may not be there.
 The third problem is that the old approach does not create a team atmosphere, which is
important in today’s work environment. Rather, it creates an atmosphere where each
function views its role separately in a type of “us versus them” mentality.
3. Computer Aided Design (CAD) & Computer Aided Manufacturing (CAM)

CAD is an electronic system for designing new parts or products or altering existing ones,
replacing drafting traditionally done by hand. The heart of CAD is a powerful desktop computer
and graphics software that allow a designer to manipulate geometric shapes. The designer can
create drawings and view them from any angle on a display monitor. Thus, this system allows a
user to create visual display on a computer terminal screen. Using the design data stored in the
computer’s memory, manufacturing engineers and other users can quickly obtain print outs of
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plan and specifications for a part or product. CAD cut the cost of product development and
sharply reduces the time to market for new products.

CAM is an electronic system which is used to design production process and control machine
tools and material flow through programmable automation. Both CAD/CAM integrate the design
and manufacturing functions by translating final design specification in to detailed machine
instruction for manufacturing an item. CAD/CAM is quicker, less error prone than human,
eliminate duplications between engineering and manufacturing, allow engineers to see how the
various parts of a design interact with each other without having to build a prototype.

3.1.6. Other Factors to be Considered While Designing the Product

Here are some the factors that need to be considered during the product design. This section
provides an overview of various approach or techniques to product design.

1. Standardization

An important issue that often arises in both product/service design and process design is the
degree of standardization. Standardization refers to the extent to which there is absence of
variety in a product, service, or process. Standardized products are made in large quantities of
identical items; paper, gasoline, etc. Standardized service implies that every customer or item
processed receives essentially the same service. An automatic car wash is a good example; each
car, regardless of how clean or dirty it is, receives the same service. Standardized processes
deliver standardized service or produce standardized goods.

Standardization carries a number of important benefits. Standardized components and parts

are interchangeable, which greatly lowers the cost of production while increasing productivity
and making replacement or repair relatively easy. Large-volume production and purchase of only
a few types of standardized parts would reduce costs due to economies of scale. Design costs are
generally lower. Another benefit of standardization is reduced time and cost to train employees
and reduced time to design jobs. Similarly, scheduling of work, inventory handling, and
purchasing and accounting activities become much more routine.

Lack of standardization can at times lead to serious difficulties and competitive struggles,
particularly when systems running under different conditions are incompatible. Example the lack
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of standardization in computer software and operating systems (Apple vs IBM) has presented
users with hard choices because of the difficulty in switching from one system to the other.

Standardization also has disadvantages. A major one relates to the reduction in variety. This
can limit the range of customers to whom a product or service appeals.

Customers may reluctantly accept a product only because nothing else suits their needs. But that
creates a risk that a competitor will introduce a better product or greater variety and realize a
competitive advantage.

Another disadvantage is that a manufacturer may freeze (standardize) a design prematurely and,
once frozen, it may find compelling reasons to resist modification.

2. Designing for Mass Customization

Companies like standardization because it enables them to produce high volumes of relatively
low-cost products, albeit products with little variety. Customers, on the other hand, typically
prefer more variety, although they like the low cost. The question for producers is how to resolve
these issues without losing the benefits of standardization and incurring a host of problems that
are often linked to variety. These include increasing variety in the production process, which
would add to the skills and machines necessary to produce products, creating an additional
inventory burden during and after production, and adding to the difficulty of diagnosing and
repairing failed products.

The answer, at least for some companies, is mass customization, a strategy of producing
standardized goods or services but incorporating some degree of customization in the final
product or service. Mass customization; A strategy of producing basically standardized goods,
but incorporating some degree of customization.

Several tactics make this possible. One is delayed differentiation, and another is modular design.

A. Delayed differentiation

Delayed differentiation is a postponement tactic: the process of producing, but not quite
completing, a product or service, postponing completion until customer preferences or
specifications are known. There are a number of variations of this. In the case of goods, almost-
finished units might be held in inventory until customer orders are received, at which time
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customized features are incorporated, according to customer requests. For example, furniture
makers’ manufacturers of clothing, etc.

B. Modular designs

Modular designs are groupings of parts into components that are easily interchanged or replaced.
For example, computers those have modular parts that can be replaced if they become defective.
By arranging modules in different configurations, different computer capabilities can be
obtained. For mass customization, modular design enables producers to quickly assemble
modules to achieve a customized configuration for an individual customer, avoiding the long
customer wait that would occur if individual parts had to be assembled. Modular design is also
found in the construction industry.

One advantage of modular design of equipment compared with non-modular design is that
failures are often easier to diagnose and remedy because there are fewer pieces to investigate.
Similar advantages are found in ease of repair and replacement; the faulty module is
conveniently removed and replaced with a good one. The manufacture and assembly of modules
generally involves simplifications: fewer parts are involved, so purchasing and inventory control
become more routine, fabrication and assembly operations become more standardized, and
training costs often are relatively low. The main disadvantage of modular design is the inability
to disassemble some modules in order to replace a faulty part; the entire module must be
scrapped—usually at a higher cost.

3. Reliability

Reliability is a measure of the ability of a product, a part, a service, or an entire system to

perform its intended function under a prescribed set of conditions. The importance of reliability
is underscored by its use by prospective buyers in comparing alternatives and by sellers as one
determinant of price. Reliability also can have an impact on repeat sales, reflect on the product’s
image, and, if it is too low, create legal implications.

Failure is used to describe a situation in which an item does not perform as intended. This
includes not only instances in which the item does not function at all, but also instances in which
the item’s performance is substandard or it functions in a way not intended. For example, a
smoke alarm might fail to respond to the presence of smoke (not operate at all), it might sound
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an alarm that is too faint to provide an adequate warning (substandard performance), or it might
sound an alarm even though no smoke is present (unintended response).

Reliabilities are always specified with respect to certain conditions, called normal operating
conditions. These can include load, temperature, and humidity ranges as well as operating
procedures and maintenance schedules. Failure of users to heed these conditions often results in
premature failure of parts or complete systems. For example, using a passenger car to tow heavy
loads will cause excess wear and tear on the drive train; driving over potholes or curbs often
results in untimely tire failure; and using a calculator to drive nails might have a marked impact
on its usefulness for performing mathematical operations.

Improving Reliability

Reliability can be improved in a number of ways.

1. Improve component design. 5. Improve preventive maintenance

2. Improve production and/or assembly procedures.
techniques. 6. Improve user education.
3. Improve testing. 7. Improve system design.
4. Use backups.

4. Robust Design

Robust design; Design that results in products or services that can function over a broad range
of conditions. Some products will perform as designed only within a narrow range of conditions,
while other product will as be designed over a broader range of conditions. The latter case
describes a product that has robust design. For example, pair of fine leather boots vs. rubber
boots. The more the robust a product is, the less likely that it will fail due to a change in the
environment in which it is used or in which it performs. Hence, the more designers can build
robustness into the product or service, the better it should hold up, resulting in a higher level of
customer satisfaction. Read Taguchi’s Approach for more.

5. Degree of Newness

Product or service design change can range from the modification of an existing product or
service to an entirely new product or service:
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a. Modification of an existing product c. Duplicate of a competitor’s product

b. Expansion of an existing product line d. New product or service

The degree of change affects the newness to the organization and the newness to the market. For
the organization, a low level of newness can mean a fairly quick and easy transition to producing
the new product, while a high level of newness would likely mean a slower and more difficult,
and therefore more costly, transition. For the market, a low level of newness would mean little
difficulty with market acceptance, but possibly low profit potential. Even in instances of low
profit potential, organizations might use this strategy to maintain market share. A high level of
newness, on the other hand, might mean more difficulty with acceptance, or it might mean a
rapid gain in market share with a high potential for profits.

6. Quality Function Deployment

Obtaining input from customers is essential to assure that they will want what is offered for sale.
Although obtaining input can be informal through discussions with customers, there is a formal
way to document customer wants.

Quality function deployment (QFD) is a structured approach for integrating the

“voice of the customer” into both the product and service development process. 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.

7. The Three Rs: Reduce, Reuse, and Recycle

Designers often reflect on three particular aspects of potential cost saving and reducing
environmental impact: reducing the use of materials through value analysis; refurbishing and
then reselling returned goods that are deemed to have additional useful life, which is referred to
as remanufacturing; and reclaiming parts of unusable products for recycling.

A. Reduce: Value Analysis

Value analysis refers to an examination of the function of parts and materials in an effort to
reduce the cost and/or improve the performance of a product. Typical questions that would be
asked as part of the analysis include: Could a cheaper part or material be used? Is the function
necessary? Can the function of two or more parts or components be performed by a single part
Design of Operation System Product and Service Design

for a lower cost? Can a part be simplified? Could product specifications be relaxed, and would
this result in a lower price? Could standard parts be substituted for nonstandard parts

B. Remanufacturing (Reuse)

An emerging concept in manufacturing is the remanufacturing of products. Remanufacturing

refers to refurbishing used products by replacing worn-out or defective parts, and reselling the
products. This can be done by the original manufacturer or another company. Remanufacturing
is a concept that has been gaining increasing importance, as our society becomes more
environmentally conscious and focuses on efforts such as recycling and eliminating waste. In
addition to the environmental benefits, there are significant cost benefits because remanufactured
products can be half the price of their new counterparts. Among the products that have
remanufactured components are automobiles, printers, copiers, cameras, computers, and
telephones.

There are a number of important reasons for doing this. One is that a remanufactured product can
be sold for about 50 percent of the cost of a new product. Another is that the process requires
mostly unskilled and semiskilled workers. And in the global market are increasingly requiring
manufacturers to take back used products, because this means fewer products end up in landfills
and there is less depletion of natural resources such as raw materials and fuel.

Designing products so that they can be more easily taken apart has given rise to yet another
design consideration: Design for disassembly (DFD) includes using fewer parts and less
material, and using snap-fits where possible instead of screws or nuts and bolts.

C. Recycling

Recycling is sometimes an important consideration for designers. Recycling means recovering

materials for future use. This applies not only to manufactured parts, but also to materials used
during production, such as lubricants and solvents. Reclaimed metal or plastic parts may be
melted down and used to make different products.

Companies recycle for a variety of reasons, including:

Cost savings.

Environmental concerns.
Design of Operation System Product and Service Design

Environmental regulations.

An interesting note: Companies that want to do business in the European Economic Community
must show that a specified proportion of their products are recyclable. The pressure to recycle
has given rise to the term design for recycling (DFR), referring to product design that takes into
account the ability to disassemble a used product to recover the recyclable parts.

8. Legal and Ethical Considerations

Designers must be careful to take into account a wide array of legal and ethical considerations.
Generally, they are mandatory. Moreover, if there is a potential to harm the environment, then
those issues also become important. Most organizations are subject to numerous government
agencies that regulate them. Among the more familiar federal agencies are the Food and Drug
Administration, the Occupational Health and Safety Administration, the Environmental
Protection Agency, and various state and local agencies.

Product liability can be a strong incentive for design improvements. Product liability is the
responsibility of a manufacturer for any injuries or damages caused by a faulty product because
of poor workmanship or design. Many business firms have faced lawsuits related to their
products, including Firestone Tire & Rubber, Ford Motor Company, General Motors, tobacco
companies, and toy manufacturers.

Manufacturers also are faced with the implied warranties created by state laws under the
Uniform Commercial Code, which says that products carry an implication of merchantability
and fitness; that is, a product must be usable for its intended purposes.

Organizations generally want designers to adhere to guidelines such as the following:

• Produce designs that are consistent with the goals of the organization. For instance, if the
company has a goal of high quality, don’t cut corners to save cost, even in areas where it
won’t be apparent to the customer.
• Give customers the value they expect.
• Make health and safety a primary concern. At risk are employees who will produce goods
or deliver services, workers who will transport the products, customers who will use the
products or receive the services, and the general public, which might be endangered by the
products or services.
Design of Operation System Product and Service Design

3.1.7. SERVICE DESIGN

Service refers to an act, something that is done to or for a customer (client, patient, etc.). It is
provided by a service delivery system, which includes the facilities, processes, and
skills needed to provide the service. Many services are not pure services, but part of a product
bundle —the combination of goods and services provided to a customer. The service
component in products is increasing. The ability to create and deliver reliable customer-oriented
service is often a key competitive differentiator. Successful companies combine customer-
oriented service with their products.

System design involves development or refinement of the overall service package

1. The physical resources needed.

2. The accompanying goods that are purchased or consumed by the customer, or provided
with the service.

3. Explicit services (the essential/core features of a service, such as tax preparation).

4. Implicit services (ancillary/extra features, such as friendliness, courtesy).

Service design begins with the choice of a service strategy, which determines the nature and
focus of the service, and the target market. This requires an assessment by top management of
the potential market and profitability (or need, in the case of a nonprofit organization) of a
particular service, and an assessment of the organization’s ability to provide the service. Once
decisions on the focus of the service and the target market have been made, the customer
requirements and expectations of the target market must be determined.

Two key issues in service design are the degree of variation in service requirements and the
degree of customer contact and customer involvement in the delivery system. These have an
impact on the degree to which service can be standardized or must be customized. The lower the
degree of customer contact and service requirement variability, the more standardized the service
can be. Service design with no contact and little or no processing variability is very much like
product design. Conversely, high variability and high customer contact generally mean the
service must be highly customized. A related consideration in service design is the opportunity
for selling: The greater the degree of customer contact, the greater the opportunities for selling.
Design of Operation System Product and Service Design

Service is the dominant economic force in the industrialized world today and growth projection
indicates this trend will continue. Yet service operation receives far too little emphasis in
operation management course and business course in general. Service industry includes banking,
insurance, transportation, communication etc.

Differences between Service Design and Product Design

1. Products are generally tangible; services are generally intangible. Consequently, service
design often focuses more on intangible factors (e.g., peace of mind, ambiance) than does
product design.

2. In many instances’ services are created and delivered at the same time (e.g., a haircut, a car
wash). In such instances there is less latitude in finding and correcting errors before the customer
has a chance to discover them. Consequently, training, process design, and customer relations are
particularly important.

3. Services cannot be inventoried. This poses restrictions on flexibility and makes capacity issues
very important.

4. Services are highly visible to consumers and must be designed with that in mind; this adds an
extra dimension to process design, one that usually is not present in product design.

5. Some services have low barriers to entry and exit. This places additional pressures on service
design to be innovative and cost-effective.

6. Location is often important to service design, with convenience as a major factor. Hence,
design of services and choice of location are often closely linked.

7. Service systems range from those with little or no customer contact to those that have a very
high degree of customer contact. Here are some examples of those different types:

 Insulated technical core; little or no customer contact (e.g., software development).

 Production line; little or no customer contact (e.g., automatic car wash).
 Personalized service (e.g., haircut, medical service).
 Consumer participation (e.g., diet program, dance lessons).
 Self-service (e.g., supermarket).

If there is little or no customer contact, service s ystem design is like product system design.
Design of Operation System Product and Service Design

3.1.7.1 Phases in the Service Design Process

As you can see, they are quite similar to the phases of product design, except that the delivery
system also must be designed. Here below are the phase in a service design

1. Conceptualize.

 Idea generation
 Assessment of customer wants/needs (marketing)
 Assessment of demand potential (marketing)

2. Identify service package components needed (operations and marketing).

3. Determine performance specifications (operations and marketing).

4. Translate performance specifications into design specifications.

5. Translate design specifications into delivery specifications.

3.1.7.2 Service Blueprinting

A useful tool for conceptualizing a service delivery system is the service blueprint, which
is a method for describing and analyzing a service process. A service blueprint is much like an
architectural drawing, but instead of showing building dimensions and other construction
features, a service blueprint shows the basic customer and service actions involved in a service
operation.

Generally, design of the service is the specifications of how the service should be delivered. A
service blueprint is “a picture or map that accurately portrays the service system so that the
different people involved in providing it can understand and deal with it objectively regardless of
their roles or their individual points of view” (Zeithaml & Bitner 1996). It depicts the process of
service delivery, roles of customers, roles of service employees, and visible elements of service.
As a design tools, they enable management to study and analyze services prior to their actual
implementation.

These blue prints can be then the basis for job descriptions, employees training programs and
performance measurement. A service blue print is a visual diagram –usually a flow chart-that
depicts all of the activities in the service delivery process.
Design of Operation System Product and Service Design

Service blue print of Shoes polishing process

Standard Brush Apply Collect
execution time Buff
shoes polish payment
2 minutes
30 30 45 15
secs secs secs secs
Total acceptable
execution time
Wrong
5 minutes
color wax
Clean Fail
shoes point Materials
Seen by
(e.g., polish, cloth)
customer 45
secs

Line of Not seen by

visibility customer but Select and
necessary to purchase
performance supplies

The process of designing a service blueprint involves several steps:

 Identifying the sequence of steps: first it is necessary to map out the sequence of steps
that comprise the serve activity. By identifying all operations in the service activity, one
can determine what inputs are required and how each operation should be best performed.
 Isolating fail points: once the process is specified, the designer can determine where the
system might fail. Design for prevention of failure can then be made.
 Establishing time frames: standard time for each activity can be established and costs
can then be estimated. Research shows that a customer will tolerate few minutes before
lowering his or her assessment of service quality.
 Analyzing profitability: by identifying the costs for materials, overheads, and customer
services along with forecasts of demand the profitability of the service can be
determined; then ‘what if’ scenarios can be conducted to analyze the sensitivity of profits
to changes in costs or pricing structures.

3.1.7.3 Characteristics of Well-Designed Service Systems

There are a number of characteristics of well-designed service systems. They can serve as
guidelines in developing a service system. They include the following:

1. Being consistent with the organization’s mission.

Design of Operation System Product and Service Design

2. Being user-friendly.
3. Being robust if variability is a factor.
4. Being easy to sustain.
5. Being cost-effective.
6. Having value that is obvious to customers.
7. Having effective linkages between back-of-the-house operations (i.e., no contact with the
customer) and front-of-the-house operations (i.e., direct contact with customers). Front
operations should focus on customer service, while back operations should focus on speed
and efficiency.
8. Having a single, unifying theme, such as convenience or speed.
9. Having design features and checks that will ensure service that is reliable and of high
quality.

Factors to be considered while designing services

a) Customer contact

Generally, most service operations have high customer contact than manufacturing sector.
Customer contact for service operation can be high or low. Characteristics of high-and low-
contact services:

 Low contact in services is used when face to face interaction is not mandatory. High
contact operations are used for changing or uncertain demand
 Low contact services require employees with technical skills, efficient processing
routines, and standardization of the product and process. High contact services require
employees who are flexible, personable, and willing to work with the customer (the
smile factor).
 High contact services generally require higher prices and more customization due to the
variable nature of the service required.

b) Service recovery:

Service recovery is an important part of service design. Service recovery is the ability to quickly
compensate for the failure and restore if possible.

c) Cycle of Service
Design of Operation System Product and Service Design

The service provided must be considered not only in a light of a single service encounter but in
terms of the entire cycle of service delivery. Every service is delivered in a cycle of services
beginning with the point of initial customer contact and proceeding through steps or stages until
the entire service is completed.

d) Service guarantee

Many companies are now beginning to offer service guarantees as a way to ensure its
satisfactory delivery to the customer. Service guarantee help the service provider to build
confidences of the customers towards their service quality level. A service guaranty is like its
counterpart the product guarantee, except for one thing: The customer cannot return the service if
he/she does not like it. For example, if you did not like your hair cut, you have to live with it that
way, until it grows out.

3.1.7.4 Guidelines for Successful Service Design

1. Define the service package in detail. A service blueprint may be helpful for this.

2. Focus on the operation from the customer’s perspective.

3. Consider the image that the service package will present both to customers and to customers.

4. Recognize that designers’ familiarity with the system may give them a quite different
perspective than that of the customer, and take steps to overcome this.

5. Make sure that managers are involved and will support the design once it is implemented.

7. Make sure that recruitment, training, and reward policies are consistent with service
expectations.

8. Establish procedures to handle both predictable and unpredictable events.

9. Establish systems to monitor, maintain, and improve service. Etc…