Chapter 4 – Product and

Service Design
Production and Operations Management
Bachelor of Science in Business Administration - Management
INTRODUCTION

 The essence of any organization is the products and

services it offers. There is an obvious link between the
design of those products or services and the success of
the organization. Organizations that have well-designed
products or services are more likely to realize their goals
than those with poorly designed products or services.
Hence, organizations have a strategic interest in
achieving good product and service design.

 Product and service design-or redesign-should be closely

tied to an organization’s strategy. It is a major factor in
cost, quality, time-to-market, customer satisfaction, and
competitive advantage.
What Does Product and Service
Design Do?
 Translate customer wants and needs into product and
service requirements. (marketing, operations)
 Refine existing products and services. (marketing)
 Develop new products and/or services. (marketing,
operations)
 Formulate quality goals. (marketing, operations)
 Formulate cost targets. (accounting, finance, operations)
 Construct and test prototypes. (operations, marketing,
engineering)
 Document specifications.
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. The factors that give rise to market
opportunities and threats can be one or more changes:
 Economic (low demand, excessive warranty claims, the need
to reduce costs)
 Social and demographic (aging baby boomers, population
shifts)
 Political, liability, or legal (government changes, safety issues,
new regulations)
 Competitive (new or changed products or services, new
advertising/promotions)
 Cost or availability (raw materials, components, labor)
 Technological (in product components, processes)
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:
 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 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 non-standard parts?
Objectives of Product and Service
Design
 The main focus of product and service design is
customer satisfaction. It is essential for designers to
understand what the customer wants and design with
that in mind. Marketing is the primary source of this
information.
 Secondary focuses in product and service design relate
to function, cost and potential profit (in for-profit
organizations), quality, appearance, forecasted volume,
ease production, ease of assembly, and ease of
maintenance or service. It is crucial for designers to take
into account the operations capabilities of the
organization in order to achieve designs that fit with
those capabilities. This is sometimes referred as
designing for operations.
Objectives of Product and Service
Design

 In general, design, operations, and marketing must work

closely together, keeping each other informed and taking
into account the wants and needs of the customer. In
addition, legal, environmental, and ethical considerations
can influence the design function.
LEGAL, ETHICAL, AND
ENVIRONMENTAL ISSUES

 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.
 It is extremely important to design products that are
reasonably free of hazards.
 Ethical issues often rise in the design of products and
services; it is important for managers to be aware of
these issues and for designers to adhere to ethical
standards.
LEGAL, ETHICAL, AND
ENVIRONMENTAL ISSUES
 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.
 Consider potential to harm the environment.
OTHER ISSUES IN PRODUCT AND
SERVICE DESIGN

 Life Cycles
 Standardization
 Designing for Mass Customization
 Reliability
 Robust Design
 The Degree of Newness
 Cultural Differences
 Global Product Design
(Product) Life Cycles
 Is a business analysis that attempts to identify a set of
common stages in the life of commercial products.
 Incubation / Introductory Period – When an item is
introduced, it may treated as a curiosity. Demand is
generally low because potential buyers are not yet familiar
with the item.
 Growth Period – With the passage of time, design
improvements usually create a more reliable and less costly
output. Demand then grows for these reasons and because
of increasing awareness of the product or service.
 Maturity Period – The product or service reaches maturity:
there are few, if any, design changes, and demand levels off.
 Decline Period – Eventually, the market becomes
saturated, which leads to a decline in demand.
(Product) Life Cycles
Standardization

 Standardization refers to the extent to which there is

absence of variety in a product, service, or process.
 ADVANTAGES:
 Fewer parts to deal with in inventory and in manufacturing.
 Reduce training costs and time.
 More routine purchasing, handling, and inspection
procedures.
 Orders fillable from inventory.
 Opportunities for long production runs and automation.
 Need for fewer parts justifies increased expenditures on
perfecting designs and improving quality control procedures.
Standardization

 DISADVANTAGES:
 Designs may be frozen with too many imperfections
remaining.
 High cost of design changes increases resistance to
improvements.
 Decreased variety results in less consumer appeal.
Designing for Mass Customization

 Mass Customization – A strategy of producing

basically standardized goods and services, but
incorporating some degree of customization in the final
product or service.

 Delayed Differentiation – is a postponement tactic: but

not quite completing, a product or service, postponing
completion until customer preferences or specifications are
unknown.
 Modular Design – A form of standardization in which
component parts are grouped into modules that are easily
replaced or interchanged.
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.

 Failure is used to describe a situation in which an item

does not perform as intended.

 Reliabilities are always specified with respect to certain

conditions, called normal operating conditions. These
can included load, temperature, and humidity changes
as well as operating procedures and maintenance
schedules.
Reliability

 Potential Ways To Improve Reliability

 Improve component design.

 Improve production and/or assembly techniques.
 Improve testing.
 Use backups.
 Improve preventive maintenance procedures.
 Improve user education.
 Improve system design.
Robust Design

 Robust Design – 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.
 A robust-design approach would develop a product that is
unaffected by minor variations in temperature during
processing.
The 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:

 Modification of an existing product or service.

 Expansion of an existing product line or service offering.
 Clone of a competitor’s product or service.
 New product or service.
Cultural Differences

 Product designers in companies that operate globally

also must take into account any cultural differences of
different countries or regions related to the product. This
can result in different designs for different countries or
regions.
Global Product Design

 Organizations that operate globally are discovering

advantages in global product design, which uses the
combined efforts of a team of designers who work in
different countries and even on different continents.
 Advances in information technology have played a key
role in the viability of global product design teams by
enabling team members to maintain continual contact
with each other and to instantaneously share designs
and progress, and to transmit engineering changes and
other necessary information.
PHASES IN PRODUCT DESIGN
AND DEVELOPMENT
 Idea generation. Ideas can come from a variety of
sources.
 Feasibility analysis. Entails market analysis (demand),
economic analysis (development cost and production
cost), and technical analysis (capacity requirements and
availability, and the skills needed). 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.
PHASES IN PRODUCT DESIGN
AND DEVELOPMENT
 Process specifications. Once product specifications has
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. It involves
collaboration between accounting and operations.
 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 and
process specifications.
 Design review. Make any necessary changes, or
abandon. Involves collaboration among marketing,
finance, engineering, design and operations.
PHASES IN PRODUCT DESIGN
AND DEVELOPMENT

 Market test. Used to determine the extent of consumer

acceptance. If unsuccessful, return to the design review
phase. This phase is handled by marketing.
 Product introduction. Promote the product. This phase is
handled by marketing.
 Follow-up evaluation. Determine if changes are needed,
and refine forecasts. This phase is handled by
marketing.
Idea Generation

 Supply-chain based.
 Customer input can be obtained from surveys, focus groups,
complaints and unsolicited suggestions for improvement.
 Input from suppliers, distributors, employees, and
maintenance or repair personnel might come from
interviews, direct or indirect suggestions, or complaints.

 Competitor based.
 Reverse Engineering – Dismantling and inspecting a
competitor’s product to discover product improvements.
Idea Generation

 Researched based.
 Research and Development (R&D) – refers to organized
efforts that are directed toward increasing scientific
knowledge and product or process 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 of
commercial applications.
 Development converts the results of applied research into
useful commercial applications.
DESIGNING FOR
MANUFACTURING

 Concurrent Engineering
 Computer-Aided Design (CAD)
 Production Requirements
 Recycling
 Remanufacturing
 Component Commonality
Concurrent Engineering
 Concurrent Engineering – or Simultaneous
Development, bringing engineering design and
manufacturing personnel together early in the design
phase.
 ADVANTAGES:
 Manufacturing personnel are able to identify production
capabilities and capacities.
 Early opportunities for design or procurement of critical
tooling, some of which might have long lead times.
 Early consideration of the technical feasibility of a particular
design or a portion of a design.
 The emphasis can be on problem resolution instead of
conflict resolution.
Concurrent Engineering

 DISADVANTAGES:
 Long-standing existing boundaries between design and
manufacturing can be difficult to overcome.
 There must be extra communication and flexibility if the
process is to work, and these can be difficult to achieve.
Computer-Aided Design (CAD)

 Computer-Aided Design (CAD) – Product design

using computer graphics.
 A major benefit of CAD is the increase productivity of
designers.
 A second major benefit of CAD is the creation of a
database for manufacturing that can supply needed
information on product geometry and dimensions,
tolerances, material specifications, and so on.
Product Requirements

 Product capabilities, design needs to be clearly understand.

 Forecasts of future demand can be very useful, supplying
information on the timing and volume of demand, and
information on demands for new products and services.
 Manufacturability is a key concern for manufactured
goods, the ease of fabrication and/or assembly.
 Design for manufacturing (DFM) is used to indicate the
designing of products that are compatible with an
organization’s capabilities.
 Design for assembly (DFA) focuses on reducing the
number of parts in a product and on assembly methods and
sequence.
Recycling

 Recycling – Recovering materials for future use.

 Design for recycling (DFR) – Design that facilitates
the recovery of materials and components in used
products for reuse.
 Reasons for Recycle:
 Cost savings.
 Environmental concerns.
 Environmental regulations.
Remanufacturing

 Remanufacturing – Refurbishing used products by

replacing worn-out or defective components.

 Design for disassembly – Design so that used

products can be easily taken apart.
Component Commonality

 Companies often have multiple products or services to

offers customers. Often, these products or services have
a high degree of similarity of features and components.
This is particularly true of product families, but it is also
true of many services. Companies can realize significant
benefits when a part can be used in multiple products.
QUALITY FUNCTION
DEPLOYMENT

 Quality Function Deployment (QFD) – An approach

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

 House of Quality: The main QFD Matrix

QUALITY FUNCTION
DEPLOYMENT
THE KANO MODEL
 The Kano Model can be an interesting way to
conceptualize design characteristics in terms of customer
satisfaction, such as those revealed by QFD or other
means.
 The “must-have” characteristics are those that yield a
basic level of satisfaction, but do not have the potential
for increasing customer satisfaction beyond a certain
level.
 The “expected” characteristics in a design will yield a
steady increase in customer satisfaction.
 The greatest yield comes from “excitement”
characteristics, perhaps evoking a “wow” from
customers.
THE KANO MODEL
SERVICE DESIGN

 Definitions
 Overview of Service Design
 Differences between Service Design and Product Design
 Phases in the Service Design Process
 Service Blueprinting
 Characteristics of Well-Designed Service Systems
 Challenges of Service Design
 Guidelines for Successful Service Design
Definition
 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
provide to a customer.
 System design involves development or refinement of the
overall service package:
 The physical resources needed.
 The accompanying goods that are purchased and consumed by
the customer, or provided with the service.
 Explicit services (the essential/core features of a service, such as
tax preparation).
 Implicit services (ancillary/extra features, such as friendliness,
courtesy).
Overview of Service Design

 Service design begins with the choice of a service

strategy, which determines the nature and focus of the
service, and the target market.
 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.
 A related consideration in service design is the
opportunity for selling: The greater the degree of
customer contact, the greater opportunities for selling.
Difference between Service
Design and Product Design
 Service operations managers must contend with issues
that may be insignificant or nonexistent for managers in
a production setting. These include the following:
 Products are generally tangible; services are generally
intangible.
 In many instances, services are created and delivered at the
same time.
 Services cannot be inventoried.
 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.
Difference between Service
Design and Product Design

 Some services have low barriers to entry and exit.

 Location is often important to service design, with
convenience as a major factor.
 Service systems range from those with little or no customer
contact to those that have a very high degree of customer
contact.
 Demand variability alternately creates waiting lines or idle
service resources.
Difference between Service
Design and Product Design
 In services, a significant aspect of perceived quality relates
to the intangibles that are part of the service package.
Designers must proceed with caution because attempts to
achieve a high level of efficiency tend to depersonalize
service and to create the risk of negatively altering the
customer’s perception of quality, Such attempts may involve
the following:
 Reducing consumer choices makes service more efficient, but it
can be both frustrating and irritating for the customer.
 Standardizing or simplifying certain elements of service can
reduce the cost of providing a service, but it risks eliminating
features that some customers value, such as personal attention.
 Incorporating flexibility in capacity management by employing
part-time or temporary staff may involve the use of less-skilled
or less-interested people, and service quality may suffer.
Phases in the Service Design
Process
 Conceptualize
 Idea generation
 Assessment of customer wants/needs (marketing)
 Assessment of demand potential (marketing)
 Identify service package components needed (operations
and marketing)
 Determine performance specifications (operations and
marketing)
 Translate performance specifications into design
specifications
 Translate design specifications into delivery specifications
Service Blueprinting
 Service Blueprint – A method used in service design to
describe and analyze a proposed service.
 Steps in Service Blueprinting
 Established boundaries for the service and decide on the
level of detail needed.
 Identify and determine the sequence of customer and
service actions and interactions. A flowchart can be a useful
tool this.
 Develop time estimates for each phase of the process, as
well as time variability.
 Identify potential failure points and develop a plan to
prevent or minimize them, as well as a plan to respond to
service errors.
Service Blueprinting
Characteristics of Well-Designed
Service Systems
 Consistent with the organization mission.
 User friendly.
 Robust if variability is a factor.
 Easy to sustain.
 Cost-effective.
 Having value that is obvious to customers.
 Effective linkages between back-of-the-house operations (no
contact with the customer) and front-of-the-house operations
(direct contact with customers).
 Having a single, unifying theme, such as convenience or speed.
 Having design features and checks that will ensure service that
is reliable and of high quality.
Challenges of Service Design

 There are variable requirements.

 Services can be difficult to describe.
 Customer contact is usually much higher in services.
 Service design must take into account the service-
customer encounter.
Guidelines for Successful Service
Design
 Define the service package in detail.
 Focus on the operation from the customer perspective.
 Consider the image that the service package will present both to
customers and prospective customers.
 Recognize that designer familiarity with the system may give them a
quite different perspective than that of the customer, and take steps to
overcome this.
 Make sure that managers are involved and will support the design once
it is implemented.
 Define quality for both tangibles and intangibles.
 Make sure that recruitment, training, and reward policies are
consistent with service expectations.
 Establish procedures to handle both predictable and un predictable
events.
 Establish systems to monitor, maintain, and improve service.
OPERATIONS STRATEGY
 Product and service design is a fertile area for achieving
competitive advantage and/or increasing customer
satisfaction. Potential sources of such benefits include the
following:
 Increases emphasis on component commonality.
 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, such as
mass customization.
 Continually monitoring products and services for small
improvements rather than the “big bang” approach.
 Shortening the time it takes to get new or redesigned goods
and services to the market.
OPERATIONS STRATEGY

 A key competitive advantage of some companies is their

ability to bring new products to the market more quickly
than their competitors. Companies using this “first-to-
market” approach are able to enter markets ahead of
their competitors, allowing them to set higher selling
prices than otherwise due to absence of competition.
Such as strategy is also a defense against competition
from cheaper “clones” because the competitors always
have to play “catch up”.
OPERATIONS STRATEGY

 From a design standpoint, reducing the time to market

involves:
 Using standardized components to create new but reliable
products.
 Using technology such as computer-aided design
(CAD) equipment to rapidly design new or modified
products.
 Concurrent engineering to shorten engineering time.
Thank you!
Anthony Acal Marcos
BSBA4A - Management