Chapter three

Design of the operation system

 Introduction
• In this chapter we will learn about product design, which
is the process of deciding on the unique characteristics and
features of the company’s product.
• We will also learn about process selection, which is the
development of the process necessary to produce the
designed product.
• Product design and process selection decisions are typically
made together.
• A company can have a highly innovative design for its
product, but if it has not determined how to make the
product in a cost-effective way, the product will stay a
design forever.
3.1. Product and Service design
• Product design is process of defining all of
the product’s characteristics and features.
• Product design defines a product’s
characteristics, such as its appearance, the
materials it is made of, its dimensions and
tolerances, and its performance standards.
• Service design is the process of establishing
all the characteristics of the service, including
physical, sensual, and psychological benefits.
 3.1.1. The product design process
• The three major functions involved in product and
service design are marketing, product development
and manufacturing.
• Marketing has the responsibility for suggesting ideas for
new product and for providing product specification for
existing product lines.
• Product development has the responsibility for moving
the technical concept for the product to its final design.
• manufacturing function has the responsibility for
selecting and/or configuring the process by which the
product is to be manufactured.
 Cont’d
• Certain steps are common to the development of most
product designs: idea generation, product
screening, preliminary design and testing, and
final design.
• 1. Idea generation; All product designs begin with an
idea.
• The idea might come from a product manager who
spends time with customers and has a sense of what
customers want, from an engineer with a flare for
inventions, or from anyone else in the company.
• To remain competitive, companies must be
innovative and bring out new products regularly.
 Where to get idea?
• Ideas can come from customers, competitors, and
suppliers.
• The first source of ideas is customers, the driving force
in the design of goods and services.
• Marketing is a vital link between customers and product
design.
• Market researchers collect customer information by
studying customer buying patterns and using tools such
as customer surveys and focus groups.
• Note that customers’ preference may change overtime
so studying customers’ pattern is an ongoing process.
 Cont’d
• Competitors are another source of ideas.
• A company learns by observing its competitors’
products and their success rate.
• This includes looking at product design, pricing
strategy, and other aspects of the operation.
• Studying the practices of companies considered
“best-in-class” and comparing the performance
of one’s own company against theirs is called
benchmarking.
 Cont’d
• Reverse Engineering is another way of using
competitors’ ideas is to buy a competitor’s
new product and study its design features.
• Using this process, a company’s engineers
carefully disassemble the product and analyze
its parts and features.
 Cont’d
• Product design ideas are also generated by a company’s
R & D (research and development) department,
whose role is to develop product and process innovation.
• Suppliers are another source of product design ideas.
• To remain competitive, more companies are developing
partnering relationships with their suppliers to jointly
satisfy the end customer.
• Suppliers participate in a program called early supplier
involvement (ESI), which involves them in the early
stages of product design.
 Cont’d
2. Product Screening;
• After a product idea has been developed, it is evaluated to
determine its likelihood of success. This is called product
screening.
• The company’s product screening team evaluates the product design
idea according to the needs of the major business functions and by
considering issues such as the following:
• Operations; What are the production needs of the proposed new
product, and how do they match our existing resources? Will we need
new facilities and equipment? Do we have the labor skills to make the
product? Can the material for production be readily obtained?
• Marketing; What is the potential size of the market for the proposed
new product? How much effort will be needed to develop a market
for the product, and what is the long-term product potential?
• Finance ;What is the proposed new product’s financial potential,
cost, and return on investment?
 How to finally screen the idea?
• There are decision-making tools to help us evaluate new
product ideas. A popular one is break-even analysis, which we
look at next.
• Break-Even Analysis: is a technique that can be useful when
evaluating a new product.
• It 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. A product with a
break-even quantity that is hard to attain might not be a good
product choice to pursue.
Cont’d
 Cont’d
3. Preliminary Design and Testing
• 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.
 Cont’d
4. The pilot production Run
Small-scale production run or pilot production run is
important for the following reasons. Some of these are:
– To reveal problems not anticipated or planned
– To provide a quantity of product for further studying market
acceptance, developing better production, cost figures,
evaluate labor and maintenance requirements, and
determining reject levels more accurately.
– To reveal unidentified process problems, coordination
requirements, needed quality control techniques difficulties
in material handling and storage, and physical
environmental factors such as noise or heat and other
possible safety hazards.
 Cont’d
5. Final 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.
 3.1.2. Factors impacting product design

Here are some factors that need to be considered during the

product design stage.
 Design for manufacture (DFM); is a series of guidelines that we
should follow to produce a product easily and profitably and focus
on two issues:
1. Design simplification means reducing the number of parts and
features of the product whenever possible. A simpler product is
easier to make, costs less, and gives higher quality.
2. Design standardization refers to the use of common and
interchangeable parts. Substitutable, compatible, similar
• By using interchangeable parts, we can make a greater variety of
products with less inventory and significantly lower cost and
provide greater flexibility.
 Cont’d
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. There are
typically four stages of the product life cycle:
introduction, growth, maturity, and decline.
• Bugs- listening devices
• 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.
 Cont’d
• In the growth stage, the product takes hold and
both product and market continue to be refined.
• The third stage is that of 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.
• Finally, there is a decline in demand because of
new technology, better product design, or market
saturation.
 Cont’d
• The first two stages of the life cycle can
collectively be called the early stages
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
both the product and market are well
defined.
 Cont’d
• Understanding the stages of the product life
cycle is important for product design
purposes, such as knowing at which stage to
focus on design changes.
• Also, when considering a new product, the
expected length of the life cycle is critical in
order to estimate future profitability
relative to the initial investment.
 Cont’d
Concurrent engineering; An approach that
brings together multifunction teams in the 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/DT/ with improved quality results.
Development tine is the time needed to take an idea to
the marketplace
 Cont’d
• 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, who
then had to decide how to produce the product.
 Cont’d
• There are many problems with the old
approach.
• First, it is very inefficient and costly. For
example, there may be certain aspects of the
product that are not critical for product success
but are costly or difficult to manufacture.
• 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.
 Cont’d
• A second problem is that the “over-the-wall” approach takes a
longer amount of time than when product and process design are
performed concurrently.
• 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.
• With the old approach, when the designers were finished with
the designs, they considered their job done. If there were
problems, each group blamed the other.
• With concurrent engineering, the team is responsible for
designing and getting the product to market. Team members
continue working together to resolve problems with the product
and improve the process.
 Cont’d
 Remanufacturing
• Remanufacturing is a concept that has been gaining
increasing importance as our society becomes more
environmentally conscious and focuses on recycling and
eliminating waste.
• Remanufacturing is the concept of using components of
old products in the production of new ones.
• In addition to the environmental benefits, there are
significant cost benefits because remanufactured products
can be half the price of their new counterparts.
• Remanufacturing has been quite popular in the production
of computers, televisions, and automobiles.
 3.2. Process selection
• Process planning and design is the complete
definition and description of the specific steps in
production.
• The design and redesign of products and the
design or redesign of processes are interrelated.
Unified, interconnected
• Process planning and selection also involves
choice of technology and related issues and it has
major implications for capacity planning, layout of
facilities, equipment, and design of work systems.
 Cont’d
• All processes can be grouped into two broad categories:
intermittent operations and repetitive operations.
• Intermittent processes are processes that are used to
produce a variety of products with different processing
requirements in lower volumes.
• Because different products have different processing needs,
there is no standard route that all products take through the
facility. Instead, resources are grouped by function and the
product is routed/ moved/ to each resource as needed.
• Think about a healthcare facility. Each patient, “the product,”
is routed to different departments as needed. One patient
may need to get an X-ray, go to the lab for blood work, and
then go to the examining room. Another patient may need to
go to the examining room and then to physical therapy.
 Cont’d
• To be able to produce products with different
processing requirements, intermittent operations
tend to be labor intensive rather than capital
intensive.
• Workers need to be able to perform different tasks,
depending on the processing needs of the products
produced.
• Often we see skilled and semiskilled workers in this
environment, with a fair amount of worker discretion
in performing their jobs. Preference, choice
• Workers need to be flexible and able to perform
different tasks as needed for the different products.
 Cont’d
• Equipment in this type of environment is more
general-purpose to satisfy different processing
requirements.
• Automation tends to be less common because
automation is typically product-specific.
• Given that many products are being produced with
different processing requirements, it is usually not cost
efficient to invest in automation for only one product
type.
• Finally, the volume of goods produced is directly tied to
the number of customer orders.
 Cont’d
• Repetitive process are processes that are used
to produce one or a few standardized products in
high volume. Examples are a typical assembly
line, cafeteria, or automatic car wash.
• Resources are organized in a line flow to
efficiently accommodate production of the
product.
• Note that in this environment it is possible to
arrange resources in a line because there is only
one type of product.
 Cont’d
• To efficiently produce a large volume of one type
of product, these operations tend to be capital
intensive rather than labor intensive. An example
is “mass-production” operations, which usually
have much invested in their facilities and
equipment to provide a high degree of product
consistency.
• Often these facilities rely on automation and
technology to improve efficiency and increase
output rather than on labor skill.
 Cont’d
• The most common differences between
intermittent and repetitive operations relate to
two dimensions: (1) the amount of product
volume produced, and (2) the degree of product
standardization.
• Product volume can range from making a unique
product one at a time to producing a large
number of products at the same time.
• Product standardization refers to a lack of
variety in a particular product.
 Cont’d
• Dividing processes into two fundamental
categories is helpful in our understanding of their
general characteristics.
• To be more detailed, we can further divide each
category according to product volume and
degree of product standardization, as follows.
• Intermittent process can be divided into project
processes and batch processes.
• Repetitive process can be divided into line
processes and continuous processes.
 Cont’d
Project process is a type of process used to make a one-
at-a-time product exactly to customer specifications.
• These processes are used when there is high
customization and low product volume, because each
product is different.
• Examples can be seen in construction, shipbuilding,
medical procedures, creation of artwork, custom
tailoring, and interior design.
• With project processes the customer is usually
involved in deciding on the design of the product.
 Cont’d
Batch process is a type of process used to
produce a small quantity of products in groups
or batches based on customer orders or
specifications.
• The volumes of each product produced are still
small, and there can still be a high degree of
customization. Ex department selection
• Examples can be seen in bakeries, education,
and printing shops. The classes you are taking at
the university use a batch process.
 Cont’d
Line process is a type of process used to produce a large
volume of a standardized product.
• discrete units of product
• They are also known as flow shops, flow lines, or
assembly lines.
• With line processes the product that is produced is
made in high volume with little or no
customization.
• Think of a typical assembly line that produces
everything from cars, computers, television sets, shoes.
 Cont’d
Continuous process is a type of process that
operates continually to produce a high volume of
a fully standardized product.
• Examples include oil refineries, water treatment
plants, and certain paint facilities.
• The products produced by continuous processes
are usually in continual rather than discrete
units, such as liquid or gas.
• This process is usually highly capital intensive
and automated.
 Cont’d
• Note that both project and batch processes have low
product volumes and offer customization.
• The difference is in the volume and degree of customization.
Project processes are more extreme cases of intermittent
operations compared to batch processes.
• Also, note that both line and continuous processes
primarily produce large volumes of standardized products.
• Again, the difference is in the volume and degree of
standardization. Continuous processes are more extreme
cases of high volume and product standardization than are
line processes.
 3.2.1. Factors related with process
design
• Decisions concerning product design and process
selection are directly linked and cannot be made
independently of one another.
• The type of product a company produces defines the type of
operation needed.
• The type of operation needed, in turn, defines many other
aspects of the organization.
• This includes how a company competes in the marketplace
(competitive priorities), the type or equipment and its
arrangement in the facility, the type of organizational
structure, and future types of products that can be
produced by the facility.
 Cont’d
Competitive Priorities; the decision of how a company
will compete in the marketplace—its competitive
priorities—is largely affected by the type of process it
has in place.
• Intermittent processes are typically less competitive
on cost than repetitive processes.
• The reason is that repetitive processes mass-produce a
large volume of one product.
• The cost of the product is spread over a large volume,
allowing the company to offer that product at a
comparatively lower price.
 Cont’d
• Think about the cost difference you would incur if you
decided to buy a business suit “off the rack” from your local
department store (produced by a repetitive) versus having it
custom made by a tailor.
• Certainly a custom-made suit would cost considerably
more. The same product produced by a repetitive process
typically costs less than one made by an intermittent
process.
• However, intermittent operations have their own
advantages. Having a custom-made suit allows you to choose
precisely what you want in style, color, texture, and fit.
• Also, if you were not satisfied, you could easily return it for
adjustments and alterations.
• So Intermittent operations can compete more on flexibility.
 Cont’d
• Today all organizations understand the importance of quality.
However, the elements of quality that a company focuses on may
be different depending on the type of process used.
• Repetitive processes provide greater consistency among
products. The first and last products made in the day are almost
identical. B/S ,Standardized products are produced
• Intermittent operations, on the other hand, offer greater variety
of features and workmanship not available with mass
production/low volume/.
• Therefore it is important that companies understand the
competitive priorities best suited for the type of process that
they use.
 Cont’d
Product and Service Strategy; The type of operation a company has
in place is directly related to its product and service strategy.
• Product and service strategies can be classified as make-to-
stock, assemble-to-order, and make-to order.
• These strategies differ by the length of their delivery lead time,
which is the amount of time from when the order is received to
when the product is delivered and by the degree of product
customization.
• Make-to-stock is a strategy that produces finished products for
immediate sale or delivery, in anticipation of demand.
• Companies using this strategy produce a standardized product in
larger volumes.
• Typically, this strategy is seen in repetitive operations. Delivery
lead time is the shortest, but the customer has no involvement in
 Cont’d
• Assemble-to-order strategy, also known as
build-to-order, produces standard components
that can be combined to customer specifications.
• Delivery time is longer than in the make-to-stock
strategy but allows for some customization.
• Examples include prefabricated furniture with
choices of fabric colors, or vacation packages
with standard options. Dry goods
 Cont’d
• Make-to-order is a strategy used to produce
products to customer specifications after an order
has been received. After order will be produced
• The delivery time is longest, and product
volumes are low.
• Examples are custom-made clothing, and
customized professional services. Ordering a food
to your liking in a sit-down restaurant is another
example of this strategy.
• This strategy is best for an intermittent operation.
 Cont’d
Degree of Vertical Integration; the larger the number of
processes performed by a company in the chain from raw
materials to product delivery, the higher the vertical
integration.
• Vertical integration is a strategic decision that should
support the future growth direction of the company.
• Vertical integration is a good strategic option when there
are high volumes of a small variety of input materials,
as is the case with repetitive operations.
• The reason is that the high volume and narrow variety of
input material allow task specialization and cost
justification.
 Cont’d
• It is typically not a good strategic decision to vertically integrate
into specialized processes that provide inputs in small volumes.
This would be the case for intermittent operations.
• For example, let’s consider a bakery that makes a variety of
different types of cakes. Maybe the bakery purchases different
fillings from different sources, such as apple pie filling from one
company, chocolate filling from another, and cream filling from a
third. If the company were to purchase production of the apple
filling, it would not gain much strategically because it still relies on
other suppliers. In this case, outsourcing may be a better choice.
However, if the bakery shifted its production to making only apple
pies, then the vertical integration might be a good choice.
• In summary, vertical integration is typically a better strategic
decision for repetitive operations.
 3.2.2. Designing process
• Process flow analysis is a technique used for
evaluating a process in terms of the sequence of steps
from inputs to outputs with the goal of improving its
design.
• One of the most important tools in process flow
analysis is a process flowchart.
• A process flowchart is used for viewing the sequence
of steps involved in producing the product and the flow
of the product through the process.
• It is useful for seeing the totality of the operation and
for identifying potential problem areas.
 Cont’d
• There is no exact format for designing a
flowchart. It can be very simple or highly
detailed.
• The typical symbols used are arrows to
represent flows, triangles to represent
decision points, inverted triangles to
represent storage of goods, and rectangles
as tasks.
Cont’d
 Cont’d
• In Figure (a), are flows between stages in a simple multistage
process, which is a process with multiple activities (“stages”).
You can see that the arrows indicate a simple flow of materials
between the different stages.
• Often, multiple stages have storage areas or “buffers” between
them for placement of either partially completed (work-in-
process) or fully completed (finished goods) inventory, shown in
Figure (b). This enables the two stages to operate independently
of each other. Otherwise, the first stage would have to produce a
product at the same exact rate as the second stage.
• For example, let’s say that the first stage of a multistage process
produces one product in 40 seconds and the second stage in 60
seconds.
 Cont’d
• That means that for every unit produced the first stage would
have to stop and wait 20 seconds for the second stage to
finish its work.
• Because the capacity of the second stage is holding up the
speed of the process, it is called a bottleneck.
• Now let’s see what happens if the first stage takes 60 seconds
to produce a product and the second stage 40 seconds. In this
case the first stage becomes the bottleneck, and the second
stage has to wait 20 seconds to receive a product. Obviously,
the best is for both stages to produce at the same rate, though
this is often not possible. So inventory is then placed between
the stages to even out differences in production capacity.
3.2.3. Measuring process performance

• An important way of ensuring that a process is functioning

properly is to regularly measure its performance.
• Process performance metrics are measurements of
different process characteristics that tell us how a process
is performing.
• Just as accountants and finance managers use financial
metrics, operations managers use process performance
metrics to determine how a process is performing and how
it is changing over time.
• There are many process performance metrics that focus on
different aspects of the process.
 Cont’d
Throughput time is a process performance metrics that measure
the average amount of time it takes a product to move
through the system.
• This includes the time someone is working on the product as
well as the waiting time.
• A lower throughput time means that more products can move
through the system.
• One goal of process improvement is to reduce throughput
time.
• For example, think about the time spent at your last doctor’s
appointment. The total amount of time you spent at the facility,
regardless of whether you were waiting, talking with the
physician, or having lab work performed, is throughput time.
 Cont’d
Process velocity; is an important metric that
measures how much wasted time exists in a
process.
• It is calculated as ratio of throughput time to
value-added time.
• where value-added time is the time spent
actually working on the product.
• Notice that the closer this ratio is to 1.00, the
lower the amount of time the product spends on
non-value-adding activities (e.g., waiting).
 Cont’d
• Another important metric is productivity, which is
the ratio of outputs over inputs. Productivity measures
how well a company converts its inputs to outputs.
• Also important is utilization, which is the ratio of the
time a resource is actually used versus the time it
is available for use. It measures the actual time that a
resource (e.g., equipment or labor) is being used.
• Last, efficiency is a metric that measures actual
output relative to some standard of output.
• It tells us whether we are performing at, above, or
below standard.