Operations and Supply Chain Management Week 3

CHAPTER 3 | DESIGN OF PRODUCTS

AND SERVICES

1. PRODUCT DESIGN
The producing companies are called contract manufacturers, and they have become
successful industries. A simple definition of a contract manufacturer is an organization
that performs manufacturing and/or purchasing needed to produce a product or device
not for itself, but as a service to another firm.
A company’s core competency is the one thing that it can do better than its competitors.
A core competency has three characteristics:
i. It provides potential access to a wide variety of markets.
ii. It increases perceived customer benefits.
iii. It is hard for competitors to imitate.
The real challenge for a firm is to decide exactly how the various functions critical to
success will be handled.

A. Product development process

We begin by defining a generic product development process that describes the basic
steps needed to design a product. This process represents the basic sequence of steps or
activities that a firm employs to conceive, design, and bring a product to market.
The six phases of the generic development process are the following:
1. Phase 0: Planning
This phase begins with corporate strategy and includes assessment of
technology developments and market objectives.
The output is project mission statement, which specifies the target market
for the product, business goals, key assumptions, and constraints.
2. Phase 1: Concept development
In this phase, the needs of the target market are identified, alternative
product concepts are generated and evaluated, and one or more concepts
are selected for further development and testing.
3. Phase 2: System-level design
 The system-level design phase includes the definition of the product
architecture and the decomposition of the product into subsystems and
components.
The output of this phase usually includes a geometric layout of the
product, a functional specification of each of the product’s subsystems,
and a preliminary process flow diagram for the final assembly process.
4. Phase 3: Detail design
This phase includes the complete specification of the geometry, materials,
and tolerances of all the unique parts in the product and the
identification of all the standard parts to be purchased from suppliers.
The output of this phase is the drawings or computer files describing the
geometry of each part and its production tooling, the specifications of
purchased parts, and the process plans for the fabrication and assembly
of the product.
5. Phase 4: Testing and refinement
The testing and refinement phase involve the construction and evaluation
of multiple preproduction versions of the product. Prototypes are tested
to determine whether the product will work as designed and whether the
product satisfies customer needs.
6. Phase 5: Production ramp-up
In the production ramp-up phase, the product is made using the intended
production system. The purpose of the ramp-up is to train the workforce
and to work out any remaining problems in the production processes.
The transition from production ramp-up to ongoing production is usually
gradual. At some point in the transition, the product is and becomes
available for widespread distribution launched.

i. Technology-push products
In developing technology-push products, a firm begins with a new proprietary
technology and looks for an appropriate market in which to apply this technology (that
is, the technology “pushes” development).
iv. Platform products
A platform product is built around a preexisting technological subsystem (a technology
platform). In some sense, platform products are very similar to technology-push
products in that the team begins the development effort with an assumption that the
product concept will embody a particular technology. The primary difference is that a
technology platform has already demonstrated its usefulness in the marketplace in
meeting customer needs.
v. Process-intensive products

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 The production process has an impact on properties of the product so that product
design cannot be separated from the production process design. Process-intensive
products are produced at very high volumes and are bulk, rather than discrete, goods.
vi. Customized products
Customized products are slight variations of standard configurations and are typically
developed in response to a specific order by a customer.
vii. High-risk products
High-risk products are those that entail unusually large uncertainties related to the
technology or market so that there is substantial technical or market risk.
viii. Quick-build products
Following concept development in this process, the system-level design phase entails
decomposition of the product into high-, medium-, and low-priority features. This is
followed by several cycles of design, build, integrate, and test activities, beginning with
the highest-priority items.
ix. Complex system
When developing complex systems, modifications to the generic product development
process address a number of system-level issues. Detail design of the components is a
highly parallel process, often referred to as concurrent engineering, with many separate
development teams working at once.

2. PRODUCT DESIGN CRITERIA

A. Designing for the customer
Before we detail the how’s and whys of designing and producing products, it is useful to
reflect (or, perhaps more accurately, to editorialize) on the issue of product design from
the user’s standpoint.
i. Quality function deployment
One approach to getting the voice of the customer into the design specification of a
product is quality function deployment (QFD).
The QFD process begins with studying and listening to customers to determine the
characteristics of a superior product. After the customer requirements are defined, they
are weighted based on their relative importance to the customer. Next, the consumer is
asked to compare and rate the company’s products with the products of competitors.
Customer requirement information forms the basis for a matrix called the house of
quality.
1. The first step in building the house of quality is to develop a list of
customer requirements for the product.
2. Next, a set of technical characteristics of the product is developed.

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 ii. Value analysis/value engineering
The purpose of value analysis/value engineering (VA/VE) is to simplify products and
processes. Its objective is to achieve equivalent or better performance at a lower cost
while maintaining all functional requirements defined by the customer. VA/VE does this
by identifying and eliminating unnecessary cost.
The VA/VE analysis approach involves brainstorming
such questions as:
1. Does the item have any design features that are not necessary?
2. Can two or more parts be combined into one?
3. How can we cut down the weight?
4. Can any nonstandard parts be eliminated?
iii. Designing products for manufacture and assembly
It is an activity that starts with sketches of parts and assemblies and then progresses to
the computer-aided design (CAD) workstation (described in Appendix B on Operations
Technology), where assembly drawings and detailed part drawings are produced.
1. How does design for manufacturing and assembly (DFMA) work?
The greatest improvements related to DFMA arise from simplification of
the product by reducing the number of separate parts. In order to guide
the designer in reducing the part count, the methodology provides three
criteria against which each part must be examined as it is added to the
product during assembly:
a. During the operation of the product, does the part move relative to all
other parts already assembled?
b. Must the part be of a different material than, or be isolated from,
other parts already assembled?
c. Must the part be separate from all other parts to allow the
disassembly of the product for adjustment or maintenance?
2. Ecodesign
3. Ecodesign is the incorporation of environmental considerations in the
design and development of products or services. Ecodesign adopts an
integrated approach to the relationship between products and services
and the environment on three levels:
a. The whole life cycle of the product or service is considered.
b. The product is considered as a system.
c. A multicriteria approach is considered.
The application of ecodesign can benefit business, users, and society at
the same time because it responds to the common interest of obtaining
more efficient products in an economic as well as environmental
dimension.

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3. DESIGNING SERVICE PRODUCTS
Here are three general factors to consider when determining this:
i. Similarity to current services. This means that the new service should fit into the
current service experience for the customer.
ii. Similarity to current processes. Even the greatest service ideas require
operational support to execute.
iii. Financial justification. Designing and implementing a new service is costly and
should be financially justified.
A. Complexity and divergence
A useful way of analyzing the process similarity for new service development is by
specifying the end of the proposed service process complexity divergence relative to the
basic service process.
Complexity is the number of steps involved in a service and the possible actions that can
be taken at each step. Divergence is the number of ways a customer/service provider
interaction can vary at each step according to the needs and abilities of each.
This can be used to determine different resource requirements such as worker skills,
layout, and process controls.

2. ECONOMIC ANALYSIS OF PRODUCT DEVELOPMENT PROJECTS

It is important to remember that economic analysis can capture only those factors that
are measurable and that projects often have both positive and negative implications
that are difficult to quantify. Economic analysis is useful in at least two different
circumstances:
i. Go/no-go milestones. These decisions typically arise at the end of each phase of
development.
ii. Operational design and development decisions.
A. Build a Base-Case financial model
The most basic categories of cash flow for a typical new product development project
are:
iv. Development cost (all remaining design, testing, and refinement costs up to
production ramp-up)
v. Ramp-up cost
vi. Marketing and support cost
vii. Production cost

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 viii. Sales revenue
The numerical values of the cash flows come from budgets and other estimates obtained
from the development team, the manufacturing organization, and the marketing
organization.

B. Sensitivity analysis
Sensitivity analysis uses the financial model to answer “what if” questions by calculating
the change in NPV corresponding to a change in the factors included in the model. Many
other scenarios can be developed for the project, including the following:
i. Project development time.
ii. Sales volume.
iii. Product cost or sales price.
iv. Development cost.
Financial modeling and sensitivity analysis are powerful tools for supporting product
development decisions, but these techniques have important limitations. Development
teams must understand the strengths and limitations of the techniques and refrain from
developing a stifling bureaucracy around the development of new products.

4. MEASURING PRODUCT DEVELOPMENT PERFORMANCE

Measures of product development success can be categorized into those that relate to
the speed and frequency of bringing new products online, to the productivity of the
actual development process, and to the quality of the actual products introduced. The
following are generic descriptions of typical measures:
i. Time to market - A measure of product development success. There are two
measures here: the frequency of new product introductions, and the time from
initial concept to market introduction.
ii. Productivity - A measure of how well resources are used.
iii. Quality - Measures that relate to the reliability of the product in use the
product’s performance features compared to customer expectations and the
ability of a factory or service process to produce the product.
1. Conformance quality - The degree to which the product or service design
specifications are met.
2. Design quality - The inherent value of the product in the marketplace.
3. Defects per million opportunities (DPMO) - A metric used to describe the
variability of a process.