CHAPTER

Product Design and

Process Selection •3
 Product design is the process of defining all of the
product’s characteristics
 Strategic Importance
 Product (good/service) design and process selection affect
product quality, product cost, and customer satisfaction.
 Products & service offerings must support the company’s
business strategy by satisfying the target customers’ needs &
preferences.
 If not, the company will lose its customer base and its market
position will erode.
 Design of services versus goods
 Product design defines a product’s characteristics such as
 Appearance, materials, dimensions, tolerances, performance
standards.
 Product Development:
Step–by-Step
1. Idea Development:
 A need is identified & a product idea to
satisfy it is put together.
2. Product Screening/Evaluation:
 Initial ideas are evaluated for difficulty &
likelihood of success.
3. Preliminary Design & Testing
 Market testing & prototype development
4. Final Design
 Product & service characteristics are set.
 Final design based on test results, facility,
equipment, material, & labor skills
defined, suppliers identified
 Idea Development
 Existing & target customers
 Customer surveys & focus groups.
 Benchmarking
 Studying “best in class” companies from your
industry or others and comparing their
practices & performance to your own.
 Reverse engineering
 Disassembling a competitor’s product &
analyzing its design characteristics & how it
was made.
 Suppliers, employees and technical
advances
 Product Screening
 Operations/technical feasibility
(manufacturability):
 Are production requirements consistent with
existing capacity?
 Are the necessary materials, equipment, labor
skills, & raw materials available?
 Market feasibility (marketability):
 How large is the market niche?
 What is the long-term potential for the product?
 Financial feasibility (profitability):
 What is the expected return on investment?
 B/E analysis, ROI, payback period, NPV
 Preliminary Design &
Testing
 General performance characteristics
are translated into technical
specifications.
 Prototypes are built & tested (maybe
offered for sale on a small scale).
 Bugs are worked out & designs are
refined.
 Final Design

 Specifications are set & then used

to:
 Develop processing and service delivery
instructions.
 Guide equipment selection

 Outline jobs to be performed

 Negotiate contracts with suppliers and

distributors.
Break-Even Analysis
Graph
 Break-Even (B/E)
Analysis
 Break-even (B/E) analysis (start-up decision) in selecting
product/process design.
 Total cost = fixed costs + variable costs (quantity):
TC  F  VC  Q

 Revenue = selling price (quantity)

R   SP  Q

 Break-even point is where total costs = revenue:

TC  R or F  VC  Q   SP  Q
F
or Q
SP  VC
 B/E Example
 A firm estimates that the fixed cost of
producing a line of footwear is $52,000
with a $9 variable cost for each pair
produced. They want to know:
 If each pair sells for $25, how many pairs
must they sell to break-even?
 If they sell 4000 pairs at $25 each, how
much money will F make?
they $52,000
Q   3250 pairs
SP  VC $25  $9
 Break-even point:
 P  (400
Profit SP  Q  pairs)=
 F  VC  Q  total revenue – total
  $25 4000   $52,000)   $9 4000
costs
 $12,000
 Factors to Consider in Product
Design
1. Design for Manufacturing
(DFM)
Used to reduce differences between designers &
developers (manuf./production staff), and ensure
product manufacturability (based on value analysis
or value engineering). DFM Guidelines:
A. Design Simplification
 Minimize number of parts
 Simplify operations
 Lower cost
 Easier to make
 Fewer errors with fewer parts
 Avoid tools (e.g., snap together components)
 Higher quality
B. Design Standardization
 Usage of common or standardized parts for
multiple applications.
 DFM Toolbox Example

(a) The original design (b) Revised design (c) Final design

Assembly using One-piece base & Design for push-and-snap

common fasteners elimination of fasteners assembly
(e.g., nuts and bolts)
 DFM Benefits
 Lower costs:
 Lower inventories (fewer, standardized
components)
 Less labor required (simpler flows,
easier tasks)
 Higher quality:
 Simple, easy-to-make products means
fewer opportunities to make mistakes.
2. Product Life Cycle (PLC)
- Short life products (mobiles) versus
long life products
- Early stage (runner-ups or immature
goods) versus late stage (leaders or
mature goods)
 3. Concurrent
Engineering
 A design approach that uses
multifunctional teams to
simultaneously design the product &
process.
 Replaces a traditional ‘over-the-wall’
approach where one group does
their part & then hands off the
design to the next group.
 Other Design factors
 Old “over-the –wall”
sequential design
process should not be
used
 Each function did its
work and passed it to
the next function.

 Replace with a
Concurrent
Engineering process
 “Walls broken down”
 All functions form a
design team working
together to develop
specifications, involve
customers early, solve
potential problems,
reduce costs, &
shorten time to
 Concurrent Engineering
Benefits
 Representatives from the different groups can
better consider trade-offs in cost & design
choices as each decision is being made.
 Development time is reduced due to less
rework (traditionally, groups would argue with
earlier decisions & try to get them changed).
 Emphasis is on problem-solving (not placing
blame on the ‘other group’ for mistakes).
4. Remanufacturing
a concept that has been gaining increasing
importance, as societies become more
environmentally conscious and focuses on
efforts such as recycling and eliminating
 Process Design
Selection
 Intermittent operations (process can be stopped):
 Capable of producing low volumes (custom-made) of
a large variety of product designs in relatively
different processing requirements.
 Labor intensive (skilled and semiskilled labor)
 General purpose and flexible equipment
 It is not cost efficient to invest in automation for one
product.
 Examples: healthcare, education, carpentry, and
bakery (different types of bread, cakes, and pies).

 Repetitive/Non-intermittent/Continuous
operations (process cannot be stopped once started)
 Capable of producing a small variety (one or a few)
standardized (off the shelf/rack) designs in very high
Intermittent Operations
 Pros:
 Very flexible
 Cons:
 Material handling & variable costs are high
 Production and delivery scheduling problems

Repetitive/Non-intermittent/Continuous
Operations
 Pros
 Highly efficient (low variable costs) due to
enjoyment of economies-of-scale (lower unit cost
associated with large production volumes).
 Cons
 Inflexible to design changes
 Susceptible to component failure
 High fixed costs for capital equipment
 Intermittent and
Continuous/Repetitive
Decision Operations
Intermittent Operation Continuous Operation
Product variety Great Small
Degree of standardization Low High
Organization of resources Grouped by Function Line flow
Path of products Varied, depends on product Line flow
Factor driving production Customer orders Forecast of demand
Critical resource Labor Capital
Type of equipment General purpose Specialized
Degree of automation Low High
Throughput time Longer Shorter
Work-in-process inventory More Less
Continuum of Process
Types
 Continuum of Process
 Projects: Types
 Used for one-at-a-time products made exactly to
customer specifications. (e.g., construction,
shipbuilding, lawyer services, medical procedures,
custom tailoring, and interior design). Sometimes
called Custom Job Shop, or Professional Service
(e.g., lawyers).
 Batch processes:
 Used for small quantities (batches) with a high level
of customization. (e.g., bakeries, and printing
shops). Sometimes called Machine/Job Shop, or
Service Shop (e.g., schools).
 Line processes:
 Used for relatively high volumes with little or no
customization (e.g., cars, computers, TVs, shoes,
and cafeteria lines). Sometimes called Mass
Production, or Mass Service (e.g., banks).
 Continuous processes:
 Used for very high volume standardized products,
 Project Process Flow

Task 2 Task 4

Start End

Task 1 Task 3

Task Task or activity

Precedence relationship
 Batch Process Flow
Good # 2
WS 2 WS 4

Good # 2

WS 1 WS 3 WS 5 Good # 1

WS Task or work station

Product flows
Line (repetitive) Process
Flow

WS 1 WS 2 WS 3

WS Task or work station

Product flow
 Designing Processes
 Process flow design and analysis
 Process flowcharting/mapping for
designing, analyzing, and improving
processes
 Flowcharts are graphical tools that define the
operation, step-by-step. Flowcharts can be as
simple or detailed as needed (there is no exact
format for designing a flowchart).
 Flowcharts
 Can help visualize the flow of work/process &
information.
 Can help identify potential problem areas.
 Can help to improve process operation by
making it faster, more efficient, less costly,
 Process Flowchart
Symbols
 Circle: Begin/End

 Arrow: Flow

 Rectangle: Operation/Task

 Triangle: Decision point

 Inverted
triangle: Storage
 Elements of Flowchart
Development
 Multistage process

WS1 WS2 WS3

 Multistage process with buffer (work-in-

process inventory)

WS1 WIP WS2

 contd...
 Parallel stages producing different
productWS1
Finished
Goods
#1

Finished
Goods
WS2 #2

 Parallel stages producing same

productWS1 Finished
Goods

WS2
 I-Plant: Material flows in a sequence, such as in an
assembly line. The primary work is done in a straight
sequence of events (one-to-one). The constraint is the
slowest operation.
 A-Plant: The general flow of material is many-to-one,
such as in a plant where many sub-assemblies
converge for a final assembly. The primary problem in
A-plants is in synchronizing the converging lines so
that each supplies the final assembly point at the right
time.
 V-Plant: The general flow of material is one-to-many,
such as a plant that takes one raw material and can
make many final products. Classic examples are meat
rendering plants or a steel manufacturer. The primary
problem in V-plants is "robbing" where one operation
(A) immediately after a diverging point "steals"
materials meant for the other operation (B). Once the
material has been processed by A, it cannot come back
and be run through B without significant rework.
 T-Plant: The general flow is that of an I-Plant (or has
multiple lines), which then splits into many assemblies
(many-to-many). Most manufactured parts are used in
Flowcharts for different product strategies for
pizza-making
Flowchart for evaluating pizza’s customer
order process (potential problem areas or
bottlenecks indicated by long waiting)
 Linking Product and Process
Design/Selection
 The type of product a company produces defines the
type of operation needed. The type of operation
needed, in turn, defines many other operations
decisions.Table 3-3 Differences in key
organizational decisions for different types of
operations.

Decisions: Intermittent (I) (labor int.) Repetitive

(R) (capital int.)
Product Design: (I): Early stage product life cycle.
(R): Late stage product life cycle (high
demand+standardization+know how).
Competitive Priorities (I): Delivery, flexibility, and
quality (variety)
(R). Cost (due to economies of scale), time, and
quality (consistency between items).
Facility layout (I): Resources are grouped by
function (fabricating or machining process).
Examples: lathing-milling-drilling-grinding-painting-
Facility Layout
 Vertical Integration
 Vertical integration is a strategic decision that
refers to the number of processes of the supply
chain (external operations) performed and
owned by a company.
 Supply chain is a set of processes that start
with raw materials acquisition and end with
delivery of finished products to customers.
 Vertical integration is good choice for
continuous operations (high volume and
narrow variety materials provide cost
justification) and poor for intermittent
operations (low volume and wide variety
materials).
 Example: A bakery that makes a variety of different
types of cakes and pies. The bakery buys different
fillings from different sources such as apple pie
filling from one company, chocolate filling from
another, and cream filling from another.
 Vertical Integration Decisions

H Poor

Variety

L Good

L Volume H
 The Supply Chain
Information

Suppliers Producers Distributors Customers

Materials, Finished Package Total

parts, sub- goods, end and delivery satisfaction
Products Products Products
assemblies, and products and and with quality,
and
Services
and services Services Services price,
services delivery,
and service
Inventory Inventory Inventory

Cash
 Designing Services
How are Services Different from
Manufacturing
1. Intangible Product
 Cannot be touched, seen, or stored in inventory for
later use or traded in for another model.
 The service design needs to define what the
customer is supposed to experience (e.g.,
relaxation, comfort, efficiency, and speed- such as
that offered by Federal Express).
 The experience of the customer is directly related
to customer expectations.
 For services to be successful the customer’s
experience needs to meet or even exceed his
expectations.
 Customer expectations can vary depending on the
2. High Degree of Customer Contact
 The customer is often present while the service is
being delivered, such as at a theatre, restaurant,
or bank.
 The customer contact with the service provider is often
the service itself, such as what you experience at a
doctor’s clinic.
 Unfortunately, since services often have multiple
service providers, there can be great variation in
the type of service delivered depending on the
skills of the service provider (e.g., hairdresser,
food server, physician).
 For a service to be successful, the service
experience must be consistent all times. This
requires
 Quality management to ensure high consistency and
reliability.
 Standardization and simplification of procedures in
 Classification of Services
 Classification of service operations based
on the degree of customer contact and
labor intensity.
 Pure Services (high customer contact): high
face-to-face contacts and high labor intensity,
low product standardization, and low sales
volume (e.g., restaurants, health-care
facilities, schools, and hospitals).
 Quasi-Manufacturing Services (low
customer contact): high degree of service
standardization, higher sales volume, and
lower labor intensity, and almost no face-to-
face contacts with customers (e.g.,
warehouses, distribution centers, and back
office facilities).

 Service Design: The Service
Concept/Package
 Successful service organizations don’t happen
spontaneously; they are carefully thought out and
planned, down to every employee action.
 To design a successful service we must start with a
service concept or idea, which needs to be very
comprehensive.
 When purchasing a service, customers usually buy a
service concept/package, or bundle of goods that
are composed of
 The physical goods (tangible aspects such as the food
consumed,as well as facilities such as comfortable tables
and chairs, table cloths, and fine china).
 The sensual benefits (intangible items that we experience
through our senses such as taste and smell of the food).
 The psychological benefits (intangible items such as the
promptness, friendliness, ambiance of the service provider,
as well as status, mind comfort, and well-being of the
experience).
 It is highly important that service design specifically
identify every aspect of the service package.
 We shouldn’t focus only on tangible aspects of the
Service Design Models
1. Substitute Technology for People (higher
standardization/consistency and lower service costs)
 One way to reduce the uncertainty (increase
consistency) of service delivery is to use
technology to develop a production line approach
to services as in McDonald’s. Some examples of its
use of technology include the following:
 Buzzers and lights are used to signal cooking time for
frying perfect French fries.
 The size of the French fryer is designed to produce the
correct amount of fries.
 The French fry scoop is the perfect size to fill an order.
 “Raw materials” are received in usable form (e.g.,
hamburger patties are pre-made; pickles and tomatoes
are pre-sliced; French fries are pre-cut).
 In addition to technology, there is consistency in
facilities and processes (e.g. cleanliness not left to
the discretion of workers).
 Today, we are accustomed to the product
2. Get Customers Involved (results in lowered
service costs)
 Taking advantage of the customer’s presence and
having him/her participate and be responsible for his
service (get him involved).
 As different types of customers have different
preferences, many facilities (gas stations) are finding
that it is best to offer full-service and self-service
options (pumps).
 Examples of self-serve areas include restaurants (salad bars,
food buffets, drinks, etc.), grocery stores, and hotels (in-
room coffee makers).
 Advantages
 Taking a large burden away from the service provider.
 Service delivery is made faster and costs are lowered due to
lowered staffing requirements.
 Empowering customers and giving them a great deal of
customer convenience and increasing their satisfaction.
3. Develop Special Customer
Relationships/Attention (geared towards high