OPERATIONS MANAGEMENT

TEGT3722

Chapter 3 - Product Design & Process Selection

By

S.H Shaanika
sshaanika@unam.na
JEDS Campus
Learning Objectives

1. Define product design and explain its strategic impact on

organizations
2. Describe steps to develop a product design
3. Using break-even analysis as a tool in selecting between
alternative products
4. Identify different types of processes and explain their
characteristics

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 Learning Objectives – con’t

5. Understand how to use a process flowchart

6. Understand how to use process performance metrics
7. Understand current technology advancements and how they
impact process and product design
8. Understand issues impacting the design of service operations

3
Product Design & Process Selection - defined
Product design – the process of defining all of the companies
product characteristics
• Product design must support product manufacturability
(the ease with which a product can be made)
• Product design defines a product’s characteristics of:
•appearance, •tolerances, and
•materials, •performance standards.
•dimensions,

Process Selection – the development of the process

necessary to produce the designed product.

4
Design of Services versus Goods

Service design is unique in that the service and entire service concept
are being designed
• must define both the service and concept
- Physical elements, aesthetic & psychological benefits
e.g. promptness, friendliness, ambiance
• Product and service design must match the needs and preferences of the
targeted customer group

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Product Design
The Product Design Process
Idea development: all products begin with an idea from
customers, competitors, suppliers and company’s R&D.
Reverse engineering: disassembling of competitor’s
product for complete analysis
Benchmarking: comparing one’s own practices,
performances with that of ‘best-in -class’
Perceptual mapping

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Perceptual Map of Breakfast Cereals in Idea
Development

GOOD
TASTE

Cocoa Puffs

LOW HIGH
NUTRITION NUTRITION

Rice
Rice Cheerios
Cheerios
Krispies
Krispies
Wheaties
Wheaties

Shredded
Shredded
Wheat
Wheat
BAD
TASTE
 Product Design Process
• Idea developments selection affects
• Product quality
• Product cost
• Customer satisfaction
• Overall manufacturability – the ease with which the product can
be made

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The Product Design Process
Step 1 - Idea Development - Someone thinks of a need and a product/service design to
satisfy it: customers, marketing, engineering, competitors,
benchmarking, reverse engineering
Step 2 - Product Screening - Every business needs a formal/structured evaluation
process: fit with facility and labor skills, size of market, contribution
margin, break-even analysis, return on sales
Step 3 – Preliminary Design and Testing - Technical specifications are developed,
prototypes built, testing starts
Step 4 – Final Design - Final design based on test results, facility, equipment, material, &
labor skills defined, suppliers identified

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 The Product Design Process

Idea Feasibility
generation Product or study Performance
service concept specifications

Suppliers Customers Form design

R&D

Marketing Competitors Revising and testing

prototypes

Functional Production
design design
Design Manufacturing
New product or specifications or delivery
service launch specifications
Pilot run
Final design and final tests
& process plans
 Factors Impacting Product Design
• Must Design for
Manufacturing – DFM
• Guidelines to produce a
product easily and profitably
• Simplification - Minimize
parts
• Standardization
• Design parts for
multiply applications
• Use modular design
• Simplify operations

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Factors In Product Life Cycle
• Product life cycle – series of
changing product demand
• Consider product
life cycle stages
• Introduction
• Growth
• Maturity
• Decline
• Facility & process investment
depends on life cycle

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 Concurrent Engineering
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

• All functions form a design team that

develops specifications, involves customers
early, solves potential problems, reduces
costs, & shortens time to market

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Remanufacturing

Uses components of old products in the

production of new ones and has:
• Environmental benefits
• Cost benefits

Good for:
• Computers, televisions, automobiles

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Types of Processes

• Intermittent processes:
• Processes used to produce a variety of products with different
processing requirements in lower volumes. (such as healthcare
facility)

• Repetitive processes:
• Processes used to produce one or a few standardized products in
high volume. (such as a cafeteria, or car wash)

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Process Selection

• Product design considerations must include the

process
• Differences between Intermittent & Repetitive
Ops:
(1) the amount of product volume produced, and
(2) the degree of product standardization.

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Intermittent and Repetitive Operations

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Process Selection Types

• Process types can be:

• Project process – make a one-at-a-time product exactly to customer
specifications
• Batch process – small quantities of product in groups or batches based on
customer orders or specifications
• Line process – large quantities of a standard product
• Continuous process – very high volumes of a fully standard product
• Process types exist on a continuum

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Underlying Process Relationship Between Volume and
Standardization Continuum

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Process Selection Considerations

• Process selection is based on five considerations

1. Type of process; range from intermittent to repetitive or
continuous
2. Degree of vertical integration
3. Flexibility of resources
4. Mix between capital & human resources
5. Degree of customer contact

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Product Screening Tool –
Break-Even Analysis
Computes the quantity of goods company needs to sell to
cover its costs
• F – Fixed costs; VC – Variable cost/unit
• SP – selling price/unit
• Q- Quantity sold; QBE – Break even quantity
• Total cost – sum of fixed and variable cost
Total cost = F + (VC)*Q
• Revenue – amount of money brought in from sales
Revenue = (SP) * Q
• Break-even quantity, QBE = F/ (SP - VC)
Break-Even Analysis: Example

Fixed cost = F = $2,000

Variable cost = VC = $5 per raft
Selling Price= SP = $10 per raft

Break-even quantity is
F
Q= SP -VC = = rafts

6-23
Break-Even Analysis: Graph
Dollars

$3,000 — Total
cost
line

$2,000 —

$1,000 —

Total
revenue
line
400 Units
Break-even point

6-24
Process Selection

Process A Process B
$2,000 + $5v = $10,000 + $2v
$3v = $8,000
v = 2,667 rafts

Below or equal to 2,667, choose A

Above or equal to 2,667, choose B

6-25
 Choosing Between Three Processes

$20,000 — Total cost of

process A

$15,000 — Total cost of

process B

$10,000 —

$5,000 —

| | | |
1000 2000 3000 4000 Units

Example 4.3
6-26
Choosing Between Three
Processes

Process A Process B Process C

$2,000 + $5v $10,000 + $2v $14,000 + $v

Point of Indifference between Processes B and C

$10,000 + $2v = $14,000 + $v
v = 4,000

Example 4.2
6-27
 Choosing Between Three Processes

Total cost of
process C
$20,000 — Total cost of
process A

$15,000 — Total cost of

process B

$10,000 —

$5,000 —

| | | |
1000 2000 3000 4000 Units

Example 4.3
6-28
Choosing Between Three Processes

 Between 400 and 2667 units,

Choose Process A
Between 2667 and 4000 units,
 Choose Process B
 Above 4000 units,
 Choose Process C

6-29
 Process Design Tools
Often stages in the
production process can
be performed in parallel,
as shown here in (c) and
(d). The two stages can
produce different
products (c) or the same
product (d).

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Designing Processes
• Process design tools include
• Process flow analysis
• Process flowchart
• Design considerations include
• Make-to-stock strategy
• Assemble-to-order strategy
• Make-to-order strategy
See flowcharts for different product strategies at Antonio’s Pizzeria
(next slide)

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Flowchart for Different Product Strategies at Antonio’s
Pizzaria

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Process Flowchart of Customer Flow at
Antonio’s Pizzeria
A basic process
performance metric is
throughput time. A
lower throughput time
means that more
products can move
through the system.
One goal of process
improvement is to
reduce throughput
time.

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Process Performance Metrics
Process performance metrics – defined:
Measurement of different process
characteristics that tell us how a process is
performing
• Determining if a process is functioning properly is
required
• Determination requires measuring performance

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Process Performance Metrics

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Linking Product Design & Process Selection

• Product design and process selection are directly linked

• Type of product selected defines type of operation required
• Type of operation available defines broader organizational aspects
such as
• Equipment required
• Facility arrangement
• Organizational structure

36
 Linking Design & Process Selection
• Organizational Decisions appropriate for different types of operations

37
Linking Product Design & Process Selection
con’t
Product Design Decisions:
Intermittent and repetitive operations typically focus on producing
products in different stages of the product life cycle. Intermittent is
best for early in product life; repetitive is better for later when
demand is more predicable.

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Linking Product Design & Process Selection,
con’t
• Competitive Priorities: decisions of how a company will compete in
the marketplace. Intermittent operations are typically less
competitive on cost than repetitive operations. (Think “off the rack”
vs. custom tailored clothing.)

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Intermittent VS. Repetitive Facility Layouts

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Product and Service Strategy

• Type of operation is directly related to product and service strategy

• Three basic strategies include
1. Make-to-stock; in anticipation of demand
2. Assemble-to-order; built from standard components on order
3. Make-to-order; produce to customer specification at time of order

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Product and Service Strategy Options

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Degrees of Vertical Integration & Make or Buy
• Vertical integration refers to the degree a firm chooses to do
processes itself- raw material to sales
• Backward Integration means moving closer to primary operations
• Forward Integration means moving closer to customers

• A firm’s Make-or-Buy choices should be based on the following

considerations:
• Strategic impact
• Available capacity
• Expertise
• Quality considerations
• Speed
• Cost (fixed cost + variable cost)make = Cost (fixed cost + Variable cost)buy

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 Technology Decisions
Information Technology
• Simplify first then apply appropriate technology
ERP, GPS, RFID
Automation
Automated Material Handling: Automated guided vehicles (AGV), Automated storage &
retrieval systems (AS/RS)
Flexible Manufacturing Systems (FMS)
Robotics & Numerically-Controlled (NC) equipment

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E-manufacturing
• Web-based environment creates numerous business opportunities to
include;
• Product design collaboration
• Process design collaboration
• Computer-aided design – uses computer graphics to design new
products
• Computer-integrated manufacturing – integration of product design,
process planning, and manufacturing using an integrated computer
system

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Designing Services: How do they Differ from Manufacturing?

• Services are different from manufacturing as they;

• Produce intangible products
• Involve a high degree of customer contact
• Type of service is classified according to degree of customer contact

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 Designing Services
• Service Characteristics
• Pure services
• Quasi-Manufacturing
• Mixed services
• Service Package
• The physical goods
• The sensual benefits
• The psychological benefits
• Differing designs
• Substitute technology for people
• Get customer involved
• High customer attention

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Product Design and Process Selection Across the
Organization
• Strategic and financial of product design and process selection
mandates operations work closely across the organization
• Marketing is impacted by product that is produced
• Finance is integral to the product design and process selection issues due to
frequent large financial outlays

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Product Design and Process Selection Across the
Organization – con’t
• Strategic and financial of product design and process selection
mandates operations work closely across the organization
• Information services has to be developed to match the needs of the
production process
• Human resources provides important input to the process selection decisions
for staffing needs

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Chapter 3 Highlights
• Product design is the process of deciding on the unique characteristics and
features of a company’s product Process selection is the development of the
process necessary to produce the product being designed.
• Steps in product include idea generation, product screening, preliminary design
and testing, and final design
• Break-even analysis is a tool used to compute the amount of goods that have to
be sold just to cover costs.
• Production processes can be divided into two broad categories: intermittent and
repetitive operation project to batch to line to continuous

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Chapter 3 Highlights con’t
• Product design and process selection decisions are linked
• Process flow charts is used for viewing the flow of the processes
involved in producing the
• Different types of technologies can significantly enhance product and
process design. These include automation, automated material
handling devices, CAD, NC, FMS, and CIM
• Designing services have more complexities than manufacturing,
because service produce an intangible product and typically have a
high degree of customer contact.

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THANK YOU