operation management

1. Kahsu Mebrahtu (Asst. Professor)
MBA PROGRAMME
MEKELLE UNIVERSITY,CBE
Kahsu Mebrahtu, Mekelle University, College of
Business and Economics

2. • New products and services are the lifeblood of an
organization:
 It provide a competitive edge by bringing
new ideas to the market quickly
Strategically, it defines a firm’s customers ,
as well as its competitors
It capitalizes on a firm’s core competencies
and determines what new competencies
need to be developed

3. An effective design process:
 Matches product or service characteristics
with customer requirements
Ensures that customer requirements are
met in the simplest and least costly manner
Reduces the time required to design a
new product or service , and
Minimizes the revisions necessary to
make a design workable
Kahsu Mebrahtu, Mekelle University, College
of Business and Economics

4. PART I: PRODUCT DESIGN
 What is product? What is new product?
 Product design :
 Defines the appearance of the product
 Sets standards for performance
 Specifies which materials are to be used and
 Determines dimensions and tolerances
Kahsu Mebrahtu, Mekelle University, College of
Business and Economics 3 - 4

5. Strategies for New-Product
Introduction
 Market Pull (“We Make What We Can Sell”)
 Technology Push (“We Sell What We Can Make”)
 Inter-functional View
 Competitors :
 Perceptual maps
 Benchmarking and
 Reverse engineering
Kahsu Mebrahtu, Mekelle University, College of
Business and Economics 3 - 5

6. New Product Development Process
 Concept Development
 Development of Detailed Product Design&
Prototyping
 Pilot Production/Testing
 Mass Production and Commercialization
Kahsu Mebrahtu, Mekelle University, College of
Business and Economics 3 - 6

7. Stage I. Concept Development & Feasibility Study
 This involves: Generating Ideas for the new product
 New ideas can be generated from:
.. The market
.. Within the company (technology push& inter-functional)
..Competitors
 Market surveys , focus groups and interview are important tools to
get product ideas from customers.
 Brain storming, panel discussions , Delphi-method etc are
important tools in generating ideas from within.
 Marketing and sales departments have big role at this stage .
 The outputs of this stage should be :
..concept design and defining the target market
Kahsu Mebrahtu, Mekelle University, College of
Business and Economics 3 - 7

8. Design Process (cont.)
Copyright 2006 John Wiley &
Sons, Inc. 5-8
Pilot run
and final tests
New product or
service launch
Final design
& process plans
Idea
generation
Feasibility
study
Product or
service concept
Performance
specifications
Functional
design
Form design
Production
design
Revising and testing
prototypes
Design
specifications
Manufacturing
or delivery
specifications
Suppliers
R&D
Customers
Marketing Competitors

9. Idea Generation Sources
 Company’s own R&D
department
 Customer complaints or
suggestions
 Marketing research
 Suppliers
 Salespersons in the field
 Factory workers
 New technological
developments
 Competitors
Copyright 2006 John Wiley &
Sons, Inc. 5-9

10. Idea Generation Sources (cont.)
 Perceptual Maps
 Visual comparison of
customer perceptions
 Benchmarking
 Comparing product/service
against best-in-class
 Reverse engineering
 Dismantling competitor’s product to improve
your own product
Copyright 2006 John Wiley &
Sons, Inc. 5-10

11. cont… Feasibility Study
• At this stage the promising concepts undergo a feasibility study that
includes several analyses:
 Market analysis- assesses whether there is enough demand
for the proposed product –this requires customer survey
Economic analysis –estimating production and development
costs and comparing with estimated sales volume (tools such
as cost/benefit analysis , net present value or IRR.
Technical and strategic analyses –answer questions such as:
 Does the new product require new technology
 Is the risk or capital investment excessive
 Does the company have sufficient labour and management skills
 Does the new product provides a competitive advantage for the
company
Kahsu Mebrahtu, Mekelle University, College of
Business and Economics 3 - 11

12.  Performance specification-
Performance specifications are written for product
concepts that pass the feasibility study and are
approved for development
Kahsu Mebrahtu, Mekelle University, College of
Business and Economics

13. Stage II. Development of Detailed Product Design&
Prototyping
• This stage includes performing the following activities:
A. Rapid Prototyping
-This involves building a prototype , testing the prototype, revising the
design, retesting etc.
B. Form Design-refers to the physical appearance of product-its shape,
colour, size ,and style . Aesthetics such as image , market appeal and personal
identification
C. Functional Design
This is concerned with how the product performs . It seeks to meet the
performance specifications of fitness for use by the customer
Kahsu Mebrahtu, Mekelle University, College of
Business and Economics 3 - 13

14. Cont…
• How ever the detailed product design need to be evaluated
in terms of the following criteria:
Achievement of customer requirements and
product specifications
Expected quality and reliability of the
product
Reducibility and cost of the product
The impact on production of the company’s
other products
Kahsu Mebrahtu, Mekelle University, College of
Business and Economics 3 - 14

15. Stage III: Pilot Production/Testing
This stage requires the following activities :
 Small quantity production
 Market test of the sample products
 Gathering customer opinion on the sample
products
 Based on the customer feedback making the
necessary design changes in the product
STAGE IV : Mass Production and
Commercialization
Kahsu Mebrahtu, Mekelle University, College of
Business and Economics 3 - 15

16. Concurrent Design
 A new approach to design
that involves simultaneous
design of products and
processes by design teams
 Improves quality of early
design decisions
 Involves suppliers
 Incorporates production
process
 Scheduling and
management can be
complex as tasks are done
in parallel
Copyright 2006 John Wiley &
Sons, Inc. 5-16

17. Design for Manufacture and
Assembly (DFMA)
 Design for manufacture
 design a product for
easy and economical
production
 Design for assembly
 a set of procedures for:
 reducing number of parts in
an assembly
 evaluating methods of
assembly
 determining an assembly
sequence
Copyright 2006 John Wiley &
Sons, Inc. 5-17

18. DFM Guidelines
 Minimize number of parts and subassemblies
 Avoid tools, separate fasteners, and adjustments
 Use standard parts when possible and repeatable, well-
understood processes
 Design parts for many uses, and modules that can be
combined in different ways
 Design for ease of assembly, minimal handling, and
proper presentation
 Allow for efficient and adequate testing and replacement
of parts
Copyright 2006 John Wiley &
Sons, Inc. 5-18

19. Technology in the
Design Process
 Computer Aided Design (CAD)
 assists in creation, modification, and analysis of a
design
 includes
 computer-aided engineering (CAE)
 tests and analyzes designs on computer screen
 computer-aided manufacturing (CAM)
 ultimate design-to-manufacture connection
Copyright 2006 John Wiley &
Sons, Inc. 5-19

20. Value analysis (VA)
 Can we do without it?
 Does it do more than is required?
 Does it cost more than it is worth?
 Can something else do a better job?
 Can it be made by
 a less costly method?
 with less costly tooling?
 with less costly material?
 Can it be made cheaper, better, or faster by
someone else?
Copyright 2006 John Wiley &
Sons, Inc. 5-20

21. DFM: An Example
Kahsu Mebrahtu, Mekelle University, College of
Business and Economics 3 - 21
(c) Final design
Design for push-and-snap
assembly
(b) Revised design
One-piece base &
elimination of fasteners
(a) The original design
Assembly using
common fasteners

22. Design for Environment
 Design for environment
 designing a product from material that can be recycled
 design from recycled material
 design for ease of repair
 minimize packaging
 minimize material and energy used during manufacture,
consumption and disposal
 Extended producer responsibility
 holds companies responsible for their product even after its
useful life
Copyright 2006 John Wiley &
Sons, Inc. 5-22

23. Modular Design
 Allow greater variety
 Develop a series of basic product components
(modules) for later assembly
 Reduces complexity and costs associated with large
number of product variations
Kahsu Mebrahtu, Mekelle University, College of
Business and Economics 3 - 23

24. Kahsu Mebrahtu, Mekelle University, College of
Business and Economics

25. Special Considerations in Service
Design
 Services are intangible
 Service output is
variable
 Service have higher
customer contact
 Services are perishable
 Service inseparable from
delivery
 Services tend to be
decentralized and
dispersed
 Services are consumed
more often than
products
 Services can be easily
emulated(copied or
imitated )
Copyright 2006 John Wiley &
Sons, Inc. 5-25

26. Service
Design
Process
Copyright 2006 John Wiley &
Sons, Inc. 5-26
Performance Specifications
Service
Delivery Specifications
Physical
items
Sensual
benefits
Psychological
benefits
Design Specifications Service
Provider
Customer
Customer
requirements
Customer
expectations
Activities Facility
Provider
skills
Cost and time
estimates
Schedule Deliverables Location
Service Concept Service Package
Desired service
experience
Targeted
customer

27. Service Design Process
(cont.)
 Service concept
 purpose of a service; it defines target
market and customer experience
 Service package
 mixture of physical items, sensual
benefits, and psychological benefits
 Service specifications
 performance specifications
 design specifications
 delivery specifications
Copyright 2006 John Wiley &
Sons, Inc. 5-27

28. High v. Low Contact Services
(cont.)
 Facility
location
 Convenient to customer
Copyright 2006 John Wiley &
Sons, Inc. 5-28
Design
Decision
High-Contact Service Low-Contact Service
 Near labor or
transportation
source
Source: Adapted from R. Chase, N. Aquilano, and R. Jacobs, Operations Management for Competitive
Advantage (New York:McGraw-Hill, 2001), p. 210
 Facility
layout
 Must look presentable
, accommodate
customer needs and
facilitate interaction
with the customer
 Designed for
efficiency

29. High v. Low Contact Services
(cont.)
 Quality
control
 More variable since
customer is involved in
process; customer
expectations and
perceptions of quality
may differ; customer
present when defects
occur
Copyright 2006 John Wiley &
Sons, Inc. 5-29
Design
Decision
High-Contact Service Low-Contact Service
 Measured against
established
standards; testing
and rework possible
to correct defects
Source: Adapted from R. Chase, N. Aquilano, and R. Jacobs, Operations Management for Competitive
Advantage (New York:McGraw-Hill, 2001), p. 210
 Capacity  Excess capacity
required to handle
peaks in demand
 Planned for average
demand

30. High v. Low Contact Services
(cont.)
 Worker skills  Must be able to interact
well with customers and
use judgment in
decision making
Copyright 2006 John Wiley &
Sons, Inc. 5-30
Design Decision High-Contact Service Low-Contact Service
 Technical skills
Source: Adapted from R. Chase, N. Aquilano, and R. Jacobs, Operations Management for Competitive
Advantage (New York:McGraw-Hill, 2001), p. 210
 Scheduling  Must accommodate
customer schedule
 Customer
concerned only
with completion
date

31. The Service Triangle
Kahsu Mebrahtu, Mekelle University, College of
Business and Economics 3 - 31
The
Customer
The Service
Strategy
The
People
The
Systems

32. Service Strategy: Focus and
Advantage
Performance Priorities
• Treatment of the customer
• Speed and convenience of service delivery
• Price
• Variety
• Quality of the tangible goods
• Unique skills that constitute the service offering
Kahsu Mebrahtu, Mekelle University, College of
Business and Economics 3 - 32

33. End
Thank You
Kahsu Mebrahtu, Mekelle University, College of
Business and Economics 3 - 33