Design of the production system

Product/Service and Design

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The Product design process• The purpose of any organisation is to provide products

and services to its customers. But the success of the product or service depends on its acceptance on the market. Therefore products that satisfy the needs of the customer must be designed, while maintaining quality. This will ensure long-term success of the organization. The design process primarily depends on the relationship between the marketing, design and operations functions of the organisation for its success. The cooperation of these functions should facilitate identification of customer needs, production of a cost-effective and quality design, which meets customer needs. Costly designs can result into an overpriced product that may loose market share.

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Roles of the functions Marketing function To evaluate consumer needs thru market research. Provision of a demand forecast in the market, while

taking into account the external environment. Understanding the attributes of the product/service life

cycle.• Engineering • Carrying out product/service design and re-engineering

Operations • Production of the good or service as designed using the

specified processes • Ensuring efficient levels of supply while delivering a high

quality product. 3

Product Design

• This specifies which materials are to be used; it determines the dimensions and tolerances, the appearance of the product, and sets standards for performance.

• Service design on the other hand • Specifies what physical items, sensual benefits and

psychological benefits the customer is to receive from the service.

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Effective process

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 • Minimizes the revisions necessary to make a design

workable.

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Product Design Process

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Idea generation Ideas for new products or improvement on already

existing products can be generated from many sources which may include the co’s Researh&Development dep’t, customer complaints or suggestions, marketing research, suppliers, sales persons in the field, factory workers and new technological developments and competitors. Perceptual maps (a visual method of comparing customer perceptions of different products or services), bench marking (Comparing a product or process against the best in class product) and reverse engineering (carefully dismantling competitor’s product to improve your own product) can help companies learn from competitors.

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Feasibility Study • This consists of a market analysis, an economic

analysis, and a technical/ strategic analysis. • Market analysis assesses whether there’s enough

demand for the proposed product to invest in its further development. It involves carrying out customer surveys, interviews, focus groups, or market tests so as to evaluate the product concept (refers to the physical product and the overall set of expected benefits that a customer is buying).

• Economic analysis: - consists of developing estimates of production and development costs and comparing them with estimates of demand. Estimates of demand can be derived from statistical forecasts of industry sales and estimates of market share, in the sector the product is competing in. 8

• Techniques such as cost/benefit analysis, cost- volume- profit (CVP) model, decision theory and accounting measures such as net present value (NPV) and Internal rate of return (IRR) may be used to calculate the

profitability of the product.• Technical analysis - Involves ensuring whether the

technical capability to manufacture the product exists. It ensures availability of appropriate materials, machinery, and skills to work with the materials.

• Strategic analysis involves ensuring that the product provides a competitive edge for the organisation, drawing on its competitive strengths and it’s compatibility with the core business.

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Preliminary Design • It involves testing and revising a prototype, until a viable

design is determined. The engineers take general performance specifications and translate them into technical specifications. It includes form design and functional design.

• Form design • Refers to the physical appearance of the product, i.e.

how it will look like in terms of shape, colour, size, image, market appeal, and style

• Functional design • Is concerned with how the product will perform. The key

characteristics considered here are reliability and maintainability.

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• Reliability: - is the probability that a given part or product will perform its intended function for a specific period of time under normal conditions of use.

• Maintainability/ serviceability: -Refers to the ease or cost with which a product or service is maintained or repaired

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Production design • Refers to how the product will be made. Designs

that are difficult to make always result into poor quality products. Recommended approaches to production design include simplification, standardisation and modularity.

• Simplification reduces the number of parts, assemblies, or options in a product, whereas with standardisation, commonly available and interchangeable parts can be used.

• Modular designing combines standardized building blocks, or modules, to create unique finished products.

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Final design and process plans

• This design consists of detailed drawings and specifications for the new product or service. It also includes process plans, which are instructions for manufacture, including necessary equipment and tooling, component sourcing recommendations, job descriptions and procedures for workers and computer programmes for automated machines.

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The final product should: Satisfy customer needs Be able to be produced economically and

efficiently Be of quality Be simple, safe and reliable to use Have good ergonomic features Be environmentally friendly both in use

and disposal Be economic and simple to maintain

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Service X-tics and Operational IssuesService X-tics and Operational Issues• Services

– acts, deeds, or performances

• Goods– tangible objects

• Facilitating services– accompany almost all purchases of goods

• Facilitating goods– accompany almost all service purchases

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Characteristics of services• The unique service characteristics include:

customer influence, intangibility, inseparability of production and consumption, heterogeneity, perishability, and labor intensity.

• These six characteristics are not necessarily independent of one another. They are interdependent and overlap to some degree. The combination of these characteristics makes service industries unique and the management of service operations complex.

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• Customer influence The presence of the customer in service delivery is one source of complexity not generally found in manufacturing settings. Customer influence (contact, interaction, encounters, participation, and involvement) reflects the impact of the customer on service operations.

• Intangibility is often cited as a fundamental difference between goods and services. Services cannot be touched, seen, and tasted in the same manner as manufactured goods. Services consist of facilitating goods, supporting facilities, implicit services, and explicit services. It is through a mix of these four elements that customers perceive and experience service.

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• Simultaneity This refers to the inseparability of production and consumption. This exposes the production process to customer examination and influence. Most goods are produced in factories without the presence of customers and then shipped, sold, and consumed in separate stages and separate places. Services are usually sold first and then produced and consumed simultaneously. There is no buffer or clear distinction between the production stage and the consumption stage.

• Heterogeneity The output of the service can vary from service provider to service provider, from customer to customer, and from day to day. To make it more complicated and interesting, customers' evaluation of the same service performance can be quite different. The main causes of heterogeneity are:

• The service may be intentionally customized.

• Human involvement of the service provider and the customer, naturally creates variability.

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• Perishability In services, unused capacity is capacity lost forever. Airline seats not taken, lodge rooms not occupied, and theater tickets not sold cannot be stored and sold tomorrow. This characteristic is known as perishability. It leads to difficulty in demand management, capacity utilization, production planning, and personnel scheduling.

• Labour intensity Service organizations are often characterized as being more labor intensive than manufacturing organizations. Service management is seen as being different from manufacturing management because of the higher labor content in most service settings.

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Differences between Goods and servicesIt’s important to note that not all differences apply to all services with equal force, in citing these differences we are dealing with generalizations which have to be taken into consideration.

• Nature of the Product While a good is a tangible product (object, device, thing) a service is an intangible product (a deed, an act, performance, or an effort). It is impossible for customer to sample – see, taste, feel, hear, or smell a service before they buy it unlike for the good. Like all performances, services are time bound and experiential, even though they may have lasting consequences. The person getting a service cannot know the outcome in advance. The customer has to have faith in the service provider. Service providers can do certain things to improve the client’s confidence.

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• Customer Involvement in Production Performing a service involves assembling and delivering the output of a mix of physical facilities and mental or physical labour. Often customers are actively involved in helping to create the service product–either by serving themselves or by co–operating with service personnel in certain setting. Thus the customer takes part directly in the production of a service.

• Services unlike goods can be categorised according to the degree of contact that the customer has with the service organisation.

• People as Part of the Product In high–contact services, customers not only come into contact with service personnel, they may get in contact with other customers. Also, the type of customer who patronises a particular service business helps to define the nature of the service experience. 21

• Quality Control Problems Manufactured goods can be checked for conformance with quality standards long before they reach the customer. But when services are consumed as they are produced, final “assembly” must take place under real–time conditions. As a result, mistakes and shortcomings are harder to conceal since production (provision) takes place in the presence of the customer.

• No inventories for Services In the goods industry goods can be preserved to meet future demand. Because a service is a deed or performance rather than a tangible item that the customer keeps, it cannot be inventoried. Services are consumed to a large extent at the same time as they are produced, thus services cannot be stored or transported. Of course, the necessary equipment, facilities and labour can be held in readiness to create the service, but these simply represent productive capacity, not the product itself.

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• Importance of the Time Factor Many services are delivered in real time; services are created, dispensed, and consumed simultaneously. A service is inseparable from its source whether the source is a person or machine. Moreover, customers have to be present to receive some service. There are limits as to how long customers are willing to be kept waiting for service to be provided (think of a hungry man waiting at a restaurant).

• Different Distribution Channels Unlike manufacturing firms, which require physical distribution channels for moving goods from factory to customers, service businesses either use electronic channels or else combine other types of channels. In the latter instance, service firms often find themselves responsible for managing customer-contact personnel. They may also have to manage the consumption behaviour of

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customers who enter the service factory to ensure that the operation runs smoothly and that one person’s behaviour doesn’t irritate other customers who are present at the same time.

• Potential Entrants Threat Unlike manufacturing, most service operations require very little in the way of capital investment, multiple locations, or proprietary technology. For many services, therefore, barriers to entry are low. Low barriers to entry imply that service operations must be very sensitive to potential as well as actual competitive actions and reactions. Competitors can enter an industry easily. For this reason service provider should always act very quickly to counter actions of competitors and potential entrants.

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The Service design process

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• 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

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The Product Life cycle• The Product Life Cycle (PLC) is based upon the

biological life cycle. For example, a seed is planted (introduction); it begins to sprout (growth); it shoots out leaves and puts down roots as it becomes an adult (maturity); after a long period as an adult the plant begins to shrink and die out (decline).

• The Product Life Cycle refers to the succession of stages a product goes through.

• In theory it's the same for a product. After a period of development it is introduced or launched into the market; it gains more and more customers as it grows; eventually the market stabilises and the product becomes mature; then after a period of time the product is overtaken by development and the introduction of superior

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• competitors, it goes into decline and is eventually withdrawn.

• However, most products fail in the introduction phase. Others have very cyclical maturity phases where declines see the product promoted to regain customers.

• market stabilizes and the product becomes mature; then after a period of time the product is overtaken by development and the introduction of superior competitors, it goes into decline and is eventually withdrawn.

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• However, most products fail in the introduction phase. Others have very cyclical maturity phases where declines see the product promoted to regain customers.

• A product is anything that can be offered to the market for attention, use or consumption that might satisfy consumer needs and wants. A product can comprise of a physical object, service, place, person, ideas etc.

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• Once a product has been designed and commercially launched on the market, a company must manage it by changing tastes, technology and competition. Every product goes thru a life cycle I.e. it grows, matures and eventually dies as newer products come along and serve the customers’ needs better. The product lifecycle describes the stages a new product idea goes through from the beginning to the end. It is the course that a product’s sales and profits take over its lifetime. The PLC is divided into 5 major stages

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• Product development stage This stage begins when a company finds and develops a new idea. During this stage, sales are zero, and profits are negative.

Introduction stage Is a stage in which the new product is first distributed and made available for purchase. - Production costs are high, frequent design changes may occur, little or no competition for the new product. Low sales, negative profits

• The operations objective should be to create product awareness and trial.

• Strategies

• Offer a basic product, use cost-plus price, and use heavy sales promotion to entice trial by customers, build selective

distribution, and build product awareness among early adopters and dealers.

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• Growth stage • This stage is characterized by a rapid increase in

volumes and the possibility of competitors entering the market. There will be increased sales, profits, an increase in customer acceptance, declining production costs resulting from process improvements, and standardisation.

• Operations objective; • Maximise the market share. • Strategies:

• Establish the product in the market as firmly as possible in order to secure future sales, Improve product quality and introduce new product features, Lower prices to

penetrate the market, Build awareness and interest in33

• the mass market, build extensive distribution, and reduce sales promotion to take advantage of heavy consumer demand.

• 4) Maturity stage • At this stage, competitive pressures will increase, sales

growth slows down, it is characterised by peak sales, high profits, number of competitors is stable and begins declining, high customer acceptance (low cost per customer), middle majority customers.

• Operations objective; • Maximise profits while defending market share • Strategies: • Brand the product to differentiate it from competitors and set

a competitive price

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• Design improvement to both the product and process, Increase advertising techniques to maintain interest and market share, minimise new investments, build more intensive distribution, diversify brands and models, increase promotion to encourage brand switching.

• 5) Decline stage• This is where the sales of a product decline or reduce. • Characteristics • Declining sales, declining number of competitors, low

cost per customer, declining profits. • Operations objective • Reduce expenditure and strengthen the brand.

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• Strategies • Phase out weak products and items • Reduce advertising to the level needed to retain

hardcore loyal customers, reduce price, be selective in distribution and phase out unstable outlets, and reduce sales promotion to minimum levels.

• NOTE• Not all products go thru these stages during their life

cycle. • Wide variations exist in the length or time a particular

product takes to pass through a given stage of the life cycle.

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Design of production Systems• This is the preliminary stage of the production process. It

is the art of planning, or creating systems for production and provision of products and services. In designing systems for both services and products, various factors have to be considered and these include:

Capital requirements Required skills for the design of the programme Product design Demand for the product or service Safety requirements etc.

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Classification of products in the production design system • The process or production design system involves the

collecting of human resource, machinery and other factors of production and organizing them in a process to produce the needed services or products.

• In designing such a process, products can be classified as follows:

i) Customized products These are specifically designed to the specifications and needs of the clients. Emphasis is placed in uniqueness, quality, and dependability especially on time of delivery and flexibility of the process to accommodate the different clients.

ii) Standardized products Are uniform products and are readily available in the inventory. Their prices are also pre determined

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Types of production systems • Process focused: • Under this type, the products, people and all other

resources are organised according to the process of production. The individual product requirements dictate the flow of the items being processed. The process-focused system is suitable for customized products.

• Product focused • Under this, the products, people and other resources

are organised according to the products to be produced. This system is suitable for standardized products.

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stages of designing a production system 1. Forming an organizing/ design team • Designing is more effectively carried in a team than as an

individual. Because of increasing complexity of technology, customer requirements, material specifications coupled with speed of development; there is need for teamwork. The design team can be internal e.g. comprising of the employees or it may be external i.e. consisting of consultants.

2. Setting objectives • These are the objectives of designing a production or

operation system and they should be well designed. Designed objectives can effectively be determined as a result of a market survey and customer specifications to come up with a system that will enable an organisation to produce what will be required by the customers

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3) Conceptual stage • Is a stage where all ideas and proposals carefully discussed by

the design team to agree on how the production system should be set or organized. At this stage the design team and the marketing function decide on the products to be produced, the nature of production system requirements, cost estimates etc.

4) Embodiment stage • In this stage the design team establishes how the production

system will operate and the necessary requirements for its operation. The team then tries to match the designed production system with the product design. The team also has to establish if the key designed objectives can be met and then re-examines the possibilities of change if necessary

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5) Detailing • Here the details in terms of shape, size, materials, costs etc

are set and analyzed to see if they conform to the quality standards required for the operation system. The success of this stage depends greatly on how well each of the preceding stages have been completed particularly in respect of the information feedback to the design team and the results of tests and other findings.

6) Pre-production batch stage • A pre-production batch needs to be successfully made i.e

meeting all the costs, quality criteria and includes any feedback from the market, the information must then be evaluated and adjustments made prior to full and normal production.

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7) Customer feedback • Designing of a production or operating system

can only be considered if the finalized version of the system has been in general use for sometime and the feedback from the customers carefully analyzed and forwarded to the appropriate departments of the organization.

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Reading assignment one

• Make notes on variety management and its importance.

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The end. Thank you

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