ORGANIZATIONS AND PRODUCTS Viability of organization and Customer Satisfaction “The basic purpose of any organization is the ‘making and selling of products or the rendering of certain services or both. However, organizations must make sure that the Gesign of the product they sell or the service they Tender are what the customers want ‘or willing to by. This alone can ensure their continued existence. Need for Continuous Efforts Th the environment in which organizations work, constant changes keep taking place. The changes may be in Sti, a ntuatomers needs and expectations * Spending parm of the people * Economic 2nd financial policies of the government Legistations relating to products and services * Technology * Competitors activities ° Internal environmer organization's desire to a) reduce cost by redesign to increase sales and thus enjoy economies of manufacture b) redesich to take advantage of new manufacturing technologies c) to eliminate unnecessary features. So, in order to meet these challenges send survive, organizations have to make continuous efforts to launch new products Or enhance their current ones. Product Defined Ayproduct may be defined as a tangible output obtained by the transformation of raw materials by a production system thal is aersnlally an input-process-output system. It ve a composite of characteristics and features “=physical and psychological-that is offered for purchase to a customer who may be consumer or an industrial purchaser. In terms of marketing, it is a bundle of benefits offered to a customer. product Development ; Tie the process by which new design ideas are bought from non-existence to se mcrahip by customers. Thes will have effect on ‘all the departments of the ‘organization as indicated below: Marketing and researcir identifies idea that customers will pay for. Design-winere design engineers will ‘raneform the ideas into profitable designs. Manufacturing- where the products will actually be made. ea mee product development needs 2 lot of money. Caeaenebmust offer the correct range of skills. product development is therefore a theme runt through an engineering organization. It is the very Tfeblood of the organization, and without it there can be no continued survival.Different Aspects of Design From the foregoing discussion, it is clear that design can have several aspects. We discuss below the more important ones that define the broad areas. I. Design for production. The focus:here will be on ease. and economy. This will require 1. Judicious choice of materials and. processes 2. Ensuring ease of manufacture i assembly 3. Paying sttontion to standardization and ‘simplification 4. Keeping strict contro! over cost. IL.Design for function. This implies value in use, as experienced in quality and reliability. This can be achieved by ensuring that the product 1. Functions with the desired degree ‘of accuracy 2. Gives long service life (durability) 3- Offers ease of use (Ergonomic considerations) 4, Optimizes space utilization 5. Works satisfactorily under tne stated operating conditions 6. Satisfies maintainability criteria in terms of ease in dismantling, easy access to parts, modularity, ease in repairs and replacements, interchangeability, etc. TIL. Design for appearance. The product should please the eye and attract the customers. IV. Design for distribution. The product design should offer 1. Ease and economy in packaging 2. Safe storage within minimum space 3. Ease in handling and transportation. V. Design for economy. This will consider cost aspects in all its dimensions. 1. Value engineering can be adopted to make the choice of appropriate materials and processes 2. Simplicity in design can be pursued to minimize manufacturing and assembly operations and reduce problems in packaging, storage, handling, and transportation. 3. Enhance maintainability thus reducing down time, cost of repairs and servicing, personnel and their training.© ECONOMIC AND FINANCIAL EVALUATION Tn order to see whether a desian/product concept is economically viable, following information is required: quotes 1. Esumate of the net capital outfay nequired, 2. Estimates ofthe availabilty and cost of capital to the company, and 3. A correct set of standards by which to select a design/product concept for execution 0 that the long-term economic benefits are maximized, Given the necessary information, a method has to be found to evaluate the profitability of, new investments, The main emphasis is on the return that will be derived from the capital invested in the project. In other words, the basic approach is to compare the benefits derived there from to the costs incurred. In selecting a suitable criterion, the following two fundamental principles should be kept in view: 1. The bigger the better principle. Other things being equal, bigger benefits are preferable to smaller ones. 2. The bird in hand principle. Other things being equal, early benefits are preferable to later benefits. “There are four basic methods to assess the economic viability of a project: 1. Non-discounted cash flow method: (2) Payback period method 2. Discounted cash flow method: (2) Net present value (NPV) method (b) Benefit-cost ratio (B-CR) method (c) Intemal rate of return (IRR) method. 1. (a) Payback period method Payback period is the time required to recover the original cash investment through annual ‘cash savings (inflows). Payback period (PBP) in years = Oral investment ‘Annual cash savings Example 1 Fan initial investment of Rs 20,000 yields an annual cash flow (savings) of Rs 5000, then PEP = 20,000 = 4 years 5000 Example 2 ‘An investment proposal requires an investment of Rs 50,000. The cash flow expected to be generated in different years is as follows; Year 1 2 3 4 5 Cash flow 20,000 22,000 12,000 12,000 10,000 Should the proposal be accepted if the maximum acceptable period is 3 years? Solution If the cash flow for a year is expected to be generated uniformly throughout the period, then the pay back period for an investment of Rs 50,000 can be calculated as follows: Recovery of investment in the first two years is 20,000 + 22,000 = 42,000 ‘The remaining amount (50,000-42,000) i.e., 8000 will be recovered in 8000/12,000 = 0.66 years.