ORM I

PRODUCT/ SERVICE AND

PROCESS DESIGN

PRODUCT/ SERVICE DESIGN

Competitive strategy
Develop new products
Strategies for existing products
Strategies can be different during
different phases of product life cycle

Sales, cost, and cash flow

Product Life Cycles

Cost of development and production
Sales revenue
Net revenue (profit)
Cash
flow
Negative
cash flow

Introduction

Loss

Growth

Maturity

Decline

Figure 5.1

INTRODUCTION
COSTS
-Research
-Product development
-Process modification and
enhancement
-Supplier development

GROWTH
-Product design begins to
stabilize
-Effective forecasting
becomes necessary
-Increasing capacity may
be necessary

MATURITY

-High volume
-Improved cost control

DECLINE
New product to be introduced

.
.
.
.

DEVELOPING NEW
PRODUCTS

Technical and economic feasibility studies

Prototype design
Performance testing of prototype
Market sensing/evaluation and economic
evaluation of the prototype
. Design of production model
. Market/performance/process testing and
economic evaluation of production model
. Continuous modification of production
model

Product Development
System
Ideas
Ability
Customer Requirements
Scope of
product
development
team

Functional Specifications
Product Specifications Scope for
design and
Design Review
engineering
teams
Test Market
Introduction
Evaluation

QUALITY FUNCTION
DEPLOYMENT
-Identify customer wants
-Translate customer wants to product
specifications
- Compare performance to desirable
attributes

DEFINING THE PRODUCT

- Definition is in terms of functions
-Rigorous specifications
developed during the design
phase
- Engineering drawing
- Bill of material (BOM)

DEVELOPING NEW
PRODUCTS
The production model should exhibit:

low cost
reliable quality
superior performance
the ability to be produced in the
desired quantities on the
intended equipment

PRODUCT DEVELOPMENT PROJECTS

About 5% of all new-product ideas survive to
production, and only about 10% of these are
successful.
It is best to cancel unpromising newproduct/service development projects early!
Employees often become emotionally caught
up in these projects and are overly optimistic
An impartial management review board is
needed for periodic reviews of the progress
of these projects.

Designing and Developing New Services

Three general dimensions of service design
are:
Degree of Standardization of the Service
Degree of Customer Contact in Delivering
the Service
High level of contact (dress boutique) or low
level (fast-food restaurant)?

Mix of Physical Goods and Intangible

Services
Mix dominated by physical goods (tailors shop)
or by intangible services (university)?

Designing and Developing New

Services
Unless services are dominated by
physical goods, their development
usually does not require engineering,
testing, and prototype building.
Because many service businesses
involve intangible services, market
sensing tends to be more by surveys
rather than by market tests and
demonstrations.

Getting New Products to Market

Faster
Speed creates competitive
advantages
Speed saves money
Tools to improve speed:
Autonomous design and development
teams
Computer-aided design/computer-aided
manufacturing (CAD/CAM)
Simultaneous (concurrent) engineering

SUMMARY
Product/
Service Ideas
Economic and Technical
Feasibility Studies

Product/Service Design

Continuous
Interaction

Production Process Design

Produce and Market

New Product/Service