Chapter 3, Part 1

Product Design

Operations Management
by
R. Dan Reid & Nada R. Sanders
2nd Edition © Wiley 2005

PowerPoint Presentation by R.B. Clough - UNH

© 2005 Wiley
 Designing Goods and Services

 The core product may be a good or a service

 Product design should support the business
strategy
 Product design should meet the needs of a
target market.
 Product design should give the company a
competitive advantage.

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 Designing Goods

 Form design: Sensory aspects of the

product (aesthetics)
 Size, color, shape, sound
 "Look and feel" – "smoothness", quality
impression
 Functional design: how the product
performs

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 Functional Design of Goods

 Fitness for use: performs basic

functions as intended
 Durability: how long the product lasts
 Reliability: consistent performance
 Maintainability: ease and cost of
repairs

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 Technical Specifications for Goods

 Dimensions
 Examples: length, diameter
 Target value: ideal or desired value for a
dimension
 Tolerance: how much can the actual
dimension vary from the target value
without affecting performance or
aesthetics?

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 Designing Services

 Physical elements: facility, equipment

and furnishings, inventories
 Sensory and aesthetic aspects
 Psychological benefits
 Quality standards

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 Steps in Product Design
Step 1: Idea Development

 Identify a need and a product to fill that need.

 Ideas can come from customers, marketing,
research and development, suppliers, or
analysis of competitive products
 Product benchmarking: comparing your product
with those of competitors
 Reverse engineering: disassembling a product
to analyze its design features
 Your product design should not infringe on a
competitor's patents.

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 Steps in Product Design
Step 2: Product Screening

 Marketing issues
 Current and future size of target market(s)
 Market share
 Pricing
 Effect on the firm's competitive position

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 Steps in Product Design
Step 2: Product Screening

 Operations issues
 Product technology
 Process technology
 Is new equipment needed? Can we build it or
buy it?
 Would we need a new or modified facility?
 Can the firm make this product with consistent
quality at a price that customers are willing to
pay?
 Does our labor force have the needed skills?

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 Steps in Product Design
Step 2: Product Screening (2)

 Financial analysis: what you need to

know
 Profit margin
 Ability to finance any needed investment
 Breakeven point: the volume at which
costs = revenue
 Return on assets
 Return on sales
 Return on investment

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 Step 2: Product Screening (3)
Financial Analysis (continued)
Break-Even Analysis

 Compute quantity of goods that

must be sold to break-even
 Compute total revenue at an
assumed selling price
 Compute fixed cost and variable
cost for several quantities
 Plot the total revenue line and
the total cost line
 Intersection is break-even
 Sensitivity analysis can be done
to examine changes in all of the
assumptions made

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 Steps in Product Design
Step 2: Product Screening (4)

 Financial analysis: check assumptions

 Identify all costs and all cost savings.
 If the firm does not introduce this product,
will it lose market share? How much?
 Cost and revenue estimates are not exact.
Perform the calculations using different
sets of assumptions (called sensitivity
analysis or case analysis).

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 Steps in Product Design
Step 3: Preliminary Design and Testing

 Develop technical specifications for

the product
 Develop and test prototypes
 Computer-assisted design (CAD) lets
engineers test a virtual model of the
product
 Physical prototypes are also used

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 Steps in Product Design
Step 3: Preliminary Design & Testing (2)

 Computer-aided design (CAD): use of

computer software to design products
 Similar software is used to make
animated films
 Computer-aided engineering (CAE): use of
computer software to evaluate and improve
product designs
 Specialized CAD/CAE software is used by
architects and landscape architects

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 Steps in Product Design
Step 3: Preliminary Design & Testing (3)

 Advantages of CAD and CAE

 Products can be designed, tested, and brought to
market faster
 Reduces design and testing costs

 Lets the firm test more designs  better products

 Lets designers in different places and different

companies work together
 Can be linked with computer-aided process
planning (CAPP) and computer-aided
manufacturing (CAM)

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 CAPP and CAM

 Computer-aided process planning (CAPP):

software that uses product specifications
generated by CAD and CAE to develop
manufacturing instructions for CAM
 Computer-aided manufacturing (CAM): the
use of computer software to control
manufacturing equipment

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 Steps in Product Design
Step 4: Final Design & Transition to Production

 Product specification
 Equipment selection

 Layout

 Job design

 Employee selection and training

 Supplier selection

Some steps will not be needed for minor

product variations
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 Design for Manufacture

 Value engineering: Eliminate product features

that add cost but do not add value to the
customer.
 Reduce the number of parts.
 Reduces the cost of ordering, purchasing, and
storing parts.
 Reduces the space required to hold inventory
 Reduces the number of tools and operations
required
 Reduces the time required to make the product

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 Design for Manufacture (2)

Example of reducing the number of parts,

operations, and tools.

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 Design for Manufacture (3)

 Modular design: Design products to be

assembled from standard components.
 Use standard parts to reduce design
costs and purchasing costs.

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 Concurrent Engineering

 Design the product and the process at the

same time.
 Use a design team that includes marketing,
operations, engineering, operations, and
suppliers.
 Stay in touch with customers during the design
process.
 Requires good project management and
coordination among all groups involved.
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 Advantages of Concurrent Engineering

 Increases the chances of a successful

product.
 Shortens time to market.
 Takes advantage of supplier expertise.
 Reduces design costs.
 Reduces the need to make expensive
changes in the product and the process
later.

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 The End
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