Operations Management

Lect. 3 “Product and Service Design and Process Selection”

Dr: Aly Hassan Elbatran

Head of Mechanical Engineering

Faculty of Engineering, Arab Academy for Science
and Technology and Maritime Transport, Egypt

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Product and Service Design - Process Selection

Product Design :-

The process of defining all of the company’s product characteristics

- Product design must support product manufacturability (the ease with which a
product can be made)

- Product design defines a product’s characteristics of:

• appearance, materials, dimensions, tolerances, and performance

standards

Process Selection :-

the development of the process necessary to produce the designed product.

Service Design:-
The process of establishing all the characteristics of the service, including physical,
sensual, and psychological benefits.

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Product Design Process

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 Product Design Process

Step 1 - Idea Development - Someone thinks

of a need and a product/service design to

satisfy it: customers, marketing, engineering,

competitors, benchmarking, reverse

engineering

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 Idea Development
Idea Development
• all products begin with an idea whether from:
• customers,
• competitors or
• suppliers

Benchmarking

• The process of studying the practices of companies considered “best-in-

class” and comparing your company’s performance against theirs.

Reverse Engineering

• The process of disassembling a product to analyze its design features.

Early supplier involvement

• Involving suppliers in the early stages of product design.

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 Product Design Process

Step 2 - Product Screening - Every business

needs a formal/structured evaluation

process: fit with facility and labor skills, size

of market, contribution margin, break-even

analysis, return on sales

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 Product Screening
 Operations
 What are the production needs of the proposed new product, and how do
they match our existing resources?
 Will we need new facilities and equipment?
 Do we have the labor skills to make the product? Can the material for
production be readily obtained?
 Marketing
 What is the potential size of the market for the proposed new product?
 How much effort will be needed to develop a market for the product, and
 what is the long-term product potential?
 Finance
 The production of a new product is a financial investment like any other.
 What is the proposed new product’s financial potential, cost, and return on
investment?

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 Product Screening Tools- Break Even Analysis
Break-even analysis: A technique used to compute the amount of goods a
company would need to sell to cover its costs.

QBE = F/ (SP - VC)

 QBE – Break even quantity

 F – Fixed costs

 SP – selling price/unit

 VC – Variable cost

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 Break Even Analysis

Break-even analysis also includes calculating (Q = number

of units sold)

Total cost – sum of fixed and variable cost

Total cost = F + (VC)*Q

Revenue – amount of money brought in from sales

Revenue = (SP) * Q

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Break Even Analysis

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 Break Even Analysis: Example
Fred Boulder, owner of Sports Feet Manufacturing, is considering whether to produce
a new line of footwear. Fred has considered the processing needs for the new
product as well as the market potential. He has also estimated that the variable cost
for each product manufactured and sold is $9 and the fixed cost per year is $52,000.
(a) If Fred offers the footwear at a selling price of $25, how many pairs must he sell to
break even?
(b) If Fred sells 4000 pairs at the $25 price, what will be the contribution to profit?

QBE = F/ (SP - VC)= 52,000/(25-9)= 3250 pairs

Profit = Total revenue- Total cost

((SP) * Q) - (F + (VC)*Q)
=(25*4000) - (52000+(9*4000)) =12000$

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 Product Design Process

Step 3 – Preliminary Design and Testing -

Technical specifications are developed,

prototypes built, testing starts

Step 4 – Final Design - based on test results,

facility, equipment, material, & labor skills

defined, suppliers identified

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 Factors Affecting Product Design
Design for Manufacture
A series of guidelines to follow in order to produce a product easily and profitably.

1. Design simplification means reducing the number of parts and features of the
product whenever possible. A simpler product is easier to make, costs less, and
gives higher quality.
2. Design standardization refers to the use of common and interchangeable
parts. By using interchangeable parts, we can make a greater variety of products
with less inventory and significantly lower cost and provide greater flexibility.

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 Factors Affecting Product Design
Product Life Cycle
 Product life cycle – series of changing product demand

 Consider product life cycle stages

 Introduction, Growth, Maturity, Decline

 Facility & process investment depends on life cycle

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 Factors Affecting Product Design
Concurrent Engineering

An approach that brings together multifunction teams in the early phase of

product design in order to simultaneously design the product and the process.

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 Factors Affecting Product Design
Remanufacturing

 Remanufacturing is a concept that has been gaining increasing importance

as our society becomes more environmentally conscious and focuses on

recycling and eliminating waste.

 Remanufacturing uses components of old products in the production of

new ones. In addition to the environmental benefits, there are significant

cost benefits because remanufactured products can be half the price of

their new counterparts.

 Remanufacturing has been quite popular in the production of computers,

televisions, and automobiles.

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 Process Selection
 Intermittent Operations are used to produce a variety of products with
different processing requirements in lower volumes.
 Examples are an auto body shop, a tool and die shop, or a healthcare
facility.
 Because different products have different processing needs, there is no
standard route that all products take through the facility.

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 Process Selection
 Repetitive Operations are used to produce one or a few standardized products
in high volume.
 Examples are a typical assembly line, cafeteria, or automatic car wash.
 Resources are organized in a line flow to efficiently accommodate production of
the product. Note that in this environment it is possible to arrange resources in a
line because there is only one type of product.
 This is directly the opposite of what we find with intermittent operations.

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Process Selection

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 Process Types
Production system, any of the methods used in industry to create goods
and services from various resources.

Types production systems:

1) Project process
2) Batch process
3) Line or Flow process
4) Continuous Process

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 Project Process
 Project processes are used to make one-of-a-kind products exactly to
customer specifications.
 These processes are used when there is high customization and low product
volume, because each product is different.
 Examples can be seen in construction, shipbuilding, medical procedures,
creation of artwork, custom tailoring, and interior design.
 With project processes the customer is usually involved in deciding on the
design of the product.

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 Batch Process

 Batch processes are used to produce small quantities of products in groups or

batches based on customer orders or product specifications.
 They are also known as job shops. The volumes of each product produced are
still small, and there can still be a high degree of customization.
 Examples can be seen in bakeries, education, and printing shops.

 So, if a manufacturer has the shortage of Product X and 100 units of this product
is consumed in one month, then the manufacturer can give orders for batch
production of 100 units of Product X.

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 Line or Flow Process
 Mass production is also known as flow production or assembly line production.
 With line processes the product that is produced is made in high volume with
little or no customization
 It is one of the most common types of products used in the automobile industry,
computers, television sets, shoes, candy bars, even food items and is also
used in industries where continuous production is required.

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 Continuous Production
 Continuous processes operate continually to produce a very high volume of a
fully standardized product.
 There is a lot of confusion between mass production and continuous
production. It can be differentiated by a single element. The amount of
mechanical work involved. In Mass production, both machines and humans
work in tandem. However, in continuous production, most of the work is done
by machines rather than humans. In continuous production, the production is
continuous, 24×7 hours, all days in a year.

 Steel Making
 Flour Factory
 Sugar Factory
 Paper Mills

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Process Relationship Between Volume and Standardization
Continuum

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 Process Design
 Process flow analysis:- A
technique used for evaluating a
process in terms of the sequence
of steps from inputs to outputs with
the goal of improving its design.
 Process flowchart:- A chart
showing the sequence of steps in
producing the product or service.
 Because the capacity of the
second stage is holding up the
speed of the process, it is called a
bottleneck which Longest task in
the process..

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 Process Design
 Make-to-stock strategy:- Produces standard products and services for immediate sale or delivery.
 Assemble-to-order strategy:- Produces standard components that can be combined to customer
specifications.
 Make-to-order strategy:- Produces products to customer specifications after an order has been received.

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Process Design

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 Process Performance Metrics

Definition: Measurement of different process

characteristics that tell us how a process is

performing and how it is changing over time.

 Determining if a process is functioning properly is

required

 Determination requires measuring performance

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Process Performance Metrics

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 Process Performance Metrics
Insurance Company is analyzing its operation in an effort to improve performance. The following data have
been collected:
It takes an average of 4 hours to process and close a title, with value-added time estimated at 30
minutes per title.
Each title officer is on payroll for 8 hours per day, though working 6 hours per day on average, accounting
for lunches and breaks. Industry standard for labor utilization is 80 percent.
The company closes on 8 titles per day, with an industry standard of 10 titles per day for a comparable
facility.
Determine process velocity, labor utilization, and efficiency for the company. Can you draw any
conclusions?
𝑡ℎ𝑟𝑜𝑢𝑔ℎ𝑝𝑢𝑡 𝑡𝑖𝑚𝑒 4 ℎ𝑜𝑢𝑟𝑠/𝑡𝑖𝑡𝑙𝑒
P𝑟𝑜𝑐𝑒𝑠𝑠 𝑉𝑒𝑙𝑜𝑐𝑖𝑡𝑦 = = =8
𝑣𝑎𝑙𝑢𝑒−𝑎𝑑𝑑𝑒𝑑 𝑡𝑖𝑚𝑒 0.5 ℎ𝑜𝑢𝑟/𝑡𝑖𝑡𝑙𝑒

6 ℎ𝑜𝑢𝑟𝑠/𝑑𝑎𝑦
Labor Utilization = = 8 ℎ𝑜𝑢𝑟/𝑑𝑎𝑦 = 75%

8 𝑡𝑖𝑡𝑙𝑒𝑠/𝑑𝑎𝑦
Efficiency = =10 𝑡𝑖𝑡𝑙𝑒𝑠/𝑑𝑎𝑦 = 80%

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 Linking Product Design & Process Selection

 Product design and process selection are directly linked

 Type of product selected defines type of operation required

 Type of operation available defines broader organizational

aspects such as

 Equipment required

 Facility arrangement

 Organizational structure

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Linking Product Design & Process Selection

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Facility Layout

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Product and Service Strategy

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 Technology Decisions
 Advancements in technology have had the greatest impact on process design
decisions.
 Technological advances have enabled companies to produce products faster, with
better quality, at a lower cost.
 Many processes that were not imaginable only a few years ago have been made
possible through technology.
 Information Technology (IT)
 Enterprise resource planning (ERP)
 GPS
 Radio frequency identification (RFID)
 Automation:- Using machinery to perform work without human operators.
 A flexible manufacturing system (FMS) is a type of automation system that
combines the flexibility of intermittent operations with the efficiency of repetitive
operations.
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 Product Design and Process Selection Across the Organization
 Operations is an integral part of these decisions because it understands issues of production,
ease of fabrication, productivity, and quality.
 operations work closely with other organizational functions to make these decisions.

Information
Marketing Finance Human Resources
System
• is impacted by • plays an integral • needs to be part • provides
product design role in product of the process important input to
issues because design and selection process selection
they determine process selection decisions. decisions
the types of issues because Operations because it is the
products that will these decisions decisions, such as function directly
be produced and require large forecasting, responsible for
affect marketing’s financial outlays. purchasing, hiring employees.
ability to sell • Finance needs to scheduling, and • If special labor
them. be a part of these inventory control, skills are needed
• marketing needs decisions to differ based on in the process of
to be closely evaluate the the type of production,
involved in financial impact operation the human resources
ensuring that the on the company company has. needs to be able
process can meet to provide
market demands information on the
for many years to available labor
come. pool.

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THANK YOU

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