OPM 2103

Operations Management

Class 8 – Product and Service Design

Copyright ©2018 McGraw-Hill Higher Education. 1

 Class 8 Course Learning Outcomes

3. Apply appropriate qualitative and quantitative methods in various areas of

operations management that will facilitate managerial decisions aligned to the
strategic priorities of an organization.

Session Learning Outcomes

8.1 Explain the strategic importance of product and service design.

8.2 Describe what product and service design does.
8.3 Name the key questions of product and service design.
8.4 Identify some reasons for design or redesign.
8.5 List some of the main sources of design ideas.
8.6 Discuss the importance of legal, ethical, and sustainability considerations in product and
service design.

Copyright ©2018 McGraw-Hill Higher Education. 2

8.1 Explain the strategic importance of product and service design.

The essence of a business organization is the products and services it offers, and every
aspect of the organization and its supply chain are structured around those products and
services.

Organizations that have well-designed products or services are more likely to realize their
goals than those with poorly designed products or services.

Product or service design should be closely tied to an organization’s strategy. It is a

major factor in cost, quality, time-to-market, customer satisfaction, and competitive
advantage.

The introduction of new products or services, or changes to product or service designs,

can have impacts throughout the organization and the entire supply chain.

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8.2 Describe what product and service design does.

The various activities and responsibilities of product and service design include the
following (functional interactions are shown in parentheses):

1. Translate customer wants and needs into product and service requirements
(marketing, operations)
2. Refine existing products and services (marketing)
3. Develop new products and/or services (marketing, operations)
4. Formulate quality goals (marketing, operations)
5. Formulate cost targets (accounting, finance, operations)
6. Construct and test prototypes (operations, marketing, engineering)
7. Document specifications
8. Translate product and service specifications into process specifications (engineering,
operations)

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8.3 Name the key questions of product and service design.

From a buyer’s standpoint, most purchasing decisions entail two

fundamental considerations; one is cost and the other is quality or
performance. From the organization’s standpoint, the key questions are:

1. Is there demand for it? What is the potential size of the market, and
what is the expected demand profile (will demand be long term or short
term, will it grow slowly or quickly)?

2. Can we do it? Do we have the necessary knowledge, skills, equipment,

capacity, and supply chain capability? For products, this is known as
manufacturability; for services, this is known as serviceability. Also, is
outsourcing some or all of the work an option?
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8.3 Name the key questions of product and service design.

3. What level of quality is appropriate? What do customers expect? What

level of quality do competitors provide for similar items? How would it fit
with our current offerings?

4. Does it make sense from an economic standpoint? What are the

potential liability issues, ethical considerations, sustainability issues,
costs, and profits? For nonprofits, is the cost within budget?

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Activity 8.1 Product and Service Design

Instruction Read the scenario to answer the question.

SLO 8.1, 8.1, 8.3

Format Group Exercise

Time Limit 10 Minutes

Discussion 5 Minutes

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8.4 Identify some reasons for design or redesign.

Organizations become involved in product and service design or redesign for a

variety of reasons. The main forces that initiate design or redesign are market
opportunities and threats. The factors that give rise to market opportunities
and threats can be one or more changes:

1. Economic (e.g., low demand, excessive warranty claims, the need to reduce costs)
2. Social and demographic (e.g., aging baby boomers, population shifts)
3. Political, liability, or legal (e.g., government changes, safety issues, new regulations)
4. Competitive (e.g., new or changed products or services, new
advertising/promotions)
5. Cost or availability (e.g., of raw materials, components, labor, water, energy)
6. Technological (e.g., in product components, processes)

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8.5 List some of the main sources of design ideas.
Ideas for new or redesigned products or services can come from a variety of sources,
including customers, the supply chain, competitors, employees, and research.

1. Customers - Customer input can come from surveys, focus groups, complaints, and
unsolicited suggestions for improvement.

2. Supply chain and employees - Input from suppliers, distributors, and employees can
be obtained from interviews, direct or indirect suggestions, and complaints.

3. Competitors - One of the strongest motivators for new and improved products or
services is competitors’ products and services. Some companies purchase a
competitor’s product and then carefully dismantle and inspect it, searching for ways
to improve their own product. This is called reverse engineering.

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8.5 List some of the main sources of design ideas.

4. Research and Development - Research is another source of ideas for new or

improved products or services. Research and development (R&D) refers to organized
efforts that are directed toward increasing scientific knowledge and product or
process innovation.

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8.6 Legal, ethical, and sustainability considerations

Designers must be careful to take into account a wide array of legal and
ethical considerations. Generally, they are mandatory. Moreover, if there is a
potential to harm the environment, then those issues also become
important.

Product liability can be a strong incentive for design improvements.

Product liability is the responsibility of a manufacturer for any injuries or

damages caused by a faulty product because of poor workmanship or design

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8.6 Legal, ethical, and sustainability considerations

Ethical issues often arise in the design of products and services; it is

important for managers to be aware of these issues and for designers to
adhere to ethical standards.

Designers are often under pressure to speed up the design process and to
cut costs.

These pressures often require them to make trade-off decisions, many of

which involve ethical considerations.

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8.6 Legal, ethical, and sustainability considerations

Ethical Considerations – Example

One example of what can happen is “vaporware,” when a software company

doesn’t issue a release of software as scheduled as it struggles with
production problems or bugs in the software.

The company faces the dilemma of releasing the software right away or
waiting until most of the bugs have been removed—knowing that the longer
it waits, the more time will be needed before it receives revenues and the
greater the risk of damage to its reputation.

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8.6 Legal, ethical, and sustainability considerations

Product and service design is a focal point in the quest for sustainability. Key
aspects include cradle-to-grave assessment, end-of-life programs, reduction
of costs and materials used, reuse of parts of returned products, and
recycling (the three R’s).

1. Cradle-to-grave assessment, also known as life cycle analysis, is the

assessment of the environmental impact of a product or service throughout
its useful life, focusing on such factors as global warming (the amount of
carbon dioxide released into the atmosphere), smog formation, oxygen
depletion, and solid waste generation.

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8.6 Legal, ethical, and sustainability considerations

2. End-of-life (EOL) programs deal with products that have reached the end
of their useful lives. The products include both consumer products and
business equipment.
3. The Three R’s: Reduce, Reuse, and Recycle
• Reduce: Value Analysis - Value analysis refers to an examination of
the function of parts and materials in an effort to reduce the cost
and/or improve the performance of a product
• Reuse: Remanufacturing - Remanufacturing refers to refurbishing
used products by replacing worn-out or defective components, and
reselling the products.
• Recycle - Recycling means recovering materials for future use.

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Activity 8.2 Consequences of poor forecasting

Instruction Read the scenario to answer the question.

SLO 8.4, 8.5, 8.6

Format Group Exercise

Time Limit 10 Minutes

Discussion 5 Minutes

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Questions?

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