CHAPTER

Product Design
& Process Selection 3

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 Learning Objectives

• Explain the strategic impact of product design

• Understand the steps in product design
• Apply break-even analysis to guide decision-
making
• Identify the characteristics of different
production processes
• Illustrate process flowcharting
• Understand the impact of technology

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 Product & Service Design
• The process of deciding on the unique characteristics of a company’s product & service
offerings
• Serves to define a company’s customer base, image, competition and future growth

• Manufacturability
• The ease with which a product can be made.

• Product design
• The process of defining all of the product’s characteristics.

• product design is much more than working on diagrams, Product design brings together
marketing analysts, art directors, sales forecasters, engineers, finance experts, and other
members of a company to think and plan strategically.
• Service design
• The process of establishing all the characteristics of the service, including physical,
• sensual, and psychological benefits.

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 Products versus Services

• Products:
– Tangible offerings
– Dimensions, materials, tolerances &
performance standards
• Services:
– Intangible offerings
– Physical elements + sensory, esthetic, &
psychological benefits
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 Strategic Importance

• Products & service offerings must

support the company’s business
strategy by satisfying the target
customers’ needs & preferences
• If not, the company will lose its
customer base and its market position
will erode

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 Step–by-Step

• Idea Development:
– A need is identified & a product idea to satisfy it
is put together
• Product Screening:
– Initial ideas are evaluated for difficulty &
likelihood of success
• Preliminary Design & Testing
– Market testing & prototype development
• Final Design
– Product & service characteristics are set
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 Idea Development

• Existing & target customers

– Customer surveys & focus groups
• Benchmarking
– Studying “best in class” companies from your
industry or others and comparing their practices &
performance to your own
• Reverse engineering
– Disassembling a competitor’s product & analyzing
its design characteristics & how it was made
• Suppliers, employees and technical advances
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 Product Screening

• Operations:
– Are production requirements consistent with
existing capacity?
– Are the necessary labor skills & raw materials
available?
• Marketing:
– How large is the market niche?
– What is the long-term potential for the product?
• Finance:
– What is the expected return on investment?

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 Preliminary Design & Testing

• General performance characteristics

are translated into technical
specifications
• Prototypes are built & tested (maybe
offered for sale on a small scale)
• Bugs are worked out & designs are
refined

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 Final Design

• Specifications are set & then used to:

– Develop processing and service delivery
instructions
– Guide equipment selection
– Outline jobs to be performed
– Negotiate contracts with suppliers and
distributors

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 Break-Even Analysis

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 Break-Even Analysis

• Total cost = fixed costs + variable costs (quantity):

TC  F  VC Q
• Revenue = selling price (quantity)

R  SP Q
• Break-even point is where total costs = revenue:

TC  R or F  VC Q  SP Q
F
or Q
SP  VC
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 Example

• A firm estimates that the fixed cost of

producing a line of footwear is $52,000
with a $9 variable cost for each pair
produced. They want to know:
– If each pair sells for $25, how many pairs
must they sell to break-even?
– If they sell 4000 pairs at $25 each, how
much money will they make?
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 Example Solved

• Break-even point:
F $52,000
Q   3250 pairs
SP  VC $25  $9
• Profit = total revenue – total costs
P  SP Q  F  VC Q 
 $254000  $52,000  $94000 
 $12,000

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Design for Manufacture (DFM)
• Guidelines:

– Minimize the number of parts

– Use common or standardized parts
– Use modular design
– Avoid the need for tools (e.g.: snap together components)
– Simplify operations

• DFM guidelines focus on two issues:

• 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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 DFM Example

fewer chances for error, better quality, and lower costs

due to
shorter assembly time.
shorter assembly time.
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 DFM Benefits

• Lower costs:
– Lower inventories (fewer, standardized
components)
– Less labor required (simpler flows, easier
tasks)
• Higher quality:
– Simple, easy-to-make products means
fewer opportunities to make mistakes
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 Product Life Cycle

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 Concurrent Engineering
• A design approach that uses multifunctional teams to simultaneously design the product &
process.
• Replaces a traditional ‘over-the-wall’ approach where one group does their part & then
hands off the design to the next group.

• This type of approach has been found to achieve a smooth transition from the design stage
to actual production in a shorter amount of development time with improved quality results.

• The old approach to product and process design was to first have the designers of the idea
come up with the exact product characteristics. Once their design was complete they would
pass it on to operations, who would then design the production process needed to produce
the product.

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 Sequential Design

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 Concurrent Engineering

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Concurrent Engineering Benefits

• Representatives from the different groups can

better consider trade-offs in cost & design
choices as each decision is being made
• Development time is reduced due to less
rework (traditionally, groups would argue with
earlier decisions & try to get them changed)
• Emphasis is on problem-solving (not placing
blame on the ‘other group’ for mistakes)

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 Process Selection

• Intermittent operations:
– Capable of producing a large variety of
product designs in relatively low volumes
• Continuous operations:
– Capable of producing one (or a few)
standardized designs in very high volumes

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 Intermittent versus Continuous

Decision Intermittent Operation Continuous Operation

Product variety Great Small
Degree of standardization Low High
Organization of resources Grouped by Function Line flow
Path of products Varied, depends on product Line flow
Factor driving production Customer orders Forecast of demand
Critical resource Labor Capital
Type of equipment General purpose Specialized
Degree of automation Low High
Throughput time Longer Shorter
Work-in-process inventory More Less

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 Intermittent Operations

• Pros:
– Very flexible
• Cons:
– Material handling & variable costs are high
– Work scheduling is difficult

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 Continuous Operations

• Pros
– Highly efficient to produce large volumes
(low variable costs)
• Cons
– Inflexible to design changes
– Susceptible to component failure
– High fixed costs for capital equipment

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 Continuum of Process Types
• Projects
– Used for one-at-a-time products made exactly to customer specifications
• e.g. construction, shipbuilding, medical procedures, custom tailoring,
• and interior design.
• Batch processes (job shop):
– Used for small quantities (batches) with a high level of customization
• e.g. bakeries, education, and printing shops. The classes you are taking at the university
use a batch
• process.
• Line processes:
– Used for relatively high volumes with little customization
• e.g. cars, computers, television sets, shoes, candy bars, even food items.
• Continuous processes:
– Used for very high volume standardized products (often commodities)
• e.g. oil refineries, water treatment plants,

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 Continuum of Process Types

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 Vertical Integration

• How much of the supply chain is owned

by a company?
– A supply chain is the series of linked
activities from raw material extraction to
the final customer (Chapter 4)
• Consider the direction of integration:
– Forward (toward customers)
– Backward (toward suppliers)
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 Make-or-Buy

• Outsourcing decisions should consider:

– Long-term strategic impact
– Existing capacity available
– Expertise required & available
– Quality issues
– Ramp up speed & delivery issues
– Total costs

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 Process Flowcharting

• Graphically defines the operation, step-

by-step
• Used to help visualize the flow of work
& information:
– Can help identify potential problem areas
– Format can be as simple or detailed as
needed

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 Example

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 Process Technology

• Automation
• Automated Material Handling:
– Automated guided vehicles (AGV)
– Automated storage & retrieval systems (AS/RS)
• Computer-Aided Design (CAD) software
• Robotics & Numerically-Controlled (NC)
equipment
• Flexible Manufacturing Systems (FMS)
• Computer-Integrated Manufacturing (CIM)
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 The End

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