new product development - services

8/7/2019 New Product Development - Services

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Presented By:Presented By:

Learning GroupLearning Group A10A10

PGPM 09PGPM 09TermTerm IIII

Operations ManagementOperations Management

NEW PRODUCT DEVELOPMENTNEW PRODUCT DEVELOPMENT --

SERVICESSERVICES


SERVICESSERVICES


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IntroductionIntroductionIntroductionIntroduction

ServicesServices are operations with:are operations with:

Intangible outputs that ordinarily cannot beIntangible outputs that ordinarily cannot be

inventoriedinventoried

Close customer contactClose customer contact Short lead timesShort lead times

High labor costs relative to capital costsHigh labor costs relative to capital costs

Subjectively determined qualitySubjectively determined quality


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Facts about service businesses:Facts about service businesses:

Enormous diversityEnormous diversity

Service businesses can be any sizeService businesses can be any size

Twice as many nonTwice as many non--retail service businesses asretail service businesses asretailretail

Technical training important due to significantTechnical training important due to significant

dependence on computers, automation anddependence on computers, automation and

technologytechnology


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OtherFacts about service businesses:OtherFacts about service businesses:

Service workers well paid relative toService workers well paid relative to

manufacturingmanufacturing

Need better planning, controlling, andNeed better planning, controlling, andmanagement to stay competitivemanagement to stay competitive


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Some of the Largest Service BusinessesSome of the Largest Service BusinessesSome of the Largest Service BusinessesSome of the Largest Service Businesses

Rank in the top 20 US Corporations:Rank in the top 20 US Corporations:

AT&TAT&T

WalWal--MartMart

CitigroupCitigroup State FarmState Farm

SBC CommunicationsSBC Communications

Sear,

Roebuck & Company

Sear,

Roebuck & Company


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ProcessProcess

Planning and DesignPlanning and Design


SERVICESSERVICES


SERVICESSERVICES


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Product/Service DesignProduct/Service DesignProduct/Service DesignProduct/Service Design

When a product/service is designed:When a product/service is designed:

The detailed characteristics of the product/service areThe detailed characteristics of the product/service are

established.established.

The characteristics of the product/service directlyThe characteristics of the product/service directlyaffects how the product/service can be produced/affects how the product/service can be produced/

delivered.delivered.

How the product/service is produced/deliveredHow the product/service is produced/delivered

determines the design of the production/deliverydetermines the design of the production/deliverysystem.system.


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Product/Service DesignProduct/Service DesignProduct/Service DesignProduct/Service Design

Product/service design directly affects:Product/service design directly affects:

Product/service qualityProduct/service quality

Production/delivery costProduction/delivery cost

Customer satisfactionCustomer satisfaction


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Product/Service Design and DevelopmentProduct/Service Design and DevelopmentProduct/Service Design and DevelopmentProduct/Service Design and Development

Sources of Product InnovationSources of Product Innovation

Developing New Products/ServicesDeveloping New Products/Services

Getting Them to Market FasterGetting Them to Market Faster

Improving Current Products/ServicesImproving Current Products/Services Designing for Ease of ProductionDesigning for Ease of Production

Designing for QualityDesigning for Quality

Designing and Developing NewS

ervicesDesigning and Developing NewS

ervices


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Stage Operations Emphasis

Introductory Research

Product development

Process modification & enhancementSupplier development

Growth Capacity determination/enhancement

Maturity High volume production with innovation

Cost control

Reduction in optionsParing down of product line

Decline Termination of production if necessary

Operations Emphasis in Product Life CycleOperations Emphasis in Product Life Cycle


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Sources of Product/Service InnovationSources of Product/Service InnovationSources of Product/Service InnovationSources of Product/Service Innovation

CustomersCustomers

ManagersManagers

MarketingMarketing

OperationsOperations EngineeringEngineering

Research and Development (R&D)Research and Development (R&D)

Basic researchBasic research Applied researchApplied research


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Steps in Developing New ProductsSteps in Developing New ProductsSteps in Developing New ProductsSteps in Developing New Products

1.1. Technical and economic feasibility studiesTechnical and economic feasibility studies

2.2. Prototype designPrototype design

3.3. Performance testing of prototypePerformance testing of prototype

4.4. Market sensing/evaluation and economic evaluationMarket sensing/evaluation and economic evaluationof the prototypeof the prototype

5.5. Design of production modelDesign of production model

6.6. Market/performance/process testing and economicMarket/performance/process testing and economic

evaluation of production modelevaluation of production model

7.7. Continuous modification of production modelContinuous modification of production model


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Process Design in ServicesProcess Design in ServicesProcess Design in ServicesProcess Design in Services

Some of the factors important in process design forSome of the factors important in process design for

products are also important in services:products are also important in services:

Nature (level and pattern) of customer demandNature (level and pattern) of customer demand

Degree of vertical integrationDegree of vertical integration Production flexibilityProduction flexibility

Degree of automationDegree of automation

Service qualityService quality


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Three schemes for producing and delivering servicesThree schemes for producing and delivering services

QuasiQuasi--ManufacturingManufacturing

CustomerCustomer--asas--ParticipantParticipant

CustomerCustomer--asas--ProductProduct


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QuasiQuasi--ManufacturingManufacturing

Physical goods are dominant over intangiblePhysical goods are dominant over intangibleserviceservice

Production of goods takes place along a productionProduction of goods takes place along a productionlineline

Operations can be highly automatedOperations can be highly automated

Almost no customer interactionAlmost no customer interaction

Little regard for customer relationsLittle regard for customer relations ExampleExample banks checking encoding operationbanks checking encoding operation


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CustomerCustomer--asas--ParticipantParticipant

Physical goods may be a significant part of thePhysical goods may be a significant part of the

serviceservice

Services may be either standardized or customServices may be either standardized or custom High degree of customer involvement in theHigh degree of customer involvement in the

processprocess

Examples: ATM, selfExamples: ATM, self--service gas stationservice gas station


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CustomerCustomer--asas--ProductProduct

Service is providedService is provided through personal attention tothrough personal attention tothe customerthe customer

Customized serviceCustomized service onon the customerthe customer

High degree of customer contactHigh degree of customer contact

There is a perception of high qualityThere is a perception of high quality

Customer becomes the central focus of the processCustomer becomes the central focus of the process

designdesign Examples: medical clinic, hair salonExamples: medical clinic, hair salon


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ServiceService--System Design MatrixSystem Design Matrix

Mail contact

Face-to-face

loose specs

Face-to-face

tight specs

Phone

Contact

Face-to-facetotal

customization

Buffered

core (none)

Permeable

system (some)

Reactive

system (much)

High

LowHigh

Low

Degree of customer/server contact

On-site

technology

Sales

Opportunity

Production

Efficiency


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Process ReengineeringProcess ReengineeringProcess ReengineeringProcess Reengineering

The concept of drastically changing an existingThe concept of drastically changing an existing

process designprocess design

Not merely making marginal improvements toNot merely making marginal improvements to thethe

processprocess A correctly reengineered process should be moreA correctly reengineered process should be more

efficientefficient

A smaller labor force is often the resultA smaller labor force is often the result


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FacilityFacility Location:Location:

ServicesServices


SERVICESSERVICES


SERVICESSERVICES


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A Sequence of DecisionsA Sequence of DecisionsA Sequence of DecisionsA Sequence of Decisions

National DecisionNational Decision

Regional DecisionRegional Decision

Community DecisionCommunity Decision

Site DecisionSite Decision

Political, social, economic stability;

Currency exchange rates; . . . . .

Climate; Customer concentrations;

Degree of unionization; . . . . .

Transportation system availability;

Preference of management; . . . . .

Site size/cost; Environmental impact;

Zoning restrictions; . . . . .


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Factors AffectingFactors Affecting

the Location Decisionthe Location Decision



EconomicEconomic

Site acquisition, preparation and construction costsSite acquisition, preparation and construction costs

Labor costs, skills and availabilityLabor costs, skills and availability

Utilities costs and availabilityUtilities costs and availability Transportation costsTransportation costs

TaxesTaxes


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NonNon--economiceconomic

Labor attitudes and traditionsLabor attitudes and traditions

Training and employment servicesTraining and employment services

Communitys attitudeCommunitys attitude Schools and churchesSchools and churches

Recreation and cultural attractionsRecreation and cultural attractions

Amount and type of housing availableAmount and type of housing available


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Facility Types and TheirFacility Types and Their

Dominant Locational FactorsDominant Locational Factors

Facility Types and TheirFacility Types and Their

Dominant Locational FactorsDominant Locational Factors

RetailingRetailing and Forand For--Profit ServicesProfit Services

Near concentrations of target customersNear concentrations of target customers

Government and Health/Emergency ServicesGovernment and Health/Emergency Services

Near concentrations of constituentsNear concentrations of constituents


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Some Reasons theSome Reasons the

Facility Location Decision ArisesFacility Location Decision Arises



Changes in the marketChanges in the market

ExpansionExpansion

ContractionContraction

Geographic shiftGeographic shift Changes in inputsChanges in inputs

Labor skills and/or costsLabor skills and/or costs

Materials costs and/or availabilityMaterials costs and/or availability Utility costsUtility costs

. . . more. . . more


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Changes in the environmentChanges in the environment

Regulations and lawsRegulations and laws

Attitude of the communityAttitude of the community

Changes in technologyChanges in technology


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Analyzing Service Location DecisionsAnalyzing Service Location DecisionsAnalyzing Service Location DecisionsAnalyzing Service Location Decisions

Consumer BehaviorConsumer Behavior

ResearchResearch

Market ResearchMarket Research

Data Gathering forData Gathering for

Each Location AlternativeEach Location Alternative

Revenue Projections forRevenue Projections for

Each Location AlternativeEach Location Alternative

Why do customers buy ourproducts and services?

Who are our customers?

What are their characteristics?

What are the economic projections?

What is the time-phased revenue?

Profit Projections forProfit Projections for

Each Location AlternativeEach Location AlternativeWhat are the projected revenues

less time-phased operating costs?

Where are our customers concentrated?

What are their traffic/spending patterns?


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Qualitative Factors in Location DecisionsQualitative Factors in Location DecisionsQualitative Factors in Location DecisionsQualitative Factors in Location Decisions

OftenOften--important qualitative factors includeimportant qualitative factors include

HousingHousing

ClimateClimate

Community activitiesCommunity activities Education and health servicesEducation and health services

RecreationRecreation

ChurchesChurches

Union activitiesUnion activities Community attitudesCommunity attitudes


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Facility Layout:Facility Layout:

ServicesServices


SERVICESSERVICES


SERVICESSERVICES


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Facility LayoutFacility LayoutFacility LayoutFacility Layout

Facility layoutFacility layout means planning:means planning:

for the location of all machines, utilities, employeefor the location of all machines, utilities, employee

workstations, customer service areas, materialworkstations, customer service areas, material

storage areas, aisles, restrooms, lunchrooms,storage areas, aisles, restrooms, lunchrooms,

internal walls, offices, and computer roomsinternal walls, offices, and computer rooms

for the flow patterns of materials and peoplefor the flow patterns of materials and people

around, into, and within buildingsaround, into, and within buildings


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Locate All Areas In and Around BuildingsLocate All Areas In and Around BuildingsLocate All Areas In and Around BuildingsLocate All Areas In and Around Buildings

EquipmentEquipment Work stationsWork stations

Material storageMaterial storage

Rest/break areasRest/break areas

UtilitiesUtilities

Eating areasEating areas

AislesAisles

OfficesOffices


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Characteristics of the Facility Layout DecisionCharacteristics of the Facility Layout DecisionCharacteristics of the Facility Layout DecisionCharacteristics of the Facility Layout Decision

Location of these various areas impacts the flowLocation of these various areas impacts the flowthrough the system.through the system.

The layout can affect productivity and costs generatedThe layout can affect productivity and costs generated

by the system.by the system.

Layout alternatives are limited byLayout alternatives are limited by

the amount and type of space required for thethe amount and type of space required for thevarious areasvarious areas

the amount and type of space availablethe amount and type of space available the operations strategythe operations strategy

. . . more. . . more


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Characteristics of the Facility Layout DecisionCharacteristics of the Facility Layout DecisionCharacteristics of the Facility Layout DecisionCharacteristics of the Facility Layout Decision

Layout decisions tend to be:Layout decisions tend to be:

InfrequentInfrequent

Expensive to implementExpensive to implement

Studied and evaluated extensivelyStudied and evaluated extensively LongLong--term commitmentsterm commitments


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Service Facility LayoutsService Facility Layouts


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Characteristics of ServicesCharacteristics of ServicesCharacteristics of ServicesCharacteristics of Services

There may be a diversity of services providedThere may be a diversity of services provided

There are three dimensions to the type of service:There are three dimensions to the type of service:

Standard or custom designStandard or custom design

Amount of customer contactAmount of customer contact Mix of physical goods and intangible servicesMix of physical goods and intangible services

There are three types of service operations:There are three types of service operations:

Quasi manufacturingQuasi manufacturing

CustomerCustomer--asas--participantparticipant

CustomerCustomer--asas--productproduct


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Characteristics of Service Facility LayoutsCharacteristics of Service Facility LayoutsCharacteristics of Service Facility LayoutsCharacteristics of Service Facility Layouts

The encounter between the customer and the serviceThe encounter between the customer and the servicemust be provided for.must be provided for.

The degree to which customerThe degree to which customer--related features mustrelated features must

be provided varies with the amount of customerbe provided varies with the amount of customer

involvement and customer contact.involvement and customer contact.


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Planning Service Facility LayoutsPlanning Service Facility LayoutsPlanning Service Facility LayoutsPlanning Service Facility Layouts

QuasiQuasi--Manufacturing ServicesManufacturing Services

Several topics previously discussed underSeveral topics previously discussed under

Manufacturing Layouts are relevant here:Manufacturing Layouts are relevant here:

Principles of material handlingPrinciples of material handling CAD and simulation softwareCAD and simulation software

Line balancingLine balancing


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CustomerCustomer--asas--Participant & CustomerParticipant & Customer--asas--ProductProduct

An important element is providing for customerAn important element is providing for customer

waiting lineswaiting lines

Amount of space needed for service countersAmount of space needed for service countersand waiting customersand waiting customers

Placement of waiting lines in overall layoutPlacement of waiting lines in overall layout


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For many service operations, layouts are like processFor many service operations, layouts are like processlayouts in manufacturinglayouts in manufacturing

The departments of hospitals are grouped and locatedThe departments of hospitals are grouped and located

according to their processesaccording to their processes

In some cases,In some cases, closeness ratingscloseness ratings are used to reflect theare used to reflect the

desirability of having one department near anotherdesirability of having one department near another


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Using Closeness RatingsUsing Closeness Ratings

to Develop Service Facility Layoutsto Develop Service Facility Layouts



StartStart Let m = 1 and n = 6.Let m = 1 and n = 6.

Identify dept. pairs with CRof m.Identify dept. pairs with CRof m.

Develop layout with dept. pairs idenDevelop layout with dept. pairs iden--

tified in Step 2 adjacent to one another.tified in Step 2 adjacent to one another.

Identify dept. pairs with CRof n.Identify dept. pairs with CRof n.

Fit the dept. pairs identified in Step 4Fit the dept. pairs identified in Step 4

into the trial layout from Step 3.into the trial layout from Step 3.

Step 1Step 1

Step 2Step 2

Step 3Step 3

Step 4Step 4

Step 5Step 5

Examine the trial layout from Step 5.Examine the trial layout from Step 5.

If any CRs of dept. pairs are violated,If any CRs of dept. pairs are violated,

rearrange depts. to comply with CRs.rearrange depts. to comply with CRs.

Step 6Step 6

DoesDoes

m = 3 and n = 4m = 3 and n = 4??

StopStop

Let m = m + 1Let m = m + 1

and n = nand n = n -- 1.1.

NoNo

YesYes


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Typical Closeness RatingsTypical Closeness Ratings

ClosenessCloseness MeaningMeaning

RatingRating of RatingofRating

11 NecessaryNecessary

22 Very ImportantVery Important

33 ImportantImportant

44 Slightly ImportantSlightly Important55 UnimportantUnimportant

66 UndesirableUndesirable


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Example: AGAdvertisingExample: AGAdvertisingExample: AGAdvertisingExample: AGAdvertising


AG Advertising is moving into a new office suiteAG Advertising is moving into a new office suite

having seven large, roughly equal size rooms, one forhaving seven large, roughly equal size rooms, one for

each department of the firm.each department of the firm. Jennifer,Jennifer, the manager,the manager,

must now assign each department to a room. She hasmust now assign each department to a room. She has

developed a grid of closeness ratings (on the nextdeveloped a grid of closeness ratings (on the next

slide) for the 21 unique pairs of departments.slide) for the 21 unique pairs of departments.


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55

66

44

44

22

33 33

55

44

11

2266

2244

3333

116655

1122

Closeness Ratings GridCloseness Ratings Grid

Dept. ADept. A

Dept. BDept. B

Dept. CDept. C

Dept. DDept. D

Dept. EDept. E

Dept. FDept. FDept. GDept. G


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Unassigned Rooms of Office SuiteUnassigned Rooms of Office Suite


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Layout Satisfying All Pairings ofLayout Satisfying All Pairings of

Departments with 1 Closeness RatingsDepartments with 1 Closeness Ratings

CR= 1CR= 1BB DD

BB FF

CC GG


BB DD

FFCC GG


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Trying to satisfying all pairings of departments withTrying to satisfying all pairings of departments with

6 closeness ratings, we see that Dept. C needs to be6 closeness ratings, we see that Dept. C needs to be

moved.moved.

CR= 1CR= 1 CR= 6CR= 6

BB DD AA DD

BB FF BB CC

CC GG


BB DD

FFGG CC


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Layout Satisfying All Pairings of Departments with 6Layout Satisfying All Pairings of Departments with 6Closeness Ratings (note that we swapped Dept. D andCloseness Ratings (note that we swapped Dept. D and

Dept. F)Dept. F)

CR= 1CR= 1 CR= 6CR= 6

BB DD AA DD

BB FF BB CC

CC GG

BB FF AA

DD EE GG CC


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Capacity Planning, Aggregate Planning, MasterSchedule,Capacity Planning, Aggregate Planning, MasterSchedule,

and Shortand Short--Term SchedulingTerm Scheduling

Capacity Planning1. Facility Size

2. Equipment Procurement

Aggregate Planning

1. Facility Utilization2. Personnel needs

3. Subcontracting

Master Schedule

1. MRP

2. Disaggregation of master plan

Short-term Scheduling

1. Work center loading

2. Job sequencing

Long-term

Intermediate-term

Intermediate-term

Short-term


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Aggregate Plans for ServicesAggregate Plans for ServicesAggregate Plans for ServicesAggregate Plans for Services

For standardized services, aggregate planning may beFor standardized services, aggregate planning may besimpler than in systems that produce productssimpler than in systems that produce products

For customized services,For customized services,

there may be difficulty in specifying the nature andthere may be difficulty in specifying the nature andextent of services to be performed for eachextent of services to be performed for eachcustomercustomer

customer may be an integral part of the productioncustomer may be an integral part of the productionsystemsystem

Absence of finishedAbsence of finished--goods inventories as a buffergoods inventories as a buffer

between system capacity and customer demandbetween system capacity and customer demand


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Quality Parameters:Quality Parameters:

ServicesServices


SERVICESSERVICES


SERVICESSERVICES


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What is Quality?What is Quality?What is Quality?What is Quality?

The quality of a product or service is a customersThe quality of a product or service is a customers

perception of the degree to which the product orperception of the degree to which the product orservice meets his or her expectations.service meets his or her expectations.


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Design qualityDesign quality

How does the product or service appear inHow does the product or service appear inprepre--

production or preproduction or pre--deliverydeliveryphases (i.e. on aphases (i.e. on aCAD terminal, on a blueprint, etc.)CAD terminal, on a blueprint, etc.)

Conformance qualityConformance quality

Degree to which the design specifications areDegree to which the design specifications aremet by themet by theproduction or deliveryproduction or delivery systemsystem

Quality DefinitionsQuality DefinitionsQuality DefinitionsQuality Definitions


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Performance qualityPerformance quality

Degree to which the product or service meets orDegree to which the product or service meets or

exceedsexceeds customer expectationscustomer expectations in thein the

marketplace (i.e. product or servicemarketplace (i.e. product or serviceperformance characteristics)performance characteristics)



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Societal qualitySocietal quality

Degree to which the product or service meetsDegree to which the product or service meets

or exceedsor exceeds societal expectationssocietal expectations (i.e. product or(i.e. product or

service performance characteristics importantservice performance characteristics importantto the general public)to the general public)



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Nature ofQualityNature ofQualityNature ofQualityNature ofQuality

Dimensions of QualityDimensions of Quality

Determinants of QualityDeterminants of Quality

Costs of QualityCosts of Quality


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Some Dimensions of Product QualitySome Dimensions of Product QualitySome Dimensions of Product QualitySome Dimensions of Product Quality

PerformancePerformance relative to customers intended userelative to customers intended use

FeaturesFeatures special characteristicsspecial characteristics

ReliabilityReliability likelihood of breakdowns, malfunctionslikelihood of breakdowns, malfunctions

ServiceabilityServiceability speed/cost/convenience of servicingspeed/cost/convenience of servicing

DurabilityDurability amount of time/use before repairsamount of time/use before repairs

AppearanceAppearance effects on human senseseffects on human senses

Customer serviceCustomer service treatment before/during/after saletreatment before/during/after sale

SafetySafety user protection before/during/after useuser protection before/during/after use


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Determinants ofQualityDeterminants ofQualityDeterminants ofQualityDeterminants ofQuality

Quality of designQuality of design products/service designed basedproducts/service designed basedon customers expectations and desireson customers expectations and desires

Quality capability of production processesQuality capability of production processes processes must be capable of producing the productsprocesses must be capable of producing the products

designed for the customersdesigned for the customers Quality of conformanceQuality of conformance capable processes cancapable processes can

produce inferior product if not operated properlyproduce inferior product if not operated properly

Quality of customer serviceQuality of customer service a superior product doesa superior product does

not mean success; must have quality service alsonot mean success; must have quality service also Organization quality cultureOrganization quality culture superior product andsuperior product and

service requires organizationservice requires organization--wide focus on qualitywide focus on quality


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Appraisal costsAppraisal costs

Prevention costsPrevention costs

Internal failure costsInternal failure costs

External failure costsExternal failure costs

Costs ofQualityCosts ofQualityCosts ofQualityCosts ofQuality


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TraditionalQuality ManagementTraditionalQuality ManagementTraditionalQuality ManagementTraditionalQuality Management

Rigorous system of inspectionRigorous system of inspection

Defective products will be identified and discardedDefective products will be identified and discarded

Quality can be inspected into productsQuality can be inspected into products

Main decision is how many products to inspectMain decision is how many products to inspect(largely a question of economics)(largely a question of economics)


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TQM may be defined as managing the entireTQM may be defined as managing the entire

organization so that it excels on all dimensions oforganization so that it excels on all dimensions of

products and services that are important to theproducts and services that are important to the

customercustomer

Total Quality ManagementTotal Quality ManagementTotal Quality ManagementTotal Quality Management


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PDCA CyclePDCA CyclePDCA CyclePDCA Cycle

2. DO2. DO

Try plan onTry plan on

a test basisa test basis

1. PLAN1. PLAN

Identify imIdentify im--provements andprovements and

develop plandevelop plan

3. CHECK3. CHECK

Evaluate planEvaluate plan

to see if itto see if itworksworks

4. ACT4. ACT

PermanentlyPermanentlyimplementimplement

improvementsimprovements


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Quality Management in ServicesQuality Management in ServicesQuality Management in ServicesQuality Management in Services

Since many services are intangible, it is difficult toSince many services are intangible, it is difficult todetermine their qualitydetermine their quality

Customers set their own standards for servicesCustomers set their own standards for services

Perceived quality of service affected by thePerceived quality of service affected by the

surroundingssurroundings

Performance of service employees determines inPerformance of service employees determines in

large part the quality of the serviceslarge part the quality of the services


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new product development - services

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