Lecture Fundamentals of operations management (4/e): Chapter 3 - Davis, Aquilano, Chase

Chapter 3 - New product and service development, and process selection. After studying this chapter you will be able to: Illustrate the importance of the development of new products and services to a firm’s competitiveness, identify the various types of new products that are developed by companies, introduce the new product design process and the concept of a product’s life cycle,...

New Product and Service  Development, and Process  Selection

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chapter 3

DAVIS AQUILANO CHASE

PowerPoint Presentation by Charlie Cook

Management 4e 

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• Introduce the new product design process and the

concept of a product’s life cycle.

• Demonstrate the necessity of concurrent product and process design as a new product or service is

developed.

• Present a framework for understanding how new

services are developed and introduced into the

marketplace.

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Managerial Issues

Managerial Issues

• Product life cycles becoming shorter.

–The need to bring products to market more

quickly and efficiently.

• Conducting product development on a

continuous basis.

–New products may represent a majority of sales

and profits.

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–Improved worldwide telecommunications

–Lower trade barriers (import duties and tariffs)

and the creation of trade organizations (NAFTA and European Union)

–Faster transportation of goods

• Advances in Technology

–Products become obsolete faster.

–Improved manufacturing processes (CAD and

CAM and industrial robots)

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• Greater Market Share

–Early entry captures large initial market share.

• Price Premiums

–Ability to initially charge more for new products.

• Quick Reaction to Competition

–Rapid response to competitor’s new products.

• Set Industry Standards

–Initial product sets market/industry standards.

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The Impact of Speed to Market on Sales

The Impact of Speed to Market on Sales

Exhibit 3.1a

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The Impact of Speed to Market on Profits

The Impact of Speed to Market on Profits

Exhibit 3.1c

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Categories of New Products

Categories of New Products

• Incremental or Derivative Products

–Are hybrids or enhancements of existing

products.

–Require minimal changes in design or process,

allowing for quick development.

–Require fewer resources to develop new

features or functions.

–Help ensure near-term cash flows by

maintaining current market share.

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Categories of New Products

Categories of New Products

• Next Generation or Platform Products

–Represent new “system” solutions for

customers.

• Require more resources to develop.

• Are key to continued product revenue growth.

• Breakthrough or Radical Products

–Create new product categories as core

businesses.

–Require substantial design and process change –Render existing products obsolete in long-term.

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The Trend toward Shorter  Product Development Times

The Trend toward Shorter  Product Development Times

Exhibit 3.2

Source: Data: Product Development & Management

Association, Business Week, January 27, 1997, p 6.

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The New Product  Development (NPD) Process

The New Product  Development (NPD) Process

• New Product Development Process

–The method by which new products evolve from

conceptualization through engineering to

manufacturing and marketing.

• Market Success Depends on NPD

–Continuously generate new product ideas.

–Convert ideas to reliable functional designs.

–Ensure that the designs are readily producible –Select the processes most compatible with

customer needs.

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Sequential Flow of Activities in  Product Design and Process Selection

Sequential Flow of Activities in  Product Design and Process Selection

Exhibit 3.3

Source: Reprinted with the permission of the Free Press, an imprint of Simon &

Schuster from Fast Cycle Times: How to Align Purpose, Strategy, and Structure

for Speed by Christopher Meyer Copyright © 1993 by Christopher Meyer.

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The New Product  Development (NPD) Process

The New Product  Development (NPD) Process

• Concurrent Engineering

–The simultaneous and coordinated efforts of all

functional areas which accelerates the time to market for new products.

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Concurrent Engineering Approach to NPD

Concurrent Engineering Approach to NPD

Exhibit 3.4

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–Market pull: the “voice of the customer” in

providing feedback to determine product

specifications.

–Technology push: a product developed by the

firm’s R&D is “pushed” into the market.

• Concept Development

–Initial product design developed and tested –Analysis of the market and customer

requirements.

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• Quality Function Deployment (QFD)

–The process for translating customer

requirements into a product’s design.

• Voice of the Customer

–Customer feedback is used in QFD process to

determine product specifications.

–Customer attributes:

• Product needs

• Product preferences

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–The part of the QFD process that uses customer

feedback for product design criteria.

–Use of QFD teams

• Identify important customer attributes.

• Design superior product.

• Shorten product design time.

• Facilitate interfunctional cooperation.

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• New Product Planning

–Build models of new product.

–Test new elements and components.

–Conduct detailed investment and financial

analyses of product’s anticipated life cycle.

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• Design for Manufacturability (DFM)

–Choosing manufacturing methods and

materials.

–Minimizing the number of individual parts:

• Reduces assembly time.

• Increases reliability.

– Setting product specifications.

• Output from the design activity that states all

criteria for building a product.

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Design Change to Reduce the Number of Parts in a Bracket

Design Change to Reduce the Number of Parts in a Bracket

Exhibit 3.6

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• Process that produces products in small lot sizes

(e.g., job and batch operations).

–Line-flow process

• Continuous process that produces high volume,

highly standardized products (e.g., assembly-line and continuous operations).

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Types of Processes Types of Processes

Exhibit 3.7

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Process Selection in Manufacturing

Process Selection in Manufacturing

• The Product-Process Matrix

–High production volumes and narrow product

lines make specialized equipment and

standardized materials economically feasible.

• Remaining in a process niche after the product

cycle has advanced to its next stage dooms a firm

to market failure.

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Matching Major Stages of  Product and Process Life Cycles

Matching Major Stages of  Product and Process Life Cycles

Exhibit 3.8

Source: Adapted from Robert Hay and Steven Wheelwright, Restoring Competitive Edge:

Competing through Manufacturing (New York: John Wiley & Sons, 1984).

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Product and Process Life Cycles Product and Process Life Cycles

Exhibit 3.9

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Types of Incremental and New Services

Types of Incremental and New Services

Exhibit 3.10

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Categories of New Services

Categories of New Services

• Incremental services

–Service line extensions

• New services that augment current services.

–Service improvements

• New services in which features have changed

relative to existing services.

–Style changes

• Modest forms of new services that change only the

appearance of the service.

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• New services in established markets already

served by existing services.

–New services for current markets

• Added services to current customers.

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A Framework for Categorizing New Services

A Framework for Categorizing New Services

Exhibit 3.11

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Categories of New Services

Categories of New Services

services Delivered in similar fashion

service Delivered in similar fashion

method

through a different/new channel

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The New Service Development (NSD) Process The New Service Development (NSD) Process

personnel, conducting pilot runs

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–The percent of time the customer is involved

relative to the time required to deliver the

service.

• Creation of the Service

–The work process involved in providing the

service.

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Low Degree

of Customer Contact

Percentage of customer contact (customer influence on the system) Difficulty in managing system

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The Service Process Matrix

The Service Process Matrix

Exhibit 3.13

Source: Roger W Schemenner, “How Can Service Businesses Survive and

Prosper?” Sloan Management Review 27, no 3 (Spring 1986), pp 21–32,

by permission of publisher Copyright 1986 by Sloan Management Review

Association, All rights reserved.

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Designing a New Service Organization

Designing a New Service Organization

• “Service Vision” (Heskett)

–Identification of the target market

• Who is our customer?

–Defining the service concept

• How do we differentiate our service in the market?

–Developing the service strategy

• What is our service package and its operating

focus?

–Creating the service delivery system

• What processes, staff, and facilities are needed?

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• Differences in service design and

manufacturing product development:

–Service design and process development are

simultaneous.

–Service operations cannot be copyrighted to

protect them from imitation by competitors.

–The service package is the major output of NSD –Prior training strongly influences the service

package.

–Service organizations can change their service

offerings very rapidly.

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Service­System Design Matrix

Service­System Design Matrix

Exhibit 3.14

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Strategic Uses of the  Service­System Design Matrix

Strategic Uses of the  Service­System Design Matrix

1 Enabling systematic integration of operations and marketing strategy

2 Clarifying exactly which combination of service

delivery the firm is actually providing

3 Permitting comparison with other firms in the way specific services are delivered

4 Indicating evolutionary or life cycle changes that might be in order as the firm grows

5 Providing flexibility

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• Facilities-based services that provide assistance

to customers who come to the service facility.

• Field-based services that provide on-site services

to customers.

–Customer support services

• Provide product information and services to

current external customers.

–Internal services

• Provide services for other internal organizational

units.

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Process Selection in Services (cont’d)

Process Selection in Services (cont’d)

• The Production Line Approach

–Orientation is toward the efficient production of

results—precisely controlled execution of the

“central function”.

• The Customer Involvement Approach

–Having the customer take a greater participatory

role in the production of the service.

• The Personal Attention Approach

–The central focus is complete customer

attention and satisfaction at all times.

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Common Characteristics of  Well­Designed Service Systems

Common Characteristics of  Well­Designed Service Systems

1 Each element of the service system is consistent

with the operating focus of the firm

2 It is user-friendly—customers can interact easily

3 It is robust—capable of coping with variations in

demand and resources availability

4 It is structured so that consistent performance by its

people and systems is easily maintained

5 It provides effective links between the back office

and the front office so that nothing falls between the cracks

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Common Characteristics of  Well­Designed Service Systems (cont’d)

Common Characteristics of  Well­Designed Service Systems (cont’d)

6 It manages the evidence of service quality in such a

way that customers see the value of the service

provided

7 It is cost-effective—there is a minimum waste of time

and resources in delivering the service