bangalore 1 mba, semester 2 operations management module 2 : strategic decisions ms. aarti mehta...

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AMITY GLOBALBUSINESS SCHOOL Bangalore

MBA, Semester 2

Operations Management

Module 2 : Strategic Decisions

Ms. Aarti Mehta Sharma

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PRODUCT / service product life cycle

product design & planning Process Design

Module II

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Product “thing produced by labor or effort" or the "result

of an act or a process"

A product is anything that can be offered to a market that might satisfy a want or need.

Products are purchased as raw materials and sold as finished goods.

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Product Life Cycle • Every product has a certain marketable life

period.

• Depending upon the product life span will vary

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– PLC determines revenue earned and capacity planning

– Contributes to strategic marketing planning– May help the firm to identify when

a product needs support, redesign, reinvigorating, withdrawal, etc.

– May help in new product development planning

– May help in forecasting and managing cash flow

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AMITY GLOBALBUSINESS SCHOOL Bangalore Product Life Cycle

Analysis

Time

Introduction

Growth

Maturity

Saturation

Decline

Dem

and

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• Introduction – sales begin, production and mktg are developing and profits are negative

- Third generation mobile phones

- E-conferencing

- iris-based personal identity cards

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• Growth – sales grow, mktg intensifies, production concentrates on expanding capacity fast enough to keep up with the demand, profits begin

- Portable DVD Players- Email - Smart cards

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• Maturity – production concentrates on high volume, efficiency and low costs; mktg shifts to competitive sales promotion or maintaining market share

- Personal Computers- Faxes- Cotton t-shirts- Credit cards

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• Decline - Sales and profits start to decline, the organisation may try to change their pricing strategy to stimulate growth, however the product will either have to be re-modified, or replaced within the market.

- Typewriters- Handwritten letters- Cheque books

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SPAN • The cycle may vary from as little as 90

days, as in the case of “Krissh” products

• Shortened PLC’s (computers)

• As long as 100 or more years, as for gasoline-powered automobiles.

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AMITY GLOBALBUSINESS SCHOOL BangaloreWhy is Product Development

Important?1. To satisfy consumers (Demand) - Product items, no matter how successful

have a certain lifespan (product mortality)

- Replacement products need to be constantly planned

- True across all industries especially IT eg Microsoft’s new versions, Window’s XP, PS-2 etc)

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2.To create new jobs (Irish Economy)3.To maintain margins (Market share)4.Government Directives5.To expand the business (Growth)

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different kinds of new products • Generic – mkt opp - sporting, furniture,

tools

• Technology Push – new tech, finds mkt – gore-tex(artificial veins)

• Platform products ( estd product line ) – consumer electronics

• Process intensive = foods, chemicals

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AMITY GLOBALBUSINESS SCHOOL BangaloreProduct design

• New product

• Improve existing one

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AMITY GLOBALBUSINESS SCHOOL BangaloreService design

Service design is the activity of planning and organizing people, infrastructure, communication and material components of a service in order to improve its quality and the interaction between service provider and customers.

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The purpose of service design methodologies is to design according to the needs of customers or participants, so that the service is user-friendly, competitive and relevant to the customers. The backbone of this process is to understand the behavior of the customers, their needs and motivations

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New Product/ Service Development Process

Phases• Idea Generation / Idea Screening• Concept Testing• Business Analysis• Product Development ( concurrent engg ? )• Test Marketing• Production Ramp up• Introduction to market • Customer feedback

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AMITY GLOBALBUSINESS SCHOOL BangaloreDesign

21st century demands :

- New innovative products & services / improving existing products & s/ designing products & services for ease of prod

- Flexible production Systems ( lean/ assembly lines/ cellular)

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Innovation • Customers, marketing, production • Basic research / applied research- Technical and economic feasibility studies- Protoype design- Performance testing - Market testing- Design for mfg- Market, performance, process testing, and

economic evaluation of model- Continual modification of production model

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AMITY GLOBALBUSINESS SCHOOL Bangaloregetting new products to market

faster• Use Autonomous design and development

teams (GM, IBM, Motorola, GE, Nissan…)

• CAD / CAM

• Concurrent Engg - design the product and the accompanying production process simultaneously ( No throwing over the wall…)

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AMITY GLOBALBUSINESS SCHOOL BangaloreBoeing 787- Feb 2012

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boeing …• Computer simulation• Different groups of engrs design diff

parts(plumbing, air circulation systems)• Software reads all files simultaneously;

combines them 3 dimensionally; • Thus, designers of one system can check

for design interference with other systems• Speeds up product development, reduces

design and developmental cost

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AMITY GLOBALBUSINESS SCHOOL Bangaloreimproving the design of

existing products • Modifying and improving existing products• Improve performance, quality and cost in order to

maintain or improve mkt share of maturing products• For eg : At Toyota, improvements were made- Taillights hooked up with single connector instead of

two; savings = $ 0.42- Underside coated only where needed; savings= $2

Continuous design improvements (value analysis)

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AMITY GLOBALBUSINESS SCHOOL BangaloreFerrari --- limousine

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AMITY GLOBALBUSINESS SCHOOL BangaloreDesigning for

production• Specifications : Detailed descriptions of

material, or part, physical descriptions• Tolerances : a minimum and maximum of

each product; eg :4 ± 0.001 inch• Standardization : reduces variety among a

group of products or parts -- higher volume• Simplification :is the elimination of complex

features for higher customer satisfaction / reduced costs

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AMITY GLOBALBUSINESS SCHOOL Bangalore Designing for

QualityProducts of superior quality

• TQM

• Costs Of Quality

• Detecting Defects

• Preventing Defects

• Toyota, Intel, Motorola(6σ)

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contract manufacturers• Companies that manufacture for others

Automobile industry – interiors, taillights, GPS systems

Pharma – clinical trials

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Product FailureThe failure rate of new products remains high despite

product-planning processes• A recent survey of industrial and consumer goods’ firms revealed a failure rate of 35%

Product Failure can be defined in two ways:• Absolute Failure occurs if a company incurs a financial loss• Relative Failure occurs if a company makes a profit but does not attain profits or image objectives

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Why New Products FailThere are several reasons for absolute or

relative new-product failure, including

– Lack of differential advantage

– Poor planning

– Poor timing

– Unrealistic expectations and enthusiasm by product sponsor

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New Products/Services

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AMITY GLOBALBUSINESS SCHOOL BangaloreIdentify

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services revisited• Intangible items that cannot be inventoried• Close customer contact• Short lead times• High labor costs relative to capital costs• Subjectively determined quality• Great diversity in service jobs• 5: 1 • 2: 1 (non retail : retail )AT& T, Wal Mart, ICICI, Fullerton ….

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design • Quasi Mfg : prodn occurs; - back room

operations at banks, aircraft maintenance etc

• Customer as participant : customer involvement is high – retailing

• Customer as product : medical clinics, beauty parlors

Not mutually exclusive – Mc Donalds, Air India

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scheduling..• Services are produced and delivered by

people• Demand is non uniform( non peak incentives, advance

appointments,,waiting lines, part time personnel )

Taco Bell – computer simulation programme- how many employees are needed in a day

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Activity • Organise into groups• Choose one of these industries : generate an

idea for a new product / service (feasible) – name the product

- mobile phones - education - travel - textiles - restaurant - movie promotions

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• Make a role play / presentation to bring out all the steps involved in new product development

( 20 mins).

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Product design – the process of defining all of the companies product characteristics

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

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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

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• 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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AMITY GLOBALBUSINESS SCHOOL BangaloreService design

• Service design is unique in that the service and entire service concept are being designed– must define both the service and concept

- Physical elements, aesthetic & psychological benefits

e.g. promptness, friendliness, ambiance

– Product and service design must match the needs and preferences of the targeted customer group

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AMITY GLOBALBUSINESS SCHOOL BangaloreProcess

A process is any part of an organization that takes inputs and transforms them into outputs, that is of greater value than the inputs.

• Inputs• Outputs• Resources

• Activities

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Types of processes• Process focussed

• Product Focussed

- continuous

- discrete / assembly line / production line / Repetitive Focussed /

• Cellular processes

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Factors affecting Process• Expected demand

• No. of different products to be made

• Made to stock / order

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AMITY GLOBALBUSINESS SCHOOL Bangalore Process Focus

• Facilities are organized by process

• Similar processes are together– Example: All drill presses are together

• Low volume, high variety products

• ‘Jumbled’ flowOperation

Product A

Product B

1111 2222 3333• Other names

– Intermittent process/batch shop

– Job shop

– Example : machine, print, carpentry

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AMITY GLOBALBUSINESS SCHOOL BangaloreProcess-Focused - Examples

Bank

© 1995 Corel Corp.

Machine Shop© 1995 Corel Corp.

Hospital© 1995 Corel Corp.

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AMITY GLOBALBUSINESS SCHOOL BangaloreOperations of a Health CenterOperations of a Health Center

D

T

R P

B

D: Doctor (examination rooms)R: Radiology (X-ray)T: Triage (assess severity of illness)B: Blood (lab test)P: Pharmacy (fill prescriptions)

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AMITY GLOBALBUSINESS SCHOOL BangaloreHealth Center - Physical ExamHealth Center - Physical Exam

Physical exam

D

T

R P

B


Physical exam

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AMITY GLOBALBUSINESS SCHOOL BangaloreHealth Center - Broken ArmHealth Center - Broken Arm

Physical exam

Broken armD

T

R P

B


Broken arm

Physical exam

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AMITY GLOBALBUSINESS SCHOOL BangaloreHealth Center - FluHealth Center - Flu

Physical exam

Broken arm

Flu

D

T

R P

B


Broken arm

Flu

Physical exam

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Pros & Cons

• Advantages– Greater product flexibility– More general purpose equipment– Lower initial capital investment

• Disadvantages– More highly trained personnel– More difficult production planning & control– Low equipment utilization (5% to 25%)

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AMITY GLOBALBUSINESS SCHOOL BangaloreProduct Focussed - Repetitive /

Discrete• Facilities often organized by assembly

lines• Characterized by modules

– Parts & assemblies made previously

• Modules combined for many output options

• Other names– Assembly line – Production line

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AMITY GLOBALBUSINESS SCHOOL BangaloreRepetitive Focused Strategy -

Considerations• More structured than process-focused,

less structured than product focused• Enables quasi-customization• Using modules, it enjoys economic

advantage of continuous process, and custom advantage of low-volume, high-variety model

• Example : autos, motorcycles - Harley Davidson

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Repetitive-Focused Strategy - Examples

Truck

© 1995 Corel Corp.

Clothes Dryer

© 1995 Corel Corp.

Fast Food

McDonald’sover 95 billion served

McDonald’sover 95 billion served

© 1984-1994 T/Maker Co.

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Automobiles, toys, computers - Repetitive (discrete) flow – products are discrete

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AMITY GLOBALBUSINESS SCHOOL BangaloreProduct-Focused Strategy

- Continuous • Facilities are organized by product• High volume, low variety products• Example : commercial baked goods, steel,

glass - Tata Steel

Operation

Products A & B

11 22 33

• Other names– Line flow production

– Continuous production

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Operations of an Automobile Assembly PlantOperations of an Automobile Assembly Plant

A: Front-end body-to-chassis assembly

H: Hood attachmentF: Fluid fillingS: Start-up testing

A SH F

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AMITY GLOBALBUSINESS SCHOOL Bangalore AAP - Mid-sized 6 cylinderAAP - Mid-sized 6 cylinder



Mid-sized

6 cylinder

A SH F

Mid-sized 6 cylinder

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AMITY GLOBALBUSINESS SCHOOL Bangalore AAP - Compact 4 cylinderAAP - Compact 4 cylinder



Mid-sized

6 cylinder

Compact 4 cylinder

A SH F

Mid-sized 6 cylinder

Compact

4 cylinder

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• Advantages– Lower variable cost per unit– Lower but more specialized labor skills– Easier production planning and control– Higher equipment utilization (70% to 90%)

• Disadvantages– Lower product flexibility– More specialized equipment– Usually higher capital investment

Product-Focused Strategy - Pros & Cons

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AMITY GLOBALBUSINESS SCHOOL BangaloreProduct-Focused Examples

Paper (Continuous)© 1984-1994 T/Maker Co.

© 1995 Corel Corp.

Soft Drinks (Continuous, then Discrete)

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Process Focus Repetitive Focus Continuous Focus

1. Product: Smallquantity, largevariety

1. Product: Long runs,usually standardized

1. Product: Largequantities, smallvariety

2. Equipment:General purpose

2. Equipment: Special;assembly line

2. Equipment:Special-purpose

3. Operators broadlyskilled

3. Employees modestlytrained

3. Operators lessbroadly skilled

4. Many jobinstructions

4. Repetitive operations 4. Few work orders andjob instructions;standardization

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• Using technology and imagination to rapidly mass-produce products that cater to sundry unique customer desires.

• Under mass customization the three process models become so flexible that distinctions between them blur, making variety and volume issues less significant.

Mass Customization

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AMITY GLOBALBUSINESS SCHOOL Bangalore Cellular

Manufacturing / Group Technology _ Parts with similar characteristics are

grouped into part families– Parts in a part family are typically made on

the same machines with similar tooling

– Each part produced receives a multi-digit code that describes the physical characteristics of the part.

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– Some part families (those requiring significant batch sizes) can be assigned to manufacturing cells.

– The organization of the shop floor into cells is referred to as cellular manufacturing.

– Flow of parts within cells tend to be more like product-focused systems

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– Process changeovers simplified– Variability of tasks reduced (less training needed)– More direct routes through the system– Quality control is improved– Production planning and control simpler– Automation simpler

Advantages

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– Duplication of equipment

– Under-utilization of facilities

– Processing of items that do not fit into a family may be inefficient

Disadvantages

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ContinuumContinuum

Repetitive-Focused

Product-Focused

Process-Focused

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AMITY GLOBALBUSINESS SCHOOL BangaloreProduct Process Matrix

Product structureProduct Life Cycle

Process structure

Low vol – low stdardn

Multipl prods,low vol

Few maj prods,higher vol

Hi vol,hi std

Effectiveness measure

Job shop Comm printer, french rest

Flex high, unit cost-high

Batch Heavy eqpt

Assembly Line

Automobile, mc donalds

Continuous

Sugar refinery

Flex-low unit cost -lo

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AMITY GLOBALBUSINESS SCHOOL BangaloreProcess chart

• State exact materials

• Time required at every step

• Spatial movement patterns

• Transformations – input --- output

• Conformance standards( rejection / acceptance)

• Applicable for services & mfg

bangalore 1 mba, semester 2 operations management module 2 : strategic decisions ms. aarti mehta...

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