CHAPTER 3-PRODUCT AND SERVICE DESIGN

3.1 Introduction

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. Hence,
organizations have a strategic interest in product and service design. 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. Consequently,
marketing, finance, operations, accounting, IT, and HR need to be involved. Demand
forecasts and projected costs are important, as is the expected impact on the supply chain.
It is significant to note that an important cause of operations failures can be traced to
faulty design. Designs that have not been well thought out, or incorrectly implemented,
or instructions for assembly or usage that are wrong or unclear, can be the cause of
product and service failures, leading to lawsuits, injuries and deaths, product recalls, and
damaged reputations. In this chapter you will discover insights into the design process
that apply to both product and service design.

3.2. Product Design

Design is the process of structuring of components parts /activities of products so that as

a unit it can provide value for the customer. Product is designed in terms of size, color,
shape, content and other related dimensions. Design greatly affects operation by
specifying the products that will be made and it is the prerequisite for operations to occur.
Who is responsible for developing design? It is generally true that design decision is not
the sole responsibility of operations department. What to produce rather is an interactive
decision of: marketing, purchasing, finance, engineering, etc. and involves active
participations of customers, suppliers, creditors, government agencies and other
stakeholders.

Most of us might think that the design of a product is not that interesting. After all, it
probably involves materials, measurements, dimensions, and blueprints. When we
think of design, we
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 usually think of car design or computer design and envision engineers working on diagrams. However,
product design is much more than that.

Product design brings together marketing analysts, art directors, sales forecasters, engineers, finance
experts, and other members of a company to think and plan strategically. It is exciting and creative, and it
can spell success or disaster for a company. Product design is the process of deciding on the unique
characteristics and features of the company‘s product. Product design is the process of dining all the
features and characteristics of just about anything you can think of. Consumers respond to a product‘s
appearance, color, texture, performance. All of its features, summed up, are the product‘s design.
Someone came up with the idea of what this product will look like, taste like, or feel like so that it will
appeal to you. This is the purpose of product design. Product design defines a product‘s characteristics,
such as its appearance, the materials it is made of, its dimensions and tolerances, and its performance
standards.
What Does Product and Service Design Do?

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)

Product and service design involves or affects nearly every functional area of an organization. However,
marketing and operations have major involvement.
3.3. Reasons for Product or Service Development
Product development is the process through which companies react to market signals, respond to changes in
customer demand, adopt new technologies, foray into new areas, and ensure continuous growth. It is a core
process in achieving strategic objectives, renewal of the company business model and deterring competition
from displacing the company from its market position.
New Product Development is a comprehensive set of multi-disciplinary processes that turns
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ge
into a product to satisfy a customer. Intense global competition, short product and technology lifecycles,
 unpredictable consumer buying patterns and possible market stagnation makes new product development a
critical activity in most businesses. There are differentreasons of developing new product or service.
Technological Reasons /Obsolete Technology
A company may need to discontinue production of a product since technology has become obsolete and is
beyond maintenance. New technology requires development of new products.
Product Target Gap
Sometimes a company wants to deliver a promised benefit to its customers but, it delivers less then what is
promised. A ―Product Target Gap‖ is there. The company must change the product and come up with
something new, unless it decides to make its product ―Price Advantage Product‖ and targets relatively
more bargain seekers.
Economic Reasons
1. Price and/or availability of Raw Materials & Other Resources
Direct and/or indirect resources (both raw materials and skilled human resources may become unavailable
over time. For instance, leather products, platinum, palladium, natural silk, black pearl, Matura diamond, etc.
forced many companies to change their products. Moreover, prices of resources may increase that may, in
turn, increase the cost of production higher than/equal to choke price or close to it. In addition, prices of
energy, raw materials, and wages may increase toa level to make the product unprofitable; the company
goes for something new.
2. An Unutilized Resource
When a company cannot fully utilize a resource, it tries to develop a new product to better utilize that resource.
3. A New Resource
When a company acquires a new resource (a new formula, a new design, a new technology, a newer invention,
a new raw material), it tries to make something new.
Changing Customer Tastes & Preferences Customers do not want to buy same thing again and again
They want something different over time. It is a common sense that over time our needs change as we want
to enhance or to maintain our lifestyles. In our Product Inventory Basket (PIB), we add many new things and
drop many old things. Consumer tastes & preferences change with age,marital status, occupational change,
migration, and many other things.

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4. Socio-legal Reasons
A company‗s one or more products may become illegal, immoral, or opposed to public policy. When Products
or their production and/or disposal are Unfriendly for ecological balance and/or physical environment (called
environmental outcomes of a product) must be changed and new ones must be developed.
5. Marketing Reason
• A New Market Opportunity - When a company finds a new market for its product; it changes the
product to better fulfil market-specific requirements.
• Contestable Market Effect - If a product is bringing profit to its producers, others also start
developing similar substitutes which are new products for them.
• Competitive Moves: When a company‗s product is deleted from the distribution channel, it
may need to change its product and/or develop a new product to better keep the
channelmembers satisfied
3.4. Strategies for New Product Introduction
There are three approaches to introducing new products: market pull, technology push and inter-functional.
1) Market Pull: is where the market is need of a product, so designers make a product to meet that need.
The best example of this is cameras; they have evolved over the years to meet the changing needs of the user.
Due to this development in the design in cameras (making them lightweight, more compact, clearer resolution
and so on) the editing software improved alongside.
Over recent years they have developed to get even smaller, and have been put into mobile phones, then as
people wants changed (people wanted to be able to take photos of themselves) the developed to be even
smaller and then moved to the front of the phone.
Other examples are; hybrid cars, recyclable carrier bags, low light energy bulbs.
2) Technology push: is a strategy that involves developing and bringing new technologies to market through
research and development (R&D) or production and sales activities.
It can also refer to public policies that incentivize innovation within firms, organizations, or governments.
It is where the technology is available and the designers make a product to use it.
The best example of this is touch screen technology; this was first developed by the Royal Radar
Establishment. In the 80s Hewlett Packard picked up on this technology and brought out a touch screen
computer.
Over recent years the technology has become more and more advanced and is now found in the majority of
mobile phones, laptops and computers.
Other examples; cassettes, products with smaller components.

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3) Inter-functional: It can be defined as the cooperation of the various internal business functions to achieve
the overall goals of the firm and insure its responsiveness to environmental changes.
This view holds that the product should not only fit the market needs but have a technical advantage as well.
To accomplish this, all functions (e.g., marketing, engineering, operations, and finance) should cooperate to
design the new products needed by the firm.
Often this is done by forming cross functional teams that are responsible for development of the new product.
This is the most appealing of the three views but also the most difficult to implement.
Cross-functional rivalry and friction must be overcome to achieve the degree of cooperation required for
inter functional product development to succeed.

3.5. The Designing Process

Achieving good design takes more than simply time and talent. It takes clarity around a specific goal, and when
a larger team is involved, collaboration and alignment. For that reason, the design process is crucial because
it‘s the disciplined approach that guides creative teams towards a clear and meaningful goal for their design
work. The design process is very important to non-designers too. For example, when you‘re designing a digital
product, cross-functional team members such as product managers, researchers, analysts, developers, and other
stakeholders have valuable input for what is being designed. The design process makes it easier for those
different individuals to get involved at the right time, such as during market research, brainstorming, user
testing, and Design Delivery. Ultimately, the design process provides healthy guidelines to ensure that your
design concepts meet user needs while staying brand consistent.
3.5.1. Objectives of Product and Service Design
The overall objective is to satisfy the customer while making a reasonable profit. These objectives
typically include the product or service performance, cost, and quality. It is crucial for designers to take
into account the capabilities of the organization to produce or deliver a given product or service. This is
sometimes referred to as design for operations. When the operations involve manufacturing, the term
often used is manufacturability: the ease with which design features can be achieved by manufacturing
and assembly. Failure to take this into consideration can result in reduced productivity, reduced quality,
and increased costs. For these reasons, it is wise for design to solicit input from manufacturing people
throughout the design process. Likewise, in the design of services, it is important to involve service
people in the design process to reduce the risk of achieving a design that looks good on paper, but
doesn‘t work in the real world. In some cases, there are regulatory requirements for safety and
environment. Finally, a design project has its own targets for development time and costs.
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3.5.2. Common design process challenges
Whether you‘re designing a small product feature, an entire website, or something in between, a few of them
challenges seem to always pop up in the design process.
a) Communicating design intent
Staying true to your vision and design intent from ideation all the way to finished product is a big challenge in
the design process. That‘s because it‘s not easy to communicate lots of design information to multiple members
of a product team who aren‘t designers themselves. Imagine having to describe a moving art installation to a
room full of people, including what it looks like, how it moves, and the smallest of details. On top of that, each
person in the room has varying levels of knowledge about art in general. This represents the communication
challenge that happens during the design process between designers, product managers, developers, QA,
stakeholders, and more.
b) Making designs that stand out
How do you ensure your new designs actually make an impact on your users and don‘t get overlooked
among competitors? And how do you push the envelope with your design concepts while also honoring
your brand and user needs? Making designs that stand out is a timeless challenge for design teams and it
comes up often in the design process, as that‘s when you have to make trade-offs between what‘s exciting
vs. what‘s practical.
c) Sharing designs with developers
For design projects like applications, websites, and full digital products and features, never underestimate the
importance of Design Delivery. It represents the ―passing of the baton‖ between the designers and developers,
two groups who operate from different sides of the brain yet rely on each other to realize a shared design vision.
While many think of this process as ―design handoff‖, relating to only specs, what developers actually want
when receiving designs is clarity and efficiency for their development workflow. Things that contribute to this
are design version history, clear instructions on design behavior, the big picture context of how designs fit in
a user flow, and reusable design elements in a design system.
3.6. New Product Development Process
New product development (NPD) is a process of taking a product or service from conception to market.
The process sets out a series of stages that new products typically go through, beginning with ideation and
concept generation, and ending with the product's introduction to the market. Occasionally, some of the
stages overlap or vary depending on the nature of the business.
To get to a final design of a product or service, the design activity must pass through several key stages.
These form an approximate sequence, although in practice designers will often recycle or backtrack through
the stages. The basic stages of product/service design are the following.
1. Idea generation 5. Prototype Testing
2. Feasibility analysis 6. Final Product Design
3. Initial (Preliminary) Product Design 7. Product introduction
4. Prototype development 8. Follow-up evaluation

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1. Idea Generations: - The first step to develop new product is to generate as much ideas as one
can. All product designs begin with an idea. The idea might come from a product manager who
spends time with customers and has a sense of what customers want, from an engineer with a
flair for inventions, or from anyone else in the company. To remain competitive, companies must
be innovative and bring out new products regularly. The ideas for new product or service
concepts can come from sources outside the organization, such as customers or competitors,
technology and from sources within the organization, such as staff (for example, from sales staff
and front-of- house staff) or from the R&D department.

A. Customer: customers are the principal source to generate new ideas. A product is useless if
nobody wants it. Manufacturers are always trying to develop new products that meet the needs
and demands of customers. Marketing can tap this source of ideas in a number of ways, such
as the use of focus group, surveys, and the analysis of buying patterns.

B. Competitors: One of the strongest motivators for new and improved products or services is
competitors‘ products and services. By studying a competitor‘s products or services and how
the competitor operates (pricing policies, return policies, warranties, location strategies, etc.),
an organization can glean many ideas that can help to achieve design improvement. Studying
the practices of companies considered ―best in class‖ and comparing the performance of our
company against theirs is called benchmarking. Beyond that, 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. Sometimes reverse
engineering can enable a company to leapfrog the competition by developing an even better
product.
C. New technology: another source of new ideas is new technology. In 1970s, for example, the
development of semiconductors, microchips, and microprocessors revolutionized the
electronic industries. This leads to many improvements in the design and functions of
numerous items such as television sets and business machines. These new innovations
replaced products based on older technologies. Also, entirely new products such as home
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 video equipment‘s, electronic games, and many others were created.
D. Suppliers; are still another source of ideas, and with increased emphasis on supply chains and
supplier partnerships, suppliers are becoming an important source of ideas.
E. Research and Development (R&D): Research is another source of ideas for new or
improved products or services and plays an important role in developing new products and
advancing technologies. Research and development (R&D) refer to organized efforts that are
directed toward increasing scientific knowledge and product or process innovation. The purpose
of R&D is to generate new ideas and concepts and to develop these ideas and concepts in to
useful products. Research usually means attempting to develop new knowledge and ideas in
order to solve a particular problem or to grasp an opportunity. Development is the attempt to
try to utilize and operationalize the ideas that come from research. Most of the advances in
semiconductors, medicine, communications, and space technology can be attributed to R&D
efforts at colleges and universities, research foundations, government agencies, and private
enterprises.
F. Ideas from staff: The contact staff in a service organization or the salesperson in a product-
oriented organization could meet customers every day. These staff may have good ideas about
what customers like and do not like. They may have gathered suggestions from customers or have
ideas of their own as to how products or services could be developed to meet the needs of their
customers more effectively

2. Step; Screening(Feasibility Analysis): - not all new ideas should be developed in to new
products and hence the second step is screening. The purpose of screening is to eliminate ideas
that do not appear to have a high potential for success and there for avoid expensive
development costs. The purpose of the concept-screening stage is to take the flow of concepts
and evaluate them. Generally, three major criteria (feasibility study) are used in initial screening.
Market feasibility, financial feasibility and technical feasibility
a. Market feasibility: Evaluate the new ideas in terms of whether the product has market or
not as the market feasibility proposed,
b. Technical feasibility: does the product confirm the design objective as per the technical
design (availability of technology and skilled labor), and
c. Financial feasibility: how well the product quality performance and costs confirm to the
design objectives.
To assist in product analysis, several methods have been developed.
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 I. Screening by check list: One is a check list scoring method that involves developing a list
of factors along with a weight for each. If the total score is above a certain minimum level
the new product idea may be selected for further development. Alternatively, the method may
be used to rank product ideas in priority order for selection.
II. Break-Even Analysis: A Tool for Product Screening it is a technique that can be useful when
evaluating a new product. This technique computes the quantity of goods a company needs
to sell just to cover its costs, or break even, called the ―break-even‖ point. When evaluating
an idea for a new product it is helpful to compute its break-even quantity. An assessment can
then be made as to how difficult or easy it will be to cover costs and make a profit.
The total cost of producing a product or service is the sum of its fixed and variable costs. A
company incurs fixed costs regardless of how much it produces. Fixed costs include overhead,
taxes, and insurance. Variable costs, on the other hand, are costs that vary directly with the number
of units produced, and include items such as materials and labor. Together, fixed and variable costs
add up to total cost:
we have the following equation:
Total cost = FC + (VC) Q

Where: FC = Fixed cost

VC = Variable cost per unit

Q = Number of units sold

The quantity produced is shown on

the horizontal axis and dollars are
shown on the vertical axis. Fixed cost is represented by a horizontal line and is the same regardless
of how much is produced. The diagonal line above fixed cost is total cost, which is the sum of
fixed and variable costs. When Q = 0, total cost is only equal to fixed cost. As Q increases, total
cost increases through the variable cost component. The upper diagonal in the figure is revenue.
Revenue is the amount of money brought in from sales:
Revenue = (SP) Q Where: SP = selling price per unit.
When Q = 0, revenue is zero. As sales increase, so does revenue. Remember, however, that to
cover all costs we have to sell the break-even amount. This is the quantity QBE, where revenue
equals total cost. If we sell below the break-even point, we will incur a loss, since costs exceed
revenue. To make a profit, we have to sell above the break-even point. Since revenue equals total
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 cost at the break-even point, we can use the above equations to compute the value of the break-
even quantity:
Total cost = total revenue FC + (VC) Q = (SP) Q

Algebraically solving for Q, we get the following equation:

QBE = 𝐶
𝑆𝑃−𝑉𝐶

Note that we could also find the break-even point by drawing the graph and finding where the total
cost and revenue lines cross. Break-even analysis is an excellent tool for more than simply deciding
between different products. It can be used to make many other decisions, such as evaluating
different processes or deciding whether it is better to make or buy a product.

3. Initial (Preliminary) Product Design

This stage of the product-design process is concerned with developing the best design for the new
product ideas. It is the translation of ideas in to products. Preliminary product design must specify the
product completely. At the end of the product design phase, the firm has a set of product specifications
and engineering drawing (or computer image) specified in sufficient detail that production prototype can
be built and tested. In the preliminary design tradeoffs between cost, quality and product performances
are considered.

4. Prototype Construction
If the preliminary product design is approved, a prototype/s may be built for further testing and analysis.
Several prototypes which closely resembles with the final products may be made by hand from some
artificial materials such as plastics, mud, clay, wood etc. For example, the auto industry regularly makes
clay models of new automobiles.

5. Prototype Testing:
A model is tested for its physical properties or uses under actual operating conditions. Testing of
prototypes is aimed at verifying marketing and technical performance. The purpose of a test market is to
gather quantitative data on customer acceptance of the new product. Prototype is also tested for technical
product performance. In general, such testing is important in uncovering any problems and correcting
them prior to full scale production. For example, auto manufacturer perform extensive road tests on new
models; similar experiments are performed on tires, airplanes, and sports equipment.

6. Final Product Design

Prototype testing may indicate certain changes in the preliminary product design. If changes are made

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 the product may be tested further to ensure final product performance. Market test is used to determine
the extent of consumer acceptance. If this market test is unsuccessful, return to the design review phase
(this phase is handled by marketing). During the final phase these changes are incorporated in to the
design specification. Drawing and specifications for the product are to be developed at this stage. And go
for full scale operations.

7. Product Introduction: this stage is used to promote the product; handled by marketing.
8. Follow-up Evaluation: it helps to determines if changes are needed & refine forecasts; handled
by marketing.

3.7. Value Analysis

Value analysis is a set of techniques, knowledge, and skills used to improve the value of a product by
eliminating unnecessary costs or improving its functions without compromising its quality, reliability, and
performance. It involves understanding the components of a product and related costs. Value analysis is
defined as ―an organized creative approach which has its objective, the efficient identification of unnecessary
cost-cost which provides neither quality nor use nor life nor appearance nor customer features. Value analysis
focuses engineering, manufacturing and purchasing attention to one objective-equivalent performance at a
lower cost. 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.

Typical questions that would be asked as part ofthe analysis include: Could a cheaper part or material be
used? Is the function necessary? Can thefunction of two or more parts or components be performed by a
single part for a lower cost? Can a part be simplified? Could product specifications be relaxed, and would this
result in a lower price? Could standard parts be substituted for nonstandard parts?

Value analysis is concerned with the costs added due to inefficient or unnecessary specifications and features.
Value is not inherent in a product, it is a relative term, and value can change with time and place.

It can be measured only by comparison with other products which perform the same function. Value is the
relationship between what someone wants and what he is willing to pay for it. In fact, the heart of value
analysis technique is the functional approach. It relates to cost of function whereas others relate cost to product.
It is denoted by the ratio between function and cost.

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 3.7.1. Steps in Value Analysis
In order to answer the above questions, three basic steps are necessary:
1) Identifying the function: Any useful product has some primary function, which must be
identified a bulb to give light, a refrigerator to preserve food, etc. In addition, it may have
secondary functions such as withstanding shock, etc. These two must be identified.
2) Evaluation of the function by comparison: Value being a relative term, the comparison
approach must be used to evaluate functions. The basic question is, Does the function
accomplish reliability at the best cost and can be answered only comparison.
3) Develop alternatives: Realistic situations must be faced, objections should overcome
and effective engineering manufacturing and other alternatives must be developed. In order
to develop effective alternatives and identify unnecessary cost the following thirteen value
analysis principles must be used:
o Avoid generalities.
o Get all available costs.
o Use information only from the best source.
o Brainstorming sessions.
o Blast, create and refine: In the blast stage, alternative productive products, materials,
processes or ideas are generated. In the ‗create‗ stage the ideas generated in the blast stage
are used to generate alternatives which accomplish the function almost totally. Inthe
refining stage the alternatives generated are sifted and refined so as to arrive at the final
alternative to be implemented
o Identify and overcome road blocks.
o Use industry specialists to extend specialized knowledge.
o Key tolerance not to be too light.
o Utilize the pay for vendors‗ skills techniques.
o Utilize vendors‗ available functional products.
o Utilize specialty processes.
o Utilize applicable standards.
o Use the criterion ‗Would I spend my money this way?
3.7.2 Benefits of Value Analysis
As we‘ve mentioned before, value analysis is crucial since it identifies possible problems and suggests
improvements that should be made in your company. This process helps:
Reduce costs;
Maintain high quality;
Provide an opportunity to use new technologies;
Eliminate waste;
Lower inventory;
Encourage new ideas;
Improve brand image;
Improve design

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3.8. Product Design
Product design brings together marketing analysts, art directors, sales forecasters, engineers, finance
experts, and other members of a company to think and plan strategically. It is exciting and creative, and it
can spell success or disaster. Product design is the process of defining all the features and characteristics
of just about anything you can think of, for both products and services. Consumers respond to a
product‗s appearance, color, texture, performance. All of its features, summed up, are the product‗s
design. Someone came up with the idea of what this product will look like, taste like, or feel like so that it
will appeal to you. This is the purpose of product design.
Product design: defines a product‗s characteristics, such as its appearance, the materials it is made of,
its dimensions and tolerances, and its performance standards.
3.8.1. The product design process
Certain steps are common in the development of most product designs. They are idea generation,
product screening, preliminary design and testing, and final design.
1) Idea Generation
All product designs begin with an idea. The idea might come from a product manager who spends
time with customers and has a sense of what customers want, from an engineer with a flair for
inventions, or from anyone else in the company.
To remain competitive, companies must be innovative and bring out new products regularly.
Sources of product ideas
o Ideas from Customers, Competitors, and Suppliers
1. The first sources of ideas are customers, the driving force in the design of goods and services.
 Marketing is a vital link between customers and product design.
 Market researchers collect customer information by studying customer buying patterns
and using tools such as customer surveys and focus groups.
 Management may love an idea, but if market analysis shows that customers do not like
it, the idea is not viable.
 Analyzing customer preferences is an on-going process.
 Customer preferences next year may be quite different from what they are today. For
this reason, the related process of forecasting future consumer preferences is
important, though difficult.
2. Competitors are another source of ideas. A company learns by observing its competitors‗
products and their success rate.
This includes looking at product design, pricing strategy, and other aspects of the
operation. Studying the practices of companies considered ―best in class‖ and
comparing the performance of our company against theirs is called benchmarking.
3. Reverse Engineering: Another way of using competitors‗ ideas is to buy a
competitor‗s new product and study its design features. Using a process called reverse
engineering; a company‗s engineers carefully disassemble the product and analyses its
parts and features.
4. Product design ideas are also generated by a company‗s R & D (research and
development) department, whose role is to develop product and process innovation.
5. Suppliers are another source of product design ideas.
To remain competitive more companies are developing partnering relationships with their suppliers,
to jointly satisfy the end customer. Suppliers participate in a program called early supplier
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 involvement (ESI) where suppliers are involved in the early stages of product design.
2) Screening
After a product idea has been developed it is evaluated to determine its likelihood of
success this is called product screening.
The company‗s product screening team evaluates the product design idea
according to the needs of the major business functions.
In their evaluation, executives from each function area may explore issues from the
following:
 Operations What are the production needs of the proposed new product and how do they
match our existing resources? Will we need new facilities and equipment? Do we have the
labour skills to make the product? Can the material for production be readily obtained
 Marketing What is the potential size of the market for the proposed new product? How much
effort will be needed to develop a market for the product and what is the long-term product
potential?
 Finance The production of a new product is a financial investment like any other. What are the
proposed new product‗s financial potential, cost, and return on investment?
 To assist in product analysis, several methods have been developed.
 Screening by check list: One is a check list scoring method that involves developing a list of
factors along with a weight for each. If the total score is above a certain minimum level the
new product idea may be selected for further development. Alternatively, the method may be
used to rank product ideas in priority order for selection.
 Break-Even Analysis: A Tool for Product Screening
Break-even analysis is a technique that can be useful when evaluating a new product. This technique
computes the quantity of goods a company needs to sell just to cover its costs, or break even, called the
―break-even‖ point. When evaluating an idea for a new product it is helpful to compute its break-even
quantity. An assessment can then be made as to how difficult or easy it will be to cover costs and make a
profit. A product with a break-even quantity that is hard to attain might not be a good product choice to
pursue. Next we look at how to compute the break-even quantity. The total cost of producing a product
or service is the sum of its fixed and variable costs. A company incurs fixed costs regardless of how
much it produces. Fixed costs include overhead, taxes, and insurance. For example, a company must pay
for overhead even if it produces nothing. Variable costs, on the other hand, are costs that vary directly
with the amount of units produced, and include items such as direct materials and labor. Together, fixed
and variable costs add up to total cost: Total cost =FC + VC (Q)
Where F= fixed cost
VC= variable cost per unit Q =number of units sold
Figure 3.1 below shows a graphical representation of these costs as well as the break-
even quantity. Fixed cost is represented by a horizontal line as this cost is the same
regardless of how much is produced. Adding variable cost to fixed cost creates total
cost, represented by the diagonal line above fixed cost. When Q = 0, total cost is only
equal to fixed cost. As Q increases, total cost increases through the variable cost
component. The blue diagonal in the figure is revenue, the amount of money brought
in from sales:

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 Revenue = (SP) Q
Where SP= selling price per unit
When Q = 0, revenue is zero. As sales increase, so does revenue.
Remember, however, that to cover all costs we have to sell the break-even
amount. This is the quantity QBE, where revenue equals total cost. If we
sell below the break-even point we incur a loss, since costs exceed revenue.
To make a profit, we have to sell above the break-even point. Since
revenue equals total cost at the break-even point, we can use the previous
equations to compute the value of the break-even quantity:
Total cost=total revenue F + (VC) Q = (SP) Q
Solving for Q, we get the following equation:
BEQ= Fixed cost

Selling price/ unit - variable cost / unit

Note that we could also find the break-even point by drawing the graph and finding where the total cost
and revenue lines cross.

Figure 3.1: Graphical approach to break-even analysis

Break-even analysis is useful for more than just deciding between different
products. It can be used to make other decisions, such as evaluating different
processes or deciding whether the company should make or buy a product.
3) Initial (Preliminary) Product Design and Testing
Once a product idea has passed the screening stage, it is time to begin
preliminary design and testing. At this stage, design engineers translate general
performance specifications into technical specifications. Prototypes are built and
tested. Changes are made based on test results, and the process of revising,
rebuilding a prototype, and testing continues.

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 4) Final Product Design
Following extensive design testing the product moves to the final design stage.
This is where final product specifications are drawn up. The final
specifications are then translated into specific processing instructions to
manufacture the product, which include selecting equipment, outlining jobs that
need to be performed, identifying specific materials needed and suppliers that
will be used, and all the other aspects of organizing the process of product
production.
3.8.2. Factors to be considered in product design
1) Design for Manufacture (DFM)
Design for manufacturability (DFM) is a product development approach that explicitly considers
the effectiveness with which an item can be made during the initial development of the product
design. This approach is based on the belief that the cost of developing and running the value
adding system is as important as the functionality and aesthetics of the product service bundles.
Manufacturability refers to the ease with which the product can be manufactured. Three concepts
are closely related to designing for easy of production. These are:
• Simplifications: is a design or redesign strategy that improves the manufacturability,
serviceability, or reliability of a product or service by reducing the complexity of its
design. Often a product or parts may be needlessly complex because of a designers or
product engineer‘s bias toward technological sophistication or perhaps because of
incremental design changes that have been made over a period of years.
• Specifications: is a detail description of material, parts, or products including physical
dimensions. These specifications profiled production department with precise information
about the characteristics of products to be produced.
• Standardization: refers to a design activity that reduce variety amount a group of product
or parts. Standardization of groups of products or parts usually results in higher volume
for each product or part model which can leads to lower production costs, higher product
quality, greater ease of automation, and lower inventory investment.
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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 2) Product Life Cycle
Another factor in product design is the stage of the life cycle of the product. Most products go
through a series of stages of changing product demand called the product life cycle. Many new
products and services go through a life cycle in terms of demand. When an item is introduced, it
may be treated as a curiosity. There are typically four stages of the product life cycle: introduction,
growth, maturity, and decline.
Stage 1 Introduction: Demand is generally low because potential buyers are not yet familiar with
the item. Products in the introductory stage are not well defined and neither is their market. Often
all the ―bugs‖ have not been worked out and customers are uncertain about the product.
Stage 2 Growth: In the growth stage, the product takes hold and both product and market continue
to be refined. With the passage of time, design improvements usually create a more reliable and
less costly product. Demand then grows for these reasons and because of increasing awareness of
the product or service. Higher production volume will involve different methods and contribute to
lower costs.
Stage 3 Maturity: where demand levels off and there are usually no design changes. The product
is predictable at this stage and so is its market. Many products, such as toothpaste, can stay in this
stage for many years. The product or service reaches maturity: there are few, if any, design
Changes, and demand levels off. Eventually, the market becomes saturated, which leads to a
decline in demand.
Stage 4 Decline: is because of new technology, better product design, or market saturation. Some
firms adopt a defensive research posture whereby they attempt to prolong the useful life of a
product or service by improving its reliability, reducing costs of producing it (and, hence, the
price), redesigning it, or changing the packaging.
The first two stages of the life cycle can collectively be called the early stages of the product life
cycle because the product is still being improved and refined, and the market is still in the process
of being developed. The last two stages of the life cycle can be referred to as the later stages
because here the product and market are both well defined.

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 3) Concurrent Engineering
To achieve a smoother transition from product design to production, and to decrease product
development time, many companies are using simultaneous development, or concurrent
engineering. Concurrent engineering; is an approach that brings many people together in the
early phase of product design in order to simultaneously design the product and the process. 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. This
was called the ―over-the-wall‖ approach, because the designers would throw their design ―over-
the-wall‖ to operations then had to decide how to produce the product. There are many problems
with the old approach.
a) First, it is very inefficient and costly. Since manufacturing does not understand which features
are not critical, it may develop an unnecessarily costly production process with costs passed
down to the customers. Because the designers do not know the cost of the added feature, they
may not have the opportunity to change their design or may do so much later in the process,
incurring additional costs. Concurrent engineering allows everyone to work together so these
problems do not occur.
b) A second problem is that the ―over-the-wall‖ approach takes a longer amount of time than
when product and process design work together. Companies do not have the luxury of enough
time to follow a sequential approach and then work the ―bugs‖ out. They may eventually get a
great product, but by then the market may not be there.
c) The third problem is that the old approach does not create a team atmosphere, which is
important in today‘s work environment. Rather, it creates an atmosphere where each function
views its role separately in a type of ―us versus them‖ mentality.
4) Standardization
An important issue that often arises in both product/service design and process design is the degree
of standardization. Standardization refers to the extent to which there is absence of variety in a
product, service, or process. Standardized products are made in large quantities of identical items;
paper, gasoline, etc. Standardized service implies that every customer or item processed receives
essentially the same service. An automatic car wash is a good example; each car, regardless of
how clean or dirty it is, receives the same service. Standardized processes deliver standardized
service or produce standardized goods.
Standardization carries a number of important benefits. Standardized components and parts
are interchangeable, which greatly lowers the cost of production while increasing productivity and
making replacement or repair relatively easy. Large-volume production and purchase of only a
few types of standardized parts would reduce costs due to economies of scale. Design costs are
generally lower. Another benefit of standardization is reduced time and cost to train employees
and reduced time to design jobs. Similarly, scheduling of work, inventory handling, and purchasing
and accounting activities become much more routine.
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Lack of standardization can at times lead to serious difficulties and competitive struggles,
particularly when systems running under different conditions are incompatible. Example the lack
of standardization in computer software and operating systems (Apple vs IBM) has presented users
with hard choices because of the difficulty in switching from one system to the other.
Standardization also has disadvantages. A major one relates to the reduction in variety. This
can limit the range of customers to whom a product or service appeals.
Customers may reluctantly accept a product only because nothing else suits their needs. But that
creates a risk that a competitor will introduce a better product or greater variety and realize a
competitive advantage.
Another disadvantage is that a manufacturer may freeze (standardize) a design prematurely and,
once frozen, it may find compelling reasons to resist modification.
5) Designing for Mass Customization
Companies like standardization because it enables them to produce high volumes of relatively low-
cost products, albeit products with little variety. Customers, on the other hand, typically prefer
more variety, although they like the low cost. The question for producers is how to resolve these
issues without losing the benefits of standardization and incurring a host of problems that are often
linked to variety. These include increasing variety in the production process, which would add to
the skills and machines necessary to produce products, creating an additional inventory burden
during and after production, and adding to the difficulty of diagnosing and repairing failed
products.
The answer, at least for some companies, is mass customization, a strategy of producing
standardized goods or services but incorporating some degree of customization in the final product
or service. Mass customization; A strategy of producing basically standardized goods, but
incorporating some degree of customization.
Several tactics make this possible. One is delayed differentiation, and another is modular design.
1. Delayed differentiation
Delayed differentiation is a postponement tactic: the process of producing, but not quite
completing, a product or service, postponing completion until customer preferences or
specifications are known. There are a number of variations of this. In the case of goods, almost-
finished units might be held in inventory until customer orders are received, at which time
customized features are incorporated, according to customer requests. For example, furniture
makers‘ manufacturers of clothing, etc.
2. Modular designs
Modular designs are groupings of parts into components that are easily interchanged or replaced.
For example, computers those have modular parts that can be replaced if they become defective.
By arranging modules in different configurations, different computer capabilities can be obtained.
For mass customization, modular design enables producers to quickly assemble modules to
achieve a customized configuration for an individual customer, avoiding the long customer wait
that would occur if individual parts had to be assembled. Modular design is also found in the
construction industry.

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One advantage of modular design of equipment compared with non-modular design is that failures
are often easier to diagnose and remedy because there are fewer pieces to investigate. Similar
advantages are found in ease of repair and replacement; the faulty module is conveniently removed
and replaced with a good one. The manufacture and assembly of modules generally involves
simplifications: fewer parts are involved, so purchasing and inventory control become more
routine, fabrication and assembly operations become more standardized, and training costs often
are relatively low. The main disadvantage of modular design is the inability to disassemble some
modules in order to replace a faulty part; the entire module must be scrapped—usually at a higher
cost.
6) Reliability
Reliability is a measure of the ability of a product, a part, a service, or an entire system to perform
its intended function under a prescribed set of conditions. The importance of reliability is
underscored by its use by prospective buyers in comparing alternatives and by sellers as one
determinant of price. Reliability also can have an impact on repeat sales, reflect on the product‘s
image, and, if it is too low, create legal implications.
Failure is used to describe a situation in which an item does not perform as intended. This includes
not only instances in which the item does not function at all, but also instances in which the item‘s
performance is substandard or it functions in a way not intended. For example, a smoke alarm
might fail to respond to the presence of smoke (not operate at all), it might sound an alarm that is
too faint to provide an adequate warning (substandard performance), or it might sound an alarm
even though no smoke is present (unintended response).
Reliabilities are always specified with respect to certain conditions, called normal operating
conditions. These can include load, temperature, and humidity ranges as well as operating
procedures and maintenance schedules. Failure of users to heed these conditions often results in
premature failure of parts or complete systems. For example, using a passenger car to tow heavy
loads will cause excess wear and tear on the drive train; driving over potholes or curbs often results
in untimely tire failure; and using a calculator to drive nails might have a marked impact on its
usefulness for performing mathematical operations.
Improving Reliability
Reliability can be improved in a number of ways.
Improve component design. Improve preventive maintenance
Improve production and/or assembly procedures.
techniques. Improve user education.
Improve testing. Improve system design.
Use backups.
7) Robust Design
Robust design; Design that results in products or services that can function over a broad range of
conditions. Some products will perform as designed only within a narrow range of conditions,
while other product will as be designed over a broader range of conditions. The latter case
describes a product that has robust design. For example, pair of fine leather boots vs. rubber boots.
The more the robust a product is, the less likely that it will fail due to a change in the environment
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in which it is used or in which it performs. Hence, the more designers can build robustness into
the product or service, the better it should hold up, resulting in a higher level of customer
satisfaction. Read Taguchi‘s Approach for more.
8) Computer Aided Design (CAD) & Computer Aided Manufacturing (CAM)
CAD is an electronic system for designing new parts or products or altering existing ones,
replacing drafting traditionally done by hand. The heart of CAD is a powerful desktop computer
and graphics software that allow a designer to manipulate geometric shapes. The designer can
create drawings and view them from any angle on a display monitor. Thus, this system allows a
user to create visual display on a computer terminal screen. Using the design data stored in the
computer‘s memory, manufacturing engineers and other users can quickly obtain print outs of plan
and specifications for a part or product. CAD cut the cost of product development and sharply
reduces the time to market for new products.
CAM is an electronic system which is used to design production process and control machine tools
and material flow through programmable automation. Both CAD/CAM integrate the design and
manufacturing functions by translating final design specification in to detailed machine instruction
for manufacturing an item. CAD/CAM is quicker, less error prone than human, eliminate
duplications between engineering and manufacturing, allow engineers to see how the various parts
of a design interact with each other without having to build a prototype.
9) Degree of Newness
Product or service design change can range from the modification of an existing product or service
to an entirely new product or service:
a. Modification of an existing product c. Duplicate of a competitor‘s product
b. Expansion of an existing product line d. New product or service
The degree of change affects the newness to the organization and the newness to the market. For
the organization, a low level of newness can mean a fairly quick and easy transition to producing
the new product, while a high level of newness would likely mean a slower and more difficult, and
therefore more costly, transition. For the market, a low level of newness would mean little
difficulty with market acceptance, but possibly low profit potential. Even in instances of low profit
potential, organizations might use this strategy to maintain market share. A high level of newness,
on the other hand, might mean more difficulty with acceptance, or it might mean a rapid gain in
market share with a high potential for profits.
10) Quality Function Deployment
Obtaining input from customers is essential to assure that they will want what is offered for sale.
Although obtaining input can be informal through discussions with customers, there is a formal
way to document customer wants.
Quality function deployment (QFD) is a structured approach for integrating the ―voice of the
customer‖ into both the product and service development process. The purpose is to ensure that
customer requirements are factored into every aspect of the process. Listening to and
understanding the customer is the central feature of QFD.

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11) The Three Rs: Reduce, Reuse, and Recycle
Designers often reflect on three particular aspects of potential cost saving and reducing
environmental impact: reducing the use of materials through value analysis; refurbishing and then
reselling returned goods that are deemed to have additional useful life, which is referred to as
remanufacturing; and reclaiming parts of unusable products for recycling.
9. 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. Typical questions that would be asked as
part of the analysis include: Could a cheaper part or material be used? Is the function necessary?
Can the function of two or more parts or components be performed by a single part for a lower
cost? Can a part be simplified? Could product specifications be relaxed, and would this result in a
lower price? Could standard parts be substituted for nonstandard parts
10. Remanufacturing (Reuse)
An emerging concept in manufacturing is the remanufacturing of products. Remanufacturing
refers to refurbishing used products by replacing worn-out or defective parts, and reselling the
products. This can be done by the original manufacturer or another company. Remanufacturing is
a concept that has been gaining increasing importance, as our society becomes more
environmentally conscious and focuses on efforts such as recycling and eliminating waste. In
addition to the environmental benefits, there are significant cost benefits because remanufactured
products can be half the price of their new counterparts. Among the products that have
remanufactured components are automobiles, printers, copiers, cameras, computers, and
telephones.
There are a number of important reasons for doing this. One is that a remanufactured product can
be sold for about 50 percent of the cost of a new product. Another is that the process requires
mostly unskilled and semiskilled workers. And in the global market are increasingly requiring
manufacturers to take back used products, because this means fewer products end up in landfills
and there is less depletion of natural resources such as raw materials and fuel.
Designing products so that they can be more easily taken apart has given rise to yet another design
consideration: Design for disassembly (DFD) includes using fewer parts and less material, and
using snap-fits where possible instead of screws or nuts and bolts.
11. Recycling
Recycling is sometimes an important consideration for designers. Recycling means recovering
materials for future use. This applies not only to manufactured parts, but also to materials used
during production, such as lubricants and solvents. Reclaimed metal or plastic parts may be melted
down and used to make different products.
Companies recycle for a variety of reasons, including:
Cost savings.
Environmental concerns.
Environmental regulations.
An interesting note: Companies that want to do business in the European Economic Community
must show that a specified proportion of their products are recyclable. The pressure to recycle has
given rise to the term design for recycling (DFR), referring to product design that22takes | P a into
ge
account the ability to disassemble a used product to recover the recyclable parts.
12) Legal and Ethical 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. Most organizations are subject to numerous government
agencies that regulate them. Among the more familiar federal agencies are the Food and Drug
Administration, the Occupational Health and Safety Administration, the Environmental Protection
Agency, and various state and local agencies.
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. Many business firms have faced lawsuits related to their products,
including Firestone Tire & Rubber, Ford Motor Company, General Motors, tobacco companies,
and toy manufacturers.
Manufacturers also are faced with the implied warranties created by state laws under the Uniform
Commercial Code, which says that products carry an implication of merchantability and fitness;
that is, a product must be usable for its intended purposes.
Organizations generally want designers to adhere to guidelines such as the following:
1. Produce designs that are consistent with the goals of the organization. For instance, if the
company has a goal of high quality, don‘t cut corners to save cost, even in areas where it
won‘t be apparent to the customer.
2. Give customers the value they expect.
3. Make health and safety a primary concern. At risk are employees who will produce goods
or deliver services, workers who will transport the products, customers who will use the
products or receive the services, and the general public, which might be endangered by the
products or services.
3.9. SERVICE OPERATION DESIGN
Service refers to an act, something that is done to or for a customer (client, patient, etc.). It is
provided by a service delivery system, which includes the facilities, processes, and skills needed
to provide the service. Many services are not pure services, but part of a product bundle —the
combination of goods and services provided to a customer. The service component in products is
increasing. The ability to create and deliver reliable customer-oriented service is often a key
competitive differentiator. Successful companies combine customer-oriented service with their
products.
System design involves development or refinement of the overall service package
1. The physical resources needed.
2. The accompanying goods that are purchased or consumed by the customer, or provided
with the service.
3. Explicit services (the essential/core features of a service, such as tax preparation).
4. Implicit services (ancillary/extra features, such as friendliness, courtesy).

Service design begins with the choice of a service strategy, which determines the nature and focus
of the service, and the target market. This requires an assessment by top management 23 | Pof
a gthe
e
potential market and profitability (or need, in the case of a nonprofit organization) of a particular
service, and an assessment of the organization‘s ability to provide the service. Once decisions on
the focus of the service and the target market have been made, the customer requirements and
expectations of the target market must be determined.
Two key issues in service design are the degree of variation in service requirements and the degree
of customer contact and customer involvement in the delivery system. These have an impact on
the degree to which service can be standardized or must be customized. The lower the degree of
customer contact and service requirement variability, the more standardized the service can be.
Service design with no contact and little or no processing variability is very much like product
design. Conversely, high variability and high customer contact generally mean the service must be
highly customized. A related consideration in service design is the opportunity for selling: The
greater the degree of customer contact, the greater the opportunities for selling.
Service is the dominant economic force in the industrialized world today and growth projection
indicates this trend will continue. Yet service operation receives far too little emphasis in operation
management course and business course in general. Service industry includes banking, insurance,
transportation, communication etc.
Differences between Service Design and Product Design
1. Products are generally tangible; services are generally intangible. Consequently, service design
often focuses more on intangible factors (e.g., peace of mind, ambiance) than does product design.
2. In many instances‘ services are created and delivered at the same time (e.g., a haircut, a car
wash). In such instances there is less latitude in finding and correcting errors before the customer
has a chance to discover them. Consequently, training, process design, and customer relations are
particularly important.
3. Services cannot be inventoried. This poses restrictions on flexibility and makes capacity issues
very important.
4. Services are highly visible to consumers and must be designed with that in mind; this adds an
extra dimension to process design, one that usually is not present in product design.
5. Some services have low barriers to entry and exit. This places additional pressures on service
design to be innovative and cost-effective.
6. Location is often important to service design, with convenience as a major factor. Hence, design
of services and choice of location are often closely linked.
7. Service systems range from those with little or no customer contact to those that have a very
high degree of customer contact. Here are some examples of those different types:
 Insulated technical core; little or no customer contact (e.g., software development).
 Production line; little or no customer contact (e.g., automatic car wash).
 Personalized service (e.g., haircut, medical service).
 Consumer participation (e.g., diet program, dance lessons).
 Self-service (e.g., supermarket).
If there is little or no customer contact, service system design is like product system design.
Phases in the Service Design Process
As you can see, they are quite similar to the phases of product design, except that the delivery
system also must be designed. Here below are the phase in a service design 24 | P a g e
 1. Conceptualize.
 Idea generation
 Assessment of customer wants/needs (marketing)
 Assessment of demand potential (marketing)
2. Identify service package components needed (operations and marketing).
3. Determine performance specifications (operations and marketing).
4. Translate performance specifications into design specifications.
5. Translate design specifications into delivery specifications.
Service Blueprinting
A useful tool for conceptualizing a service delivery system is the service blueprint, which is a
method for describing and analyzing a service process. A service blueprint is much like an
architectural drawing, but instead of showing building dimensions and other construction features,
a service blueprint shows the basic customer and service actions involved in a service operation.
Generally, design of the service is the specifications of how the service should be delivered. A
service blueprint is ―a picture or map that accurately portrays the service system so that the
different people involved in providing it can understand and deal with it objectively regardless of
their roles or their individual points of view‖ (Zeithaml and Bitner 1996). It depicts the process of
service delivery, roles of customers, roles of service employees, and visible elements of service.
As a design tools, they enable management to study and analyze services prior to their actual
implementation.
These blue prints can be then the basis for job descriptions, employees training programs and
performance measurement. A service blue print is a visual diagram –usually a flow chart-that
depicts all of the activities in the service delivery process.

Service blue print of Shoes polishing process

Standard
execution time
2 minutes
45 15
secs secs
Total acceptable
execution time
Wrong
5 minutes
color wax

Seen by
customer 45
secs

Line of Not seen by

visibility customer but
necessary to
performance

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The process of designing a service blueprint involves several steps:
 Identifying the sequence of steps: first it is necessary to map out the sequence of steps that comprise
the serve activity. By identifying all operations in the service activity, one can determine what inputs are
required and how each operation should be best performed.
 Isolating fail points: once the process is specified, the designer can determine where the system might
fail. Design for prevention of failure can then be made.
 Establishing time frames: standard time for each activity can be established and costs can then be
estimated. Research shows that a customer will tolerate few minutes before lowering his or her
assessment of service quality.

 Analyzing profitability: by identifying the costs for materials, overheads, and customer services along
with forecasts of demand the profitability of the service can be determined; then ‗what if‘ scenarios can
be conducted to analyze the sensitivity of profits to changes in costs or pricing structures.
Characteristics of Well-Designed Service Systems
There are a number of characteristics of well-designed service systems. They can serve as guidelines in
developing a service system. They include the following:
1. Being consistent with the organization‘s mission.
2. Being user-friendly.
3. Being robust if variability is a factor.
4. Being easy to sustain.
5. Being cost-effective.
6. Having value that is obvious to customers.
7. Having effective linkages between back-of-the-house operations (i.e., no contact with the customer) and
front-of-the-house operations (i.e., direct contact with customers). Front operations should focus on
customer service, while back operations should focus on speed and efficiency.
8. Having a single, unifying theme, such as convenience or speed.
9. Having design features and checks that will ensure service that is reliable and of high quality.
Factors to be considered while designing services
a) Customer contact
Generally, most service operations have high customer contact than manufacturing sector. Customer contact for
service operation can be high or low. Characteristics of high-and low- contact services:
 Low contact in services is used when face to face interaction is not mandatory. High contact
operations are used for changing or uncertain demand
 Low contact services require employees with technical skills, efficient processing routines, and
standardization of the product and process. High contact services require
employees who are flexible, personable, and willing to work with the customer (the smile factor).
 High contact services generally require higher prices and more customization due to the variable
nature of the service required.

b) Service recovery:
Service recovery is an important part of service design. Service recovery is the ability to quickly compensate
for the failure and restore if possible.
c) Cycle of Service
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The service provided must be considered not only in a light of a single service encounter but in terms of the
entire cycle of service delivery. Every service is delivered in a cycle of services beginning with the point of
initial customer contact and proceeding through steps or stages until the entire service is completed.
d) Service guarantee
Many companies are now beginning to offer service guarantees as a way to ensure its satisfactory delivery to the
customer. Service guarantee help the service provider to build confidences of the customers towards their
service quality level. A service guaranty is like its counterpart the product guarantee, except for one thing: The
customer cannot return the service if he/she does not like it. For example, if you did not like your hair cut, you
have to live with it that way, until it grows out.

Guidelines for Successful Service Design

a) Define the service package in detail. A service blueprint may be helpful for this.
b) Focus on the operation from the customer‘s perspective.
c) Consider the image that the service package will present both to customers and to customers.
d) Recognize that designers‘ familiarity with the system may give them a quite different perspective
than that of the customer, and take steps to overcome this.
e) Make sure that managers are involved and will support the design once it is implemented.
f) Make sure that recruitment, training, and reward policies are consistent with service expectations.
g) Establish procedures to handle both predictable and unpredictable events.
h) Establish systems to monitor, maintain, and improve service. Etc

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