Chapter 4: Product and Service Design

➢ 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 customers 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, operation)
4. Formulate quality goals. (marketing, operation)
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.
➢ Key Questions
From a buyer’s standpoint, most purchasing decisions entail two fundamental considerations;
one is cost and the other is quality or performance. From the organization’s standpoint, the key
questions are:
1. Is there demand for it?
2. Can we do it?
3. What level pf quality is appropriate?
4. Does it make sense from an economic standpoint?

➢ Reasons for Product and Service Design or Redesign

Product and service design has typically had strategic implication for the success and
prosperity of an organization. Furthermore, it has an impact on future activities. Consequently,
decisions in this area are some of the most fundamental that managers must make.
Organizations become involved in product and service design or redesign for a variety of
reasons. The main forces that initiate design or redesign are market opportunities and threats.
The factors that give rise to market opportunities and threats can be one or more changes:
a. Economic (e.g., low demand, excessive warranty claims, the need to reduce costs).
b. Social and demographic (e.g., aging baby boomers, population shift).
c. Political, liability, or legal (e.g., government changes, safety issues, new regulations).
d. Competitive (e.g., new or changed products or services, new advertising/promotions).
e. Cost or availability (e.g., of raw materials, components, labor, water, energy).
f. Technological (e.g., in product components, processes).
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➢ Idea Generation
Ideas for new or redesigned products or services can come from a variety of sources, including
customers, the supply chain, competitors, employees, and research. Customer input can come from
surveys, focus groups, complaints, and unsolicited suggestions for improvement. Input from
suppliers, distributors, and employees can be obtained from interviews, direct or indirect
suggestions, and complaints.
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. 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.
Research is another source of ideas for new or improved products or services. Research
and development (R&D) refers to organized efforts that are directed toward increasing scientific
knowledge and product or process innovation.
The benefits of successful R&D can be tremendous. Some research leads to patents, with
the potential of licensing and royalties. However, many discoveries are not patentable, or
companies don't wish to divulge details of their ideas, so they avoid the patent route. Even so, the
first organization to bring a new product or service to the market generally stands to profit from it
before the others can catch up. Early products may be priced higher because a temporary monopoly
exists until competitors bring their versions out.

➢ 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.
Thus, it is extremely important to design products that are reasonably free of hazards. When
hazards do exist, it is necessary to install safety guards or other devices for reducing accident
potential, and to provide adequate warning notices of risks.
Organizations generally want designers to adhere to guidelines such as
the following:
a) Produce designs that are consistent with the goals of the organization.
b) Give customers the value they expect.
c) Make health and safety a primary concern.
Chapter 4: Product and Service Design

➢ Human Factors
Human factor issues often arise in the design of consumer products. Safety and liability are
two critical issues in many instances, and they must be carefully considered.
Another issue for designers to take into account is adding new features to their products or
services. Companies in certain businesses may seek a competitive edge by adding new features.
Although this can have obvious benefits, it can sometimes be "too much of a good the time-to-
market.
Advances in information technology have played a key role in the viability of global product
design teams by enabling team members to maintain continual contact with each other and to
instantaneously share designs and progress, and to transmit engineering changes and other
necessary information.

➢ Environmental Factors: Sustainability

Product and service design is a focal point in the quest for sustainability. Key aspects include
cradle-to-grave assessment, end-of-life programs, reduction of costs and materials used, reuse of
parts of returned products, and recycling.

Cradle-to-Grave Assessment
Cradle-to-grave assessment, also known as life cycle analysis, is the assessment of the
environmental impact of a product or service throughout its useful life, focusing on such
factors as global warming (the amount of carbon dioxide released into the atmosphere, smog
formation, oxygen depletion, ana solid waste generation.
For products, cradle-to-grave analysis takes into account impacts in every phase of a product's
life cycle, from raw material extraction from the earth, or the growing and harvesting of plant
materials, through fabrication of parts and assembly operations, or other processes used to create
products, as well as the use or consumption of the product, and final disposal at the end of a
product's useful life.
It also considers energy consumption, pollution and waste, and transportation in all phases.
Although services generally involve less use of materials, cradle-to-grave assessment of services
is nonetheless important because services consume energy and involve many of the same or similar
processes that products involve. The goal of cradle-to-grave assessment is to choose products and
services that have the least environmental impact while still taking into account economic
considerations.
Chapter 4: Product and Service Design

End of Life Programs

End-of-Life (EOL) programs deal with products that have reached the end of their useful
lives. The products include both consumer products and business equipment. The purpose of these
programs is to reduce the dumping of products, particularly electronic equipment, in landfills or
third-world countries, as has been the common practice, or incineration, which converts materials
into hazardous air and water emissions and generates toxic ash. Although the programs are not
limited to electronic equipment, that equipment poses problems because the equipment typically
contains toxic materials such as lead, cadmium, chromium, and other heavy metals.

➢ The Three R's: 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.
a. 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?
b. Reuse: Remanufacturing
An emerging concept in manufacturing is the remanufacturing of products. Remanufacturing
refers to refurbishing used products by replacing worn-out or defective components and
reselling the products. This can be done by the original manufacturer or another company. Among
the products that have remanufactured components are automobiles, printers, copiers, cameras,
computers, and telephones.
c. Recycle
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
1. Cost Savings.
2. Environment concerns.
3. Environmental regulations.
Chapter 4: Product and Service Design

➢ Other Design Considerations

A side from legal, ethical, environmental, and human considerations designers must also take
into account product or service life cycles, how much standardization to incorporate, product or
service reliability, and the range of operating conditions under which a product or service must
function.
Strategies for Product or Service Life Stages
Most, but not all, products and services go through a series of stages over their useful life,
sometimes referred to as their life cycle. Demand typically varies by phase. Different phases call
for different strategies. In every phase, forecasts of demand and cash flow are key inputs for
strategy.
When a product or service is introduced, it may be treated as a curiosity item. Many
potential buyers may suspect that all the bugs haven't been worked out and that the price may drop
after the introductory period. Strategically, companies must carefully weigh the trade-offs in
getting all the bugs out versus getting a leap on the competition, as well as getting to the market at
an advantageous time.
It is important to have a reasonable forecast of initial demand so that an adequate supply
of product or an adequate service capacity is in place. Over time, design improvements and
increasing demand yield higher reliability and lower costs, leading the growth in demand. In the
growth phase, it is important to obtain accurate projections of the demand growth rate and
how long that will persist, and then to ensure that capacity increases coincide with increasing
demand.
In the next phase, the product or service reaches maturity, and demand levels off. Few, if
any, design changes are needed. Generally, costs are low and productivity is high. New uses for
products or services can extend their life and increase the market size.
In the decline phase, decisions must be made on whether to discontinue a product or
service and replace it with new ones or abandon the market, or to attempt to find new uses
or new users for the existing product or service. Some products do not exhibit life cycles:
wooden pencils; paper clips; nails; knives, forks, and spoons; drinking glasses; and similar items.
However, most new products do.
Some service life cycles are related to the life cycles of products. For example, as older
products are phased out, services such as installation and repair of the older products also phase
out.
Wide variations exist in the amount of time a particular product or service takes to pass through a
given phase of its life cycle: some pass through various stages in a relatively short period; others
take considerably longer. Often, it is a matter of the basic need for the item and the rate of
technological change.
Chapter 4: Product and Service Design

➢ Degree of 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 an absence of
variety in a product, service, or process.
Standardization carries a number of important benefits as well as certain disadvantages.
Standardized products are immediately available to customers. Standardized products mean
interchangeable parts, which greatly lower the cost of production while increasing productivity
and making replacement or repair relatively easy compared with that of customized parts.
Design costs are generally lower. By reducing variety, companies save time and money while
increasing quality and reliability of their products.
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, and quality is more consistent.
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. And 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 the design is frozen, find compelling reasons to resist modification.

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 (1) losing the benefits of standardization and (2) incurring a host of problems
that are often linked to variety. These include increasing the resources needed to achieve design
variety; increasing variety in the production process, which would add to the skills necessary to
produce products, causing a decrease in productivity; creating an additional inventory burden
during and after production, by having to carry replacement parts for the increased variety of parts;
and adding to the difficulty of diagnosing and repairing product failures. 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. Several tactics
make this possible. One is delayed differentiation, and another is modular design.
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.
Chapter 4: Product and Service Design

Modular design is a form of standardization. Modules represent groupings of component parts

into subassemblies, usually to the point where the individual parts lose their separate identity. For
mass customization, modular design enables producers to quickly assemble products with 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. 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 involve 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 disadvantages of modular design stem from the decrease in variety: The number of
possible configurations of modules is much less than the number of possible configurations based
on individual components. Another disadvantage that is sometimes encountered is the inability to
disassemble a module in order to replace a faulty part; the entire module must be scrapped—
usually at a higher cost.

➢ Phases in Product Design and Development

Feasibility analysis. Feasibility analysis entails market analysis (demand). economic analysis
(development cost and production cost, profit potential. and technical analysis (capacity
requirements and availability, and the skills needed). Also, it is necessary to answer the question.
Does it fit with the mission? It requires collaboration among marketing, finance, accounting,
engineering, and operations.
Product specifications. This involves detailed descriptions of what is needed to meet (or
exceed) customer wants, and requires collaboration between legal, marketing, and operations.
Process specifications. Once product specifications have been set, attention turns to
specifications for the process that will be needed to produce the product. Alternatives must be
weighed in terms of cost, availability of resources, profit potential, and quality. This involves
collaboration between accounting and operations.
Prototype development. With product and process specifications complete, one (or a few) units
are made to see if there are any problems with the product or process specifications.
Design review. At this stage, any necessary changes are made or the project is abandoned.
Marketing, finance, engineering, design, and operations collaborate to determine whether to
proceed or abandon.
Market test. A market test is used to determine the extent of consumer acceptance. If
unsuccessful, the product returns to the design review phase. This phase is handled by marketing.
Chapter 4: Product and Service Design

Production introduction. The new product is promoted. This phase is handled by marketing.
Follow-up evaluation. Bases on user feedback, changes may be made or forecasts refined. This
phase is handled by marketing.