International Executive Master of Business Administration
Operations
Management
[Link]
OM4
CHAPTER 6
GOODS AND SERVICE
DESIGN
DAVID A. COLLIER
AND
JAMES R. EVANS
learning outcomes
LO1 Describe the steps involved in designing goods
and services.
LO2 Explain the concept and application of Quality
Function Deployment.
LO3 Describe how the Taguchi loss function,
reliability, design for manufacturability, and
design for sustainability are used for designing
manufactured goods.
LO4 Explain the five elements of service delivery
system
design.
LO5 Describe the four elements of service encounter
design.
LO6 Explain how goods and service design concepts
are integrated at LensCrafters. 2
Operations Management
LO 3
Designing Goods and Services
CBP design and configuration choices revolve
around a
solid understanding of customer needs and target
markets,
• Time: Reduce waiting time, be more responsive
andtothe value that
customer customers place on attributes,
needs.
such as: Select location for customer convenience.
• Place:
• Information: Provide product support, user
manuals.
• Entertainment: Enhance customer experience.
• Exchange: Multiple channels used for purchases.
• Form: How well the physical characteristics of a
good address customer needs.
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LO 1
Designing Goods and Services
The design of a manufactured good focuses
on its physical characteristics.
The design of a service, however, cannot be
done independently from the “process” by
which the service is delivered.
Prototype testing is the process by which
a model (real or simulated) is constructed to
test the good’s physical properties or use
under actual operating conditions, as well as
consumer reactions to the prototype. 6
Operations Management
LO 2
Customer-Focused Design
• Customer requirements, as expressed in the
customer’s own terms, are called the voice
of the customer.
• Quality function deployment (QFD) is an
approach to guide the design, creation, and
marketing of goods and services by
integrating the voice of the customer into all
decisions.
• QFD translates customer wants and needs
into technical requirements of a product or
service.
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LO 2
The House of Quality
Building the House of Quality:
1. Determine customer requirements through the
voice of the customer (VOC).
2. Define technical requirements of the product.
3. Determine interrelationships between the
technical requirements.
4. The relationship matrix defines what technical
requirements satisfy VOC needs.
5. Customer priorities and competitive evaluation
help select which VOC requirements the product
should focus on.
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LO 3
Tolerance Design and the Taguchi Loss Function
• For most manufactured goods, design
blueprints specify a target dimension
(called the nominal), along with a range
of permissible variation (called the
tolerance). For example, 0.500 0.020
cm.
• The nominal dimension is 0.500 cm, but
may vary anywhere in the range from
0.480 to 0.520 cm.
• This is sometimes called the “goal post
model.”
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LO 3
Exhibit 6.3 Traditional Goal Post View of Conforming to Specifications
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LO 4
Tolerance Design and the Taguchi Loss Function
Taguchi loss function:
L(x) = k(x – T )2
Where:
L(x) is the monetary value of the loss
associated with deviating from the target, T;
x is the actual value of the dimension;
k is a constant that translates the deviation
into dollars.
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LO 3
Exhibit 6.4 Nominal-Is-Best Taguchi Loss Function
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LO 2
Design for Reliability
• Reliability is the probability that a
manufactured good, piece of equipment,
or system performs its intended function
for a stated period of time under
specified operating conditions.
Operations Management 14
LO 3
Design for Reliability
In a series system, if one component fails, the
entire system fails. The reliability of a series
system is the product of the individual
probabilities of each process in a system.
Rs = (p1)(p2)(p3). . . (pn) [6.2]
Exhibit 6.5 Structure of a Serial System
Operations Management 15
LO 3
Design for Reliability Exhibit 6.6 Structure of a Parallel System
In parallel systems,
functions are
independent and the
entire system will fail
only if all components
fail. The reliability of
a parallel system is
computed as:
Rp = 1 – (1 – p1)(1 – p2)(1 – p3). . . (1 – pn)
Operations Management 16
LO 3
Design for Reliability
• Design failure-mode-and-effects
analysis (DFMEA) is a technique for
identifying how a product may fail; the
effect of a failure on the customer;
seriousness, likelihood of occurrence, and
ability to detect a potential failure; cause
of failure, and how it can be corrected by
improving the design.
Operations Management 18
LO 3
Design for Manufacturability
• Design for manufacturability (DFM) is
the process of designing a product for
efficient production at the highest level of
quality.
• Product simplification is the process of
trying to simplify designs to reduce
complexity and costs and thus improve
productivity, quality, flexibility, and
customer satisfaction.
Operations Management 19
LO 3
Design for Sustainability
• Many products are discarded simply because
the cost of maintenance or repair is too high
when compared with the cost of a new item.
One aspect of designing for sustainability is
designing products that can easily be
repaired and refurbished or otherwise
salvaged for reuse.
• Design for Environment (DfE) is the
explicit consideration of environmental
concerns during the design of goods,
services, and processes and includes such
practices as designing for recycling and
disassembly.
Operations Management 20
LO 4
Service Delivery System Design
Service delivery system design includes
the following:
• Facility location and layout
• The servicescape
• Process and job design
• Technology and information support
systems
• Organizational structure
Operations Management 21
LO 4
Service Delivery System Design
Facility Location and Layout
• Location creates customer’s convenience.
• Great store layout, process design, and
service encounter design are meaningless
if the store is in the wrong location.
• The Internet is making physical locations
less important for some information-
intensive services such as Charles
Schwab, Vanguard, and Scottrade.
Operations Management 22
LO 4
Service Delivery and System Design
Servicescape
• All of the physical evidence a customer
might use to form an impression.
• The servicescape provides the behavioral
setting where service encounters take
place.
• Standardization of the servicescape and
service processes enhances efficiency,
especially for multiple site organizations.
Operations Management 23
LO 4
Three Dimensions of a Servicescape
• Ambient conditions—manifest by sight,
sound, smell, touch, and temperature; five
human senses; e.g., leather chairs in the lobby,
cartoon characters in children’s hospital, music
at a coffee shop.
• Spatial layout and functionality—how
furniture, equipment, and office spaces are
arranged; also streets, parking lots, stadiums,
etc.
• Signs, symbols, and artifacts—explicit
signals that communicate an image of the firm;
e.g., diplomas hanging on the wall in a medical
clinic,
Operations company logos and uniforms, artwork, 24
Management
LO 4
Service Process and Job Design
Service process design is the activity of
developing an efficient sequence of activities
to satisfy internal and external customer
requirements.
Develop procedures to ensure that:
• Things are done right the first time.
• Interactions between customers and
service providers are simple and quick.
• Human error is avoided.
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LO 4
Service Process and Job Design
Technology and Information Support
Systems
• What technology does each job require?
• What information technology best
integrates all parts of the value chain?
• Technology ensures speed, accuracy,
customization, and flexibility.
Operations Management 26
LO 5
Service Encounter Design
Service encounter design focuses on the
interaction, directly or indirectly, between the
service provider(s) and the customer.
Principal elements:
• Customer contact behavior and skills
• Service provider selection, development,
and empowerment
• Recognition and reward
• Service recovery and guarantees
28
LO 5
Service Encounter Design
Customer Contact Behavior and Skills
• Customer contact refers to the physical or
virtual presence of the customer in the service
delivery system during a service experience.
• Customer contact is measured by the
percentage of time the customer must be in
the system relative to the total time it takes to
provide the service.
• Systems in which the percentage is high are
called high-contact systems; those in which
it is low are called low-contact systems.
29
LO 5
Service Encounter Design
Service Provider Selection, Development
and Empowerment
• Recruit and train employees to exceed customer
expectations.
• Empowerment simply means giving people
authority to make decisions based on what they
feel is right, to have control over their work, to
take risks and learn from mistakes, and to
promote change.
30
LO 5
Service Encounter Design
Service Guarantees and Recovery
• A service upset is any problem a
customer has—real or perceived—with
the service delivery system and includes
terms such as service failure, error,
defect, mistake, or crisis.
• A service guarantee is a promise to
reward and compensate a customer if a
service upset occurs during the service
experience.
32
LO 5
Service Encounter Design
Service Guarantees and Recovery
• Service recovery is the process of
correcting a service upset and satisfying
-theBegin
customer.
immediately after a service upset.
- Document the process and train
employees.
- Listen to the customer and respond.
sympathetically.
- Resolve the problem quickly, provide an
apology, offer compensation.
33
LO 6
An Integrative Case Study of LensCrafters
• Eyewear is produced in “store backroom
factory” in rapid response without
sacrificing quality, efficient production
procedures.
• -Service delivery
Located system design:
in high-traffic areas for
convenience.
- Servicescape of quality and
professionalism.
- 11 different in-store job roles.
- Customers can see glasses being made
in the optical lab.
34
LO 6
Exhibit 6.9 One Example View of LensCrafters’ Customer Benefit Package
35
LO 6
Exhibit 6.10
A Schematic View of a
Typical LensCrafters
Store Layout
36
Important points of the lecture
• An Integrated Framework for Goods and Service Design
• Taguchi Loss Function
• Design for Reliability
• Design for Sustainability
• Service Delivery System Design
• Service Encounter Design