Operations Management / Supply Chain Management

Module 04: Design of Goods and Services / Sustainability

We are going to take a little step back and review a few things from Module 01 just to set the stage for this Product and Service Design Module.  So, please bear with me for a few minutes.

As mentioned earlier, the Global Marketplace is comprised of many types of businesses both small and large, product and service, for profit and not for profit.  The output of these companies are products and / or services.  These products and services are hopefully designed and delivered to fully meet the firms’ customers.

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In order to meet all their sales objectives, global businesses must develop and effectively market new products to meet localized demand.  This means that companies must understand the basic needs of their customers and be able to translate those needs into products and services that meet them.  Product development cannot occur in a vacuum or isolated development laboratory.  The customer must be engaged at the very beginning of the process.

In this Module we will cover a very relevant technique (Quality Function Deployment – sometimes referred to as the “House of Quality”.   It represents a formalized process for translating customer requirements into finished products and services that can be produced and delivered at high quality, day-to-day.

Customer satisfaction must be viewed from the eyes of the customer.  In general, if a customer’s expectations of a supplier’s performance are met or exceeded, the customer will be satisfied.  So:

  • If Perceived Performance > = Expectations, then Satisfaction
  • If Perceived Performance < Expectations, then Dissatisfaction

In reality, Organizations exist to provide goods or services to society.  Great products are the key to success and most top organizations typically focus on core products.  In addition, as indicated above, Customers buy satisfaction, not just a physical good or particular service.  These are fundamental facts with implications throughout the operations functions.  Since goods or services are the basis for an organization’s existence, limited and predicable life cycles requires constantly looking for, designing, and developing new products.  New products generate substantial revenue and it is critical that company functional leaders are aligned to bring new products and services to market as quickly as possible.

The objective of any product / service decision is to develop and implement a product / service strategy that meets the demands of the marketplace and provide a competitive advantage.  However, it is quite important to remember that companies compete on many different dimensions.  The text highlights three primary ones:

  • Differentiation (Shouldice Hospital)
  • Low cost (Taco Bell)
  • Rapid response (Toyota)

You can probably think of other companies that fit these classifications.

It is impossible to be “all things to all” customers so businesses must chose what market segments they will compete in, what customer segments they will focus on and how they will address the needs of the various segments.  These decisions are typically considered during the Strategic Planning Process using a Strengths, Weaknesses / Opportunities / Threats (SWOT) analysis.  Some other key competitive strategies are highlighted below.

Slide04

How does this relate to our extended supply chain?  Well, to meet their financial objectives, companies must develop effective, demand driven, cost effective infrastructure / supply networks to support the products and services they provide.  At the same time, they must develop appropriate product life cycle, sustainability and risk management strategies to sustain their long-range growth and survival.  All of these must be considered in the early development phase to ensure that customer demands can be met in an effective and financially beneficial manner.