Operations Management / Supply Chain Management

Module 04.02 Key Concept: Product / Service Definition

In the previous section we reviewed the steps within the Quality Function Deployment process and presented the idea of translating customer wants into specific products and services.  From a design perspective, customer wants are usually expressed in terms of “function”.  These must then be translated into specific engineering requirements and quality assurance parameters. Rigorous specifications are developed during the design phase and manufactured products will have an engineering drawing  an a Bill of Material (BOM).  An Engineering drawing shows dimensions, tolerances, and materials.  It also shows codes for Group Technology.  The Bill of Material lists the components of a product along with quantities and where used.  It shows the detailed product structure.
An example of some functional parameters for cheese are presented below.

U.S. grade AA. Monterey cheese shall conform to the following requirements:

(1) Flavor.  Is fine and highly pleasing, free from undesirable flavors and odors.  May possess a very slight acid or feed flavor.

(2) Body and texture.  A plug drawn from the cheese shall be reasonably firm.  It shall have numerous small mechanical openings evenly distributed throughout the plug.  It shall not possess sweet holes, yeast holes, or other gas holes.

(3) Color.  Shall have a natural, uniform, bright and attractive appearance.

(4) Finish and appearance—bandaged and paraffin-dipped.  The rind shall be sound, firm, and smooth providing a good protection to the cheese.

Group Technology is often used as a common Process Design approach.  Parts are grouped into families with similar characteristics.  A coding system describes processing and physical characteristics.  Part families can be produced in dedicated manufacturing cells.  This results in: improved design; reduced raw material and purchases; simplified production planning and control; improved layout, routing, and machine loading and reduced tooling setup time, work-in-process, and production time.
 Several other standard documents are used in a manufacturing environment.  These may also be adapted for use in service design:
  • Assembly drawing

  • Assembly chart

  • Route sheet

  • Work order

  • Engineering change notices (ECNs) – a correction or modification to a product’s definition or documentation (i.e. Engineering drawings or Bill of Material).  ECN’s are quite common with long product life cycles, long manufacturing lead times, or rapidly changing technologies.
The need to manage ECNs has led to the development of configuration management systems.  A product’s planned and changing components are accurately identified and control and accountability for change are identified and maintained.  Product Life Cycle Management Systems incorporate integrated software that brings together most, if not all, elements of product design and manufacture: Product design; CAD/CAM, DFMA; Product routing; Materials; Assembly; Environmental.
There are many similarities between Product design and Service design, but there are also some fundamental differences.  For example, Service design typically includes direct interaction with the customer. Process – chain – network (PCN) analysis focuses on the ways in which processes can be designed to optimize interaction between firms and their customers.
Within the Process Chain Network Analysis, the Direct interaction region includes process steps that involve interaction between participants. The surrogate (substitute) interaction region includes process steps in which one participant is acting on another participant’s resources.  Then the independent processing region includes steps in which the supplier and/or the customer is acting on resources where each has maximum control.  All three regions have similar operating issues but the appropriate way of handling the issues differs across regions. Service operations exist only within the area of direct and surrogate interaction.  PCN analysis provides insight to aid in positioning and designing processes that can achieve strategic objectives.
Typically, Service productivity is notoriously low because of either customer involvement in the design or delivery of the service, or both.  This tends to complicate the service design process.  Service efficiency can be optimized by many approaches:
  • Limit the number of options –Improves efficiency and ability to meet customer expectations
  • Delay customization
  • Modularization –Eases customization of a service
  • Automation –Reduces cost, increases customer service
  • Recognition of Moment of Truth – Critical moments between the customer and the organization that determine customer satisfaction

Documentation is very important for Services.  High levels of customer interaction necessitates different documentation.  This often includes explicit job instructions as well as the utilization of other techniques such as Scripts and Storyboards.

The following list is representative of documented requirements for a Drive Up Bank Teller Service:

  • Be especially discreet when talking to the customer through the microphone.
  • Provide written instructions for customers who must fill out forms you provide.
  • Mark lines to be completed or attach a note with instructions.
  • Always say “please” and “thank you” when speaking through the microphone.
  • Establish eye contact with the customer if the distance allows it.
  • If a transaction requires that the customer park the car and come into the lobby, apologize for the inconvenience.

The text brings in a very useful decision making tool – the Decision Tree Analysis.  This process recognizes the presence of different options for a decision, recognizes that costs and benefits will differ between options and brings in the concept of probabilities / uncertainties in outcomes.  Decision Tree Analysis is quite appropriate for Product / Service development projects.  It is particularly useful when there are a series of decisions and outcomes which lead to other decisions and outcomes.  The basic process includes the following general steps:

  • Include all possible alternatives and states of nature – including “doing nothing”
  • Enter payoffs at end of branch
  • Determine the expected value of each branch and “prune” the tree to find the alternative with the best expected value

The structure of a simple decision tree for different product development investments is shown in the text.

The example is presented in detail in the text and will only be summarized here.  You can see that there are basically three options being considered: Purchasing new CAD equipment, Hiring and training more engineers and Do nothing.  Probabilities for high and low sales are also shown for each option.  The cost of each option is estimated and the potential Net Present Value expected from each option are calculated.

Based on this analysis, the highest return is expected with investment in new CAD equipment.

Once product development activities are complete, the decision is made to move to a Production environment. In reality, product development can be viewed a evolutionary process that is never complete.  Enhancements, updates, and such always occur. Product must move from design to production in a timely manner in order to facilitate quickness in time to market.  Most products have a trial production period to insure producibility, develop tooling, quality control, and training and ensure successful production for the long-term.

Responsibility must also transition as the product moves through its life cycle.  Typically, line management takes over from design.  There are three common approaches to managing this transition.  Each one has merit.  The ultimate approach selected will depend on the organization and the scope of the project.
  • Project managers
  • Product development teams
  • Integrate product development and manufacturing organizations