The purpose of the operations function is to add value

Module 1
during the transformation process.
Definitions
Operations is that part of a business organization that
Value-added pertains to the difference between the
is responsible for producing goods and/or services
cost of inputs and the value or price of outputs.

Goods are physical items that include raw materials,

-involves planning or designing and controlling the
parts, subassemblies and final products.
production of goods and services, ensuring that
businesses are efficient in using resources to meet
Services are activities that provide some combination
customer requirements.
of time, location, form, or psychological value.
Planning – conceptualizing; setting of standards and
Basic functional areas in a business organization
objectives which will be the basis for controlling.
● FINANCE
● MARKETING
Control – supervision or monitoring to ensure that
● OPERATIONS
required outputs are obtained. Results are compared
to plans or standards to know if corrective actions are
Finance is responsible for financial management,
needed.
planning, and stewardship.
Differences Between Production and Service
Marketing includes evaluating what the consumers
Operations
want, promoting goods and services, developing a
pricing strategy to capture market share while
Production of goods results in a tangible output.
remaining competitive.
Delivery of service, generally implies an act.

Operations is the area responsible for converting

Categories of Service Jobs
inputs into outputs. Inputs might be design specs, raw
● Professional services (e.g., financial, health
materials, work orders, etc.
care, legal)
● Mass services (e.g., utilities, internet,
converting = the transformation process.
communications)
Input > Process > Output
● Service shops (e.g., appliance repair, car
Conversion
wash, auto repair/maintenance)

Outputs are the products and services the

organization provides to customers. MANUFACTURING SERVICE

The Supply Chain is included in the Operations produce tangible, provide intangible
functional area. generally standardized products that are often
products customized to satisfy
specific needs
A supply chain is a network of companies and
people that are involved in the production and delivery goods are produced products cannot be
of a product or service. before they are produced ahead of time
consumed or used
The components of a supply chain include producers,
vendors, warehouses, transportation companies, goods can be stored in production and
inventory before they consumption happen at
distribution centers, and retailers.
are needed the same time; cannot
be stored for later use.
Operations management
-it is concerned with managing an entire production very low customer high interaction with
system that converts inputs into outputs. contact customers

-the administration of business structure, practices,

Importance of Studying Operations Management
and processes to enhance efficiency and maximize
profit.

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Employers would prefer graduates who have more of A). Budgeting - budgets must be periodically
a general knowledge of how business organizations prepared to plan financial requirements.
operate. B). Economic analysis of investment proposals -
evaluation of investments in plant and equipment
Every aspect of business affects, or is affected by requires inputs from both operations and finance
operations. people.
C). Provision of funds - the necessary funding of
- Operations and sales are the two line operations and the amount and timing of funding are
functions in a business organization. important and even critical when funds are tight.
- Supported by: accounting, finance, Careful planning can help avoid cash-flow problems.
marketing, MIS or IT, legal, HR and public
relations. 3. Finance people should be consulted when
making revisions so they can provide
1. Accounting supplies information to information on what funds might be available
management on costs of labor, materials, and to determine what funds might be
and overhead, and may provide reports on needed for new products or services.
items such as scrap, downtime, inventories
and deviations from standards. Responsibilities of Operations Manager
● Forecasting
EXAMPLES: ● Capacity planning
● Locating facilities
MIS or IT provides management with the information ● Facilities and layout
needed to manage effectively by designing systems to ● Scheduling Managing inventories Assuring
capture relevant information and designing reports. quality
● Motivating and training employees
Legal department must be consulted on contracts
with employees, customers, suppliers, and Forecasting – planning ahead: projecting growth or
transporters, as well as on liability and environmental decline in demand for products or services; seasonal
issues. factors.
Capacity planning – determining the production lines
The Human Resources Department is tasked with the and facilities needed to produce the output in order to
recruitment and training of personnel, labor relations, meet current and forecasted demands.
wage and salary administration, assisting in Locating facilities – where to build the factories and
manpower projections, and ensuring the health and distribution centers to optimize efficiency; or on which
safety of employees. cities to provide services.
Facilities and layout – to ensure effective use of
Public relations is responsible for building and workers and equipment.
maintaining a positive public image of the ➔ arrangement of production lines and
organization. equipment
➔ considers convenience of customers
2. All members of the organization should Scheduling – timing of production runs, routine
understand not only their own role, but also maintenance, scheduling of workers and service staff.
the roles of others. Managing inventories – ensuring that raw materials
and supplies are available when needed.
there is significant interfacing and collaboration Assuring quality - the emphasis is on meeting
among the various functional areas, involving production standards to ensure product safety; for the
exchange of information and cooperative decision service sector, emphasis is on efficiency and courtesy.
making. Motivating and training employees – people should
know what needs to be done and how to do them
● Budgeting well; motivated employees tend to perform better
● Economic analysis of investment proposals
● Provision of funds Trends in Operations Management
1. Focus on employee wellbeing, safety and
health

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 ➔ The main focus of this trend is the ethical who use the scientific approach to develop new
obligations of a company towards its knowledge and translate that into commercial
workforce as well as social compliance with applications.
new industry regulations and standards. b. Process technology refers to methods,
2. Automating manual processes procedures, and equipment used to produce goods
➔ cutting down unnecessary labor, gaining and provide services.
efficiency and capacity, and cutting down c. Information technology (IT) refers to the science
expenses and waste. and use of computers and other electronic equipment
3. Improving communications to store, process, and send information.
➔ Dealing with increasingly remote workforces ➔ This includes electronic data processing, use
and ensuring collaboration across teams of barcodes to identify and track goods,
working flexibly requires a seamless, obtaining point-of-sale information, data
integrated communications system. transmission, and more.
4. Agile organization solutions ➔ e-business: the use of electronic technology
➔ Market pressures, movements in the global to facilitate business transactions.
economy, and quickly changing consumer ➔ e-commerce: consumer-to business
demands require organizations to keep on transactions.
top of the latest agile solution trends
5. Internal problem auditing Challenges of Social Responsibility
➔ Regular internal audits ensure that action
can be taken the minute an issue is spotted. Social Responsibility
6. Use of enterprise data - an ethical concept in which a person works and
➔ data that is shared across an organization by cooperates with other people and organizations for
its users the benefit of the community.
➔ enhances efficiency and collaboration - a moral obligation on a company or an individual to
7. Focus on customers take decisions or actions that are in favor and useful
➔ feedback from customers if taken seriously, to society.
enables the operations team to tailor its
offerings, products and services. 1. Resistance From Stakeholders - Implementation
8. Developments in technology faces opposition, especially in profit driven
➔ Technology - the application of scientific organizations. Short Term profits are prioritized over
discoveries to the development and societal benefits.
improvement of products, services and
operations processes. 2. Cost & Resource Constraints - Social
9. Globalization responsibility demands substantial investments of
➔ the growing interconnection of nations' time, money, and resources.
economies. it represents the flow of financial
products, goods, technology, information, 3. Complex Regulatory Compliance - Firms must
and jobs across national borders and navigate diverse environmental, labor, and community
cultures. standards across regions, which can be time
10. Total Quality Management consuming.
➔ emphasis is on customer satisfaction.
➔ Process improvement can result in improved 4. Measuring & Evaluating Impact - Quantifying
quality, cost reduction, and time reduction. social and environmental impact is crucial but
11. Lean systems challenging due to intangible outcomes.
➔ focused on quality, flexibility, time and cost
reduction, and teamwork. 5. Balancing Short-Term Financial Goals vs
➔ It involves flattening of the organizational Long-Term Social Objectives
structure, with fewer levels of management. - Some initiatives take time to yield results, creating
pressure to prioritize immediate profits.
Three kinds of technology
a. Product and service technology - refers to the
discovery and development of new products and
services; done mainly by researchers and engineers,

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 Tactics are the methods and actions taken to
accomplish strategies. Simple illustration: You would
Module 2
like to have a career in business, have a good job,
Competitiveness, Strategy and Productivity
and earn enough income to live comfortably.

Competitiveness
Strategies and Tactics
Refers to how effectively an organization meets the
wants and needs of customers relative to others that Mission: Live a good life.
offer similar goods or services
Goal: Successful career, good
How Marketing Influences Competitiveness income.
1. Identifying consumer wants and/or needs
Strategy: Obtain a college
2. Price and quality education.
3. Advertising and promotion
Tactics: Select a college and a
Influence of Operations on Competitiveness major; decide how to
1.Product and service design finance college.
2. Cost
3. Location Operations: Register, buy books,
take courses, study
4. Quality
5. Flexibility and quick response
6. Supply chain / inventory management Mission
7. Service Organizational Goals
8. Managers and workers Organizational Strategies
Functional Goals
Why Some Organizations Fail
1. Neglecting operations strategy. Marketing Finance Operations
2. Failing to take advantage of strengths and strategies strategies strategies
opportunities, and/or failing to recognize Tactics Tactics Tactics
competitive threats. Operating Operating Operating
3. Putting too much emphasis on short-term Procedures Procedures Procedures
financial performance at the expense of
research and development. Strategy Formulation
4. Placing too much emphasis on product and -To formulate an effective strategy, the core
service design and not enough on process competencies of the organization must be taken into
design and improvement. account.
5. Neglecting investments in capital and human
resources. ➔ Core competencies are the special
6. Failing to establish good internal attributes or abilities that give an
communications and cooperation among organization a competitive edge.
different functional areas.
7. Failing to consider customer wants and - Perform a SWOT analysis, (strengths, weaknesses,
needs. opportunities, and threats).
- Perform environmental scanning to determine
Mission and Strategies what competitors are doing, or planning to do.
An organization’s mission is the reason for its
existence. It is expressed in its mission statement ➔ Environmental scanning is the monitoring
which serves as the basis for organizational goals. of events and trends that present either
threats or opportunities for the organization.
Goals serve as a foundation for the development of
organizational strategies. Key Factors in Environmental Scanning
Strategies are the plans for achieving organizational External:
goals. 1. Economic conditions - these include the general
health and direction of the economy, inflation and
deflation, interest rates, tax laws, and tariffs.

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2. Political conditions - these include favorable or ➢ the bargaining power of customers,
unfavorable attitudes toward business, political ➢ the bargaining power of suppliers,
stability or instability, and wars. ➢ the intensity of competition.
3. Legal environment - this includes antitrust laws,
government regulations, trade restrictions, minimum Strategy Formulation Key Steps
wage laws, product liability laws and recent court 1. Link strategy directly to the organization’s mission
experience, labor laws, and patents. or vision statement.
4. Technology - this can include the rate at which 2. Assess strengths, weaknesses, threats, and
product innovations are occurring, current and future opportunities, and identify core competencies.
process technology (equipment, materials handling), 3. Identify order winners and order qualifiers.
and design technology. 4. Select one or two strategies (e.g., low cost, speed,
5. Competition - this includes the number and customer service) to focus on.
strength of competitors, the basis of competition
(price, quality, special features), and the ease of Order qualifiers are those characteristics that potential
market entry. customers perceive as minimum standards of
6. Customers - loyalty, existing relationships, and acceptability for a product to be considered for
understanding of wants and needs are important. purchase.
7. Suppliers - relationships, dependability of suppliers, Order winners are those characteristics of an
quality, flexibility, and service are typical organization’s goods or services that cause them to
considerations. be perceived as better than the competition.
8. Markets - this includes size, location, brand
loyalties, ease of entry, potential for growth, long-term OPERATIONS STRATEGY
stability, and demographics. Mission
Organizational Goals
Internal Factors That Relates to Possible Organizational Strategies
Strengths or Weaknesses Functional Goals

1. Human resources - these include the skills and Marketing Finance Operations
abilities of managers and workers, special talents strategies strategies strategies
(creativity, designing, problem solving), loyalty, Tactics Tactics Tactics
expertise, dedication, and experience. Operating Operating Operating
2. Facilities and equipment - capacities, location, age, Procedures Procedures Procedures
and cost to maintain or replace can have a significant
impact on operations.
3. Financial resources - cash flow, access to
additional funding, existing debt burden, and cost of OPERATIONS STRATEGY
capital are important considerations. - deals primarily with the operations aspect of the
4. Products and services - these include existing organization.
products and services, and the potential for new - relates to products, processes, methods, operating
products and services. resources, quality, costs, lead times, and scheduling.
5. Technology - this includes existing technology, the
ability to integrate new technology, and the probable Productivity
impact of technology on current and future operations. - A measure of the effective use of resources,
6. Other factors - include patents, labor relations, usually expressed as the ratio of output to
company or product image, distribution channels, input.
relationships with distributors, maintenance of - An index that measures output (goods and
facilities and equipment, access to resources, and services) relative to the input (labor,
access to markets. materials, energy, and other resources) used
to produce it.
Strategy Formulation
- The five forces model can be used as an alternative Productivity = Output / Input
to SWOT.
➢ threat of new competition, Productivity growth = Current productivity −
➢ threat of substitute products or services, Previous productivity / Previous productivity

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Examples of partial productivity measures 4. Consider incentives to reward workers for
➔ Labor productivity = Units of output per labor contributions.
hour 5. Establish reasonable goals for improvement.
➔ Machine productivity = Units of output per 6. Measure improvements and publicize them.
machine hour
➔ Energy productivity = Units of output per
Module 3 Forecasting
kilowatt-hour

Forecasting
Productivity in the Service Sector
- an attempt to predict future outcomes based on past
Where services are involved, process yield
events and management insight.
measurement is often dependent on the particular
- a forecast is an estimate about the future value of a
process.
variable such as demand.
➔ Example: in a car rental agency, a measure
Uses of Forecast
of yield is the ratio of cars rented to cars
➔ Accounting – new product or process cost
available for a given day.
estimates, profit projections, cash
➔ In education, a measure for college and
management.
university admission yield is the ratio of
➔ Finance – equipment and equipment
student acceptances to the total number of
replacement needs, timing and amount of
students approved for admission.
funding or borrowing needs.
➔ For subscription services, yield is the ratio of
➔ Human resources - hiring activities, including
new subscriptions to the number of calls
recruitment, interviewing, training; layoff
made or the number of letters mailed.
planning, outplacement counseling.
➔ MIS – new / revised information systems,
Factors that Affect Productivity
internet services
Generally, they are methods, capital, quality,
➔ Operations - schedules, capacity planning,
technology, and management
work assignments and workloads, inventory
planning, make-or buy decisions,
Factors that Affect Productivity
outsourcing, project management.
- Standardizing processes and procedures wherever
➔ Product or service design - revision of
possible to reduce variability can have a significant
current features, design of new products or
benefit for both productivity and quality.
services.
- Use of the internet can lower costs of a wide range
➔ Marketing - pricing and promotion,
of transactions, thereby increasing productivity.
e-business strategies, global competition
- Computer viruses can have an immense negative
strategies.
impact on productivity.
- Scrap rates and reworks have an adverse effect on
FEATURES COMMON TO ALL FORECASTS
productivity, signaling inefficient use of resources.
- Labor turnover has a negative effect on productivity;
➔ Forecasts are not perfect - actual results
replacements need time to get up to speed.
usually differ from predicted values; the
- Design of the workspace can impact productivity
presence of randomness precludes a perfect
- Equipment breakdowns and shortages of parts or
forecast. Allowances should be made for
materials.
forecast errors.
- Incentive plans that reward productivity increases
➔ Forecasts for groups of items tend to be
can boost productivity.
more accurate than forecasts for individual
items because forecasting errors among
Improving Productivity
items in a group usually have a canceling
effect.
1. Develop productivity measures for all operations.
➔ Forecast accuracy decreases as the time
Measurement is the first step in managing and
period covered by the forecast (the time
controlling an operation.
horizon) increases.
2. Look at the system as a whole.
3. Solicit ideas from workers.

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ELEMENTS OF A GOOD FORECAST Salesforce Opinions - sales staff or the customer
service staff are often good sources of information
➢ Timely - usually, a certain amount of time is because of their direct contact with consumers.
needed to respond to the information
contained in a forecast. Consumer Surveys - it is the consumers who
ultimately determine demand, hence their inputs can
● For example, capacity cannot be produce valued information.
expanded overnight, nor can
inventory levels be changed Delphi method - involves circulating a series of
immediately. questionnaires among individuals who possess the
knowledge and ability to contribute meaningfully. The
➢ Accurate, and the degree of accuracy should goal is to predict when a certain event will occur.
be stated. This will enable users to plan for
possible errors and will provide a basis for FORECASTS BASED ON TIME-SERIES DATA
comparing alternative forecasts. - a time series is a time-ordered sequence of
➢ Reliable – a result of accuracy; it should observations taken at regular intervals.
work consistently. - forecasting techniques based on time-series data
- Expressed in meaningful units are made on the assumption that future values of the
(quantifiable). series can be estimated from past values.
- Should be in writing.
- Simple to understand and use. Components of Time Series Analysis
➢ Cost-effective - the benefits should outweigh 1. Trend refers to a long-term upward or downward
the costs. movement in the data.
2. Seasonality refers to short term, fairly regular
STEPS IN THE FORECASTING PROCESS variations generally related to factors such as the
1. Determine the purpose of the forecast. calendar or time of day.
2. Establish a time horizon. 3. Cycles are wavelike variations of more than one
3. Obtain, clean, and analyze appropriate data. year’s duration.
4. Select a forecasting technique. 4. Irregular variations are due to unusual
5. Make the forecast. circumstances.
6. Monitor the forecast errors. 5. Random variations are residual variations that
remain after all other behaviors have been accounted
APPROACHES TO FORECASTING for.
A demand forecast should be based on a time series
2 general approaches: of past demand rather than unit sales.

● qualitative: consist mainly of subjective

inputs, which often defy precise numerical
description.
● quantitative: uses mathematical models and
statistical techniques to make predictions.

QUALITATIVE FORECASTS
- normally resorted to when quantitative data are not
available
- forecasts are based on executive opinions,
consumer surveys, opinions of the sales staff, and
opinions of experts

Executive Opinions - A small group of upper-level

managers may meet and collectively develop a
forecast. This approach is often used as a part of
long-range planning and new product development.

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 Questions/Issues to Take Into Account:
Module 4 Product and Service Design
1. Is there demand for it?
Product design - the combination of manufacturing
2. Can we do it?
capabilities with product and business knowledge to
3. What level of quality is appropriate?
convert ideas into physical and usable objects.
4. Does it make sense from an
Service design - the coordination and combination of
economic standpoint?
people, communication, and material components to
create quality service.
Reasons for Product and Service Design or
Redesign:
Strategic importance of product and service
● Economic
design:
● Social and demographic
➢ Organizations that have well designed
● Political, liability, or legal
products or services are more likely to
● Competitive
realize their goals than those with poorly
● Cost or availability
designed products or services.
● Technological
➢ Product or service design should be closely
tied to an organization’s strategy.
IDEA GENERATION (Main sources of design
➢ It is a major factor in cost, quality,
ideas):
time-to-market, customer satisfaction, and
competitive advantage.
1. Competitors’ products and services - by
➢ Demand forecasts and projected costs are
studying a competitor’s products or services and how
important, as is the expected impact on the
the competitor operates an organization can glean
supply chain.
many ideas.
➢ A significant cause of operations failures can
➢ Reverse engineering - dismantling and
be traced to faulty design.
inspecting a competitor’s product to discover
➢ Designs that have not been well thought out,
product improvement; or even come up with
or are incorrectly implemented, or
a product better than the competitor’s.
instructions for assembly or usage that are
wrong or unclear, can be the cause of
2. Research and development (R&D) - organized
product and service failures, leading to
efforts to increase scientific knowledge or product
lawsuits, injuries and deaths, product recalls,
innovation.
and damaged reputations.
➢ Basic research has the objective of
advancing the state of knowledge about a
What Does Product and Service Design Do?
subject, without any near-term expectation of
1. Translate customer wants and needs into
commercial applications.
product and service requirements.
➢ Applied research has the objective of
2. Refine existing products and services.
achieving commercial applications.
3. Develop new products and/or services.
➢ Development converts the results of applied
4. Formulate quality goals.
research into useful commercial applications.
5. Formulate cost targets.
6. Construct and test prototypes.
LEGAL AND ETHICAL CONSIDERATIONS:
7. Document specifications.
1. Product liability - the responsibility of a
8. Translate product and service specifications
manufacturer for any injuries or damages caused by a
into process specifications.
faulty product; a product must be suitable for its
intended purpose.
Objectives of Product and Service Design:
➢ Primary consideration - Customer
HUMAN FACTORS:
satisfaction
1. Safety and liability are two critical issues in many
➢ Secondary considerations - Cost or profit,
instances, and they must be carefully considered.
quality, ability to produce a product or
2. Creeping featurism seeking a competitive edge by
provide a service, ethics/safety, and
adding new features.
sustainability.

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CULTURAL FACTORS: - any cultural differences of getting a leap on the competition, as well as
different countries or regions related to the product getting to market at an advantageous time.
must be taken into account; this can result in different ➢ It is important to have a reasonable forecast
designs for different countries or regions. of initial demand so an adequate supply of
product or an adequate service capacity is in
GLOBAL PRODUCT AND SERVICE DESIGN: place.
organizations that operate globally use the combined 2. Growth phase
efforts of a team of designers who work in different ➢ design improvements and increasing
countries and even on different continents engaging demand yield higher reliability and lower
the best human resources from around the world. costs, leading the growth in demand.
➢ It is important to obtain accurate projections
ENVIRONMENTAL FACTORS - SUSTAINABILITY of the demand growth rate and how long that
KEY ASPECTS: will persist, and then to ensure that capacity
increases coincide with increasing demand.
1. Cradle-to-grave assessment - the assessment of 3. Maturity
the environmental impact of a product or service ➢ the demand levels off; few, if any, design
throughout its useful life. changes are needed.
➢ also known as life cycle analysis focusing on ➢ Generally, costs are low and productivity is
such factors as global warming. high; new uses for products or services can
extend their life and increase the market
2. End-of-Life Programs - the purpose is to reduce size.
the dumping of products that have reached the end of 4. Decline phase
their useful lives, in landfills or third-world countries, ➢ decisions must be made about whether to
or incineration which converts materials into discontinue a product or service and replace
hazardous air and water emissions and generates it with new ones or abandon the market, or
toxic ash. to attempt to find new uses or new users for
➢ The Three Rs: Reduce, Reuse, and the existing product or service.
Recycle Reduce: Value Analysis -
Examination of the function of parts and Product life cycle management (PLM) - a
materials in an effort to reduce cost and/or systematic approach to managing the series of
improve product performance. changes a product goes through, from its conception
to its end-of-life.
3. The Three Rs: Reduce, Reuse, and Recycle
➢ Reduce: Value Analysis - Examination of the Three phases of PLM application:
function of parts and materials in an effort to • Beginning of life
reduce cost and/or improve product • Middle of life
performance. • End of life
➢ Reuse: Remanufacturing - refurbishing used
products by replacing worn-out or defective Key issues in product or service design
components, and reselling the products. 1. Standardization - extent to which a product,
➢ Recycle: recovering materials for future use. service, or process lacks variety.
Reasons for recycling:
1. Cost savings Standardization ADVANTAGES:
2. Environment concerns 1. Fewer parts to deal with in inventory and in
3. Environmental regulation manufacturing.
2. Reduced training costs and time.
Phases in product design and development: 3. More routine purchasing, handling, and inspection
1. Launching (introduction) procedures.
➢ it may be treated as a curiosity item; many 4. Orders fillable from inventory.
potential buyers may suspect that all the
bugs haven’t been worked out and that the Standardization DISADVANTAGES:
price may drop after the introductory period. 1. Designs may be frozen with too many
➢ companies must carefully weigh the imperfections remaining.
trade-offs in getting all the bugs out versus

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2. High cost of design changes increases resistance ➢ Expansion of an existing product line or
to improvements. service offering
3. Decreased variety results in less consumer appeal. ➢ Clone of a competitor’s product or service
➢ New product or service
Key issues in product or service design
➢ Companies like standardization because it 6. Quality function deployment (QFD)
enables them to produce high volumes of ➢ An approach that integrates the “voice of the
relatively low-cost products, albeit products customer” into both product and service
with little variety. development.
➢ Customers, on the other hand, typically ➢ The purpose is to ensure that customer
prefer more variety, although they like the requirements are factored into every aspect
low cost. of the process.

The question for producers is how to resolve PHASES IN PRODUCT DESIGN & DEVT
these issues without 1. Feasibility analysis
➢ losing the benefits of standardization, and 2. Product specifications
➢ incurring a host of problems that are often 3. Process specifications
linked to variety. 4. Prototype development
5. Design review
2. Mass Customization - a strategy of producing 6. Market test
basically standardized goods, but incorporating some 7. Product introduction
degree of customization in the final product or service. 8. Follow-up evaluation

Mass Customization Techniques 1. Feasibility analysis - entails market analysis

➢ Delayed differentiation (demand), economic analysis (development cost and
➢ Modular design production cost, profit potential), and technical
analysis (capacity requirements and availability, and
Delayed differentiation - A postponement tactic: the the skills needed).
process of producing, but not quite completing, a ➢ requires collaboration among marketing,
product or service, postponing completion until finance, accounting, engineering, and
customer preferences or specifications are known. operations.
Modular design - A form of standardization in which
component parts are grouped into modules that are 2. Product specifications - detailed descriptions of
easily replaced or interchanged. what is needed to meet (or exceed) customer wants,
and requires collaboration between legal, marketing,
3. Reliability - a measure of the ability of a product, a and operations.
part, a service, or an entire system to perform its
intended function under a prescribed set of 3. Process specifications – determining the
conditions. methods that will be needed to produce the product.
➢ alternatives must be weighed in terms of
Failure – is a situation in which a product, part, or cost, availability of resources, profit potential,
system does not perform as intended. and quality; this involves collaboration
Normal operating conditions -the set of conditions between accounting and operations.
under which an item’s reliability is specified; if users
do not heed these conditions it often results in 4. Prototype development* - once product and
premature failure of parts or complete systems. process specifications are complete, one (or a few)
units are made to see if there are any problems with
4. Robust Design – a design that results in products the product or process specifications.
or services that can function over a broad range of * Sample or model
conditions.

5. Degree of Newness
➢ Modification of an existing product or service

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5. Design review - at this stage, any necessary 4. Recognize that designers’ familiarity with the
changes are made or the project is abandoned. system may give them quite a different perspective
➢ marketing, finance, engineering, design, and than that of the customer, and take steps to overcome
operations collaborate to determine whether this.
to proceed or abandon. 5. Make sure that managers are involved and will
support the design once it is implemented.
6. Market test - used to determine the extent of 6. Define quality for both tangibles and intangibles.
consumer acceptance. If unsuccessful, the product Intangible standards are more difficult to define, but
returns to the design review phase. they must be addressed.
➢ This phase is handled by marketing.

7. Product introduction - the new product is

promoted.
➢ This phase is handled by marketing guys
who determine the type of promotion that is
suitable for the product.

8. Follow-up evaluation - Based on user feedback,

changes may be made or forecasts refined.
➢ This phase is handled by marketing.

Characteristics of well-designed service system:

● Being consistent with the organization’s
mission.
● Being user-friendly.
● Being robust if variability is a factor.
● Being easy to sustain.
● Being cost-effective.
● Having value that is obvious to customers.
● Having a single, unifying theme, such as
convenience or speed.
● Having design features and checks that will
ensure service that is reliable and of high
quality.
● 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.

Guidelines for successful service designs:

1. Define the service package in detail. A service
blueprint may be helpful for this.
2. Focus on the operation from the customer’s
perspective. Consider how customer expectations
and perceptions are managed during and after the
service.
3. Consider the image that the service package will
present both to customers and to prospective
customers.

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