The formula for the moving average is:Standardization, Mass Customization

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The formula for the moving average is:DESIGN STRATEGIES >>

Production and Operations Management MGT613

Lecture 12

In our last discussion we focused on the objectivity and importance of Product and Service Design. We

also went through the primary and secondary reasons due to which organizations opt for designing a

new product or offering of a new service. We also talked about the strategy for designing of new

products and services. We investigated the legal, ethical and environmental regulations. We also

formulated a design strategy and also discussed guidelines, which the organizations must fulfill in order

to achieve competitive advantage through designing of effective productive systems.

Critical Issues in Product and Service Design

An organization needs to decide about the following critical issues in developing its product and service

design.

How much standardization

Product/service reliability

Range of operating conditions

Product/service life cycles

Standardization

Standardization is the extent to which there is an absence of variety in a product, service or process.

Standardized products are immediately available to customers. You go to a market and request for a

charger for your cellular phone, the shopkeeper would ask for the model, make and deliver you as

special product which is made by your cell phone company or by an independent manufacturer, who

provides a standardized compatible model.

Advantages of Standardization

1. Fewer parts to deal with in inventory & manufacturing .The trend is to use the same components for

different models of products or even in services side, the data of a customer once taken as input can

be utilized for other services.

2. Design costs are generally lower (the standardized product has a proven track record, so there is no

need to check its safety and reliability features from square 1, its true, its tested and verified on

prototype models before being marketed)

3. Reduced training costs and time. An important advantage and can improve PRODUCTIVITY.

4. More routine purchasing, handling, and inspection procedures (These indicate a decrease in cost and

can improve reliability as well as over all design and manufacturing processes)

5. Orders fillable from inventory, no need to carry extra safety stock levels as compatible

components/parts can be used. Any product registering lower sales can be phased out but its

components may be reused in an other more popular product even Softwares in cellular phones,

hands free arrangement etc)

6. Opportunities for long production runs and automation .Uninterrupted stock of components

available, so production can be controlled and if possible a demand forecast may be used.

7. Need for fewer parts justify increased expenditures on perfecting designs and improving quality

control procedures. The company can free up its inventory carrying costs and use it on increasing

its long term tangible and intangible quality standards

Disadvantages of Standardization

1. Designs may be frozen ( Standardized) with too many imperfections remaining ( An existing

shortcoming may never be removed because of this leading to product or component failure,

catalytic converter failure led to a number of good cars in 1980s).

Production and Operations Management MGT613

2. High cost of design changes increases resistance to improvements (associated with its lack of

confidence on the design side as well as outsourcers, who provide design services).

3. Reduction in Variety which leads to decreased variety results in less consumer appeal. This also at

times lead to the competitor producing a better product or greater variety which itself is a feature of

lean production.

Mass Customization

Mass customization is a strategy of producing standardized goods or services, but incorporating some

degree of customization through delayed differentiation and modular design.

Delayed Differentiation is the postponement tactic. Producing but not quite completing a product or

service until customer preferences or specifications are known, a pc manufacturer employed this

technology and improved its time of delivery. This led to new concepts of marketing and manufacturing

to register higher profits and revenues.

Product/Service Reliability

Reliability: The ability of a product, part, or system to perform its intended function under a prescribed

set of conditions

Failure: Situation in which a product, part, or system does not perform as intended

Normal operating conditions: The set of conditions under which an item's reliability is specified e.g. an

automobile designed for operation Europe may not fulfill its intended service in Pakistan. SO IT

WOULD FAIL AND BE LESS RELIABLE

Life Cycles of Products or Services

We often hear the term short and long product lives which reflect upon the idea how product lives are

governed by Technological rate of change. In other words the need and utility of the Product gets

severely reduced. E.g. VCR no longer enjoys the source of entertainment it enjoyed in 1970s to 1990s.

Most of the products exhibit Product Life cycles except wooden pencils, paper clips, nails, knives etc.

Saturation

Demand

Maturity

Decline

Growth

Introduction

Time

Life

Cycles of Products or Services normally entail the following phases.

1. INTRODUCTION PHASE: When items are first introduced, it is received with curiosity.

Demand is low in the beginning then when buyers begin familiar with the product and see it as a

reliable and good buy, they start buying it.

Production and Operations Management MGT613

2. GROWTH PHASE: With the passage of time, production and design improvements lead to

decrease in cost and price becomes an attractive feature with increase in reliability.

3. MATURITY PHASE: When the product reaches maturity stage its demand can only increase if

design is refined or changed and some differentiation feature is added this may increase the

demand but when it goes down

4. SATURATION PHASE: In this phase product demand declines and the market is saturated

with either a compatible product or substitutes.

5. DECLINE: In this phase, most of the organizations adopt a defensive design R&D Strategy in

an attempt to prolong the life of the product by employing new packaging, redesigning it,

improving its reliability

As students of Operations Management, you may be asked to suggest the Product Life Cycle for

Telecom Industry constituents or in other words where would you place cell phones, wireless

phones, landline phones or satellite/cable based telephones in view of the life cycle you just studied.

You can make an attempt to answer this for Pakistan as well as other developed countries. Can you

appreciate the similarities and points of differences?

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