2 prod decision analisis dev
TRANSCRIPT
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Product Decision, Analysis & Development
What is a Product?
The term product is often used as a catch-all word to identify
solutions a marketer provides to its target market. We will follow this
approach and permit the term product to cover offerings that fall into one
of the following categories:
Goods Something is considered a good if it is a tangible item. Thatis, it is something that is felt, tasted, heard, smelled or seen. For
example, bicycles, cell phones, and donuts are all examples of tangible
goods. In some cases there is a fine line between items that affect the
senses and whether these are considered tangible or intangible. We
often see this with digital goods accessed via the Internet, such as
listening to music online or visiting an information website. In these
cases there does not appear to be anything that is tangible or real since it
is essentially computer code that is proving the solution. However, for
our purposes, we distinguish these as goods since these products are
built (albeit using computer code), are stored (e.g., on a computer hard
drive), and generally offer the same benefits each time (e.g., quality of
the download song is always the same).
Services Something is considered a service if it is an offering acustomer obtains through the work or labor of someone else. Services
can result in the creation of tangible goods (e.g., a publisher of business
magazines hires a freelance writer to write an article) but the main
solution being purchased is the service. Unlike goods, services are not
stored, they are only available at the time of use (e.g., hair salon) and the
consistency of the benefit offered can vary from one purchaser to
another (e.g., not exactly the same hair styling each time).
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Ideas Something falls into the category of an idea if the marketerattempts to convince the customer to alter their behavior or their
perception in some way. Marketing ideas is often a solution put forth by
non-profit groups or governments in order to get targeted groups to
avoid or change certain behavior. This is seen with public service
announcements directed toward such activity as youth smoking,
automobile safety, and illegal drug use.
In BUSINESS, a product is a good economics and accounting good or
service which can be bought and sold. In marketing, a product is anything that
can be offered to a market that might satisfy a want or need. In manufacturing,
products are purchased as raw materials and sold as finished goods.
Commodities are usually raw materials such as metals and agricultural
products, but a commodity can also be anything widely available in the open
market.
In general usage, product may refer to a single item or unit, a group of
equivalent products, a grouping of goods or services, or an industrialclassification for the goods or service.
Production decisions:In decisions on producing or providing products and services in
the market it is essential that the production of the product or service is well
planned and coordinated, both within and with other functional area of the
firm, particularly marketing. The main elements to consider are theproduction process itself, specifications, culture, the physical product,
packaging, labeling, branding, warranty and service.
Product SelectionSelecting which products to manufacture can be one of the most challenging
parts. You may have a preference based on knowledge of your product or
service, world trends in our industry or your intuition about potential new
markets. It makes sense to test and confirm your preference using a mix of
formal and informal measures.
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The product selection process requires you to:
* Collect information about potential export markets
* Make comparisons
* Make decisions
Idea for New Product or Service
Sources of Ideas:At this stage, someone has an idea for a new product or service. Ideas can
come from many sources, for example:
Complaints from current customers (Customer Service and CustomerSatisfaction)
Requests for Proposals from large businesses, government agencies,etc.
Modifications to current products (Innovation)Suggestions from employees, customers, suppliers, etc. (Creative
Thinking)
Distributors Competitors Research and Development Consultants Brainstorming: The process of getting a group to think of unlimited
ways to vary a product or solve a problem.
Rules of thumb, intuition, tradition, and simple financial analysis are
often no longer sufficient for addressing such common decisions as make-
versus-buy, facility site selection, and process redesign. In general, the
forces of competition are imposing a need for more effective decision
making at all levels in organizations.
Decision analysts provide quantitative support for the decision-
makers in all areas including engineers, analysts in planning offices and
public agencies, project management consultants, manufacturing process
planners, financial and economic analysts, and experts supportingmedical/technological diagnosis, and so on and on.
Progressive Approach to Modeling: Modeling for decision making
involves two distinct parties, one is the decision-maker and the other is the
model-builder known as the analyst. The analyst is to assist the decision-
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maker in his/her decision-making process. Therefore, the analyst must beequipped with more than a set of analytical methods.
Specialists in model building are often tempted to study a problem,
and then go off in isolation to develop an elaborate mathematical model for
use by the manager (i.e., the decision-maker). Unfortunately the manager
may not understand this model and may either use it blindly or reject it
entirely. The specialist may feel that the manager is too ignorant and
unsophisticated to appreciate the model, while the manager may feel that the
specialist lives in a dream world of unrealistic assumptions and irrelevant
mathematical language.
Such miscommunication can be avoided if the manager works with
the specialist to develop first a simple model that provides a crude but
understandable analysis. After the manager has built up confidence in thismodel, additional detail and sophistication can be added, perhaps
progressively only a bit at a time. This process requires an investment of
time on the part of the manager and sincere interest on the part of the
specialist in solving the manager's real problem, rather than in creating and
trying to explain sophisticated models. This progressive model building is
often referred to as the bootstrapping approach and is the most important
factor in determining successful implementation of a decision model.
Moreover the bootstrapping approach simplifies otherwise the difficult task
of model validating and verification processes.
What is a System: Systems are formed with parts put together in a
particular manner in order to pursuit an objective. The relationship between
the parts determines what the system does and how it functions as a whole.
Therefore, the relationship in a system are often more important than the
individual parts. In general, systems that are building blocks for othersystems are called subsystems
The Dynamics of a System: A system that does not change is a static
(i.e., deterministic) system. Many of the systems we are part of are dynamic
systems, which are they change over time. We refer to the way a system
changes over time as the system's behavior. And when the system's
development follows a typical pattern we say the system has a behavior
pattern. Whether a system is static or dynamic depends on which time
horizon you choose and which variables you concentrate on. The time
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horizon is the time period within which you study the system. The variablesare changeable values on the system.
In deterministic models, a good decision is judged by the outcome
alone. However, in probabilistic models, the decision-maker is concerned
not only with the outcome value but also with the amount of risk each
decision carries
As an example of deterministic versus probabilistic models, consider
the past and the future: Nothing we can do can change the past, but
everything we do influences and changes the future, although the future has
an element of uncertainty. Managers are captivated much more by shaping
the future than the history of the past.
Uncertainty is the fact of life and business; probability is the guide fora "good" life and successful business. The concept of probability occupies
an important place in the decision-making process, whether the problem is
one faced in business, in government, in the social sciences, or just in one's
own everyday personal life. In very few decisions making situations is
perfect information - all the needed facts - available. Most decisions are
made in the face of uncertainty. Probability enters into the process by
playing the role of a substitute for certainty - a substitute for completeknowledge.
Probabilistic Modeling is largely based on application of statistics forprobability assessment of uncontrollable events (or factors), as well as risk
assessment of your decision. Therefore risk assessment means a study to
determine the outcomes of decisions along with their probabilities.
Decision-makers often face a severe lack of information. Probability
assessment quantifies the information gap between what is known, and what
needs to be known for an optimal decision. The probabilistic models are
used for protection against adverse uncertainty, and exploitation of
propitious uncertainty.
It is a challenging task to compare several courses of action and then
select one action to be implemented. At times, the task may prove too
challenging. Difficulties in decision making arise through complexities in
decision alternatives. The limited information-processing capacity of a
decision-maker can be strained when considering the consequences of only
one course of action. Yet, choice requires that the implications of various
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courses of action be visualized and compared. In addition, unknown factors
always intrude upon the problem situation and seldom are outcomes known
with certainty. Almost always, an outcome depends upon the reactions of
other people who may be undecided themselves. It is no wonder that
decision-makers sometimes postpone choices for as long as possible. Then,
when they finally decide, they neglect to consider all the implications of
their decision.
Emotions and Risky Decision: Most decision makers rely on emotions
in making judgments concerning risky decisions. Many people are afraid of
the possible unwanted consequences. However, do we need emotions in
order to be able to judge whether a decision and its concomitant risks are
morally acceptable. This question has direct practical implications: should
engineers, scientists and policy makers involved in developing risk
regulation take the emotions of the public seriously or not? Even thoughemotions are subjective and irrational (or a-rational), they should be a part of
the decision making process since they show us our preferences. Since
emotions and rationality are not mutually exclusive, because in order to be
practically rational, we need to have emotions. This can lead to an
alternative view about the role of emotions in risk assessment: emotions can
be a normative guide in making judgments about morally acceptable risks.
Most people often make choices out of habit or tradition, without
going through the decision-making process steps systematically. Decisions
may be made under social pressure or time constraints that interfere with acareful consideration of the options and consequences. Decisions may be
influenced by one's emotional state at the time a decision is made. When
people lack adequate information or skills, they may make less than optimal
decisions. Even when or if people have time and information, they often do a
poor job of understanding the probabilities of consequences. Even when they
know the statistics; they are more likely to rely on personal experience than
information about probabilities. The fundamental concerns of decision
making are combining information about probability with information about
desires and interests. For example: how much do you want to meet her, howimportant is the picnic, and how much is the prize worth?
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Business decision making is almost always accompanied by
conditions of uncertainty. Clearly, the more information the decision maker
has, the better the decision will be. Treating decisions as if they were
gambles is the basis of decision theory. This means that we have to trade off
the value of a certain outcome against its probability.
To operate according to the canons of decision theory, we must compute the
value of a certain outcome and its probabilities; hence, determining the
consequences of our choices.
Types of new products: There are several general categories of newproducts. Some are new to the market (ex. DVD players into the home
movie market), some are new to the company (ex. Game consoles for Sony),
some are completely novel and create totally new markets (ex. the airline
industry). When viewed against a different criteria, some new product
concepts are merely minor modifications of existing products while someare completely innovative to the company.
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Changes to Augmented Product Core product revision Line extensions New product lines Repositionings Completely new
WHAT IS PRODUCT DESIGN?
It is a systematic formulation which leads to the selection of
material, its specification and its aesthetic appearance of theproduct to be manufactured. Though product design is a part of
engineering design but its role in operation management is very
crucial.
IMPORTANCE OF PRODUCT DESIGN
Production or operations strategy is directly influenced by product
design for the following reasons.
1. As products are designed, all the detailed characteristics of eachproduct are established.
2. Each product characteristics directly affects how the product can bemade or produced (i.e. process technology and process design)
3. How the product is made determines the design of the productionstrategy (production design) which is the heart of production and
operation strategy.
Further, product design directly affects product quality, production
and customer satisfaction. Hence, the design of product is crucial to stayin todayss global competition.
A good product design can improve the marketability of a product
making it easier to operate or use, upgrading its quality, improving
appearance, and/or reducing manufacturing costs.
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A distinctive design may be the only feature that signifies
differentiates a product. An excellent design includes usability,
aesthetics, reliability, functionality, innovation and appropriateness. An
excellent design provides competitive advantage to the manufacture by
ensuring appropriate quality, reasonable cost and the expected product
features, Firms tomorrow will definitely compete not on price and
quality, but on product design.
WHAT DOES PRODUCT DESIGN DO?
The activities and responsibilities of product design includes
following:
1. Translating customer needs and wants into product andrequirements (marketing).
2. Refining existing products (marketing).3. Developing new products (marketing & product design).4. Formulating quality goals (quality assurance, production).5. Formulating cost targets (Accounting).6. Constructing and testing prototype (marketing, production).7. Documentary specifications (product design).
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REASONS FOR PRODUCT DESIGN OR REDESIGN
The most obvious reason for product design is to offer new productsto remain competitive in the market. The second most important reason is
to make the business grow and increase profits. Also, when productivity
gains result in reduction of workforce, developing new products can
mean adding jobs and retaining surplus workforce instead of downsizing
by layoff/ retrenchment.
Some times product design is actually redesign or modification of
existing design instead of an entirely new design. The reasons for this
include customer complaints, accidents or injuries during product use,
excessive warranty claims or low demand. Some times product redesignis initiated to achieve cost reductions in labour and materials costs.
OBJECTIVES OF PRODUCT DESIGN
1.The overall objective is profit generation in the long run.2.To achieve the desired product quality.3.To reduce the development time and cost to the minimum.4.To reduce the cost of product.5.To ensure productibility or manufacturability (design for
manufacturing and assembly).
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CHARACTERISTICS OF GOOD PRODUCT DESIGN
A good product design must ensure the following:
1. FUNCTION OR PERFORMANCE:- The function or performanceis what customer expects the product to do solve his/her problem
or for certain benefits leading to satisfaction. For example, a
customer for motorbike expects the bike to start with a few kicks
on the kick pedal and also expects some other functional aspects
such as pick up, maximum speed, engine power and fuel
consumption etc.
2. APPEARANCE OR AESTHETICS:- This includes the style,colour, look, feel, etc. which appeals to the human sense and adds
value to the product.
3. RELIABILITY:- This refers to the length of time a product can beused before it fails. In other words, reliability is the probability that
a product will function for a specific time period without a failure.
4. MAINTAINABILITY:- This refers to the restoration of a productonce it has failed. High degree of maintainability is desired so that
the product can be restored (repaired) to be used within a short
time after it breaks down. This is also known as service ability.
5. AVAILABILITY:- This refers to the continuity of service to thecustomer. A product is available for use when it is in an
operational state. Availability is a combination of reliability and
maintainability. High reliability and maintainability ensures high
availability.
6. PRODUCIBILITY:- This refers to the ease of manufacture withminimum cost (economic production). This is ensured in product
design by proper specification of tolerances, use of materials that
can be easily processed and also use of economical processes and
equipments to produce the product quickly and at a cheaper cost.
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7. SIMPLIFICATION:- It refers to the elimination of the complexfeatures so that the intended function is performed with reduced
costs, higher quality or more customer satisfaction. A simplified
design has fewer parts which can be manufactured and assembled
with less time and cost.
8. STANDARDISATION:- It refers to the design activity thatreduces variety among a group of products or parts. For example,
group technology items have standarised design which calls for
similar manufacturing process steps to be followed. Standard
design leads to variety reduction and results in economies of large
scale due to high volume of production of standard products.
However, standardized designs may lead to reduced choices forcustomers.
9. SPECIFICATION:- A specification is a detailed description of amaterial part or product, including physical measures such a
dimensions, volume, weight, surface finish etc. These
specifications indicate tolerances on physical measures which
provide production department with precise information about the
characteristics of products to be produced and the process and
production equipments to be used to achieve the specified
tolerance(acceptable variations). Interchangeability of parts in
products produced in large volumes (mass production and flow-
line production) is achieved by appropriate specification of
tolerances to facilitate the designed fit between parts which are
assembled together.
10.SAFETY:- The product must be safe to the user and should notcause any accident while using or should not cause any health
hazard to the user. Safety in storage, handling and usage must be
ensured by the design and a proper package has to be provided toavoid damage during transportation and storage of the product. For
example, a pharmaceutical product while curing the patient, should
not cause some other side effect threatening the user.
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FACTORS INFLUENCING PRODUCT DESIGN
1. CUSTOMER REQUIREMENTS:- The designers must find outthe exact requirements of the customers to ensure that the products
suit the convenience of customer for use. The products must bedesigned to be used in all kinds of conditions.
2. CONVENIENCE OF THE OPERATOR OR USER:- Theindustrial products such as machines and tools should be so
designed that they are convenient and comfortable to operate or
use.
3.Break - even chartsA break-even-chart shows the relationship between fixed costs,
variable costs and profit. Fixed costs include all development
charges, design charges and capital investment in plant and
equipment while variable costs include material cost, labor cost,
and part of overhead costs.
In manual production methods, fixed costs are low but variable
costs per unit are high. Break-Even-points under such methods are
lower. Though profit start early (i.e. at smaller outputs) but they
(profit) are lower even at high outputs.
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Figure shows the break-even-point at 30 % production capacity
The above aspects clearly bring out the importance of market research as
the basis for accurate sales forecasting in the development of new product
design. In mechanized production systems, fixed costs are high but variable
costs per unit are lower. In such cases break-even-point is raised but at
higher volume there is substantial profit.
Above fig. shows break-even-point at 60 % production capacity.
Depending upon the forecast of the product demand, manufacturing system
selection has to take place. If market forecast shows higher volumes,
mechanized production system may be selected so that the sooner
production starts and the volume increases, the sooner the investment will
show a return. The designer in such situations has to ensure that the product
design is such that
1. It tends easily to large production2. There are no teething problems3. Product has low variable-cost-element. Value engg. Techniquesconsiderably help to reduce variable as well as fixed cost.
4. TRADE-OFF BETWEEN FUNCTION AND FORM:- Thedesign should combine both performance and aesthetics or
appearance with a proper balance between the two.
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5. TYPES OF MATERIALS USED:- Discovery of new and bettermaterials can improve the product design. Designers keep in touch
with the latest development taking place in the fields of materials
and components and make use of improved materials and
components in their product designs.
6. WORK METHODS AND EQUIPMENTS:- Designers mustkeep abreast improvements in work methods, processes and
equipments and design the products to make use of the latest
technology and manufacturing processes to achieve reduction in
costs.
7. COST/PRICE RATIO:- In a competitive market, there is lot ofpressure of designers to design products which are cost effectivebecause cost and quality are inbuilt in the design. With a constraint
on the upper limit on cost of producing products, the designer must
ensure cost effective designs.
8. PRODUCT QUALITY:- The product quality partly depends upon onquality of design and partly on quality of conformance. The quality
policy of the firm provides the necessary guide lines for the
designers the extent to which quality should be built in the design
stage itself by deciding the appropriate design specifications and
tolerances. Product quality is made up of quality of design and
quality of conformance.The quality of design must be fixedat the
corporate level to provide the designer the guide line for the
quality standard of his design. Such a policy will set the design
trend for the futute and build a particular quality Image of the
companies product.
Once the quality policy has been specified, the designer has to
design the product which
Meets the customers requirementMeets the companies quality standard, and is capable of
being manufactured using facilities at the command of the
companies production department.
Quality of design is reflected in clear and concise drawings and
realistic tolerances and finishes, reliability and maintainilty figures,
and properly specified visual standards. The specification of all
these factors leads to consistency of product quality and when
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achieved to the level of that quality, the total gives quality of
design. High quality of design means high and consistent
performance over a period of time and this is a property which
depends largely on the designer.
9. PROCESS CAPABILITY:- The product design should take into
consideration the quality of conformance the degree to which
quality of design achieved in manufacturing. This depends on the
process capability of the machine and equipments. However the
designer should have the knowledge of the capability of the
manufacturing facilities and specific tolerances which can be
achieved by the available machines and equipments.Product design
is goverened by quality policy of the firm on one side andavailibilty of the plant and machinery to meet specification on the
other side. There is no sense in designing a product which cannot
be manufactured at the machinres avalible in the company and at
the same time the machine capability should not be so bad that
they cannot meet the needs of the quality of design.
The capabilitgy of machine is deteemined in terms of standard
deviation of that machine of that particular operation. The process
capability should be such that they meetcompanies quality
standards. It is responsibility of production department to keep
their plant in top condition. It is also their responsibility to replace
worn out machine and justify expenditure to top management.
However the designer must know the capability of machine
available in the company and design the products to satisfy their
process capability as well as design quality.
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10. EFFECT ON EXISTING PRODUCTS:- New product design
while replacing existing product designs, must take into
consideration the use of standards parts and components, existing
manufacturing and distribution strategies and blending of new
manufacturing technology with the existing one, so that the costs
of implementing the changes are kept to the minimum. The
designer also needs to consider the effect of the new products on
the existing product. If new product is to replace an existing
product, it should
fit into the manufacturing and distribution plans of the originalproduct.
Use the same standardised parts and components.Require same manufacturing technology.
And if the new product requires different distribution arrangements
and use of different technology, the effect on the sell of other productmust be considered.
11.PACKAGING:- Packaging is an essential part of a product andpackaging design and product design go hand in hand with equal
importance. Packaging design must take into account the
objectives of packaging such as protection and promotion of the
product. Attractive packaging enhances the sales appeal of
products in case of consumer product (non-durable).
Good packaging is as important as good design of the product.
Packaging is required for either :
Protection of the product, or A means o transporting the product to the consumer, or Promotion ( advertising) of the product
Consumer product generally attractive packaging to increase sale
appeal while capital goods requires heavy and sturdy packaging as
protection and as a means of transporting, packaging, particularly in a
consumer product, is a design activity.
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STAGES IN PRODUCT DESIGN
The various stages through which a product design passes:
1. CONCEPTION2. ACCEPTANCE3. EXECUTION4. EVALUATION5. TRANSLATION6. PRE-PRODUCTIONCONCEPTION:- In this stage a draft copy of product specification
prepared by the marketing department in consultation with the design
department. The purpose of the draft specification is to help designer
understand what exactly the customers expect from the product, alsoto let marketing people understand the cost of the proper product. The
design specifications should include information of the product such
as requirements regarding performance, aesthetics (appearance)
safety, reliability, serviceability, maintainability, volume of demand
for the product and maximum acceptable of design and development
of the product.
ACCEPTANCE:- The draft specification is scrutinized for checkingtechnical feasibility and economic viability. If the specification
accepted, it may have to be modified or rejected and such decisions
taken jointly by design and marketing departments.
EXECUTION:- This stage involves the conversion of designspecification into drawings (preliminary design) to build the prototype
model product. The prototype model should be a true replies of the
prototype new product satisfying all the requirements of the customer.
Sometimes it may be necessary to build more models prototype (For
example, A model, B model, C model etc.) First A model is
built and tested, if not satisfactory, the designed is modified and thenB model is built and tested and so on till a satisfactory prototype
model is built and tested. This stage establishes the feasibility of the
proposed product design.
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EVALUTION AND REVIEW OF DESIGN:- The design isevaluated by a cross functional team having representatives from
finance, marketing, manufacturing and service departments to achieve
optimal design (trading off between product quality and cost). The
design is reviewed to ensure that all requirements of the product such
as function, aesthetics (appearance), materials and process
alternatives, and their costs, economic assembly, repair and
maintenance, lead time required for installing the new process and
training the labour etc. are met by the product design.
TRANSALTION:- In this stage based on the experiences in theprevious stages, the detailed engineering drawings for parts,
subassemblies, final assemblies, part lists etc., are prepared. These
documents are known as a provisional design documents which take
into account the producibility aspects of the design. Also, detailedestimates of costs are prepared at this stage.
PREPRODUCTION:- A pilot production run is carried out using theprovisional design documents and the producibility aspect is proved
in this stage. Based on the experience gained in preproduction, the
provisional design is modified into final design which is approved for
bulk production later.
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Design Influences Manufacturing Cost
Design is the single most important area where the efforts to minimise
manufacturing cost are really rewarding. Costs can be curtailed more
easily at design stage and once product has been designed or developed, verylittle can be done except to cut corners here and there. some of the areas
where significant savings can be made at the design stage are discussed here
under:
a: Materials--
Material cost constitutes a major portion of the product total cost and as such
it provides vast scope for cost reduction .At the design stage, the designer
must ensure that ----
Only those materials which make the product perform satisfactorilyare selected. If cheaper material can work satisfactorily, there are no
us to go for costly.
Materials which are easily available in the market are used. Scarce orthose with long lead time prove to be expensive due to higher
procurement cost.
Component dimensions are such that commercially standard availablesizes can be used. Non standard sizes push up cost due to greaterprocess waste.
b:Machinability
Machinability of materials is another important aspect to be considered at
the design stage while selecting material .Some materials are easy to
machine, allow higher cutting speeds and cause less tool wear and breakage.
Even if such materials are costly, they should be preferred if there is greater
savings due to lower machining cost. Steel for example , is less costly thanbrass or aluminium but it is slow to machine. Cost benefit analysis may be
made for each alternative before making the final selection.
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c: Make-or-buy decisions
No firm can manufacture all the items required by it .Some of them are to be
purchased . Analysis ,therefore ,must be made at design stage at to which
parts are to be purchased are which are to be manufactured. As a general role,it is advantageous to
Manufacture a part for which best technical know how is available.Manufacture a part if its procurement is expected to require large amountof money very year.
Buy parts which are available at quite reasonable rates in market and thereis very little or no profit in manufacture them considering the investments
and other problems.
Buy parts which require the use of special manufacturingprocess/equipment which utilisation is expected to be very poor.
d: Tolerances
Absolute uniformity to produce each piece to an exact dimension is not only
impossible to obtain in production but also is costly to approach. tolerances
are stipulated to
Provide a necessary fit or clearance between the mating parts. Ensure interchange ability between the parts. Enable manufacturing of products/parts at the lowest cost.
Specification of tolerance by the designer is an important aspect of
production design. Too close tolerances are costly to obtain since they
require skilled operators, precisions machines, high grade materials and
better quality tools. Machines requires to be reset more often and inspection
require to be conducted more frequently to avoid out-of-limit work. The net
effect of close tolerances is more defectives and higher manufacturing cost
Most common cause of unnecessary costs attributable and finishes is lack of
knowledge of cost of manufacturing a job to key tolerances and finishes.Miraculous results can be achieved if designers are told as to how much it
costs the firm to machine a surface to particular tolerance. following figure
shows the effect of cost of producing a product to a specific tolerance and
the manufacturing method necessary to achieve the specified tolerance.
e: Use of standard parts
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To reduce cost of product, the design must incorporate maximum number
of standard parts/vendors speciality products. Several parts can be had
from the speciality manufacturers at low cost by making slight changes in
original design. Non standard parts should only be created when it iseconomically justified. Obvious benefits of using standards parts are as
follows:
Standard parts cost less to buy since they are produced by theirmanufacturers large quantities on special purpose machines with
special purpose tooling to cater to needs of a large numbers of
customers.
Standard parts are easy to procure from multiple sources with smallerlead time thereby reducing procurement cost and inventory carrying
cost. Standard parts concept is not restricted to mean a material, or a
fastener or a bearing or something else to comply with aninternational standard specifications but it also implies something that
somebody is making for some one. for eg -a product may require a
gear ,a shaft, a sprocket or a pin, or a cover or a bush ,it is likely that
somebody is already making it for someone .Inclusion of such parts
and their procurement instead of making ,even if it involves slight
changes in the design, is sure to reduce manufacturing cost.
Analysis should also be made, when standard part cannot be used due to
some limitations ,whether or not the standard part be purchased and thesame can ba altered at the home plant make it suitable for use.
f: Variety reduction(or use of fewer parts)
Variety reduction is the voluntary elimination of unnecessary variety in the
products ,materials, components, tools etc. Benefits of variety reduction
include reduced manufacturing cost, lower inventory investment, lesser
labour cost, fewer defectives, better quality and economy in buying cost.
While designing a product, care must be taken to keep as a fewer parts aspossible .Lesser number of parts also improve the reliability of the product
as probability of failure of the product with lesser number of parts is lower.
g: Tool design
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Product design should be such that companys existing manufacturing
facilities-machines, tools, fixtures etc.-are utilized to extent possible. Also,
as far as possible, only stand cutting tools (drilling, reamers, taps,
etc.)Should be used. Special tools should be considered only when extra cost
of the tools is justified.
Meaning of product development
Product development is creation of new product to fill the new demands of
the market, improvements in the old product to conform to the changes in
the consumer demands, and addition/deletion from the product line to realise
greater efficiency and profitability to the organisation. Product development
aims to provide the goods wanted by the market, at the time and in the
quantities desired by it, at the prices it is willing to pay yet leaving asufficient margin(or a net profit) for the manufacturer.
Product development falls into two categories:
(a) introduction of new product.(b) improvement of existing product.
(A)Introduction of new products:Products are created to
Give practical shape to the ideas struck accidentally. Fill the gaps in the complete range of products. Give a boost to the existing product range (it is a common practice to
keep a few products ready at maturity in the market to take place of
existing products if the decline in the market).
Utilize the ideal resources. Protect the company against the risk of being wiped off by having a
few more products with new designs. Give scope or utilize the special skills available with the company . Project corporate image of the company. Meet new requirements of the customers (i.e. to exploit a fashion.)
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There are several stages in the new product development process...not
always followed in order:
1. Idea Generation (The "fuzzy front end" of the NPD process, seebelow)
o Ideas for new products can be obtained from customers(employing user innovation), the company's R&D department,
competitors, focus groups, employees, salespeople, corporate
spies, trade shows, or through a policy of Open Innovation.
Ethnographic discovery methods (searching for user patterns
and habits) may also be used to get an insight into new product
lines or product features.
o Formal idea generation techniques can be used, such as attributelisting, forced relationships, brainstorming, morphological
analysis and problem analysis2. Idea Screening
o The object is to eliminate unsound concepts prior to devotingresources to them.
o The screeners must ask at least three questions: Will the customer in the target market benefit from the
product?
Is it technically feasible to manufacture the product? Will the product be profitable when manufactured and
delivered to the customer at the target price?
3. Concept Development and Testingo Develop the marketing and engineering details
Who is the target market and who is the decision makerin the purchasing process?
What product features must the product incorporate? What benefits will the product provide? How will consumers react to the product? How will the product be produced most cost effectively? Prove feasibility through virtual computer aided
rendering, and rapid prototyping What will it cost to produce it?
o test the concept by asking a sample of prospective customerswhat they think of the idea
4. Business Analysiso Estimate likely selling price based upon competition and
customer feedback
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o Estimate sales volume based upon size of marketo Estimate profitability and breakeven point
5. Beta Testing and Market Testingo Produce a physical prototype or mock-upo Test the product (and its packaging) in typical usage situationso Conduct focus group customer interviews or introduce at trade
show
o Make adjustments where necessaryo Produce an initial run of the product and sell it in a test market
area to determine customer acceptance
6. Technical Implementationo New program initiationo Resource estimationo Requirement publicationo Engineering operations planningo Department schedulingo Supplier collaborationo Logistics plano Resource plan publicationo Program review and monitoringo Contingencies - what-if planning
7. Commercialization (often considered post-NPD)o Launch the producto Produce and place advertisements and other promotionso Fill the distribution pipeline with producto Critical path analysis is most useful at this stage
These steps may be iterated as needed. Some steps may be eliminated. To
reduce the time that the NPD process takes, many companies are completing
several steps at the same time (referred to as concurrent engineering or
time to market). Most industry leaders see new product development as a
proactive process where resources are allocated to identify market changes
and seize upon new product opportunities before they occur (in contrast to a
reactive strategy in which nothing is done until problems occur or thecompetitor introduces an innovation). Many industry leaders see new
product development as an ongoing process (referred to as continuous
development) in which the entire organization is always looking for
opportunities.
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For the more innovative products indicated on the diagram above, great
amounts of uncertainty and change may exist, which makes it difficult or
impossible to plan the complete project before starting it. In this case, a moreflexible approach may be advisable.
Because the NPD process typically requires both engineering and marketing
expertise, cross-functional teams are a common way of organizing projects.
The team is responsible for all aspects of the project, from initial idea
generation to final commercialization, and they usually report to senior
management (often to a vice president or Program Manager). In those
industries where products are technically complex, development research is
typically expensive, and product life cycles are relatively short, strategic
alliances among several organizations helps to spread the costs, provide
access to a wider skill set, and speeds the overall process.
Also, notice that because engineering and marketing expertise are usually
both critical to the process, choosing an appropriate blend of the two is
important.
People respond to new products in different ways. The adoption of a new
technology can be analyzed using a variety of diffusion theories such as the
Diffusion of innovations theory.it include economical support of socialsector.
(B) Improvement of existing products
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Improvement of existing products has to be a continuous activity of every
manufacturer. Improvements of product is done for two objectives :
i. Short term objectives.ii. Long term objectives.
Short term objectives of product improvements are : To provide a new look to the product. To utilize the existing equipment and manpower. To satisfy immediate needs of the customers. To stimulate sales by providing new advantages.
Long term objectives of the product improvements are:
to monopolise the market to ensure long term growth of business by trying up with
the customers to only branded products.
To make possible the manufacturer of the product onquantity basis.
To reduce the cost of manufacture of the product.
RELATIONSHIP BETWEEN RESEARCH , DEVELOPMENT
AND DESIGN
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A lot of confusion exists regarding terminology in the field of research,
development and design . inspite of considerable overlap, distinction can
be made ,basic terms necessary to understand the differences are defined
below:
a) Product is tangible output of a production system.b) Design is the translation of requirements into a form convenient for
manufacture or use .
c) Research is the deliberate and planned effort to discover new ideas,techniques, systems, applications etc .
d) Development is the improvement of existing techniques or systems.e) Innovation is the generation of new ideas.
From the above definition it can be concluded that:
Product development involves refinement or improvement of anexisting product.
Product design involves the development of specifications of aproduct. Product design encompasses both research and
development .
Product research generates basic information which gets convertedinto practical ends during development and into final physical form
on completion of design.
Few additional key words are:
a) Prototype is a model of a product or part of a product. It is the firstembodiment of features of a product to be used for testing.
b) Module is a component made up of several parts that arefrequently used interchangeably between a number of products.
c) Standardization is the use of standardized products , components ,materials , or processes for fabrication or assembling products.
d) Simplification is the reduction in components of a product as wellas reduction in complexity.
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PRODUCT LIFE CYCLEA product has to undergo through four different stages.
1) Introduction: when a new product is introduced.
2) Growth: when the sales of a product pick up/increase in marketshare.
3) Maturity: here the market share/sales remain constant. Productredesign is improvement to prevent decline of an existing products.
4) Decline: here the sales of the product reduces due to eitherinnovation by the competitors or introduction of a new product by
the comprtitors redisgn here would see a product life cycle be
recived.
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Case study
CADBURY FUSE
Background to the confectionery market
Per capita confectionery consumption in the UK is among the highest in
the world, exceeded only by Ireland and Denmark. Chocolate confectionery
accounts for around 70% of sales value in the UK market, with sales ofsweets (sugar confectionery) at around 30%.
Historically, the chocolate confectionery market has been characterized
by the dominance of a number of well established brands, such as Cadbury
Dairy Milk, Mars Bar and Kit Kat.
Although some brands enjoy a rich heritage, the key need in a busy and
developed market sector is innovation, not just of existing brands but also in
the development of completely new brands. Brand-led innovation is a vital
component in the growth of this market as it enables organisations to buildcompetitive advantage. Over recent years, competitors in the chocolate
market have made significant investments in new product development.
Indeed, over 15% of volume sales in the last ten years have been generated
by new products. For Cadbury, this figure is even higher, at 20%, with new
brand launches such as Wispa Gold and TimeOut.
This case study focuses on the launch of Cadbury Fuse. In the face of
strong competition from well-known brands in an already busy market
sector, the launch of Fuse represented a significant investment in a newbrand.
Market research is a process designed to link managers to consumers
through information. It is used to identify opportunities and make better
informed decisions about products which have future market potential.
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Market research has revealed that snacks play more of a functional role
than one of pure indulgence. Research also shows that successful snack
brands in the confectionery category tend to have more 'foodie' values and
often contain ingredients such as cereal, wafer, biscuits, peanuts and fruit to
break up the chocolate delivery.
Cadbury's philosophy is to continue as a driving force in the
confectionery market, and thus constantly analyze its offerings for
consumers. The core objective of Cadbury's innovation program is to
generate incremental volume for the company and achieve the vision of
market leadership in every segment in which it operates. The role of
innovation is critical as it allows Cadbury to develop ahead of its
competitors in those areas of the market which are new or growing.
Product Development
Cadbury set out two objectives for the development of Fuse:
1.To grow the market for chocolate confectionery2. To increase Cadbury's share of the snacking sector
The 'Fuse' concept was developed after market research identified the
growth of snacking and a definite gap in the market for a more chocolaty
snack. A number of ingredients were devised and tested following a survey
which questioned consumers about their snacking habits and preferences. Aresearch and development team was then asked to develop a number of
product recipes which addressed the needs expressed by consumers.
Not all products successfully emerge from the product development phase.
Research and development involves combining various ingredients to
develop potential new products. Considerable development time was spent
on Fuse, carefully engineering the ingredients in order to deliver the right
balance of chocolate, food elements and texture. More than 250 ingredients
were tried and tested in various combinations before the recipe wasfinalized.
Any new product in the snacking sector must establish points ofdifference from existing products within the market - thus creating a unique
selling proposition (USP) i.e. a product with unique appeal which is not
shared by any of its competitors. Whereas other confectionery snacking
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products focus primarily upon ingredients, with chocolate used only to coat
the bar, the product developers decided to use Cadbury chocolate to ''fuse''
together a number of popular snacking ingredients such as raisins, peanuts,crisp cereal and fudge pieces.
Early consumer testing
As products are developed, they must be tested to ensure that consumers
would be willing to buy them. As approximately 85% of all new products
launched into the grocery and allied trade sectors fail in their first year,
extensive research helps to reduce the risk of launching a new product into
an already competitive market. Fuse went through two extensive 'in home
placement' tests. The results of these tests were multiplied into repeat
purchase and purchase frequency figures to allow Cadbury to anticipate the
volume of bars required for the launch of Fuse and post-launch.
Pack design
Packaging enables a manufacturer to convey both the tangible and
intangible attributes of a product. The packaging for Cadbury's new product
sought to position it as a unique, exciting and delicious chocolate snack
which would stand out from its competitors. It was important to emphasise
the qualities and appeal of Fuse whilst at the same time reinforcing that it
was a Cadbury brand.
The packaging achieved impact by using bright, fiery colours for the
product name and contrasting them against the deep and instantly
recognisable 'Cadbury purple', which communicated the manufacturer's
heritage. The colours were also used in a gun powder style to suggest an
explosive taste. The vibrancy of the design aimed to differentiate it from
other products in the sector so that it would have an immediate point-of-sale
impact both on-shelf and in store display units.
Three different packaging formats were developed in order to maximise
the various multi-purchase opportunities available. The key pack size wasthe single bar, designed to entice trial and to encourage repeat purchase. The'treat size' and the multi-packs were aimed at families.
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Brand name
Like packaging, brand names play a critical role in the success of aproduct, by helping to create a product's 'personality'. The new product
aimed to have broad appeal to 16-34 year olds, although it was primarily
targeted at 16-24 year olds. The name Fuse was chosen to communicate the
fusion of snacking ingredients. The logo was bright and fiery with a mock
fuse - alight in several places - which aimed to give the new bar the quirky
and humorous style which Cadbury sought to appeal to this younger target
market.
Further consumer testing
Testing is vital throughout the entire product development process. It
helps to provide valuable information that can be used to fine-tune theproduct and minimise many of the launch risks.
In research, Fuse scored higher for texture, 'interesting eat' and
combination of ingredients, than its competitors and achieved the highest
rating ever for a new Cadbury product - 82% of consumers rated Fuse asexcellent or very good and 83% said they would buy it regularly.
The Launch
The launch strategy of any new product is critical. Cadbury has twotargets for its products - trade customers who stock the product and
consumers who buy it. In recent years, product launching has become an art
which can make or break a product. A successful launch makes potential
customers aware of the new product and keen to try it.
Before consumers could try the product, however, it was important for
Cadbury to gain the support of its trade customers. Retailers had to view it as
helpful in encouraging customers to visit their shops. If the product had
failed to interest retailers and distributors, the costs of investment would not
have been met and they would not have stocked the product.
Cadbury conducted one-to-one briefings with over 70 key tradecustomers. This helped Cadbury build awareness and commitment to the
launch and obtain significant orders for in-store displays and merchandising
ahead of the launch date. The trade commitment was reflected in high levels
of display support in store during the launch.
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Traditionally, new confectionery products are initially launched in one
region of the country, in order to gauge the product's success, before moving
on to other regions over a period of time. Time Out and Wispa Gold, for
example, were launched in this way. The commitment to the success of Fuse
was so great, however, that it was Cadbury's first completely national launchfor 20 years.
There were certain key requirements to the co-ordination of the launch:
Secrecy had to be paramount!
Marketers who had identified the gap in the market had to work closely
with individuals from research and development as well as other external
agencies.
Manufacturing operations, in conjunction with marketing and finance, had
to evaluate a new factory investment for Board approval.
Having a catchy 'hook' for a new launch helps to make consumers notice
the product. Cadbury and its trade customers managed the first availability
of Fuse around one day, Tuesday 24th September, aptly christened
'Fuseday'. This involved tight management of stock distribution, with more
than 40 million bars being moved from Cadbury depots into the trade only a
few days prior to the launch date.
Press releases were tailored to specific audiences. In each case, a strict
embargo was imposed to ensure that the impact of Fuseday was not diluted.
The only exceptions were briefings with The Grocer, and Marketing (trade
publications) and The Daily Telegraph, which reviewed the product in its
business pages.
Public relations (PR) support was substantial. It told the story of Fuse,
explained that it had taken five years to develop, involved an investment of
10 million, the development of a new plant at Somerdale near Bristol and
4 million in advertising costs. The TV campaign and PR campaign were sosuccessful that Cadbury was under pressure to meet repeat orders post-launch!
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Post-launch results
After a new product launch, it is important to analyse whether the product
has managed to meet its launch objectives. During 1996, the chocolate
market grew by 9% with 19% of this growth attributable to Fuse - a singlebrand which had only been available for a quarter of the year.
One way of evaluating the effectiveness of advertising and promotional
campaigns is to ask market research volunteers to identify advertisements
using prompts in a recall test. The Fuse launch had created massive
awareness of the new brand, achieving greater prompted awareness than the
celebrated Wispa launch. Within just one week of the launch, a record 40
million Fuse bars were sold into the trade and within eight weeks of sale,
Cadbury Fuse was the UK's favourite confectionery line, outselling both
Mars Bar and Kit Kat by 20% and capturing an astonishing 6.5% of hand-held confectionery product sales. It had also contributed significantly to
Cadbury's growth in 1996. The launch had exceeded expectations, with
consumers buying 70 million Fuse bars within the first three months of itslaunch.
Cadbury's competitors reacted to the success of Fuse by increasing their own
new product activity.
Conclusion
This case study has examined Cadbury's ability to use innovation in a
developed and crowded market-place. There were three clear elements in
this process:
1. the use of consumer research to identify a significant marketopportunity;
2. product research and development combined with extensive consumertesting;
3. massive trade and consumer hype generated by a national launch.Snacking remains the big opportunity to expand the chocolate market
even further. As Fuse moves through the growth phases of its product life-
cycle, the next stage is to move it into the 'super brand' league. As it does so,
the key requirement will be to maintain the product's momentum by
continuing to develop innovative approaches to marketing it to consumers.