business systems – operations management session 4c.pdf · business systems - operations...

1

Business Systems - Operations ManagementSession 4 – Product & Service Design, Supply Network Design

1

Business Systems Business Systems ––Operations ManagementOperations Management

Facilitator:Facilitator:Dr. Jonathan FarrellDr. Jonathan Farrell

Session 4 – Product & Service Design, Supply Network Design

2

This EveningThis Evening’’s Programs Program

• Product & Service Design– Why is it important?– What are the stages– Quality Function Deployment (QFD)

• Case Study – Chatsworth House (pp 143-144)• Exercises (refer to the Folder of Readings) • Supply Network Design

– Why?– What is involved?– Location & Capacity?

2


3

Some DefinitionsSome Definitions

Product: “A thing produced by any action or operation, or by labour”

Service: “The supplying of any articles, commodities or activities, etc., required or demanded”

Activity: “A specific deed or action”

Process: “A systematic series of actions directed to some end”*

*Source, Macquarie Dictionary*Source, Macquarie Dictionary

4

The product / service design feedback loopThe product / service design feedback loop

Marketing

OperationsProduct

or service design

Customer

ExpectationsInterpretation of expectations

Productor service specification

Productor service

3


5

Design of Design of the productthe productor serviceor service

Design of Design of the process or the process or service service delivery delivery systemsystem

Decisions taken during the design of theDecisions taken during the design of theproduct/service impact upon the processproduct/service impact upon the process

which produces it and vice versawhich produces it and vice versa

Design for Manufacture vs Design for Manufacture vs Manufacture for DesignManufacture for Design

6

Design of Design of the productthe productor serviceor service

Design of Design of the process or the process or service service delivery delivery systemsystem

Decisions taken during the design of theproduct/service impact upon the process

which produces it and vice versa

Products/services should be designed so

that they can be created effectively

Processes should bedesigned so that they can

create all products/servicesthe operation may introduce

Design for Manufacture vs Design for Manufacture vs Manufacture for DesignManufacture for Design

4


7

Design is itself a transformation processDesign is itself a transformation process

TRANSFORMED RESOURCES

Technical informationMarket informationTime information

TRANSFORMING RESOURCES

Test and design equipmentDesign and technical staff

INPUTSTHE DESIGN

ACTIVITY OUPUT FINISHED DESIGNS

8

Product DesignProduct Design

• Value adding through design or form.• How can a toilet brush sell for $2 at K-Mart and for

$60 at David Jones?• Trade-offs between function and form.

5


9

Product Design Product Design –– The Five StepsThe Five Steps

1. Concept Generation2. Establish Customer Requirements3. Evaluation of Requirements4. Preliminary Design5. Final Design & Prototyping

10

Concept generation

Marketing department

Internal sourcesInternal sources External sourcesExternal sources

Analysis of customer needs

Suggestions coming from customer contact staff

Ideas from research and development

Market surveys

Suggestions coming from customers

Actions of competitors

Step 1 Concept GenerationStep 1 Concept Generation

6


11

© 1998 by Prentice-Hall IncRussell/Taylor Oper Mgt 2/e

Conceptual Map Of Breakfast CerealsConceptual Map Of Breakfast Cereals

Good tasteGood taste

Bad tasteBad taste

High nutritionHigh nutritionLow nutritionLow nutrition

•Cocoa Pops

•Rice Bubbles

•Wheaties

•Nutri-Grain

•Shredded Wheat

•Muesli

12

Step 2 Step 2 –– Establish Customer RequirementsEstablish Customer Requirements

• Market Research• Customer Complaints• Sales Enquiries• Quality Function Deployment

7


13

Quality Function Deployment Quality Function Deployment

• Find out what the customer wants in the product• Weight the customer’s requirements based on

customer importance• Get the customer to rank your product against the

competition based on these weighted requirements• Construct a “House of Quality matrix”

14

WhatsWhats

How you are How you are going to going to provide itprovide it

What theWhat thecustomercustomerwantswants

Who theWho thecompetitorscompetitorsare are

How How muchsmuchs

HowsHows WhWhooss

Target values Target values of what we of what we will dowill do

House of House of Quality Quality matrixmatrix

8


15

Hows

Whats

HowMuchs

Hows

Whats

HowMuchs

Hows

Whats

HowMuchs

QFD CascadeQFD Cascade

e.g. packaging probleme.g. packaging problem

16

Screening filtersScreening filters

Marketing Marketing screenscreen

Operations Operations screenscreen

FinancialFinancialscreenscreen

Step 3 Evaluation of RequirementsStep 3 Evaluation of Requirements

9


17

Value AnalysisValue Analysis // Value EngineeringValue Engineering

• Achieve equivalent or better performance at a lower cost while maintaining all functional requirementsdefined by the customer.

Does the item have any design features that are not necessary?Can two or more parts be combined into one?How can we cut down the weight?Are there nonstandard parts that can be exchanged for standard parts?

18

Step 4 Step 4 -- Preliminary DesignPreliminary Design

• Create functional design• Build prototype• Test prototype• Revise prototype• Retest

““DesignDesign--BuildBuild--TestTest”” cyclecycle

10


19

PrototypingPrototyping

Prototypes are needed so products and services can be tested

Prototypes come in various forms:

- card models;

- clay models;

- computer simulations.

CAD has considerably simplified the production of prototypes

20

Step 5 Step 5 -- Final Design & Process PlanningFinal Design & Process Planning

• Produce detailed drawings & specifications• Create workable instructions for manufacture or

delivery of service• Select tooling & equipment• Prepare job descriptions• Determine operation & assembly order• Set KPIs

11


21

Flow process chart Flow process chart symbolssymbols

An operation, task or work

activity

A movementof materials or information or

people from one place to another

An inspection, check or

examination of materials or

information or people

A delay or pause in the

process

A storage of materials or file of information

or queue of people

22

Flow process chart for one day on an Flow process chart for one day on an adventure holidayadventure holiday

Flow process chartActivity ÉÉÉÉÉÉÉÉÉÉÉ.ÉÉÉ. . Location ÉÉÉÉÉÉÉÉÉÉ.

Description of element1 Get up

2 Go to washroom

3 Wash, brush teeth

4 Return to bedroom

5 Dress

6 Go to dining room

7 Await serving

8 Eat

9 Go to rifle range

10 Await instructor and equipment

11 Check equipment

12 Rifle shooting

12


23

In most service operations, the overlap In most service operations, the overlap between service and process design is between service and process design is implicitimplicit in the nature of the service.in the nature of the service.

Design of the Design of the productproduct

Design of the Design of the processprocess

Design Design of the of the serviceservice

Design of Design of the the processprocess

In manufacturing operations, In manufacturing operations, overlapping the activities of the product overlapping the activities of the product and process design is and process design is beneficial.beneficial.

Product Design Product Design vsvs Service DesignService Design

24

Characteristics of ServicesCharacteristics of Services

• Customer participates in the service process

• Simultaneous production and consumption

• Experience versus Consumption

• A service is a perishable commodity – not always repeatable

13


25

Characteristics of Services (cont.)Characteristics of Services (cont.)

• Customer and provider must meet (although not necessarily physically) for the service to be performed

• Most services are labour intensive – however more services are becoming technology intensive

• Services are intangible (ideas & concepts) – you only see the result (or not) of a service

• Services typically have a high holding cost and low service delivery cost

26

The Service PackageThe Service Package

Supporting Facilities:Supporting Facilities: Infrastructure (eg ski lift)Infrastructure (eg ski lift)

Facilitating goods:Facilitating goods: Physical item (eg skis)Physical item (eg skis)

Information:Information: Customer info.Customer info.

Explicit services:Explicit services: Observed, felt benefitsObserved, felt benefits

Implicit services:Implicit services: Psychological benefitsPsychological benefits

A mix of tangible and intangible attributesA mix of tangible and intangible attributes

14


27

Service Design ElementsService Design ElementsService Design Elements

•• StructuralStructuralDelivery systemDelivery system (front & back office)(front & back office)Facility designFacility design (aesthetics, layout)(aesthetics, layout)LocationLocation (competition, site characteristics)(competition, site characteristics)Capacity planningCapacity planning (number of servers)(number of servers)

•• ManagerialManagerialService encounterService encounter (culture, empowerment)(culture, empowerment)QualityQuality (measurement, guarantee)(measurement, guarantee)Managing capacity and demandManaging capacity and demand (queues)(queues)Information Information (data collection, resource)(data collection, resource)

28

In Planning Services, there are In Planning Services, there are several factors to consider . . .several factors to consider . . .

• Who are the customers?

• What are the services they want / need?

• How are they delivered?

• What are their expectations?

• Who are the consumers?

15


29

Customers & Consumers Are Customers & Consumers Are Becoming More DemandingBecoming More Demanding

• More focused services

• High quality

• Better response times

• Better value for money

• Customers & consumers are more informed

30

Customers versus ConsumersCustomers versus Consumers

• With products, the customer and the consumer are typically the same person – not so with services

• Most service centres don’t recognise the differences, and their very different needs

• Customers and consumers have different requirements for the same service

• Different resources are usually required to service customer / consumer

16


31

The Difference Between The Difference Between Customers and ConsumersCustomers and Consumers

• The customer:– Negotiates the need for the services– Driven by his/her goals and objectives– Cost conscious

• The consumer:– Requires the service to carry out his/her job– Not necessarily interested in cost– Not interested in processes, procedures, etc. – Focus on time to complete the service

32

Customers & Consumers Are Becoming Customers & Consumers Are Becoming More DemandingMore Demanding

• More focused services

• High quality

• Better response times

• Better value for money

• Customers & consumers are more informed

17


33

Why Define Services?Why Define Services?

• Poor Service Definitions are recognised as the single biggest cause of failure in any agreement between provider and customer

• Poorly defined services lead to:

– Confusion over what’s being delivered, and how & when it is to be delivered

– Differences in expectations

– “out of scope” increases in service provision costs

34

Designing ServicesDesigning Services

• The most difficult aspects of any service:– understanding just what the service comprises– Why would a customer want the service– How much does it cost to deliver?

• Service Definitions are essential

• So are Service Level Agreements

18


35

Defining ServicesDefining Services

• Describe the Service – is it a service or just an activity?

• What are the benefits?

• What are the deliverables?

• What resources will be required?

36

Defining Services (cont.)Defining Services (cont.)

• When will they be required?

• How will the service be delivered (i.e. what are the processes)?

• What are the obligations of both parties – provider and customer?

19


37

Service Level Agreements (SLAs)Service Level Agreements (SLAs)

• Comprise a set of Service Definitions between provider and customer

• Define the scope and level of service delivery between provider and customer

• Sometimes includes the cost of service delivery –transactional or time based

38

Why SLAs?Why SLAs?

• Establish response and resolution times

• Set expectations for both parties

• Define escalation procedures for the time when things go wrong

• Define dispute resolution procedures

20


39

Setting up SLAsSetting up SLAs

• It’s not a small task – it can take three to six months including the service definitions

• Plan well ahead• Who are the key customer staff• Who will be involved from your staff?• Set customer expectations early• Identify your resources requirements early

40

Implementing SLAsImplementing SLAs

• It doesn’t happen overnight!

• Services, customers, consumers, resources, etc. all need to be identified, defined described and agreed upon

• The services must align with and support the organisation’s objectives

• Business plans must be clearly defined and in place

21


41

Services as Competitive AdvantageServices as Competitive Advantage

• As products become more and more commoditised – an organisation’s competitive difference lies in the services

• Services can be full of variables – i.e. they are hard to duplicate

42

Services as Competitive Advantage Services as Competitive Advantage (cont.)(cont.)

• How will the service be delivered, or will the customer self-deliver?

• How will the service deliverer treat the customer?

• What flexibility with service delivery does the deliverer have?

• What is the desired speed of service delivery – fast, slow or somewhere in between?

22


43

Services as Competitive Advantage (cont.)Services as Competitive Advantage (cont.)

• How often is the service to be delivered?

• How will service quality be measured?

• Which resources will be used – human, technological, etc.

• Will they deliver the service or support its delivery?

• What is the price of the service?

44

Benefits to the OrganisationBenefits to the Organisation

• Services are well defined

• Resource utilisation can be planned

• Service skills / resource skills can be analysed and matched

• The overall cost of support to the organisation is lowered

• Productivity is increased

• However the organisation has to plan for it

23


45

Benefits to the CustomersBenefits to the Customers

• (Usually) A fairer means of cost allocation

• User choice - core services versus optional services

• Better utilisation of resources - supporting the organisation’s objectives

• Lower cost of operations

46

Benefits to the Services DepartmentBenefits to the Services Department

• The true cost of providing the services is highlighted

• Resource utilisation can be planned

• The services must be cost-effective - or be outsourced

• Quality is always raised

24


47

The Cost of ServicesThe Cost of Services

• Activity Based Costing (ABC) doesn’t work with services

• Resources are typically used in services, not consumed

• The same resource can be used in many services

• A service may use many, different resources

48

The Cost of Services (cont.)The Cost of Services (cont.)

• You need to calculate the total cost of each resource, then apportion its cost across all the services that use it.

• However, some resources are costed based on time, but the services use them on a transactional basis e.g. a training room

• Costing needs to take into account the availability of the resource and the time spent in service delivery

• Each service has a holding cost and a delivery cost (dependent on the processes for delivery)

25


49

Case Study Case Study ––Chatsworth House Adventure PlaygroundChatsworth House Adventure Playground

• What do you think comprise the concept, package and process for the adventure playground?

• Describe the four options highlighted in the case in terms of their feasibility, acceptability and vulnerability.

• What does the concept of interactive design mean for a service such as the adventure playground described in this case study?

50

Exercises Exercises -- Process DesignProcess Design

26


51

Supply NetworksSupply Networks

• What is a supply network?• Why are they important?• How do we put one together?• What are the key factors in designing a

supply network?

52

Supply Network Supply Network vsvs Supply ChainSupply Chain

• A Supply Chain is the linkage of a set of operations passing from supplier through the organisation to the customer. The typical organisation will have numerous supply chains

• A Supply Network is all the operations that are linked i.e. all the supply chains), passing from all suppliers through the organisation so as to product goods and services to the customers

27


53

A Typical Supply NetworkA Typical Supply NetworkRaw Materials

Supplier

ComponentManufacturer

ProductManufacturer

Wholesaler

Retailer

UpstreamUpstreamIntegrationIntegration

DownstreamDownstreamIntegrationIntegration

54

Supply Network Design Supply Network Design

Layout & Flow

Process Technology Job Design

Processes that produce products & services

28


55

Advantages of taking a network perspectiveAdvantages of taking a network perspective

Vertical integrationVertical integrationHow much of the network should the operation seek to own?

Taking a network perspective helps

businesses address the three key network

design decisions.

Location of the Location of the operationoperationWhere should the operation be located?

Balance of capacityBalance of capacityHow should capacity be managed in the long-term?

56

Direction, extent and balance of vertical Direction, extent and balance of vertical integrationintegration

Raw material

suppliersComponent

makerAssembly operation Wholesaler Retailer

Downstream vertical integration

Upstream vertical integration

Narrow process span

Wide process span

Should excess capacity be used to supply other companies?

29


57

The Location of OperationsThe Location of Operations

OperationSupplySupply--side side factorsfactors

DemandDemand--side side factorsfactors

Labour costs

Land costs

Energy costs

Transportation costs

Community factors

Labour skills

Suitability of site

Image

Convenience for customers

58

Firms in the same industry may configure Firms in the same industry may configure their supply networks in different waystheir supply networks in different ways

Home Office Market

Corp. Market

Suppliers

Retailers

HP

Home Office Market

Corp. Market

Suppliers

Dell Direct Store

DELL

30


59

Supply NetworksSupply Networks

• What does your Supply Network look like?• Is it effective with regards your organisation?• What changes, if any would you make?

– Location?– Outsourcing?– Supply-side?– Customer-side?– How much vertical integration?

business systems – operations management session 4c.pdf · business systems - operations...

Documents