Lecture Fundamentals of operations management (4/e): Chapter 3 - Davis, Aquilano, Chase

Chapter 3 - New product and service development, and process selection. After studying this chapter you will be able to: Illustrate the importance of the development of new products and services to a firm’s competitiveness, identify the various types of new products that are developed by companies, introduce the new product design process and the concept of a product’s life cycle,...

DAVIS F   O   U   R   T   H       E   D   I   T   I   O   N AQUILANO CHASE chapter New Product and Service  Development, and Process  Selection © The McGraw-Hill Companies, Inc., 2003 PowerPoint Presentation by Charlie Cook Chapter Objectives Chapter Objectives • Illustrate the importance of the development of new products and services to a firm’s competitiveness • Identify the various types of new products that are developed by companies • Introduce the new product design process and the concept of a product’s life cycle • Demonstrate the necessity of concurrent product and process design as a new product or service is developed • Present a framework for understanding how new services are developed and introduced into the © The McGraw­Hill  marketplace Fundamentals of Operations  Companies, Inc., 2003 Management 4e  3–2 Managerial Issues Managerial Issues • Product life cycles becoming shorter –The need to bring products to market more quickly and efficiently • Conducting product development on a continuous basis –New products may represent a majority of sales and profits Fundamentals of Operations  Management 4e  © The McGraw­Hill  Companies, Inc., 2003 3–3 Why the Emphasis on New  Why the Emphasis on New  Goods and Services Goods and Services • Increased Competition –Improved worldwide telecommunications –Lower trade barriers (import duties and tariffs) and the creation of trade organizations (NAFTA and European Union) –Faster transportation of goods • Advances in Technology –Products become obsolete faster –Improved manufacturing processes (CAD and © The McGraw­Hill  CAM and industrial robots) Fundamentals of Operations  Companies, Inc., 2003 Management 4e  3–4 The Benefits of Introducing  The Benefits of Introducing  New Products Faster New Products Faster • Greater Market Share –Early entry captures large initial market share • Price Premiums –Ability to initially charge more for new products • Quick Reaction to Competition –Rapid response to competitor’s new products • Set Industry Standards –Initial product sets market/industry standards © The McGraw­Hill  Fundamentals of Operations  Companies, Inc., 2003 Management 4e  3–5 The Impact of Speed to Market on Sales The Impact of Speed to Market on Sales Fundamentals of Operations  Management 4e  © The McGraw­Hill  Companies, Inc., 2003 Exhibit 3.1a 3–6 The Impact of Speed to Market on  The Impact of Speed to Market on  Profit Margins Profit Margins Fundamentals of Operations  Management 4e  © The McGraw­Hill  Companies, Inc., 2003 Exhibit 3.1b 3–7 The Impact of Speed to Market on Profits The Impact of Speed to Market on Profits Fundamentals of Operations  Management 4e  © The McGraw­Hill  Companies, Inc., 2003 Exhibit 3.1c 3–8 Categories of New Products Categories of New Products • Incremental or Derivative Products –Are hybrids or enhancements of existing products –Require minimal changes in design or process, allowing for quick development –Require fewer resources to develop new features or functions –Help ensure near-term cash flows by maintaining current market share Fundamentals of Operations  Management 4e  © The McGraw­Hill  Companies, Inc., 2003 3–9 Categories of New Products Categories of New Products • Next Generation or Platform Products –Represent new “system” solutions for customers • Require more resources to develop • Are key to continued product revenue growth • Breakthrough or Radical Products –Create new product categories as core businesses –Require substantial design and process change –Render existing products obsolete in long-term © The McGraw­Hill  Fundamentals of Operations  Companies, Inc., 2003 Management 4e  3–10 A Framework for Categorizing New Services A Framework for Categorizing New Services Fundamentals of Operations  Management 4e  © The McGraw­Hill  Companies, Inc., 2003 Exhibit 3.11 3–31 Categories of New Services Categories of New Services Service Category Content Change “Window Dressing” Not significantly different from other services Delivered in similar fashion Breadth of Offering Significant design change in content of service Delivered in similar fashion Revolutionary New in both content and delivery method Channel Development Delivery of same/existing service through a different/new channel Fundamentals of Operations  Management 4e  © The McGraw­Hill  Companies, Inc., 2003 3–32 The New Service Development (NSD) Process The New Service Development (NSD) Process Stage Activity Design Formulating the objectives and strategy of the new service Analysis Considering the financial implications of the new service Examining supply chain issues for delivery of service Development Testing the service design, training personnel, conducting pilot runs Full Launch Releasing the service to the market place FundamentalsofOperations Management4e âTheMcGrawưHill Companies,Inc.,2003 333 TheCustomerContactApproachto TheCustomerContactApproachto DesigningServiceProcesses DesigningServiceProcesses ã Customer Contact –The presence of the customer in the system • Extent of Contact –The percent of time the customer is involved relative to the time required to deliver the service • Creation of the Service –The work process involved in providing the service © The McGraw­Hill  Fundamentals of Operations  Companies, Inc., 2003 Management 4e  3–34 The Customer Contact Approach to  The Customer Contact Approach to  Designing Service Processes Designing Service Processes High HighDegree Degree of ofCustomer Customer Contact Contact High Low LowDegree Degree of ofCustomer Customer Contact Contact Percentage of customer contact (customer influence on the system) Difficulty in managing system Fundamentals of Operations  Management 4e  Low © The McGraw­Hill  Companies, Inc., 2003 3–35 Major Differences between High­ and Low­ Major Differences between High­ and Low­ Contact Systems in a Bank Contact Systems in a Bank Fundamentals of Operations  Management 4e  © The McGraw­Hill  Companies, Inc., 2003 Exhibit 3.12 3–36 The Service Process Matrix The Service Process Matrix Fundamentals of Operations  Management 4e  Source: Roger W Schemenner, “How Can Service Businesses Survive and Prosper?” Sloan Management Review 27, no (Spring 1986), pp 21–32, by permission of publisher Copyright 1986 by Sloan Management Review Association, All rights reserved © The McGraw­Hill  Companies, Inc., 2003 Exhibit 3.13 3–37 Designing a New Service Organization Designing a New Service Organization • “Service Vision” (Heskett) –Identification of the target market • Who is our customer? –Defining the service concept • How we differentiate our service in the market? –Developing the service strategy • What is our service package and its operating focus? –Creating the service delivery system • What processes, staff, and facilities are needed? Fundamentals of Operations  Management 4e  © The McGraw­Hill  Companies, Inc., 2003 3–38 Designing a New Service Organization  Designing a New Service Organization  (cont’d) (cont’d) • Differences in service design and manufacturing product development: –Service design and process development are simultaneous –Service operations cannot be copyrighted to protect them from imitation by competitors –The service package is the major output of NSD –Prior training strongly influences the service package –Service organizations can change their service © The McGraw­Hill  offerings very rapidly Fundamentals of Operations  Companies, Inc., 2003 Management 4e  3–39 Service­System Design Matrix Service­System Design Matrix Fundamentals of Operations  Management 4e  © The McGraw­Hill  Companies, Inc., 2003 Exhibit 3.14 3–40 Strategic Uses of the  Strategic Uses of the  Service­System Design Matrix Service­System Design Matrix Enabling systematic integration of operations and marketing strategy Clarifying exactly which combination of service delivery the firm is actually providing Permitting comparison with other firms in the way specific services are delivered Indicating evolutionary or life cycle changes that might be in order as the firm grows Providing flexibility © The McGraw­Hill  Fundamentals of Operations  Companies, Inc., 2003 Management 4e  3–41 Process Selection in Services Process Selection in Services • Types of Service Organizations –Service businesses • Facilities-based services that provide assistance to customers who come to the service facility • Field-based services that provide on-site services to customers –Customer support services • Provide product information and services to current external customers –Internal services • Provide services for other internal organizational © The McGraw­Hill  units Fundamentals of Operations  Companies, Inc., 2003 Management 4e  3–42 Process Selection in Services (cont’d) Process Selection in Services (cont’d) • The Production Line Approach –Orientation is toward the efficient production of results—precisely controlled execution of the “central function” • The Customer Involvement Approach –Having the customer take a greater participatory role in the production of the service • The Personal Attention Approach –The central focus is complete customer attention and satisfaction at all times © The McGraw­Hill  Fundamentals of Operations  Companies, Inc., 2003 Management 4e  3–43 Common Characteristics of  Common Characteristics of  Well­Designed Service Systems Well­Designed Service Systems Each element of the service system is consistent with the operating focus of the firm It is user-friendly—customers can interact easily It is robust—capable of coping with variations in demand and resources availability It is structured so that consistent performance by its people and systems is easily maintained It provides effective links between the back office and the front office so that nothing falls between the © The McGraw­Hill  cracks Fundamentals of Operations  Companies, Inc., 2003 Management 4e  3–44 Common Characteristics of  Common Characteristics of  Well­Designed Service Systems (cont’d) Well­Designed Service Systems (cont’d) It manages the evidence of service quality in such a way that customers see the value of the service provided It is cost-effective—there is a minimum waste of time and resources in delivering the service Fundamentals of Operations  Management 4e  © The McGraw­Hill  Companies, Inc., 2003 3–45 ... assembly-line and continuous operations) Fundamentals? ?of? ?Operations? ? Management? ?4e  © The McGraw­Hill  Companies, Inc., 20 03 3– 23 Types? ?of? ?Processes Types? ?of? ?Processes Fundamentals? ?of? ?Operations? ? Management? ?4e ... Companies, Inc., 20 03 Exhibit 3. 1b 3? ??7 The Impact? ?of? ?Speed to Market on Profits The Impact? ?of? ?Speed to Market on Profits Fundamentals? ?of? ?Operations? ? Management? ?4e  © The McGraw­Hill  Companies, Inc., 20 03 Exhibit... © The McGraw­Hill  Fundamentals? ?of? ?Operations? ? Companies, Inc., 20 03 Management? ?4e  3? ??5 The Impact? ?of? ?Speed to Market on Sales The Impact? ?of? ?Speed to Market on Sales Fundamentals? ?of? ?Operations? ? Management? ?4e