OPERATIONS MANAGEMENT MODULE- II PRODUCT AND SERVICE DESIGN.

OPERATIONS MANAGEMENT

MODULE- IIPRODUCT AND SERVICE DESIGN

Operations and Supply Strategy Framework2-2

UNDERSTANDING PRODUCTIVITY

Productivity is a common measure on how well resources are being used. In the broadest sense, it can be defined as the following ratio:

Outputs Inputs

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Total Measure Productivity

Total Measure Productivity = Outputs Inputs

or

= Goods and services produced All resources used

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Partial Measures of Productivity

• Partial measures of productivity =

• Output or Output or Output or Output Labor Capital Materials Energy

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Multifactor Measures of Productivity

Multifactor measures of productivity =

Output Labor + Capital + Energy

or

Output Labor + Capital + Materials

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Exercise on Productivity Measurement

• You have just determined that your service employees have used a total of 2400 hours of labor this week to process 560 insurance forms. Last week the same crew used only 2000 hours of labor to process 480 forms.

• Which productivity measure should be used?• Is productivity increasing or decreasing?

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Exercise on Productivity Measurement (Solution)

• You have just determined that your service employees have used a total of 2400 hours of labor this week to process 560 insurance forms. Last week the same crew used only 2000 hours of labor to process 480 forms.

• Which productivity measure should be used?• Answer: Could be classified as a Total Measure or

Partial Measure.• Is productivity increasing or decreasing?• Answer: Last week’s productivity = 480/2000 = 0.24,

and this week’s productivity is = 560/2400 = 0.23. So, productivity is decreasing slightly.

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CASE: IKEA: Design And Pricing

What are IKEA”s competitive priorities?

• IKEA’s Corporate Mantra: “ LOW PRICE WITH MEANING”

• MAXIMIZE VALUE at LOW COST • Make the Product Offerings LESS EXPENSIVE

but NOT CHEAP

Describe IKEA’s process forDeveloping a New Product.

• Five Stages:(1) Pick a price. (2) Choose a manufacturer. (3) Design the product.(4) Ship it. (5) Sell it.

IKEA’s process for Developing a New Product.

(1) Pick a price. :• Low Price begins at the Drawing Board• Cross Functional Team comprising: Design,

Product Development & Purchase Deptts.• All components of costing such as, Basic

Material, Size, Features, Colour,Packing, Shipping etc. discussed for low cost operation

• Exp: Green/ Yellow/ White instead of Red


Key Points:• Lighter color: Green/ Yellow/ White instead

of Red• Environment friendly, free from Lead &

Cadmium• IKEA Code of Conduct banning Child Labor,

Health & Safety at work place• Quality Control & Audits by External Agencies


Key Points:• Internal Competition to select the best design• Competitors given brief about Key functions, materials ,

manufacturing and the price• Best design is the one which provides maximum

functionality at indicated price like the Swiss Army Knives• Size and handles of Mugs redesigned shorter to

accommodate 2024 mugs on each pallet • Transportation cost optimised by increasing number to 2024


Key Points:• IKEA practices the concept of FLAT for packing products• Learnt concept in 1956 from a customer carrying table

dissembled flat• Bulky furnitures packed in rectangular flat cartons with detailed

assembly drawings with required bolts/ nuts . Clamps and screws

• In IKEA, waste is a sin. Employees wage a war against waste at all fronts.

• Waste of Space in packing is avoided. They don’t want to ship air• Transportation & self assembly of furniture by customers

contribute to Low cost Operations.


Key Points:• Child Care, Food court, Information Kiosks for guidance on home

décor, color coordination etc. and Display of yellow tagged Low Priced products ( BTI: Breath Taking Items) are special features.

• Store Layout Guides customers through pre-determined path which augments shopping of related items before the customer arrives Billing counter

• IKEA educates customers ‘How to live a modern living without expensive buying’

• Collecting big flat pickings from Bins, carrying them on trolleys to the check out point, transporting them home in SUVs, assembling them according to the drawings in their chosen home settings, make millions of customers happy all over the world.

DESIGNING SEVICE OPERATIONS

Process Design in Service Operations

• Three types of Service Operations:– Quasi-Manufacturing – Customer-as-Participant – Customer-as-Product


• Quasi-Manufacturing ( similar to manufacturing)– Tangible outcome receives priority over intangible – Operation takes place according to pre designed process

flow like a manufacturing line operation– Operations could be highly automated, which may not

visible to customers– Little or almost no customer interaction– Little regard for customer relations– Example – – Kitchen of a Hotel or a restaurant– Back end office operations of a call center– Pathological Lab tests


• Customer-as-Participant– Physical product may be a significant part of the

service outcome– Requires high degree of customer involvement in

the process– Service Products may be either standardized or

customized to needs of the customer– Examples: – ATM, – Self-service petrol pumps


• Customer-as-Product– Service outcome (Product) is the customer himself– Requires customized service on the customer– Deserves personal attention to customer needs– Involves high degree of customer contact– Quality depends upon customer perception – Examples: – Hair cutting Salon or a Beauty Parlour– Doctor’s clinic– Teaching & Training

Copyright 2009 John Wiley & Sons, Inc.

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Service Design Process


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• Service concept– purpose of a service; it defines target market and

the extent of customer experience to be provided• Service package

– mix of physical products, experiential and psychological satisfaction

• Service specifications– performance specifications– design specifications – delivery and after sales service



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Service Process Matrix

Market

Operations

Narrow range of services

Service concept

Focused operations for a narrow market

Market

Operations

Narrow range of services

Service concept

Focused operations for a wide market

Market

Operations

Wide range of services

Service concept

Unfocused operations for a narrow market

Market

Operations

Wide range of services

Service concept

Unfocused operations for a wide market

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Characteristics of Well Designed Service Systems

1. Consistent with the organization mission2. User friendly3. Robust4. Easy to sustain5. Cost effective6. Effective linkages between back end operations7. Single unifying theme: Deliver value to customer8. Ensure visibility of Quality and Reliability

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Guidelines for Successful Service Design1. Define the service package2. Focus on customer’s perspective3. Make sure that managers are involved4. Define quality for tangible and intangibles5. Make sure that recruitment, training and rewards are

consistent with service expectations6. Establish procedures to handle exceptions7. Establish systems to monitor service


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Mapping Process Flow

• Any manufacturing or service operation comprises of two broad set of activities, namely:– Activities related to main production or service

operation– Activities related to support functions, such as:

Inspection & quality control, Storage & movement, Supply & distribution and other Process delays


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Process Flowchart Symbols

Operations

Inspection

Transportation

Delay

Storage

W

F

S

S S

S S

B

C

F

K I T

MCDONALD SERVICE FLOW CHART

C: Customer- B: Billing- K: Kitchen- W: Waiting- I: Inspection – T:Tray- F: Fries-F: Fill

Designing for Ease of Production

• Ease of Production (Manufacturability)– Specifications - Precise information about the

characteristics of the product– Tolerances - Minimum & maximum limits on a

dimension that allows the item to function as designed

– Standardization - Reduce variety among a group of products or parts

– Simplification - Reduce or eliminate the complexity of a part or product

Case: Narayan Hridayalaya

Vision and Values

– Make Heart Surgery affordable to poor & common man– Grow exponentially from 5000 Bed Hospital to 30000 Beds in 5 years– No poor and children would be denied medical care for lack of money– “ Hands which help are better than the lips that pray”: Mother Teresa

“ When you do your work without expecting anything in return, just for the joy of bringing happiness to others, that’s when, you realize it is not your hands, which do the job, it is the hands of God.”: Driving Motivation of Dr Devy Shetty “

Case: Narayan HridayalayaBusiness Model:

– Seed money from philanthropist Father-in-law– Adopting Business Model of Wal-Mart :Economy of scale is the main Mantra– Strategic Plans to grow from 5000 Beds to 50000 in 5 years– 24 Operation Theatres and other infrastructure support to enable 50 major

heart surgeries daily– Large number of pathological tests per day per machine brings down unit

cost of the test– Machines for tests hired on long term lease: suppliers are happy with the

revenue earned on Reagents sale– Dedicated team of Doctors willing to work on even half the normal salary– Dr Shetty himself provides consultations to at least 2 patients every five

minutes– Lean Staffing brings down costs as well as corrupt practices

Case: Narayan Hridayalaya

• Strategies for making the enterprise Cost Effective:Collaborations: – ISRO providing Satellite Service Links to smaller Hospitals– Telemedicine made available to remote locations– Anesthetics in US provide support in surgery on infants– Biocon developing new drugs which are considerably

cheaper than conventional ones– Karnataka Govt. support through Micro Health Scheme

called ‘Yashaswini’ on small premium of Rs 10 for farmers– Dedicated team of Doctors working at half the salary to

pursue service to humanity (Self actualization needs)

OPERATIONS MANAGEMENT MODULE- II PRODUCT AND SERVICE DESIGN.

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