2 Prod Decision Analisis Dev

7/27/2019 2 Prod Decision Analisis Dev

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OPERATIONS MANAGEMENT SEMESTER-I

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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.

Documents

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