Unit 1

Operations Management
Production and operations management concerns itself with the conversion of inputs into
outputs, using physical resources, so as to provide the desired utility/utilities- of form, place,
possession or a state or a combination thereof- to the customer while meeting the other
organizational objectives of effectiveness, efficiency and adaptability

Production
The term production refers the transformation of raw materials into finished goods and/or producing
services in order to satisfy the customer needs. Production involves application of processes by which the
inputs can be transformed into desired product (output) of potential utility with improving the properties
and adding economic values through the best method without compromising with the quality. The
different forms of production processes are:
1) Production by extraction or separation: In this type of production, the desired products are
produced by separating the content of a mixture.
Example: Producing the different fuel products in oil refinery.
2) Production by improvement or modification: The chemical and mechanical properties of
materials are improved without any physical change.
For example: Annealing or Hardening of metal by slow heating or sudden cooling respectively.
3) Production by assembly: In this type of production, the desired product is produced by
assembling various components.
Example: Car assembly, assembly of computers.
A Production System/ Process
Material

Money

Method

Inputs 6M

Machine

Men

Conversion/
Transformation Process

Management

Nature of Production
The nature of production can be explained with the help of following features:

Goods

Output

Services

1) Production as a system: The production is a system, which transforms the inputs into desired
outputs with the help of various resources. Inputs may be labor, raw material, equipment, capital
etc.
Example: In extracting the metal from its ore, the ore is input, the extraction is a transformation
process and the extracted metal is final output.
2) Production creates utility and adds value: Production creates goods and services of potential
utilities. During the transformation process of raw material into finished goods, various types of
utilities are created while adding value to the output to satisfy the customer needs.
Example: In the process of production of petrol from crude oil, the diesel and gasoline are
produced as utilities.
3) Production as a transformation process: The term transformation consists of processes or
activities wherein various resources such as workers, machines and equipment are used to convert
inputs into outputs. It is the core part of the production process.
4) Production as an organizational function: The various functions are required to complete the
operation process by all the organizations to manufacture the goods. These are marketing
function, finance function, production function and human resource function. In every
organization, production plays a vital and central role in achieving the objectives of the
organization.

Production Management
The need of production is generated by the customer needs on input side and fulfilled by the satisfaction
of customer on the output side by the produced goods and services. The needs of customer flow into the
organization, which then transforms into the products that satisfy the consumer. It can be represented by a
simple input output diagrams.

Input
(Customer
Needs)

Transformation
by
organization
(process)

Output
(Satisfaction of
Customer)

Fig 1.6: Production Management

Production Management may be defined in various ways according to the different views:
1.) The activities performed by the management for selecting, designing, directing, operating,
controlling and updating the production system.
2.) Production management can be defined as a function of management, related to planning,
directing, coordinating and controlling the resources required for production of the specified
product by appropriate methods.

3.) Production Management means a process of effective planning, directing, coordination and
controlling of production. The production management is responsible for the actual
transformation of raw materials into finished goods.
4.) Various activities like material supply and processing activities of an enterprise are planned,
organized, coordinated and controlled by the production department, so that the specified
products are produced by specified methods to meet the objectives of the enterprise and the
customer.
Production Management is concerned with those processes, which convert the input into
outputs. The inputs are various resources like material, men, machine, methods etc. and the
outputs are goods.
--- H.A.Harding
Production Management deals with the decision making related to production processes so that
the resulting goods are produced according to specifications, in the quantities and by the schedule
demanded and at the minimum cost.
---- E.S. Buffas
In general the word production is often used to mean the same as manufacturing. In order to go
through a process of manufacturing, the requirement is of the manpower, the job, the equipment
and the necessary material. To run production, we require some service activities to ensure the
manufacturing activities could go on smoothly into the right direction.

Operations Management
The term Operations Management is an extension of production management. Operations management
emerged from the field of production or manufacturing of finished goods and services management,
which is concerned with the application of basic concept, practices and principles of management to those
areas of the organization, which are linked with the production of goods and/or services. It is defined as
the systematic direction and control of the processes and applications, which convert unfinished or semi
finished
inputs
into
useful
products.

Broadly speaking, Operations Management deals with all the processes and activities involved
with designing, producing and delivering a product and/ or service. The operations management
functions consist of five sequential steps, which are as follows:
Step 1: Identification of customers needs and translation into a statement of explicit
forecast.
Step 2: Analysis of forecast and integration of facility for a statement of resource plans.
Step 3: Satisfaction of resource plans by the suppliers either internal or external and
generation of the inputs.

Step 4: Movement of inputs into the conversion facility, which produces the output
either physical or intangible.
Step 5: Delivering the goods or services to the customer up to their satisfaction with
distribution facility.

Characteristics of Operations Management

1) Basic Business Function (Producing the quality product or service) to satisfy the customer
Operations Management is the basic function of any business. It is a line function which interacts
with all other business functions and provides a quality products or services (package of attributes) to
satisfy the needs of the customer which is ultimate goal of any business.
2) Responsibility to produce and deliver on time
Operations Management deals with the activities, decisions and responsibilities of
production
mangers, as they are responsible to manage the production and delivery of products and services.
3) Real Value Addition Function
Operations Management is that part of any function or managers responsibilities, which involves
the use of the transformational model for the production of goods and services. The transformation
model is basically an input- transformation-output model to provide the real value addition not only
to satisfy the customer, but also bring the repeat orders to increase the business profits.
4) Changing physical properties to provide competitive edge
All operations transform inputs into outputs by changing some aspect like physical properties,
informational properties, possession, location, storage or accommodation, and physiological state so
as to compete with business rivals with a strategic base.
5) Decision Making is a core function
In the operations function, the management decisions can be categorized into three
Strategic or long term decisions, intermediate decisions and short term decisions.

broad areas:

6) Use of Management Models to manage the Operations

According to management approaches, the operations managers job is to manage the
process of
converting inputs into desired output. In doing so, the manager uses various approaches such as the
classical, behavioral and systematic models of management.

Components of Operations Management

The three basic components of operations management are mentioned as under:

Product Development
Product development is the process of designing, creating, and marketing a service or product.
The product can either be new to the market or new to the producing company or an existing
modified product. In many cases, a product will be labeled afresh and improved when some
changes are made.

Process Design and Management

Process design is the selection of inputs, resources, workflows and methods that transform inputs
into outputs. Input selection begins by deciding which processes are to be done in-house and
which processes are to be done outside. The major decisions concerning the production and
operations are those concerned with design of physical processes for producing goods and
services.

Supply Chain
It is a chain to organizations, activities, technology, people, information and resources involved in
supplying a product or service from producer to the end user. The complete supply chain
activities transform and transfer the natural resources, raw materials and components into a
finished product up to the end customer.

Significance of Production and Operations Management in Business

Operations Management plays a crucial role in business as it is the core function which is related
with transformation of raw material into finished goods and services in order to satisfy customer
needs. The various points of importance are listed as below:

Operations Management is line functional area of business, which accounts for more than
70 percent of deployment of manpower and investments.

Operations Management function supports corporate strategy.

It exchanges the critical information about product, process, quality, supply chain, time of
purchase of raw material and stores, time of delivery of finished goods, etc. with different
functional areas like marketing, finance and personnel. This includes in-bound logistics,
out-bound logistics and aspects of technology development.

The Operations function plays a very important role in fulfilling and satisfying the needs
of customer. The total bundle of characteristics provides the level of value, the customers
deem appropriate. The customers buy the products with the following considerations:
-

Attributes
Price
Quality
Image

Performance
Safety
Durability
Place distribution
Time delivery, availability

The value driven by the customers in the product or service can only be added in terms of
complete package of attributes and features by the Production and Operations Department.

The company survives by providing the customers with what they want i.e. a complete package as per the
needs of the customer. Every Product or Service is really a collection of different attributes and must be
with right product at right place and at right price. The company should perform its operations and should
produce the products and services of right quality at right time. This is only possible with the significant
and crucial role played by the Production and Operations Department.

Production Cycle
(Manufacturing Vs Service Operations)
The production process may be defined as the transformation of inputs i.e., raw-materials and components
or semi finished goods into certain outputs such as semi finished goods or finished products with the help
of some conversion process. During the conversion process the value addition is done i.e., outputs should
have more value than the value of inputs. The simple production process can be shown in the fig. as
below:

Random Fluctuations
a) In the Process
b) From the
environment

Inputs (6 Ms)
Materials
Men
Money
Machinery
Methods
Management

Conversion Process
Adjustment
if needed

Output Analysis

Output
Goods/ Services

Transforming
inputs into outputs

Monitoring
(Feedback)
Comparison of
Actual Vs. Planned

Fig. Production Cycle

The production process can be classified into manufacturing operations and service operations. The
tangible products or goods are produced through manufacturing operations with the help of certain
machinery and equipment along with the manpower while services are mostly manpower oriented with
less use of machinery.

Manufacturing Operations
The Manufacturing operations transform material, money, machinery into finished and tangible products
through manpower, management and methods. Manufacturing operations are basic processes and can be
clubbed into various categories which change the shape, size or physical/ chemical properties of the
inputs. The manufacturing operations are classified as follows:
1. Forming Processes
2. Machining Processes

3. Assembly Processes
4. Treatment Processes
5. Fabrication Processes
6. Chemical Processes
7. Testing Processes
1. Forming Processes
These processes basically change the physical shape and size of the jobs without any removal of the
material. The various forming processes are listed as under:

Casting The casting is a process of pouring the molten metal into a moulded cavity and
allowed the sufficient time to retain the shape of cavity. The various types of casting are
Sand and Die Casting.
Forging In forging process, the metal is heated and placed in a die and a compressive
force is applied to the metal and finally the metal takes the shape of the die. The various
types of forging processes are Hot and Cold Forging.
Moulding Moulding is a manufacturing process for producing parts and components
from both thermoplastic and thermosetting plastic materials. Material is fed into a heated
barrel, mixed and forced into a mould cavity where it cools and hardens to the
configuration of the mould cavity. The various types of moulding are Injection and
Centrifugal Moulding
Extrusion Extrusion is a process used to create objects of a fixed cross-sectional
profile. A material is pushed or drawn through a die, barrel and mandrel of the desired
cross-section. Extrusion is also classified as Forward, Backward and Impact Extrusion.
Stamping A cold working process. A force is applied to acquire desire size and
shape with the help and die and punch.
Embossing The dies are used to stretch and form as per requirements. The stretching
here means the metal is expanded and pulled and diameter or thickness is reduced with
the help of applied force and forming means the desired shape with the help of die is
given.
Spinning It is shaping a metal against a mandrel rotating on high speed lathe.
Coining - A compressive force is applied to produce the shallow configurations of the
blank.

2. Machining Processes
In these processes, generally the metal is removed from the job. The metal removal operation is
performed with the help of machine and a tool which changes the shape of raw material, provides
required particular surface finish and converts into needed dimensions. Some of the machining process is
listed as follows:

Turning- It is performed on lathe machine with help of cutting tool.

Drilling It is performed by a rotating drill bit on a work piece.

Boring A drill hole diameter is enlarged by a boring bit.

Reaming When a drill hole is made to an accurate size by a reamer.
Milling - A rotating multipoint cutting tool i.e. milling cutter is used
Etching It is also known as chemical milling under controlled chemical reactions,
which is used to remove the metal from the surface of the job.
Grinding The rotating grinding wheels made of abrasive materials are used.
Filing The various types of files like triangular, flat, square, half round, round etc. are
used.
Shaping or Planing Shaping tools and shapers are used for these operations.
Electro-Chemical Machining It is a chip less chemical process in which
electrodes and chemicals are used and the metal is removed with the help of
electrical and chemical processes.
Electro-Discharge Machining It is also a chip less process but only electric energy is
used.
Laser Machining Electric beam is used to remove the metal from a job.
3. Assembly Processes
The assembly processes are used to join the various components with the help of various mechanisms
which are listed as under:

Welding Two pieces of metals are joined together fusion due to heat or electrical
energy with the pressure.
Soldering It is a metal joining process with the help of soldering alloy at a lower
temperature.
Brazing It is also a metal (non ferrous alloys) joining process and the base metals is
filled up between the joined by capillary action and solidifies upon cooling.
Fastening Screws, Nuts and Bolts are tightened to join the parts and components. Here
disassembly is also easily possible by loosening the screws, nuts and bolts.
Joining through adhesives Chemical adhesives used to bind the similar or dissimilar
materials.
Riveting Used rivets in the holes made through two or more joining items.

4. Treatment Processes

(A) Heat Treatment The alloys are subjected to heat treatment to obtain desire
mechanical properties like toughness, hardness or even softness. The heat treatment
processes involved heating, soaking, cooling, etc. The various heat treatment processes are
listed as below:

Annealing It is metal softening process in which internal stresses are removed

by slow cooling the job in the furnace itself to make machining easy.

Normalizing It is modified form of annealing but cooled at room temperature

outside the furnace in still air.

Hardening Metal is heated at a high temperature and kept for a period time and
then cooled rapidly by quenching in water, oil or salt water (brine).
Tempering In this metal is reheated to a temperature below the critical point
and kept for a particular time at the same temperature then cooling
slowly in oil or liquid salt bath containing mixture of chloride,
fluoride or nitrate to reduced brittleness and the ductility of the metal.

(B) Surface Treatment This treatment is applicable to the metals and alloys for the use of
industrial and domestic applications to remove the deficiencies of tarnishing and corrosion if
exposed to the atmosphere. Here some coating is used on most metal items for the protection from
atmosphere and many a times for the purpose of giving new aesthetic look. In this method, there are
two steps; first the cleaning of surface and then finishing of the surface. The cleaning is done with
the help of acids, alkaline, electrolyte, vapor degreasing and ultra sonic methods. Various methods is
used for finishing of surface are plastic coating, electroplating, powder coating, galvanizing,
anodizing metal spraying, phosphating and hot dipping.
5. Fabrication Processes
Fabrication is basically an assembly involving casting, forging, welding and parts and made of thick
metal plates. There are three types of fabrication light, medium and heavy fabrication.
Examples:

Light Fabrication Utensils and Bicycles

Medium Fabrication - Automobiles and Aircrafts
Heavy Fabrication - Locomotives and Earthmoving

6. Chemical Processes
Chemical Processes are generally metal removal or metal addition processes. Many a times these
processes change the finish of the product also. Generally chemical processes are applied in combination
of electrical processes. Electro chemical plating on good conducting metals is an example of this
category. The various types of plating like gold, silver, copper, tin, nickel, chromium plating are the
examples of this category. Chemical etching is the pure chemical process which removes the metal as per
design required.
7. Testing Processes
These are not basically the manufacturing processes but assist in producing the manufacturing items of
accurate specifications and of required quality. Testing processes are of two types:

Destructive Testing Processes Here the job/ sample is destroyed and cannot be used.
These processes are used for the diagnostic purposes to find out any defects.

Non-Destructive Testing Processes Here the sample can be used even after testing as a
good product.

The testing processes can be applied in both the categories to test the product (acceptance sampling) or
processes (process control charts like X-Bar and R Charts.

Difference between Production and Operations Management

There are some differences between these two terms. The major differences between the two terms are as
follows:
1. According to the nature of output, in Production Management the finished products are tangible for
example production of cars and bikes, while in case of Operations Management the nature of output may
be in the form of either tangible or intangible just like banking, restaurant and transportation services.
2. With respect to the consumption of output, in Production Management the products consumed over a
period of time, while in Operations Management other than products, the services should be availed
immediately.
3. In case of nature of work, Production function requires less labor and more equipment and in
Operations Management in case of services, the requirement of labor is more and equipment is less.
4. Finally the difference between the two terms is with respect to the degree of customer participation,
the Production Management requires no participation of customer in the transformation process while in
case of Operations Management, the customer frequently participates in the conversion process in case of
services atleast.

To sum up the differences between the two terms it is also assumed that Operations Management
is a new version of the Production Management, which includes additional activities like
procurement of raw material, supply chain and value chain.

Classification of Operations (Kinds of Production Systems)

The type of product line decides the organization of manufacturing system and planning and control of
production. The basic principles, which guide the formulation of planning, policy and its execution, may
be the same for all the manufacturing concerns. But emphasis on particular aspects of production
management in fulfilling of specific requirement of the plant and the management approach to the
problems of inventory, mission setting, routing, loading, follow up and general control will differ
depending upon the type of production system.

In general there are three classification of production system. These are as under:

1. Job Production:
In this type of production system, one or more varieties of products in small or big quantities
designed and produced as per the specifications of customers within pre-fix time and cost. The
quantity involved is generally small and the manufacturing of the products will take place as per the
specifications given by the customer. Thus because of the high variety, the scheduling becomes
complicated. This system may be classified further in the following categories:
1) Job produced only once
2) Job produced at irregular intervals
3) Job produced at regular intervals
Nature of Job Production
1) The requirement for each product, capabilities for each work center and order
priorities are different, so there is a need of detailed planning. In comparison to
repetitive line manufacturing, the scheduling of job production is relatively
complicated.
2) Every job is unique. So highly skilled operators, who can take up each job as a
challenge, are required.
3) Opportunity to use innovative ideas and creative methods exists.
4) Various functional departments are needed as per the specifications.
5) Because of job production, operators become more skilled and competent as each
job gives them learning opportunity.
Examples of Job Production
Aircraft, Customer Clothing, Large Turbo generator, Construction
Equipment, Special purpose machine and like.
2. Batch Production:

In this type of production, job routes through various functional units and divided in batch.
The batch production is defined by APICS (American Production and Inventory Control
Society) as a form of manufacturing, when the production of plant and equipment is
terminated, the plant and equipment can be used for producing similar products. Batch
production aims at satisfying the continuous customer demand for an item. However, the
plant is capable of a particular production rate that exceeds the demand rate. The quantities in
batch production are decided based on the balancing of two costs that is set up cost and
inventory carrying cost.
This production system can also be classified under three categories. These

are:

1.) A batch produced only once: Here customer places the order with the firm for the product of his
specifications. The size of the order is greater than that of job production order. The firm has to plan
for the resources after taking the order from the customer.
2.) A batch produced at irregular intervals as per customer order or when the need arises: As the
frequencies are irregular, the firm can maintain a file of its detailed plans and it can refer to its
previous files and start the production.
3.)

3.

A batch produced periodically at known intervals: Here the firm either receives
the order from the customer at regular intervals or it may produce the product to satisfy the demand.
It can have well designed file of its plans, material requirement and instructions for the ready
reference. It can also purchase materials required in bulk in advance. As the frequency of regular
orders goes on increasing the batch production system becomes mass production system. Here also, in
case the demand for a particular product ceases, the plant and machinery can be used for producing
other products with slight modification in layout or in machinery and equipment.

Continuous Production:
The continuous production system is the specialized manufacturing of identical products on which the
machinery and equipment is fully engaged. The continuous production is normally associated with large
quantities and with high rate of demand. Hence the advantage of automatic production is taken. This
system is classified as per the following categories:
(i)
(ii)

Mass Production: Here same type of product is produced to meet the demand of
an assembly line or of the market.
Flow Production: In flow production, production process generally follows a
specific and fixed sequence of operations and the material flows in a particular sequence. The
difference between mass and flow production is the type of product to be produced and its
relation to the plant.

Nature of Mass Production:

1.) There are dedicated special purpose machines having higher production
capabilities and output rates.
2.)
3.)
4.)
5.)

Higher capacity utilization is possible due to line balancing.

Material handling can be fully automated.
Production cost per unit comes down due to economies of scale.
As standardization of product and process sequence, so the line layout is
recommended.
Nature of Flow Production:

1.) The variation in finished product quality is due to different sources of supply of
raw material.

2.) Larger investment and usually capital-intensive units.

3.) Shorter lead time
4.) Demand for By-Products and joint products.

Nature and Types of Decision Making in Production and Operations

Management
Operations managers have to take the decisions at three levels:

Strategic
Tactical
Operating

1) STRATEGIC DECISIONS IN OPERATIONS: These are the decisions which have following
characteristics:

Longer term decisions

Usually made at the senior management level
Product and service strategy
Competitive priorities
Positioning strategy
Location, capacity
Long term partnerships
Quality system and overall approach to quality

2) TACTICAL DECISIONS: These decisions have a bundle of features which are as follows:
Medium term decisions
Tactical in nature
Made by middle and senior managers
Process design
Technology management
Job design and workforce management
Capacity management
Facility location
Facility layout
3) OPERATING DECISIONS: There are routine decisions but have very important impact on any
business. The nature of these decisions can be well described by the following aspects:

Shorter term decisions

Made at middle and lower management levels
Forecasting
Materials management
Inventory management

Aggregate planning
Master production scheduling
Production control
Scheduling

Functions of Production and Operations Management

The functions of operations management depends on the size of firm as it decides the organizational
control and decision making powers at different levels of management.

In small size firms, all other functions like production, marketing, finance, personnel etc are
looked after by one manager.
In medium sized firms, different functions are performed by different managers.
In large sized firms, operations management looks after production activities only.
Some common functions of operations department are as under:

1) Selection of material:
The operations manager selects appropriate material for the product. For that purpose,
research on material is necessary to find out the availability of material and their suitability to
the process, budget and thus to the product.

2) Selection of appropriate method:

The suitable method of production is the most important task. The appropriate method will be
selected by operations department suitable to the available resources and constraints.

3) Selection of suitable machinery and equipment:

The operation department selects the suitable machinery and equipment
according to the design and requirement of the process and layout of the shop
floor.

4) Fixation of production targets and delivery dates:

The operations department has to keep the cost at minimum for the survival in the
competitive situation. Thus the department has to decide what should be done in maintaining
the cost at the desired level.

5) Scheduling of activities:
To achieve the production target, it has to be specified clearly the exact start and finish time
of different activities. Accordingly, the department has to manage the timings of purchase of
the materials and to plan the activities of manpower.

6) Routing and making the layout of lines:

Fixing the route for raw material, components and various activities from the
warehouse to the production facility and then to the finished goods warehouse
and fixing the layouts of various lines of production to achieve the production
target are also the major functions of this department.

7) Dispatching:
Various documents such as routing sheet, inspection cards for the components
of various products are planned and prepared by the production department for
starting the production. Releasing of these documents is known as dispatching.

8) Follow-up:
Follow up of all the scheduled activities is necessary. The management wants to know
whether the activities are being carried out as per the plans or not. The actual work is
compared with the plan and thus analysis of the progress of the work is also done by the
operations department. It there is any derivation from the target, then it should be rectified.

9) Inspection;
A separate Quality Control Department does the quality inspection of the
products to find out any chances of qualifying of the defective products. But
many a times, this work is also done by operations department.

Responsibilities and Duties of Production Manager

Maintain a professional appearance and make commitment to quality
Continuous improvement and respect for individuals
Supervise the Production Team to produce and prioritize jobs
Comply with all safety requirements.

Communicate effectively with the General Manager/Owner, the Sales Team, and the
Production Team.
6. Follow systems and procedures outlined in the company manuals.
7. Meet all assigned goals and assist others in accomplishing their goals.
8. Meet all customer commitments through the production of timely, efficient and high quality
products and service
9. Update and maintain production schedule.
10. Organize workflow according to workload to meet delivery schedule and to complete assigned
jobs.
11. Maintain production control records and provide information to sales representatives,
customers and management with regard to delivery
12. Coordinate and maintain the order entry standards and procedures for the company
13. Schedule, plan and conduct Morning Production Meetings.
14. Prepare, update, and communicate the production schedule
15. Manage the coordination and control of all jobs/work orders.
16. Monitor quality, accuracy, and timeliness of all orders to ensure customer commitments are
met through production of high quality material that meets customer delivery expectations.

New Product Development

The various stages of new product development are as follows:
Stage 1: Need Identification
(Idea Generation)
Stage 2: Advance Product Planning
(Conceptual Feasibility)
Stage 3: Advance Design
(Technical Feasibility)
Stage 4: Detailed Engineering Design
(Design for function, reliability, maintainability, safety, productivity)
Stage 5: Production Process Design and Development
Stage 6: Product Evaluation and Improvement
Stage 7: Product Use and Support

Product Design
Product design deals with its form and function. From implies the shape and appearance of the
product while function is related to the working of the product. So that the product design

includes, preparation of drawings, specification, experimental and development effort associate

with the product to be product or manufactured.

Product Design
Product design refers to transforming the new, innovative and effective ideas into a product
through a process. The entrepreneurs conceive and then analyze the idea, implement through the
feasibility studies and systems approach and then finally convert that idea into a tangible
product or intangible service. This process can be facilitated and enhanced by computers,
information technology, digital tools and the nano-technology. The process has three stages as
described below:
First Stage

Creating an idea from imagination, observation through conscious or sub-conscious efforts or

research.

The idea should solve to satisfy the need, to do a specific task or job.

Second Stage

The Product Design Solutions come from the need of meeting the user expectations, using the
various techniques ranging from exploration, ergonomics and prototyping.

Producing as per the design.

Third Stage

Then it is the last stage of marketing which is responsible for selling and distributing the product
up to the last stage of operations i.e. consumer.

Objectives of Product Design

The product or service design is the basic and first step in the process of providing the product or
service to the customer in order to fulfill and satisfy the needs of the customer. So the basic
objective of product design is to satisfy the customer to the maximum at minimum cost thereby
increasing the market share and profit to the stakeholders. Other than this objective, some more
important objectives are listed as below:

Customer needs and desire are satisfied by products and services by efficient product
design.

Existing products are modified to enhance the use value or utility.

The quality functions are taken care by better product design.

The cost of the product is minimized and the product is made simpler through product
design process.

The marketability of the product can be improved.

The product design increases usability, liability, functionality, aesthetics and

dependability.

Product design can make the process of manufacturing simpler, ergonomical and cheaper.

Guiding Principles in Designing the Product

For the good design, the following guiding principles can be used:

An effective NPD process: A good process requires effective teamwork, encourages strong
communication and provides management control.

Expert designers constituting as part of core team: A project may require a human expert,
stylistic input or software interface design skills. Strong teams understand when and where
external support is required.

Design supplementing competence and skill: External specialists should be considered as a part
of the design team. Such partnerships are a critical ingredient of success.

Appropriate projects for optimum use of resources: An effective product strategy should be
linked closely to the overall business strategy and needs the selection of the right projects,
because of the cost incurred.

Design fulfilling market needs: Formulating a shared vision of the product to be designed,
bringing together marketing, industrial design, production and engineering aspects is important. It
should be based on the market, how it is segmented and where the opportunity is to be targeted.

Practical design leading to optimum production: The team should maintain the shared vision
throughout the project from idea through to production.

Involvement of Consumer needs in design: Users can create valuable insights into future needs
and wants. User involvement during concept selection can help significantly in decision-making.
Finally, users must be included in market testing.

Inculcating creativity through innovative ideas: A main feature of strong design teams is the
ability to be divergent in the search for solutions to problems and creating a culture, which
supports innovation and creativity.

Multiple Phase Prototyping from the beginning: Product design is having high inherent risks,
like market, business and technical risks. Prototyping, model making, simulation, concept testing
and evaluation can be an effective way of exploring and reducing these risks.

Importance of both tangible and intangible attributes: In some companies, design teams focus
on performance and functionality - the 'tangible' product attributes and often pay little attention to
'intangible' attributes. But there should be equal consideration of the 'tangible' and 'intangible'
product attributes.

Optimum Variety with minimum cost and complexity: Products are generally designed one at
a time. Modular approach can reduce complexity as well as cost while delivering the variety.

Importance of Product Design

The whole operations management revolves around the product design as it directly influences
the utility of a product or services to the customer. Certain aspects of product design are very
critical and important for the product life cycle, which are listed as below:

During the design stage itself the complete package of attributes of a product or service
is established.

The production process also depends on the design of product i.e. which technology to
be used, skill level of manpower is also determined at this stage.

The whole aggregate planning also depends on product design.

The product design creates the utility value in the mind of target customer by specifying
the features related to performance, durability, reliability, safe use, aesthetics and thus
marketability.

A good product design is the initial assurance of the success of product and project.

There are many more aspects taken care by product design. As it is the starting point of the
whole production process, so it becomes very important to design the product or service in an
effective and efficient manner.

Factors Affecting Product Design

The product depends on many issues ranging from the requirements and needs of the customer,
the feasibility of the process, quality of raw materials, budget and competitive price of the
product to the quality parameters to be put into the products. Some of these factors are listed as
below:

Product attributes to be included so that the utility could be increased.

Easy to manufacture to the operator so that product could be made in a simpler way.

Customer requirements must be fulfilling to satisfy his/her needs and to get repeat
orders.

Availability of manpower with required skill level is another factor of affecting the
product design.

Cost/price limit is another factor which limits the product design with respect to addition
or modification of attributes package in the product.

Process/ Technological capability to handle the product to be manufacture.

Process methods and layouts limit the product design and its modification.

The quality level of raw materials to be used is another important factor.

The balance to be obtained between the cost and functions of the products.

The packaging aesthetics and attractiveness are major issues in product design.

The desired quality level of the finished product is also important in this regard.

The branding and brand loyalty of existing products in product mix also decide about
the quality level of the product in question and so the product design.

The above factors are very crucial to decide about the level of exercise and efforts to be made in
product design.

Service Design

Service Design is the process of planning and organizing all the inputs and resources like the people,
infrastructure, communication and materials of a service, in order to improve its quality, the interaction
between service organization and customers and the performance quality, e.g., a restaurant may choose to
have a Service Design agency change its menu set out, or change the layout and appearance of the
restaurant to improve the customer's experience and perception.
The major portion of the Gross Domestic Product (GDP) in many of the developed and developing
countries comes from service operations. In India particularly, in the previous years, the share of service
sector is more than 55% in this regard. The design of services is also equally important. All the issues,
concerns, factors and considerations are applicable to services also. Even beyond these issues, the service
sector involves more manpower, so the human, technological and commercial concerns become more
predominant and designing the services. The nature of services is altogether different than the products.
Certain assumptions are made in case of services. The more details about services have been taken in the
following paragraphs.

Nature of Services
Few generalizations are the basis of services. These are as follows:
1. Everyone is expert on services we all know, what we want from a service organization.
2. What is well in providing one kind of service may be disastrous in other type. e.g., meal and fast
food.
3. Quality of work is not quality of service, e.g., Auto dealer may be good in work but may consume
a week to get the job done.
4. Most services are mix of tangible and intangible attributes. All require different approaches to
design and mange than the production of goods.
5. The services with higher degree of contact are those, where products and services are consumed
on the spot, e.g. the food served and consumed in the restaurants.
6. Effective management of services requires proper understanding of marketing, personnel and
operations.
7. In services, the cycle of encounters are either through face to face, phone, electromechanical
devices or mail interactions.

Types of Services
There are two types of service operations such as service as a business and service to serve the
organization internally.
(A) Services Business: The management of organizations, where primary business requires interaction
with the customers to produce the services falls into this category, e. g., banks, airlines, hospitals, law
firms, restaurants. There are two types of services as mentioned below:
1. Facility Based Services are those services where customer must go to the service facility e.g. Clinic,
Hospitals and Bank.

2. Field Based Services are those services where production & consumption of services takes place in
customers environment, e.g. home delivery of food, insurance service by the agent, etc.
Technology has transferred many facility based services to field based services.
e.g., Telemarketing brings shopping center.
(B) Internal Services: This category of services is required to support the larger activities of the
organization, e.g. data processing, accounting, engineering and maintenance service is viewed parallel to
quality. Here the customer is focal point of all decisions and actions in any service organization as shown
in figure

Service strategy

Main & central position

Customer

Systems

People

Fig. Internal Service System focusing Customer

There are two viewpoints. First is that the organizations exist to serve the customers. The Systems and
people exist to facilitate the process of service.
The other view point is that the service organization exists to serve the workforce. They determine the
following:

How is the service perceived by the customer?

How does the management treat the workers and employees?

How do the serving personnel treat the public? i.e., Customer gets the kind of service that
management deserves.

If workforce is well trained and well motivated, then they will be more enthusiastic and do better
job for their customers.

The whole Operations are responsible for efficient service systems. e.g. the procedures,
equipment and facilities responsible for managing the work of service workforce.

Operational Classification of Services

There are two types of classifications:
(a) General Classification on the basis of work e.g; Financial, Health, Transformations services. But
these are indicators about the types of processes.
(b) Classification on the basis of Customer Contact in creation of the services. Service systems are
operationally distinguished from one another with respect to physical presence of customer during the
process of creation of service and also in providing the service to the customer.
1. High Degree of Customer Contact (HDCC)
2. Low Degree of Customer Contact (LDCC)
HDCC service system is more difficult to rationalize and more difficult to control as customer affects the
time of demand, exact nature of service, quality as compared to the service where customers presence is
either very less or remote from the point of service creation.

Designing Service Organizations

There are certain facts about the nature of services.

Services cant be stored as we cant inventory services, so we create the services

as the demand arises.
So the capacity to create and provide the services becomes the dominant issue in
case of service design.
The service capacity should be optimum. There should be neither loss of customer
nor excessive cost due to excess capacity.
The Assistance and consultation of marketing is always advisable to decide about
the service capacity. e.g. discounted fare and rates in air travel, hotel and
restaurant booking.

Many a times, it becomes difficult to separate out the operations management functions from marketing
functions in services. The waiting line models are the powerful mathematical models/ tools for this type
of analysis. Certain questions like how many tellers should be installed in the bank? How many phone
lines must be there in mail order operations? Can be analyzed with these models?

In designing a service organization, four elements are to be emphasized, which are listed as below:
a) Identification of target market. i.e. strategic service vision (who is customer?)
b) Service concept (how we differentiate our service with respect to the services provided by other
organizations?)
c) Service strategy (what is the service package and operating focus?)
d) Service delivery system (what is actual process, number and skill level of staff and facilities by
which the service is created are the major factors which distinguish service design and product
development.)
Issues in Designing services:
There are certain facts and considerations to be taken care, while designing the services:
1) Process and production must be developed simultaneously. In fact in services, the process itself is
the production.
2) Although equipment and software supporting a service can be protected by patents and
copyrights, but service operations itself lacks the legal protection from duplication and imitation.
3) It is only a service package, not the definable goods.
4) Training individuals is part of service package. e.g Professional Service Organizations (PSO),
prior certificates of approval are necessary e.g., Law firms and hospitals.
5) Many service Organizations can change their service means higher degree of flexibility such as
barber shops, retail stores and restaurants.

Challenges in Product and Service Design

The concerns of environment and ethical and legal issues are major challenges in designing the
product and service. The governmental rules and regulations with respect to environment,
ecology, pollution and safety of consumer and operator provide the bigger challenges for the
design engineers. The examples of establishing the factory in the vicinity of population or
without pollution control devices anywhere, fastening the seat belt while travelling beyond a
specified speed limit and emission levels (e.g. Euro I, II, III Standards) are very important and
critical in designing products and services.

Similarly, the design engineer and company management are responsible for any type of injuries
or damages caused to operator or customer due to defective product design e.g. sharp edges may
cause the injury to the users of the products. In the same way certain ethical concerns are also
raised by many social organizations that the company has to followed while designing the
products for example animal and environmental protection, software with sufficient safety from
the viruses and hacking.