GOODS AND SERVICE DESIGN CHAPTER 6 DAVID A.

GOODS AND SERVICE DESIGN CHAPTER 6 DAVID A.

GOODS AND SERVICE DESIGN CHAPTER 6 DAVID A. COLLIER AND JAMES R. EVANS 2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1 CHAPTER 6 GOODS AND SERVICE DESIGN 6-1 Describe the steps involved in designing goods and services.

6-2 Explain the concept and application of quality function deployment. 6-3 Describe how the Taguchi loss function, reliability, design for manufacturability, and design for sustainability are used for designing manufactured goods. 6-4 Explain the five elements of service delivery system design. 6-5 Describe the four elements of service encounter

design. 6-6 Explain how goods and service design concepts are integrated at LensCrafters. Learning. All Rights Reserved. May not be scanned, copied or 2013 OM4 Cengage duplicated, or posted to a publicly accessible website, in whole or in part. 2 CHAPTER 6 GOODS AND SERVICE DESIGN Every design projecta new automobile or cell phone, a new online or financial service, and even a new

pizzais a series of trade-offs: between technology and functionality, between ambition and affordability, between the desires of the people creating the object and the needs of the people using it. 2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 3 CHAPTER 6 GOODS AND SERVICE DESIGN Exhibit 6.1 An Integrated Framework for Goods and Service Design (slide 1) 2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or

duplicated, or posted to a publicly accessible website, in whole or in part. 4 CHAPTER 6 GOODS AND SERVICE DESIGN Exhibit 6.1 An Integrated Framework for Goods and Service Design (slide 2) 2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 5 CHAPTER 6 GOODS AND SERVICE DESIGN Designing Goods and Services

CBP design and configuration choices revolve around a solid understanding of customer needs and target markets, Time: Reduce waiting time, be more responsive andtothe value that customers place on attributes, customer needs. such as: Select location for customer convenience. Place: Information: Provide product support, user manuals. Entertainment: Enhance customer experience. Exchange: Multiple channels used for purchases. Form: How well the physical characteristics of a good address customer needs. 2013 OM4 Cengage Learning. All Rights Reserved.

May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 6 CHAPTER 6 GOODS AND SERVICE DESIGN Designing Goods and Services The design of a manufactured good focuses on its physical characteristicsdimensions, materials, color, and so on. The design of a service, however, cannot be done independently from the process by which the service is delivered. The process by which the service is created and delivered (that is, produced) is, in essence, the service itself! 2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or

duplicated, or posted to a publicly accessible website, in whole or in part. 7 CHAPTER 6 GOODS AND SERVICE DESIGN Designing Goods and Services Prototype testing is the process by which a model (real or simulated) is constructed to test the goods physical properties or use under actual operating conditions, as well as consumer reactions to the prototype. 2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 8

CHAPTER 6 GOODS AND SERVICE DESIGN Customer-Focused Design Customer requirements, as expressed in the customers own terms, are called the voice of the customer. Quality function deployment (QFD) is an approach to guide the design, creation, and marketing of goods and services by integrating the voice of the customer into all decisions. QFD translates customer wants and needs into technical requirements of a product or service. 2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

9 CHAPTER 6 GOODS AND SERVICE DESIGN The House of Quality Building the House of Quality: 1. Determine customer requirements through the voice of the customer (VOC). 2. Define technical requirements of the product. 3. Determine interrelationships between the technical requirements. 4. The relationship matrix defines what technical requirements satisfy VOC needs. 5. Customer priorities and competitive evaluation help select which VOC requirements the product should focus on. 2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or

duplicated, or posted to a publicly accessible website, in whole or in part. 10 CHAPTER 6 GOODS AND SERVICE DESIGN Exhibit 6.2 The House of Quality 2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 11 CHAPTER 6 GOODS AND SERVICE DESIGN Exhibit Extra A House of

Quality for Building a Better Pizza 2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 12 CHAPTER 6 GOODS AND SERVICE DESIGN Tolerance Design and the Taguchi Loss Function For most manufactured goods, design blueprints specify a target dimension (called the nominal), along with a range of permissible variation (called the tolerance). For example, 0.500 0.020 cm.

The nominal dimension is 0.500 cm, but may vary anywhere in the range from 0.480 to 0.520 cm. This is sometimes called the goal post model. 2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 13 CHAPTER 6 GOODS AND SERVICE DESIGN Exhibit 6.3 Traditional Goal Post View of Conforming to Specifications 2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

14 CHAPTER 6 GOODS AND SERVICE DESIGN Tolerance Design and the Taguchi Loss Function Genichi Taguchi, a Japanese engineer, maintained that the traditional practice of setting design specifications is inherently flawed. Taguchi argued that the smaller the variation about the nominal specification, the better is the quality. In turn, products are more consistent, would fail less frequently, and thus, be less costly in the long run. 2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 15

CHAPTER 6 GOODS AND SERVICE DESIGN Tolerance Design and the Taguchi Loss Function Taguchi loss function: L(x) = k(x T )2 [6.1] Where: L(x) is the monetary value of the loss associated with deviating from the target, T; x is the actual value of the dimension; k is a constant that translates the deviation into dollars. 2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

16 CHAPTER 6 GOODS AND SERVICE DESIGN Exhibit 6.4 Nominal-Is-Best Taguchi Loss Function 2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 17 CHAPTER 6 GOODS AND SERVICE DESIGN Solved Problem Suppose that the specification on a part is 0.500 0.020 cm. A

detailed analysis of product returns and repairs has discovered that many failures occur when the actual dimension is near the extreme of the tolerance range (that is, when the dimensions are approximately 0.48 or 0.52) and costs $50 for repair. Thus, in Equation 6.1, the deviation from the target, x T , is 0.02 and L(x) = $50. Substituting these values, we have: 50 = k(0.02)2 or k = 50/0.0004 = 125,000 Therefore, the loss function for a single part is L(x) = 125000(x T)2. This means when the deviation is 0.10, the firm can still expect a 18 loss per unit of: L(0.51) = 125,000(0.10) = $12.50 per part 2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or d u p l i c a t e d , o r p o s t e d t o a p u b l i c l y a c c e s s i b l e w e b s i t e , i n w h o l e 2o r i n p a r t . CHAPTER 6

GOODS AND SERVICE DESIGN Design for Reliability Reliability is the probability that a manufactured good, piece of equipment, or system performs its intended function for a stated period of time under specified operating conditions. 2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 19 CHAPTER 6 GOODS AND SERVICE DESIGN Design for Reliability

Reliability is a probability, that is, a value between 0 and 1. - Example: A reliability of 0.97 means that on average, 97 of 100 times the item will perform its function for a given period of time under specified operating conditions. Many designs have components arranged in series; others consist of parallel components that function independently of each other. 2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 20 CHAPTER 6 GOODS AND SERVICE DESIGN

Design for Reliability In a series system, if one component fails, the entire system fails. The reliability of a series system is the product of the individual probabilities of each process in a system. Rs = (p1)(p2)(p3). . . (pn) [6.2] Exhibit 6.7 Structure of a Serial System 2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 21 CHAPTER 6 Design for Reliability

GOODS AND SERVICE DESIGN Exhibit 6.8 Structure of a Parallel System In parallel systems, functions are independent and the entire system will fail only if all components fail. The reliability of a parallel system is computed as: Rp = 1 (1 p1)(1 p2)(1 p3). . . (1 pn) [6.3] 2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

22 CHAPTER 6 GOODS AND SERVICE DESIGN Design for Reliability Example: The reliability of this series system is: Rs = (.98)(.91)(.99) = .883 or 88.3% Exhibit 6.9 Subassembly Reliabilities 2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 23 CHAPTER 6 GOODS AND SERVICE DESIGN

Design for Reliability Series-Parallel Systems: The reliability of the parallel system for subassembly B is: Rp = 1 (1 .91)(1 .91) = 1 0.0081 = 0.9919. Exhibit 6.10 Modified Design Thus, the reliability of the entire system is: Rs = (.98)(.9919)(.99) = .962 or 96.2%. 2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 24 CHAPTER 6 GOODS AND SERVICE DESIGN

Design for Reliability Design failure-mode-and-effects analysis (DFMEA) is a technique for identifying how a product may fail; the effect of a failure on the customer; seriousness, likelihood of occurrence, and ability to detect a potential failure; cause of failure, and how it can be corrected by improving the design. 2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 25 CHAPTER 6 GOODS AND SERVICE DESIGN Design for Manufacturability

Design for manufacturability (DFM) is the process of designing a product for efficient production at the highest level of quality. Product simplification is the process of trying to simplify designs to reduce complexity and costs and thus improve productivity, quality, flexibility, and customer satisfaction. 2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 26 CHAPTER 6 GOODS AND SERVICE DESIGN Design for Sustainability Many products are discarded simply because

the cost of maintenance or repair is too high when compared with the cost of a new item. One aspect of designing for sustainability is designing products that can easily be repaired and refurbished or otherwise salvaged for reuse. Design for Environment (DfE) is the explicit consideration of environmental concerns during the design of goods, services, and processes and includes such practices as designing for recycling and disassembly. 2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 27 CHAPTER 6

GOODS AND SERVICE DESIGN Service Delivery System Design Service delivery system design includes the following: Facility location and layout The servicescape Process and job design Technology and information support systems Organizational structure 2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 28 CHAPTER 6 GOODS AND SERVICE DESIGN

Service Delivery System Design Facility Location and Layout Location creates customers convenience. Great store layout, process design, and service encounter design are meaningless if the store is in the wrong location. The Internet is making physical locations less important for some informationintensive services such as Charles Schwab, Vanguard, and Scottrade. 2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 29 CHAPTER 6 GOODS AND SERVICE DESIGN

Service Delivery and System Design Servicescape All of the physical evidence a customer might use to form an impression. The servicescape provides the behavioral setting where service encounters take place. Standardization of the servicescape and service processes enhances efficiency, especially for multiple site organizations. 2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 30 CHAPTER 6 GOODS AND SERVICE DESIGN

Three Dimensions of a Servicescape Ambient conditionsmanifest by sight, sound, smell, touch, and temperature; five human senses; e.g., leather chairs in the lobby, cartoon characters in childrens hospital, music at a coffee shop. Spatial layout and functionalityhow furniture, equipment, and office spaces are arranged; also streets, parking lots, stadiums, etc. Signs, symbols, and artifactsexplicit signals that communicate an image of the firm; e.g., diplomas hanging on the wall in a medical clinic, company logos and uniforms, artwork, 31 2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. CHAPTER 6

GOODS AND SERVICE DESIGN Types of Servicescapes Some servicescapes, termed lean servicescape environments, are very -simple. Examples: Ticketron outlets, FedEx drop-off kiosks More complicated designs and service systems are termed elaborate servicescape environments. - Examples: Hospitals, airports, universities 2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 32 CHAPTER 6

GOODS AND SERVICE DESIGN Service Process and Job Design Service process design is the activity of developing an efficient sequence of activities to satisfy internal and external customer requirements. Develop procedures to ensure that: Things are done right the first time. Interactions between customers and service providers are simple and quick. Human error is avoided. 2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 33 CHAPTER 6

GOODS AND SERVICE DESIGN Service Process and Job Design Technology and Information Support Systems What technology does each job require? What information technology best integrates all parts of the value chain? Technology ensures speed, accuracy, customization, and flexibility. 2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 34 CHAPTER 6 GOODS AND SERVICE DESIGN

Service Process and Job Design Organizational Structure Pure functional organization requires more handoffs between work activities and results in increased opportunity for error and slower processing times. Process-based organization leverages cross-functionality of service processes. 2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 35 CHAPTER 6 GOODS AND SERVICE DESIGN Service Encounter Design Service encounter design focuses on the

interaction, directly or indirectly, between the service provider(s) and the customer. Principal elements: Customer contact behavior and skills Service provider selection, development, and empowerment Recognition and reward Service recovery and guarantees 2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 36 CHAPTER 6 GOODS AND SERVICE DESIGN Service Encounter Design Customer Contact Behavior and Skills Customer contact refers to the physical or

virtual presence of the customer in the service delivery system during a service experience. Customer contact is measured by the percentage of time the customer must be in the system relative to the total time it takes to provide the service. Systems in which the percentage is high are called high-contact systems; those in which it is low are called low-contact systems. 2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 37 CHAPTER 6 GOODS AND SERVICE DESIGN Service Encounter Design Customer-contact requirements are

measurable performance levels or expectations that define the quality of customer contact with representatives of an organization. Answering a telephone within two rings Examples: Using a customers name whenever possible 2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 38 CHAPTER 6 GOODS AND SERVICE DESIGN Service Encounter Design Service Provider Selection, Development

and Empowerment Recruit and train employees to exceed customer expectations. Empowerment simply means giving people authority to make decisions based on what they feel is right, to have control over their work, to take risks and learn from mistakes, and to promote change. Ritz-Carlton Hotel employees can spend up to $2,000 to resolve customer complaints with no questions asked. 2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 39 CHAPTER 6

GOODS AND SERVICE DESIGN Service Encounter Design Recognition and Reward Key motivational factors: - Recognition - Advancement - Achievement - Nature of the work 2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 40 CHAPTER 6 GOODS AND SERVICE DESIGN

Service Encounter Design Service Guarantees and Recovery A service upset is any problem a customer hasreal or perceivedwith the service delivery system and includes terms such as service failure, error, defect, mistake, or crisis. A service guarantee is a promise to reward and compensate a customer if a service upset occurs during the service experience. 2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 41 CHAPTER 6 GOODS AND SERVICE DESIGN

Service Encounter Design Service Guarantees and Recovery Service recovery is the process of correcting a service upset and satisfying the customer. - Begin immediately after a service upset. - Document the process and train employees. Listen to the customer and respond. sympathetically. Resolve the problem quickly, provide an apology, offer compensation. 2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

42 CHAPTER 6 GOODS AND SERVICE DESIGN An Integrative Case Study of LensCrafters LensCrafters (www.lenscrafters.com) mission statement suggests that time and service quality are the most important competitive priorities and potential order winners. CBP is the integrated set of goods (eyewear) and services (accurate eye exam and one-hour service). 2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 43

CHAPTER 6 GOODS AND SERVICE DESIGN An Integrative Case Study of LensCrafters Eyewear is produced in store backroom factory in rapid response without sacrificing quality, efficient production procedures. -Service delivery system design: Located in high-traffic areas for convenience. - Servicescape of quality and professionalism. - 11 different in-store job roles. - Customers can see glasses being made

in the optical lab. 2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 44 CHAPTER 6 GOODS AND SERVICE DESIGN Exhibit 6.11 One Example View of LensCrafters Customer Benefit Package 2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 45 CHAPTER 6

GOODS AND SERVICE DESIGN Exhibit 6.12 A Schematic View of a Typical LensCrafters Store Layout 2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 46

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