Designing of Operational Systems and Control | CMA Inter Syllabus

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Designing of Operational Systems and Control

Product Design

Product is an important part of the fundamental marketing mix. Customers pay for the products that best fulfil their requirement and provide them the desired value. The attributes and quality of the product triggers the demand which in turn is a reason for the existence of the value chains and hence organizations. Therefore, designing a product is an important strategic decision. Product design is a collection of interdependent directional activities that are planned and executed in a structured and planned way to develop the value propositions to be offered to the end customers for fulfilling their needs. Therefore, the basic objectives of product design include

• To develop the products as per the needs of the end customer with an objective to provide optimum value
• To minimize the cost, and lead time (i.e., design to market)
• To maximize resource utilization

Importance of Product design:

1. To establish detailed characteristics (i.e., core and augmented) of the products in line with market demand and competitions.
2. To provide the technical requirements for defining the technological requirements and processes
3. To provide a guideline for production system design
4. To provide necessary impetus to production and operations strategy

A good product design enables the organizations to stay ahead of the competition and sustain in this VUCA world and helps to build long-term relationship with the end customers. Product design has an indirect impact on employment too. In other words, a distinctive product design stands as an order winning criteria for the organizations. Some of the attributes of a good design are user-friendliness, features, aesthetics, reliability, durability, innovativeness and appropriateness.

What Does Product Design Do?

The activities and responsibilities of product design include the following:

1. Understand and translate the requirements of the customers (Voice of the Customers) into a set of technical requirements (Voice of the Process) for design and execution planning and processes.
2. Differentiate the existing products to stretch the product life cycle
3. Developing new products
4. Providing inputs required for the formulation of the quality goals
5. Help in cost optimization
6. Building and testing model prototypes
7. Documentation of the design specifications

Factors affecting the Product Design

1. True understanding of the stated and unstated needs and requirements of the end customers. Sometimes it is difficult to get an idea of the unstated or latent needs. Modern day designers most often rely on social media analytics for discovering the latent needs.
2. User-friendliness of the products attracts people from various demographic backgrounds.
3. Striking a balance among form, function/features and cost. In other words, an appropriate balance between economies of scale and economies of scope is required.
4. Quality of raw materials or basic ingredients
5. Selection/design of the processes and layouts
6. The quality and conditions of the machines/instruments used in the design process
7. Capability and maturity of the processes
8. Skilled resource persons
9. Effect on the existing products
10. Presentation (e.g., packaging) of the products

Characteristics of Good Product Design

A good product design must ensure the following:

1. Product quality: The product must satisfy the needs of the end customers while providing optimum value. The performance should be at par with the expectations.
2. The product must be reliable and worthy for paying for the same
3. The product must be designed at an optimum cost to be offered at an affordable price to the target customers
4. The product must be having a shorter design to market lead time
5. The aesthetics/looks of the product must create an immediate impression in the minds of the customers
6. The product must be compatible, user-friendly and upgradable with availability of after sales support (e.g., spare parts)
7. The product must be easily maintainable and reproducible
8. The product should balance between standardized basic features and customized augmented features
9. A detailed specification
10. The product must be safe to use, error proof and should not harm the environment and users

Process Design and Selection

Process Design encompasses all the activities that are performed to produce the final products as per the specifications in line with the requirements of the customers.

Typically, the process design depends on the following

1. Characteristics/ nature of the product - Type of the product
2. Variety: the degree of customization and standardization (Make to Order, Make to Stock, Engineer to Order and Assemble to Order)
3. Volume: the amount to be produced and size of the lot (single piece or batch or continuous production)
4. Level of involvement of human resource: Accordingly, the process may be automatic (least involvement of manual labour; capital intensive) or semi-automatic or manual (labour intensive).
5. Resource requirement: Machines (special purpose and/or general), human capital, space, energy, raw materials and others
6. Expenditure: the cost of operations- fixed and overhead
7. Decision on the extent of In-house (‘Make’) or Outsource (‘Buy’) production

Process choice determines whether resources are organised around products or processes in order to implement the flow strategy. It depends on the volumes and degree of customisation to be provided.

These major process decisions are discussed in detail in the following paragraphs:

1. Process Choice: The production manager has to choose from five basic process types — (i) job shop, (ii) batch, (iii) repetitive or assembly line, (iv) continuous and (v) project.

1. Job shop process: It is used in job shops when a low volume of high-variety goods are needed. Processing is intermittent, each job requires somewhat different processing requirements. A job shop is characterised by high customisation (made to order), high flexibility of equipment and skilled labour and low volume. A tool and die shop is an example of job shop, where job process is carried out to produce one-of-a kind of tools. Firms having job shops often carry out job works for other firms. A job shop uses a flexible flow strategy, with resources organised around the process.
2. Batch process: Batch processing is used when a moderate volume of goods or services is required and also a moderate variety in products or services. A batch process differs from the job process with respect to volume and variety. In batch processing,volumes are higher because same or similar products or services are repeatedly provided, examples of products produced in batches include paint, ice cream, soft drinks, books and magazines.
3. Repetitive process: This is used when higher volumes of more standardised goods or services are needed. This type of process is characterised by slight flexibility of equipment (as products are standardised) and generally low labour skills. Products produced include automobiles, home appliances, television sets, computers, toys etc. Repetitive process is also referred to as line process as it include production lines and assembly lines in mass production. Resources are organised around a product or service and materials move in a line flow from one operation to the next according to a fixed sequence with little work-in-progress inventory. This kind of process is suitable to “manufacture-to-stock” strategy with standard products held in finished goods inventory. However, “assemble-to-order” strategy and “mass customisation” are also possible in repetitive process.
4. Continuous process: This is used when a very highly standardised product is desired in high volumes. These systems have almost no variety in output and hence there is no need for equipment flexibility. A continuous process is the extreme end of high volume, standardised production with rigid line flows. The process often is capital intensive and operate round the clock to maximise equipment utilisation and to avoid expensive shut downs and shut ups. Examples of products made in continuous process systems include petroleum products, steel, sugar, flour, paper, cement, fertilisers etc.
5. Project process: It is characterised by high degree of job customisation, the large scope for each project and need for substantial resources to complete the project. Examples of projects are building a shopping centre, a dam, a bridge, construction of a factory, hospital, developing a new product, publishing a new book etc. Projects tend to be complex, take a long time and consist of a large number of complex activities. Equipment flexibility and labour skills can range from low to high depending on the type of projects.

Product Life Cycle

Likewise, the business organizations and human beings, each product has a life that goes through various phases or cycles. All these cycles during the usable life of a product is collectively called as Product Life Cycle (PLC). A typical PLC has five stages:

1. Introduction phase: During this phase the product (either completely new product or a new variant of the existing product) gets introduced in the market for the first time. For the introduction of the new products in the market, at this stage, the volume stays low, sales are low and effect of learning curve is not realized. Hence, the return on investment is low. This phase is featured by higher level of expenditure in the promotional campaigns. The pricing depends on the innovativeness of the product, nature of the target customer segment and most often discounts are given to entice the potential customers.
2. Growth phase: In this stage, the company focuses on rapid revenue generation and market growth. During this phase, the product sales intend to cover up the fixed cost and bring down the overhead costs while utilizing the learning in the previous stage. Promotional and advertising strategy is decided according to the level of the growths. The objective is to hold the existing customers and create new customers.
3. Maturity phase: This phase is characterized by saturation in the market place. This is a critical phase for the organizations. In the earlier stage (i.e., growth) the objective of the company is to achieve fast growth while in this stage the company wants to flatten the curve to slow down the movement toward fall down. Further, at this stage the organizations infuse variety and differentiation in the products most often to start a new PLC from hereon for finding out a niche market. At this stage, organizations get engaged in aggressive promotional and pricing programs. Profit margin is comparatively lower at this stage.  
4. Decline phase: After maturity, the products start losing their attractiveness in the market and sales get falling down. Profit margin becomes increasingly narrower. The organizations take a call to scrap the product and focus on cost consolidation. Sometimes, organizations come up with revival planning with product differentiation and promotional strategy to improve the sales.

A typical PLC for a FMCG product and high tech product are given in following figures

Process Planning and Selection

Process planning refers to all decisions regarding facility selection, layout planning, design of work systems and defining operating procedures, capacity planning, arrangement of equipment and resources, human resource planning etc which are necessary to facilitate the smooth execution of the activities to produce the intended products as required by the customers.

Process planning depends on variety and volume of outputs of the products, degree of equipment flexibility and flow of activities.

Process Strategy

A process strategy is a decision taken by the organization vis-à-vis selection of the processes for converting the input (i.e., resources) into output (i.e., finished products and services as required by the customers) in line with the product specifications. A typical process strategy depends on long-term efficiency and productivity, resource availability, flexibility, cost and benefits, quality of the products and lead time. Accordingly, the process strategy stands on the following premises:

1. Trade-off between Make (in house conversion, fully or partial) or Buy (outsourcing, fully or partial) decisions
2. Degree of capital intensity that decides the optimum balance between level of automation and manual operations
3. The extent of flexibility required in the process (i.e., the flexibility in the positioning and functioning of the machines, works stations and requisite skills for layout decisions)

Accordingly, the facilities are designed while having three focus areas such as

1. Process focused: The facility is designed in a process centric way. Accordingly, the equipment, machines and work stations are organized. Each process is capable of carrying a wide range of activities (aka intermittent processes) and flexible enough to adopt frequent changes. This type of arrangement allows a higher level of customization, i.e., product flexibility. This type of system is also known as job shop production. Example of products: Aircraft
2. Product focused: The facility is planned in a product centric way to allow a higher level of standardization. The products in higher volume (with lower variety) are produced to give economies of scale and learning benefits for better facility utilization rate. Examples of products: steel, glass, paper, electric bulbs, chemicals and pharmaceutical products. This type of arrangements is suited for continuous flow and batch production. However, this type of structure incurs a higher amount of fixed cost.
3. Repetitive Focus: This structure utilizes the benefits of the above-mentioned arrangements. It uses modular production. This type of structure is also known as assembly production. Examples include automobile process, household appliances etc.

Process Layout Selection

Process layout aims to identify the necessary arrangement of facilities such as equipment/machines, material, people, and work stations for

1. facilitating the production efficiently
2. minimizing unnecessary movements and transportation
3. efficient material handling
4. effective design and organizations of the work stations
5. identification and removal of the bottlenecks/ constraints
6. effective utilization of the spaces.

The underlying objective is to provide the value added products and services to the end customers while minimizing the waste in the process and hence, optimizing the operational cost and resource utilization.

The classical way of categorization includes four types of layouts

1. process layout
2. product layout
3. Group layout(combination layout)
4. Fixed position layout

1. Process layout or functional layout: It organizes the work stations in such a way that similar type of machines and services (i.e., facilities) are located together. Therefore, each such sub-facility is specialized in performing a particular activity of the whole conversion process. This type of layout is suitable for low volume, high variety products produced by job shop, batch production and other non-repetitive processes. Examples: Furniture, restaurants etc.
2. Product layout or line layout: In this type of layout, the facility is organized as per the logical/sequential flow of the activities performed to produce the products. This type of layout is used for high volume and continuous production where level of customization is low. Typical examples include assembly line or mass production used in consumer electronics, automobile sectors etc.
3. Group (combination) layout: This combines the features of both the previously mentioned layouts. In this layout the individual processes are replicated at multiple cells wherein each cell is equipped with all facilities to complete the corresponding process. This type of layout is suitable for cellular manufacturing that minimizes the cost of transportation and material handling.
4. Fixed position or Project layout: In this type of layouts, main facilities are fixed at specified locations while the materials, people and work stations move as per the requirements to those locations. This type of layout is of single use and suitable for highly customized (ETO type) products. Examples: Air Craft, Ships

Each production system is uniquely suited to produce a particular mix and volume of products.Each production system provides different levels and a unique set of the manufacturing outputs: cost, quality, performance, delivery, flexibility and innovativeness.One of the tasks of the manufacturing strategy is to select the best production system for each product or product family.

The PV-LF Matrix is a useful tool for analysing the similarities and differences among the seven production systems. The PV-LF Matrix has four dimensions:

1. Number of products produced
2. Production volume of each product
3. Layout or arrangement of equipment and processes used to manufacture the products
4. Flow of material through the equipment and processes

A typical PV-LF diagram is given below

Design Thinking

What is Design Thinking?

Design thinking is a non-linear, iterative process that seeks to understand users needs, challenge assumptions, redefine problems and create innovative solutions to prototype and test. This is involving five phases—Empathize, Define, Ideate, Prototype and Test—it is most useful to tackle problems that are ill-defined or unknown.

The Five Stages of Design Thinking

The Hasso Plattner Institute of Design at Stanford (aka the d.school) describes design thinking as a five-stage process. Note: These stages are not always sequential, and teams often run them in parallel, out of order and repeat them in an iterative fashion.

Stage 1: Empathize—Research Your Users Needs

Here, you should gain an empathetic understanding of the problem you’re trying to solve, typically through user research. Empathy is crucial to a human-centered design process such as design thinking because it allows you to set aside your own assumptions about the world and gain real insight into users and their needs.

Stage 2: Define—State Your Users’ Needs and Problems

It’s time to accumulate the information gathered during the Empathize stage. You then analyze your observations and synthesize them to define the core problems you and your team have identified. These definitions are called problem statements. You can create personas to help keep your efforts human-centered before proceeding to ideation.

Stage 3: Ideate—Challenge Assumptions and Create Ideas

Now, you’re ready to generate ideas. The solid background of knowledge from the first two phases means you can start to “think outside the box”, look for alternative ways to view the problem and identify innovative solutions to the problem statement you’ve created. Brainstorming is particularly useful here...

Stage 4: Prototype—Start to Create Solutions

This is an experimental phase. The aim is to identify the best possible solution for each problem found. Your team should produce some inexpensive, scaled-down versions of the product (or specific features found within the product) to investigate the ideas you’ve generated. This could involve simply paper prototyping.

Stage 5: Test—Try Your Solutions Out

Evaluators rigorously test the prototypes. Although this is the final phase, design thinking is iterative: Teams often use the results to redefine one or more further problems. So, you can return to previous stages to make further iterations, alterations and refinements – to find or rule out alternative solutions.

Overall, you should understand that these stages are different modes which contribute to the entire design project, rather than sequential steps. Your goal throughout is to gain the deepest understanding of the users and what their ideal solution/product would be.