PRODUCTION

MANAGEMENT
Lecture no 5

Resource Person: Engr Muhammad Raheel Butt

LECTURE NO 5
• New Product Development & Product Life-Cycle Strategies
• New Product Development fundamentals : Design for ‘X’
• Strategic Decisions in POM: Developing Products
• Function Analysis and System Technique (FAST) method
THE MEANING OF “PRODUCT”

 ✔A product is a set of tangible and intangible

attributes, which include packaging, color, price,
quality, brand name and manufactures and retailers
services , all these that buyer accept as a want
satisfaction.
THE MEANING OF “PRODUCT”
Product Classification
What is new Product ?
Reasons for new product developing
Methods used for developing new product
Causes of New Product Failures

 Overestimation of Market Size

 Product Design Problems
 Product Incorrectly Positioned, Priced or Advertised
 Costs of Product Development
 Competitive Actions
 To create successful new products, the company must:
 understand it’s customers, markets and competitors
 develop products that deliver superior value to customers.
New Product Development Process

 Idea Generation and Screening

 Concept Development and Testing
 Marketing Strategy
 Business Analysis
 Product Development
 Test Marketing
 Commercialization
New Product Development Process
Step 1: Idea Generation

Systematic Search for New Product Ideas

 Internal sources
 Customers
 Competitors
 Distributors
 Suppliers
New Product Development Process
Step 2: Idea Screening

 Process to spot good ideas and drop poor ones

 Criteria
 Market Size
 Product Price
 Development Time & Costs
 Manufacturing Costs
 Rate of Return
3.
3. Choose
Choosethe
theBest
BestOne
One
2.
2. Concept
ConceptTesting
Testing--Test
Testthe
the
Product
ProductConcepts
Conceptswith
withGroups
Groups
of
ofTarget
TargetCustomers
Customers
1.
1. Develop
DevelopProduct
ProductIdeas
Ideasinto
into
Alternative
Alternative
Product
ProductConcepts
Concepts
Step 3: Concept Development and Testing
New Product Development Process
New Product Development Process
Step 4: Marketing Strategy Development

Marketing Strategy Statement Formulation

Part
PartOne
One--Overall:
Overall:
Target
Target Market
Market
Planned
PlannedProduct
ProductPositioning
Positioning
Sales
Sales &&Profit
Profit Goals
Goals
Market Share
Market Share

Part
PartTwo
Two--Short-Term:
Short-Term:
Product’s
Product’s Planned
Planned Price
Price
Distribution
Distribution
Marketing
Marketing Budget
Budget

Part
PartThree
Three--Long-Term:
Long-Term:
Sales
Sales &
& Profit
Profit Goals
Goals
Marketing
Marketing Mix
Mix Strategy
Strategy
 IfIfYes,
Yes,Move
Moveto
to
Product
ProductDevelopment
Development
IfIfNo,
No,Eliminate
Eliminate
Product
ProductConcept
Concept
Business
BusinessAnalysis
Analysis
Review
ReviewofofProduct
ProductSales,
Sales,Costs,
Costs,
and
andProfits
ProfitsProjections
Projectionsto
toSee
Seeifif
They
TheyMeet
MeetCompany
CompanyObjectives
Objectives
Step 5: Business Analysis & Step 6: Product Development
New Product Development Process
New Product Development Process
Step 7: Test Marketing

Standard
Standard
Test Controlled
Controlled
Test Market
Market Test
Test Market
Market
Full
Fullmarketing
marketingcampaign
campaign AAfew
in fewstores
storesthat
thathave
have
inaasmall
smallnumber
numberof of agreed
agreedto
tocarry
carrynew
new
representative
representativecities.
cities. products
productsfor
foraafee.
fee.

Simulated
Simulated
Test
Test Market
Market
Test
Testin
inaasimulated
simulated
shopping
shoppingenvironment
environment
to
toaasample
sampleofof
consumers.
consumers.
Product Life Cycle
Introduction Stage of the PLC

Sales
Sales Low
Low sales
sales

Costs
Costs High
High cost
cost per
per customer
customer

Profits
Profits Negative
Negative
Create
Create product
product awareness
awareness
Marketing
Marketing Objectives
Objectives and
and trial
trial
Product
Product Offer
Offer aa basic
basic product
product

Price
Price Use
Use cost-plus
cost-plus

Distribution
Distribution Build
Build selective
selective distribution
distribution

Advertising Build
Build product
product awareness
awareness among
among early
early adopters
adopters and
and
Advertising
dealers
dealers
Growth Stage of the PLC

Sales
Sales Rapidly
Rapidly rising
rising sales
sales
Costs
Costs Average
Average cost
cost per
per customer
customer
Profits
Profits Rising
Rising profits
profits
Marketing
Marketing Objectives
Objectives Maximize
Maximize market
market share
share
Product
Product Offer
Offer product
product extensions,
extensions, service,
service, warranty
warranty
Price
Price Price
Price to
to penetrate
penetrate market
market
Distribution
Distribution Build
Build intensive
intensive distribution
distribution
Advertising
Advertising Build
Build awareness
awareness and
and interest
interest in
in the
the mass
mass market
market
Maturity Stage of the PLC

Sales
Sales Peak
Peak sales
sales
Costs
Costs Low
Low cost
cost per
per customer
customer
Profits
Profits High
High profits
profits
Marketing Maximize
Maximize profit
profit while
while defending
defending
Marketing Objectives
Objectives market
market share
share
Product
Product Diversify
Diversify brand
brand and
and models
models
Price
Price Price
Price to
to match
match or
or best
best competitors
competitors
Distribution
Distribution Build
Build more
more intensive
intensive distribution
distribution
Advertising
Advertising Stress
Stress brand
brand differences
differences and
and benefits
benefits
Decline Stage of the PLC

Sales
Sales Declining
Declining sales
sales
Costs
Costs Low
Low cost
cost per
per customer
customer
Profits
Profits Declining
Declining profits
profits
Marketing
Marketing Objectives
Objectives Reduce
Reduce expenditure
expenditure and
and milk
milk the
the brand
brand
Product
Product Phase
Phase out
out weak
weak items
items
Price
Price Cut
Cut price
price
Distribution
Distribution Go
Go selective:
selective: phase
phase out
out unprofitable
unprofitable outlets
outlets
Advertising
Advertising Reduce
Reduce to
to level
level needed
needed to
to retain
retain
hard-core
hard-core loyal
loyal customers
customers
Strategic Decisions in POM: Developing Product

 In 2008, Ford Motor Company reorganized using what’s known as the 10 strategic operations
areas.
 It was part of the company’s turnaround and enabled the organization be more flexible and
survive the financial crisis without taking government bailouts.
 Toyota, Google and Jet Blue are also known for using the 10 area system in all of their business
activities. It is used across industries as a guide to operations management
Strategic Decisions in POM: Developing Product

The areas are:

 Goods and services: This includes looking for ways to implement consistency in costs,
quality, and resources across all business divisions.

 Quality Management: Be clear on the customer’s demands and then meet those expectations.
Use market research to determine customer needs and batch quality assurance testing on
products and services in production.

 Process and Capacity Design: Design strategies which support all production goals including
technology and resources. A value stream map can help determine what processes are
necessary and how to keep them running efficiently.
Strategic Decisions in POM: Developing Product

 Location: In developing a location strategy consider supply chain and how the location will receive
supplies, the movement of goods and services internally and to customers, and the role of marketing and
public relations in the location choice.

 Layout Design and Strategy: Consider the placement of desks, workstations, and how materials are
delivered and used.

 Human Resources and Job Design: Implement continuous improvement programs with regular reviews,
provide continuous training for employees, and institute employee satisfaction programs to achieve
success in this area.

 Supply Chain Management: Determine the best strategies to streamline, be cost effective, and to
develop trusted partners.
 Strategic Decisions in POM: Developing Product

 Inventory: Different markets mean different challenges when it comes to inventory but all need to
strategize and plan their inventory control. Weather, supply shortages, and labor all influence how
an organization maintains its inventory.
 Scheduling: Consider both production and people. Ask questions such as how much product is
required to be produced for the customer in the required time? How many people and how many
machines are required to do the job effectively and efficiently? This differs among industries and
business departments. For example, emergency rooms need to maintain different schedules than a
hospital’s corporate office.
 Maintenance: This includes maintaining people and machines, as well as, process. What do you
need to do to maintain quality and keep resources reliable and stable?
These 10 areas can be applied to any size business, not just global giants such as Ford and Jet Blue. Use them as
a guide to analyze your operations. Measure your current productivity and then implement strategies to
operationalize these 10 areas into your decision making process and watch your productivity become more
efficient.
FUNCTION ANALYSIS SYSTEM TECHNIQUE (FAST)

What is Function Analysis System Technique (FAST)?

 A technique to develop a graphical representation showing the logical relationships between
the functions of a project, product, process or service based on the questions “How” and
“Why”.
FUNCTION ANALYSIS SYSTEM TECHNIQUE (FAST)
Benefits of the Function Analysis System Technique:

How To Create a FAST Diagram

Three key questions are addressed in a FAST Diagram:

 How do you achieve this function?

 Why do you do this function?
 When you do this function, what other functions must you do?
 The following diagram illustrates how a function is expanded in "How" and
"Why" directions in a FAST diagram.
Function Analysis System Technique (FAST):
FUNCTION ANALYSIS SYSTEM TECHNIQUE (FAST) DIAGRAM
Customer Need Mapped to Functions
FUNCTION ANALYSIS SYSTEM TECHNIQUE (FAST)

Why is the Function Analysis System Technique important?

 The Function Analysis System Technique aids in thinking about the problem objectively and in
identifying the scope of the project by showing the logical relationships between functions.
 The organization of the functions into a function-logic, FAST diagram enables participants to
identify of all the required functions.
 The FAST diagram can be used to verify if, and illustrate how, a proposed solution achieves the
needs of the project, and to identify unnecessary, duplicated or missing functions.
 Steps in constructing the FAST Diagram
Start with the Functions as identified using Function Analysis:

 Expand the functions in the "How" and "Why" directions:

 Build along the "How" path by asking 'how is the function achieved'? Place the answer to the right in terms of
an active verb and measurable noun.
 Test the logic in the direction of the "Why" path (right to left) by asking 'why is this function undertaken?'
 When the logic does not work, identify any missing or redundant functions or adjust the order.
 To identify functions that happen at the same time, ask "when this function is done, what else is done or caused
by the function?"
 The higher order functions (functions towards the left on the FAST Diagram) describe what is being
accomplished and lower order functions (functions towards the right on the FAST Diagram) describe how they
are being accomplished.
 "When" does not refer to time as measured by a clock, but functions that occur together with or as a result of
each other.
Example
Example Fast Diagram: Pencil Manufacturing
Example Fast Diagram: Overhead Projector Fast Diagram
Example Fast Diagram: Mouse Trap
 Consider the following FAST diagram for a mouse trap using the how and why logic as
described above.
FUNCTION ANALYSIS SYSTEM TECHNIQUE (FAST)

Who is involved?
 The Function Analysis System Technique (FAST) diagram is usually prepared in a workshop
setting and led by someone with experience in preparing FAST diagrams. Input for the diagram
is received from workshop participants.
Is there a "correct" FAST Diagram?
 There is no 'correct' FAST diagram but there is a valid method of representing the logic in a
diagram. The validity of a FAST model for a given situation is dependent on knowledge and
scope of the workshop participants. The FAST diagram aids the team in reaching consensus on
their understanding of the project
Benefits of the Function Analysis System Technique:

The development of a FAST diagram is a creative thought process which supports

communication between team members.
The development of a FAST diagram helps teams to:
 Develop a shared understanding of the project
 Identify missing functions.
 Define, simplify and clarify the problem.
 Organize and understand the relationships between functions.
 Identify the basic function of the project, process or product.
 Improve communication and consensus.
 Stimulate creativity.