Page 52 - DMGT501_OPERATIONS_MANAGEMENT

Operations Management

Notes 4. Delivery: Standard products may create economies of scale in transportation. Inventories
of standard products can also be placed at sites near customers to facilitate a rapid response
to any order, often providing a competitive advantage with time-conscious customers.
5. Simplified Value Comparisons: Standardized goods help consumers to shop for the best
price or product performance. People can easily compare the cost of a 60-watt Philips bulb
with a Laxman & Sylvania bulb. It also provides consumer protection as the performance
standards are often regulated.

Though the points mentioned below are applicable to all designs, they are especially important
in designing products using standard parts. As will be observed from Figure 2.5, standard
components require little or no tooling and processing. However, in such products it is essential
to ensure and take extra care so that the product:
1. Functions so as to perform as intended;

2. Reliability is ensured so that the product will perform consistently;
3. Is maintainable so that maintenance is economical;
4. Is safe so that it will perform with minimal hazard to the user and the environment; and
5. Production process is simple, so the product can be produced at the intended costs and
volumes.
Figure 2.5: Breakup of Manufacturing Costs

Manufacturing Cost

Components Assembly Overhead

Equipment Indirect
Standard Custom Labor Support
and Tooling Allocation
Processing Tooling
Raw Material

2.9 Modular Design

Another way to introduce customized products quickly is to use modular designs. In the fashion
world, this is called mix-and-match clothing. In manufacturing, assemble to order systems
allow the customer to specify a need and then either the customer or the vendor selects pre-
engineered sub-assemblies to meet a customer's need. The product is then either assembled or
shipped as a kit to the customer. This is the system that Dell uses. A wider variety of end product
options is possible but within certain limits.

Example: The product architecture Maruti Udyog Limited used in launching the Maruti
800, Omni and Gypsy in 1984-85 from a single platform was based on a modular design concept.
Basic modules were integrated to create three different products, with a high degree of
commonality of parts. Writing on the product architecture, the General Manager of MUL in his
note referred to earlier wrote,
"It is possible for us to find a product which can, with necessary engineering inputs, with a high degree of
parts commonality, cater to the demands of the three demand segments identified earlier. This vehicle, I am

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