operations management week 3
stayma1
183.pdf
CASE STUDIES De Mar’s Product Strategy
De Mar, a plumbing, heating, and air-conditioning company located in Fresno,
California, has a simple but powerful product strategy: Solve the customer’s
problem no matter what, solve the problem when the customer needs it
solved, and make sure the customer feels good when you leave. De Mar
offers guaranteed, same-day service for customers requiring it. The company
provides 24-hour-a-day, 7-day-a-week service at no extra charge for
customers whose air conditioning dies on a hot summer Sunday or whose
toilet overflows at 2:30 A.M. As assistant service coordinator Janie Walter puts
it: “We will be there to fix your A/C on the fourth of July, and it’s not a penny
extra. When our competitors won’t get out of bed, we’ll be there!”
De Mar guarantees the price of a job to the penny before the work begins.
Whereas most competitors guarantee their work for 30 days, De Mar
guarantees all parts and labor for one year. The company assesses no travel
charge because “it’s not fair to charge customers for driving out.” Owner Larry
Harmon says: “We are in an industry that doesn’t have the best reputation. If
we start making money our main goal, we are in trouble. So I stress customer
satisfaction; money is the by-product.”
De Mar uses selective hiring, ongoing training and education, performance
measures, and compensation that incorporate customer satisfaction, strong
teamwork, peer pressure, empowerment, and aggressive promotion to
implement its strategy. Says credit manager Anne Semrick: “The person who
wants a nine-to-five job needs to go somewhere else.”
De Mar is a premium pricer. Yet customers respond because De Mar delivers
value—that is, benefits for costs. In 8 years, annual sales increased from
about $200,000 to more than $3.3 million.
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Discussion Questions
1. What is De Mar’s product? Identify the tangible parts of this product and
its service components.
2. How should other areas of De Mar (marketing, finance, personnel)
support its product strategy?
3. Even though De Mar’s product is primarily a service product, how
should each of the 10 strategic OM decisions in the text be managed to
ensure that the product is successful?
Source: Reprinted with the permission of The Free Press, from On Great
Service: A Framework for Action by Leonard L. Berry. Copyright © 1995 by
Leonard L. Berry.
Product Design at Regal Marine
Video Case
With hundreds of competitors in the boat business, Regal Marine must work to
differentiate itself from the flock. As we saw in the Global Company Profile that
opened this chapter, Regal continuously introduces innovative, high-quality
new boats. Its differentiation strategy is reflected in a product line consisting of
22 models.
To maintain this stream of innovation, and with so many boats at varying
stages of their life cycles, Regal constantly seeks design input from
customers, dealers, and consultants. Design ideas rapidly find themselves in
the styling studio, where they are placed onto CAD machines in order to speed
the development process. Existing boat designs are always evolving as the
company tries to stay stylish and competitive. Moreover, with life cycles as
short as 3 years, a steady stream of new products is required. A few years
ago, the new product was the three-passenger $11,000 Rush, a small but
powerful boat capable of pulling a water-skier. This was followed with a 20-foot
inboard–outboard performance boat with so many innovations that it won prize
after prize in the industry. Another new boat is a redesigned 52-foot sports
yacht that sleeps six in luxury staterooms. With all these models and
innovations, Regal designers and production personnel are under pressure to
respond quickly.
By getting key suppliers on board early and urging them to participate at the
design stage, Regal improves both innovations and quality while speeding
product development. Regal finds that the sooner it brings suppliers on board,
the faster it can bring new boats to the market. After a development stage that
constitutes concept and styling, CAD designs yield product specifications. The
first stage in actual production is the creation of the “plug,” a foam-based
carving used to make the molds for fiberglass hulls and decks. Specifications
from the CAD system drive the carving process. Once the plug is carved, the
permanent molds for each new hull and deck design are formed. Molds take
about 4 to 8 weeks to make and are all handmade.
Similar molds are made for many of the other features in Regal boats—from
galley and stateroom components to lavatories and steps. Finished molds can
be joined and used to make thousands of boats.
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Discussion Questions *
1. How does the concept of product life cycle apply to Regal Marine
products?
2. What strategy does Regal use to stay competitive?
3. What kind of engineering savings is Regal achieving by using CAD
technology rather than traditional drafting techniques?
4. What are the likely benefits of the CAD design technology?
*You may wish to view the video that accompanies this case before
addressing these questions.
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