Heizer Om10 Ch05 MBA

5 - 1© 2011 Pearson Education, Inc. publishing as Prentice Hall

55 Design of Goods and Services

Design of Goods and Services

PowerPoint presentation to accompany PowerPoint presentation to accompany Heizer and Render Heizer and Render Operations Management, 10e Operations Management, 10e Principles of Operations Management, 8ePrinciples of Operations Management, 8e

PowerPoint slides by Jeff Heyl


Regal MarineRegal Marine

Global market

3-dimensional CAD system Reduced product development time

Reduced problems with tooling

Reduced problems in production

Assembly line production

JIT

5 - 3

Some Well Known Companies Having Some Well Known Companies Having Competitive Advantage Through Their Competitive Advantage Through Their

ProductsProducts

• Organizations provide goods and services for the society. Great products are key to the success. They provide competitive advantage.

Honda: engine technology

Microsoft: PC software

Intel: Microprocessors

Michelin: Tires

Dell Computer: Customized hardware and software and Dell does this very fast.

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Some Well Known Companies Having Some Well Known Companies Having Competitive Advantage Through Their Competitive Advantage Through Their

ProductsProducts• Toyota’s competitive advantage is rapid response to

changing customer demand. Their shorter design time (less than 2 years which is below the industry standard) gives them a competitive advantage.

• Regal Marine: introduces six new boats a year.

• Hospitals specialize to gain competitive advantage ,

- maternity hospitals, (Çınarlı Maternity Hospital)

- children hospitals,

- EKOL (Throat, nose and ear hospital in Çiğli, İzmir)


The objective of the product decision The objective of the product decision is to develop and implement a is to develop and implement a

product strategy that meets the product strategy that meets the demands of the marketplace with a demands of the marketplace with a

competitive advantagecompetitive advantage

Product DecisionProduct Decision


Product Strategy OptionsProduct Strategy Options

Differentiation

Shouldice Hospital in Canada

specializing in hernia operation

Low cost

Taco Bell, Walmart

Rapid response

Toyota (product development under 2 years. Industry standard is over 2 years)

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Product Life CyclesProduct Life Cycles May be any length from a few hoursMay be any length from a few hours

((a newspapera newspaper), ), months (months (cell cell phonesphones), years (), years (furnituresfurnitures), ), to to decadesdecades ( (Wolgswagen BeetleWolgswagen Beetle))

A product’s life is divided into four A product’s life is divided into four phases:1. Introduction, 2. Growth, 3. phases:1. Introduction, 2. Growth, 3. Maturity, 4. DeclineMaturity, 4. Decline

The following figure shows how The following figure shows how these four stages are linked to these four stages are linked to product sales, cash flow and cost.product sales, cash flow and cost.


Product Life CyclesProduct Life Cycles

Negative cash flow

Introduction Growth Maturity Decline

Sal

es,

cost

, an

d c

ash

flo

w Cost of development and production

Cash flow

Net revenue (profit)

Sales revenue

Loss

Figure 5.1


Product Life CycleProduct Life Cycle

Introductory PhaseIntroductory Phase

Fine tuning may warrant unusual expenses for

1. Research

2. Product development

3. Process modification and enhancement

4. Supplier development



Growth PhaseGrowth Phase

Product design begins to stabilize

Effective forecasting of capacity becomes necessary

Adding or enhancing capacity may be necessary



Maturity PhaseMaturity Phase

Competitors now established

High volume, innovative production may be needed

Improved cost control is required



Decline PhaseDecline Phase

Unless product makes a special contribution to the organization, must plan to terminate offering


Product-by-Value AnalysisProduct-by-Value Analysis Lists products in descending order

(from largest to smallest) of their individual dollar contribution to the firm

Lists the total annual dollar contribution of the product

Helps management to evaluate alternative strategies so that limited existing resourses are to be invested in few critical and not in many trivial.


Product-by-Value AnalysisProduct-by-Value Analysis

Individual Contribution ($)

Total Annual Contribution ($)

Recliner $136 $51,000

Couch $102 $36,720

Arm Chair $87 $51,765

Foot Stool $12 $6,240

Sam’s Furniture Factory


Importance of New ProductsImportance of New Products

Industry leader

Top third

Middle third

Bottom third

Figure 5.2a

Percentage of Sales from New Products50%

40%

30%

20%

10%

Position of Firm in Its Industry


Scope of product

development team

Product Development Product Development SystemSystem

Scope for design and engineering

teams

Evaluation

Introduction

Test Market

Functional Specifications

Design Review

Product Specifications

Customer Requirements

Ability

Ideas

Figure 5.3


Quality Function Quality Function DeploymentDeployment

1.Identify what will satisfy the customer

2.Translate those customer desires into the TARGET DESIGN

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House of QualityHouse of Quality

• A part of the QFD process that utilizes a planning matrix to relate customer “wants” to “how” the company is going to meet those “wants”.


House of Quality ExampleHouse of Quality Example

Your team has been charged with designing a new camera for Great Cameras, Inc.

The first action is to construct a House of Quality


House of Quality ExampleHouse of Quality Example

Customerimportance

rating(5 = highest)

Lightweight 3Easy to use 4Reliable 5Easy to hold steady 2Color correction 1

What the customer

wants

What the Customer

Wants

RelationshipMatrix

TechnicalAttributes and

Evaluation

How to SatisfyCustomer Wants

Interrelationships

An

alys

is o

fC

om

pet

ito

rs


House of Quality ExampleHouse of Quality ExampleWhat the Customer

Wants

RelationshipMatrix


Evaluation


Interrelationships

An

alys

is o

fC

om

pet

ito

rs

Lo

w e

lect

rici

ty r

equ

irem

ents

Alu

min

um

co

mp

on

ents

Au

to f

ocu

s

Au

to e

xpo

sure

Pai

nt

pal

let

Erg

on

om

ic d

esig

n



Lightweight 3Easy to use 4Reliable 5Easy to hold steady 2Color corrections 1

House of Quality ExampleHouse of Quality ExampleWhat the Customer

Wants

RelationshipMatrix


Evaluation


Interrelationships

An

alys

is o

fC

om

pet

ito

rs

High relationship

Medium relationship

Low relationship

Relationship matrix


House of Quality SequenceHouse of Quality Sequence

Figure 5.4

Deploying resources through the organization in response to customer requirements

Pro

du

ctio

n

pro

cess

Quality plan

House 4

Sp

ecif

ic

com

po

nen

ts

Production process

House 3

Des

ign

ch

arac

teri

stic

s

Specific components

House 2

Cu

sto

mer

re

qu

irem

ents

Design characteristics

House 1

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Four Approaches to Four Approaches to OrganizingOrganizing for Product for Product

DevelopmentDevelopment1) Historically – distinct departments

R&D Dept, Eng. Dept, Mnfg. Eng. Dept, Prod. Dept.Duties and responsibilities are well

defined (Advantage)

Difficult to foster forward thinking (Disadvantage)

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Organizing for Product Organizing for Product DevelopmentDevelopment

2) A ChampionTo assign a product manager to

champion the product through the product development system and related organizations

5 - 26

Organizing for Product Organizing for Product DevelopmentDevelopment

3) Team approach (Concurrent Engineering)

Cross functional – representatives from all disciplines or functions

Product development teams, design for manufacturability teams, value engineering teams

Marketability, manufacturability, serviceability

4) Japanese “whole organization” approach

No organizational divisions

5 - 27

Design for Design for Manufacturability andManufacturability and

Value Engineering Value Engineering DESIGN FOR MANUFACTURABILITY AND VALUE

ENGINEERING activities

reduce complexity of products,

reduce cost,

improve functional aspects of product,

improve maintainability (serviceability) of the product.

In short, they yield value improvement by focusing on achieving the functional specifications necessary to meet the customer requirements in an optimal way.


Issues for Product Issues for Product DevelopmentDevelopment

Robust design

Modular design

Computer-aided design (CAD)

Computer-aided manufacturing (CAM)

Virtual reality technology

Value analysis

Environmentally friendly design


Robust DesignRobust Design

Product is designed so that small variations in production or assembly do not adversely affect the product

Typically results in lower cost and higher quality


Modular DesignModular Design

Products designed in easily segmented components

Adds flexibility to both production and marketing

Improved ability to satisfy customer requirements


Using computers to design products and prepare engineering documentation

Shorter development cycles, improved accuracy, lower cost

Supports “mass customization”

3-D Object Modeling

Small prototype development

Computer Aided Design Computer Aided Design (CAD)(CAD)


Computer-Aided Computer-Aided Manufacturing (CAM)Manufacturing (CAM)

Utilizing specialized computers and program to control manufacturing equipment

Often driven by the CAD system (CAD/CAM)

CNC MachinesCNC Machines


1. Better Product quality

2. Shorter design time

3. Less Production cost

4. Database availability

Benefits of CAD/CAMBenefits of CAD/CAM


Virtual Reality TechnologyVirtual Reality Technology

Computer technology used to develop an interactive, 3-D model of a product from the basic CAD data

Allows people to ‘see’ the finished design before a physical model is built

Very effective in large-scale designs such as plant layout

5 - 35

Value AnalysisValue Analysis versus Value versus Value EngineeringEngineering

While Value Engineering focuses on preproduction design improvement, Value Analysis takes place during the production process.

Value Analysis seeks improvements leading either to a better product or a product which can be produced more economically.

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Ethics and Environmentally Ethics and Environmentally Friendly DesignsFriendly Designs

It is possible to enhance productivity, It is possible to enhance productivity, drive down costs, and preserve drive down costs, and preserve resourcesresources..

Effective at any stage of the product life cycleEffective at any stage of the product life cycle

DesignDesign

ProductionProduction

DestructionDestruction

5 - 37

Guidelines for Environmentally Guidelines for Environmentally Friendly DesignsFriendly Designs

1. Make products recyclable

2. Use recycled materials

3. Use less harmful ingredients(Using soy-based inks)

4. Use lighter componentsMercedes is using banana plant fiber for car exteriors

Biodegradable and lightweight

5. Use less energy

6. Use less material

5 - 38

OM Strategies need to be sensitive OM Strategies need to be sensitive to limited enviromental resourcesto limited enviromental resources

• Design: Nike’s new Air Jordan Shoes

- very little chemical-based glue

- recycled outsole

• Production: Ban Roll-On

- repackaging in smaller cartons

• Destruction: BMW

- recycles most of a car including plastic components


Time-Based CompetitionTime-Based Competition

Product life cycles are becoming shorter and the rate of technological change is increasing

Developing new products faster can result in a competitive advantage


Product Development Product Development StrategiesStrategies

By Purchasing a Firm (Microsoft acquired Hotmail for $500 million in 1997)

Through Joint Ventures (GM & Toyota, Fuji & Xerox) Both organizations learn

Risks are shared

Through Alliances (Sturbuck & Barnes and Noble) Cooperative agreements between

independent organizations, each remains independent, but uses complementing strengths


Defining The ProductDefining The Product

Define the functions of product

Define design specifications to achieve these functions

Prepare an engineering drawing

List the components of a product, Bill of material (BOM)

Determine equipment, layout and human resources


Engineering DrawingsEngineering Drawings

Figure 5.8


Bills of MaterialBills of MaterialBOM for Panel Weldment

NUMBER DESCRIPTION QTY

A 60-71 PANEL WELDM’T 1

A 60-7 LOWER ROLLER ASSM. 1R 60-17 ROLLER 1R 60-428 PIN 1P 60-2 LOCKNUT 1

A 60-72 GUIDE ASSM. REAR 1R 60-57-1 SUPPORT ANGLE 1A 60-4 ROLLER ASSM. 102-50-1150 BOLT 1

A 60-73 GUIDE ASSM. FRONT 1A 60-74 SUPPORT WELDM’T 1R 60-99 WEAR PLATE 102-50-1150 BOLT 1 Figure 5.9 (a)

5 - 44

A A Product Structure DiagramProduct Structure Diagram Showing BOMShowing BOM


Parts grouped into families with similar characteristics

Coding system describes processing and physical characteristics

Part families can be produced in dedicated manufacturing cells

Group TechnologyGroup Technology


Group Technology SchemeGroup Technology Scheme

Figure 5.10

(a) Ungrouped Parts(b) Grouped Cylindrical Parts (families of parts)

Grooved Slotted Threaded Drilled Machined


1. Simplified production planning and control

2. Improved layout, routing, and machine loading

3. Reduced tooling setup time, work-in-process, and production time

Group Technology BenefitsGroup Technology Benefits


Documents for ProductionDocuments for Production

Assembly drawing

Assembly chart

Route sheet

Work order

Engineering change notices (ECNs)


Assembly DrawingAssembly Drawing

Shows exploded view of product

Details relative locations to show how to assemble the product

Figure 5.11 (a)


Assembly ChartAssembly Chart1

2

3

4

5

6

7

8

9

10

11

R 209 Angle

R 207 Angle

Bolts w/nuts (2)

R 209 Angle

R 207 Angle

Bolt w/nut

R 404 Roller

Lock washer

Part number tag

Box w/packing material

Bolts w/nuts (2)

SA1

SA2

A1

A2

A3

A4

A5

Leftbracket

assembly

Rightbracket

assembly

Poka-yoke inspection

Figure 5.11 (b)

Identifies the point of production where components flow into subassemblies and ultimately into the final product


Route SheetRoute Sheet

Lists the operations and times required to produce a component

Setup OperationProcess Machine Operations Time Time/Unit

1 Auto Insert 2 Insert Component 1.5 .4 Set 562 Manual Insert Component .5 2.3

Insert 1 Set 12C3 Wave Solder Solder all 1.5 4.1

components to board

4 Test 4 Circuit integrity .25 .5test 4GY


Work OrderWork Order

Instructions to produce a given quantity of a particular item, usually to a schedule

Work Order

Item Quantity Start Date Due Date

Production DeliveryDept Location

157C 125 5/2/08 5/4/08

F32 Dept K11


Service DesignService Design Service typically includes direct

interaction with the customer Increased opportunity for customization

Reduced productivity

Cost and quality are still determined at the design stage Delay customization

Modularization helps customization

Reduce customer interaction, often through automation


Service DesignService Design

Figure 5.12


Service DesignService Design

Figure 5.12


Application of Decision Application of Decision Trees to Product DesignTrees to Product Design

Particularly useful when there are a series of decisions and outcomes which lead to other decisions and outcomes


Application of Decision Application of Decision Trees to Product DesignTrees to Product Design

1. Include all possible alternatives and states of nature - including “doing nothing”

2. Enter payoffs at end of branch

3. Determine the expected value of each branch and “prune” the tree to find the alternative with the best expected value

ProceduresProcedures


(.6)

Low sales

(.4)

High sales

(.6) Low sales

(.4)

High sales

Decision Tree ExampleDecision Tree Example (A semiconductor (A semiconductor manufacturer wants to produce a new manufacturer wants to produce a new

microprocessor)microprocessor)

Purchase CAD

Hire and train engineers

Do nothing

Figure 5.14


(.6) Low sales

(.4)

High sales

Decision Tree ExampleDecision Tree Example

Purchase CAD

(.6)

Low sales

(.4)

High sales


Do nothing

Figure 5.14

$2,500,000 Revenue- 1,000,000 Mfg cost ($40 x 25,000)

- 500,000 CAD cost$1,000,000 Net

$800,000 Revenue- 320,000 Mfg cost ($40 x 8,000)- 500,000 CAD cost- $20,000 Net loss

EMV (purchase CAD system) = (.4)($1,000,000) + (.6)(- $20,000)


(.6) Low sales

(.4)

High sales


Purchase CAD

(.6)

Low sales

(.4)

High sales


Do nothing

Figure 5.14


- 500,000 CAD cost$1,000,000 Net


EMV (purchase CAD system) = (.4)($1,000,000) + (.6)(- $20,000)

= $388,000

$388,000


(.6)

Low sales

(.4)

High sales

(.6) Low sales

(.4)

High sales


Purchase CAD$388,000

Hire and train engineers$365,000

Do nothing $0

$0 Net

$800,000 Revenue- 400,000 Mfg cost ($50 x 8,000)- 375,000 Hire and train cost

$25,000 Net


- 375,000 Hire and train cost$875,000 Net


- 500,000 CAD cost$1,000,000 Net


Figure 5.14