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© 2006 Prentice Hall, Inc.5 – 1 Operations Management Chapter 5 - Design of Goods and Services Chapter 5 - Design of Goods and Services © 2006 Prentice.

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Presentation on theme: "© 2006 Prentice Hall, Inc.5 – 1 Operations Management Chapter 5 - Design of Goods and Services Chapter 5 - Design of Goods and Services © 2006 Prentice."— Presentation transcript:

1 © 2006 Prentice Hall, Inc.5 – 1 Operations Management Chapter 5 - Design of Goods and Services Chapter 5 - Design of Goods and Services © 2006 Prentice Hall, Inc. PowerPoint presentation to accompany Heizer/Render Principles of Operations Management, 6e Operations Management, 8e

2 © 2006 Prentice Hall, Inc.5 – 2 Outline Global Company Profile: Regal Marine Global Company Profile: Regal Marine Goods And Services Selection Goods And Services Selection Product Strategy Options Support Competitive Advantage Product Strategy Options Support Competitive Advantage Product Life Cycles Product Life Cycles Life Cycle and Strategy Life Cycle and Strategy Product-by-Value Analysis Product-by-Value Analysis

3 © 2006 Prentice Hall, Inc.5 – 3 Outline - Continued Generating New Products Generating New Products New Product Opportunities New Product Opportunities Importance of New Products Importance of New Products Product Development Product Development Product Development System Product Development System Quality Function Deployment (QFD) Quality Function Deployment (QFD) Organizing for Product Development Organizing for Product Development Manufacturability and Value Engineering Manufacturability and Value Engineering

4 © 2006 Prentice Hall, Inc.5 – 4 Outline - Continued Issues For Product Design Issues For Product Design Robust Design Robust Design Modular Design Modular Design Computer-Aided Design (CAD) Computer-Aided Design (CAD) Computer-Aided Manufacturing (CAM) Computer-Aided Manufacturing (CAM) Virtual Reality Technology Virtual Reality Technology Value Analysis Value Analysis Ethics and Environmentally Friendly Design Ethics and Environmentally Friendly Design

5 © 2006 Prentice Hall, Inc.5 – 5 Outline - Continued Time-Based Competition Time-Based Competition Purchase of Technology by Acquiring Firm Purchase of Technology by Acquiring Firm Joint Ventures Joint Ventures Alliances Defining the Product Alliances Defining the Product Make-or-Buy Decisions Make-or-Buy Decisions Group Technology Group Technology Documents For Production Documents For Production

6 © 2006 Prentice Hall, Inc.5 – 6 Outline - Continued Product Lifecycle Management (PLM) Product Lifecycle Management (PLM) Service Design Service Design Documents for Services Documents for Services Application of Decision Trees to Product Design Application of Decision Trees to Product Design Transition to Production Transition to Production

7 © 2006 Prentice Hall, Inc.5 – 7 Learning Objectives Product life cycle Product life cycle Product development team Product development team Manufacturability and value engineering Manufacturability and value engineering Robust design Robust design Time-based competition Time-based competition When you complete this chapter, you should be able to : Identify or Define:

8 © 2006 Prentice Hall, Inc.5 – 8 Learning Objectives Modular design Modular design Computer aided design Computer aided design Value analysis Value analysis Group technology Group technology Configuration management Configuration management When you complete this chapter, you should be able to : Identify or Define:

9 © 2006 Prentice Hall, Inc.5 – 9 Learning Objectives Alliances Alliances Concurrent engineering Concurrent engineering Product-by-value analysis Product-by-value analysis Product documentation Product documentation When you complete this chapter, you should be able to : Explain:

10 © 2006 Prentice Hall, Inc.5 – 10 Regal Marine Global market Global market 3-dimensional CAD system 3-dimensional CAD system Reduced product development time Reduced product development time Reduced problems with tooling Reduced problems with tooling Reduced problems in production Reduced problems in production Assembly line production Assembly line production JIT JIT

11 © 2006 Prentice Hall, Inc.5 – 11 The good or service the organization provides society The good or service the organization provides society Top organizations typically focus on core products Top organizations typically focus on core products Customers buy satisfaction, not just a physical good or particular service Customers buy satisfaction, not just a physical good or particular service Fundamental to an organization's strategy with implications throughout the operations function Fundamental to an organization's strategy with implications throughout the operations function Product Decision

12 © 2006 Prentice Hall, Inc.5 – 12 Product Strategy Options Differentiation Differentiation Shouldice Hospital Shouldice Hospital Low cost Low cost Taco Bell Taco Bell Rapid response Rapid response Toyota Toyota

13 © 2006 Prentice Hall, Inc.5 – 13 Product Life Cycles May be any length from a few hours to decades May be any length from a few hours to decades The operations function must be able to introduce new products successfully The operations function must be able to introduce new products successfully

14 © 2006 Prentice Hall, Inc.5 – 14 Product Life Cycles Negative cash flow IntroductionGrowthMaturityDecline Sales, cost, and cash flow Cost of development and production Cash flow Net revenue (profit) Sales revenue Loss Figure 5.1

15 © 2006 Prentice Hall, Inc.5 – 15 Product Life Cycle Costs Costs incurred Costs committed Ease of change ConceptDetailedManufacturingDistribution, designdesignservice, prototypeand disposal Percent of total cost 100 – 80 – 60 – 40 – 20 – 0 –

16 © 2006 Prentice Hall, Inc.5 – 16 Product Life Cycle Introduction Fine tuning Fine tuning Research Research Product development Product development Process modification and enhancement Process modification and enhancement Supplier development Supplier development

17 © 2006 Prentice Hall, Inc.5 – 17 Product Life Cycle Growth Product design begins to stabilize Product design begins to stabilize Effective forecasting of capacity becomes necessary Effective forecasting of capacity becomes necessary Adding or enhancing capacity may be necessary Adding or enhancing capacity may be necessary

18 © 2006 Prentice Hall, Inc.5 – 18 Product Life Cycle Maturity Competitors now established Competitors now established High volume, innovative production may be needed High volume, innovative production may be needed Improved cost control, reduction in options, paring down of product line Improved cost control, reduction in options, paring down of product line

19 © 2006 Prentice Hall, Inc.5 – 19 Product Life Cycle Decline Unless product makes a special contribution to the organization, must plan to terminate offering Unless product makes a special contribution to the organization, must plan to terminate offering

20 © 2006 Prentice Hall, Inc.5 – 20 Importance of New Products Industry leader Top third Middle third Bottom third Figure 5.2 Percentage of Sales from New Products 50% 40% 30% 20% 10% Position of Firm in Its Industry

21 © 2006 Prentice Hall, Inc.5 – 21 Product-by-Value Analysis Lists products in descending order of their individual dollar contribution to the firm Lists products in descending order of their individual dollar contribution to the firm Lists the total annual dollar contribution of the product Lists the total annual dollar contribution of the product Helps management evaluate alternative strategies Helps management evaluate alternative strategies

22 © 2006 Prentice Hall, Inc.5 – 22 Product-by-Value Analysis Individual Contribution ($) Total Annual Contribution ($) Love Seat$102$36,720 Arm Chair$87$51,765 Foot Stool$12$6,240 Recliner$136$51,000 Sams Furniture Factory

23 © 2006 Prentice Hall, Inc.5 – 23 New Product Opportunities Brainstorming is a useful tool 1.Understanding the customer 2.Economic change 3.Sociological and demographic change 4.Technological change 5.Political/legal change 6.Market practice, professional standards, suppliers, distributors

24 © 2006 Prentice Hall, Inc.5 – 24 Scope of product development team Product Development System Scope for design and engineering teams Evaluation Introduction Test Market Functional Specifications Design Review Product Specifications Customer Requirements Ability Ideas Figure 5.3

25 © 2006 Prentice Hall, Inc.5 – 25 Quality Function Deployment Identify customer wants Identify customer wants Identify how the good/service will satisfy customer wants Identify how the good/service will satisfy customer wants Relate customer wants to product hows Relate customer wants to product hows Identify relationships between the firms hows Identify relationships between the firms hows Develop importance ratings Develop importance ratings Evaluate competing products Evaluate competing products

26 © 2006 Prentice Hall, Inc.5 – 26 QFD House of Quality What the Customer Wants Relationship Matrix Technical Attributes and Evaluation How to Satisfy Customer Wants Interrelationships Analysis of Competitors

27 © 2006 Prentice Hall, Inc.5 – 27 House 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

28 © 2006 Prentice Hall, Inc.5 – 28 House of Quality Example Customerimportancerating (5 = highest) Lightweight 3 Easy to use 4 Reliable5 Easy to hold steady 2 No double exposures1 What the customer wants What the Customer Wants Relationship Matrix Technical Attributes and Evaluation How to Satisfy Customer Wants Interrelationships Analysis of Competitors

29 © 2006 Prentice Hall, Inc.5 – 29 House of Quality Example What the Customer Wants Relationship Matrix Technical Attributes and Evaluation How to Satisfy Customer Wants Interrelationships Analysis of Competitors Low electricity requirements Aluminum components Auto focus Auto exposure Auto film advance Ergonomic design How to Satisfy Customer Wants

30 © 2006 Prentice Hall, Inc.5 – 30 Lightweight 3 Easy to use 4 Reliable5 Easy to hold steady 2 No double exposures1 House of Quality Example What the Customer Wants Relationship Matrix Technical Attributes and Evaluation How to Satisfy Customer Wants Interrelationships Analysis of Competitors High relationship Medium relationship Low relationship Relationship matrix

31 © 2006 Prentice Hall, Inc.5 – 31 House of Quality Example What the Customer Wants Relationship Matrix Technical Attributes and Evaluation How to Satisfy Customer Wants Interrelationships Analysis of Competitors Low electricity requirements Aluminum components Auto focus Auto exposure Auto film advance Ergonomic design Relationships between the things we can do

32 © 2006 Prentice Hall, Inc.5 – 32 House of Quality Example Weighted rating What the Customer Wants Relationship Matrix Technical Attributes and Evaluation How to Satisfy Customer Wants Interrelationships Analysis of Competitors Lightweight 3 Easy to use 4 Reliable5 Easy to hold steady 2 No double exposures1 Our importance ratings

33 © 2006 Prentice Hall, Inc.5 – 33 House of Quality Example Company A Company B GPGPFGGPPPGPGPFGGPPPP Lightweight 3 Easy to use 4 Reliable5 Easy to hold steady 2 No double exposures1 Our importance ratings225 How well do competing products meet customer wants What the Customer Wants Relationship Matrix Technical Attributes and Evaluation How to Satisfy Customer Wants Interrelationships Analysis of Competitors

34 © 2006 Prentice Hall, Inc.5 – 34 House of Quality Example What the Customer Wants Relationship Matrix Technical Attributes and Evaluation How to Satisfy Customer Wants Interrelationships Analysis of Competitors Technical attributes Technical evaluation Company A0.760%yes1okG Company B0.650%yes2okF Us0.575%yes2okG 0.5 A 75% 2 to 2 circuits Failure 1 per 10,000 Panel ranking

35 © 2006 Prentice Hall, Inc.5 – 35 House of Quality Example Completed House of Quality

36 © 2006 Prentice Hall, Inc.5 – 36 House of Quality Sequence Design characteristics Specific components House 2 Customer requirements Design characteristics House 1 Specific components Production process House 3 Production process Quality plan House 4 Figure 5.4 Deploying resources through the organization in response to customer requirements

37 © 2006 Prentice Hall, Inc.5 – 37 Organizing for Product Development Historically – distinct departments Historically – distinct departments Duties and responsibilities are defined Duties and responsibilities are defined Difficult to foster forward thinking Difficult to foster forward thinking Today – team approach Today – team approach Cross functional – representatives from all disciplines or functions Cross functional – representatives from all disciplines or functions Concurrent engineering – cross functional team Concurrent engineering – cross functional team

38 © 2006 Prentice Hall, Inc.5 – 38 Manufacturability and Value Engineering Benefits: Benefits: 1.Reduced complexity of products 2.Additional standardization of products 3.Improved functional aspects of product 4.Improved job design and job safety 5.Improved maintainability of the product 6.Robust design

39 © 2006 Prentice Hall, Inc.5 – 39 Cost Reduction of a Bracket through Value Engineering Figure 5.5

40 © 2006 Prentice Hall, Inc.5 – 40 Issues for Product Development Robust design Robust design Modular design Modular design Computer-aided design (CAD) Computer-aided design (CAD) Computer-aided manufacturing (CAM) Computer-aided manufacturing (CAM) Virtual reality technology Virtual reality technology Value analysis Value analysis Environmentally friendly design Environmentally friendly design

41 © 2006 Prentice Hall, Inc.5 – 41 Robust Design Product is designed so that small variations in production or assembly do not adversely affect the product 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 Typically results in lower cost and higher quality

42 © 2006 Prentice Hall, Inc.5 – 42 Modular Design Products designed in easily segmented components Products designed in easily segmented components Adds flexibility to both production and marketing Adds flexibility to both production and marketing Improved ability to satisfy customer requirements Improved ability to satisfy customer requirements

43 © 2006 Prentice Hall, Inc.5 – 43 Using computers to design products and prepare engineering documentation Using computers to design products and prepare engineering documentation Shorter development cycles, improved accuracy, lower cost Shorter development cycles, improved accuracy, lower cost Information and designs can be deployed worldwide Information and designs can be deployed worldwide Computer Aided Design (CAD)

44 © 2006 Prentice Hall, Inc.5 – 44 Design for Manufacturing and Assembly (DFMA) Design for Manufacturing and Assembly (DFMA) Solve manufacturing problems during the design stage Solve manufacturing problems during the design stage 3-D Object Modeling 3-D Object Modeling Small prototype development Small prototype development International data exchange through STEP International data exchange through STEP Extensions of CAD

45 © 2006 Prentice Hall, Inc.5 – 45 Computer-Aided Manufacturing (CAM) Utilizing specialized computers and program to control manufacturing equipment Utilizing specialized computers and program to control manufacturing equipment Often driven by the CAD system Often driven by the CAD system

46 © 2006 Prentice Hall, Inc.5 – 46 1.Product quality 2.Shorter design time 3.Production cost reductions 4.Database availability 5.New range of capabilities Benefits of CAD/CAM

47 © 2006 Prentice Hall, Inc.5 – 47 Virtual Reality Technology Computer technology used to develop an interactive, 3-D model of a product from the basic CAD data 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 Allows people to see the finished design before a physical model is built Very effective in large-scale designs such as plant layout Very effective in large-scale designs such as plant layout

48 © 2006 Prentice Hall, Inc.5 – 48 Value Analysis Focuses on design improvement during production Focuses on design improvement during production Seeks improvements leading either to a better product or a product which can be produced more economically Seeks improvements leading either to a better product or a product which can be produced more economically

49 © 2006 Prentice Hall, Inc.5 – 49 Ethics and Environmentally Friendly Designs It is possible to enhance productivity, drive down costs, and preserve resources The Ethical Approach 1.View product design from a systems perspective 2.Consider the entire life cycle of the product

50 © 2006 Prentice Hall, Inc.5 – 50 Goals for Ethical and Environmentally Friendly Designs 1.Develop safe and more environmentally sound products 2.Minimize waste of raw materials and energy 3.Reduce environmental liabilities 4.Increase cost-effectiveness of complying with environmental regulations 5.Be recognized as a good corporate citizen

51 © 2006 Prentice Hall, Inc.5 – 51 Guidelines for Environmentally Friendly Designs 1.Make products recyclable 2.Use recycled materials 3.Use less harmful ingredients 4.Use lighter components 5.Use less energy 6.Use less material

52 © 2006 Prentice Hall, Inc.5 – 52 Legal and Industry Standards For Design … Federal Drug Administration Federal Drug Administration Consumer Products Safety Commission Consumer Products Safety Commission National Highway Safety Administration National Highway Safety Administration Childrens Product Safety Act Childrens Product Safety Act

53 © 2006 Prentice Hall, Inc.5 – 53 Legal and Industry Standards For Manufacture/Assembly … Occupational Safety and Health Administration Occupational Safety and Health Administration Environmental Protection Agency Environmental Protection Agency Professional ergonomic standards Professional ergonomic standards State and local laws dealing with employment standards, discrimination, etc. State and local laws dealing with employment standards, discrimination, etc.

54 © 2006 Prentice Hall, Inc.5 – 54 Legal and Industry Standards For Disassembly/Disposal … Vehicle Recycling Partnership Vehicle Recycling Partnership Increasingly rigid laws worldwide Increasingly rigid laws worldwide

55 © 2006 Prentice Hall, Inc.5 – 55 Time-Based Competition Product life cycles are becoming shorter and the rate of technological change is increasing Product life cycles are becoming shorter and the rate of technological change is increasing Developing new products faster can result in a competitive advantage Developing new products faster can result in a competitive advantage

56 © 2006 Prentice Hall, Inc.5 – 56 Product Development Continuum External Development Strategies Alliances Joint Ventures Purchase Technology or Expertise by Acquiring the Developer Internal Development Strategies Migrations of Existing Products Enhancement to Existing Products New Internally Developed Products InternalCost of Product Development Shared LengthySpeed of Product DevelopmentRapid and/ or Existing HighRisk of Product DevelopmentShared Figure 5.6

57 © 2006 Prentice Hall, Inc.5 – 57 Acquiring Technology By Purchasing a Firm By Purchasing a Firm Speeds development Speeds development Issues concern the fit between the acquired organization and product and the host Issues concern the fit between the acquired organization and product and the host Through Joint Ventures Through Joint Ventures Both organizations learn Both organizations learn Risks are shared Risks are shared Through Alliances Through Alliances Cooperative agreements between independent organizations Cooperative agreements between independent organizations

58 © 2006 Prentice Hall, Inc.5 – 58 Defining The Product First definition is in terms of functions First definition is in terms of functions Rigorous specifications are developed during the design phase Rigorous specifications are developed during the design phase Manufactured products will have an engineering drawing Manufactured products will have an engineering drawing Bill of material (BOM) lists the components of a product Bill of material (BOM) lists the components of a product

59 © 2006 Prentice Hall, Inc.5 – 59 Engineering drawing Engineering drawing Shows dimensions, tolerances, and materials Shows dimensions, tolerances, and materials Shows codes for Group Technology Shows codes for Group Technology Bill of Material Bill of Material Lists components, quantities and where used Lists components, quantities and where used Shows product structure Shows product structure Product Documents

60 © 2006 Prentice Hall, Inc.5 – 60 Monterey Jack Cheese (a) U.S. grade AA. Monterey cheese shall conform to the following requirements: (1) Flavor. Is fine and highly pleasing, free from undesirable flavors and odors. May possess a very slight acid or feed flavor. (2) Body and texture. A plug drawn from the cheese shall be reasonably firm. It shall have numerous small mechanical openings evenly distributed throughout the plug. It shall not possess sweet holes, yeast holes, or other gas holes. (3) Color. Shall have a natural, uniform, bright and attractive appearance. (4) Finish and appearance - bandaged and paraffin-dipped. The rind shall be sound, firm, and smooth providing a good protection to the cheese. Code of Federal Regulation, Parts 53 to 109,. Revised as of Jan. 1, 1985, General Service Administration

61 © 2006 Prentice Hall, Inc.5 – 61 Engineering Drawings Figure 5.8

62 © 2006 Prentice Hall, Inc.5 – 62 Bills of Material Panel Weldment NUMBERDESCRIPTIONQTY A 60-71PANEL WELDMT1 A 60-7LOWER ROLLER ASSM.1 R ROLLER1 R PIN1 P 60-2 LOCKNUT1 A 60-72GUIDE ASSM. REAR1 R SUPPORT ANGLE1 A 60-4 ROLLER ASSM BOLT1 A 60-73GUIDE ASSM. FRONT1 A SUPPORT WELDMT1 R WEAR PLATE BOLT1 Figure 5.9

63 © 2006 Prentice Hall, Inc.5 – 63 Bills of Material BBQ Bacon Cheeseburger DescriptionQty Bun1 Hamburger patty8 oz. Cheddar cheese2 slices Bacon2 strips BBQ onions1/2 cup Hickory BBQ sauce1 oz. Burger set Lettuce1 leaf Lettuce1 leaf Tomato1 slice Tomato1 slice Red onion4 rings Red onion4 rings Pickle1 slice Pickle1 slice French fries5 oz. Seasoned salt1 tsp. 11-inch plate1 HRC flag1 Figure 5.9

64 © 2006 Prentice Hall, Inc.5 – 64 Parts grouped into families with similar characteristics Parts grouped into families with similar characteristics Coding system describes processing and physical characteristics Coding system describes processing and physical characteristics Part families can be produced in dedicated manufacturing cells Part families can be produced in dedicated manufacturing cells Group Technology

65 © 2006 Prentice Hall, Inc.5 – 65 Group Technology Scheme Figure 5.10 (a) Ungrouped Parts (b) Grouped Cylindrical Parts (families of parts) GroovedSlotted ThreadedDrilledMachined

66 © 2006 Prentice Hall, Inc.5 – 66 1.Improved design 2.Reduced raw material and purchases 3.Simplified production planning and control 4.Improved layout, routing, and machine loading 5.Reduced tooling setup time, work-in- process, and production time Group Technology Benefits

67 © 2006 Prentice Hall, Inc.5 – 67 Documents for Production Assembly drawing Assembly drawing Assembly chart Assembly chart Route sheet Route sheet Work order Work order Engineering change notices (ECNs) Engineering change notices (ECNs)

68 © 2006 Prentice Hall, Inc.5 – 68 Assembly Drawing Shows exploded view of product Shows exploded view of product Details relative locations to show how to assemble the product Details relative locations to show how to assemble the product Figure 5.11 (a)

69 © 2006 Prentice Hall, Inc.5 – 69 Assembly Chart 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) SA 1 SA 2 A1 A2 A3 A4 A5 Left bracket assembly Right bracket assembly Poka-yoke inspection Figure 5.11 (b) Identifies the point of production where components flow into subassemblies and ultimately into the final product Identifies the point of production where components flow into subassemblies and ultimately into the final product

70 © 2006 Prentice Hall, Inc.5 – 70 Route Sheet Lists the operations and times required to produce a component SetupOperation ProcessMachineOperationsTimeTime/Unit 1Auto Insert 2Insert Component Set 56 2Manual Insert Component.52.3 Insert 1 Set 12C 3Wave SolderSolder all components to board 4Test 4Circuit integrity.25.5 test 4GY

71 © 2006 Prentice Hall, Inc.5 – 71 Work Order Instructions to produce a given quantity of a particular item, usually to a schedule Work Order ItemQuantityStart DateDue Date ProductionDelivery DeptLocation 157C1255/2/065/4/06 F32Dept K11

72 © 2006 Prentice Hall, Inc.5 – 72 Engineering Change Notice (ECN) A correction or modification to a products definition or documentation A correction or modification to a products definition or documentation Engineering drawings Engineering drawings Bill of material Bill of material Quite common with long product life cycles, long manufacturing lead times, or rapidly changing technologies

73 © 2006 Prentice Hall, Inc.5 – 73 Configuration Management The need to manage ECNs has led to the development of configuration management systems The need to manage ECNs has led to the development of configuration management systems A products planned and changing components are accurately identified and control and accountability for change are identified and maintained A products planned and changing components are accurately identified and control and accountability for change are identified and maintained

74 © 2006 Prentice Hall, Inc.5 – 74 Product Lifecycle Management Integrated software that brings together most, if not all, elements of product design and manufacture Integrated software that brings together most, if not all, elements of product design and manufacture Product design Product design CAD/CAM, DFMA CAD/CAM, DFMA Product routing Product routing Materials Materials Assembly Assembly Environmental Environmental

75 © 2006 Prentice Hall, Inc.5 – 75 Service Design Service typically includes direct interaction with the customer Service typically includes direct interaction with the customer Increased opportunity for customization Increased opportunity for customization Reduced productivity Reduced productivity Cost and quality are still determined at the design stage Cost and quality are still determined at the design stage Delay customization Delay customization Modularization Modularization Reduce customer interaction, often through automation Reduce customer interaction, often through automation

76 © 2006 Prentice Hall, Inc.5 – 76 (c) Customer participation in design and delivery such as counseling, college education, financial management of personal affairs, or interior decorating Service Design Figure 5.12 (a) Customer participation in design such as pre-arranged funeral services or cosmetic surgery (b) Customer participation in delivery such as stress test for cardiac exam or delivery of a baby

77 © 2006 Prentice Hall, Inc.5 – 77 Moments of Truth Concept created by Jan Carlzon of Scandinavian Airways Concept created by Jan Carlzon of Scandinavian Airways Critical moments between the customer and the organization that determine customer satisfaction Critical moments between the customer and the organization that determine customer satisfaction There may be many of these moments There may be many of these moments These are opportunities to gain or lose business These are opportunities to gain or lose business

78 © 2006 Prentice Hall, Inc.5 – 78 The technician was sincerely concerned and apologetic about my problem He asked intelligent questions that allowed me to feel confident in his abilities The technician offered various times to have work done to suit my schedule Ways to avoid future problems were suggested Experience Enhancers Only one local number needs to be dialed I never get a busy signal I get a human being to answer my call quickly and he or she is pleasant and responsive to my problem A timely resolution to my problem is offered The technician is able to explain to me what I can expect to happen next Standard Expectations Moments-of-Truth Computer Company Hotline I had to call more than once to get through A recording spoke to me rather than a person While on hold, I get silence,and wonder if I am disconnected The technician sounded like he was reading a form of routine questions The technician sounded uninterested I felt the technician rushed me Experience Detractors Figure 5.13

79 © 2006 Prentice Hall, Inc.5 – 79 Documents for Services High levels of customer interaction necessitates different documentation High levels of customer interaction necessitates different documentation Often explicit job instructions for moments-of-truth Often explicit job instructions for moments-of-truth Scripts and storyboards are other techniques Scripts and storyboards are other techniques

80 © 2006 Prentice Hall, Inc.5 – 80 Application of Decision Trees to Product Design Particularly useful when there are a series of decisions and outcomes which lead to other decisions and outcomes Particularly useful when there are a series of decisions and outcomes which lead to other decisions and outcomes

81 © 2006 Prentice Hall, Inc.5 – 81 Application of Decision Trees to Product Design Include all possible alternatives and states of nature - including doing nothing Include all possible alternatives and states of nature - including doing nothing Enter payoffs at end of branch Enter payoffs at end of branch Determine the expected value of each branch and prune the tree to find the alternative with the best expected value Determine the expected value of each branch and prune the tree to find the alternative with the best expected value Procedures

82 © 2006 Prentice Hall, Inc.5 – 82(.6) Low sales (.4) High sales (.6) Low sales (.4) High sales Decision Tree Example Purchase CAD Hire and train engineers Do nothing Figure 5.14

83 © 2006 Prentice Hall, Inc.5 – 83 (.6) Low sales (.4) High sales Decision Tree Example Purchase CAD (.6) Low sales (.4) High sales Hire and train engineers Do nothing Figure 5.14 $2,500,000Revenue - 1,000,000Mfg cost ($40 x 25,000) - 500,000CAD cost $1,000,000Net $800,000Revenue - 320,000Mfg cost ($40 x 8,000) - 500,000CAD cost - $20,000Net loss EMV (purchase CAD system)= (.4)($1,000,000) + (.6)(- $20,000)

84 © 2006 Prentice Hall, Inc.5 – 84 (.6) Low sales (.4) High sales Decision Tree Example Purchase CAD $388,000 (.6) Low sales (.4) High sales Hire and train engineers Do nothing Figure 5.14 $2,500,000Revenue - 1,000,000Mfg cost ($40 x 25,000) - 500,000CAD cost $1,000,000Net $800,000Revenue - 320,000Mfg cost ($40 x 8,000) - 500,000CAD cost - $20,000Net loss EMV (purchase CAD system)= (.4)($1,000,000) + (.6)(- $20,000) = $388,000

85 © 2006 Prentice Hall, Inc.5 – 85(.6) Low sales (.4) High sales (.6) Low sales (.4) High sales Decision Tree Example Purchase CAD $388,000 Hire and train engineers $365,000 Do nothing $0 $0 Net $800,000Revenue - 400,000Mfg cost ($50 x 8,000) - 375,000CAD cost $25,000Net $2,500,000Revenue - 1,250,000Mfg cost ($50 x 25,000) - 375,000CAD cost $875,000Net $2,500,000Revenue - 1,000,000Mfg cost ($40 x 25,000) - 500,000CAD cost $1,000,000Net $800,000Revenue - 320,000Mfg cost ($40 x 8,000) - 500,000CAD cost - $20,000Net loss Figure 5.14

86 © 2006 Prentice Hall, Inc.5 – 86 Transition to Production Know when to move to production Know when to move to production Product development can be viewed as evolutionary and never complete Product development can be viewed as evolutionary and never complete Product must move from design to production in a timely manner Product must move from design to production in a timely manner Most products have a trial production period to insure producibility Most products have a trial production period to insure producibility Responsibility must also transition as the product moves through its life cycle Responsibility must also transition as the product moves through its life cycle


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