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Operations Management Chapter 5 Design of Goods and Services Chapter 5 Design of Goods and Services.

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Presentation on theme: "Operations Management Chapter 5 Design of Goods and Services Chapter 5 Design of Goods and Services."— Presentation transcript:

1 Operations Management Chapter 5 Design of Goods and Services Chapter 5 Design of Goods and Services

2 Outline 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 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 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 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 Outline - Continued Service Design Service Design Documents for Services Documents for Services Application of Decision Trees to Product Design Application of Decision Trees to Product Design

7 Product Strategy Options Differentiation Differentiation Low cost Low cost Rapid response Rapid response

8 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

9 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

10 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

11 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

12 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

13 Importance of New Products Industry leader Top third Middle third Bottom third Percentage of Sales from New Products 50% 40% 30% 20% 10% Position of Firm in Its Industry

14 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

15 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 Sam s Furniture Factory

16 New Product Opportunities 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

17 Few Successes Development Stage Number 1000 Market requirement Design review, Testing, Introduction 25 Ideas 1750 Product specification 100 Functional specifications One success! 500

18 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

19 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

20 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

21 High relationship Medium relationship Low Relationship Customer Requirements Customer Importance Target Values House of Quality Example

22 High relationship Medium relationship Low Relationship Customer Requirements Customer Importance Target Values Light weight Easy to use Reliable What the customer desires ( wall ) Aluminum Parts Auto Focus Auto Exposure

23 House of Quality Example

24

25 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 Deploying resources through the organization in response to customer requirements

26 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

27 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

28 Cost Reduction of a Bracket through Value Engineering

29 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

30 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

31 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

32 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)

33 1.Product quality 2.Shorter design time 3.Production cost reductions 4.Database availability 5.New range of capabilities Benefits of CAD/CAM

34 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

35 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

36 Ethics and Environmentally Friendly Designs It is possible to enhance productivity, drive down costs, and preserve resources

37 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

38 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

39 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

40 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

41 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

42 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

43 Engineering Drawings

44 Bills of Material Panel Weldment NUMBERDESCRIPTIONQTY A 60-71PANEL WELDM T1 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 WELDM T1 R WEAR PLATE BOLT1

45 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

46 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

47 Group Technology Scheme (a) Ungrouped Parts (b) Grouped Cylindrical Parts (families of parts) GroovedSlotted ThreadedDrilledMachined

48 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

49 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)

50 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

51 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 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

52 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

53 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

54 Engineering Change Notice (ECN) A correction or modification to a product s definition or documentation A correction or modification to a product s 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

55 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

56 (c) Customer participation in design and delivery such as counseling, college education, financial management of personal affairs, or interior decorating Service Design (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

57 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

58 Application of Decision trees to Product Design Silicon.Inc is considering to produce and market microprocessorSilicon.Inc is considering to produce and market microprocessor Options:Options: – 1. To purchase sophisticated CAD system($500,000 equipment cost with $40 per unit manufacturing cost) – 2. To hire and train engineers($ 375,000 for hiring and training with $50 per unit manufacturing cost)

59 Market potentialMarket potential –High acceptance (25,000 $100) –Low acceptance (8,000 $100) ProbabilityProbability –High acceptance : 0.40 –Low acceptance : 0.60

60 Evaluation Purchase CAD with High AcceptancePurchase CAD with High Acceptance –Revenue = 2,500,000 (25,000 x 100) –Mfg cost = -1,000,000 (25,000 x 40) –CAD cost = - 500,000 –Net = 1,000,000 Purchase CAD with Low AcceptancePurchase CAD with Low Acceptance –Revenue = 800,000 (8,000 x 100) –Mfg cost = - 320,000 (8,000 x 40) –CAD cost = - 500,000 –Net = - 20,000

61 Evaluation Hire and train engineer with High AcceptanceHire and train engineer with High Acceptance –Revenue = 2,500,000 (25,000 x 100) –Mfg cost = -1,250,000 (25,000 x 50) –H&T cost = - 375,000 –Net = 875,000 Hire and train engineer with Low AcceptanceHire and train engineer with Low Acceptance –Revenue = 800,000 (8,000 x 100) –Mfg cost = - 400,000 (8,000 x 50) –H&T cost = - 375,000 –Net = 25,000

62 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

63 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

64 (.6) Low sales (.4) High sales (.6) Low sales (.4) High sales Decision Tree Example Purchase CAD Hire and train engineers Do nothing

65 (.6) Low sales (.4) High sales Decision Tree Example Purchase CAD (.6) Low sales (.4) High sales Hire and train engineers Do nothing $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)

66 (.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 $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

67 (.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


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