1. © 2008 Prentice Hall, Inc.5 – 1 Operations Management Chapter 5 – Design of Goods and Services PowerPoint presentation to accompany Heizer/Render Principles of Operations Management, 7e Operations Management, 9e

2. © 2008 Prentice Hall, Inc.5 – 2 Product Life Cycles  May be any length from a few hours to decades  The operations function must be able to introduce new products successfully

3. © 2008 Prentice Hall, Inc.5 – 3 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

4. © 2008 Prentice Hall, Inc.5 – 4 Product Life Cycle Introduction  Fine tuning may warrant unusual expenses for  Research  Product development  Process modification and enhancement  Supplier development

5. © 2008 Prentice Hall, Inc.5 – 5 Product Life Cycle Growth  Product design begins to stabilize  Effective forecasting of capacity becomes necessary  Adding or enhancing capacity may be necessary

6. © 2008 Prentice Hall, Inc.5 – 6 Product Life Cycle Maturity  Competitors now established  High volume, innovative production may be needed  Improved cost control, reduction in options, paring down of product line

7. © 2008 Prentice Hall, Inc.5 – 7 Product Life Cycle Decline  Unless product makes a special contribution to the organization, must plan to terminate offering

8. © 2008 Prentice Hall, Inc.5 – 8 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 Brainstorming is a useful tool

9. © 2008 Prentice Hall, Inc.5 – 9 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

10. © 2008 Prentice Hall, Inc.5 – 10 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

11. © 2008 Prentice Hall, Inc.5 – 11 Quality Function Deployment  Identify customer wants  Identify how the good/service will satisfy customer wants  Relate customer wants to product hows  Identify relationships between the firm’s hows  Develop importance ratings  Evaluate competing products  Compare performance to desirable technical attributes

12. © 2008 Prentice Hall, Inc.5 – 12 QFD House of Quality Relationship matrix How to satisfy customer wants Interrelationships Competitive assessment Technical evaluation Target values What the customer wants Customer importance ratings Weighted rating

13. © 2008 Prentice Hall, Inc.5 – 13 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

14. © 2008 Prentice Hall, Inc.5 – 14 House of Quality Example Customerimportancerating (5 = highest) Lightweight 3 Easy to use 4 Reliable5 Easy to hold steady 2 Color correction1 What the customer wants What the Customer Wants Relationship Matrix Technical Attributes and Evaluation How to Satisfy Customer Wants Interrelationships Analysis of Competitors

15. © 2008 Prentice Hall, Inc.5 – 15 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 Paint pallet Ergonomic design How to Satisfy Customer Wants

16. © 2008 Prentice Hall, Inc.5 – 16 Lightweight 3 Easy to use 4 Reliable5 Easy to hold steady 2 Color corrections1 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

17. © 2008 Prentice Hall, Inc.5 – 17 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 Paint pallet Ergonomic design Relationships between the things we can do

18. © 2008 Prentice Hall, Inc.5 – 18 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 Color corrections1 Our importance ratings22927273225

19. © 2008 Prentice Hall, Inc.5 – 19 House of Quality Example Company A Company B GPGPFGGPPPGPGPFGGPPPP Lightweight 3 Easy to use 4 Reliable5 Easy to hold steady 2 Color corrections1 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

20. © 2008 Prentice Hall, Inc.5 – 20 House of Quality Example What the Customer Wants Relationship Matrix Technical Attributes and Evaluation How to Satisfy Customer Wants Interrelationships Analysis of Competitors Target values (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

21. © 2008 Prentice Hall, Inc.5 – 21 House of Quality Example Completed House of Quality Lightweight3 Easy to use4 Reliable5 Easy to hold steady2 Color correction1 Our importance ratings Low electricity requirements Aluminum components Auto focus Auto exposure Paint pallet Ergonomic design Company A Company B GPGPFGGPPPGPGPFGGPPPP Target values (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 22 9 27 27 32 25

22. © 2008 Prentice Hall, Inc.5 – 22 Issues for Product Development  Robust design  Modular design  Computer-aided design (CAD)  Computer-aided manufacturing (CAM)  Virtual reality technology  Value analysis  Environmentally friendly design

23. © 2008 Prentice Hall, Inc.5 – 23 Robust 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

24. © 2008 Prentice Hall, Inc.5 – 24 Modular Design  Products designed in easily segmented components  Adds flexibility to both production and marketing  Improved ability to satisfy customer requirements

25. © 2008 Prentice Hall, Inc.5 – 25  Using computers to design products and prepare engineering documentation  Shorter development cycles, improved accuracy, lower cost  Information and designs can be deployed worldwide Computer Aided Design (CAD)

26. © 2008 Prentice Hall, Inc.5 – 26  Design for Manufacturing and Assembly (DFMA)  Solve manufacturing problems during the design stage  3-D Object Modeling  Small prototype development  CAD through the internet  International data exchange through STEP Extensions of CAD

27. © 2008 Prentice Hall, Inc.5 – 27 Computer-Aided Manufacturing (CAM)  Utilizing specialized computers and program to control manufacturing equipment  Often driven by the CAD system (CAD/CAM)

28. © 2008 Prentice Hall, Inc.5 – 28 1.Product quality 2.Shorter design time 3.Production cost reductions 4.Database availability 5.New range of capabilities Benefits of CAD/CAM

29. © 2008 Prentice Hall, Inc.5 – 29 Virtual 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

30. © 2008 Prentice Hall, Inc.5 – 30 Value Analysis  Focuses on design improvement during production  Seeks improvements leading either to a better product or a product which can be produced more economically

31. © 2008 Prentice Hall, Inc.5 – 31 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

32. © 2008 Prentice Hall, Inc.5 – 32 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

33. © 2008 Prentice Hall, Inc.5 – 33 Time-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

34. © 2008 Prentice Hall, Inc.5 – 34 Defining The Product  First definition is in terms of functions  Rigorous specifications are developed during the design phase  Manufactured products will have an engineering drawing  Bill of material (BOM) lists the components of a product

35. © 2008 Prentice Hall, Inc.5 – 35 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, General Service Administration

36. © 2008 Prentice Hall, Inc.5 – 36  Engineering drawing  Shows dimensions, tolerances, and materials  Shows codes for Group Technology  Bill of Material  Lists components, quantities and where used  Shows product structure Product Documents

37. © 2008 Prentice Hall, Inc.5 – 37 Engineering Drawings Figure 5.8

38. © 2008 Prentice Hall, Inc.5 – 38 Bills of Material Hard Rock Cafe’s Hickory 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 (b)

39. © 2008 Prentice Hall, Inc.5 – 39 Documents for Production  Assembly drawing  Assembly chart  Route sheet  Work order  Engineering change notices (ECNs)

40. © 2008 Prentice Hall, Inc.5 – 40 Assembly Drawing  Shows exploded view of product  Details relative locations to show how to assemble the product Figure 5.11 (a)

41. © 2008 Prentice Hall, Inc.5 – 41 Assembly Chart 1 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) 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

42. © 2008 Prentice Hall, Inc.5 – 42 Route Sheet Lists the operations and times required to produce a component SetupOperation ProcessMachineOperationsTimeTime/Unit 1Auto Insert 2Insert Component 1.5.4 Set 56 2Manual Insert Component.52.3 Insert 1 Set 12C 3Wave SolderSolder all 1.54.1 components to board 4Test 4Circuit integrity.25.5 test 4GY

43. © 2008 Prentice Hall, Inc.5 – 43 Work Order Instructions to produce a given quantity of a particular item, usually to a schedule Work Order ItemQuantityStart DateDue Date ProductionDelivery DeptLocation 157C1255/2/085/4/08 F32Dept K11

44. © 2008 Prentice Hall, Inc.5 – 44 Engineering Change Notice (ECN)  A correction or modification to a product’s definition or documentation  Engineering drawings  Bill of material Quite common with long product life cycles, long manufacturing lead times, or rapidly changing technologies

45. © 2008 Prentice Hall, Inc.5 – 45 Service 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  Reduce customer interaction, often through automation

46. © 2008 Prentice Hall, Inc.5 – 46  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  Reduce customer interaction, often through automation (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

47. © 2008 Prentice Hall, Inc.5 – 47 Moments of Truth  Concept created by Jan Carlzon of Scandinavian Airways  Critical moments between the customer and the organization that determine customer satisfaction  There may be many of these moments  These are opportunities to gain or lose business

48. © 2008 Prentice Hall, Inc.5 – 48 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

49. © 2008 Prentice Hall, Inc.5 – 49 Documents for Services  High levels of customer interaction necessitates different documentation  Often explicit job instructions for moments-of-truth  Scripts and storyboards are other techniques

50. © 2008 Prentice Hall, Inc.5 – 50 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

51. © 2008 Prentice Hall, Inc.5 – 51 Application of Decision Trees to Product Design  Include all possible alternatives and states of nature - including “doing nothing”  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 Procedures

52. © 2008 Prentice Hall, Inc.5 – 52(.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

53. © 2008 Prentice Hall, Inc.5 – 53 (.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)

54. © 2008 Prentice Hall, Inc.5 – 54 (.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

55. © 2008 Prentice Hall, Inc.5 – 55(.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) - 375,000Hire and train cost $25,000Net $2,500,000Revenue - 1,250,000Mfg cost ($50 x 25,000) - 375,000Hire and train 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