Product design and process selection Benchmarking Idea development Technology push Marketing pull Product screening Marketing criteria Financial criteria Operational criteria Preliminary design and testing Prototyping Trial marketing Final design Reverse Engineering Concurrent Engineering Value Engineering Breakeven Analysis Remanufacturing

Concurrent Engineering Concurrent engineering can be defined as the simultaneous development of project design functions, with open and interactive communication existing among all team members for the purposes of reducing time to market, decreasing cost, and improving quality and reliability.

The product life cycle Sales Profit Every product and service follows a life cycle that spans: Planning Introduction Growth Maturity Decline Healthy companies manage their product and service offerings to insure a balanced portfolio Sales Dollars Profit Plan Intro Growth Maturity Decline

The process-focused Project Shop Characteristics Makes a one-of-a-kind product (volume = 1) Uses general purpose equipment Has informal relationships with many vendors Very little vertical integration Flexible layout often with factors of production moving to job

The Job Shop Characteristics Makes many products in small volume Uses general purpose equipment Has informal relationships with vendors Very little vertical integration Departmentalized layout with chaotic flow

(Cell, Flow or Hybrid Shop) The Large Batch (Cell, Flow or Hybrid Shop) Characteristics Makes several families of products in moderate volume Uses general purpose equipment often fixtured Little vertical integration Hybrid layout with flow lines

The Assembly Line Characteristics Makes few products in large volume Uses specialized high-volume equipment Has formal relationships with vendors May use vertical integration Product-based layout with linear flow

Breakeven Analysis Fixed cost Variable cost Total cost Revenue Cost Used to determine volume needed to cover total costs Often first step in product development process Assumes linear costs Volume

Breakeven Example A firm is considering marketing a new toothbrush. The firm expects to sell each toothbrush for $2.10. The per brush cost of material, labor and overhead equals $1.45. The required investment in plant and equipment is $50,000. How many brushes must be sold for the firm to breakeven? If only 65,000 brushes are expected to sell, what must the variable costs be in order to allow the firm to breakeven?

Break-even Analysis Example The Stroudwater Street Service Station is looking to invest in a new fully automated car wash. They have collected the following information on three different models. Initial Variable Investment Cost (car) a) VacuClean System 250,000 1.50 b) Wash n Scrub Model III 400,000 1.20 c) DynoClean 550,000 0.95 a & b b & c a & c

Car Wash Break-even Analysis Continued VacuClean Wash n Scrub DynoClean Total Cost 550,000 400,000 250,000 500,000 545,454 600,000 Volume

Car Wash Break-even Analysis Continued If we were able to charge $1.75 for a car wash, at what volumes would we breakeven? Initial Variable Investment Cost (car) a) VacuClean System 250,000 1.50 b) Wash n Scrub Model III 400,000 1.20 c) DynoClean 550,000 0.95 a) 250,000/1.75-1.50=1,000,000 b) 400,000/1.75-1.20= 727,272 c) 550,000/1.75-0.95= 687,500 Note that the best profit-making process decision is Dynoclean and only if demand is greater than 687,500