Reid & Sanders, Operations Management © Wiley 2002 Product Design & Process Selection 3 C H A P T E R

Reid & Sanders, Operations Management © Wiley 2002 Page 2 Learning Objectives Explain the strategic impact of product design Understand the steps in product design Apply break-even analysis to guide decision- making Identify the characteristics of different production processes Illustrate process flowcharting Understand the impact of technology

Reid & Sanders, Operations Management © Wiley 2002 Page 3 Product & Service Design The process of deciding on the unique characteristics of a company’s product & service offerings Serves to define a company’s customer base, image, competition and future growth

Reid & Sanders, Operations Management © Wiley 2002 Page 4 Products versus Services Products: –Tangible offerings –Dimensions, materials, tolerances & performance standards Services: –Intangible offerings –Physical elements + sensory, esthetic, & psychological benefits

Reid & Sanders, Operations Management © Wiley 2002 Page 5 Strategic Importance Products & service offerings must support the company’s business strategy by satisfying the target customers’ needs & preferences If not, the company will lose its customer base and its market position will erode

Reid & Sanders, Operations Management © Wiley 2002 Page 6 Step–by-Step Idea Development: –A need is identified & a product idea to satisfy it is put together Product Screening: –Initial ideas are evaluated for difficulty & likelihood of success Preliminary Design & Testing –Market testing & prototype development Final Design –Product & service characteristics are set

Reid & Sanders, Operations Management © Wiley 2002 Page 7 Idea Development Existing & target customers –Customer surveys & focus groups Benchmarking –Studying “best in class” companies from your industry or others and comparing their practices & performance to your own Reverse engineering –Disassembling a competitor’s product & analyzing its design characteristics & how it was made Suppliers, employees and technical advances

Reid & Sanders, Operations Management © Wiley 2002 Page 8 Product Screening Operations: –Are production requirements consistent with existing capacity? –Are the necessary labor skills & raw materials available? Marketing: –How large is the market niche? –What is the long-term potential for the product? Finance: –What is the expected return on investment?

Reid & Sanders, Operations Management © Wiley 2002 Page 9 Preliminary Design & Testing General performance characteristics are translated into technical specifications Prototypes are built & tested (maybe offered for sale on a small scale) Bugs are worked out & designs are refined

Reid & Sanders, Operations Management © Wiley 2002 Page 10 Final Design Specifications are set & then used to: –Develop processing and service delivery instructions –Guide equipment selection –Outline jobs to be performed –Negotiate contracts with suppliers and distributors

Reid & Sanders, Operations Management © Wiley 2002 Page 11 Break-Even Analysis

Reid & Sanders, Operations Management © Wiley 2002 Page 12 Break-Even Analysis Total cost = fixed costs + variable costs (quantity): Revenue = selling price (quantity) Break-even point is where total costs = revenue:

Reid & Sanders, Operations Management © Wiley 2002 Page 13 Example A firm estimates that the fixed cost of producing a line of footwear is $52,000 with a $9 variable cost for each pair produced. They want to know: –If each pair sells for $25, how many pairs must they sell to break-even? –If they sell 4000 pairs at $25 each, how much money will they make?

Reid & Sanders, Operations Management © Wiley 2002 Page 14 Example Solved Break-even point: Profit = total revenue – total costs

Reid & Sanders, Operations Management © Wiley 2002 Page 15 Design for Manufacture (DFM) Guidelines: –Minimize the number of parts –Use common or standardized parts –Use modular design –Avoid the need for tools (e.g.: snap together components) –Simplify operations

Reid & Sanders, Operations Management © Wiley 2002 Page 16 DFM Example

Reid & Sanders, Operations Management © Wiley 2002 Page 17 DFM Benefits Lower costs: –Lower inventories (fewer, standardized components) –Less labor required (simpler flows, easier tasks) Higher quality: –Simple, easy-to-make products means fewer opportunities to make mistakes

Reid & Sanders, Operations Management © Wiley 2002 Page 18 Product Life Cycle

Reid & Sanders, Operations Management © Wiley 2002 Page 19 Concurrent Engineering A design approach that uses multifunctional teams to simultaneously design the product & process Replaces a traditional ‘over-the-wall’ approach where one group does their part & then hands off the design to the next group

Reid & Sanders, Operations Management © Wiley 2002 Page 20 Sequential Design

Reid & Sanders, Operations Management © Wiley 2002 Page 21 Concurrent Engineering

Reid & Sanders, Operations Management © Wiley 2002 Page 22 Concurrent Engineering Benefits Representatives from the different groups can better consider trade-offs in cost & design choices as each decision is being made Development time is reduced due to less rework (traditionally, groups would argue with earlier decisions & try to get them changed) Emphasis is on problem-solving (not placing blame on the ‘other group’ for mistakes)

Reid & Sanders, Operations Management © Wiley 2002 Page 23 Process Selection Intermittent operations: –Capable of producing a large variety of product designs in relatively low volumes Continuous operations: –Capable of producing one (or a few) standardized designs in very high volumes

Reid & Sanders, Operations Management © Wiley 2002 Page 24 Intermittent versus Continuous

Reid & Sanders, Operations Management © Wiley 2002 Page 25 Intermittent Operations Pros: –Very flexible Cons: –Material handling & variable costs are high –Work scheduling is difficult

Reid & Sanders, Operations Management © Wiley 2002 Page 26 Continuous Operations Pros –Highly efficient to produce large volumes (low variable costs) Cons –Inflexible to design changes –Susceptible to component failure –High fixed costs for capital equipment

Reid & Sanders, Operations Management © Wiley 2002 Page 27 Continuum of Process Types Projects –Used for one-at-a-time products made exactly to customer specifications Batch processes: –Used for small quantities (batches) with a high level of customization Line processes: –Used for relatively high volumes with little customization Continuous processes: –Used for very high volume standardized products (often commodities)

Reid & Sanders, Operations Management © Wiley 2002 Page 28 Continuum of Process Types

Reid & Sanders, Operations Management © Wiley 2002 Page 29 Vertical Integration How much of the supply chain is owned by a company? –A supply chain is the series of linked activities from raw material extraction to the final customer (Chapter 4) Consider the direction of integration: –Forward (toward customers) –Backward (toward suppliers)

Reid & Sanders, Operations Management © Wiley 2002 Page 30 Make-or-Buy Outsourcing decisions should consider: –Long-term strategic impact –Existing capacity available –Expertise required & available –Quality issues –Ramp up speed & delivery issues –Total costs

Reid & Sanders, Operations Management © Wiley 2002 Page 31 Process Flowcharting Graphically defines the operation, step- by-step Used to help visualize the flow of work & information: –Can help identify potential problem areas –Format can be as simple or detailed as needed

Reid & Sanders, Operations Management © Wiley 2002 Page 32 Example

Reid & Sanders, Operations Management © Wiley 2002 Page 33 Process Technology Automation Automated Material Handling: –Automated guided vehicles (AGV) –Automated storage & retrieval systems (AS/RS) Computer-Aided Design (CAD) software Robotics & Numerically-Controlled (NC) equipment Flexible Manufacturing Systems (FMS) Computer-Integrated Manufacturing (CIM)

Reid & Sanders, Operations Management © Wiley 2002 Page 34 The End Copyright © 2002 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United State Copyright Act without the express written permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein.