Developing Products and Services

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 6, Slide 2 Developing Products and Services Why bother? New product development process What is good design? –An operations and supply chain perspective

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 6, Slide 3 Why Bother?  External benefits  Internal benefits  Exploit strengths/core competencies  Block competitors

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 6, Slide 4 External Benefits Competitive Advantage

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 6, Slide 5 Internal Benefits Shorter cycle time, less cost, less waste, …, e.g. NCR 2760: –Only 15 “components” –85% fewer parts / 65% fewer vendors –Snaps together –Lifetime cost for a SINGLE fastener: $ 12,500

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 6, Slide 6 Exploit Strengths and Core Competencies Honda –Motorcycles  Automobiles John Deere –Farm equipment  Lawn equipment Hewlett-Packard –Color printers  Digital photography

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 6, Slide 7 Block Competitors Gillette “made a point of designing its Sensor razor so that it … would be difficult for competitors to copy” Microsoft bundling Windows and Explorer

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 6, Slide 8 Finally... 30% of revenues and profits come from products introduced in the last 5 years Development time: –Typically 31 months in 1992 –Less than 25 months now –Less than 18 months for many high- tech products

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 6, Slide 9 Operations and Supply Chain Perspectives Repeatability, testability and serviceability of the designRepeatability, testability and serviceability of the design Product volumesProduct volumes Product costsProduct costs Match with existing capabilitiesMatch with existing capabilities

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 6, Slide 10 Repeatability, Testability and Serviceability Repeatability –Consistent production –Tolerance to manufacturing variations (robustness) Testability –Non-value added activity, so should be easy and inexpensive to do Serviceability –Ease of repair, critical for products expected to be serviced or repaired (autos)

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 6, Slide 11 Product Volumes and Cost Determines process strategies –Types of equipment –Level of automation –Staffing required Determines level of customization Determines level of after-sales support

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 6, Slide 12 Match with Existing Capabilities Product design flexibility Easy to add features? Easy to upgrade? Process flexibility Share processes / parts? Will upgrades make current operations obsolete?

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 10, Slide 13 The Development Process

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 6, Slide 14 Planning Design and Development Preparation and Launch Concept Development Time Survival rate of an idea $ spent on idea Model of Development Process

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 6, Slide 15 Concept Development PlanningDesign and Development Commercial Preparation Launch  Propose new technologies  Develop product or service ideas  Identify general performance characteristics  Identify underlying technologies  Develop detailed specifications  Build and test prototypes  Resolve remaining technical problems  Evaluate field experience  Analyze warranty returns Engineering Functional Activities

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 6, Slide 16 Concept Development PlanningDesign and Development Commercial Preparation Launch  Provide market input  Propose and investigate product or service concepts  Define target customer needs  Estimate sales and margins  Include customer in development effort  Conduct customer tests  Evaluate prototypes  Plan marketing rollout  Train sales force  Prepare sales procedures  Select distribution channels  Fill downstream supply chain  Sell and promote Marketing Functional Activities

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 6, Slide 17 Concept Development PlanningDesign and Development Commercial Preparation Launch  Scan suppliers for promising technologies and capabilities  Develop initial cost estimates  Identify key supply chain partners  Develop detailed process maps of operations and supply chain flows  Test new processes  Build pilot units using new operations  Train personnel  Verify supply chain flows  Ramp up volumes  Meet cost targets  Meet quality and other performance target goals Operations and Supply Chain Functional Activities

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 6, Slide 18 Concurrent Engineering Overlapping development phases requires tight coordination, but shrinks overall development time

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 6, Slide 19 What is Good Design? Traditional View:  Is it easy to use?  Is it attractive?  Is it safe?

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 6, Slide 20 Cost of Design Estimate: 80% of item cost determined at design stage Obvious and hidden costs: –Component cost –Operations cost –Engineering changes –Distribution costs

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 6, Slide 21 Quality Function Deployment

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 6, Slide 22 QFD Linkages PRODUCT CHARACTERISTICS CUSTOMER REQUIREMENTS PRODUCT SPECIFICATIONS PRODUCT CHARACTERISTI CS PROCESS CHARACTERISTICS PRODUCT SPECIFICATIONS PROCESS SPECIFICATIONS PROCESS CHARACTERISTI CS Customer requirements  product characteristics  product specifications  process characteristics  process specifications

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 6, Slide 23 Design for Manufacturing (DFM)

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 6, Slide 24 Modular Design Allows higher level of customization Retains lower-cost advantage of higher volumes for core components Easier assembly Facilitates servicing and repairs Allows for upgrades

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 6, Slide 25 Modular Design Examples Balley Engineered Structures –7 different kinds of panels –“Customized” walk-in coolers –From these, assembles almost endless variety of finished products Personal Computer Manufacturers Manufactured Home Builders

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 6, Slide 26 Target Costing: Value Analysis Goals: Maximize value / cost How can we increase this ratio? Focus on secondary functions –Packaging –Shipping –Custom parts and tooling –Use of standard parts –Make versus buy

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 10, Slide 27 A good cookie, a great razor Nabisco and Gillette: Two contrasting approaches to product design