Developing Products and Services

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 6, Slide 2 Chapter Objectives Be able to:  Explain why product design is important to a business’s success.  Describe the six dimensions of product design that are of particular interest to operations and supply chain managers.  Describe the five phases of product and service development and explain the difference between sequential development and concurrent engineering.  Discuss the different roles played by such areas as engineering and accounting during the development process.  Describe some of the more common approaches to improving product and service designs, including the Define-Measure- Analyze-Design-Verify (DMADV) process, quality function deployment (QFD), design for manufacturability (DFM), and target costing.

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 6, Slide 3 Developing Products and Services Why bother? New product development process What is good design? –An operations and supply chain perspective

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 6, Slide 4 Why Bother?  External benefits  Internal benefits  Exploit strengths/core competencies  Block competitors

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 6, Slide 5 External Benefits Competitive Advantage

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 6, Slide 6 Internal Benefits Shorter cycle time, less cost, less waste, … For example: NCR 2760: –Only 15 “components” –85% fewer parts / 65% fewer vendors –Snaps together –Lifetime cost for a SINGLE fastener: $ 12,500

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 6, Slide 7 Exploit Strengths and Core Competencies Honda –Motorcycles  Automobiles John Deere –Farm equipment  Lawn equipment Hewlett-Packard –Color printers  Digital photography

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 6, Slide 8 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

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 6, Slide 9 Finally... 30% of revenues and profits come from products introduced in the last 5 years Development time decreasing: –Typically 31 months in 1992 –Less than 24 months now –Less than 18 months for many high-tech products

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 6, Slide 10 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

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 6, Slide 11 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)

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 6, Slide 12 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

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 6, Slide 13 ‘Hidden’ Costs Number of parts in a product –Increased handling, tracking, and other inventory costs –More procedures required Engineering changes –Affect entire supply chain Transportation costs –Logistics becoming a significant cost –Size, shape, weight, packaging are concerns

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 6, Slide 14 Match with Existing Capabilities Product design flexibility Easy to add features? Easy to upgrade? Examples: PCs, home theater systems Process flexibility Share processes / parts? Will upgrades make current operations obsolete?

The Development Process

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 6, Slide 16 Planning Design and Development Preparation and Launch Concept Development Time Survival rate of an idea $ spent on idea Model of Development Process

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 6, Slide 17 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

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 6, Slide 18 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

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 6, Slide 19 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

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 6, Slide 20 Concurrent Engineering Overlapping development phases requires tight coordination, but shrinks overall development time

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 6, Slide 21 Design Players Engineering Marketing Accounting Finance Designers Purchasing — presourcing Suppliers — gray and black box design participation

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 6, Slide 22 Design Approaches DMADV (Define-Measure-Analyze-Design- Verify) QFD (Quality Function Deployment) CAD (Computer-Aided Design) CAD/CAM (Computer-Aided Design / Computer- Aided Manufacturing) DFM (Design for Manufacturability) DFMt (Design for Maintainability) DFSS (Design for Six Sigma) DFE (Design for the Environment)

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 6, Slide 23 DMADV Steps Define goals and deliverables Measure and determine needs and specifications Analyze product or process options Design product or process Verify results

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 6, Slide 24 Quality Function Deployment Synergies

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 6, Slide 25 QFD Linkages PRODUCT CHARACTERISTICS CUSTOMER REQUIREMENTS PRODUCT SPECIFICATIONS PRODUCT CHARACTERISTICS PROCESS CHARACTERISTICS PRODUCT SPECIFICATIONS PROCESS SPECIFICATIONS PROCESS CHARACTERISTICS Customer requirements  product characteristics  product specifications  process characteristics  process specifications

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 6, Slide 26 Design for Manufacturing (DFM)

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 6, Slide 27 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

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 6, Slide 28 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

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 6, Slide 29 DFMt, DFSS, DFE DFMt — focuses on long-term serviceability of the product or service DFSS — focuses on achieving Six Sigma quality levels  less than 3.4 defects per one million opportunities DFE — focuses on reducing environmental effects of product or process (Hewlett-Packard design guidelines, page 166)

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 6, Slide 30 Target Costing: Value Analysis Goals: Maximize function / cost How can we increase this ratio? Focus on secondary functions –Packaging –Shipping –Custom parts and tooling –Use of standard parts –Make versus buy

“A good cookie, a great razor” Case Studies Nabisco and Gillette: Two contrasting approaches to product design