Developing Products and Services Chapter 15

Text: Quality Management 5 th edition Authors: David Goetsch & Stanley Davis Where appropriate reference text page numbers will be on bottom of slides

Developing Products and Services Why bother? New product development process What is good design? –An operations and supply chain perspective

Why Bother?  External benefits  Internal benefits  Exploit strengths/core competencies  Block competitors

External Benefits Competitive Advantage

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

Exploit Strengths and Core Competencies Honda –Motorcycles  Automobiles John Deere –Farm equipment  Lawn equipment Hewlett-Packard –Color printers  Digital photography

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

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

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

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)

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

‘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

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

Planning Design and Development Preparation and Launch Concept Development Time Survival rate of an idea $ spent on idea Model of Development Process

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

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

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

Concurrent Engineering Overlapping development phases requires tight coordination, but shrinks overall development time

Design Players Engineering Marketing Accounting Finance Designers Purchasing — presourcing Suppliers — gray and black box design participation

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)

DMADV Steps Define goals and deliverables Measure and determine needs and specifications Analyze product or process options Design product or process Verify results

Quality Function Deployment Synergies

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

Design for Manufacturing (DFM)

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

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

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)

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