Chapter 3, Part 1 Product Design Operations Management by R. Dan Reid & Nada R. Sanders 2nd Edition © Wiley 2005 PowerPoint Presentation by R.B. Clough - UNH © 2005 Wiley

Designing Goods and Services The core product may be a good or a service Product design should support the business strategy Product design should meet the needs of a target market. Product design should give the company a competitive advantage. © 2005 Wiley

Designing Goods Form design: Sensory aspects of the product (aesthetics) Size, color, shape, sound "Look and feel" – "smoothness", quality impression Functional design: how the product performs © 2005 Wiley

Functional Design of Goods Fitness for use: performs basic functions as intended Durability: how long the product lasts Reliability: consistent performance Maintainability: ease and cost of repairs © 2005 Wiley

Technical Specifications for Goods Dimensions Examples: length, diameter Target value: ideal or desired value for a dimension Tolerance: how much can the actual dimension vary from the target value without affecting performance or aesthetics? © 2005 Wiley

Designing Services Physical elements: facility, equipment and furnishings, inventories Sensory and aesthetic aspects Psychological benefits Quality standards © 2005 Wiley

Steps in Product Design Step 1: Idea Development Identify a need and a product to fill that need. Ideas can come from customers, marketing, research and development, suppliers, or analysis of competitive products Product benchmarking: comparing your product with those of competitors Reverse engineering: disassembling a product to analyze its design features Your product design should not infringe on a competitor's patents. © 2005 Wiley

Steps in Product Design Step 2: Product Screening Marketing issues Current and future size of target market(s) Market share Pricing Effect on the firm's competitive position © 2005 Wiley

Steps in Product Design Step 2: Product Screening Operations issues Product technology Process technology Is new equipment needed? Can we build it or buy it? Would we need a new or modified facility? Can the firm make this product with consistent quality at a price that customers are willing to pay? Does our labor force have the needed skills? © 2005 Wiley

Steps in Product Design Step 2: Product Screening (2) Financial analysis: what you need to know Profit margin Ability to finance any needed investment Breakeven point: the volume at which costs = revenue Return on assets Return on sales Return on investment © 2005 Wiley

Step 2: Product Screening (3) Financial Analysis (continued) Break-Even Analysis Compute quantity of goods that must be sold to break-even Compute total revenue at an assumed selling price Compute fixed cost and variable cost for several quantities Plot the total revenue line and the total cost line Intersection is break-even Sensitivity analysis can be done to examine changes in all of the assumptions made © 2005 Wiley

Steps in Product Design Step 2: Product Screening (4) Financial analysis: check assumptions Identify all costs and all cost savings. If the firm does not introduce this product, will it lose market share? How much? Cost and revenue estimates are not exact. Perform the calculations using different sets of assumptions (called sensitivity analysis or case analysis). © 2005 Wiley

Steps in Product Design Step 3: Preliminary Design and Testing Develop technical specifications for the product Develop and test prototypes Computer-assisted design (CAD) lets engineers test a virtual model of the product Physical prototypes are also used © 2005 Wiley

Steps in Product Design Step 3: Preliminary Design & Testing (2) Computer-aided design (CAD): use of computer software to design products Similar software is used to make animated films Computer-aided engineering (CAE): use of computer software to evaluate and improve product designs Specialized CAD/CAE software is used by architects and landscape architects © 2005 Wiley

Steps in Product Design Step 3: Preliminary Design & Testing (3) Advantages of CAD and CAE Products can be designed, tested, and brought to market faster Reduces design and testing costs Lets the firm test more designs  better products Lets designers in different places and different companies work together Can be linked with computer-aided process planning (CAPP) and computer-aided manufacturing (CAM) © 2005 Wiley

CAPP and CAM Computer-aided process planning (CAPP): software that uses product specifications generated by CAD and CAE to develop manufacturing instructions for CAM Computer-aided manufacturing (CAM): the use of computer software to control manufacturing equipment © 2005 Wiley

Product specification Equipment selection Layout Job design Steps in Product Design Step 4: Final Design & Transition to Production Product specification Equipment selection Layout Job design Employee selection and training Supplier selection Some steps will not be needed for minor product variations © 2005 Wiley

Design for Manufacture Value engineering: Eliminate product features that add cost but do not add value to the customer. Reduce the number of parts. Reduces the cost of ordering, purchasing, and storing parts. Reduces the space required to hold inventory Reduces the number of tools and operations required Reduces the time required to make the product © 2005 Wiley

Design for Manufacture (2) Example of reducing the number of parts, operations, and tools. © 2005 Wiley

Design for Manufacture (3) Modular design: Design products to be assembled from standard components. Use standard parts to reduce design costs and purchasing costs. © 2005 Wiley

Concurrent Engineering Design the product and the process at the same time. Use a design team that includes marketing, operations, engineering, operations, and suppliers. Stay in touch with customers during the design process. Requires good project management and coordination among all groups involved. © 2005 Wiley

Advantages of Concurrent Engineering Increases the chances of a successful product. Shortens time to market. Takes advantage of supplier expertise. Reduces design costs. Reduces the need to make expensive changes in the product and the process later. © 2005 Wiley

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