Slide 0 of 52 Chapter 7 Designing and Developing Products and Production Processes: Manufacturing and Service Operations

Slide 1 of 52 OverviewOverview l Designing and Developing Products and Services l Process Planning and Design l Major Factors Affecting Process Design Decisions l Types of Process Designs l Interrelationships Among Product Design, Process Design, and Inventory Policy l Process Design in Services l Deciding Among Processing Alternatives l Wrap-Up: What World-Class Producers Do

Slide 2 of 52 Product/Service Development and Design

Slide 3 of 52 Stages of a Product’s Life Cycle Introduction Growth Maturity Decline Introduction Growth Maturity Decline B&W TV Automobile Video Recorder Compact Disc Player Fax Machine Color Copier Cell Phone Color Laser Printer

Slide 4 of 52 Product Life Cycle & Sales, Cost, and Net Revenues Time

Slide 5 of 52 Operations Emphasis in Product Life Cycle

Slide 6 of 52 American Approach to Product Design ResearchDevelopment Manufacturing Process Process Design Design ManufacturingProduct

Slide 7 of 52 Japanese Approach to Product Design Research, Development, and Research, Development, and Manufacturing Process Design ManufacturingProduct

Slide 8 of 52 Product/Service Design When a product/service is designed: l The detailed characteristics of the product/service are established. l The characteristics of the product/service directly affects how the product/service can be produced/ delivered. l How the product/service is produced/delivered determines the design of the production/delivery system.

Slide 9 of 52 Product/Service Design Product/service design directly affects: l Product/service quality l Production/delivery cost l Customer satisfaction

Slide 10 of 52 Product/Service Design and Development l Sources l Developing New Products/Services l Getting Them to Market Faster l Improving Current Products/Services l Designing for Ease of Production l Designing for Quality l Designing and Developing New Services

Slide 11 of 52 Sources of Product/Service Innovation l Customers l Managers l Marketing l Operations l Engineering l Research and Development (R&D) l Basic research l Applied research

Slide 12 of 52 Steps in Designing and Developing New Products 1. Technical and economic feasibility studies 2. Prototype design 3. Performance testing of prototype 4. Market sensing/evaluation and economic evaluation of the prototype 5. Design of production model 6. Market/performance/process testing and economic evaluation of production model 7. Continuous modification of production model

Slide 13 of 52 Getting New Products to Market Faster l Speed creates competitive advantages l Speed saves money l Tools to improve speed: l Autonomous design and development teams l Computer-aided design/computer-aided manufacturing (CAD/CAM) l Simultaneous (concurrent) engineering

Slide 14 of 52 Improving the Design of Existing Products/Services l Focus is improving performance, quality, and cost l Objective is maintaining or improving market share of maturing products/services l Little changes can be significant l Small, steady (continuous) improvements can add up to huge long-term improvements l Value analysis is practiced, meaning design features are examined in terms of their cost/benefit (value).

Slide 15 of 52 Designing for Ease of Production l Ease of Production (Manufacturability) l Specifications - Precise information about the characteristics of the product l Tolerances - Minimum & maximum limits on a dimension that allows the item to function as designed l Standardization - Reduce variety among a group of products or parts l Simplification - Reduce or eliminate the complexity of a part or product

Slide 16 of 52 Designing for Quality l Crucial element of product design is its impact on quality l Quality is determined by the customer’s perception of the degree of excellence of the product/service’s characteristics l Chapter 17 covers the principles of designing products/services for quality l... more

Slide 17 of 52 Designing and Developing New Services Three general dimensions of service design are: l Degree of standardization of the service l Degree of customer contact in delivering the service l Mix of physical goods and intangible services

Slide 18 of 52 Process Planning and Design

Slide 19 of 52 Inputs: Product/Service Information Product/Service Information Production System Information Production System Information Operations Strategy Operations Strategy Process Planning & Design: Select process type Select process type Vertical integration studies Vertical integration studies Process/Product studies Process/Product studies Equipment studies Equipment studies Production procedures studies Production procedures studies Facilities studies Facilities studies Outputs: Process Technology Process Technology Facilities Facilities Personnel Estimates Personnel Estimates Process Planning and Design

Slide 20 of 52 Major Factors Affecting Process Designs l Nature of product/service demand l Degree of vertical integration l Production flexibility l Degree of automation l Product/Service quality

Slide 21 of 52 Degree of Vertical Integration l Vertical integration is the amount of the production and distribution chain that is brought under the ownership of a company. l This determines how many production processes need to be planned and designed. l Decision of integration is based on cost, availability of capital, quality, technological capability, and more. l Strategic outsourcing (lower degree of integration) is the outsourcing of processes in order to react quicker to changes in customer needs, competitor actions, and technology.

Slide 22 of 52 Production Flexibility l Product flexibility -- ability of the production (or delivery) system to quickly change from producing (delivering) one product (or service) to another. l Volume flexibility -- ability to quickly increase or reduce the volume of product( or service) produced (or delivered).

Slide 23 of 52 Degree of Automation l Advantages of automation l Improves product quality l Improves product flexibility l Reduces labor and related costs l Disadvantages of automation l Equipment can be very expensive l Integration into existing operations can be difficult

Slide 24 of 52 Types of Process Designs l Product-Focused l Process-Focused l Group Technology/Cellular Manufacturing

Slide 25 of 52 Product-Focused (Production Line) l Processes (conversions) are arranged based on the sequence of operations required to produce a product or provide a service l Two general forms l Discrete unit l Process (Continuous) l Examples l Automobiles l Vacuum cleaners

Slide 26 of 52 PurchasedComponents,Subassemblies Product-Focused Production ComponentsSubassem. Assemblies Product/Material Flow Production Operation Assemblies Raw Material Components Compon. Subassem. Fin. Goods

Slide 27 of 52 Process-Focused (Job Shop) l Processes (conversions) are arranged based on the type of process, i.e., like processes are grouped together l Products/services (jobs) move from department (process group) to department based on that particular job’s processing requirements l Examples l Auto body repair l Custom woodworking shop

Slide 28 of 52 Process-Focused Production CuttingAssemblySandingFinishingPlaning Drilling Shaping Turning Job A Job B 4455 Custom Woodworking Shop

Slide 29 of 52 Group Technology/Cellular Manufacturing l Group technology forms parts with similar processing requirements into part families or groups. l A manufacturing cell is an arrangement of the processes required to make the parts that make up the group.

Slide 30 of 52 Group Technology/Cells l Advantages (relative to a job shop) l Process changeovers simplified l Variability of tasks reduced l More direct routes through the system l Quality control is improved l Production planning and control simpler l Automation simpler

Slide 31 of 52 Group Technology/Cells l Disadvantages l Duplication of equipment l Under-utilization of facilities l Processing of items that do not fit into a family may be inefficient

Slide 32 of 52 Product/Process Design & Inventory Policy l Standard Products and Produce to Stock l Forecast/orders drive production schedule l Maintain pre-determined finished-goods levels l MRP forecast drives material ordering l Custom Products and Produce to Order l Orders set production schedule and drive material deliveries l Design time may be required before production can be scheduled

Slide 33 of 52 Process Design in Services l Quasi manufacturing -- production of goods takes place along a production line with almost no customer interaction l Customer-as-participant -- high degree of customer involvement in the process of generating the service l Customer-as-product -- service is provided through personal attention to the customer

Slide 34 of 52 Deciding Among Processing Alternatives l Batch Size and Product/Service Variety l Capital Requirements l Economic Analysis l Cost functions of alternatives l Operating leverage - relationship between a firm’s annual costs and its annual sales l Break-even analysis l Financial analysis

Slide 35 of 52 Process Design Depends on Product Diversity and Batch Size Batch Size Number of Product Designs ProductFocused,DedicatedSystems ProductFocused,BatchSystem Process-Focused, Job Shop Job Shop CellularManufacturing

Slide 36 of 52 Flexible Manufacturing System Generalpurpose Work cells CIM Flexible FlexibleManufacturing System System Focused Focusedautomation Dedicatedautomation Products Volume

Slide 37 of 52 Economic Analysis l Cost Function of Processing Alternatives l If capital is not a factor, the process design preferred depends upon product volume l Operating Leverage l Relationship between firm’s annual costs and annual sales l If high % firm’s costs fixed, then high degree of operating leverage l Small % change in sales drives large % change in operating income l... more

Slide 38 of 52 Economic Analysis l Break Even Analysis l Formulas for comparing processes l Cannot incorporate uncertainty, costs assumed over entire range of values, and does not take into account time value of money l Financial Analysis l Incorporate time value of money.... net present value, internal rate of return, etc.

Slide 39 of 52 Cost Functions of Processing Alternatives Annual Cost of Production ($000) UnitsProduced Per Year 100, ,000 CellularManufacturingPreferred Automated Assembly Line Preferred JobShopPreferred 500 1,000 2,000 1,500 Job Shop Cellular Manufacturing Automated Assembly Line

Slide 40 of 52 Example: Cost Functions of Processing Alternatives Three production processes - A, B, and C - have the following cost structure: Fixed Cost Variable Cost Process Per Year Per Unit Fixed Cost Variable Cost Process Per Year Per Unit A$120,000 $3.00 A$120,000 $3.00 B 90, B 90, C 80, C 80, What is the most economical process for a volume of 8,000 units per year?

Slide 41 of 52 Example: Cost Functions of Processing Alternatives l Most Economical Process at 8,000 Units TC = FC + v(Q) A: TC = 120, (8,000) = $144,000 per year B: TC = 90, (8,000) = $122,000 per year C: TC = 80, (8,000) = $116,000 per year Process C has the lowest annual cost. Process C has the lowest annual cost.

Slide 42 of 52 Example: Cost Functions of Processing Alternatives l Break-Even Points of Processes Q = FC / (p-v) Q = FC / (p-v) Assuming a $6.95 selling price per unit: Assuming a $6.95 selling price per unit: A: Q = 120,000 / ( ) = 30,380 units B: Q = 90,000 / ( ) = 30,509 units C: Q = 80,000 / ( ) = 32,654 units

Slide 43 of 52 Deciding Among Processing Alternatives l Assembly Charts (Gozinto Charts) l Macro-view of how materials are united l Starting point to understand factory layout needs, equipment needs, training needs l Process Charts l Details of how to build product at each process l Includes materials needed, types of processes product flows through, time it takes to process product through each step of flow

Slide 44 of 52 Wrap-Up: World Class Practice l Fast new product introduction l Design products for ease of production l Refine forecasting l Focus on core competencies... less vertical integration l Lean production l Flexible automation l Job shops move toward cellular manufacturing l Manage information flow..... automate and simplify!