1. Decision Analysis

2. Decision Analysis Payoff Table - craps tables
Maximax - maximum of maximum payoffs - optimistic - “hard ways”
Maximin - maximum of minimum payoffs - safe bets or even odds bets
Minimax regret - minimum of maximum regrets or opportunity costs

3. Decision Trees
Graphical method of analyzing a decision - similar to Theory of Constraints
Payoff table can be translated to a Decision Tree

4. The Payoff Table
A method of organizing & illustrating the payoffs from different decisions given various states of nature
A payoff is the outcome of the decision – a Craps table pay off chart is an example of a payoff chart

5. Payoff Table States Of Nature (Alternatives) Decision a b
1 Payoff 1/a Payoff 1/b
2 Payoff 2/a Payoff 2/b

6. Maximums: 1,300,000; 500,000 Minimums: 500,000; 320,000; -150,000
STATES OF NATURE
Good Foreign Poor Foreign
DECISION Competitive Conditions Competitive Conditions
Expand $ 800,000 $ 500,000
Maintain status quo 1,300, ,000
Sell now 320, ,000
Maximums: 1,300,000; 500,000
Minimums: 500,000; 320,000; -150,000

7. decision/State of Nature
good economy
fair economy
poor economy
EMV
sell condo
295000
126000
19500
178550
sell beach house
175000
76000
37500
113950
sell office bldg
275000
95000
78000
179900
0.5
0.2
0.3
EVPI
183950
VPI
4050

8. Chapter 5
Products and Services

9. Product Design Specifies materials Determines dimensions & tolerances
Defines appearance
Sets performance standards

10. Service Design Specifies what the customer is to experience
Physical items
Sensual benefits
Psychological benefits

11. An Effective Design Process
Matches product/service characteristics with customer needs
Meets customer requirements in simplest, most cost-effective manner
Reduces time to market - haste vs. speed to market
Minimizes revisions - quality designed into the product

12. Stages in the Design Process
Idea Generation — Product Concept - can you create your own market? What role does the voice of the customer play in idea generation?
Feasibility Study — Performance Specifications
Preliminary Design — Prototype - testing and redesign
Final Design — Final Design Specifications
Process Planning — Manufacturing Specifications - make to order/stock – assembly line?

13. New product or service launch Revising and testing prototypes
The Design Process
Pilot run
and final tests
New product or service launch
Final design
& process plans
Idea
generation
Feasibility
study
Product or service concept
Performance specifications
Functional
design
Form design
Production design
Revising and testing prototypes
Design specifications
Manufacturing or delivery specifications
Suppliers
R&D
Customers
Marketing
Competitors

14. Idea Generation Suppliers, distributors, salespersons
Trade journals and other published material
Warranty claims, customer complaints, failures
Customer surveys, focus groups, interviews
Field testing, trial users
Research and development

15. More Idea Generators Perceptual Maps Benchmarking Reverse engineering
Visual comparison of customer perceptions
Benchmarking
Comparing product/service against best-in-class
Reverse engineering
Dismantling competitor’s product to improve your own product

16. Perceptual Map of Breakfast Cereals
HIGH NUTRITION
LOW NUTRITION
GOOD TASTE
BAD TASTE

17. Perceptual Map of Breakfast Cereals
HIGH NUTRITION
LOW NUTRITION
GOOD TASTE
Cocoa Puffs
BAD TASTE
Rice
Krispies
Wheaties
Cheerios
Shredded
Wheat

18. Feasibility Study Market Analysis - Market Segmentation
Economic Analysis
Technical / Strategic Analysis
Performance Specifications
Not unlike mission analysis or
Intelligence Preparation of the Battlefield

19. Risk Analysis 1. Identify the Hazards
2. Assess hazards to determine risks.
3. Develop controls and make risk decisions.
4. Implement controls.
5. Supervise and evaluate.
From FM

20. Preliminary Design Create form & functional design Build prototype
How will it look?
Create form & functional design
Build prototype
Test prototype
Revise prototype
Retest

21. Functional Design (How the Product Performs)
Reliability
Probability product performs intended function for specified length of time
Maintainability
Ease and/or cost or maintaining/repairing product

22. Computing Reliability
Components in series
0.90
0.90 x 0.90 = 0.81

23. Computing Reliability
Components in series
0.90
0.90 x 0.90 = 0.81
Components in parallel
0.95
0.90 R2 R1
This is a refresher to High School Physics classes – capacitors in parallel provide a greater level of reliability than do capacitors in sequence. Having components in parallel provides some built in redundancy.
(1-0.95) = 0.995

24. System Availability MTBF MTBF + MTTR System Availability, SA =
This calculation is critical to determine the availability of a system based on the Mean Time
Between Failure (MTBF) and the Mean Time To Repair (MTTR). The only draw back to this
calculation is that you are working on averages.

25. System Availability MTBF MTBF + MTTR System Availability, SA =
PROVIDER MTBF (HR) MTTR (HR) A B C
At first glance it would appear that the items from Provider A has the longest mean time
between failures. This is why the Systems Availability computation is necessary.

26. System Availability MTBF MTBF + MTTR System Availability, SA =
PROVIDER MTBF (HR) MTTR (HR) A B C
Although Provider A’s products have the longest mean time between failure, look at the
Mean Time To Repair – when calculating the System Availability, the products from
Provider C provides the best System Availability.
SAA = 60 / (60 + 4) = or 93.75%
SAB = 36 / (36 + 2) = or 94.73%
SAC = 24 / (24 + 1) = .96 or 96%

27. Production Design Part of the preliminary design phase Simplification
Standardization
Modularity

28. Final Design & Process Plans
Produce detailed drawings & specifications
Create workable instructions for manufacture
Select tooling & equipment
Prepare job descriptions
Determine operation & assembly order
Program automated machines

29. Improving the Design Process
Design teams
Concurrent design
Design for manufacture & assembly
Design to prevent failures and ensure value
Design for environment
Measure design quality
Utilize quality function deployment
Design for robustness
Engage in collaborative design

30. Breaking Down Barriers to Effective Design

31. Preferred solution = cross functional teams
Design Teams
Preferred solution = cross functional teams
Marketing, manufacturing, engineering
Suppliers, dealers, customers
Lawyers, accountants, insurance companies

32. Concurrent Design Improves quality of early design decisions
Decentralized - suppliers complete detailed design
Incorporates production process
Scheduling and management can be complex as tasks are done in parallel
include the customer in the process!!

33. Design for Manufacture and Assembly
Design a product for easy & economical production
Incorporate production design early in the design phase
Improves quality and reduces costs
Shortens time to design and manufacture
also known as Design for Six Sigma

34. Design for Six Sigma Define – the goals of the design activity
Measure – customer input to determine what is critical to quality from the customers’ perspective – what are customer delighters? What aspects are critical to quality?
Analyze – innovative concepts for products and services to create value for the customer
Design – new processes, products, and services to deliver customer value
Verify – new systems perform as expected

35. DFM Guidelines
Minimize the number of parts, tools, fasteners, and assemblies
Use standard parts and repeatable processes
Modular design
Design for ease of assembly, minimal handling
Allow for efficient testing and parts replacement

36. Design for Assembly (DFA)
Procedure for reducing number of parts
Evaluate methods for assembly
Determine assembly sequence

37. Design Review Failure Mode and Effects Analysis (FMEA)
A systematic approach for analyzing causes & effects of failures
Prioritizes failures
Attempts to eliminate causes

38. Value Analysis (Value Engineering)
Is there value added?
Ratio of value / cost
Assessment of value :
1. Can we do without it?
2. Does it do more than is required?
3. Does it cost more than it is worth?
4. Can something else do a better job
5. Can it be made by less costly method, tools, material?
6. Can it be made cheaper, better or faster by someone else? Should we contract it out?

39. Design for Environment
Design from recycled material
Use materials which can be recycled
Design for ease of repair
Minimize packaging
Minimize material & energy used during manufacture, consumption & disposal
green laws in Europe -

40. Examples Recycling of oil
carpets in land fills - 4 billion pounds in land fills annually
Xerox and Hewlett-Packard - pay for return of printer cartridges on larger printers

41. Quality Function Deployment (QFD)
Translates the “voice of the customer” into technical design requirements
Displays requirements in matrix diagrams
First matrix called “house of quality”
Series of connected houses

42. Design for Robustness Product can fail due to poor design quality
Products subjected to many conditions
Robust design studies
Controllable factors - under designer’s control
Uncontrollable factors - from user or environment
Designs products for consistent performance

43. Consistency is Important
Consistent errors are easier to correct than random errors
Parts within tolerances may yield assemblies which aren’t
Consumers prefer product characteristics near their ideal values

44. Characteristics of Services
Services are intangible
Service output is variable
Service have higher customer contact
Services are perishable
Service inseparable from delivery
Tend to be decentralized and dispersed
Consumed more often than products
Services can be easily emulated
Call girl principle – value diminishes after service is rendered

45. A Well-Designed Service System is
Consistent with firm’s strategic focus
Customer friendly
Easy to sustain
Effectively linked between front & back office
Cost effective
Visible to customer

46. Processes and Technologies
Chapter 6
Processes and Technologies

47. Process Strategy Overall approach to producing goods and services
Defines:
Capital intensity
Process flexibility
Vertical integration
Customer involvement
Vertical integration vs Horizontal integration. Depends on how much a company wants to control an industry.
In the 80’s Anheuser Busch tried to control their market by creating Eagle Snacks to spur the sales of beer; moved into the bottle and can making industry; moved into the Aluminium industry; moved into the cardboard industry to make boxes for shipping beer. They finally decided that their core competency was making beer not snacks and boxes.

48. Types of Processes Projects Batch production Mass production
Continuous production
Projects are usually one of a kind items such as ship building
Continuous production on the other end of the spectrum is commodities such as oil that are produced continuously.

49. Process Planning Make-or-buy decisions Process selection
Specific equipment selection
Process plans
Process analysis

50. Make-or-Buy Decisions
1. Cost
2. Capacity
3. Quality
4. Speed
5. Reliability
6. Expertise
What about
Proprietary Information?
Barrier to Make-or-Buy?

51. Source: Aberdeen Research,
“Low-Cost Country Sourcing Success Strategies: Maximizing and
Sustaining the Next Big Supply Savings Opportunity,” Jun 2005

52. Specific Equipment Selection
Purchase cost
Operating cost
Annual savings
Revenue enhancement
Replacement analysis
Risk and uncertainty
Piecemeal analysis – “one piece at
a time”

53. Process Plans Blueprints
Bill of material Flat or multiple layers - part or assembly
Assembly chart / product structure diagram
Operations process chart - list of operations involved in assembly
Routing sheet - sequence of events

54. Operations Process Chart
Part name Crevice Tool
Part No
Usage Hand-Vac
Assembly No. 520
Oper. No. Description Dept. Machine/Tools Time
10 Pour in plastic bits 041 Injection molding 2 min
20 Insert mold 041 #076 2 min
30 Check settings , 67, min & start machine
40 Collect parts & lay flat 051 Plastics finishing 10 min
50 Remove & clean mold 042 Parts washer 15 min
60 Break off rough edges 051 Plastics finishing 10 min

55. Process Analysis
The systematic examination of all aspects of a process to improve its operation
Faster
More efficient
Less costly
More responsive
Basic tools
Process flowchart
Process diagrams
Process maps

56. Process Flowchart Symbols
Operations
Inspection
Transportation
Delay
Storage

57. Process Flowchart Operation Transport Inspect Step Delay Storage
Distance
(feet)
Time
(min)
Description of
process 1 2 3 4 5 6 7 8 9 10 11
Unload apples from truck
Move to inspection station
Weigh, inspect, sort
Move to storage
Wait until needed
Move to peeler
Apples peeled and cored
Soak in water until needed
Place in conveyor
Move to mixing area
Total
Page 1 0f 3
480 30 20 15
360
190 ft
20 ft
50 ft
100 ft
Date:
Analyst: TLR
Location: Graves Mountain
Process: Apple Sauce

58. Process Diagram Reserve Storage Quality Assurance Back to Vendor UPS
Parcel Post
Next-Day UPS
Mono-gramming
Embroid-ering
Hemming
Gift Boxing
Receiving
Active Bins
Picking
Packing
Shipping

59. Process Map Customer Waiter Salad Chef Dinner Chef N
Place order
Drink
Eat salad or soup
Eat dinner
Receives check
Gives payment to waiter
Collect change, leave tip
Fill in tip amount
Give order to waiter
Prepare dinner order
Prepare soup or salad order
Is order complete?
Give soup or salad order to chef
Give dinner order to chef
Get drinks for customer
Deliver salad or soup order to customer
Deliver dinner to customer
Deliver check to customer
Receive payment for meal
Cash or Credit?
Bring change to customer
Run credit card through
Return credit slip to customer
Collect tip Y N
Credit
Cash
Customer Waiter Salad Chef Dinner Chef

60. Principles for Redesigning Processes
Remove waste, simplify, consolidate
Link processes to create value
Let the swiftest and most capable execute
Capture information digitally and propagate

61. Principles for Redesigning Processes
Provide visibility through information about process status
Fit the process with sensors and feedback loops
Add analytic capabilities
Connect, collect and create knowledge around the process
Personalize the process

62. Other ways to redesign the process
Define
Measure
Improve
Define
Measure
Analyze
Improve
Control
Velocity Management
Methodology
General Electric’s
Six Sigma Methodology

63. Techniques for Generating Innovative Ideas
Vary entry point to a problem
Draw analogies
Change your perspective
Use attribute brainstorming

64. Information Technology
Management Information Systems (MIS)
Move large amounts of data
Decision Support Systems (DSS)
Add decision making support
Expert System
Recommend decision based on expert knowledge

65. Artificial Intelligence
Neural networks
Emulate interconnections in brain
Genetic algorithms
Based on adaptive capabilities in nature
Fuzzy logic
Simulate human ability to deal with ambiguity

66. Enterprise Software Collect, analyze, and make decisions based on data
ERP - Enterprise Resource Planning
Managing wide range of processes
Human resources, materials management, supply chains, accounting, finance, manufacturing, sales force automation, customer service, customer order entry
Finding hidden patterns through data mining

67. ERP SAP – 42% of market; forecast to 43% in 2006
Oracle – 20%; forecast to 23% 2006
Sage Group – 6%
Microsoft – 4%
Horror Stories – Hershey’s, Dell

68. Advanced Communications
Electronic data interchange (EDI)
Internet, extranets
Wireless communications
Teleconferencing & telecommuting
Bar coding, Radio Frequency Identification
Virtual reality
Distance Learning?

69. RFID Active Tags Passive Tags Always on Small Battery powered
Can be read from up to 300 ft
US Army
Savi Tags
Passive Tags
Small
Must be activated
May be turned off
England
California
Rolex

70. Automated Material Handling
Conveyors
Automated guided vehicle (AGV)
Automated storage & retrieval system (ASRS) Grainger/Defense Distribution Center, San Joaquin

71. Flexible Manufacturing Systems (FMS)
Programmable machine tools
Controlled by common computer network
Combines flexibility with efficiency
Reduces setup & queue times
cellular layout - more on design next week

72. Robotics Programmable manipulators Follow specified path
Better than humans with respect to
Hostile environments
Long hours
Consistency
Adoption has been slowed by ineffective integration and adaptation of systems
Welding at Harley Davidson Plant

73. Next Week
Chapter 10/11, 17
Handout Mid Term