1. 5 - 1© 2011 Pearson Education, Inc. publishing as Prentice Hall 5 5 Design of Goods and Services PowerPoint presentation to accompany Heizer and Render Operations Management, 10e Principles of Operations Management, 8e PowerPoint slides by Jeff Heyl

2. 5 - 2© 2011 Pearson Education, Inc. publishing as Prentice Hall The objective of the product decision is to develop and implement a product strategy that meets the demands of the marketplace with a competitive advantage Product Decision

3. 5 - 3© 2011 Pearson Education, Inc. publishing as Prentice Hall The good or service the organization provides society Top organizations typically focus on core products Customers buy satisfaction, not just a physical good or particular service Fundamental to an organization's strategy with implications throughout the operations function Product Decision

4. 5 - 4© 2011 Pearson Education, Inc. publishing as Prentice Hall Product Strategy Options Differentiation Shouldice Hospital Low cost Taco Bell Rapid response Toyota

5. 5 - 5© 2011 Pearson Education, Inc. publishing as Prentice Hall Product Life Cycles May be any length from a few hours to decades The operations function must be able to introduce new products successfully

6. 5 - 6© 2011 Pearson Education, Inc. publishing as Prentice Hall Product Life Cycles Negative cash flow IntroductionGrowthMaturityDecline Sales, cost, and cash flow Cost of development and production Cash flow Net revenue (profit) Sales revenue Loss Figure 5.1

7. 5 - 7© 2011 Pearson Education, Inc. publishing as Prentice Hall Product Life Cycle Introductory Phase Fine tuning may warrant unusual expenses for 1.Research 2.Product development 3.Process modification and enhancement 4.Supplier development

8. 5 - 8© 2011 Pearson Education, Inc. publishing as Prentice Hall Product Life Cycle Growth Phase Product design begins to stabilize Effective forecasting of capacity becomes necessary Adding or enhancing capacity may be necessary

9. 5 - 9© 2011 Pearson Education, Inc. publishing as Prentice Hall Product Life Cycle Maturity Phase Competitors now established High volume, innovative production may be needed Improved cost control, reduction in options, paring down of product line

10. 5 - 10© 2011 Pearson Education, Inc. publishing as Prentice Hall Product Life Cycle Decline Phase Unless product makes a special contribution to the organization, must plan to terminate offering

11. 5 - 11© 2011 Pearson Education, Inc. publishing as Prentice Hall Product Life Cycle Costs Costs incurred Costs committed Ease of change ConceptDetailedManufacturingDistribution, designdesignservice, prototypeand disposal Percent of total cost 100 – 80 – 60 – 40 – 20 – 0 –

12. 5 - 12© 2011 Pearson Education, Inc. publishing as Prentice Hall Product-by-Value Analysis Lists products in descending order of their individual dollar contribution to the firm Lists the total annual dollar contribution of the product Helps management evaluate alternative strategies

13. 5 - 13© 2011 Pearson Education, Inc. publishing as Prentice Hall Product-by-Value Analysis Individual Contribution ($) Total Annual Contribution ($) Love Seat$102$36,720 Arm Chair$87$51,765 Foot Stool$12$6,240 Recliner$136$51,000 Sams Furniture Factory

14. 5 - 14© 2011 Pearson Education, Inc. publishing as Prentice Hall New Product Opportunities 1.Understanding the customer 2.Economic change 3.Sociological and demographic change 4.Technological change 5.Political/legal change 6.Market practice, professional standards, suppliers, distributors Brainstorming is a useful tool

15. 5 - 15© 2011 Pearson Education, Inc. publishing as Prentice Hall Scope of product development team Product Development System Scope for design and engineering teams Evaluation Introduction Test Market Functional Specifications Design Review Product Specifications Customer Requirements Ability Ideas Figure 5.3

16. 5 - 16© 2011 Pearson Education, Inc. publishing as Prentice Hall Quality Function Deployment 1.Identify customer wants 2.Identify how the good/service will satisfy customer wants 3.Relate customer wants to product hows 4.Identify relationships between the firms hows 5.Develop importance ratings 6.Evaluate competing products 7.Compare performance to desirable technical attributes

17. 5 - 17© 2011 Pearson Education, Inc. publishing as Prentice Hall Manufacturability and Value Engineering Benefits: 1.Reduced complexity of products 2.Reduction of environmental impact 3.Additional standardization of products 4.Improved functional aspects of product 5.Improved job design and job safety 6.Improved maintainability (serviceability) of the product 7.Robust design

18. 5 - 18© 2011 Pearson Education, Inc. publishing as Prentice Hall Issues for Product Development Robust design Modular design Computer-aided design (CAD) Computer-aided manufacturing (CAM) Virtual reality technology Value analysis Environmentally friendly design

19. 5 - 19© 2011 Pearson Education, Inc. publishing as Prentice Hall Robust Design Product is designed so that small variations in production or assembly do not adversely affect the product Typically results in lower cost and higher quality

20. 5 - 20© 2011 Pearson Education, Inc. publishing as Prentice Hall Modular Design Products designed in easily segmented components Adds flexibility to both production and marketing Improved ability to satisfy customer requirements

21. 5 - 21© 2011 Pearson Education, Inc. publishing as Prentice Hall Using computers to design products and prepare engineering documentation Shorter development cycles, improved accuracy, lower cost Information and designs can be deployed worldwide Computer Aided Design (CAD)

22. 5 - 22© 2011 Pearson Education, Inc. publishing as Prentice Hall Design for Manufacturing and Assembly (DFMA) Solve manufacturing problems during the design stage 3-D Object Modeling Small prototype development CAD through the internet International data exchange through STEP Extensions of CAD

23. 5 - 23© 2011 Pearson Education, Inc. publishing as Prentice Hall Computer-Aided Manufacturing (CAM) Utilizing specialized computers and program to control manufacturing equipment Often driven by the CAD system (CAD/CAM)

24. 5 - 24© 2011 Pearson Education, Inc. publishing as Prentice Hall 1.Product quality 2.Shorter design time 3.Production cost reductions 4.Database availability 5.New range of capabilities Benefits of CAD/CAM

25. 5 - 25© 2011 Pearson Education, Inc. publishing as Prentice Hall Virtual Reality Technology Computer technology used to develop an interactive, 3-D model of a product from the basic CAD data Allows people to see the finished design before a physical model is built Very effective in large-scale designs such as plant layout

26. 5 - 26© 2011 Pearson Education, Inc. publishing as Prentice Hall Value Analysis Focuses on design improvement during production Seeks improvements leading either to a better product or a product which can be produced more economically with less environmental impact

27. 5 - 27© 2011 Pearson Education, Inc. publishing as Prentice Hall Ethics, Environmentally Friendly Designs, and Sustainability It is possible to enhance productivity and deliver goods and services in an environmentally and ethically responsible manner In OM, sustainability means ecological stability Conservation and renewal of resources through the entire product life cycle

28. 5 - 28© 2011 Pearson Education, Inc. publishing as Prentice Hall Ethics, Environmentally Friendly Designs, and Sustainability Design Polyester film and shoes Production Prevention in production and packaging Destruction Recycling in automobiles

29. 5 - 29© 2011 Pearson Education, Inc. publishing as Prentice Hall The Ethical Approach View product design from a systems perspective Inputs, processes, outputs Costs to the firm/costs to society Consider the entire life cycle of the product

30. 5 - 30© 2011 Pearson Education, Inc. publishing as Prentice Hall The Ethical Approach Goals 1.Developing safe end environmentally sound practices 2.Minimizing waste of resources 3.Reducing environmental liabilities 4.Increasing cost-effectiveness of complying with environmental regulations 5.Begin recognized as a good corporate citizen

31. 5 - 31© 2011 Pearson Education, Inc. publishing as Prentice Hall Guidelines for Environmentally Friendly Designs 1.Make products recyclable 2.Use recycled materials 3.Use less harmful ingredients 4.Use lighter components 5.Use less energy 6.Use less material

32. 5 - 32© 2011 Pearson Education, Inc. publishing as Prentice Hall Time-Based Competition Product life cycles are becoming shorter and the rate of technological change is increasing Developing new products faster can result in a competitive advantage

33. 5 - 33© 2011 Pearson Education, Inc. publishing as Prentice Hall Acquiring Technology By Purchasing a Firm Speeds development Issues concern the fit between the acquired organization and product and the host Through Joint Ventures Both organizations learn Risks are shared Through Alliances Cooperative agreements between independent organizations

34. 5 - 34© 2011 Pearson Education, Inc. publishing as Prentice Hall Defining The Product First definition is in terms of functions Rigorous specifications are developed during the design phase Manufactured products will have an engineering drawing Bill of material (BOM) lists the components of a product

35. 5 - 35© 2011 Pearson Education, Inc. publishing as Prentice Hall Engineering drawing Shows dimensions, tolerances, and materials Shows codes for Group Technology Bill of Material Lists components, quantities and where used Shows product structure Product Documents

36. 5 - 36© 2011 Pearson Education, Inc. publishing as Prentice Hall Engineering Drawings Figure 5.8

37. 5 - 37© 2011 Pearson Education, Inc. publishing as Prentice Hall Bills of Material BOM for Panel Weldment NUMBERDESCRIPTIONQTY A 60-71PANEL WELDMT1 A 60-7LOWER ROLLER ASSM.1 R 60-17 ROLLER1 R 60-428 PIN1 P 60-2 LOCKNUT1 A 60-72GUIDE ASSM. REAR1 R 60-57-1 SUPPORT ANGLE1 A 60-4 ROLLER ASSM.1 02-50-1150 BOLT1 A 60-73GUIDE ASSM. FRONT1 A 60-74 SUPPORT WELDMT1 R 60-99 WEAR PLATE1 02-50-1150 BOLT1 Figure 5.9 (a)

38. 5 - 38© 2011 Pearson Education, Inc. publishing as Prentice Hall Parts grouped into families with similar characteristics Coding system describes processing and physical characteristics Part families can be produced in dedicated manufacturing cells Group Technology

39. 5 - 39© 2011 Pearson Education, Inc. publishing as Prentice Hall Group Technology Scheme Figure 5.10 (a) Ungrouped Parts (b) Grouped Cylindrical Parts (families of parts) GroovedSlotted ThreadedDrilledMachined

40. 5 - 40© 2011 Pearson Education, Inc. publishing as Prentice Hall 1.Improved design 2.Reduced raw material and purchases 3.Simplified production planning and control 4.Improved layout, routing, and machine loading 5.Reduced tooling setup time, work-in- process, and production time Group Technology Benefits

41. 5 - 41© 2011 Pearson Education, Inc. publishing as Prentice Hall Documents for Production Assembly drawing Assembly chart Route sheet Work order Engineering change notices (ECNs)

42. 5 - 42© 2011 Pearson Education, Inc. publishing as Prentice Hall Assembly Drawing Shows exploded view of product Details relative locations to show how to assemble the product Figure 5.11 (a)

43. 5 - 43© 2011 Pearson Education, Inc. publishing as Prentice Hall Assembly Chart 1 2 3 4 5 6 7 8 9 10 11 R 209 Angle R 207 Angle Bolts w/nuts (2) R 209 Angle R 207 Angle Bolt w/nut R 404 Roller Lock washer Part number tag Box w/packing material Bolts w/nuts (2) SA 1 SA 2 A1 A2 A3 A4 A5 Left bracket assembly Right bracket assembly Poka-yoke inspection Figure 5.11 (b) Identifies the point of production where components flow into subassemblies and ultimately into the final product

44. 5 - 44© 2011 Pearson Education, Inc. publishing as Prentice Hall Route Sheet Lists the operations and times required to produce a component SetupOperation ProcessMachineOperationsTimeTime/Unit 1Auto Insert 2Insert Component 1.5.4 Set 56 2Manual Insert Component.52.3 Insert 1 Set 12C 3Wave SolderSolder all 1.54.1 components to board 4Test 4Circuit integrity.25.5 test 4GY

45. 5 - 45© 2011 Pearson Education, Inc. publishing as Prentice Hall Work Order Instructions to produce a given quantity of a particular item, usually to a schedule Work Order ItemQuantityStart DateDue Date ProductionDelivery DeptLocation 157C1255/2/085/4/08 F32Dept K11

46. 5 - 46© 2011 Pearson Education, Inc. publishing as Prentice Hall Engineering Change Notice (ECN) A correction or modification to a products definition or documentation Engineering drawings Bill of material Quite common with long product life cycles, long manufacturing lead times, or rapidly changing technologies

47. 5 - 47© 2011 Pearson Education, Inc. publishing as Prentice Hall Configuration Management The need to manage ECNs has led to the development of configuration management systems A products planned and changing components are accurately identified and control and accountability for change are identified and maintained

48. 5 - 48© 2011 Pearson Education, Inc. publishing as Prentice Hall Product Life-Cycle Management (PLM) Integrated software that brings together most, if not all, elements of product design and manufacture Product design CAD/CAM, DFMA Product routing Materials Assembly Environmental

49. 5 - 49© 2011 Pearson Education, Inc. publishing as Prentice Hall Service Design Service typically includes direct interaction with the customer Increased opportunity for customization Reduced productivity Cost and quality are still determined at the design stage Delay customization Modularization Reduce customer interaction, often through automation

50. 5 - 50© 2011 Pearson Education, Inc. publishing as Prentice Hall Service Design Figure 5.12

51. 5 - 51© 2011 Pearson Education, Inc. publishing as Prentice Hall Service Design Figure 5.12

52. 5 - 52© 2011 Pearson Education, Inc. publishing as Prentice Hall Application of Decision Trees to Product Design Particularly useful when there are a series of decisions and outcomes which lead to other decisions and outcomes

53. 5 - 53© 2011 Pearson Education, Inc. publishing as Prentice Hall Application of Decision Trees to Product Design 1.Include all possible alternatives and states of nature - including doing nothing 2.Enter payoffs at end of branch 3.Determine the expected value of each branch and prune the tree to find the alternative with the best expected value Procedures

54. 5 - 54© 2011 Pearson Education, Inc. publishing as Prentice Hall (.6) Low sales (.4) High sales (.6) Low sales (.4) High sales Decision Tree Example Purchase CAD Hire and train engineers Do nothing Figure 5.14

55. 5 - 55© 2011 Pearson Education, Inc. publishing as Prentice Hall (.6) Low sales (.4) High sales Decision Tree Example Purchase CAD (.6) Low sales (.4) High sales Hire and train engineers Do nothing Figure 5.14 $2,500,000Revenue - 1,000,000Mfg cost ($40 x 25,000) - 500,000CAD cost $1,000,000Net $800,000Revenue - 320,000Mfg cost ($40 x 8,000) - 500,000CAD cost - $20,000Net loss EMV (purchase CAD system)= (.4)($1,000,000) + (.6)(- $20,000)

56. 5 - 56© 2011 Pearson Education, Inc. publishing as Prentice Hall (.6) Low sales (.4) High sales Decision Tree Example Purchase CAD (.6) Low sales (.4) High sales Hire and train engineers Do nothing Figure 5.14 $2,500,000Revenue - 1,000,000Mfg cost ($40 x 25,000) - 500,000CAD cost $1,000,000Net $800,000Revenue - 320,000Mfg cost ($40 x 8,000) - 500,000CAD cost - $20,000Net loss EMV (purchase CAD system)= (.4)($1,000,000) + (.6)(- $20,000) = $388,000 $388,000

57. 5 - 57© 2011 Pearson Education, Inc. publishing as Prentice Hall (.6) Low sales (.4) High sales (.6) Low sales (.4) High sales Decision Tree Example Purchase CAD $388,000 Hire and train engineers $365,000 Do nothing $0 $0 Net $800,000Revenue - 400,000Mfg cost ($50 x 8,000) - 375,000Hire and train cost $25,000Net $2,500,000Revenue - 1,250,000Mfg cost ($50 x 25,000) - 375,000Hire and train cost $875,000Net $2,500,000Revenue - 1,000,000Mfg cost ($40 x 25,000) - 500,000CAD cost $1,000,000Net $800,000Revenue - 320,000Mfg cost ($40 x 8,000) - 500,000CAD cost - $20,000Net loss Figure 5.14

58. 5 - 58© 2011 Pearson Education, Inc. publishing as Prentice Hall Transition to Production Know when to move to production Product development can be viewed as evolutionary and never complete Product must move from design to production in a timely manner Most products have a trial production period to insure producibility Develop tooling, quality control, training Ensures successful production

59. 5 - 59© 2011 Pearson Education, Inc. publishing as Prentice Hall Transition to Production Responsibility must also transition as the product moves through its life cycle Line management takes over from design Three common approaches to managing transition Project managers Product development teams Integrate product development and manufacturing organizations