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 Regal Marine  Global market  3-dimensional CAD system  Reduced product development time  Reduced problems with tooling  Reduced problems in production  Assembly line production  JIT

3. 5 - 3 Some Well Known Companies Having Competitive Advantage Through Their Products Organizations provide goods and services for the society. Great products are key to the success. They provide competitive advantage. Honda: engine technology Microsoft: PC software Intel: Microprocessors Michelin: Tires Dell Computer: Customized hardware and software and Dell does this very fast.

4. 5 - 4 Some Well Known Companies Having Competitive Advantage Through Their Products Toyota’s competitive advantage is rapid response to changing customer demand. Their shorter design time (less than 2 years which is below the industry standard) gives them a competitive advantage. Regal Marine: introduces six new boats a year. Hospitals specialize to gain competitive advantage, - maternity hospitals, (Çınarlı Maternity Hospital) - children hospitals, - EKOL (Throat, nose and ear hospital in Çiğli, İzmir)

5. 5 - 5© 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

6. 5 - 6© 2011 Pearson Education, Inc. publishing as Prentice Hall Product Strategy Options  Differentiation  Shouldice Hospital in Canada specializing in hernia operation  Low cost  Taco Bell, Walmart  Rapid response  Toyota (product development under 2 years. Industry standard is over 2 years)

7. 5 - 7 Product Life Cycles  May be any length from a few hours (a newspaper), months (cell phones), years (furnitures), to decades (Wolgswagen Beetle)  A product’s life is divided into four phases:1. Introduction, 2. Growth, 3. Maturity, 4. Decline The following figure shows how these four stages are linked to product sales, cash flow and cost. The following figure shows how these four stages are linked to product sales, cash flow and cost.

8. 5 - 8© 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

9. 5 - 9© 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

10. 5 - 10© 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

11. 5 - 11© 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 is required

12. 5 - 12© 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

13. 5 - 13© 2011 Pearson Education, Inc. publishing as Prentice Hall Product-by-Value Analysis  Lists products in descending order (from largest to smallest) of their individual dollar contribution to the firm  Lists the total annual dollar contribution of the product  Helps management to evaluate alternative strategies for each product so that limited existing resourses are to be invested in few critical and not in many trivial.

14. 5 - 14© 2011 Pearson Education, Inc. publishing as Prentice Hall Product-by-Value Analysis Individual Contribution ($) Total Annual Contribution ($) Recliner$136$51,000 Couch$102$36,720 Arm Chair$87$71,765 Foot Stool$12$6,240 Sam’s Furniture Factory

15. 5 - 15© 2011 Pearson Education, Inc. publishing as Prentice Hall Importance of New Products Industry leader Top third Middle third Bottom third Figure 5.2a Percentage of Sales from New Products 50% 40% 30% 20% 10% Position of Firm in Its Industry

16. 5 - 16© 2011 Pearson Education, Inc. publishing as Prentice Hall Scope of product development team Product Development Stages Scope for design and engineering teams Evaluation Introduction Test Market Functional Specifications Design Review Product Specifications Customer Requirements Ability Ideas Figure 5.3

17. 5 - 17 Four Approaches to Organizing for Product Development 1) Historically – distinct departments R&D Dept, Eng. Dept, Mnfg. Eng. Dept, Prod. Dept.  Duties and responsibilities are well defined (Advantage)  Difficult to foster forward thinking (Disadvantage)

18. 5 - 18 Organizing for Product Development 2) A Champion  To assign a product manager to champion the product through the product development system and related organizations

19. 5 - 19 Organizing for Product Development 3) Team approach (Concurrent Engineering)  Cross functional – representatives from all disciplines or functions  Product development teams, design for manufacturability teams, value engineering teams Marketability, manufacturability, serviceability 4) Japanese “whole organization” approach  No organizational divisions, no teams

20. 5 - 20© 2011 Pearson Education, Inc. publishing as Prentice Hall Quality Function Deployment (QFD) 1.Identify what will satisfy the customer 2.Translate those customer desires into the TARGET DESIGN

21. 5 - 21 House of Quality (A Graphic Technique) A part of the QFD process that utilizes a planning matrix to relate “what” customer wants to “how” the company is going to meet those “wants”.

22. 5 - 22© 2011 Pearson Education, Inc. publishing as Prentice Hall House of Quality Example Your team has been charged with designing a new camera for Great Cameras, Inc. The first action is to construct a House of Quality

23. 5 - 23© 2011 Pearson Education, Inc. publishing as Prentice Hall House of Quality Example Customer importance rating (5 = highest) Lightweight 3 Easy to use 4 Reliable5 Easy to hold steady 2 Color correction1 What the customer wants What the Customer Wants Relationship Matrix Technical Attributes and Evaluation How to Satisfy Customer Wants Interrelationships Analysis of Competitors

24. 5 - 24© 2011 Pearson Education, Inc. publishing as Prentice Hall House of Quality Example What the Customer Wants Relationship Matrix Technical Attributes and Evaluation How to Satisfy Customer Wants Interrelationships Analysis of Competitors Low electricity requirements Aluminum components Auto focus Auto exposure Paint pallet Ergonomic design How to Satisfy Customer Wants

25. 5 - 25© 2011 Pearson Education, Inc. publishing as Prentice Hall Lightweight 3 Easy to use 4 Reliable5 Easy to hold steady 2 Color corrections1 House of Quality Example What the Customer Wants Relationship Matrix Technical Attributes and Evaluation How to Satisfy Customer Wants Interrelationships Analysis of Competitors High relationship Medium relationship Low relationship Relationship matrix

26. 5 - 26© 2011 Pearson Education, Inc. publishing as Prentice Hall House of Quality Sequence Figure 5.4 Deploying resources through the organization in response to customer requirements Production process Quality plan House 4 Specific components Production process House 3 Design characteristics Specific components House 2 Customer requirements Design characteristics House 1

27. 5 - 27 Design for Manufacturability and Value Engineering  DESIGN FOR MANUFACTURABILITY AND VALUE ENGINEERING activities reduce complexity of products, reduce cost, improve functional aspects of product, improve maintainability (serviceability) of the product.  In short, they yield value improvement by focusing on achieving the functional specifications necessary to meet the customer requirements in an optimal way.

28. 5 - 28© 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

29. 5 - 29© 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

30. 5 - 30© 2011 Pearson Education, Inc. publishing as Prentice Hall Modular Design  Products designed in easily segmented components  Adds flexibility to both production and marketing(Customization)  Improved ability to satisfy customer requirements

31. 5 - 31© 2011 Pearson Education, Inc. publishing as Prentice Hall  Using computers to design products and prepare engineering documentation  Shorter development cycles, improved accuracy, lower cost  Supports “mass customization”  3-D Object Modeling Small prototype development Computer Aided Design (CAD)

32. 5 - 32© 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)  CNC Machines

33. 5 - 33© 2011 Pearson Education, Inc. publishing as Prentice Hall 1.Better Product quality 2.Shorter design time 3.Less Production cost 4.Database availability Benefits of CAD/CAM

34. 5 - 34© 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

35. 5 - 35 Value Analysis versus Value Engineering  While Value Engineering focuses on preproduction design improvement, Value Analysis takes place during the production process.  Value Analysis seeks improvements leading either to a better product or a product which can be produced more economically.

36. 5 - 36 Ethics and Environmentally Friendly Designs It is possible to enhance productivity, drive down costs, and preserve resources. Effective at any stage of the product life cycle  Design  Production  Destruction

37. 5 - 37 Guidelines for Environmentally Friendly Designs 1.Make products recyclable 2.Use recycled materials 3.Use less harmful ingredients (Using soy-based inks) 4. Use lighter components Mercedes is using banana plant fiber for car exteriors Biodegradable and lightweight 5. Use less energy 6. Use less material

38. 5 - 38 OM Strategies need to be sensitive to limited enviromental resources Design: Nike’s new Air Jordan Shoes - very little chemical-based glue - recycled outsole Production: Ban Roll-On - repackaging in smaller cartons Destruction: BMW - recycles most of a car including plastic components

39. 5 - 39© 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.  Instead of developing new products from scratch, other strategies can be used SUCH AS

40. 5 - 40© 2011 Pearson Education, Inc. publishing as Prentice Hall Product Development Strategies  By Purchasing a Firm (Microsoft acquired Hotmail for $500 million in 1997)  Through Joint Ventures (GM & Toyota, Fuji & Xerox)  Both organizations learn  Risks are shared  Through Alliances (Sturbuck & Barnes and Noble)  Cooperative agreements between independent organizations, each remains independent, but uses complementing strengths

41. 5 - 41© 2011 Pearson Education, Inc. publishing as Prentice Hall Defining The Product  Only after the functions of a product are defined, design specifications to achieve these functions are determined and decisions regarding equipment, layout and human resources are made.

42. 5 - 42 Documents for Defining a Product An engineering drawing List the components of a product, Bill of material (BOM) © 2011 Pearson Education, Inc. publishing as Prentice Hall

43. 5 - 43© 2011 Pearson Education, Inc. publishing as Prentice Hall Engineering Drawings Figure 5.8

44. 5 - 44© 2011 Pearson Education, Inc. publishing as Prentice Hall Bills of Material BOM for Panel Weldment NUMBERDESCRIPTIONQTY A 60-71PANEL WELDM’T1 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 WELDM’T1 R 60-99 WEAR PLATE1 02-50-1150 BOLT1 Figure 5.9 (a)

45. 5 - 45 A Product Structure Diagram Showing BOM

46. 5 - 46© 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

47. 5 - 47© 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

48. 5 - 48© 2011 Pearson Education, Inc. publishing as Prentice Hall 1.Simplified production planning and control 2.Improved layout, routing, and machine loading 3.Reduced tooling setup time, work-in-process, and production time Group Technology Benefits

49. 5 - 49© 2011 Pearson Education, Inc. publishing as Prentice Hall Documents for Production  Assembly drawing  Assembly chart  Route sheet  Work order  Engineering change notices (ECNs)

50. 5 - 50© 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)

51. 5 - 51© 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

52. 5 - 52© 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

53. 5 - 53© 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

54. 5 - 54© 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 helps customization  Reduce customer interaction, often through automation

55. 5 - 55© 2011 Pearson Education, Inc. publishing as Prentice Hall Service Design Figure 5.12

56. 5 - 56© 2011 Pearson Education, Inc. publishing as Prentice Hall Service Design Figure 5.12

57. 5 - 57© 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

58. 5 - 58© 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

59. 5 - 59© 2011 Pearson Education, Inc. publishing as Prentice Hall (.6) Low sales (.4) High sales (.6) Low sales (.4) High sales Decision Tree Example (A semiconductor manufacturer wants to produce a new microprocessor) Purchase CAD Hire and train engineers Do nothing Figure 5.14

60. 5 - 60© 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)

61. 5 - 61© 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

62. 5 - 62© 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