1. 5 Design of Goods and Services Heizer and Render
Principles of Operations Management, 8e
PowerPoint slides by Jeff Heyl

2. 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. Product Decision
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

4. Product Decision 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

5. Product Strategy Options
Differentiation
Shouldice Hospital
Low cost
Taco Bell
Rapid response
Toyota

6. Product Life Cycles May be any length from a few hours to decades
The operations function must be able to introduce new products successfully

7. Product Life Cycle Introductory Phase Growth Phase
Fine tuning may warrant unusual expenses for
Research
Product development
Process modification and enhancement
Supplier development
Growth Phase
Product design begins to stabilize
Effective forecasting of capacity becomes necessary
Adding or enhancing capacity may be necessary

8. Product Life Cycle Maturity Phase Decline Phase
Competitors now established
High volume, innovative production may be needed
Improved cost control, reduction in options, paring down of product line
Decline Phase
Unless product makes a special contribution to the organization, must plan to terminate offering

9. Product Life Cycle Costs
Concept Detailed Manufacturing Distribution,
design design service,
prototype and disposal
Percent of total cost
100 –
80 –
60 –
40 –
20 –
0 –
Costs committed
Costs incurred
Ease of change

10. 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

11. New Product Opportunities
Understanding the customer
Economic change
Sociological and demographic change
Technological change
Political/legal change
Market practice, professional standards, suppliers, distributors
Brainstorming is a useful tool

12. Disney Attendance

13. Product Development System

14. Quality Function Deployment
Identify customer wants
Identify how the good/service will satisfy customer wants
Relate customer wants to product hows
Identify relationships between the firm’s hows
Develop importance ratings
Evaluate competing products
Compare performance to desirable technical attributes

15. Competitive assessment
QFD House of Quality
How to satisfy
customer wants
Interrelationships
What the customer
wants
Customer importance ratings
Competitive assessment
Relationship
matrix
Weighted rating
Technical
evaluation
Target values

16. 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

17. House of Quality Example
What the Customer
Wants
Relationship
Matrix
Technical
Attributes and
Evaluation
How to Satisfy
Customer Wants
Interrelationships
Analysis of
Competitors
What the customer wants
Customer
importance
rating
(5 = highest)
Lightweight 3
Easy to use 4
Reliable 5
Easy to hold steady 2
Color correction 1

18. 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
Ergonomic design
Auto exposure
Auto focus
Paint pallet
How to Satisfy
Customer Wants

19. 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
Lightweight 3
Easy to use 4
Reliable 5
Easy to hold steady 2
Color corrections 1
Relationship matrix

20. House of Quality

21. House of Quality Lightweight 3 Easy to use 4 Reliable 5
What the Customer
Wants
Relationship
Matrix
Technical
Attributes and
Evaluation
How to Satisfy
Customer Wants
Interrelationships
Analysis of
Competitors
Lightweight 3
Easy to use 4
Reliable 5
Easy to hold steady 2
Color corrections 1
Our importance ratings
Weighted rating

22. Our importance ratings 22 5
What the Customer
Wants
Relationship
Matrix
Technical
Attributes and
Evaluation
How to Satisfy
Customer Wants
Interrelationships
Analysis of
Competitors
Company A
Company B
G P
F G
P P
Lightweight 3
Easy to use 4
Reliable 5
Easy to hold steady 2
Color corrections 1
Our importance ratings 22 5
How well do competing products meet customer wants

23. (Technical attributes)
What the Customer
Wants
Relationship
Matrix
Technical
Attributes and
Evaluation
How to Satisfy
Customer Wants
Interrelationships
Analysis of
Competitors
Target values
(Technical attributes)
Technical evaluation
Company A % yes 1 ok G
Company B % yes 2 ok F
Us % yes 2 ok G
Failure 1 per 10,000
Panel ranking
2 circuits
2’ to ∞
0.5 A
75%

24. Completed House of Quality
Lightweight 3
Easy to use 4
Reliable 5
Easy to hold steady 2
Color correction 1
Our importance ratings
Low electricity requirements
Aluminum components
Ergonomic design
Auto exposure
Auto focus
Paint pallet
Company A
Company B
G P
F G
P P
Target values
(Technical attributes)
Technical evaluation
Company A % yes 1 ok G
Company B % yes 2 ok F
Us % yes 2 ok G
Failure 1 per 10,000
Panel ranking
2 circuits
2’ to ∞
0.5 A
75%
Completed House of Quality

25. House of Quality Sequence
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
Figure 5.4

26. Organizing for Product Development
Historically – distinct departments
Duties and responsibilities are defined
Difficult to foster forward thinking
A Champion
Product manager drives the product through the product development system and related organizations
Team approach
Cross functional – representatives from all disciplines or functions
Product development teams, design for manufacturability teams, value engineering teams
Japanese “whole organization” approach
No organizational divisions

27. Manufacturability and Value Engineering
Benefits:
Reduced complexity of products
Reduction of environmental impact
Additional standardization of products
Improved functional aspects of product
Improved job design and job safety
Improved maintainability (serviceability) of the product
Robust design

28. 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. Issues for Product Development 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
Modular Design
Products designed in easily segmented components
Adds flexibility to both production and marketing
Improved ability to satisfy customer requirements

30. Issues for Product Development Computer Aided Design (CAD)
Using computers to design products and prepare engineering documentation
Shorter development cycles, improved accuracy, lower cost
Information and designs can be deployed worldwide

31. Issues for Product Development Extensions of CAD
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

32. Computer-Aided Manufacturing (CAM)
Utilizing specialized computers and program to control manufacturing equipment
Often driven by the CAD system (CAD/CAM)
Benefits of CAD/CAM
Product quality
Shorter design time
Production cost reductions
Database availability
New range of capabilities

33. Issues for Product Development 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
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

34. 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

35. Ethics, Environmentally Friendly Designs, and Sustainability
Polyester film and shoes
Production
Prevention in production and packaging
Destruction
Recycling in automobiles

36. 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

37. The Ethical Approach Goals
Developing safe end environmentally sound practices
Minimizing waste of resources
Reducing environmental liabilities
Increasing cost-effectiveness of complying with environmental regulations
Begin recognized as a good corporate citizen

38. Guidelines for Environmentally Friendly Designs
Make products recyclable
Use recycled materials
Use less harmful ingredients
Use lighter components
Use less energy
Use less material

39. Laws and Industry Standards
For Design …
Food and Drug Administration
Consumer Products Safety Commission
National Highway Safety Administration
Children’s Product Safety Act
Occupational Safety and Health Administration
Environmental Protection Agency
Professional ergonomic standards
State and local laws dealing with employment standards, discrimination, etc.
Vehicle Recycling Partnership
Increasingly rigid laws worldwide
For Manufacture/Assembly …
For Disassembly/Disposal …

40. 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

41. Product Development Continuum

42. Acquiring Technology By Purchasing a Firm Through Joint Ventures
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

43. Defining A 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

44. Defining A Product: Product Documents
Engineering drawing
Shows dimensions, tolerances, and materials
Shows codes for Group Technology
Bill of Material
Lists components, quantities and where used
Shows product structure

45. Engineering Drawings
Figure 5.8

46. Bills of Material Hard Rock Cafe’s Hickory BBQ Bacon Cheeseburger
DESCRIPTION QTY
Bun 1
Hamburger patty 8 oz.
Cheddar cheese 2 slices
Bacon 2 strips
BBQ onions 1/2 cup
Hickory BBQ sauce 1 oz.
Burger set
Lettuce 1 leaf
Tomato 1 slice
Red onion 4 rings
Pickle 1 slice
French fries 5 oz.
Seasoned salt 1 tsp.
11-inch plate 1
HRC flag 1
Hard Rock Cafe’s Hickory BBQ Bacon Cheeseburger
Figure 5.9 (b)

47. Group Technology
Parts grouped into families with similar characteristics
Coding system describes processing and physical characteristics
Part families can be produced in dedicated manufacturing cells

48. Group Technology Benefits
Improved design
Reduced raw material and purchases
Simplified production planning and control
Improved layout, routing, and machine loading
Reduced tooling setup time, work-in-process, and production time

49. Documents for Production
Assembly drawing
Assembly chart
Route sheet
Work order
Engineering change notices (ECNs)

50. Documents: Assembly Drawing
Shows exploded view of product
Details relative locations to show how to assemble the product
Figure 5.11 (a)

51. Documents: Assembly Chart1 2 3 4 5 6 7 8 9 10 11
R 209 Angle
R 207 Angle
Bolts w/nuts (2)
Bolt w/nut
R 404 Roller
Lock washer
Part number tag
Box w/packing material
SA 1
SA 2 A1 A2 A3 A4 A5
Left bracket
assembly
Right bracket
Poka-yoke inspection
Identifies the point of production where components flow into subassemblies and ultimately into the final product
Figure 5.11 (b)

52. Documents: Route Sheet
Lists the operations and times required to produce a component
Setup Operation
Process Machine Operations Time Time/Unit
1 Auto Insert 2 Insert Component Set 56
2 Manual Insert Component Insert 1 Set 12C
3 Wave Solder Solder all components to board
4 Test 4 Circuit integrity test 4GY

53. Documents: Work Order
Instructions to produce a given quantity of a particular item, usually to a schedule
Work Order
Item Quantity Start Date Due Date
Production Delivery
Dept Location
157C 125 5/2/08 5/4/08
F32 Dept K11

54. Documents: Engineering Change Notice (ECN)
A correction or modification to a product’s definition or documentation
Engineering drawings
Bill of material
Quite common with long product life cycles, long manufacturing lead times, or rapidly changing technologies

55. Documents: Configuration Management
The need to manage ECNs has led to the development of configuration management systems
A product’s planned and changing components are accurately identified and control and accountability for change are identified and maintained

56. 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

57. 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

58. Moments of Truth
Concept created by Jan Carlzon of Scandinavian Airways
Critical moments between the customer and the organization that determine customer satisfaction
There may be many of these moments
These are opportunities to gain or lose business

59. Moments-of-Truth Computer Company Hotline
The technician was sincerely concerned and apologetic about my problem
He asked intelligent questions that allowed me to feel confident in his abilities
The technician offered various times to have work done to suit my schedule
Ways to avoid future problems were suggested
Experience Enhancers
Best
Only one local number needs to be dialed
I never get a busy signal
I get a human being to answer my call quickly and he or she is pleasant and responsive to my problem
A timely resolution to my problem is offered
The technician is able to explain to me what I can expect to happen next
Standard Expectations
Better
I had to call more than once to get through
A recording spoke to me rather than a person
While on hold, I get silence, and wonder if I am disconnected
The technician sounded like he was reading a form of routine questions
The technician sounded uninterested
I felt the technician rushed me
Experience Detractors
Figure 5.13

60. Documents for Services
High levels of customer interaction necessitates different documentation
Often explicit job instructions for moments-of-truth
Scripts and storyboards are other techniques

61. First Bank Corp. Drive-up Teller Service Guidelines
Be especially discreet when talking to the customer through the microphone.
Provide written instructions for customers who must fill out forms you provide.
Mark lines to be completed or attach a note with instructions.
Always say “please” and “thank you” when speaking through the microphone.
Establish eye contact with the customer if the distance allows it.
If a transaction requires that the customer park the car and come into the lobby, apologize for the inconvenience.

62. 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

63. Application of Decision Trees to Product Design
Procedures
Include all possible alternatives and states of nature - including “doing nothing”
Enter payoffs at end of branch
Determine the expected value of each branch and “prune” the tree to find the alternative with the best expected value

64. Hire and train engineers
Decision Tree Example
(.4)
High sales
Purchase CAD
(.6) Low sales
Hire and train engineers
(.4)
High sales
(.6)
Low sales
Do nothing
Figure 5.14

65. Hire and train engineers
Decision Tree Example
(.4)
High sales
$2,500,000 Revenue
- 1,000,000 Mfg cost ($40 x 25,000)
- 500,000 CAD cost
$1,000,000 Net
Purchase CAD
(.6) Low sales
$800,000 Revenue
- 320,000 Mfg cost ($40 x 8,000)
- 500,000 CAD cost
- $20,000 Net loss
(.6)
Low sales
(.4)
High sales
Hire and train engineers
Do nothing
EMV (purchase CAD system) = (.4)($1,000,000) + (.6)(- $20,000)
Figure 5.14

66. Hire and train engineers
Decision Tree Example
(.4)
High sales
$2,500,000 Revenue
- 1,000,000 Mfg cost ($40 x 25,000)
- 500,000 CAD cost
$1,000,000 Net
Purchase CAD
$388,000
(.6) Low sales
$800,000 Revenue
- 320,000 Mfg cost ($40 x 8,000)
- 500,000 CAD cost
- $20,000 Net loss
(.6)
Low sales
(.4)
High sales
Hire and train engineers
Do nothing
EMV (purchase CAD system) = (.4)($1,000,000) + (.6)(- $20,000)
= $388,000
Figure 5.14

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

68. 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

69. 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