C H A P T E R

Design of Goods and Services

DISCUSSION QUESTIONS
1. Explicit documentation accomplishes two things: (a) it provides the information necessary to produce the product in the appropriate fashion (b) if the product we produce does not perform as we anticipated, the documentation provides the basis for nding and correcting the problems in a logical manner. 2. Product denition includes engineering drawings, written specications, bill-of-materials, formulas, portion control documents, scripts, insurance policies, etc. 3. Investment, market share, product life cycle, and breadth of the product line are all linked to the product decision. 4. Once a manufactured product is dened, the documents used are:
I I I I I I

10. A bill of materials lists the components, their description, and the quantity of each required to make one unit of the product. 11. An engineering drawing shows the dimensions, tolerances, materials, and nishes of a component. 12. An assembly chart shows in schematic form how a product is assembled. Along with a list of the operations necessary to produce a component, the process sheet includes specic methods of operation and labor standards. 13. The moment-of-truth is the moment that exemplies, detracts from, or enhances the customers expectations. 14. House of Quality is a rigorous method aimed at that specic result. It identies customer wants, and relates them to product attributes and rm abilities. It orders the wants and measures the strength of the links between wants and attributes. 15. CAD advantages include:
I I

assembly drawings assembly charts route sheets job instructions standards manuals work orders

lower cost and better designs feeding information to such departments as purchasing, manufacturing, and technical documentation encouraging integration of information with all departments of a manufacturing organization

5. Time-based competition uses a competitive strategy of getting products to market rapidly and may include rapid design, efcient delivery systems, and JIT manufacturing. 6. Joint ventures are combined ownership between two rms to form a new entity with a new mission. Alliances are cooperative agreements that allow rms to remain independent, but use complementing strengths to pursue strategies that support their individual missions. 7. Japaneseintegrate product development into one organization; Traditionaldifferent phases of development done in distinct departments; Champion (or Product Manager)a manager shepherds the product through the development process; Teams product development teams, design for manufacturability teams, value engineering teams. This last version seems to work best in the West. 8. Robust design means the product is designed so that small variations in production or assembly do not adversely affect the product. 9. CAD benets: maintain various kinds of engineering standards; check interference on parts that must t together; and efciently analyze existing and new designs for technical attributes such as strength, stress, and heat transfer.

16. CAD aids all three strategy conceptsdifferentiation, low cost, and response.
I

CAD allows more designs to be developed, evaluated, and submitted to production faster. It does this by fostering evaluation of options faster and simultaneously provides a more analytical evaluation that increases opportunities for differentiation and cost reduction. Drawings, tooling information, and control information for numerical controlled machinery are submitted faster.

CRITICAL THINKING EXERCISE

The functional approach certainly provides for xing responsibility for task, budget, and time, but does lack integration between the functions. Integrated organizations seem to work very well in Japan, but that is a unique culture and may not be applicable elsewhere. Project managers (or Product Champion) can sometimes be effective in pulling together the sundry intereststhe managers style, authority, and budget can all make a difference in the success of such an approach. The down side is if these capabilities are not present than good results may not occur. Similarly, teams, when properly constituted can sometimes be effective, but effective team building skills are not always present.

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Including environmental concerns in design raises a number of issues suitable for discussion. One, in a consumer society we are satisfying the consumer; so what are the environmental issues that concern the consumera good house of quality approach should address these. If we add the consumer concerns that manifest themselves in legislation, those too should be considered. And if management is sensitive to the issues, then environmental issues should be adequately considered.

5. How sensitive is the decision to the manufacturing costs without CAD? At low costs we hire engineers. At high costs we use CAD. The breakeven point is $48. 6. How sensitive is the decision to the manufacturing costs with CAD? At low costs we purchase CAD while at high costs we hire engineers. The breakeven point is $41.

ACTIVE MODEL EXERCISE

ACTIVE MODEL 5.1: Decision Tree
1. For what range of probabilities of high sales should we purchase the CAD system ? Any probability above .27 2. Favorable market sales has been dened as 25,000 units. Suppose this is optimistic. At what value would we change our decision and hire engineers? 19,200

END OF CHAPTER PROBLEMS

5.1 Shown below is a house of quality for a sports watch in the under $50 market. Students can nd similar watches in stores or on the web. This house includes features and comparisons for three options. Importance and rating of features are subjective and just developed for this example.

Large LCD Displays Clear instructions Weight of watch Ergonomic design of clasp Average life to failure Lumens of lighting Little metal content 3 4 5 2 5 1 40 15 20 3 10 25 12

4.

How does the price affect our decision? At low prices we hire engineers while at high prices we use CAD. The breakeven point is $74.

Relationship High = 5 Medium = 3 Low = 1

Easy to program Lightweight Easy to read Reliable Digital readouts Easy to fasten Our importance ratings

IRONMAN G-SHOCK MOSSIMO G F F G G G F F P G G F F G G P F G G = Good F = Fair P = Poor

CONTROL MATRIX Controls

3. Unfavorable market sales has been dened as 8,000 units. Suppose this is optimistic. At what value would we change our decision and hire engineers? 4,100

5.2 For an existing organization, the student should build a house of quality, entering the wants on the left and entering the hows at the top, similar to those shown in Problem 5.1 above. An example of a House of Quality for a lunch is shown in the text in Solutions to Even Numbered Problems (Appendix VI). 5.3
Define the features that will fulfill the desired attributes such as percent of butterfat and grams of sugar. Design attributes Customer wants Design attributes Features Process DESIGN MATRIX Features

Design a process that Prepare a control will allocate and blend process that will the ratio of ingredients at the right temperature. ensure that the desired ingredients are indeed mixed at the correct OPERATING ratio and temperature. MATRIX Process

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5.4 Individual answer for a bicycle customer in the style of Problem 5.1 above. 5.5 A typical bill-of-material is shown below:
Bill of Material for a Pair of Glasses in a Case Part Number G1001 CBL101 BF101 BB101 BC101 SBL101 SFA101 SF101 RL101 LL101 LTA101 LT101 LTH101 LTE101 RTA101 RT101 RTH101 RTE101 S1001 Description Sun Ban Large in Black Case Black Leather Case Black leather Front Black Leather Back Black Leather Pocket Clip Sun Ban Large Glasses Frame Assembly Alloy Frame Right Sun Ban Large Lens Left Sun Ban Large Lens Left Temple AssemblyLarge Left Temple Left Temple Hinge Left Temple Ear Pad Right Temple AssemblyLarge Right Temple Right Temple Hinge Right Temple Ear Pad Hinge Screws Quantity 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2

Alternate Assembly Chart for the ballpoint pen.

D1 Top casing D2 Pocket clip C3 Plunger cap C4 Plunger C5 Small spring C6 Ratchet cam C8 Refill C9 Large spring C7 Bottom casing C10 Ring Poka Yoke Inspection SB2 A1 B1 SC1 C1

1 2 3 4 5 6 7 8 9 10

5.6

Assembly Chart for the ballpoint pen.

C1 Top casing C2 Pocket clip C3 Plunger cap C4 Plunger C5 Small spring C6 Ratchet cam C8 Refill C9 Large spring C7 Bottom casing C10 Ring Poka Yoke Inspection SB2 A1 SB1 B1

1 2 3 4 5 6 7 8 9 10

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5.7

An assembly chart for the eye-glasses is shown below: Eye Glasses Assembly Chart

1 2 3

SF101 Frame

RL101 Right Lens

SA 4

Frame Assembly SFA101

A4

LL101 Left Lens

4 5 6

LTE101 Temple Ear Pad

LTH101 Temple Hinge

SA 2

Left Temple Assembly LTA101

A2

LT101 Temple

7 8 9

RTE101 Temple Ear Pad

RTH101 Temple Hinge

SA 3

Right Temple Assembly RTA101

A3

RT101 Temple

Q1 10 11 12
BF101 Front

Poka-yoke Inspection

BC101 Clip

SA 1

Case Assembly CBL101

A1

BB101 Back

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5.8

Assembly chart for a table lamp.

B1 Base

5.11
Fixed Cost 45,000 45,000 45,000 65,000 65,000 65,000 75,000 Variable Costs (200,000 0.55) (200,000 0.50) (200,000 0.45) (200,000 0.45) (200,000 0.40) (200,000 0.35) (200,000 0.40) (200,000 0.35) 155,000 145,000 135,000 155,000 145,000 135,000 155,000

1 2 3 4 5 6 7 8 9 10

(0.3) P3 Feet B2 Center pipe B3 Body case Sub-contract B4 Body cap P2 Washer P1 Nut P4 Socket P5 Line cord P6 Plug C1 (151,000) SD1 D1 Low tech (145,000) (0.4) (0.3) (0.7) (0.2) (0.1) (0.9) High-tech (154,000) (0.1)

75,000

145,000

B1

The rm should utilize the low technology approach for a cost of $145,000. 5.12

Test: Inspection (0.6) Proceed 11 P7 Shade B1 49,500,000 (0.4)

Sales Revenue 100,000 550

Study Cost 55,000,000

75,000

550 750) 100,000 750) 100,000

41,250,000

(0.7) Poka Yoke Inspection 55,025,000 Do study

(75,000

56,150,000

(0.3)

(70,000

52,400,000

5.9 There are obviously a very large number of possibilities. Quiznos Honey-bacon-turkey club, regular size, uses a toasted 6 bun (white or wheat), two slices of bacon, three ounces of smoked sliced turkey, 2 Tbsp. shredded lettuce, 1 Tbsp. chopped onion, and 1/2 oz. Honey-mustard sauce. It is wrapped in a 12 square deli paper. 5.10 Possible strategies: Notebook computers (Growth phase): I Increase capacity and improve balance of production system I Attempt to make production facilities more efcient Palm-held computer (Introductory phase): I Increase R&D to better dene required product characteristics I Modify and improve production process I Develop supplier and distribution systems Hand calculator (Decline phase):
I I I I

The company should complete the value analysis for an expected payoff of $55,025,000. 5.13
3,500 (0.5) good (0.5) not good 4,000 deluxe (0.5) good (0.5) not good 400 125 35,000 15,000

elegant

300 500

90 100

35,000 35,000

8,000 15,000

400

70

35,000

7000

do nothing

Concentrate on production and distribution cost reduction Attempt to develop improved product Attempt to develop supplementary product Unless product is of special importance to overall competitive strategy, consider terminating production

Produce the deluxe version; EMV is highest.

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5.14
Good (0.4) Good (0.9) Make (1,690,000) (2,150,000) Try again Fail (0.1) Fail (0.6) 1,000,000 start-up 1,000,000 start-up 1,000,000 re-design 2,000,000 1,000,000 1,000,000 1,000,000 500,000 3,500,000 start-up re-design vendor development purchase pieces

Buy (2,500,000)

1,000,000 start-up 1,000,000 vendor development 500,000 purchase pieces 2,500,000 1,000,000 vendor development 500,000 purchase pieces 1,500,000

Buy (1,500,000)

(a) The best decision would be to buy the semiconductors. This decision has an expected payoff (cost) of $1,500,000. (b) Expected monetary value, minimum cost. (c) The worst that can happen is that Ritz fails at its attempt to make semiconductors, ends up buying them instead, and spends $3,500,000. The best that can happen is that they make the semiconductors and spend only $1,000,000. 5.15 The decision tree is shown below:
On Time .4 $96,000

Internal Engineers $114,200

One Week Late

.5

$108,000

$14,000

$122,000

Two Weeks Late

.1

$120,000

$28,000

$148,000

On Time One Week Late Outsider Bidder $110,200 TwoWeeks Late Three Weeks Late On Time One Week Late Joint Design $109,800 Two Weeks Late Three Weeks Late

.2 .4

$92,000 $92,000 $14,000 $106,000

.3 .1 .1 .3

$92,000 $92,000 $86,000 $86,000

$28,000 $42,000

$120,000 $134,000

$14,000

$100,000

.4 .2

$86,000 $86,000

$28,000 $42,000

$114,000 $128,000

The joint design provides the lowest EMV and hence the lowest expected cost.

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5.16 The modied decision tree and the new payoffs are shown. We have made a second decision on those branches where the yield was only 59 per 100 and have modied the payoffs by adding the revenue and costs associated with the corrections of 5 units per 100. We then pruned those branches with the lowest payoff (which, in both cases, was the branch labeled Do not correct). Here are the EMV calculations: EMV (Design A) = (0.9)($850,000) + (0.1)($1,100,000) = $875,000 EMV (Design B) = (0.8)($750,000) + (0.2)($500,000) = $700,000 Using the high payoff branches, we conclude that the expected monetary values are $875,000 from Design A and $700,000 from Design B. Therefore, the decision when King Electronics has the option of correcting 5 units per 100 is to correct them and use Design A. Decision Tree for Problem 5.16
Improve 5 per 100 $8,850,000 Sales 59,000 at $150 + 750,000 Sales 5,000 at $150 $9,600,000 7,500,000 Mfg. cost 100,000 at $75 250,000 5000 at $50 1,000,000 Design cost $8,750,000 $850,000 $8,850,000 Sales 59,000 at $150 7,500,000 Mfg. cost 100,000 at $75 1,000,000 Design cost $350,000 $9,600,000 Sales 64,000 at $150 7,500,000 Mfg. cost 100,000 at $75 1,000,000 Design cost $1,100,000 $9,600,000 Sales 64,000 at $150 7,500,000 Mfg. cost 100,000 at $75 1,350,000 Design cost $750,000 $8,850,000 Sales 59,000 at $150 + 750,000 Sales 5,000 at $150 $9,600,000 $7,500,000 Mfg. cost 100,000 at $75 250,000 5000 at $50 1,350,000 Design cost $9,100,000 $500,000 Initial Yield 59 Do not improve $8,850,000 Sales 59,000 at $150 $7,500,000 Mfg. cost 100,000 at $75 1,350,000 Design cost 0

Initial Yield 59

(0.9) EMV = $875,000

Do not improve (0.1) Yield 64

Yield 64 (0.8)

Improve 5 per 100 EMV = $700,000 (0.2)

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5.17 Parts classication systems fall into three categories. (see Groover, Mikell, P. Automation, Production Systems, and Computer-Aided Manufacturing, (Upper Saddle River, NJ: Prentice-Hall, 2000). (a) Systems based on part design (b) Systems based on manufacturing attributes (c) Systems based on both design and manufacturing attributes

5.21

Bill of material for a table

Table Table Table Top Frame: Back Front Left Side Right Side Bracket Bolt Washer Nut Legs: Legs Casters 1 1 1 1 1 1 4 4 4 4 4 4

INTERNET HOMEWORK PROBLEMS

Solutions to Problems 5.185.24 that appear on our Internet home page (www.prenhall.com/heizer)
5.18 The answer should look something like the following
Bill of Materials for Curried Couscous Salad with Dried Cranberries Description Curried couscous salad with dried cranberries Salad Un-cooked couscous Dried cranberries Frozen peasthawed Curry powder Boiling water Thinly sliced green onions Finely chopped fresh basil Canned chickpeas Dressing Fresh lemon juice Grated orange ring Water Olive oil Thawed orange juice concentrate Black pepper Garlic cloves, crushed Quantity 1 1 1 1w cups 1 cup 1 cup 1w tsp 2 cups 1r cup 1r cup 15 1w oz

5.22 A bill of material for a computer mouse (GeniMouse) is shown below.

Bill of Material for GeniMouse Part Number Description GM1001 SC004 TA101 CB101 CBC101 RB101 LB101 PB101 BA101 IA101 IS101 IR101 MB101 BW101 BP101 BA101 CA101 DB101 CW101 GML101 GeniMouse Phillips Head No.12 0.5 inch. Screw Top Mouse Assembly Center Button Center Button Clip Right Button Left Button Palm Base Base Assembly Idler Assembly Idler Spring Idler Roller Ball Base Ball Washer Base Rest Pads Board Assembly Cable Assembly Digital Board Control Wheel GeniMouse Label Quantity 1 1 1 1 1 1 1 1 1 1 1 1 1 1 5 1 1 1 2 1

1e cup 1 tblsp 2 tsp 1 1w tblsp 1 tblsp 1r tsp 4

5.19

Product-by-value analysis for products A, B, C, D, E.

Individual Contribution C D A, E B Keep these Investigate these for replacement Total Contribution D C B A E

5.23

Sample bill of materials for a mechanical pencil

ID A1 B1 C1 C2 C3 C4 C5 C6 C7 C8 B2 C9 C10 C11 Description Mechanical Pencil Top half Top casing Pocket clip Plunger cap Plunger Small spring Brass guide Brass Clamp Eraser Lower half Bottom casing Guide Rubber Finger Grip Quantity 1 1 1 1 1 1 1 1 1 1 1 1 1 1

5.20

Bill-of-material for a wooden pencil with eraser.

Description Pencil Wood half Graphite rod Band Eraser Yellow paint Quantity 1 2 1 1 1 2 grams

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An implication (not necessarily correct) in constructing the bill of materials in this fashion is that all assembly operations will be of a similar nature. In the present instance, the assembly of the top casing and the pocket clip would probably be mechanized, while the remaining assembly steps might be done by hand. 5.24 The decision tree is:
High Demand .3 (240,000) (45) 10,800,000

3,240,000 5,670,000 8,910,000

No Change 8,910,000

Low Demand

.7

(180,000) (45)

8,100,000

High Demand

.6

(210,000) (50 3.76)

9,710,400

5,826,240 2,774,400 8,600,640

New Material 8,600,640

Low Demand

.4

(150,000) (50 3.76)

6,936,000

The EMV is maximized when using the existing material.

CASE STUDY
DE MARS PRODUCT STRATEGY
1. De Mars product is primarily service. There is a tangible product (air conditioners and plumbing componentspipe, valves, faucets, blowers, ductwork, etc.), but the distinguishing product is service. 2. Marketing needs to support the product by selling a special, reliable, quality service. Finance needs to support the product by providing friendly, easily obtained nancing. Personnel needs to be careful to convey the service and attitude that goes with a premium service and price. Particularly because of the service nature of much of the product, all functional areas must help develop and deliver the product. 3. Quality: I Must permeate all of the product/service activities Design of the Good and Service: I Both the product and service components must be selected and designed to fulll high quality aspects of the mission. Some aspects of this design will have customer input. Process Strategy: I How the product is prepared and delivered will impact customer satisfaction. In addition to installation and/or repair issues like packaging, neatness, and cleanup will all be part of the process.

Location: I May not be critical at De Mar, because the product is delivered. Layout: I Warehouse layout may impact efciency and speed of delivery for those emergency calls. Human Resources: I Are very important, because of the customer contact inherent in the product/service and the critical element of estimating that must be done very accurately. Supply Chain: I The quality of the equipment chosen for initial installation and parts will make substantial difference in the product/service delivered. Consequently, the relationship between De Mar and its suppliers is very important. Inventory: I The proper inventory and the accurate documentation and locations of that inventory are also important. Scheduling: I These clients will expect effective schedulinghaving the right part and personnel available as needed and then meeting the established delivery/repair schedule. Maintenance: I Repair and maintenance of trucks and test equipment may be the most critical elements here.

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VIDEO CASE STUDY

PRODUCT DESIGN AT REGAL MARINE
The 7 minute video available from Prentice Hall, lmed specically for this text, supplements the written case. A 2 minute edited version of the video also appears on the student CD in the text. 1. The concept of product life cycle applies to Regal Marine because Regal is constantly under pressure to introduce new productsand those products have life cycles of relatively few years. As the video suggests, it is a matter of typically less than ve years before a boat is out of style and its life cycle terminated. This is a long life cycle compared to a newspaper or magazine, but if you are the production manager it seems rather short. 2. Regal Marine uses a strategy of product differentiation, which constantly introduces new products with new innovations

and new styling to stay competitive in the luxury performance boat market. 3. The cost and time saving at Regal Marine through use of CAD is typical of the use of CAD everywhere. It allows a variety of designs and styles to be tested very economically. The ratio of savings of engineering talent is about four to one. Most importantly, it allows them to be creative economically and rapidly. 4. The payoff from CAD is not only evident in efciency, creative designs, and styling but by production of the code necessary for the numerical machines, such as the machines used to make the plugs in Washington state and for those applications of the numerical control machines at Regal Marine. CAD also provides, as a by-product, very effective and comprehensive documentation of design variables.