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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

2011 Pearson Education, Inc. publishing as Prentice Hall

5-1

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

Assembly line production


JIT
2011 Pearson Education, Inc. publishing as Prentice Hall

5-2

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.
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Some Well Known Companies Having


Competitive Advantage Through Their
Products
Toyotas 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, (narl Maternity Hospital)
- children hospitals,
- EKOL (Throat, nose and ear hospital in ili,
zmir)
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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

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5-5

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)

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5-6

Product Life Cycles


May be any length from a few hours
(a newspaper), months (cell
phones), years (furnitures), to
decades (Wolgswagen Beetle)
A products 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.
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Sales, cost, and cash flow

Product Life Cycles


Cost of development and production
Sales revenue
Net revenue (profit)

Cash
flow
Negative
cash flow

Introduction

Loss

Growth

Maturity

Decline
Figure 5.1

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5-8

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
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5-9

Product Life Cycle


Growth Phase
Product design begins to
stabilize
Effective forecasting of
capacity becomes necessary
Adding or enhancing capacity
may be necessary
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5 - 10

Product Life Cycle


Maturity Phase
Competitors now established
High volume, innovative
production may be needed
Improved cost control is
required

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5 - 11

Product Life Cycle


Decline Phase
Unless product makes a
special contribution to the
organization, must plan to
terminate offering

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5 - 12

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 so that limited
existing resourses are to be invested
in few critical and not in many trivial.

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5 - 13

Product-by-Value Analysis
Sams Furniture Factory
Individual
Contribution ($)

Total Annual
Contribution ($)

Recliner

$136

$51,000

Couch

$102

$36,720

Arm Chair

$87

$51,765

Foot Stool

$12

$6,240

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5 - 14

Importance of New Products


Percentage of Sales from New Products

50%
40%
30%
20%
10%

Industry
leader

Top
third

Middle
third

Bottom
third

Position of Firm in Its Industry


2011 Pearson Education, Inc. publishing as Prentice Hall

Figure 5.2a
5 - 15

Product Development
Ideas
System

Figure 5.3

Ability
Customer Requirements
Functional Specifications
Scope of
product
development
team

Product Specifications Scope for


design and
Design Review
engineering
teams
Test Market
Introduction
Evaluation

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5 - 16

Quality Function
Deployment

1.Identify what will satisfy


the customer
2.Translate those customer
desires into the TARGET
DESIGN
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5 - 17

House of Quality
A part of the QFD process
that utilizes a planning matrix
to relate customer wants to
how the company is going
to meet those wants.

5 - 18

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

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5 - 19

House of Quality Example

Interrelationships

What the
Customer
Wants

Technical
Attributes and
Evaluation

What the
customer
wants

Lightweight
Easy to use
Reliable
Easy to hold steady
Color correction
2011 Pearson Education, Inc. publishing as Prentice Hall

Relationship
Matrix

Analysis of
Competitors

How to Satisfy
Customer Wants

Customer
importance
rating
(5 = highest)

3
4
5
2
1
5 - 20

House of Quality Example

Interrelationships

Relationship
Matrix

2011 Pearson Education, Inc. publishing as Prentice Hall

Ergonomic design

Paint pallet

Auto exposure

Auto focus

Technical
Attributes and
Evaluation

Aluminum components

Low electricity requirements

What the
Customer
Wants

Analysis of
Competitors

How to Satisfy
Customer Wants

How to Satisfy
Customer Wants

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House of Quality Example

Interrelationships

What the
Customer
Wants

High relationship
Medium relationship
Low relationship
Lightweight
Easy to use
Reliable
Easy to hold steady
Color corrections

Relationship
Matrix

Analysis of
Competitors

How to Satisfy
Customer Wants

Technical
Attributes and
Evaluation

3
4
5
2
1

Relationship matrix
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5 - 22

House of Quality Sequence


Deploying resources through the
organization in response to
customer requirements

Customer
requirements

Design
characteristics

House
1

Design
characteristics

Specific
components

House
2

Specific
components

Production
process

House
3

Production
process

Quality
plan

House
4

Figure 5.4
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5 - 23

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)
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Organizing for Product


Development
2) A Champion
To assign a product manager to
champion the product through the
product development system and
related organizations

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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
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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.
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Issues for Product


Development
Robust design
Modular design
Computer-aided design (CAD)
Computer-aided manufacturing (CAM)
Virtual reality technology
Value analysis
Environmentally friendly design
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5 - 28

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

2011 Pearson Education, Inc. publishing as Prentice Hall

5 - 29

Modular Design
Products designed in easily
segmented components
Adds flexibility to both production
and marketing
Improved ability to satisfy customer
requirements

2011 Pearson Education, Inc. publishing as Prentice Hall

5 - 30

Computer Aided Design


(CAD)
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
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5 - 31

Computer-Aided
Manufacturing (CAM)
Utilizing specialized computers
and program to control
manufacturing equipment
Often driven by the CAD system
(CAD/CAM)
CNC Machines
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5 - 32

Benefits of CAD/CAM
1. Better Product quality
2. Shorter design time
3. Less Production cost
4. Database availability

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5 - 33

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
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5 - 34

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.
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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
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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
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OM Strategies need to be sensitive


to limited enviromental resources
Design: Nikes 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
5 - 38

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

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5 - 39

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
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strengths

5 - 40

Defining The Product


Define the functions of product
Define design specifications to
achieve these functions
Prepare an engineering drawing
List the components of a product,
Bill of material (BOM)
Determine equipment, layout and
human resources
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5 - 41

Engineering Drawings

Figure 5.8
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5 - 42

Bills of Material
BOM for Panel Weldment
NUMBER

DESCRIPTION

A 60-71

PANEL WELDMT

A 60-7
R 60-17
R 60-428
P 60-2

LOWER ROLLER ASSM.


ROLLER
PIN
LOCKNUT

1
1
1
1

A 60-72
R 60-57-1
A 60-4
02-50-1150

GUIDE ASSM. REAR


SUPPORT ANGLE
ROLLER ASSM.
BOLT

1
1
1
1

A 60-73
A 60-74
R 60-99
02-50-1150

GUIDE ASSM. FRONT


SUPPORT WELDMT
WEAR PLATE
BOLT

1
1
1
1

2011 Pearson Education, Inc. publishing as Prentice Hall

QTY

Figure 5.9 (a)


5 - 43

A Product Structure Diagram


Showing BOM

5 - 44

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
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5 - 45

Group Technology Scheme


(a) Ungrouped Parts

(b) Grouped Cylindrical Parts (families of parts)


Grooved

Slotted

Threaded

Drilled

Machined

Figure 5.10
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5 - 46

Group Technology Benefits


1. Simplified production planning
and control
2. Improved layout, routing, and
machine loading
3. Reduced tooling setup time,
work-in-process, and production
time
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5 - 47

Documents for Production


Assembly drawing
Assembly chart
Route sheet
Work order
Engineering change notices (ECNs)

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5 - 48

Assembly Drawing
Shows
exploded view
of product
Details relative
locations to
show how to
assemble the
product
Figure 5.11 (a)
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5 - 49

Assembly Chart
1
2
3
4
5
6
7
8
9
10

R 209 Angle
R 207 Angle
Bolts w/nuts (2)

Left
bracket
SA
A1
1 assembly

R 209 Angle
R 207 Angle
Bolts w/nuts (2)

Right
SA bracket A2
2 assembly

Identifies the point of


production where
components flow into
subassemblies and
ultimately into the
final product

Bolt w/nut
R 404 Roller

A3

Lock washer
Part number tag

Poka-yoke
inspection
A4

Box w/packing material


11

A5

Figure 5.11 (b)


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5 - 50

Route Sheet
Lists the operations and times required
to produce a component
Process

Machine

Operations

Auto Insert 2

2
3

Manual
Insert 1
Wave Solder

Test 4

Insert Component
Set 56
Insert Component
Set 12C
Solder all
components
to board
Circuit integrity
test 4GY

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Setup
Time

Operation
Time/Unit

1.5

.4

.5

2.3

1.5

4.1

.25

.5

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Work Order
Instructions to produce a given quantity
of a particular item, usually to a schedule
Work Order
Item

Quantity

Start Date

Due Date

157C

125

5/2/08

5/4/08

Production
Dept

Delivery
Location

F32

Dept K11

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5 - 52

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
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5 - 53

Service Design

Figure 5.12
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5 - 54

Service Design

Figure 5.12
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5 - 55

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

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5 - 56

Application of Decision
Trees to Product Design
Procedures
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
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5 - 57

Decision Tree Example (A semiconductor


manufacturer wants to produce a new
microprocessor)
(.4)

Purchase CAD

High sales

(.6) Low sales

Hire and train engineers


(.4)
High sales

(.6)
Low sales

Do nothing
Figure 5.14
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5 - 58

Decision Tree Example


(.4)

Purchase CAD

High sales

(.6) Low sales

Hire and train engineers

$2,500,000
- 1,000,000
- 500,000
$1,000,000
$800,000
- 320,000
- 500,000
- $20,000

Revenue
Mfg cost ($40 x 25,000)
CAD cost
Net
Revenue
Mfg cost ($40 x 8,000)
CAD cost
Net loss

(.4)
High sales

EMV (purchase CAD system) = (.4)($1,000,000) + (.6)(- $20,000)


(.6)
Low sales

Do nothing
Figure 5.14
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5 - 59

Decision Tree Example


(.4)

Purchase CAD
$388,000

High sales

(.6) Low sales

Hire and train engineers

$2,500,000
- 1,000,000
- 500,000
$1,000,000
$800,000
- 320,000
- 500,000
- $20,000

Revenue
Mfg cost ($40 x 25,000)
CAD cost
Net
Revenue
Mfg cost ($40 x 8,000)
CAD cost
Net loss

(.4)
High sales

EMV (purchase CAD system) = (.4)($1,000,000) + (.6)(- $20,000)


= $388,000
(.6)
Low sales

Do nothing
Figure 5.14
2011 Pearson Education, Inc. publishing as Prentice Hall

5 - 60

Decision Tree Example


(.4)

Purchase CAD
$388,000

High sales

(.6) Low sales

Hire and train engineers


$365,000
(.4)

High sales

(.6)
Low sales

Do nothing $0

$2,500,000
- 1,000,000
- 500,000
$1,000,000
$800,000
- 320,000
- 500,000
- $20,000
$2,500,000
- 1,250,000
- 375,000
$875,000
$800,000
- 400,000
- 375,000
$25,000
$0 Net

2011 Pearson Education, Inc. publishing as Prentice Hall

Revenue
Mfg cost ($40 x 25,000)
CAD cost
Net
Revenue
Mfg cost ($40 x 8,000)
CAD cost
Net loss
Revenue
Mfg cost ($50 x 25,000)
Hire and train cost
Net
Revenue
Mfg cost ($50 x 8,000)
Hire and train cost
Net

Figure 5.14
5 - 61