Heizer Om10 Ch05 MBA

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
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.
5-3
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)
5-4
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
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)
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.
5-7
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
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
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
5 - 10
Product Life Cycle

Maturity Phase
Competitors now established
High volume, innovative
production may be needed
Improved cost control is
required
5 - 11
Product Life Cycle

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

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
5 - 16
Quality Function
Deployment
1.Identify what will satisfy

the customer
2.Translate those customer
desires into the TARGET
DESIGN
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
5 - 19
Interrelationships
What the
Customer
Wants
Technical
Attributes and
Evaluation
What the
customer
wants
Lightweight
Easy to use
Reliable
Easy to hold steady
Color correction
Relationship
Matrix
Analysis of
Competitors
How to Satisfy
Customer Wants
Customer
importance
rating
(5 = highest)
3
4
5
2
1
5 - 20
Interrelationships
Relationship
Matrix
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
5 - 21
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
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
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)
5 - 24

Development
2) A Champion
To assign a product manager to
champion the product through the
product development system and
related organizations
5 - 25

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
5 - 26
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.
5 - 27
Issues for Product

Development
Robust design
Modular design
Computer-aided design (CAD)
Computer-aided manufacturing (CAM)
Virtual reality technology
Value analysis
Environmentally friendly design
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
5 - 29
Modular Design
Products designed in easily
segmented components
Adds flexibility to both production
and marketing
Improved ability to satisfy customer
requirements
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
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
5 - 32
Benefits of CAD/CAM
1. Better Product quality
2. Shorter design time
3. Less Production cost
4. Database availability
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
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.
5 - 35
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
5 - 36
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
5 - 37
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
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
2011 Pearson Education, Inc.
publishing as Prentice Hall
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
5 - 41
Engineering Drawings
Figure 5.8
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
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
5 - 45
Group Technology Scheme

(a) Ungrouped Parts
(b) Grouped Cylindrical Parts (families of parts)

Grooved
Slotted
Threaded
Drilled
Machined
Figure 5.10
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
5 - 47
Documents for Production

Assembly drawing
Assembly chart
Route sheet
Work order
Engineering change notices (ECNs)
5 - 48
Assembly Drawing
Shows
exploded view
of product
Details relative
locations to
show how to
assemble the
product
Figure 5.11 (a)
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)

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
Setup
Time
Operation
Time/Unit
1.5
.4
.5
2.3
1.5
4.1
.25
.5
5 - 51
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
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
5 - 53
Service Design
Figure 5.12
5 - 54
Service Design
Figure 5.12
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
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
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
5 - 58
Decision Tree Example

(.4)
Purchase CAD
High sales
(.6) Low sales
$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
5 - 59

(.4)
Purchase CAD
$388,000
High sales
(.6) Low sales
$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
5 - 60

(.4)
Purchase CAD
$388,000
High sales
(.6) Low sales

$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
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

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5

PowerPoint presentation to accompany

2011 Pearson Education, Inc. publishing as Prentice Hall

Assembly line production

Some Well Known Companies Having

Some Well Known Companies Having

2011 Pearson Education, Inc. publishing as Prentice Hall

Product Strategy Options

2011 Pearson Education, Inc. publishing as Prentice Hall

Product Life Cycles

Sales, cost, and cash flow

Product Life Cycles

2011 Pearson Education, Inc. publishing as Prentice Hall

Product Life Cycle

Product Life Cycle

Product Life Cycle

2011 Pearson Education, Inc. publishing as Prentice Hall

Product Life Cycle

2011 Pearson Education, Inc. publishing as Prentice Hall

2011 Pearson Education, Inc. publishing as Prentice Hall

2011 Pearson Education, Inc. publishing as Prentice Hall

Importance of New Products

Position of Firm in Its Industry

Product Specifications Scope for

2011 Pearson Education, Inc. publishing as Prentice Hall

1.Identify what will satisfy

House of Quality Example

2011 Pearson Education, Inc. publishing as Prentice Hall

House of Quality Example

House of Quality Example

2011 Pearson Education, Inc. publishing as Prentice Hall

Low electricity requirements

House of Quality Example

House of Quality Sequence

Organizing for Product

Organizing for Product

4) Japanese whole organization approach

DESIGN FOR MANUFACTURABILITY AND VALUE

reduce complexity of products,

improve functional aspects of product,

improve maintainability (serviceability) of the

In short, they yield value improvement by focusing

Issues for Product

2011 Pearson Education, Inc. publishing as Prentice Hall

2011 Pearson Education, Inc. publishing as Prentice Hall

Computer Aided Design

2011 Pearson Education, Inc. publishing as Prentice Hall

Virtual Reality Technology

Value Analysis versus Value

Ethics and Environmentally

Guidelines for Environmentally

4. Use lighter components

Biodegradable and lightweight

5. Use less energy

OM Strategies need to be sensitive

2011 Pearson Education, Inc. publishing as Prentice Hall

By Purchasing a Firm (Microsoft acquired

Through Alliances (Sturbuck & Barnes

Defining The Product

LOWER ROLLER ASSM.

GUIDE ASSM. REAR

GUIDE ASSM. FRONT

2011 Pearson Education, Inc. publishing as Prentice Hall

Figure 5.9 (a)