Design of Goods

5 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. 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

2011 Pearson Education, Inc. publishing as Prentice Hall 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)

2011 Pearson Education, Inc. publishing as Prentice Hall 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 Loss

Introduction Growth Maturity Decline

Figure 5.1

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 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

2011 Pearson Education, Inc. publishing as Prentice Hall 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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 Product Life Cycle
Maturity Phase

Competitors now established

High volume, innovative
production may be needed
Improved cost control is
required

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 Product Life Cycle

Decline Phase

Unless product makes a special

contribution to the organization,
must plan to terminate offering

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 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.

2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 13

 Product-by-Value Analysis

Sams Furniture Factory

Individual Total Annual

Contribution ($) Contribution ($)
Recliner $136 $51,000
Couch $102 $36,720
Arm Chair $87 $51,765
Foot Stool $12 $6,240

2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 14

 Product Development
Ideas
System
Ability Figure 5.3

Customer Requirements

Functional Specifications

Product Specifications Scope for

Scope of design and
product Design Review engineering
development teams
team Test Market

Introduction

Evaluation

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 Quality Function
Deployment
1.Identify what will satisfy
the customer
2.Translate those
customer desires into
the TARGET DESIGN

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 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 - 17
 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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 House of Quality Example
Interrelationships

How to Satisfy
Customer Wants

Competitors
Analysis of
What the What the
Customer
Relationship
Matrix
customer Wants

wants Technical
Attributes and
Evaluation

Customer
importance
Lightweight 3 rating
(5 = highest)
Easy to use 4
Reliable 5
Easy to hold steady 2
Color correction 1

2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 19

 House of Quality Example
Interrelationships

How to Satisfy
Customer Wants
Low electricity requirements

Competitors
Analysis of
What the
Relationship
Customer
Matrix
Aluminum components Wants

Technical
Attributes and
Evaluation

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

2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 20

 Interrelationships

House of Quality Example How to Satisfy

Customer Wants

Competitors
Analysis of
What the
Relationship
Customer
Matrix
Wants

High relationship Technical

Attributes and
Evaluation

Medium relationship
Low relationship

Lightweight 3
Easy to use 4
Reliable 5
Easy to hold steady 2
Color corrections 1

Relationship matrix
2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 21
 House of Quality Sequence
Deploying resources through the
organization in response to
customer requirements

Quality
plan
Production
process

Production
Specific

process
components House

components
4

Specific
Design House
characteristics

characteristics
3
House
Design
requirements

2
Customer

House
1

Figure 5.4

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 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 - 23
 Organizing for Product
Development
2) A Champion
To assign a product manager to
champion the product through the
product development system and
related organizations

5 - 24
 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
5 - 25
 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 - 26
 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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 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

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 Modular Design

Products designed in easily

segmented components
Adds flexibility to both production
and marketing
Improved ability to satisfy customer
requirements

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 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
2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 30
 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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 Benefits of CAD/CAM

1. Better Product quality

2. Shorter design time
3. Less Production cost
4. Database availability

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 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

2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 33

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 - 34
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 - 35
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 - 36
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 - 37
 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

2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 38

 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
2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 39
 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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 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

2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 41