Operations
Management Operations
Management
Chapter 5 – Chapter 5 –
Design of Goods Design of Goods
and Services and Services
PowerPoint presentation to accompany PowerPoint presentation to accompany
Heizer/Render Heizer/Render
Principles of Operations Management, 7e Principles of Operations Management, 7e
Operations Management, 9e Operations Management, 9e
Outline Outline
Global Company Profile: Regal Global Company Profile: Regal Marine
Marine
Goods and Services SelectionGoods and Services Selection
Product Strategy Options Support Product Strategy Options Support Competitive Advantage
Competitive Advantage
Product Life CyclesProduct Life Cycles
Life Cycle and StrategyLife Cycle and Strategy
Product-by-Value AnalysisProduct-by-Value Analysis
Outline - Continued Outline - Continued
Generating New ProductsGenerating New Products
New Product OpportunitiesNew Product Opportunities
Importance of New Products Importance of New Products
Product DevelopmentProduct Development
Product Development SystemProduct Development System
Quality Function Deployment (QFD)Quality Function Deployment (QFD)
Organizing for Product DevelopmentOrganizing for Product Development
Manufacturability and Value Manufacturability and Value Engineering
Engineering
Outline - Continued Outline - Continued
Issues for Product DesignIssues for Product Design
Robust DesignRobust Design
Modular DesignModular Design
Computer-Aided Design (CAD)Computer-Aided Design (CAD)
Computer-Aided Manufacturing (CAM)Computer-Aided Manufacturing (CAM)
Virtual Reality TechnologyVirtual Reality Technology
Value AnalysisValue Analysis
Ethics and Environmentally Friendly Ethics and Environmentally Friendly Design
Design
Outline - Continued Outline - Continued
Time-Based CompetitionTime-Based Competition
Purchasing Technology by Acquiring Purchasing Technology by Acquiring a Firm
a Firm
Joint VenturesJoint Ventures
Alliances Alliances
Defining a ProductDefining a Product
Make-or-Buy DecisionsMake-or-Buy Decisions
Group TechnologyGroup Technology
Outline - Continued Outline - Continued
Documents For ProductionDocuments For Production
Product Life-Cycle Management (PLM)Product Life-Cycle Management (PLM)
Service DesignService Design
Documents for ServicesDocuments for Services
Application of Decision Trees to Application of Decision Trees to Product Design
Product Design
Transition to ProductionTransition to Production
Learning Objectives Learning Objectives
1.1. Define product life cycleDefine product life cycle
2.2. Describe a product development systemDescribe a product development system 3.3. Build a house of qualityBuild a house of quality
4.4. Describe how time-based competition is Describe how time-based competition is implemented
implemented
When you complete this chapter you should When you complete this chapter you should
be able to : be able to :
Learning Objectives Learning Objectives
5.5. Describe how products and services Describe how products and services are defined
are defined
6.6. Prepare the documents needed for Prepare the documents needed for production
production
7.7. Describe customer participation in the Describe customer participation in the design and production of services
design and production of services
8.8. Apply decision trees to product issuesApply decision trees to product issues When you complete this chapter you should When you complete this chapter you should
be able to : be able to :
Regal Marine Regal Marine
Global marketGlobal market
3-dimensional CAD system3-dimensional CAD system
Reduced product development timeReduced product development time
Reduced problems with toolingReduced problems with tooling
Reduced problems in productionReduced problems in production
Assembly line productionAssembly line production
JITJIT
The good or service the The good or service the
organization provides society organization provides society
Top organizations typically focus on Top organizations typically focus on core products
core products
Customers buy satisfaction, not just Customers buy satisfaction, not just a physical good or particular service a physical good or particular service
Fundamental to an organization's Fundamental to an organization's strategy with implications
strategy with implications
throughout the operations function throughout the operations function
Product Decision
Product Decision
Product Strategy Options Product Strategy Options
DifferentiationDifferentiation
Shouldice HospitalShouldice Hospital
Low costLow cost
Taco BellTaco Bell
Rapid responseRapid response
ToyotaToyota
Product Life Cycles Product Life Cycles
May be any length from a few May be any length from a few hours to decades
hours to decades
The operations function must The operations function must be able to introduce new
be able to introduce new products successfully
products successfully
Product Life Cycles Product Life Cycles
Negative cash flow
Introduction
Introduction GrowthGrowth MaturityMaturity DeclineDecline Sales, cost, and cash flowSales, cost, and cash flow Cost of development and productionCost of development and production
Cash Cash
flowflow
Net revenue (profit) Net revenue (profit) Sales revenue
Sales revenue
LossLoss
Figure 5.1 Figure 5.1
Product Life Cycle Product Life Cycle
Introduction Introduction
Fine tuning may warrant Fine tuning may warrant unusual expenses for
unusual expenses for
ResearchResearch
Product developmentProduct development
Process modification and Process modification and enhancement
enhancement
Supplier developmentSupplier development
Product Life Cycle Product Life Cycle
Growth Growth
Product design begins to Product design begins to stabilize
stabilize
Effective forecasting of Effective forecasting of
capacity becomes necessary capacity becomes necessary
Adding or enhancing capacity Adding or enhancing capacity may be necessary
may be necessary
Product Life Cycle Product Life Cycle
Maturity Maturity
Competitors now establishedCompetitors now established
High volume, innovative High volume, innovative production may be needed production may be needed
Improved cost control, Improved cost control,
reduction in options, paring reduction in options, paring
down of product line down of product line
Product Life Cycle Product Life Cycle
Decline Decline
Unless product makes a Unless product makes a special contribution to the special contribution to the organization, must plan to organization, must plan to
terminate offering terminate offering
Product Life Cycle Costs Product Life Cycle Costs
Costs incurred Costs incurred Costs committed
Costs committed
Ease of change Ease of change
Concept
Concept DetailedDetailed ManufacturingManufacturing Distribution,Distribution, design
design designdesign service,service, prototype
prototype and disposaland disposal
Percent of total costPercent of total cost
100 – 100 – 80 –80 – 60 –60 – 40 –40 – 20 –20 – 0 –0 –
Product-by-Value Analysis Product-by-Value Analysis
Lists products in descending Lists products in descending order of their individual dollar order of their individual dollar
contribution to the firm contribution to the firm
Lists the total annual dollar Lists the total annual dollar contribution of the product contribution of the product
Helps management evaluate Helps management evaluate alternative strategies
alternative strategies
Product-by-Value Analysis Product-by-Value Analysis
Individual
Contribution ($) Total Annual Contribution ($)
Love Seat $102 $36,720
Arm Chair $87 $51,765
Foot Stool $12 $6,240
Recliner $136 $51,000
Sam’s Furniture Factory Sam’s Furniture Factory
New Product Opportunities New Product Opportunities
1.1. Understanding the Understanding the customer
customer
2.2. Economic changeEconomic change 3.3. Sociological and Sociological and
demographic change demographic change 4.4. Technological changeTechnological change 5.5. Political/legal changePolitical/legal change
6.6. Market practice, professional Market practice, professional
standards, suppliers, distributors standards, suppliers, distributors
Brainstorming is a useful tool
Importance of New Products Importance of New Products
Industry Industry
leader
leader Top Top third
third Middle Middle third
third Bottom Bottom third third
Figure 5.2 Figure 5.2
Percentage of Sales from New Products Percentage of Sales from New Products
50%
40%
30%
20%
10%
Position of Firm in Its Industry Position of Firm in Its Industry
50 –50
40 –40
30 –30
20 –20
10 –10
0 –0
Millions of visitors Millions of visitors
8484 8686 8888 9090 9292 9494 9696 9898 0000 0202 0404
New Products at Disney New Products at Disney
Magic Kingdom Magic Kingdom
Combined data only prior to 1993 Combined data only prior to 1993 Disney-MGM Studios
Disney-MGM Studios Epcot
Epcot
Animal Kingdom Animal Kingdom
Figure 5.2 Figure 5.2
Scope of product development
team
Product Development Product Development
System System
Scope for design and engineering
teams
Evaluation Introduction Test Market
Functional Specifications
Design Review
Product Specifications Customer Requirements
Ability Ideas
Figure 5.3 Figure 5.3
Quality Function Quality Function
Deployment Deployment
Identify customer wantsIdentify customer wants
Identify how the good/service will satisfy Identify how the good/service will satisfy customer wants
customer wants
Relate customer wants to product howsRelate customer wants to product hows
Identify relationships between the firm’s howsIdentify relationships between the firm’s hows
Develop importance ratingsDevelop importance ratings
Evaluate competing productsEvaluate competing products
Compare performance to desirable technical Compare performance to desirable technical attributes
attributes
QFD House of Quality QFD House of Quality
Relationship matrix
How to satisfy customer wants Interrelationships
Competitive assessment
Technical evaluation Target values
What the customer
wants Customer Customer importance importance ratings ratings
Weighted Weighted rating rating
House of Quality Example House of Quality Example
Your team has been charged with Your team has been charged with designing a new camera for Great designing a new camera for Great
Cameras, Inc.
Cameras, Inc.
The first action is The first action is
to construct a to construct a
House of Quality House of Quality
House of Quality Example House of Quality Example
Customer Customer importance importance
rating rating (5 = highest) (5 = highest)
Lightweight 3
Easy to use 4
Reliable 5
Easy to hold steady 2 Color correction 1 What the
What the customer customer
wants wants
What the Customer Wants
Relationship Matrix
Technical Attributes and
Evaluation How to Satisfy Customer Wants
Interrelationships
Analysis of Competitors
House of Quality Example 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 Auto focus Auto exposure Paint pallet Ergonomic design
How to Satisfy Customer Wants
Lightweight 3
Easy to use 4
Reliable 5
Easy to hold steady 2 Color corrections 1
House of Quality Example 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 High relationship
Medium relationship Medium relationship Low relationship
Low relationship
Relationship matrix Relationship matrix
House of Quality Example 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 Auto focus Auto exposure Paint pallet Ergonomic design
Relationships Relationships between the between the
things we can do things we can do
House of Quality Example House of Quality Example
Weighted Weighted
rating rating
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 22 9 27 27 32 25
House of Quality Example House of Quality Example
Company A Company B
G P
G P
F G
G P
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
How well do
competing products competing products meet customer wants meet customer wants
What the Customer Wants
Relationship Matrix
Technical Attributes and
Evaluation How to Satisfy Customer Wants
Interrelationships
Analysis of Competitors
House of Quality Example House of Quality Example
CustomerWhat theWants
Relationship Matrix
Technical Attributes and
Evaluation How to Satisfy Customer Wants
Interrelationships
Analysis of Competitors
Target values
(Technical attributes)
Technical evaluation
Company A 0.7 60% yes 1 ok G Company B 0.6 50% yes 2 ok F Us 0.5 75% yes 2 ok G
0.5 A 75% 2’ to ∞ 2 circuits Failure1 per10,000 Panel ranking
House of Quality Example House of Quality Example
Completed Completed
House of House of
Quality 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 Auto focus Auto exposure Paint pallet Ergonomic design Company A Company B
G P G P F G G P P P
Target values (Technical attributes)
Technical evaluation
Company A 0.7 60%yes 1 ok G Company B 0.6 50%yes 2 ok F
0.5 A 75% 2’ to ∞ 2 circuits Failure1 per 10,000 Panel ranking
22 9 27 27 32 25
House of Quality Sequence House of Quality Sequence
Design characteristics
Specific components
House 2
Customer requirements
Design characteristics
House 1
Specific components
Production process
House
3 Pro
duction process
Quality plan
House 4
Figure 5.4 Figure 5.4
Deploying resources through the Deploying resources through the
organization in response to organization in response to
customer requirements customer requirements
Organizing for Product Organizing for Product
Development Development
Historically – distinct departmentsHistorically – distinct departments
Duties and responsibilities are definedDuties and responsibilities are defined
Difficult to foster forward thinkingDifficult to foster forward thinking
A ChampionA Champion
Product manager drives the product Product manager drives the product through the product development
through the product development system and related organizations system and related organizations
Organizing for Product Organizing for Product
Development Development
Team approachTeam approach
Cross functional – representatives Cross functional – representatives from all disciplines or functions
from all disciplines or functions
Product development teams, design Product development teams, design for manufacturability teams, value for manufacturability teams, value
engineering teams engineering teams
Japanese “whole organization” Japanese “whole organization”
approach approach
No organizational divisionsNo organizational divisions
Manufacturability and Manufacturability and
Value Engineering Value Engineering
Benefits:Benefits:
1.1. Reduced complexity of productsReduced complexity of products
2.2. Additional standardization of productsAdditional standardization of products 3.3. Improved functional aspects of productImproved functional aspects of product 4.4. Improved job design and job safetyImproved job design and job safety
5.5. Improved maintainability (serviceability) Improved maintainability (serviceability) of the product
of the product 6.6. Robust designRobust design
Cost Reduction of a Bracket Cost Reduction of a Bracket
via Value Engineering via Value Engineering
Figure 5.5 Figure 5.5
Issues for Product Issues for Product
Development Development
Robust designRobust design
Modular designModular design
Computer-aided design (CAD)Computer-aided design (CAD)
Computer-aided manufacturing (CAM)Computer-aided manufacturing (CAM)
Virtual reality technologyVirtual reality technology
Value analysisValue analysis
Environmentally friendly designEnvironmentally friendly design
Robust Design Robust Design
Product is designed so that small Product is designed so that small variations in production or
variations in production or
assembly do not adversely affect assembly do not adversely affect
the product the product
Typically results in lower cost and Typically results in lower cost and higher quality
higher quality
Modular Design Modular Design
Products designed in easily Products designed in easily segmented components
segmented components
Adds flexibility to both production Adds flexibility to both production and marketing
and marketing
Improved ability to satisfy customer Improved ability to satisfy customer requirements
requirements
Using computers to Using computers to design products and design products and prepare engineering prepare engineering
documentation documentation
Shorter development Shorter development cycles, improved
cycles, improved
accuracy, lower cost accuracy, lower cost
Information and Information and designs can be designs can be
deployed worldwide deployed worldwide
Computer Aided Design Computer Aided Design
(CAD)
(CAD)
Design for Manufacturing and Assembly Design for Manufacturing and Assembly (DFMA)
(DFMA)
Solve manufacturing problems during the Solve manufacturing problems during the design stage
design stage
3-D Object Modeling3-D Object Modeling
Small prototype Small prototype development
development
CAD through the CAD through the internet
internet
International data International data
exchange through STEP exchange through STEP
Extensions of CAD
Extensions of CAD
Computer-Aided Computer-Aided
Manufacturing (CAM) Manufacturing (CAM)
Utilizing specialized computers Utilizing specialized computers and program to control
and program to control manufacturing equipment manufacturing equipment
Often driven by the CAD system Often driven by the CAD system (CAD/CAM)
(CAD/CAM)
1.1. Product qualityProduct quality
2.2. Shorter design timeShorter design time
3.3. Production cost reductionsProduction cost reductions 4.4. Database availabilityDatabase availability
5.5. New range of capabilitiesNew range of capabilities
Benefits of CAD/CAM
Benefits of CAD/CAM
Virtual Reality Technology Virtual Reality Technology
Computer technology used to Computer technology used to
develop an interactive, 3-D model of develop an interactive, 3-D model of
a product from the basic CAD data a product from the basic CAD data
Allows people to ‘see’ the finished Allows people to ‘see’ the finished design before a physical model is design before a physical model is
built built
Very effective in large-scale designs Very effective in large-scale designs such as plant layout
such as plant layout
Value Analysis Value Analysis
Focuses on design improvement Focuses on design improvement during production
during production
Seeks improvements leading either Seeks improvements leading either to a better product or a product
to a better product or a product which can be produced more
which can be produced more economically
economically
Ethics and Environmentally Ethics and Environmentally
Friendly Designs Friendly Designs
It is possible to enhance productivity, It is possible to enhance productivity,
drive down costs, and preserve drive down costs, and preserve
resources resources
Effective at any stage of the product life cycle Effective at any stage of the product life cycle
DesignDesign
ProductionProduction
DestructionDestruction
The Ethical Approach The Ethical Approach
View product design from a View product design from a systems perspective
systems perspective
Inputs, processes, outputsInputs, processes, outputs
Costs to the firm/costs to Costs to the firm/costs to society
society
Consider the entire life cycle of Consider the entire life cycle of the product
the product
Goals for Ethical and Goals for Ethical and
Environmentally Friendly Environmentally Friendly
Designs Designs
1.1. Develop safe and more environmentally Develop safe and more environmentally sound products
sound products
2.2. Minimize waste of raw materials and energyMinimize waste of raw materials and energy 3.3. Reduce environmental liabilitiesReduce environmental liabilities
4.4. Increase cost-effectiveness of complying Increase cost-effectiveness of complying with environmental regulations
with environmental regulations
5.5. Be recognized as a good corporate citizenBe recognized as a good corporate citizen
Guidelines for Environmentally Guidelines for Environmentally
Friendly Designs Friendly Designs
1.1. Make products recyclableMake products recyclable 2.2. Use recycled materialsUse recycled materials
3.3. Use less harmful ingredientsUse less harmful ingredients 4.4. Use lighter componentsUse lighter components
5.5. Use less energyUse less energy 6.6. Use less materialUse less material
Legal and Industry Legal and Industry
Standards Standards
For Design … For Design …
Federal Drug AdministrationFederal Drug Administration
Consumer Products Safety CommissionConsumer Products Safety Commission
National Highway Safety AdministrationNational Highway Safety Administration
Children’s Product Safety ActChildren’s Product Safety Act
Legal and Industry Legal and Industry
Standards Standards
For Manufacture/Assembly … For Manufacture/Assembly …
Occupational Safety and Health Occupational Safety and Health Administration
Administration
Environmental Protection AgencyEnvironmental Protection Agency
Professional ergonomic standardsProfessional ergonomic standards
State and local laws dealing with State and local laws dealing with
employment standards, discrimination, etc.
employment standards, discrimination, etc.
Legal and Industry Legal and Industry
Standards Standards
For Disassembly/Disposal … For Disassembly/Disposal …
Vehicle Recycling PartnershipVehicle Recycling Partnership
Increasingly rigid laws worldwideIncreasingly rigid laws worldwide
Time-Based Competition Time-Based Competition
Product life cycles are becoming Product life cycles are becoming shorter and the rate of
shorter and the rate of technological change is technological change is
increasing increasing
Developing new products faster Developing new products faster can result in a competitive
can result in a competitive advantage
advantage
Product Development Product Development
Continuum Continuum
External Development Strategies External Development Strategies
Alliances Alliances Joint ventures
Joint ventures
Purchase technology or expertise Purchase technology or expertise by acquiring the developer
by acquiring the developer Internal Development Strategies
Internal Development Strategies
Migrations of existing products Migrations of existing products Enhancements to existing products Enhancements to existing products New internally developed products New internally developed products Internal
Internal Cost of product development Cost of product development SharedShared Lengthy
Lengthy Speed of product developmentSpeed of product development Rapid and/Rapid and/
or Existing or Existing HighHigh Risk of product developmentRisk of product development Shared Shared
Figure 5.6 Figure 5.6
Acquiring Technology Acquiring Technology
By Purchasing a FirmBy Purchasing a Firm
Speeds developmentSpeeds development
Issues concern the fit between the acquired Issues concern the fit between the acquired organization and product and the host
organization and product and the host
Through Joint VenturesThrough Joint Ventures
Both organizations learnBoth organizations learn
Risks are sharedRisks are shared
Through AlliancesThrough Alliances
Cooperative agreements between Cooperative agreements between independent organizations
independent organizations
Defining The Product Defining The Product
First definition is in terms of First definition is in terms of functions
functions
Rigorous specifications are Rigorous specifications are
developed during the design phase developed during the design phase
Manufactured products will have an Manufactured products will have an engineering drawing
