Operations

Management
Chapter 5 -
Design of Goods
and Services
PowerPoint presentation to accompany
Heizer/Render
Principles of Operations Management, 6e
Operations Management, 8e

© 2006
© 2006 Prentice
Prentice Hall, Inc. Hall, Inc. 5–1
 Outline
 Global Company Profile: Regal
Marine
 Goods And Services Selection
 Product Strategy Options Support
Competitive Advantage
 Product Life Cycles
 Life Cycle and Strategy
 Product-by-Value Analysis

© 2006 Prentice Hall, Inc. 5–2

 Outline - Continued
 Generating New Products
 New Product Opportunities
 Importance of New Products
 Product Development
 Product Development System
 Quality Function Deployment (QFD)
 Organizing for Product Development
 Manufacturability and Value
Engineering

© 2006 Prentice Hall, Inc. 5–3

 Outline - Continued
 Issues For Product Design
 Robust Design
 Modular Design
 Computer-Aided Design (CAD)
 Computer-Aided Manufacturing (CAM)
 Virtual Reality Technology
 Value Analysis
 Ethics and Environmentally Friendly
Design

© 2006 Prentice Hall, Inc. 5–4

 Outline - Continued
 Time-Based Competition
 Purchase of Technology by Acquiring
Firm
 Joint Ventures
 Alliances Defining the Product
 Make-or-Buy Decisions
 Group Technology
 Documents For Production

© 2006 Prentice Hall, Inc. 5–5

 Outline - Continued
 Product Lifecycle Management (PLM)
 Service Design
 Documents for Services
 Application of Decision Trees to
Product Design
 Transition to Production

© 2006 Prentice Hall, Inc. 5–6

 Learning Objectives
When you complete this chapter, you should
be able to :
Identify or Define:

 Product life cycle

 Product development team
 Manufacturability and value engineering
 Robust design
 Time-based competition

© 2006 Prentice Hall, Inc. 5–7

 Learning Objectives
When you complete this chapter, you should
be able to :
Identify or Define:

 Modular design
 Computer aided design
 Value analysis
 Group technology
 Configuration management

© 2006 Prentice Hall, Inc. 5–8

 Learning Objectives
When you complete this chapter, you should
be able to :
Explain:

 Alliances
 Concurrent engineering
 Product-by-value analysis
 Product documentation

© 2006 Prentice Hall, Inc. 5–9

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

© 2006 Prentice Hall, Inc. 5 – 10

 Product Decision
 The good or service the
organization provides society
 Top organizations typically focus on
core products
 Customers buy satisfaction, not just
a physical good or particular service
 Fundamental to an organization's
strategy with implications
throughout the operations function
© 2006 Prentice Hall, Inc. 5 – 11
 Product Strategy Options

 Differentiation
 Shouldice Hospital
 Low cost
 Taco Bell
 Rapid response
 Toyota

© 2006 Prentice Hall, Inc. 5 – 12

 Product Life Cycles

 May be any length from a few

hours to decades
 The operations function must
be able to introduce new
products successfully

© 2006 Prentice Hall, Inc. 5 – 13

 Product Life Cycles

Cost of development and production

Sales, cost, and cash flow

Sales revenue
Net revenue (profit)

Cash
flow

Negative
cash flow Loss

Introduction Growth Maturity Decline

Figure 5.1
© 2006 Prentice Hall, Inc. 5 – 14
 Product Life Cycle Costs
Costs committed
100 –

80 –
Percent of total cost

60 – Costs incurred

40 –

20 – Ease of change

0–
Concept Detailed Manufacturing Distribution,
design design service,
prototype and disposal
© 2006 Prentice Hall, Inc. 5 – 15
 Product Life Cycle
Introduction
 Fine tuning
 Research
 Product development
 Process modification and
enhancement
 Supplier development

© 2006 Prentice Hall, Inc. 5 – 16

 Product Life Cycle
Growth
 Product design begins to
stabilize
 Effective forecasting of
capacity becomes necessary
 Adding or enhancing capacity
may be necessary

© 2006 Prentice Hall, Inc. 5 – 17

 Product Life Cycle
Maturity
 Competitors now established
 High volume, innovative
production may be needed
 Improved cost control,
reduction in options, paring
down of product line

© 2006 Prentice Hall, Inc. 5 – 18

 Product Life Cycle
Decline
 Unless product makes a
special contribution to the
organization, must plan to
terminate offering

© 2006 Prentice Hall, Inc. 5 – 19

 Importance of New Products
Percentage of Sales from New Products
50%

40%

30%

20%

10%

Industry Top Middle Bottom

leader third third third
Position of Firm in Its Industry Figure 5.2
© 2006 Prentice Hall, Inc. 5 – 20
 Product-by-Value Analysis

 Lists products in descending

order of their individual dollar
contribution to the firm
 Lists the total annual dollar
contribution of the product
 Helps management evaluate
alternative strategies

© 2006 Prentice Hall, Inc. 5 – 21

 Product-by-Value Analysis
Sam’s Furniture Factory

Individual Total Annual

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

© 2006 Prentice Hall, Inc. 5 – 22

 New Product Opportunities
1. Understanding the customer
2. Economic change
3. Sociological and demographic
change
4. Technological change Brainstorming
is a useful tool
5. Political/legal change
6. Market practice, professional
standards, suppliers, distributors

© 2006 Prentice Hall, Inc. 5 – 23

 Product Development
System
Ideas

Ability Figure 5.3

Customer Requirements

Functional Specifications

Scope of Product Specifications Scope for

product design and
Design Review engineering
development teams
team Test Market

Introduction

Evaluation
© 2006 Prentice Hall, Inc. 5 – 24
 Quality Function
Deployment
 Identify customer wants
 Identify how the good/service will satisfy
customer wants
 Relate customer wants to product hows
 Identify relationships between the firm’s
hows
 Develop importance ratings
 Evaluate competing products
© 2006 Prentice Hall, Inc. 5 – 25
 QFD House of Quality
Interrelationships

How to Satisfy
Customer Wants

Competitors
Analysis of
What the
Customer Relationship
Wants Matrix

Technical
Attributes and
Evaluation

© 2006 Prentice Hall, Inc. 5 – 26

 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

© 2006 Prentice Hall, Inc. 5 – 27

 Interrelationships

House of Quality Example

How to Satisfy
Customer Wants

Competitors
Analysis of
What the
Relationship
Customer
Matrix
Wants

What the
Technical
Attributes and
Evaluation

customer
wants Customer
importance
rating
(5 = highest)
Lightweight 3
Easy to use 4
Reliable 5
Easy to hold steady 2
No double exposures 1

© 2006 Prentice Hall, Inc. 5 – 28

 Interrelationships

House of Quality Example

How to Satisfy
Customer Wants

Competitors
Analysis of
What the
Relationship
Customer
Matrix
Wants

Technical
Low electricity requirements
Attributes and
Evaluation

Aluminum components

Ergonomic design
Auto film advance
Auto exposure
How to Satisfy
Customer Wants
Auto focus

© 2006 Prentice Hall, Inc. 5 – 29

 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
No double exposures 1

Relationship matrix
© 2006 Prentice Hall, Inc. 5 – 30
 Interrelationships

House of Quality Example

How to Satisfy
Customer Wants

Competitors
Analysis of
What the
Relationship
Customer
Matrix
Wants

Technical
Attributes and
Evaluation

Relationships

Low electricity requirements

between the
things we can do

Aluminum components

Ergonomic design
Auto film advance
Auto exposure
Auto focus

© 2006 Prentice Hall, Inc. 5 – 31

 Interrelationships

House of Quality Example

How to Satisfy
Customer Wants

Competitors
Analysis of
What the
Relationship
Customer
Matrix
Wants

Technical
Attributes and
Evaluation

Lightweight 3
Easy to use 4
Reliable 5
Easy to hold steady 2
No double exposures 1
Our importance ratings 22 9 27 27 32 25

Weighted
rating
© 2006 Prentice Hall, Inc. 5 – 32
 Interrelationships

How to Satisfy

House of Quality Example

Customer Wants

Competitors
Analysis of
What the
Relationship
Customer
Matrix
Wants

Technical
Attributes and

Company A

Company B
Evaluation

How well do
competing products
meet customer wants

Lightweight 3 G P
Easy to use 4 G P
Reliable 5 F G
Easy to hold steady 2 G P
No double exposures 1 P P
Our importance ratings 22 5
© 2006 Prentice Hall, Inc. 5 – 33
 Organizing for Product
Development
 Historically – distinct departments
 Duties and responsibilities are defined
 Difficult to foster forward thinking
 Today – team approach
 Cross functional – representatives
from all disciplines or functions
 Concurrent engineering – cross
functional team
© 2006 Prentice Hall, Inc. 5 – 34
 Manufacturability and
Value Engineering
 Benefits:
1. Reduced complexity of products
2. Additional standardization of products
3. Improved functional aspects of product
4. Improved job design and job safety
5. Improved maintainability of the product
6. Robust design

© 2006 Prentice Hall, Inc. 5 – 35

 Cost Reduction of a Bracket
through Value Engineering

Figure 5.5
© 2006 Prentice Hall, Inc. 5 – 36
 Issues for Product
Development
 Robust design
 Modular design
 Computer-aided design (CAD)
 Computer-aided manufacturing (CAM)
 Virtual reality technology
 Value analysis
 Environmentally friendly design

© 2006 Prentice Hall, Inc. 5 – 37

 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

© 2006 Prentice Hall, Inc. 5 – 38

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

© 2006 Prentice Hall, Inc. 5 – 39

 Computer Aided Design
(CAD)
 Using computers to
design products and
prepare engineering
documentation
 Shorter development
cycles, improved
accuracy, lower cost
 Information and
designs can be
deployed worldwide

© 2006 Prentice Hall, Inc. 5 – 40

 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

© 2006 Prentice Hall, Inc. 5 – 41

 Value Analysis
 Focuses on design improvement
during production
 Seeks improvements leading either
to a better product or a product
which can be produced more
economically

© 2006 Prentice Hall, Inc. 5 – 42

 Ethics and Environmentally
Friendly Designs
It is possible to enhance productivity,
drive down costs, and preserve
resources
The Ethical Approach
1. View product design from a systems
perspective
2. Consider the entire life cycle of the
product
© 2006 Prentice Hall, Inc. 5 – 43
 Goals for Ethical and
Environmentally Friendly
Designs
1. Develop safe and more environmentally
sound products
2. Minimize waste of raw materials and energy
3. Reduce environmental liabilities
4. Increase cost-effectiveness of complying
with environmental regulations
5. Be recognized as a good corporate citizen
© 2006 Prentice Hall, Inc. 5 – 44
 Guidelines for Environmentally
Friendly Designs

1. Make products recyclable

2. Use recycled materials
3. Use less harmful ingredients
4. Use lighter components
5. Use less energy
6. Use less material

© 2006 Prentice Hall, Inc. 5 – 45

 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
 Reduce customer interaction, often
through automation
© 2006 Prentice Hall, Inc. 5 – 46
 Service Design
(a) Customer participation in design
such as pre-arranged funeral services
or cosmetic surgery

(b) Customer participation in

delivery such as stress test for
cardiac exam or delivery of a
baby

(c) Customer participation in design and

delivery such as counseling, college
education, financial management of
personal affairs, or interior decorating

Figure 5.12
© 2006 Prentice Hall, Inc. 5 – 47
 Moments of Truth
 Concept created by Jan Carlzon of
Scandinavian Airways
 Critical moments between the
customer and the organization that
determine customer satisfaction
 There may be many of these moments
 These are opportunities to gain or
lose business
© 2006 Prentice Hall, Inc. 5 – 48
 Moments-of-Truth
Computer Company Hotline
Experience Enhancers

The technician was

Standard Expectations sincerely concerned and
apologetic about my
Only one local number problem
Experience Detractors needs to be dialed
He asked intelligent
I never get a busy signal questions that allowed me
I had to call more than to feel confident in his
once to get through I get a human being to
answer my call quickly abilities
A recording spoke to me and he or she is pleasant The technician offered
rather than a person and responsive to my various times to have work
While on hold, I get problem done to suit my schedule
silence,and wonder if I am A timely resolution to my Ways to avoid future
disconnected problem is offered problems were suggested
The technician sounded The technician is able to
like he was reading a form explain to me what I can
of routine questions expect to happen next
The technician sounded
uninterested
I felt the technician rushed Figure 5.13
me

© 2006 Prentice Hall, Inc. 5 – 49

 Documents for Services

 High levels of customer

interaction necessitates different
documentation
 Often explicit job instructions for
moments-of-truth
 Scripts and storyboards are
other techniques

© 2006 Prentice Hall, Inc. 5 – 50

 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

© 2006 Prentice Hall, Inc. 5 – 51

 Application of Decision
Trees to Product Design
Procedures
 Include all possible alternatives and
states of nature - including “doing
nothing”
 Enter payoffs at end of branch
 Determine the expected value of each
branch and “prune” the tree to find
the alternative with the best expected
value
© 2006 Prentice Hall, Inc. 5 – 52