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MBA IInd SEM POM Chapter 12 Product Design, Manufacturing Technology

MBA IInd SEM POM Chapter 12 Product Design, Manufacturing Technology


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Product and Service Design

Product and Service Design
 Major factors in design strategy
     Cost Quality Time-to-market Customer satisfaction Competitive advantage
Product and service design – or redesign – should be closely tied to an organization’s strategy


Product or Service Design Activities
1. Translate customer wants and needs into product and service requirements 2. Refine existing products and services 3. Develop new products and services 4. Formulate quality goals 5. Formulate cost targets 6. Construct and test prototypes 7. Document specifications


Reasons for Product or Service Design
 Economic  Social and demographic  Political, liability, or legal  Competitive  Cost or availability  Technological


Objectives of Product and Service Design
 Main focus
 Customer satisfaction  Understand what the customer wants

 Secondary focus
      Function of product/service Cost/profit Quality Appearance Ease of production/assembly Ease of maintenance/service

Designing For Operations
 Taking into account the capabilities of the organization in designing goods and services.  Failure to take this into account can:
 Reduce productivity  Reduce quality  Increase costs


Legal, Ethical, and Environmental Issues
 Legal
 FDA, OSHA  Product liability  Uniform commercial code

 Ethical
 Releasing products with defects

 Environmental


Regulations & Legal Considerations
 Product Liability - A manufacturer is liable for any injuries or damages caused by a faulty product.  Uniform Commercial Code - Products carry an implication of merchantability and fitness.


Designers Adhere to Guidelines
 Produce designs that are consistant with the goals of the company  Give customers the value they expect  Make health and safety a primary concern  Consider potential harm to the environment


Other Issues in Product and Service Design
       Product/service life cycles How much standardization Mass customization Product/service reliability Robust design Degree of newness Cultural differences


Figure 4.1

Life Cycles of Products or Services

Saturation Maturity


Decline Growth



 Standardization
 Extent to which there is an absence of variety in a product, service or process

 Standardized products are immediately available to customers


Advantages of Standardization
 Fewer parts to deal with in inventory & manufacturing  Design costs are generally lower  Reduced training costs and time  More routine purchasing, handling, and inspection procedures  Quality is more consistent

Advantages of Standardization

 Orders fillable from inventory  Opportunities for long production runs and automation  Need for fewer parts justifies increased expenditures on perfecting designs and improving quality control procedures.


Disadvantages of Standardization
 Designs may be frozen with too many imperfections remaining.  High cost of design changes increases resistance to improvements.  Decreased variety results in less consumer appeal.


Mass Customization
• Mass customization:
 A strategy of producing standardized goods or services, but incorporating some degree degree of customization  Delayed differentiation  Modular design


Delayed Differentiation
• Delayed differentiation is a postponement tactic
 Producing but not quite completing a product or service until customer preferences or specifications are known


Modular Design
Modular design is a form of standardization in which component parts are subdivided into modules that are easily replaced or interchanged. It allows:
  

easier diagnosis and remedy of failures easier repair and replacement simplification of manufacturing and assembly


 Reliability: The ability of a product, part, or
system to perform its intended function under a prescribed set of conditions

 Failure: Situation in which a product, part, or
system does not perform as intended

 Normal operating conditions: The set of
conditions under which an item’s reliability is specified


Improving Reliability
• Component design • Production/assembly techniques • Testing • Redundancy/backup • Preventive maintenance procedures • User education • System design

Product Design
 Product Life Cycles  Robust Design  Concurrent Engineering  Computer-Aided Design  Modular Design


Robust Design
Robust Design: Design that results in products or services that can function over a broad range of conditions


Taguchi Approach Robust Design
 Design a robust product

Insensitive to environmental factors either in manufacturing or in use.

 Central feature is Parameter Design.  Determines:
 

factors that are controllable and those not controllable their optimal levels relative to major product advances


Degree of Newness
1.Modification of an existing product/service 2.Expansion of an existing product/service 3.Clone of a competitor’s product/service 4.New product/service


Degree of Design Change
Table 4.3 Type of Design Change Modification Expansion Clone New Newness of the organization Low Low High High Newness to the market Low Low Low High


Cultural Differences
 Multinational companies must take into account cultural differences related to the product design.  Notable failures:
 Chevy Nova in Mexico  Ikea beds in U.S.


Global Product Design
 Virtual teams
 Uses combined efforts of a team of designers working in different countries  Provides a range of comparative advantages over traditional teams such as:
 Engaging the best human resources around the world  Possibly operating on a 24-hr basis  Global customer needs assessment  Global design can increase marketability


Phases in Product Development Process
1. 2. 3. 4. 5. 6. 7. 8. 9. Idea generation Feasibility analysis Product specifications Process specifications Prototype development Design review Market test Product introduction Follow-up evaluation

Idea Generation
Supply chain based


Competitor based

Research based


Reverse Engineering
Reverse engineering is the dismantling and inspecting of a competitor’s product to discover product improvements.


Research & Development (R&D)
 Organized efforts to increase scientific knowledge or product innovation & may involve:

 

Basic Research advances knowledge about a subject without near-term expectations of commercial applications. Applied Research achieves commercial applications. Development converts results of applied research into commercial applications.


 Manufacturability is the ease of fabrication and/or assembly which is important for:
  

Cost Productivity Quality


Designing for Manufacturing
Beyond the overall objective to achieve customer satisfaction while making a reasonable profit is: Design for Manufacturing(DFM) The designers’ consideration of the organization’s manufacturing capabilities when designing a product. The more general term design for operations encompasses services as well as manufacturing

Concurrent Engineering
Concurrent engineering is the bringing together of engineering design and manufacturing personnel early in the design phase.


Computer-Aided Design
 Computer-Aided Design (CAD) is product design using computer graphics.

increases productivity of designers, 3 to 10 times creates a database for manufacturing information on product specifications provides possibility of engineering and cost analysis on proposed designs


Product design
      Design for manufacturing (DFM) Design for assembly (DFA) Design for recycling (DFR) Remanufacturing Design for disassembly (DFD) Robust design


 Recycling: recovering materials for future use  Recycling reasons
 Cost savings  Environment concerns  Environment regulations


 Remanufacturing: Refurbishing used products by replacing worn-out or defective components.
 Remanufactured products can be sold for 50% of the cost of a new producer  Remanufacturing can use unskilled labor  Some governments require manufacturers to take back used products

 Design for Disassembly (DFD): Designing products so that they can be easily taken apart.

Component Commonality
 Multiple products or product families that have a high degree of similarity can share components  Automakers using internal parts
 Engines and transmissions  Water pumps  Etc.

 Other benefits
 Reduced training for assemble and installation  Reduced repair time and costs

Quality Function Deployment
 Quality Function Deployment
 Voice of the customer  House of quality


An approach that integrates the “voice of the customer” into the product and service development process.


The House of Quality
Figure 4.3
Correlation matrix Design requirements

Customer requirements

Relationship matrix

Competitive assessment

Specifications or target values


House of Quality Example
Figure 4.4

Water resistance

Door seal resistance

Im po


Customer Requirements Easy to close Easy to open

nc e

Engineering Characteristics

Accoust. Trans. Window

Check force on level ground Energy needed to open door

Energy needed to close door





Strong positive Positive Negative Strong negative
X = Us A = Comp. A B = Comp. B (5 is best) 1 2 3 4

Competitive evaluation


Cu st.


7 5 3 3 2
Reduce energy level to 7.5 ft/lb



Stays open on a hill Doesn’t leak in rain No road noise Importance weighting Target values



Maintain current level

Reduce force to 9 lb.

Reduce energy to 7.5 ft/lb.

Maintain current level

Maintain current level

Strong = 9 Medium = 3 Small = 1

Technical evaluation (5 is best)

5 4 3 2 1








Service Design
 Service is an act  Service delivery system
 Facilities  Processes  Skills

 Many services are bundled with products


Service Design
 Service design involves
 The physical resources needed  The goods that are purchased or consumed by the customer  Explicit services  Implicit services


Service Design
 Service
 Something that is done to or for a customer

 Service delivery system
 The facilities, processes, and skills needed to provide a service

 Product bundle
 The combination of goods and services provided to a customer

 Service package
 The physical resources needed to perform the service

Differences Between Product and Service Design
 Tangible – intangible  Services created and delivered at the same time  Services cannot be inventoried  Services highly visible to customers  Services have low barrier to entry  Location important to service  Range of service systems  Demand variability

Service Systems
 Service systems range from those with little or no customer contact to very high degree of customer contact such as:
     Insulated technical core (software development) Production line (automatic car wash) Personalized service (hair cut, medical service) Consumer participation (diet program) Self service (supermarket)


Service Demand Variability
 Demand variability creates waiting lines and idle service resources  Service design perspectives:
 Cost and efficiency perspective  Customer perspective

 Customer participation makes quality and demand variability hard to manage  Attempts to achieve high efficiency may depersonalize service and change customer’s perception of quality


Phases in Service Design
1.Conceptualize 2.Identify service package components 3.Determine performance specifications 4.Translate performance specifications into design specifications 5.Translate design specifications into delivery specifications


Service Blueprinting
 Service blueprinting
 A method used in service design to describe and analyze a proposed service

 A useful tool for conceptualizing a service delivery system


Major Steps in Service Blueprinting
1. Establish boundaries 2. Identify sequence of customer interactions
• Prepare a flowchart

3. Develop time estimates 4. Identify potential failure points


Characteristics of Well Designed Service Systems
1. 2. 3. 4. 5. 6. 7. 8. 9. Consistent with the organization mission User friendly Robust Easy to sustain Cost effective Value to customers Effective linkages between back operations Single unifying theme Ensure reliability and high quality

Challenges of Service Design
1. 2. 3. 4. Variable requirements Difficult to describe High customer contact Service – customer encounter


Guidelines for Successful Service Design
1. 2. 3. 4. 5. 6. 7. 8. 9. Define the service package Focus on customer’s perspective Consider image of the service package Recognize that designer’s perspective is different from the customer’s perspective Make sure that managers are involved Define quality for tangible and intangibles Make sure that recruitment, training and rewards are consistent with service expectations Establish procedures to handle exceptions Establish systems to monitor service

Operations Strategy
1. Increase emphasis on component commonality 2. Package products and services 3. Use multiple-use platforms 4. Consider tactics for mass customization 5. Look for continual improvement 6. Shorten time to market


Shorten Time to Market
1. Use standardized components 2. Use technology 3. Use concurrent engineering


Break-Even Analysis: Graphical Approach

 Compute quantity of goods that must be sold to breakeven  Compute total revenue at an assumed selling price  Compute fixed cost and variable cost for several quantities  Plot the total revenue line and the total cost line  Intersection is break-even  Sensitivity analysis can be done to examine changes in all of the assumptions made

Break-Even Analysis
 Total cost = fixed costs + variable costs (quantity):

TC = F + (VC )Q

 Revenue = selling price (quantity)

R = ( SP ) Q

 Break-even point is where total costs = revenue:

TC = R or F + ( VC ) Q = ( SP ) Q or F Q= SP − VC


 A firm estimates that the fixed cost of producing a line of footwear is $52,000 with a $9 variable cost for each pair produced. They want to know:
 If each pair sells for $25, how many pairs must they sell to break-even?  If they sell 4000 pairs at $25 each, how much money will they make?

Example Solved
 Break-even point:

F $52,000 Q= = = 3,250 pairs SP − VC $25 − $9
 Profit = total revenue – total costs

= ( $25) 4,000 − ( $52,000 + ( $9) 4,000) = $12,000

P = ( SP ) Q − ( F + (VC ) Q )

Break-even calculation: A company is planning to establish a chain of movie theaters. It estimates that each new theater will cost approximately $1 Million. The theaters will hold 500 people and will have 4 showings each day with average ticket prices at $8. They estimate that concession sales will average $2 per patron. The variable costs in labor and material are estimated to be $6 per patron. They will be open 300 days each year. What must average occupancy be to break even?

 Break Even Point
Total revenues = Total costs @ break-even point Q Selling price*Q = Fixed cost + variable cost*Q ($8+$2)Q= $1,000,000 + $6*Q Q = 166,667 patrons (28% occupancy)  What is the gross profit if they sell 300,000 tickets Profit = Total Revenue – Total Costs P = $10*300,000 – (1,000,000 + $6*300,000) P = $200,000  If concessions average $.50/patron, what is break-even Q now? (sensitivity analysis) ($8.50)Q = 1,000,000 - $6*Q Q = 400,000 patrons (67% occupancy)

Other Product Design Factors
 Need to Design for Manufacturing – DFM
 Minimize parts  Design parts for multiply applications  Use modular design  Avoid tools  Simplify operations


Other Design Factors
 Consider product life cycle stages
    Introduction Growth Maturity Decline

 Facility & process investment depends on life cycle


Other Design factors
 Old “over-the –wall” sequential design process should not be used
 Each function did its work and passed it to the next function

Replace with a Concurrent Engineering process
 All functions form a design team working together to develop specifications, involve customers early, solve potential problems, reduce costs, & shorten time to market


Process Selection
 Process selection is based on five considerations
     Type of process; range from intermittent to continuous Degree of vertical integration Flexibility of resources Mix between capital & human resources Degree of customer contact

Process types can be:
Project Process Batch Process Line Process Continuous Process

Underlying Process Relationship Between Volume and Standardization


Volume and Process Choice
 Low Volume typically means
      Project or Batch processes Less vertical integration More resource flexibility Less capital intensity Higher skilled labor More customer involvement

 High Volume typically means
Line/continuous processes More vertical integration Less resource flexibility More capital intensity More specialized labor Little to no customer involvement  Standardized products  Make to stock strategy      

 More customized products  Make or assemble to order strategy


Differences between Intermittent and Continuous Operations
Decision Product variety Degree of standardization Organization of resources Path of products Factor driving production Critical resource Type of equipment Degree of automation Throughput time Work-in-process inventory Intermittent Operation Great Low Grouped by Function Varied, depends on product Customer orders Labor General purpose Low Longer More Continuous Operation Small High Line flow Line flow Forecast of demand Capital Specialized High Shorter Less

Facility Layouts and Process Choice


Process Design Tools
 Process flow analysis is a tool used to analyze and document the sequence of steps within a total process. Usually first step in Process Reengineering.

 Process Reengineering is a structured approach used when major business changes are required as a result of:
 Major new products  Quality improvement needed  Better competitors  Inadequate performance

Intermittent VS. Repetitive Layouts


Product and Service Strategy Options


 Vertical integration refers to the degree a firm chooses to do processes itself- raw material to sales
 Backward Integration means moving closer to primary operations  Forward Integration means moving closer to customers

Process Decisions-Vertical Integration & Make or Buy

 A firm’s Make-or-Buy choices should be based on the following considerations:
 Strategic impact  Available capacity  Expertise  Quality considerations  Speed  Cost (fixed cost + variable cost)make = (fixed cost + Variable cost)buy  Business are trending toward less backward integration, more outsourcing

Manufacturing Technology Decisions

 Simplify first then apply appropriate technology  Automation  Automated Material Handling:
 Automated guided vehicles (AGV)  Automated storage & retrieval systems (AS/RS)

 Computer-Aided Design (CAD) software  Robotics & Numerically-Controlled (NC) equipment  Flexible Manufacturing Systems (FMS)  Computer-Integrated Manufacturing (CIM)

Designing Services
 Service Characteristics  Pure services  Quasi-Manufacturing  Mixed services  Service Package  The physical goods  The sensual benefits  The psychological benefits  Differing designs  Substitute technology for people  Get customer involved  High customer attention

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