05 Design of Goods and Services

12/14/2020
Outline
Design of Goods
and Services 5 ►
►
Global Company Profile: Regal Marine
Goods and Services Selection
► Generating New Products
PowerPoint presentation to accompany
► Product Development
Heizer, Render, Munson ► Issues for Product Design
Operations Management, Twelfth Edition
Principles of Operations Management, Tenth Edition ► Product Development Continuum
PowerPoint slides by Jeff Heyl
Copyright © 2017 Pearson Education, Inc. 5-1 Copyright © 2017 Pearson Education, Inc. 5-2
1 2
Outline - Continued Regal Marine

► Defining a Product
► Documents for Production ► Global market
► Service Design ► 3-dimensional CAD system
► Reduced product development time
► Application of Decision Trees to
Product Design ► Reduced problems with tooling
► Transition to Production ► Reduced problems in production
► Assembly line production
► JIT
3 4
Learning Objectives Learning Objectives

When you complete this chapter you When you complete this chapter you
should be able to : should be able to :
5.1 Define product life cycle 5.5 Describe how goods and services are
defined by OM
5.2 Describe a product development system
5.6 Describe the documents needed for
5.3 Build a house of quality production
5.4 Explain how time-based competition is 5.7 Explain how the customer participates in
implemented by OM the design and delivery of services
5.8 Apply decision trees to product issues
5 6
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Goods and Services Selection Goods and Services Selection

► Organizations exist to provide goods or ► Limited and predicable life cycles
services to society requires constantly looking for,
► Great products are the key to success designing, and developing new
► Top organizations typically focus on core
products
products ► Utilize strong communication among
customer, product, processes, and
► Customers buy satisfaction, not just a suppliers
physical good or particular service
► New products generate substantial
► Fundamental to an organization's revenue
strategy with implications throughout the
operations function
7 8
Goods and Services Selection Product Decision

50% –
40% – The objective of the product decision

Percent of sales from
The higher the percentage of is to develop and implement a

new products
30% – sales from the last 5 years, the

more likely the firm is to be a product strategy that meets the
leader.
20% – demands of the marketplace with a
competitive advantage
10% –
0% – Figure 5.1
Industry Top Middle Bottom
leader third third third
Position of firm in its industry
Copyright © 2017 Pearson Education, Inc. 5-9 Copyright © 2017 Pearson Education, Inc. 5 - 10
9 10
Product Strategy Options Product Life Cycles
► Differentiation
► May be any length from a few
► Shouldice Hospital
days to decades
► Low cost
► The operations function must be
► Taco Bell able to introduce new products
► Rapid response successfully
► Toyota
Copyright © 2017 Pearson Education, Inc. 5 - 11 Copyright © 2017 Pearson Education, Inc. 5 - 12
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Product Life Cycle Life Cycle and Strategy

Introductory Phase
$
Cost of development and production
Sales revenue
► Fine tuning may warrant
unusual expenses for
1) Research
Loss Profit
2) Product development
Loss
Introduction Growth Maturity Decline 3) Process modification and
enhancement
Figure 5.2 4) Supplier development
13 14
Product Life Cycle Product Life Cycle
Growth Phase Maturity Phase
► Product design begins to ► Competitors now established

stabilize ► High volume, innovative
► Effective forecasting of capacity production may be needed
becomes necessary ► Improved cost control, reduction
► Adding or enhancing capacity in options, paring down of
may be necessary product line
15 16
Product Life Cycle Product Life Cycle Costs

100 –
Costs committed
Decline Phase
80 –
Unless product makes a special

Percent of total cost
►
60 –
contribution to the organization, Costs incurred
must plan to terminate offering 40 –
20 –
Ease of change
0–
Concept Detailed Manufacturing Distribution,

design design service,
prototype and disposal
17 18
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Product-by-Value Analysis Generating New Products

1. Understanding the customer
► Lists products in descending order
of their individual dollar 2. Economic change
contribution to the firm 3. Sociological and demographic
change
► Lists the total annual dollar
contribution of the product 4. Technological change
► Helps management evaluate 5. Political and legal change
alternative strategies 6. Market practice, professional
standards, suppliers, distributors
19 20
Product
Concept
Development Stages Quality Function Deployment
Feasibility Figure 5.3
► Quality function deployment (QFD)
Customer Requirements
► Determine what will satisfy the customer
Functional Specifications
► Translate those customer desires into the
Product Specifications Scope for target design
Scope of design and
product Design Review engineering ► House of quality
development teams
team Test Market ► Utilize a planning matrix to relate
customer wants to how the firm is going
Introduction
to meet those wants
Evaluation
21 22
QFD House of Quality

Quality Function Deployment
Interrelationships
1. Identify customer wants Customer
importance How to satisfy
2. Identify how the good/service will satisfy customer ratings customer wants
wants
Competitive
assessment
3. Relate customer wants to product hows What the Relationship

customer
4. Identify relationships between the firm’s hows wants
matrix
5. Develop our importance ratings

6. Evaluate competing products
Target values Weighted
7. Compare performance to desirable technical rating
attributes Technical
evaluation
23 24
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Interrelationships
House of Quality Example House of Quality Example How to Satisfy

Customer Wants
Competitors
Analysis of
What the
Relationship
Customer
Matrix
Wants
Your team has been charged with Technical

Attributes and
Evaluation
designing a new camera for Great What the

customer wants
Customer
Cameras, Inc. importance
rating
The first action is (5 = highest)
to construct a Lightweight 3
House of Quality Easy to use 4

Reliable 5
Easy to hold steady 2
High resolution 1
© 2014 Pearson Education, Inc. 5 - 25 © 2014 Pearson Education, Inc. 5 - 26
25 26
Interrelationships Interrelationships
House of Quality Example How to Satisfy

Customer Wants
Customer Wants
Competitors
Competitors
Analysis of
Analysis of
What the What the
Relationship Relationship
Customer Customer
Matrix Matrix
Wants Wants
Technical High relationship Technical

Attributes and Attributes and
Evaluation Evaluation
Medium relationship
Low relationship
Low electricity requirements
Lightweight 3
Aluminum components
Easy to use 4
High number of pixels
How to Satisfy
Ergonomic design
Customer Wants Reliable 5

Auto exposure

Auto focus
High resolution 1
Relationship matrix
27 28

Customer Wants
Customer Wants
Competitors
Competitors
Analysis of
Analysis of
What the What the

Customer Customer
Matrix Matrix
Wants Wants
Technical Technical
Relationships between
the things we can do Lightweight 3
Easy to use 4
Reliable 5
Aluminum components
High resolution 1
Ergonomic design
Auto exposure
Our importance ratings 22 9 27 27 32 25

Auto focus
Weighted rating
29 30
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How to Satisfy How to Satisfy
House of Quality Example House of Quality Example

Customer Wants Customer Wants
Competitors
Competitors
Analysis of
Analysis of
What the What the
Customer Customer
Matrix Matrix
Wants Wants
Technical Technical
Company B
Company A
Failure 1 per 10,000

How well do competing
products meet customer
Panel ranking
wants Target values
(Technical
2 circuits
Lightweight 3 G P attributes)
2’ to ∞
0.5 A
75%
Easy to use 4 G P
Reliable 5 F G
Easy to hold steady 2 G P Company A 0.7 60% yes 1 ok G
High resolution 1 P P Technical
evaluation Company B 0.6 50% yes 2 ok F
Our importance ratings 22 5 Us 0.5 75% yes 2 ok G
31 32
House of Quality House of Quality Sequence

Aluminum components
Example
Ergonomic design
Auto exposure
Deploying resources through the organization

Company A
Company B
Auto focus
in response to customer requirements

Completed
Lightweight 3 G P
House of Easy to use 4 G P
Quality
Quality Reliable
Easy to hold steady
5
2
F
G P
G
Production
process
plan
Production
High resolution 1 P P Specific
House
process
components
components
Our importance ratings 22 9 27 27 32 25 House 4
Specific
Design
characteristics
characteristics
3
Failure 1 per 10,000
House
Design
2
requirements
Customer
Target values House

Panel ranking
(Technical
attributes) 1
2 circuits
2’ to ∞
0.5 A
75%
Company A 0.7 60% yes 1 ok G

Technical Figure 5.4
Company B 0.6 50% yes 2 ok F
evaluation
© 2014 Pearson Education, Inc. Us 0.5 75% yes 2 ok G 5 - 33 Copyright © 2017 Pearson Education, Inc. 5 - 34
33 34
Organizing for Product Organizing for Product

Development Development
► Team approach
► Traditionally – distinct departments
► Cross functional – representatives from
► Duties and responsibilities are defined all disciplines or functions
► Difficult to foster forward thinking ► Product development teams, design for
► A Champion manufacturability teams, value
engineering teams
► Product manager drives the product
through the product development ► Japanese “whole organization”
system and related organizations approach
► No organizational divisions
35 36
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Organizing for Product Manufacturability and

Value Engineering
Development
► Product development teams ► Benefits:
► Market requirements to product success 1. Reduced complexity of the product
2. Reduction of environmental impact
► Cross functional teams often involving
vendors 3. Additional standardization of components
► Open, highly participative environment 4. Improvement of functional aspects of the product
5. Improved job design and job safety
► Concurrent engineering
6. Improved maintainability (serviceability) of the
► Simultaneous performance of product product
development stages 7. Robust design
37 38
Cost Reduction of a Bracket

via Value Engineering Issues for Product Design
► Robust design
► Modular design
► Computer-aided design (CAD)
► Computer-aided manufacturing (CAM)
► Virtual reality technology
► Value analysis
► Sustainability and Life Cycle Assessment
(LCA)
Figure 5.5
39 40
Robust Design Modular Design
► Products designed in easily segmented

► Product is designed so that small
components
variations in production or assembly
do not adversely affect the product ► Adds flexibility to both production and
marketing
► Typically results in lower cost and
higher quality ► Improved ability to satisfy customer
requirements
41 42
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Extensions of CAD
Computer Aided Design (CAD)
► 3-D Object Modeling
► Using computers to ► Small prototype development
design products and ► Design for Manufacturing and Assembly
prepare engineering (DFMA)
documentation ► Solve manufacturing problems during the
► Shorter development design stage
cycles, improved ► CAD through the internet
accuracy, lower cost
► International data exchange through STEP
► Information and designs
can be deployed ► 3-D printing
worldwide
43 44
Computer-Aided Benefits of CAD/CAM

Manufacturing (CAM)
1. Product quality
► Utilizing specialized computers and
program to control manufacturing 2. Shorter design time
equipment 3. Production cost reductions
► Often driven by the CAD system 4. Database availability
(CAD/CAM) 5. New range of capabilities
45 46
Virtual Reality Technology Value Analysis

► Computer technology used to develop ► Focuses on design improvement
an interactive, 3-D model of a product during production
from the basic CAD data
► Seeks improvements leading either to
► Allows people to ‘see’ the finished a better product or a product which
design before a physical model is built can be produced more economically
► Very effective in large-scale designs with less environmental impact
such as plant layout
47 48
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Sustainability and Life Cycle Product Development

Assessment (LCA) Continuum
► Product life cycles are becoming
► Sustainability means meeting the needs of shorter and the rate of technological
the present without compromising the
ability of future generations to meet their
change is increasing
needs ► Developing new products faster can
► LCA is a formal evaluation of the result in a competitive advantage
environmental impact of a product
► Time-based competition
49 50
Product Development Product Development

Continuum Continuum
External Development Strategies
Figure 5.6 Alliances ► Purchasing technology by acquiring
Joint ventures a firm
Purchase technology or expertise
by acquiring the developer ► Speeds development
Internal Development Strategies ► Issues concern the fit between the
Migrations of existing products acquired organization and product and
Enhancements to existing products
New internally developed products
the host
Internal Cost of product development Shared

► Joint Ventures
Lengthy Speed of product development Rapid and/ ► Both organizations learn
or Existing
High Risk of product development Shared ► Risks are shared
51 52
Product Development Defining a Product

Continuum
► First definition is in terms of functions
► Alliances
► Rigorous specifications are developed
► Cooperative agreements between during the design phase
independent organizations
► Manufactured products will have an
► Useful when technology is developing
engineering drawing
► Reduces risks
► Bill of material (BOM) lists the
components of a product
53 54
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Monterey Jack Cheese Product Documents

(a) U.S. grade AA. Monterey cheese shall conform to the following
requirements: ► Engineering drawing
(1) Flavor. Is fine and highly pleasing, free from undesirable flavors and odors.
May possess a very slight acid or feed flavor. ► Shows dimensions, tolerances, and
(2) Body and texture. A plug drawn from the cheese shall be reasonably firm.
It shall have numerous small mechanical openings evenly distributed
materials
throughout the plug. It shall not possess sweet holes, yeast holes, or other ► Shows codes for Group Technology
gas holes.
(3) Color. Shall have a natural, uniform, bright and attractive appearance.
(4) Finish and appearance—bandaged and
► Bill of Material
paraffin-dipped. The rind shall be sound, ► Lists components, quantities and where
firm, and smooth providing a good
protection to the cheese. used
► Shows product structure
Code of Federal Regulation, Parts 53 to 109,
General Service Administration
55 56
Engineering Drawings Bills of Material

BOM for a Panel Weldment
NUMBER DESCRIPTION QTY

A 60-71 PANEL WELDM’T 1
A 60-7 LOWER ROLLER ASSM. 1
R 60-17 ROLLER 1
R 60-428 PIN 1
P 60-2 LOCKNUT 1
A 60-72 GUIDE ASSM. REAR 1
R 60-57-1 SUPPORT ANGLE 1
A 60-4 ROLLER ASSM. 1
02-50-1150 BOLT 1
A 60-73 GUIDE ASSM. FRONT 1
A 60-74 SUPPORT WELDM’T 1
Figure 5.8 R 60-99 WEAR PLATE 1
Figure 5.9 (a)
02-50-1150 BOLT 1
57 58
Bills of Material Make-or-Buy Decisions

Hard Rock Cafe’s DESCRIPTION QTY
Hickory BBQ Bacon Bun 1
▶ Produce components themselves or
Cheeseburger Hamburger patty 8 oz. buy from an outside source
Cheddar cheese 2 slices
Bacon
BBQ onions
2 strips
1/2 cup
▶ Variations in
Hickory BBQ sauce 1 oz. ▶ Quality
Burger set
Lettuce 1 leaf ▶ Cost
Tomato 1 slice
Red onion 4 rings ▶ Delivery schedules
Pickle 1 slice
French fries
Seasoned salt
5 oz.
1 tsp.
▶ Critical to product definition
Figure 5.9 (b) 11-inch plate 1
HRC flag 1
59 60
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Group Technology Group Technology Scheme

(b) Grouped Cylindrical Parts (families of parts)
(a) Ungrouped Parts
► Parts grouped into families with Grooved Slotted Threaded Drilled Machined
similar characteristics
► Coding system describes
processing and physical
characteristics
► Part families can be produced
in dedicated manufacturing cells
Figure 5.10
61 62
Group Technology Benefits Documents for Production

1. Improved design
2. Reduced raw material and purchases ► Assembly drawing
3. Simplified production planning and ► Assembly chart
control ► Route sheet
4. Improved layout, routing, and machine ► Work order
loading
► Engineering change notices (ECNs)
5. Reduced tooling setup time, work-in-
process, and production time
63 64
Assembly Drawing Assembly Chart

R 209 Angle
1
Left
► Shows exploded 2
R 207 Angle SA bracket
1 assembly
A1 Identifies the point of
production where
view of product 3
Bolts w/nuts (2)
components flow into
R 209 Angle subassemblies and
► Details relative 4
R 207 Angle
Right
SA bracket
ultimately into the final
product
5 A2
locations to show Bolts w/nuts (2)
2 assembly
6
how to assemble Bolt w/nut
7
the product R 404 Roller
A3
8
Lock washer Poka-yoke
9 inspection
Part number tag
10 A4
Figure 5.11 (a) Box w/packing material Figure 5.11 (b)
11 A5
65 66
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Route Sheet Work Order

Lists the operations and times required to Instructions to produce a given quantity of a
produce a component particular item, usually to a schedule
Setup Operation
Process Machine Operations Time Time/Unit Work Order
1 Auto Insert 2 Insert Component 1.5 .4 Item Quantity Start Date Due Date
Set 56
2 Manual Insert Component .5 2.3
157C 125 5/2/16 5/4/16
Insert 1 Set 12C
3 Wave Solder Solder all 1.5 4.1
components Production Delivery
to board Dept Location
4 Test 4 Circuit integrity .25 .5 F32 Dept K11

test 4GY
67 68
Engineering Change Notice Configuration Management

(ECN)
► The need to manage ECNs has led to
► A correction or modification to a the development of configuration
product’s definition or documentation management systems
► Engineering drawings
► A product’s planned and changing
► Bill of material components are accurately identified
► Control and accountability for change
Quite common with long product life cycles,
long manufacturing lead times, or rapidly
are identified and maintained
changing technologies
69 70
Product Life-Cycle
Management (PLM)
Service Design
► Integrated software that brings together ► Service typically includes direct
most, if not all, elements of product design interaction with the customer
and manufacture
► Process – chain – network (PCN)
► Product design ► Layout
analysis focuses on the ways in
► CAD/CAM ► Assembly
which processes can be designed
► DFMA ► Maintenance to optimize interaction between
► Product routing ► Environmental firms and their customers
► Materials
71 72
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Process-Chain-Network (PCN) Process-Chain-Network (PCN)

Analysis Analysis
1. Direct interaction region includes process steps
that involve interaction between participants
2. The surrogate (substitute) interaction region
includes process steps in which one participant
is acting on another participant’s resources
3. The independent processing region includes
steps in which the supplier and/or the customer
is acting on resources where each has
maximum control
Figure 5.12
73 74
Process-Chain-Network (PCN) Adding Service Efficiency

Analysis
▶ Service productivity is notoriously low
▶ All three regions have similar operating issues partially because of customer
but the appropriate way of handling the issues involvement in the design or delivery
differs across regions – service operations of the service, or both
exist only within the area of direct and
surrogate interaction ▶ Complicates product design
▶ PCN analysis provides insight to aid in
positioning and designing processes that can
achieve strategic objectives
75 76
Adding Service Efficiency Adding Service Efficiency
▶ Limit the options ▶ Automation

▶ Improves efficiency and ability to meet ▶ Reduces cost, increases customer
customer expectations service
▶ Delay customization ▶ Moment of truth
▶ Modularization ▶ Critical moments between the customer
and the organization that determine
▶ Eases customization of a service customer satisfaction
77 78
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Documents for Services First Bank Corp. Drive-up

Teller Service Guidelines
► High levels of customer interaction • Be especially discreet when talking to the customer through the
microphone.
necessitates different
• Provide written instructions for customers who must fill out forms
documentation you provide.
► Often explicit job instructions • Mark lines to be completed or attach a note with instructions.
• Always say “please” and “thank you” when speaking through the
► Scripts and storyboards are other microphone.
techniques • Establish eye contact with the customer if the distance allows it.
• If a transaction requires that the customer park the car and come
into the lobby, apologize for the inconvenience.
79 80
Application of Decision Trees Application of Decision Trees

to Product Design to Product Design
Procedure
► Particularly useful when there are a
series of decisions and outcomes that 1. Include all possible alternatives and
lead to other decisions and outcomes 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
81 82
Decision Tree Example Decision Tree Example

$2,500,000 Revenue
(.4) (.4) – 1,000,000 Mfg cost ($40 x 25,000)
Purchase CAD Purchase CAD – 500,000 CAD cost
High sales High sales
$1,000,000 Net
$800,000 Revenue
(.6) Low sales (.6) Low sales – 320,000 Mfg cost ($40 x 8,000)
– 500,000 CAD cost
Hire and train engineers Hire and train engineers – $20,000 Net loss
(.4) (.4)
High sales High sales
EMV (purchase CAD system) = (.4)($1,000,000) + (.6)(– $20,000)
(.6) (.6)
Low sales Low sales
Do nothing Do nothing
Figure 5.13 Figure 5.13

83 84
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Decision Tree Example Decision Tree Example

$2,500,000 Revenue $2,500,000 Revenue
(.4) – 1,000,000 Mfg cost ($40 x 25,000) (.4) – 1,000,000 Mfg cost ($40 x 25,000)
Purchase CAD Purchase CAD
High sales – 500,000 CAD cost High sales – 500,000 CAD cost
$388,000 $388,000
$1,000,000 Net $1,000,000 Net
$800,000 Revenue $800,000 Revenue

(.6) Low sales – 320,000 Mfg cost ($40 x 8,000) (.6) Low sales – 320,000 Mfg cost ($40 x 8,000)
– 500,000 CAD cost – 500,000 CAD cost
Hire and train engineers – $20,000 Net loss Hire and train engineers – $20,000 Net loss
$365,000
$2,500,000 Revenue
(.4) (.4) – 1,250,000 Mfg cost ($50 x 25,000)
High sales High sales – 375,000 Hire and train cost
EMV (purchase CAD system) = (.4)($1,000,000) + (.6)(– $20,000) $875,000 Net
= $388,000
$800,000 Revenue
(.6) (.6) – 400,000 Mfg cost ($50 x 8,000)
Low sales Low sales – 375,000 Hire and train cost
Do nothing Do nothing $0 $25,000 Net
Figure 5.13 $0 Net Figure 5.13

85 86
Transition to Production Transition to Production

► Know when to move to production ► Responsibility must also transition as the
► Product development can be viewed as product moves through its life cycle
evolutionary and never complete ► Line management takes over from design
► Product must move from design to production ► Three common approaches to managing
in a timely manner transition
► Most products have a trial production period ► Project managers
to insure producibility ► Product development teams
► Develop tooling, quality control, training
► Integrate product development and
► Ensures successful production manufacturing organizations
87 88
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retrieval system, or transmitted, in any form or by any means, electronic,
mechanical, photocopying, recording, or otherwise, without the prior written
permission of the publisher.
Printed in the United States of America.
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12/14/2020

Outline - Continued Regal Marine

Learning Objectives Learning Objectives

Goods and Services Selection Goods and Services Selection

Goods and Services Selection Product Decision

40% – The objective of the product decision

The higher the percentage of is to develop and implement a

30% – sales from the last 5 years, the

Position of firm in its industry

Product Strategy Options Product Life Cycles

Product Life Cycle Life Cycle and Strategy

Product Life Cycle Product Life Cycle

Growth Phase Maturity Phase

► Product design begins to ► Competitors now established

Product Life Cycle Product Life Cycle Costs

Unless product makes a special

must plan to terminate offering 40 –

Concept Detailed Manufacturing Distribution,

Product-by-Value Analysis Generating New Products

QFD House of Quality

3. Relate customer wants to product hows What the Relationship

5. Develop our importance ratings

House of Quality Example House of Quality Example How to Satisfy

Your team has been charged with Technical

designing a new camera for Great What the

House of Quality Easy to use 4

© 2014 Pearson Education, Inc. 5 - 25 © 2014 Pearson Education, Inc. 5 - 26

House of Quality Example How to Satisfy

Technical High relationship Technical

Customer Wants Reliable 5

Easy to hold steady 2

House of Quality Example How to Satisfy

What the What the

High number of pixels

Our importance ratings 22 9 27 27 32 25

© 2014 Pearson Education, Inc. 5 - 29 © 2014 Pearson Education, Inc. 5 - 30

How to Satisfy How to Satisfy

House of Quality Example House of Quality Example

Failure 1 per 10,000

House of Quality House of Quality Sequence

Deploying resources through the organization

in response to customer requirements

Target values House

Company A 0.7 60% yes 1 ok G

Organizing for Product Organizing for Product

Organizing for Product Manufacturability and

Cost Reduction of a Bracket

Robust Design Modular Design

► Products designed in easily segmented

Computer-Aided Benefits of CAD/CAM

Virtual Reality Technology Value Analysis

Sustainability and Life Cycle Product Development

Product Development Product Development

Internal Cost of product development Shared

Product Development Defining a Product

Monterey Jack Cheese Product Documents

Engineering Drawings Bills of Material

NUMBER DESCRIPTION QTY

Bills of Material Make-or-Buy Decisions

Group Technology Group Technology Scheme

Group Technology Benefits Documents for Production

Assembly Drawing Assembly Chart

Route Sheet Work Order

4 Test 4 Circuit integrity .25 .5 F32 Dept K11