Operations Management Chapter 5 Design of Goods and

Operations Management Chapter 5 Design of Goods and Services Power. Point presentation to accompany Heizer/Render Principles of Operations Management, 6 e Operations Management, 8 e © 2006 Prentice Hall, Inc. © 2006 Prentice 5–

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

Outline - Continued þ Generating New Products þ New Product Opportunities þ Importance of New Products þ Product Development System þ Quality Function Deployment (QFD) þ Organizing for Product Development þ Manufacturability and Value Engineering © 2006 Prentice Hall, Inc. 5–

Outline - Continued þ Issues For Product Design þ Robust Design þ Modular Design þ Computer-Aided Design (CAD) þ Computer-Aided Manufacturing (CAM) þ Virtual Reality Technology þ Value Analysis þ Ethics and Environmentally Friendly Design © 2006 Prentice Hall, Inc. 5–

Outline - Continued þ Time-Based Competition þ Purchase of Technology by Acquiring Firm þ Joint Ventures þ Alliances Defining the Product þ Make-or-Buy Decisions þ Group Technology þ Documents For Production © 2006 Prentice Hall, Inc. 5–

Outline - Continued þ Product Lifecycle Management (PLM) þ Service Design þ Documents for Services þ Application of Decision Trees to Product Design þ Transition to Production © 2006 Prentice Hall, Inc. 5–

Learning Objectives When you complete this chapter, you should be able to : Identify or Define: þ Product life cycle þ Product development team þ Manufacturability and value engineering þ Robust design þ Time-based competition © 2006 Prentice Hall, Inc. 5–

Learning Objectives When you complete this chapter, you should be able to : Identify or Define: þ Modular design þ Computer aided design þ Value analysis þ Group technology þ Configuration management © 2006 Prentice Hall, Inc. 5–

Learning Objectives When you complete this chapter, you should be able to : Explain: þ Alliances þ Concurrent engineering þ Product-by-value analysis þ Product documentation © 2006 Prentice Hall, Inc. 5–

Regal Marine þ Global market þ 3 -dimensional CAD system þ Reduced product development time þ Reduced problems with tooling þ Reduced problems in production þ Assembly line production þ JIT © 2006 Prentice Hall, Inc. 5–

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

Product Strategy Options þ Differentiation þ Shouldice Hospital þ Low cost þ Taco Bell þ Rapid response þ Toyota © 2006 Prentice Hall, Inc. 5–

Product Life Cycles þ May be any length from a few hours to decades þ The operations function must be able to introduce new products successfully © 2006 Prentice Hall, Inc. 5 – 13

Sales, cost, and cash flow Product Life Cycles Cost of development and production Sales revenue Net revenue (profit) Cash flow Negative cash flow Introduction © 2006 Prentice Hall, Inc. Loss Growth Maturity Decline Figure 5. 1 5 – 14

Product Life Cycle Costs Percent of total cost 100 – Costs committed 80 – 60 – Costs incurred 40 – 20 – Ease of change 0– Concept design © 2006 Prentice Hall, Inc. Detailed Manufacturing design prototype Distribution, service, and disposal 5–

Product Life Cycle Introduction þ Fine tuning þ Research þ Product development þ Process modification and enhancement þ Supplier development © 2006 Prentice Hall, Inc. 5–

Product Life Cycle Growth þ Product design begins to stabilize þ Effective forecasting of capacity becomes necessary þ Adding or enhancing capacity may be necessary © 2006 Prentice Hall, Inc. 5–

Product Life Cycle Maturity þ Competitors now established þ High volume, innovative production may be needed þ Improved cost control, reduction in options, paring down of product line © 2006 Prentice Hall, Inc. 5–

Product Life Cycle Decline þ Unless product makes a special contribution to the organization, must plan to terminate offering © 2006 Prentice Hall, Inc. 5–

Importance of New Products Percentage of Sales from New Products 50% 40% 30% 20% 10% Industry leader Top third Middle third Bottom third Position of Firm in Its Industry © 2006 Prentice Hall, Inc. Figure 5. 2 5–

Product-by-Value Analysis þ Lists products in descending order of their individual dollar contribution to the firm þ Lists the total annual dollar contribution of the product þ Helps management evaluate alternative strategies © 2006 Prentice Hall, Inc. 5–

Product-by-Value Analysis Sam’s Furniture Factory Individual Contribution ($) Total Annual Contribution ($) Love Seat $102 $36, 720 Arm Chair $87 $51, 765 Foot Stool $12 $6, 240 Recliner $136 $51, 000 © 2006 Prentice Hall, Inc. 5–

New Product Opportunities 1. Understanding the customer 2. Economic change 3. Sociological and demographic change Brainstorming 4. Technological change 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 Figure 5. 3 Ability Customer Requirements Functional Specifications Scope of product development team Product Specifications Scope for design and Design Review engineering teams Test Market Introduction Evaluation © 2006 Prentice Hall, Inc. 5–

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

QFD House of Quality Interrelationships What the Customer Wants Relationship Matrix Analysis of Competitors How to Satisfy Customer Wants 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 What the Customer Wants What the customer wants Lightweight Easy to use Reliable Easy to hold steady No double exposures © 2006 Prentice Hall, Inc. Relationship Matrix Analysis of Competitors How to Satisfy Customer Wants Technical Attributes and Evaluation Customer importance rating (5 = highest) 3 4 5 2 1 5 – 28

Interrelationships House of Quality Example © 2006 Prentice Hall, Inc. Relationship Matrix Ergonomic design Auto film advance Auto exposure Auto focus Technical Attributes and Evaluation Aluminum components Low electricity requirements What the Customer Wants Analysis of Competitors How to Satisfy Customer Wants 5 – 29

Interrelationships House of Quality Example What the Customer Wants High relationship Medium relationship Low relationship Lightweight Easy to use Reliable Easy to hold steady No double exposures Relationship Matrix Analysis of Competitors How to Satisfy Customer Wants Technical Attributes and Evaluation 3 4 5 2 1 Relationship matrix © 2006 Prentice Hall, Inc. 5 – 30

Interrelationships House of Quality Example What the Customer Wants Relationship Matrix Analysis of Competitors How to Satisfy Customer Wants © 2006 Prentice Hall, Inc. Ergonomic design Auto film advance Auto exposure Auto focus Aluminum components Relationships between the things we can do Low electricity requirements Technical Attributes and Evaluation 5 – 31

Interrelationships House of Quality Example What the Customer Wants Relationship Matrix Analysis of Competitors How to Satisfy Customer Wants Technical Attributes and Evaluation Lightweight Easy to use Reliable Easy to hold steady No double exposures Our importance ratings 3 4 5 2 1 22 9 27 27 32 25 Weighted rating © 2006 Prentice Hall, Inc. 5 – 32

Interrelationships How to Satisfy Customer Wants Technical Attributes and Evaluation How well do competing products meet customer wants Lightweight Easy to use Reliable Easy to hold steady No double exposures Our importance ratings © 2006 Prentice Hall, Inc. 3 4 5 2 1 22 Company B Relationship Matrix Company A What the Customer Wants Analysis of Competitors House of Quality Example G G F G P P P G P P 5 5 – 33

Interrelationships How to Satisfy Customer Wants 2’ to ∞ 75% 0. 5 A Technical attributes 2 circuits Technical Attributes and Evaluation Company A 0. 7 60% yes 1 Technical evaluation Company B 0. 6 50% yes 2 Us 0. 5 75% yes 2 © 2006 Prentice Hall, Inc. Panel ranking Relationship Matrix Failure 1 per 10, 000 What the Customer Wants Analysis of Competitors House of Quality Example ok G ok F ok G 5 – 34

House of Quality Example Completed House of Quality © 2006 Prentice Hall, Inc. 5 – 35

House of Quality Sequence Deploying resources through the organization in response to customer requirements Quality plan Customer requirements House 1 House 2 House 3 Production process Design characteristics Specific components Production process House 4 Figure 5. 4 © 2006 Prentice Hall, Inc. 5–

Organizing for Product Development þ Historically – distinct departments þ Duties and responsibilities are defined þ Difficult to foster forward thinking þ Today – team approach þ Cross functional – representatives from all disciplines or functions þ Concurrent engineering – cross functional team © 2006 Prentice Hall, Inc. 5–

Manufacturability and Value Engineering þ 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–

Cost Reduction of a Bracket through Value Engineering Figure 5. 5 © 2006 Prentice Hall, Inc. 5 – 39

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

Robust Design þ Product is designed so that small variations in production or assembly do not adversely affect the product þ Typically results in lower cost and higher quality © 2006 Prentice Hall, Inc. 5–

Modular Design þ Products designed in easily segmented components þ Adds flexibility to both production and marketing þ Improved ability to satisfy customer requirements © 2006 Prentice Hall, Inc. 5–

Computer Aided Design (CAD) þ Using computers to design products and prepare engineering documentation þ Shorter development cycles, improved accuracy, lower cost þ Information and designs can be deployed worldwide © 2006 Prentice Hall, Inc. 5–

Extensions of CAD þ Design for Manufacturing and Assembly (DFMA) þSolve manufacturing problems during the design stage þ 3 -D Object Modeling þSmall prototype development þ International data exchange through STEP © 2006 Prentice Hall, Inc. 5–

Computer-Aided Manufacturing (CAM) þ Utilizing specialized computers and program to control manufacturing equipment þ Often driven by the CAD system © 2006 Prentice Hall, Inc. 5 – 45

Benefits of CAD/CAM 1. Product quality 2. Shorter design time 3. Production cost reductions 4. Database availability 5. New range of capabilities © 2006 Prentice Hall, Inc. 5–

Virtual Reality Technology þ Computer technology used to develop an interactive, 3 -D model of a product from the basic CAD data þ Allows people to ‘see’ the finished design before a physical model is built þ Very effective in large-scale designs such as plant layout © 2006 Prentice Hall, Inc. 5–

Value Analysis þ Focuses on design improvement during production þ Seeks improvements leading either to a better product or a product which can be produced more economically © 2006 Prentice Hall, Inc. 5–

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–

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 – 50

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–

Legal and Industry Standards For Design … þ Federal Drug Administration þ Consumer Products Safety Commission þ National Highway Safety Administration þ Children’s Product Safety Act © 2006 Prentice Hall, Inc. 5 – 52

Legal and Industry Standards For Manufacture/Assembly … þ Occupational Safety and Health Administration þ Environmental Protection Agency þ þ Professional ergonomic standards State and local laws dealing with employment standards, discrimination, etc. © 2006 Prentice Hall, Inc. 5 – 53

Legal and Industry Standards For Disassembly/Disposal … þ Vehicle Recycling Partnership þ Increasingly rigid laws worldwide © 2006 Prentice Hall, Inc. 5 – 54

Time-Based Competition þ Product life cycles are becoming shorter and the rate of technological change is increasing þ Developing new products faster can result in a competitive advantage © 2006 Prentice Hall, Inc. 5–

Product Development Continuum External Development Strategies Figure 5. 6 Alliances Joint Ventures Purchase Technology or Expertise by Acquiring the Developer Internal Development Strategies Migrations of Existing Products Enhancement to Existing Products New Internally Developed Products Internal Lengthy High © 2006 Prentice Hall, Inc. Cost of Product Development Speed of Product Development Risk of Product Development Shared Rapid and/ or Existing Shared 5 – 56

Acquiring Technology þ By Purchasing a Firm þ Speeds development þ Issues concern the fit between the acquired organization and product and the host þ Through Joint Ventures þ Both organizations learn þ Risks are shared þ Through Alliances þ Cooperative agreements between independent organizations © 2006 Prentice Hall, Inc. 5 – 57

Defining The Product þ First definition is in terms of functions þ Rigorous specifications are developed during the design phase þ Manufactured products will have an engineering drawing þ Bill of material (BOM) lists the components of a product © 2006 Prentice Hall, Inc. 5 – 58

Product Documents þ Engineering drawing þ Shows dimensions, tolerances, and materials þ Shows codes for Group Technology þ Bill of Material þ Lists components, quantities and where used þ Shows product structure © 2006 Prentice Hall, Inc. 5–

Monterey Jack Cheese (a) U. S. grade AA. Monterey cheese shall conform to the following requirements: (1) Flavor. Is fine and highly pleasing, free from undesirable flavors and odors. May possess a very slight acid or feed flavor. (2) Body and texture. A plug drawn from the cheese shall be reasonably firm. It shall have numerous small mechanical openings evenly distributed throughout the plug. It shall not possess sweet holes, yeast holes, or other gas holes. (3) Color. Shall have a natural, uniform, bright and attractive appearance. (4) Finish and appearance - bandaged and paraffin-dipped. The rind shall be sound, firm, and smooth providing a good protection to the cheese. Code of Federal Regulation, Parts 53 to 109, . Revised as of Jan. 1, 1985, General Service Administration © 2006 Prentice Hall, Inc. 5–

Engineering Drawings Figure 5. 8 © 2006 Prentice Hall, Inc. 5 – 61

Bills of Material Panel Weldment © 2006 Prentice Hall, Inc. NUMBER DESCRIPTION QTY A 60 -71 PANEL WELDM’T 1 A 60 -7 R 60 -17 R 60 -428 P 60 -2 LOWER ROLLER ASSM. ROLLER PIN LOCKNUT 1 1 A 60 -72 R 60 -57 -1 A 60 -4 02 -50 -1150 GUIDE ASSM. REAR SUPPORT ANGLE ROLLER ASSM. BOLT 1 1 A 60 -73 A 60 -74 R 60 -99 02 -50 -1150 GUIDE ASSM. FRONT SUPPORT WELDM’T WEAR PLATE BOLT 1 1 Figure 5. 9 5 – 62

Bills of Material BBQ Bacon Cheeseburger © 2006 Prentice Hall, Inc. Description Qty Bun Hamburger patty Cheddar cheese Bacon BBQ onions Hickory BBQ sauce Burger set Lettuce Tomato Red onion Pickle French fries Seasoned salt 11 -inch plate HRC flag 1 8 oz. 2 slices 2 strips 1/2 cup 1 oz. 1 leaf 1 slice 4 rings 1 slice 5 oz. 1 tsp. 1 1 Figure 5. 9 5 – 63

Group Technology þ Parts grouped into families with similar characteristics þ Coding system describes processing and physical characteristics þ Part families can be produced in dedicated manufacturing cells © 2006 Prentice Hall, Inc. 5–

Group Technology Scheme (a) Ungrouped Parts (b) Grouped Cylindrical Parts (families of parts) Grooved Slotted Threaded Drilled Machined Figure 5. 10 © 2006 Prentice Hall, Inc. 5 – 65

Group Technology Benefits 1. Improved design 2. Reduced raw material and purchases 3. Simplified production planning and control 4. Improved layout, routing, and machine loading 5. Reduced tooling setup time, work-inprocess, and production time © 2006 Prentice Hall, Inc. 5–

Documents for Production þ Assembly drawing þ Assembly chart þ Route sheet þ Work order þ Engineering change notices (ECNs) © 2006 Prentice Hall, Inc. 5–

Assembly Drawing þ Shows exploded view of product þ Details relative locations to show to assemble the product Figure 5. 11 (a) © 2006 Prentice Hall, Inc. 5–

Assembly Chart 1 2 3 4 5 6 7 8 9 10 R 209 Angle R 207 Angle Bolts w/nuts (2) Left bracket SA A 1 1 assembly R 209 Angle R 207 Angle Bolts w/nuts (2) Right bracket SA A 2 2 assembly Bolt w/nut R 404 Roller A 3 Lock washer Part number tag þ Identifies the point of production where components flow into subassemblies and ultimately into the final product Poka-yoke inspection A 4 Box w/packing material 11 © 2006 Prentice Hall, Inc. A 5 Figure 5. 11 (b) 5 – 69

Route Sheet Lists the operations and times required to produce a component Process Machine Operations 1 Auto Insert 2 2 3 Manual Insert 1 Wave Solder 4 Test 4 Insert Component Set 56 Insert Component Set 12 C Solder all components to board Circuit integrity test 4 GY © 2006 Prentice Hall, Inc. Setup Time Operation Time/Unit 1. 5 . 4 . 5 2. 3 1. 5 4. 1 . 25 . 5 5–

Work Order Instructions to produce a given quantity of a particular item, usually to a schedule Work Order © 2006 Prentice Hall, Inc. Item Quantity Start Date Due Date 157 C 125 5/2/06 5/4/06 Production Dept Delivery Location F 32 Dept K 11 5–

Engineering Change Notice (ECN) þ A correction or modification to a product’s definition or documentation þ Engineering drawings þ Bill of material Quite common with long product life cycles, long manufacturing lead times, or rapidly changing technologies © 2006 Prentice Hall, Inc. 5–

Configuration Management þ The need to manage ECNs has led to the development of configuration management systems þ A product’s planned and changing components are accurately identified and control and accountability for change are identified and maintained © 2006 Prentice Hall, Inc. 5–

Product Lifecycle Management þ Integrated software that brings together most, if not all, elements of product design and manufacture þ Product design þ CAD/CAM, DFMA þ Product routing þ Materials þ Assembly þ Environmental © 2006 Prentice Hall, Inc. 5 – 74

Service Design þ Service typically includes direct interaction with the customer þ Increased opportunity for customization þ Reduced productivity þ Cost and quality are still determined at the design stage þ Delay customization þ Modularization þ Reduce customer interaction, often through automation © 2006 Prentice Hall, Inc. 5 – 75

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 – 76

Moments of Truth þ Concept created by Jan Carlzon of Scandinavian Airways þ Critical moments between the customer and the organization that determine customer satisfaction þ There may be many of these moments þ These are opportunities to gain or lose business © 2006 Prentice Hall, Inc. 5–

Moments-of-Truth Computer Company Hotline Experience Enhancers Standard Expectations Experience Detractors I had to call more than once to get through A recording spoke to me rather than a person While on hold, I get silence, and wonder if I am disconnected The technician sounded like he was reading a form of routine questions The technician sounded uninterested I felt the technician rushed me © 2006 Prentice Hall, Inc. Only one local number needs to be dialed I never get a busy signal I get a human being to answer my call quickly and he or she is pleasant and responsive to my problem A timely resolution to my problem is offered The technician is able to explain to me what I can expect to happen next The technician was sincerely concerned and apologetic about my problem He asked intelligent questions that allowed me to feel confident in his abilities The technician offered various times to have work done to suit my schedule Ways to avoid future problems were suggested Figure 5. 13 5 – 78

Documents for Services þ High levels of customer interaction necessitates different documentation þ Often explicit job instructions for moments-of-truth þ Scripts and storyboards are other techniques © 2006 Prentice Hall, Inc. 5 – 79

Application of Decision Trees to Product Design þ Particularly useful when there a series of decisions and outcomes which lead to other decisions and outcomes © 2006 Prentice Hall, Inc. 5–

Application of Decision Trees to Product Design Procedures þ Include all possible alternatives and states of nature - including “doing nothing” þ Enter payoffs at end of branch þ 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–

Decision Tree Example (. 4) Purchase CAD High sales (. 6) Low sales Hire and train engineers (. 4) High sales (. 6) Low sales Do nothing Figure 5. 14 © 2006 Prentice Hall, Inc. 5 – 82

Decision Tree Example (. 4) Purchase CAD High sales (. 6) Low sales Hire and train engineers $2, 500, 000 - 1, 000 - 500, 000 $1, 000 $800, 000 - 320, 000 - 500, 000 - $20, 000 Revenue Mfg cost ($40 x 25, 000) CAD cost Net Revenue Mfg cost ($40 x 8, 000) CAD cost Net loss (. 4) High sales EMV (purchase CAD system) = (. 4)($1, 000) + (. 6)(- $20, 000) (. 6) Low sales Do nothing Figure 5. 14 © 2006 Prentice Hall, Inc. 5 – 83

Decision Tree Example (. 4) Purchase CAD $388, 000 High sales (. 6) Low sales Hire and train engineers $2, 500, 000 - 1, 000 - 500, 000 $1, 000 $800, 000 - 320, 000 - 500, 000 - $20, 000 Revenue Mfg cost ($40 x 25, 000) CAD cost Net Revenue Mfg cost ($40 x 8, 000) CAD cost Net loss (. 4) High sales EMV (purchase CAD system) = (. 4)($1, 000) + (. 6)(- $20, 000) = $388, 000 (. 6) Low sales Do nothing Figure 5. 14 © 2006 Prentice Hall, Inc. 5 – 84

Decision Tree Example (. 4) Purchase CAD $388, 000 High sales (. 6) Low sales Hire and train engineers $365, 000 (. 4) High sales (. 6) Low sales Do nothing $0 $2, 500, 000 - 1, 000 - 500, 000 $1, 000 $800, 000 - 320, 000 - 500, 000 - $20, 000 $2, 500, 000 - 1, 250, 000 - 375, 000 $800, 000 - 400, 000 - 375, 000 $25, 000 $0 Net © 2006 Prentice Hall, Inc. Revenue Mfg cost ($40 x 25, 000) CAD cost Net Revenue Mfg cost ($40 x 8, 000) CAD cost Net loss Revenue Mfg cost ($50 x 25, 000) CAD cost Net Revenue Mfg cost ($50 x 8, 000) CAD cost Net Figure 5. 14 5 – 85

Transition to Production þ Know when to move to production þ Product development can be viewed as evolutionary and never complete þ Product must move from design to production in a timely manner þ Most products have a trial production period to insure producibility þ Responsibility must also transition as the product moves through its life cycle © 2006 Prentice Hall, Inc. 5–