Operations
Management
Design of Goods and Services
Chapter 5
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Outline
Global Company Profile: Regal Marine
Goods and Services Selection





Product Strategy Options Support Competitive
Advantage
Generation of New Product Opportunities
Product Life Cycles
Life Cycle and Strategy
Product-by-value Analysis
Product Development




Product Development System
Quality Function Deployment (QFD)
Organizing for Product Development
Manufacturability and Value Engineering
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Outline - continued
Issues for Product Design





Robust Design
Modular Design
Computer-Aided Design (CAD)
Value Analysis
Environmentally Friendly Design
 Time-Based Competition



Purchase of Technology by Acquiring Firm
Joint Ventures
Alliances
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Outline - continued
Defining the Product


Make-or-buy Decisions
Group Technology
Documents for Production
Service Design

Documents for Service
Application of Decision Trees to Product
Design
Transition to Production
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Learning Objectives
When you complete this chapter, you should
be able to :
Identify or Define:
Product life cycle
 Product development team
 Manufacturabililty and value engineering
 Robust design
 Time-based competition
 Modular design
 Computer aided design
 Value analysis
 Group technology
 Configuration management

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Learning Objectives
continued
When you complete this chapter, you should be
able to:
Explain:
Alliances
 Concurrent engineering
 Product-by-value analysis
 Product documentation

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Regal Marine
Global market
3-dimensional CAD
reduced product development time
 reduced problems with tooling
 reduced problems in production

Assembly line
JIT
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Humor in Product Design
As the customer
wanted it.
As Marketing
interpreted it.
© 1984-1994 T/Maker Co.
© 1984-1994 T/Maker Co.
As Operations made it.
As Engineering
designed it.
© 1984-1994 T/Maker Co.
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© 1984-1994 T/Maker Co.
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What is a Product?
Need-satisfying offering of an organization

Example
 P&G does not sell laundry detergent
 P&G sells the benefit of clean clothes
Customers buy satisfaction, not parts
May be a good or a service
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Product Strategy Options
Product differentiation
Low cost
Rapid response
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Generation of New Product
Opportunities
Economic change
Sociological and demographic change
Technological change
Political/legal change
Changes in



market practice
professional standards
suppliers and distributors
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Product Components
Product
Brand
(Name)
Physical
Good
Product
Idea
Quality
Level
Features
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Package
5-12
Service
(Warranty)
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Product Life Cycle
Introduction
Growth
Maturity
Decline
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Product Life Cycle
Introduction
Fine tuning
research
 product development
 process modification and enhancement
 supplier development

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Product Life Cycle
Growth
Product design begins to stabilize
Effective forecasting of capacity becomes
necessary
Adding or enhancing capacity may be
necessary
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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
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Product Life Cycle
Decline
Unless product makes a special contribution,
must plan to terminate offering
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Product Life Cycle, Sales, Cost,
and Profit
Sales, Cost & Profit .
Cost of
Development
& Manufacture
Sales Revenue
Profit
Cash flow
Loss
Time
Introduction
Growth
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Maturity
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Decline
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Percent of Sales From New Product
50%
40%
30%
Industry Leader
Top Third
Middle Third
Bottom Third
20%
10%
0%
Position of Firm in Its
Industry
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Products in Various Stages of Life
Cycle
Sales
Introduction
Growth
Maturity
Roller
Blades
Jet Ski
Decline
Boeing
727
Virtual
Reality
Time
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Few Successes
Number
2000
1500
Ideas
1750
Design review,
Testing, Introduction
Market
requirement
1000
500
0
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1000
Functional
specifications
500
Product
specification
100
25
One
success!
Development Stage
5-21
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Product-by-Value Analysis
Lists products in descending order of their
individual dollar contribution to the firm.
Helps management evaluate alternative
strategies.
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Scope of product development team
Product Development Stages
Idea generation
Assessment of firm’s ability to carry out
Customer Requirements
Functional Specification
Scope of design for
Product Specifications
manufacturability and
Design Review
value engineering teams
Test Market
Introduction to Market
Evaluation
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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
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Figure 5.5
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Idea Generation Stage
 Provides basis for entry into market
 Sources of ideas

Market need (60-80%); engineering & operations (20%);
technology; competitors; inventions; employees
 Follows from marketing strategy

Identifies, defines, & selects best market opportunities
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Customer Requirements Stage
 Identifies & positions key product benefits


Stated in core benefits proposition (CBP)
Example: Long lasting with more power
(Sears’ Die Hard Battery)
 Identifies detailed list of product
attributes desired by customer

Focus groups or
1-on-1 interviews
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House of Quality
Product
Characteristics
Customer
Requirements
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Functional Specification Stage
 Defines product in terms of how the
product would meet desired
attributes
 Identifies product’s engineering
characteristics

Example: printer noise (dB)
House of Quality
 Prioritizes engineering
characteristics
 May rate product compared
to competitors’
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Product
Characteristics
Customer
Requirements
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Product Specification Stage
 Determines how product will be made
 Gives product’s physical specifications
 Example: Dimensions, material etc.
 Defined by engineering
drawing
 Done often on computer
Computer-Aided
Design (CAD)
House of Quality
Component
Specifications

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Product
Characteristics
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Quality Function Deployment
 Product design process using
cross-functional teams

Marketing, engineering, manufacturing
 Translates customer preferences into specific
product characteristics
 Involves creating 4 tabular ‘Matrices’ or
‘Houses’

Breakdown product design into increasing levels of
detail
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To Build House of Quality
Identify customer wants
Identify how the good/service will satisfy
customer wants.
Relate the customer’s wants to the product’s
hows.
Identify relationships between the firm’s
hows.
Develop importance ratings
Evaluate competing products
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House of Quality Sequence
Quality
Plan
Customer
Requirements
Design
Characteristics
House
1
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Specific
Components
Design
Characteristics
Specific
Components
House
3
Production
Process
Production
Process
House
4
House
2
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House of Quality Example
You’ve been assigned
temporarily to a QFD team.
The goal of the team is to
develop a new camera
design. Build a House of
Quality.
© 1984-1994 T/Maker Co.
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House of Quality Example
Customer
Requirements
Customer
Importance
Target Values
High relationship  Medium relationship  Low Relationship
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House of Quality Example
What the customer desires
(‘wall’)
Customer
Requirements
Customer
Importance
Aluminum
Parts
Auto
Focus
Auto
Exposure
Light weight
Easy to use
Reliable
Target Values
High relationship  Medium relationship  Low Relationship
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House of Quality Example
Average customer
importance rating
Customer
Requirements
Customer
Importance
Light weight
Easy to use
Reliable
3
2
1
Aluminum
Parts
Auto
Focus
Auto
Exposure
Target Values
High relationship  Medium relationship  Low Relationship
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House of Quality Example
Relationship between
customer attributes &
engineering characteristics
(‘rooms’)
Customer
Requirements
Light weight
Easy to use
Reliable
Customer
Importance
3
2
1
Aluminum
Parts

Auto
Focus
Auto
Exposure




Target Values
High relationship  Medium relationship  Low Relationship
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House of Quality Example
Target values for engineering
characteristics (‘basement’);
key output
Customer
Requirements
Light weight
Easy to use
Reliable

Customer
Importance
3
2
1
Target Values
Aluminum
Parts

5
Auto
Focus
Auto
Exposure




1
1
High relationship  Medium relationship  Low Relationship
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House of Quality Example

Customer
Requirements
Light weight
Easy to use
Reliable
Customer
Importance
3
2
1
Target Values
Aluminum
Parts

5
Auto
Focus
Auto
Exposure




1
1
High relationship  Medium relationship  Low Relationship
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Manufacturability and
Value Engineering
Benefits:
reduced complexity of products
 additional standardization of products
 improved functional aspects of product
 improved job design and job safety
 improved maintainability of the product
 robust design

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Cost Reduction of a Bracket via
Value Engineering
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Issues for Product Development
Robust design
Time-based competition
Modular design
Computer-aided design
Value analysis
Environmentally friendly design
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Robust Design
Product is designed so that small variations
in production or assembly do not adversely
affect the product
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Modular Design
Products designed in easily segmented
components.
Adds flexibility to both production and
marketing
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Computer Aided Design (CAD)
 Designing products at
a computer terminal or
work station
Design engineer
develops rough
sketch of product
 Uses computer to
draw product

 Often used with CAM
© 1995 Corel Corp.
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Benefits of CAD/CAM
 Shorter design time
 Database availability
 New capabilities

Example: Focus more on product ideas
 Improved product quality
 Reduced production costs
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Value Analysis
Focuses on design improvement during
production
Seeks improvements leading either to a
better product or a product which can be
more economically produced.
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Environmentally Sound Strategy
Benefits
Safe and environmentally sound products
 Minimum raw material and energy waste
 Product differentiation
 Environmental liability reduction
 Cost effective compliance with environmental
regulations
 Recognition as good corporate citizen

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Environmentally Friendly Design
Make products recyclable
Use recycled materials
Use less harmful ingredients
Use lighter components
Use less energy
Use less material
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Time-based Competition
Product life cycles are becoming shorter.
Faster developers of new products gain on
slower developers and obtain a competitive
advantage
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Figure 5.6
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Product Documents
 Engineering drawing
Shows dimensions, tolerances, &
materials
 Shows codes for Group Technology

 Bill of Material


Lists components, quantities &
where used
Shows product structure
© 1984-1994 T/Make
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Monterey Jack
(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
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Engineering Drawing Example
2-1/2
13/16
diameter
1
13/32
diameter
1/4 R
2-1/4
13/16
45°
3/8
13/16
5/16
1-5/8
Bracket
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Scale: FULL
Drawn: J. Thomas
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A- 435-038
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Engineering Drawings - Show
Dimensions, Tolerances, etc.
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Bill of Material Example
© 1995 Corel Corp.
Bill of Material
P/N: 1000
Name: Bicycle
P/N
Desc
Qty
1001
Handle Bars
1
1002
Frame Assy
1
1003
Wheels
2
1004
Frame
1
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Units Level
Each
1
Each
1
Each
2
Each
2
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Examples of Bills of Materials
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Make-or-Buy Decisions
Decide whether or not you want (or need) to
produce an item
May be able to purchase the item as a
“standard item” from another manufacturer
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Group Technology Characteristics
 Parts grouped into families

Similar, more standardized parts
 Uses coding system

Describes processing & physical
characteristics
 Part families produced
in manufacturing cells

Mini-assembly lines
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© 1984-1994 T/Maker Co.
Group Technology Code Example
4mm x 45° chamfer
80mm
60mm
Round Rod
Product Code:
1 5 3 1
112mm
Part function (round rod)
Material (steel)
Max. length (50 < L < 150)
Primary machine (lathe)
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Group Technology Schemes
Enable Grouping of Parts
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Group Technology Benefits
 Improved product design
 Reduced purchases
 Reduced work-in-process inventory
 Improved routing & machine loading
 Reduced setup & production times
 Simplified production planning & control
 Simplified maintenance
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Production Documents
Assembly Drawings
Assembly chart
Route sheet
Work order
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Assembly Drawing
 Shows exploded view of product
Head
Neck
End
Cap
Handle
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Assembly Chart for
A Tuna Sandwich
1
Tuna Fish
SA1
2
3
Tuna
Assy
A1
Sandwich
Mayonaise
FG
Bread
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Assembly Drawing and Assembly
Chart
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Route Sheet
 Lists all operations
Route Sheet for Bracket
Sequence
Machine
Operation
1
Shear # 3
2
Shear # 3
3
Drill
press
Brake
press
Shear to
length
Shear 45°
corners
Drill both
holes
Bend 90°
4
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Setup
Time
5
Operation
Time/Unit
.030
8
.050
15
3.000
10
.025
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Work Order
Authorizes producing a given item, usually to a schedule
© 1984-1994 T/Maker Co.
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Engineering Change Notice (ECN)
A correction or modification of an
engineering drawing or bill of material
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© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Configuration Management
A system by which a product’s planned and
changing components are accurately
identified and for which control and
accountability of change are maintained
PowerPoint presentation to accompany Operations
Management, 6E (Heizer & Render)
5-70
© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Service Design Nature of Customer Participation
PowerPoint presentation to accompany Operations
Management, 6E (Heizer & Render)
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© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Improving Customer Relations at
a Drive-up Window
 Be especially discreet when talking with customer through the
microphone
 Provide written instructions for customers who must fill out
forms you provide
 Mark lines to be completed or attach a note with instructions
 Always say ”please” and “thank you”
 Establish eye contact with the customer if the distance allows it
 If the transaction requires that the customer park the car and
come into the lobby, apologize for the inconvenience.
PowerPoint presentation to accompany Operations
Management, 6E (Heizer & Render)
5-72
© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Moment-of-Truth at GTE
Experience Detractors
Experience Enhancers
Standard Expectations
I had to call more than once to
get through.
Only one local number needs to
be dialed
A recording spoke to me rather
than a person
I never get a busy signal
While on hold, I get silence,and
wonder if I am disconnected.
The operator sounded like he
was reading a form routine
questions.
The operator sounded
uninterested
I felt the operator rushed me.
PowerPoint presentation to accompany Operations
Management, 6E (Heizer & Render)
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 operator is able to explain
to me what I can expect to take
place
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The operator was
sincerely concerned and
apologetic about my
problem
He asked intelligent
questions that allowed
me to feel confident in
his abilities
The operator offered
various times to have
work done, to suit my
schedule
Ways to avoid future
problems were
suggested
© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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.
Considerations:



Include all possible alternatives and states of nature including “doing nothing”
Enter payoffs at end of branch
Approach determining expected values by “pruning”
tree
PowerPoint presentation to accompany Operations
Management, 6E (Heizer & Render)
5-74
© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Transition to Production
First issue: knowing when to move to
production!
Second: must view product development as
evolutionary, not responsibility of single
individual/department
Third: expect to need a trial production
period to work the bugs out
Fourth: recognize that responsibility must
also transition
PowerPoint presentation to accompany Operations
Management, 6E (Heizer & Render)
5-75
© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458