Chapter 7
Designing and Developing
Products and Production Processes:
Manufacturing and Service
Operations
Slide 0 of 52
Overview








Designing and Developing Products and Services
Process Planning and Design
Major Factors Affecting Process Design Decisions
Types of Process Designs
Interrelationships Among Product Design, Process
Design, and Inventory Policy
Process Design in Services
Deciding Among Processing Alternatives
Wrap-Up: What World-Class Producers Do
Slide 1 of 52
Product/Service
Development and Design
Slide 2 of 52
Stages of a Product’s Life Cycle
Automobile
Cell Phone
Video Recorder
Compact Disc Player
Color Laser Printer
Fax Machine
B&W TV
Color Copier
Introduction
Growth
Maturity
Decline
Slide 3 of 52
Sales, Cost & Profit
Product Life Cycle & Sales, Cost, and
Net Revenues
Sales
Revenue
Net
Revenue
Loss
1
Introduction
2
3
Growth
4
Maturity
5
Decline
Time
Slide 4 of 52
Operations Emphasis in Product Life Cycle
Stage
Operations Emphasis
Introductory Research
Product development
Process modification & enhancement
Supplier development
Growth
Capacity determination/enhancement
Maturity
Decline
High volume production with innovation
Cost control
Reduction in options
Paring down of product line
Termination of production if necessary
Slide 5 of 52
American Approach to Product Design
Research
Development
Manufacturing
Manufacturing
Process
Design
Product
Slide 6 of 52
Japanese Approach to Product Design
Research, Development, and
Manufacturing Process Design
Manufacturing
Product
Slide 7 of 52
Product/Service Design
When a product/service is designed:
 The detailed characteristics of the product/service are
established.
 The characteristics of the product/service directly
affects how the product/service can be produced/
delivered.
 How the product/service is produced/delivered
determines the design of the production/delivery
system.
Slide 8 of 52
Product/Service Design
Product/service design directly affects:
 Product/service quality
 Production/delivery cost
 Customer satisfaction
Slide 9 of 52
Product/Service Design and Development







Sources
Developing New Products/Services
Getting Them to Market Faster
Improving Current Products/Services
Designing for Ease of Production
Designing for Quality
Designing and Developing New Services
Slide 10 of 52
Sources of Product/Service Innovation






Customers
Managers
Marketing
Operations
Engineering
Research and Development (R&D)
Basic research
Applied research


Slide 11 of 52
Steps in Designing and Developing
New Products
1.
2.
3.
4.
Technical and economic feasibility studies
Prototype design
Performance testing of prototype
Market sensing/evaluation and economic evaluation
of the prototype
5. Design of production model
6. Market/performance/process testing and economic
evaluation of production model
7. Continuous modification of production model
Slide 12 of 52
Getting New Products to Market Faster



Speed creates competitive advantages
Speed saves money
Tools to improve speed:
Autonomous design and development teams
Computer-aided design/computer-aided
manufacturing (CAD/CAM)
Simultaneous (concurrent) engineering



Slide 13 of 52
Improving the Design
of Existing Products/Services





Focus is improving performance, quality, and cost
Objective is maintaining or improving market share
of maturing products/services
Little changes can be significant
Small, steady (continuous) improvements can add up
to huge long-term improvements
Value analysis is practiced, meaning design features
are examined in terms of their cost/benefit (value).
Slide 14 of 52
Designing for Ease of Production

Ease of Production (Manufacturability)
Specifications - Precise information about the
characteristics of the product
Tolerances - Minimum & maximum limits on a
dimension that allows the item to function as
designed
Standardization - Reduce variety among a group of
products or parts
Simplification - Reduce or eliminate the complexity
of a part or product




Slide 15 of 52
Designing for Quality




Crucial element of product design is its impact on
quality
Quality is determined by the customer’s perception of
the degree of excellence of the product/service’s
characteristics
Chapter 17 covers the principles of designing
products/services for quality
. . . more
Slide 16 of 52
Designing and Developing New Services
Three general dimensions of service design are:
 Degree of standardization of the service
 Degree of customer contact in delivering the service
 Mix of physical goods and intangible services
Slide 17 of 52
Process Planning
and Design
Slide 18 of 52
Process Planning and Design
Inputs:
• Product/Service Information
• Production System Information
• Operations Strategy
Process Planning & Design:
• Select process type
• Vertical integration studies
• Process/Product studies
• Equipment studies
• Production procedures studies
• Facilities studies
Outputs:
• Process Technology
• Facilities
• Personnel Estimates
Slide 19 of 52
Major Factors Affecting Process Designs





Nature of product/service demand
Degree of vertical integration
Production flexibility
Degree of automation
Product/Service quality
Slide 20 of 52
Degree of Vertical Integration




Vertical integration is the amount of the production
and distribution chain that is brought under the
ownership of a company.
This determines how many production processes need
to be planned and designed.
Decision of integration is based on cost, availability
of capital, quality, technological capability, and more.
Strategic outsourcing (lower degree of integration) is
the outsourcing of processes in order to react quicker
to changes in customer needs, competitor actions, and
technology.
Slide 21 of 52
Production Flexibility


Product flexibility -- ability of the production (or
delivery) system to quickly change from producing
(delivering) one product (or service) to another.
Volume flexibility -- ability to quickly increase or
reduce the volume of product( or service) produced
(or delivered).
Slide 22 of 52
Degree of Automation

Advantages of automation
Improves product quality
Improves product flexibility
Reduces labor and related costs
Disadvantages of automation
Equipment can be very expensive
Integration into existing operations can be difficult






Slide 23 of 52
Types of Process Designs



Product-Focused
Process-Focused
Group Technology/Cellular Manufacturing
Slide 24 of 52
Product-Focused (Production Line)


Processes (conversions) are arranged based on the
sequence of operations required to produce a product
or provide a service
Two general forms
Discrete unit
Process (Continuous)
Examples
Automobiles
Vacuum cleaners





Slide 25 of 52
Product-Focused Production
Raw Material
Components
4
2
Assemblies
1
Raw Material
3
Components
5
Fin. Goods
7
Subassem.
Purchased
6
Product/Material
Flow
1
Components,
Subassemblies
Production Operation
Slide 26 of 52
Process-Focused (Job Shop)



Processes (conversions) are arranged based on the
type of process, i.e., like processes are grouped
together
Products/services (jobs) move from department
(process group) to department based on that particular
job’s processing requirements
Examples
Auto body repair
Custom woodworking shop


Slide 27 of 52
Process-Focused Production
Custom Woodworking Shop
Cutting
Planing
1
Job A
Job B
Shaping Assembly Sanding Finishing
2
5
6
5
6
7
3
2
4
3
1
4
Drilling
Turning
Slide 28 of 52
Group Technology/Cellular Manufacturing


Group technology forms parts with similar processing
requirements into part families or groups.
A manufacturing cell is an arrangement of the
processes required to make the parts that make up the
group.
Slide 29 of 52
Group Technology/Cells

Advantages (relative to a job shop)
Process changeovers simplified
Variability of tasks reduced
More direct routes through the system
Quality control is improved
Production planning and control simpler
Automation simpler






Slide 30 of 52
Group Technology/Cells

Disadvantages
Duplication of equipment
Under-utilization of facilities
Processing of items that do not fit into a family
may be inefficient



Slide 31 of 52
Product/Process Design & Inventory Policy

Standard Products and Produce to Stock
Forecast/orders drive production schedule
Maintain pre-determined finished-goods levels
MRP forecast drives material ordering
Custom Products and Produce to Order
Orders set production schedule and drive material
deliveries
Design time may be required before production
can be scheduled






Slide 32 of 52
Process Design in Services



Quasi manufacturing -- production of goods takes
place along a production line with almost no
customer interaction
Customer-as-participant -- high degree of customer
involvement in the process of generating the service
Customer-as-product -- service is provided through
personal attention to the customer
Slide 33 of 52
Deciding Among Processing Alternatives



Batch Size and Product/Service Variety
Capital Requirements
Economic Analysis
Cost functions of alternatives
Operating leverage - relationship between a firm’s
annual costs and its annual sales
Break-even analysis
Financial analysis




Slide 34 of 52
Process Design Depends on
Product Diversity and Batch Size
Batch Size
Product
Focused,
Dedicated
Systems
Product
Focused,
Batch
System
Cellular
Manufacturing
Process-Focused,
Job Shop
Number of Product Designs
Slide 35 of 52
Flexible Manufacturing System
Products
General
purpose
1000
Work cells
CIM
100
Flexible
Manufacturing
System
Focused
automation
10
Dedicated
automation
1
1
10
100
1000
10000
100000
1000000
Volume
Slide 36 of 52
Economic Analysis

Cost Function of Processing Alternatives
If capital is not a factor, the process design
preferred depends upon product volume
Operating Leverage
Relationship between firm’s annual costs and
annual sales
If high % firm’s costs fixed, then high degree of
operating leverage
Small % change in sales drives large % change in
operating income
. . . more






Slide 37 of 52
Economic Analysis

Break Even Analysis
Formulas for comparing processes
Cannot incorporate uncertainty, costs assumed
over entire range of values, and does not take into
account time value of money
Financial Analysis
Incorporate time value of money .... net present
value, internal rate of return, etc.




Slide 38 of 52
Cost Functions of Processing Alternatives
Annual Cost of Production ($000)
2,000
1,500
1,000
500
Job
Shop
Preferred
100,000
Cellular
Manufacturing
Preferred
Automated
Assembly Line
Preferred
Units
Produced
Per Year
250,000
Slide 39 of 52
Example: Cost Functions
of Processing Alternatives
Three production processes - A, B, and C - have the
following cost structure:
Fixed Cost Variable Cost
Process
Per Year
Per Unit
A
$120,000
$3.00
B
90,000
4.00
C
80,000
4.50
What is the most economical process for a volume of
8,000 units per year?
Slide 40 of 52
Example: Cost Functions
of Processing Alternatives

Most Economical Process at 8,000 Units
TC = FC + v(Q)
A: TC = 120,000 + 3.00(8,000) = $144,000 per year
B: TC = 90,000 + 4.00(8,000) = $122,000 per year
C: TC = 80,000 + 4.50(8,000) = $116,000 per year
Process C has the lowest annual cost.
Slide 41 of 52
Example: Cost Functions
of Processing Alternatives

Break-Even Points of Processes
Q = FC / (p-v)
Assuming a $6.95 selling price per unit:
A: Q = 120,000 / (6.95 - 3.00) = 30,380 units
B: Q = 90,000 / (6.95 - 4.00) = 30,509 units
C: Q = 80,000 / (6.95 - 4.50) = 32,654 units
Slide 42 of 52
Deciding Among Processing Alternatives

Assembly Charts (Gozinto Charts)
Macro-view of how materials are united
Starting point to understand factory layout needs,
equipment needs, training needs
Process Charts
Details of how to build product at each process
Includes materials needed, types of processes
product flows through, time it takes to process
product through each step of flow





Slide 43 of 52
Wrap-Up: World Class Practice








Fast new product introduction
Design products for ease of production
Refine forecasting
Focus on core competencies ... less vertical
integration
Lean production
Flexible automation
Job shops move toward cellular manufacturing
Manage information flow ..... automate and simplify!
Slide 44 of 52