Design Of Goods And Services

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Operations Management

Winter 2004

Design of Goods and ServicesChapter 5

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Outline• GOODS AND SERVICES SELECTION

– Product Strategy Options Support Competitive Advantage

– Product Life Cycles– Life Cycle and Strategy– Product-by-value Analysis

• GENERATING NEW PRODUCTS– New Product Opportunities– Importance of New Products

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Outline - continued• PRODUCT DEVELOPMENT

– Product Development System– Quality Function Deployment (QFD)– Organizing for Product Development– Manufacturability and Value Engineering

• ISSUES FOR PRODUCT DESIGN– Robust Design– Modular Design– Computer-Aided Design (CAD)– Computer-Aided Manufacturing– Virtual Reality Technology– Value Analysis– Environmentally Friendly Design

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Outline - continued• Time-Based Competition

– Purchase of Technology by Acquiring Firm– Joint Ventures– Alliances

• 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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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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As Engineering designed it.

© 1984-1994 T/Maker Co.

As Operations made it.

© 1984-1994 T/Maker Co.

As Marketing interpreted it.

© 1984-1994 T/Maker Co.

As the customer wanted it.

© 1984-1994 T/Maker Co.

Humor in Product Design

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• 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

• Charles Revson says “Revlon sells hope, not cosmetics.

• May be a good or a service

What is a Product?

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Product Strategy Options

• Product differentiation Strategies

• Low cost• Rapid response/High Quality Service• Best Technology

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Causes Generating 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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Legislation/ Implementation Date

Stated Purpose Industry Criticism

Electrical-Waste directive (2006)

Makes electrical equipment easier to recycle in part by banning some hazardous substances

Bans some common flame retardants, raising the likelihood of fires

Telecom-data-protection directive (mid-2003)

Protects privacy on e-mail and the internet

Makes surfing more onerous by restricting use of “cookies” to remember peoples preferences

Biotech-Labeling laws (2003)

Strengthens existing food-label laws and introduces labeling for animal feed containing genetically modified content

Encourages food processors and supermarkets to avoid using genetically modified ingredients, and farmers could stop growing them

Pedestrian-protection initiative (2001-2012) (when all new cars sold in Europe must comply)

Reduces injuries and casualties in road accidents

Raises costs of cars and restricts automaker’s design freedom

Chemicals review (staggered through 2012)

Eliminates health hazards due to chemicals

Restricts even minute use of dangerous substances, such as ethanol, in products such as cosmetics and detergents

Warning

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Product

ProductIdea

Package

PhysicalGood

FeaturesQualityLevel

Service(Warranty)

Brand(Name)

Product Components

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Product Life Cycle

• Introduction

• Growth

• Maturity

• Decline

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Product Life CycleIntroduction

• Fine tuning– research

– product development

– process modification and enhancement

– supplier development

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Product Life CycleGrowth

• Product design begins to stabilize

• Effective forecasting of capacity becomes necessary

• Adding or enhancing capacity may be necessary

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Product Life CycleMaturity

• 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 CycleDecline

• Unless product makes a special contribution, must plan to terminate offering

• Harvard’s 4 squares of product development:

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Product Life Cycle, Sales, Cost, and Profit

Sale

s, C

ost &

Pro

fit

.

Introduction Maturity DeclineGrowth

Cost ofDevelopment

& ManufactureSales Revenue

Time

Cash flowLoss

Profit

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0%5%

10%15%20%25%30%35%40%45%50%

Position of Firm in Its Industry

Indu

stry

Lea

der

Top Third Middle

ThirdBottomThird

Percent of Sales From New Product

3M wants 25% of its sales from products less than 5 years old

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Products in Various Stages of Life Cycle

GrowthDecline

Time

Sales

Virtual Reality

RollerBlades Jet Ski

Boeing 727

IntroductionMaturity

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Few SuccessesFew Successes

0

500

1000

1500

2000

Development Stage

Number

1000

Market requirement

Design review,Testing, Introduction

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Ideas

1750

Product specification

100

Functional specifications

One success!

500

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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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Product Development Stages

• Idea generation• Assessment of firm’s ability to carry

out• Customer Requirements• Functional Specification• Product Specifications• Design Review• Test Market• Introduction to Market• EvaluationSc

ope

of p

rodu

ct d

evel

opm

ent t

eam

Scope of design for manufacturability and value engineering teams

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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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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

House of Quality

Customer Requirements

Product Characteristics

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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)

• Prioritizes engineering characteristics

• May rate product compared

to competitors’House of QualityHouse of Quality

Customer Requirements

Product Characteristics

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• 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)

Product Specification Stage

House of QualityHouse of Quality

ProductCharacteristics

Component Specifications

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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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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.

House of Quality Example

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House of Quality Example

High relationship Medium relationship Low Relationship

CustomerRequirements

CustomerImportance

Target Values

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House of Quality Example

High relationship Medium relationship Low Relationship

Target Values

Light weightEasy to useReliable

What the customer desires (‘wall’)

AluminumParts

AutoFocus

AutoExposure

CustomerRequirements

CustomerImportance

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House of Quality Example

High relationship Medium relationship Low Relationship

CustomerRequirements

CustomerImportance

Target Values

Light weightEasy to useReliable

AluminumParts

AutoFocus

AutoExposure

3

12

Average customer importance rating

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House of Quality Example

High relationship Medium relationship Low Relationship

CustomerRequirements

CustomerImportance

Light weightEasy to useReliable

AluminumParts

AutoFocus

AutoExposure

321

Relationship between customer attributes & engineering characteristics (‘rooms’)

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House of Quality Example

High relationship Medium relationship Low Relationship

CustomerRequirements

CustomerImportance

Target Values

Light weightEasy to useReliable

AluminumParts

AutoFocus

AutoExposure

321

5 1 1

Target values for engineering characteristics (‘basement’);

key output

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Organizing for Product Development

• Historically – distinct departments– Duties and responsibilities are defined

– Difficult to foster forward thinking

• Today – team approach– Representatives from all disciplines or

functions

– Concurrent engineering – cross functional team

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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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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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• 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.

Computer Aided Design (CAD)

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• Shorter design time

• Database availability

• New capabilities – Example: Focus more on product ideas

• Improved product quality

• Reduced production costs

Benefits of CAD/CAM

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Virtual Reality

• Computer technology used to develop an interactive, 3-D model of a product.

• Especially helpful in design of layouts (factory, store, home, office)

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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 Friendly Designs

• 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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“Green” Manufacturing

• 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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• 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/Maker Co.

Product Documents

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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

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Bill of Material for a Panel Weldment Hard Rock Café’s Hickory BBQ Bacon Cheeseburger

Number Description QtyDescription Qty

A60-71 Panel Weldm’t 1 BunHamburger PattyCheddar CheeseBaconBBQ OnionsHickory BBQ SauceBurger Set Lettuce Tomato Red Onion PickleFrench FriesSeasoned Salt11-inch PlateHRC Flag

18 oz.2 slices2 strips½ cup1 oz. 1 leaf1 slice4 rings1 slice5 oz.1 tsp11

A 60-7R 60-17R 60-428P 60-2

Lower Roller Assembly Roller Pin Locknet

1111

60-72R 60-57-1A 60-402-50-1150

Guide Assem. Rear Support Angle Roller Assem. Bolt

1111

A 60-73A 60-74R 60-9902-50-1150

Guide Assm, Front Support Weldm’t Wear Plate Bolt

1111

Bill of Materials – Manufacturing Plant Bill of Materials – Manufacturing Plant and Fast-Food Restaurantand Fast-Food Restaurant

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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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Production Documents

• Assembly Drawing

• Assembly chart

• Route sheet

• Work order

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• Shows exploded view of product

Head Neck

Handle

End Cap

© 1984-1994 T/Maker Co.

Assembly Drawing

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1

2

3

SA1 A1

A2

Tuna Fish

Mayonnaise

Bread

TunaAssy

FG

Sandwich

Assembly Chart for A Tuna Sandwich

Toasted Cheese Story

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Route Sheet

• Lists all operations

Route Sheet for BracketSequence Machine Operation Setup

TimeOperationTime/Unit

1 Shear # 3 Shear tolength

5 .030

2 Shear # 3 Shear 45°corners

8 .050

3 Drillpress

Drill bothholes

15 3.000

4 Brakepress

Bend 90° 10 .025

Route Sheet for BracketSequence Machine Operation Setup

TimeOperationTime/Unit

1 Shear # 3 Shear tolength

5 .030

2 Shear # 3 Shear 45°corners

8 .050

3 Drillpress

Drill bothholes

15 3.000

4 Brakepress

Bend 90° 10 .025

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Engineering Change Notice

(ECN)

• A correction or modification of an engineering drawing or bill of material

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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

– Revisions to Drawings and Assembly Instructions (E.G. Rev NC, Rev A, Rev B, etc.)

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Service Design - Nature of Customer Participation

Ford Taurus

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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

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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