Transcript Document

Product Design &
Process Selection
Product & Service Design
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Product design must support the
business strategy
Product design defines a product’s
characteristics:
Appearance, materials, dimensions,
tolerances, performance standards
Product & Service Design
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Service industries must define both
the service and concept: Physical
elements, psychological benefits:
promptness, friendliness, ambiance
Product and service design must
match the needs and preferences
of the targeted customer group
Product & Service Design Steps
Step 1 - Idea Development
- Someone thinks of a need and a
product/service design to satisfy it
e.g. customers, engineering,
competitors (benchmarking,
reverse engineering), suppliers
(Early Supplier Involvement)
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Product & Service Design
Steps
Step 2 - Product Screening (only 1
out of 5 ideas pass screening)
- Every business needs a formal/
structured evaluation process, e.g.
fit with business strategy (Mission)
fit with facility and labor skills
(Operations), size of market
(Marketing), contribution margin,
break-even analysis, return on
sales (Finance), ethics,
environment, legal, etc.
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Product & Service Design
Steps
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Step 3 – Preliminary Design and
Testing - Technical specifications
are developed, prototypes built,
testing starts
Product & Service Design
Steps
Step 4 – Final Design (only 1 out of
60 ideas are commercially
successful)
- Final design based on:
* test results
* facility, equipment, material, and
labor skills defined
* suppliers identified
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Break-Even Analysis: Graphical Approach
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Compute quantity of goods that
must be sold to break-even
Compute total revenue at an
assumed selling price
Compute fixed cost and variable
cost for several quantities
Plot the total revenue line and
the total cost line
Intersection is break-even
Sensitivity analysis can be done
to examine changes in all of the
assumptions made
Break-even calculation: A company is planning to establish a chain of movie
theaters. It estimates that each new theater will cost approximately $1 Million. The
theaters will hold 500 people and will have 4 showings each day with average ticket
prices at $8. They estimate that concession sales will average $2 per patron. The
variable costs in labor and material are estimated to be $6 per patron. They will be
open 300 days each year. What must average occupancy be to break even?
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Break Even Point
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Total revenues = Total costs @ break-even point Q
Selling price*Q = Fixed cost + variable cost*Q
($8+$2)Q= $1,000,000 + $6*Q
Q = 166,667 patrons (28% occupancy)
What is the gross profit if they sell 300,000 tickets
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Profit = Total Revenue – Total Costs
P = $10*300,000 – (1,000,000 + $6*300,000)
P = $200,000
If concessions average $.50/patron, what is break-even
Q now? (sensitivity analysis)
($8.50)Q = $1,000,000 + $6*Q
Q = 400,000 patrons (67% occupancy)
Other Product Design Factors
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Need to Design for
Manufacturing – DFM
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Minimize parts
Design parts for
multiply applications
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Use modular design
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Avoid tools
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Simplify operations
Other Design Factors
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Consider product
life cycle stages
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Introduction
Growth
Maturity
Decline
Facility & process
investment depends
on life cycle
Other Design factors
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Old “over-the –wall” sequential
design process should not be used
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Each function did its work and passed it to
the next function
Replace with a Concurrent Engineering
process
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All functions form a design team working
together to develop specifications, involve
customers early, solve potential problems,
reduce costs, & shorten time to market
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Remanufacturing: uses components of
old products in the production of new
ones (Computers, TV’s, Cars)
Process Selection
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Process selection is based on five considerations
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Type of process; range from intermittent to continuous
Degree of vertical integration
Flexibility of resources
Mix between capital & human resources
Degree of customer contact
Process types can be:
Project Process (project: build a highway; job shop: metal shop, ER)
Batch Process (batch: printing shop)
Line Process (assembly line: cars, pizza, cafeteria)
Continuous Process(continuous:paper mill, oil refinery)
Process Decisions-Vertical Integration
& Make or Buy
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Vertical integration refers to the degree a firm chooses
to do processes itself- raw material to sales
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Backward Integration means moving closer to primary operations
Forward Integration means moving closer to customers
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What is “horizontal integration”?
A firm’s Make-or-Buy choices should be based on the
following considerations:
Strategic impact
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Available capacity
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Expertise
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Quality considerations
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Speed
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Cost (fixed cost + variable cost)make = (fixed cost + Variable cost)buy
Business are trending toward less backward integration, more
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outsourcing
Underlying Process Relationship
Between Volume and Standardization
Differences between Intermittent
and Repetitive Operations
Decision
Product variety
Intermittent Oper.
Great
Repetitive Operation
Small
Degree of standardization Low
High
Organization of resources Grouped by Function
Line flow
Path of products
Varied, depends on product Line flow
Factor driving production Customer orders
Forecast of demand
Critical resource
Labour
Capital
Type of equipment
General purpose
Specialized
Degree of automation
Low
High
Throughput time
Longer
Shorter
Work-in-process inventory More
Less
Facility layouts: intermittent
vs. repetitive operations
Volume and Process Choice
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Low Volume typically
means
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Project or Batch processes
Less vertical integration
More resource flexibility
Less capital intensity
Higher skilled labor
More customer involvement
More customized products
Make or assemble to order
strategy
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High Volume typically
means
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Line/continuous processes
More vertical integration
Less resource flexibility
More capital intensity
More specialized labor
Little to no customer
involvement
Standardized products
Make to stock strategy
Process Design Tools
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Process flow analysis is a
technique used to analyze and
document the sequence of
steps within a total process:
uses process flowcharts -->
Usually the first step in Process
Reengineering.
Process Re-engineering
is a structured approach
used when major business
changes are required as a
result of:
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Major new products
Quality improvement
needed
Better competitors
Inadequate performance
Flowcharts for different product
strategies
Process Performance Metrics
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Measurements of different process
characteristics:tell us how the process is
performing
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Throughput time (TT): Start -> End (Avg. T.)
Process velocity = TT/Value-added time
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Nonvalue-added time: e.g. waiting
Productivity = Output/Input
Utilization = Time used/Time available
Efficiency = Actual output/Standard output
Manufacturing Technology Decisions
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Simplify first, then apply appropriate technology
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Automation
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Automated Material Handling:
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Automated guided vehicles (AGV)
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Automated storage & retrieval systems (AS/RS)
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Computer-Aided Design (CAD) software
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Robotics & Numerically-Controlled (NC) equipment
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Flexible Manufacturing Systems (FMS)
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Computer-Integrated Manufacturing (CIM)
Designing Services
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Service
Characteristics
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Intangible products
High customer contact
Differing designs
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Substitute technology for
people
Get customer involved
High customer attention
Classification of services
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Quasi-Manufacturing (warehouses,
distribution centres, environmental
testing labs)
Mixed Services (offices, banks)
Pure Services (restaurants, schools,
hospitals)
Labour intensity vs. Customer
contact
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Labour Intensity:
Customer Contact:
Standarization:
LOW
LOW
HIGH
HIGH
HIGH
LOW
Quasi-Manuf.
Pure Serv.
Service package (bundle)
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Physical benefits (e.g. food, tables,
chairs, china)
Sensual benefits (visual, smell, sounds)
Psychological benefits (status, comfort,
happiness)
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purchased together as part of the service