operations management

1. © 2008 Prentice Hall, Inc. 5 – 1
Operations
Management
Chapter 5 –Chapter 5 –
Design of GoodsDesign of Goods
and Servicesand Services
PowerPoint presentation to accompanyPowerPoint presentation to accompany
Heizer/RenderHeizer/Render
Principles of Operations Management, 7ePrinciples of Operations Management, 7e
Operations Management, 9eOperations Management, 9e

2. © 2008 Prentice Hall, Inc. 5 – 2
OutlineOutline
 Global Company Profile: RegalGlobal Company Profile: Regal
MarineMarine
 Goods and Services SelectionGoods and Services Selection
 Product Strategy Options SupportProduct Strategy Options Support
Competitive AdvantageCompetitive Advantage
 Product Life CyclesProduct Life Cycles
 Life Cycle and StrategyLife Cycle and Strategy
 Product-by-Value AnalysisProduct-by-Value Analysis

3. © 2008 Prentice Hall, Inc. 5 – 3
Outline - ContinuedOutline - Continued
 Generating New ProductsGenerating New Products
 New Product OpportunitiesNew Product Opportunities
 Importance of New ProductsImportance of New Products
 Product DevelopmentProduct Development
 Product Development SystemProduct Development System
 Quality Function Deployment (QFD)Quality Function Deployment (QFD)
 Organizing for Product DevelopmentOrganizing for Product Development
 Manufacturability and ValueManufacturability and Value
EngineeringEngineering

4. © 2008 Prentice Hall, Inc. 5 – 4
Outline - ContinuedOutline - Continued
 Issues for Product DesignIssues for Product Design
 Robust DesignRobust Design
 Modular DesignModular Design
 Computer-Aided Design (CAD)Computer-Aided Design (CAD)
 Computer-Aided Manufacturing (CAM)Computer-Aided Manufacturing (CAM)
 Virtual Reality TechnologyVirtual Reality Technology
 Value AnalysisValue Analysis
 Ethics and Environmentally FriendlyEthics and Environmentally Friendly
DesignDesign

5. © 2008 Prentice Hall, Inc. 5 – 5
Outline - ContinuedOutline - Continued
 Time-Based CompetitionTime-Based Competition
 Purchasing Technology by AcquiringPurchasing Technology by Acquiring
a Firma Firm
 Joint VenturesJoint Ventures
 AlliancesAlliances
 Defining a ProductDefining a Product
 Make-or-Buy DecisionsMake-or-Buy Decisions
 Group TechnologyGroup Technology

6. © 2008 Prentice Hall, Inc. 5 – 6
Outline - ContinuedOutline - Continued
 Documents For ProductionDocuments For Production
 Product Life-Cycle Management (PLM)Product Life-Cycle Management (PLM)
 Service DesignService Design
 Documents for ServicesDocuments for Services
 Application of Decision Trees toApplication of Decision Trees to
Product DesignProduct Design
 Transition to ProductionTransition to Production

7. © 2008 Prentice Hall, Inc. 5 – 7
Learning ObjectivesLearning Objectives
1.1. Define product life cycleDefine product life cycle
2.2. Describe a product development systemDescribe a product development system
3.3. Build a house of qualityBuild a house of quality
4.4. Describe how time-based competition isDescribe how time-based competition is
implementedimplemented
When you complete this chapter you shouldWhen you complete this chapter you should
be able to :be able to :

8. © 2008 Prentice Hall, Inc. 5 – 8
Learning ObjectivesLearning Objectives
5.5. Describe how products and servicesDescribe how products and services
are definedare defined
6.6. Prepare the documents needed forPrepare the documents needed for
productionproduction
7.7. Describe customer participation in theDescribe customer participation in the
design and production of servicesdesign and production of services
8.8. Apply decision trees to product issuesApply decision trees to product issues
When you complete this chapter you shouldWhen you complete this chapter you should
be able to :be able to :

9. © 2008 Prentice Hall, Inc. 5 – 9
Regal MarineRegal Marine
 Global marketGlobal market
 3-dimensional CAD system3-dimensional CAD system
 Reduced product development timeReduced product development time
 Reduced problems with toolingReduced problems with tooling
 Reduced problems in productionReduced problems in production
 Assembly line productionAssembly line production
 JITJIT

10. © 2008 Prentice Hall, Inc. 5 – 10
 The good or service theThe good or service the
organization provides societyorganization provides society
 Top organizations typically focus onTop organizations typically focus on
core productscore products
 Customers buy satisfaction, not justCustomers buy satisfaction, not just
a physical good or particular servicea physical good or particular service
 Fundamental to an organization'sFundamental to an organization's
strategy with implicationsstrategy with implications
throughout the operations functionthroughout the operations function
Product DecisionProduct Decision

11. © 2008 Prentice Hall, Inc. 5 – 11
Product Strategy OptionsProduct Strategy Options
 DifferentiationDifferentiation
 Shouldice HospitalShouldice Hospital
 Low costLow cost
 Taco BellTaco Bell
 Rapid responseRapid response
 ToyotaToyota

12. © 2008 Prentice Hall, Inc. 5 – 12
Product Life CyclesProduct Life Cycles
 May be any length from a fewMay be any length from a few
hours to decadeshours to decades
 The operations function mustThe operations function must
be able to introduce newbe able to introduce new
products successfullyproducts successfully

13. © 2008 Prentice Hall, Inc. 5 – 13
Product Life CyclesProduct Life Cycles
Negative
cash flow
IntroductionIntroduction GrowthGrowth MaturityMaturity DeclineDecline
Sales,cost,andcashflowSales,cost,andcashflow
Cost of development and productionCost of development and production
CashCash
flowflow
Net revenue (profit)Net revenue (profit)
Sales revenueSales revenue
LossLoss
Figure 5.1Figure 5.1

14. © 2008 Prentice Hall, Inc. 5 – 14
Product Life CycleProduct Life Cycle
IntroductionIntroduction
 Fine tuning may warrantFine tuning may warrant
unusual expenses forunusual expenses for
 ResearchResearch
 Product developmentProduct development
 Process modification andProcess modification and
enhancementenhancement
 Supplier developmentSupplier development

15. © 2008 Prentice Hall, Inc. 5 – 15
Product Life CycleProduct Life Cycle
GrowthGrowth
 Product design begins toProduct design begins to
stabilizestabilize
 Effective forecasting ofEffective forecasting of
capacity becomes necessarycapacity becomes necessary
 Adding or enhancing capacityAdding or enhancing capacity
may be necessarymay be necessary

16. © 2008 Prentice Hall, Inc. 5 – 16
Product Life CycleProduct Life Cycle
MaturityMaturity
 Competitors now establishedCompetitors now established
 High volume, innovativeHigh volume, innovative
production may be neededproduction may be needed
 Improved cost control,Improved cost control,
reduction in options, paringreduction in options, paring
down of product linedown of product line

17. © 2008 Prentice Hall, Inc. 5 – 17
Product Life CycleProduct Life Cycle
DeclineDecline
 Unless product makes aUnless product makes a
special contribution to thespecial contribution to the
organization, must plan toorganization, must plan to
terminate offeringterminate offering

18. © 2008 Prentice Hall, Inc. 5 – 18
Product Life Cycle CostsProduct Life Cycle Costs
Costs incurredCosts incurred
Costs committedCosts committed
Ease of changeEase of change
ConceptConcept DetailedDetailed ManufacturingManufacturing Distribution,Distribution,
designdesign designdesign service,service,
prototypeprototype and disposaland disposal
PercentoftotalcostPercentoftotalcost
100 –100 –
80 –80 –
60 –60 –
40 –40 –
20 –20 –
0 –0 –

19. © 2008 Prentice Hall, Inc. 5 – 19
Product-by-Value AnalysisProduct-by-Value Analysis
 Lists products in descendingLists products in descending
order of their individual dollarorder of their individual dollar
contribution to the firmcontribution to the firm
 Lists the total annual dollarLists the total annual dollar
contribution of the productcontribution of the product
 Helps management evaluateHelps management evaluate
alternative strategiesalternative strategies

20. © 2008 Prentice Hall, Inc. 5 – 20
Product-by-Value AnalysisProduct-by-Value Analysis
Individual
Contribution ($)
Total Annual
Contribution ($)
Love Seat $102 $36,720
Arm Chair $87 $51,765
Foot Stool $12 $6,240
Recliner $136 $51,000
Sam’s Furniture FactorySam’s Furniture Factory

21. © 2008 Prentice Hall, Inc. 5 – 21
New Product OpportunitiesNew Product Opportunities
1.1. Understanding theUnderstanding the
customercustomer
2.2. Economic changeEconomic change
3.3. Sociological andSociological and
demographic changedemographic change
4.4. Technological changeTechnological change
5.5. Political/legal changePolitical/legal change
6.6. Market practice, professionalMarket practice, professional
standards, suppliers, distributorsstandards, suppliers, distributors
Brainstorming
is a useful tool

22. © 2008 Prentice Hall, Inc. 5 – 22
Importance of New ProductsImportance of New Products
IndustryIndustry
leaderleader
TopTop
thirdthird
MiddleMiddle
thirdthird
BottomBottom
thirdthird
Figure 5.2Figure 5.2
Percentage of Sales from New ProductsPercentage of Sales from New Products
50%
40%
30%
20%
10%
Position of Firm in Its IndustryPosition of Firm in Its Industry

23. © 2008 Prentice Hall, Inc. 5 – 23
5050 –
4040 –
3030 –
2020 –
1010 –
00 –
Millions of visitorsMillions of visitors
8484 8686 8888 9090 9292 9494 9696 9898 0000 0202 0404
New Products at DisneyNew Products at Disney
Magic KingdomMagic Kingdom
Combined data only prior to 1993Combined data only prior to 1993
Disney-MGM StudiosDisney-MGM Studios
EpcotEpcot
Animal KingdomAnimal Kingdom
Figure 5.2Figure 5.2

24. © 2008 Prentice Hall, Inc. 5 – 24
Scope of
product
development
team
Product DevelopmentProduct Development
SystemSystem
Scope for
design and
engineering
teams
Evaluation
Introduction
Test Market
Functional Specifications
Design Review
Product Specifications
Customer Requirements
Ability
Ideas
Figure 5.3Figure 5.3

25. © 2008 Prentice Hall, Inc. 5 – 25
Quality FunctionQuality Function
DeploymentDeployment
 Identify customer wantsIdentify customer wants
 Identify how the good/service will satisfyIdentify how the good/service will satisfy
customer wantscustomer wants
 Relate customer wants to product howsRelate customer wants to product hows
 Identify relationships between the firm’s howsIdentify relationships between the firm’s hows
 Develop importance ratingsDevelop importance ratings
 Evaluate competing productsEvaluate competing products
 Compare performance to desirable technicalCompare performance to desirable technical
attributesattributes

26. © 2008 Prentice Hall, Inc. 5 – 26
QFD House of QualityQFD House of Quality
Relationship
matrix
How to satisfy
customer wants
Interrelationships
Competitive
assessment
Technical
evaluation
Target values
What the
customer
wants
CustomerCustomer
importanceimportance
ratingsratings
WeightedWeighted
ratingrating

27. © 2008 Prentice Hall, Inc. 5 – 27
House of Quality ExampleHouse of Quality Example
Your team has been charged withYour team has been charged with
designing a new camera for Greatdesigning a new camera for Great
Cameras, Inc.Cameras, Inc.
The first action isThe first action is
to construct ato construct a
House of QualityHouse of Quality

28. © 2008 Prentice Hall, Inc. 5 – 28
House of Quality ExampleHouse of Quality Example
CustomerCustomer
importanceimportance
ratingrating
(5 = highest)(5 = highest)
Lightweight 3
Easy to use 4
Reliable 5
Easy to hold steady 2
Color correction 1
What theWhat the
customercustomer
wantswants
What the
Customer
Wants
Relationship
Matrix
Technical
Attributes and
Evaluation
How to Satisfy
Customer Wants
Interrelationships
Analysisof
Competitors

29. © 2008 Prentice Hall, Inc. 5 – 29
House of Quality ExampleHouse of Quality ExampleWhat the
Customer
Wants
Relationship
Matrix
Technical
Attributes and
Evaluation
How to Satisfy
Customer Wants
Interrelationships
Analysisof
Competitors
Lowelectricityrequirements
Aluminumcomponents
Autofocus
Autoexposure
Paintpallet
Ergonomicdesign
How to Satisfy
Customer Wants

30. © 2008 Prentice Hall, Inc. 5 – 30
Lightweight 3
Easy to use 4
Reliable 5
Easy to hold steady 2
Color corrections 1
House of Quality ExampleHouse of Quality ExampleWhat the
Customer
Wants
Relationship
Matrix
Technical
Attributes and
Evaluation
How to Satisfy
Customer Wants
Interrelationships
Analysisof
Competitors
High relationshipHigh relationship
Medium relationshipMedium relationship
Low relationshipLow relationship
Relationship matrixRelationship matrix

31. © 2008 Prentice Hall, Inc. 5 – 31
House of Quality ExampleHouse of Quality ExampleWhat the
Customer
Wants
Relationship
Matrix
Technical
Attributes and
Evaluation
How to Satisfy
Customer Wants
Interrelationships
Analysisof
Competitors
Lowelectricityrequirements
Aluminumcomponents
Autofocus
Autoexposure
Paintpallet
Ergonomicdesign
RelationshipsRelationships
between thebetween the
things we can dothings we can do

32. © 2008 Prentice Hall, Inc. 5 – 32
House of Quality ExampleHouse of Quality Example
WeightedWeighted
ratingrating
What the
Customer
Wants
Relationship
Matrix
Technical
Attributes and
Evaluation
How to Satisfy
Customer Wants
Interrelationships
Analysisof
Competitors
Lightweight 3
Easy to use 4
Reliable 5
Easy to hold steady 2
Color corrections 1
Our importance ratings 22 9 27 27 32 25

33. © 2008 Prentice Hall, Inc. 5 – 33
House of Quality ExampleHouse of Quality Example
CompanyA
CompanyB
G P
G P
F G
G P
P P
Lightweight 3
Easy to use 4
Reliable 5
Easy to hold steady 2
Color corrections 1
Our importance ratings 22 5
How well doHow well do
competing productscompeting products
meet customer wantsmeet customer wants
What the
Customer
Wants
Relationship
Matrix
Technical
Attributes and
Evaluation
How to Satisfy
Customer Wants
Interrelationships
Analysisof
Competitors

34. © 2008 Prentice Hall, Inc. 5 – 34
House of Quality ExampleHouse of Quality ExampleWhat the
Customer
Wants
Relationship
Matrix
Technical
Attributes and
Evaluation
How to Satisfy
Customer Wants
Interrelationships
Analysisof
Competitors
Target
values
(Technical
attributes)
Technical
evaluation
Company A 0.7 60% yes 1 ok G
Company B 0.6 50% yes 2 ok F
Us 0.5 75% yes 2 ok G
0.5A
75%
2’to∞
2circuits
Failure1per10,000
Panelranking

35. © 2008 Prentice Hall, Inc. 5 – 35
House of Quality ExampleHouse of Quality Example
CompletedCompleted
House ofHouse of
QualityQuality
Lightweight 3
Easy to use 4
Reliable 5
Easy to hold steady 2
Color correction 1
Our importance ratings
Lowelectricityrequirements
Aluminumcomponents
Autofocus
Autoexposure
Paintpallet
Ergonomicdesign
CompanyA
CompanyB
G P
G P
F G
G P
P P
Target values
(Technical
attributes)
Technical
evaluation
Company A 0.7 60% yes 1 ok G
Company B 0.6 50% yes 2 ok F
Us 0.5 75% yes 2 ok G
0.5A
75%
2’to∞
2circuits
Failure1per10,000
Panelranking
22 9 27 27 32 25

36. © 2008 Prentice Hall, Inc. 5 – 36
House of Quality SequenceHouse of Quality Sequence
Design
characteristics
Specific
components
House
2
Customer
requirements
Design
characteristics
House
1
Specific
components
Production
process
House
3
Production
process
Quality
plan
House
4
Figure 5.4Figure 5.4
Deploying resources through theDeploying resources through the
organization in response toorganization in response to
customer requirementscustomer requirements

37. © 2008 Prentice Hall, Inc. 5 – 37
Organizing for ProductOrganizing for Product
DevelopmentDevelopment
 Historically – distinct departmentsHistorically – distinct departments
 Duties and responsibilities are definedDuties and responsibilities are defined
 Difficult to foster forward thinkingDifficult to foster forward thinking
 A ChampionA Champion
 Product manager drives the productProduct manager drives the product
through the product developmentthrough the product development
system and related organizationssystem and related organizations

38. © 2008 Prentice Hall, Inc. 5 – 38
Organizing for ProductOrganizing for Product
DevelopmentDevelopment
 Team approachTeam approach
 Cross functional – representativesCross functional – representatives
from all disciplines or functionsfrom all disciplines or functions
 Product development teams, designProduct development teams, design
for manufacturability teams, valuefor manufacturability teams, value
engineering teamsengineering teams
 Japanese “whole organization”Japanese “whole organization”
approachapproach
 No organizational divisionsNo organizational divisions

39. © 2008 Prentice Hall, Inc. 5 – 39
Manufacturability andManufacturability and
Value EngineeringValue Engineering
 Benefits:Benefits:
1.1. Reduced complexity of productsReduced complexity of products
2.2. Additional standardization of productsAdditional standardization of products
3.3. Improved functional aspects of productImproved functional aspects of product
4.4. Improved job design and job safetyImproved job design and job safety
5.5. Improved maintainability (serviceability)Improved maintainability (serviceability)
of the productof the product
6.6. Robust designRobust design

40. © 2008 Prentice Hall, Inc. 5 – 40
Cost Reduction of a BracketCost Reduction of a Bracket
via Value Engineeringvia Value Engineering
Figure 5.5Figure 5.5

41. © 2008 Prentice Hall, Inc. 5 – 41
Issues for ProductIssues for Product
DevelopmentDevelopment
 Robust designRobust design
 Modular designModular design
 Computer-aided design (CAD)Computer-aided design (CAD)
 Computer-aided manufacturing (CAM)Computer-aided manufacturing (CAM)
 Virtual reality technologyVirtual reality technology
 Value analysisValue analysis
 Environmentally friendly designEnvironmentally friendly design

42. © 2008 Prentice Hall, Inc. 5 – 42
Robust DesignRobust Design
 Product is designed so that smallProduct is designed so that small
variations in production orvariations in production or
assembly do not adversely affectassembly do not adversely affect
the productthe product
 Typically results in lower cost andTypically results in lower cost and
higher qualityhigher quality

43. © 2008 Prentice Hall, Inc. 5 – 43
Modular DesignModular Design
 Products designed in easilyProducts designed in easily
segmented componentssegmented components
 Adds flexibility to both productionAdds flexibility to both production
and marketingand marketing
 Improved ability to satisfy customerImproved ability to satisfy customer
requirementsrequirements

44. © 2008 Prentice Hall, Inc. 5 – 44
 Using computers toUsing computers to
design products anddesign products and
prepare engineeringprepare engineering
documentationdocumentation
 Shorter developmentShorter development
cycles, improvedcycles, improved
accuracy, lower costaccuracy, lower cost
 Information andInformation and
designs can bedesigns can be
deployed worldwidedeployed worldwide
Computer Aided DesignComputer Aided Design
(CAD)(CAD)

45. © 2008 Prentice Hall, Inc. 5 – 45
 Design for Manufacturing and AssemblyDesign for Manufacturing and Assembly
(DFMA)(DFMA)
 Solve manufacturing problems during theSolve manufacturing problems during the
design stagedesign stage
 3-D Object Modeling3-D Object Modeling
 Small prototypeSmall prototype
developmentdevelopment
 CAD through theCAD through the
internetinternet
 International dataInternational data
exchange through STEPexchange through STEP
Extensions of CADExtensions of CAD

46. © 2008 Prentice Hall, Inc. 5 – 46
Computer-AidedComputer-Aided
Manufacturing (CAM)Manufacturing (CAM)
 Utilizing specialized computersUtilizing specialized computers
and program to controland program to control
manufacturing equipmentmanufacturing equipment
 Often driven by the CAD systemOften driven by the CAD system
(CAD/CAM)(CAD/CAM)

47. © 2008 Prentice Hall, Inc. 5 – 47
1.1. Product qualityProduct quality
2.2. Shorter design timeShorter design time
3.3. Production cost reductionsProduction cost reductions
4.4. Database availabilityDatabase availability
5.5. New range of capabilitiesNew range of capabilities
Benefits of CAD/CAMBenefits of CAD/CAM

48. © 2008 Prentice Hall, Inc. 5 – 48
Virtual Reality TechnologyVirtual Reality Technology
 Computer technology used toComputer technology used to
develop an interactive, 3-D model ofdevelop an interactive, 3-D model of
a product from the basic CAD dataa product from the basic CAD data
 Allows people to ‘see’ the finishedAllows people to ‘see’ the finished
design before a physical model isdesign before a physical model is
builtbuilt
 Very effective in large-scale designsVery effective in large-scale designs
such as plant layoutsuch as plant layout

49. © 2008 Prentice Hall, Inc. 5 – 49
Value AnalysisValue Analysis
 Focuses on design improvementFocuses on design improvement
during productionduring production
 Seeks improvements leading eitherSeeks improvements leading either
to a better product or a productto a better product or a product
which can be produced morewhich can be produced more
economicallyeconomically

50. © 2008 Prentice Hall, Inc. 5 – 50
Ethics and EnvironmentallyEthics and Environmentally
Friendly DesignsFriendly Designs
It is possible to enhance productivity,It is possible to enhance productivity,
drive down costs, and preservedrive down costs, and preserve
resourcesresources
Effective at any stage of the product life cycleEffective at any stage of the product life cycle
 DesignDesign
 ProductionProduction
 DestructionDestruction

51. © 2008 Prentice Hall, Inc. 5 – 51
The Ethical ApproachThe Ethical Approach
View product design from aView product design from a
systems perspectivesystems perspective
 Inputs, processes, outputsInputs, processes, outputs
 Costs to the firm/costs toCosts to the firm/costs to
societysociety
Consider the entire life cycle ofConsider the entire life cycle of
the productthe product

52. © 2008 Prentice Hall, Inc. 5 – 52
Goals for Ethical andGoals for Ethical and
Environmentally FriendlyEnvironmentally Friendly
DesignsDesigns
1.1. Develop safe and more environmentallyDevelop safe and more environmentally
sound productssound products
2.2. Minimize waste of raw materials and energyMinimize waste of raw materials and energy
3.3. Reduce environmental liabilitiesReduce environmental liabilities
4.4. Increase cost-effectiveness of complyingIncrease cost-effectiveness of complying
with environmental regulationswith environmental regulations
5.5. Be recognized as a good corporate citizenBe recognized as a good corporate citizen

53. © 2008 Prentice Hall, Inc. 5 – 53
Guidelines for EnvironmentallyGuidelines for Environmentally
Friendly DesignsFriendly Designs
1.1. Make products recyclableMake products recyclable
2.2. Use recycled materialsUse recycled materials
3.3. Use less harmful ingredientsUse less harmful ingredients
4.4. Use lighter componentsUse lighter components
5.5. Use less energyUse less energy
6.6. Use less materialUse less material

54. © 2008 Prentice Hall, Inc. 5 – 54
Legal and IndustryLegal and Industry
StandardsStandards
For Design …For Design …
 Federal Drug AdministrationFederal Drug Administration
 Consumer Products Safety CommissionConsumer Products Safety Commission
 National Highway Safety AdministrationNational Highway Safety Administration
 Children’s Product Safety ActChildren’s Product Safety Act

55. © 2008 Prentice Hall, Inc. 5 – 55
Legal and IndustryLegal and Industry
StandardsStandards
For Manufacture/Assembly …For Manufacture/Assembly …
 Occupational Safety and HealthOccupational Safety and Health
AdministrationAdministration
 Environmental Protection AgencyEnvironmental Protection Agency
 Professional ergonomic standardsProfessional ergonomic standards
 State and local laws dealing withState and local laws dealing with
employment standards, discrimination, etc.employment standards, discrimination, etc.

56. © 2008 Prentice Hall, Inc. 5 – 56
Legal and IndustryLegal and Industry
StandardsStandards
For Disassembly/Disposal …For Disassembly/Disposal …
 Vehicle Recycling PartnershipVehicle Recycling Partnership
 Increasingly rigid laws worldwideIncreasingly rigid laws worldwide

57. © 2008 Prentice Hall, Inc. 5 – 57
Time-Based CompetitionTime-Based Competition
 Product life cycles are becomingProduct life cycles are becoming
shorter and the rate ofshorter and the rate of
technological change istechnological change is
increasingincreasing
 Developing new products fasterDeveloping new products faster
can result in a competitivecan result in a competitive
advantageadvantage

58. © 2008 Prentice Hall, Inc. 5 – 58
Product DevelopmentProduct Development
ContinuumContinuumExternal Development StrategiesExternal Development Strategies
AlliancesAlliances
Joint venturesJoint ventures
Purchase technology or expertisePurchase technology or expertise
by acquiring the developerby acquiring the developer
Internal Development StrategiesInternal Development Strategies
Migrations of existing productsMigrations of existing products
Enhancements to existing productsEnhancements to existing products
New internally developed productsNew internally developed products
InternalInternal Cost of product developmentCost of product development SharedShared
LengthyLengthy Speed of product developmentSpeed of product development Rapid and/Rapid and/
or Existingor Existing
HighHigh Risk of product developmentRisk of product development SharedShared
Figure 5.6Figure 5.6

59. © 2008 Prentice Hall, Inc. 5 – 59
Acquiring TechnologyAcquiring Technology
 By Purchasing a FirmBy Purchasing a Firm
 Speeds developmentSpeeds development
 Issues concern the fit between the acquiredIssues concern the fit between the acquired
organization and product and the hostorganization and product and the host
 Through Joint VenturesThrough Joint Ventures
 Both organizations learnBoth organizations learn
 Risks are sharedRisks are shared
 Through AlliancesThrough Alliances
 Cooperative agreements betweenCooperative agreements between
independent organizationsindependent organizations

60. © 2008 Prentice Hall, Inc. 5 – 60
Defining The ProductDefining The Product
 First definition is in terms ofFirst definition is in terms of
functionsfunctions
 Rigorous specifications areRigorous specifications are
developed during the design phasedeveloped during the design phase
 Manufactured products will have anManufactured products will have an
engineering drawingengineering drawing
 Bill of material (BOM) lists theBill of material (BOM) lists the
components of a productcomponents of a product

61. © 2008 Prentice Hall, Inc. 5 – 61
 Engineering drawingEngineering drawing
 Shows dimensions, tolerances, andShows dimensions, tolerances, and
materialsmaterials
 Shows codes for Group TechnologyShows codes for Group Technology
 Bill of MaterialBill of Material
 Lists components, quantities andLists components, quantities and
where usedwhere used
 Shows product structureShows product structure
Product DocumentsProduct Documents

62. © 2008 Prentice Hall, Inc. 5 – 62
Monterey Jack CheeseMonterey Jack Cheese
(a)(a) U.S. grade AAU.S. grade AA. Monterey cheese shall conform to the. Monterey cheese shall conform to the
following requirements:following requirements:
(1)(1) FlavorFlavor. Is fine and highly pleasing, free from undesirable. Is fine and highly pleasing, free from undesirable
flavors and odors. May possess a very slight acid or feedflavors and odors. May possess a very slight acid or feed
flavor.flavor.
(2)(2) Body and textureBody and texture. A plug drawn from the cheese shall be. A plug drawn from the cheese shall be
reasonably firm. It shall have numerous small mechanicalreasonably firm. It shall have numerous small mechanical
openings evenly distributed throughout the plug. It shall notopenings evenly distributed throughout the plug. It shall not
possess sweet holes, yeast holes, or other gas holes.possess sweet holes, yeast holes, or other gas holes.
(3)(3) ColorColor. Shall have a natural, uniform, bright and attractive. Shall have a natural, uniform, bright and attractive
appearance.appearance.
(4)(4) Finish and appearance - bandaged and paraffin-dippedFinish and appearance - bandaged and paraffin-dipped..
The rind shall be sound, firm, and smooth providing a goodThe rind shall be sound, firm, and smooth providing a good
protection to the cheese.protection to the cheese.
Code of Federal Regulation, Parts 53 to 109,
General Service Administration

63. © 2008 Prentice Hall, Inc. 5 – 63
Engineering DrawingsEngineering Drawings
Figure 5.8Figure 5.8

64. © 2008 Prentice Hall, Inc. 5 – 64
Bills of MaterialBills of Material
BOM for Panel WeldmentBOM for Panel Weldment
NUMBERNUMBER DESCRIPTIONDESCRIPTION QTYQTY
A 60-71A 60-71 PANEL WELDM’TPANEL WELDM’T 11
A 60-7A 60-7 LOWER ROLLER ASSM.LOWER ROLLER ASSM. 11
R 60-17R 60-17 ROLLERROLLER 11
R 60-428R 60-428 PINPIN 11
P 60-2P 60-2 LOCKNUTLOCKNUT 11
A 60-72A 60-72 GUIDE ASSM. REARGUIDE ASSM. REAR 11
R 60-57-1R 60-57-1 SUPPORT ANGLESUPPORT ANGLE 11
A 60-4A 60-4 ROLLER ASSM.ROLLER ASSM. 11
02-50-115002-50-1150 BOLTBOLT 11
A 60-73A 60-73 GUIDE ASSM. FRONTGUIDE ASSM. FRONT 11
A 60-74A 60-74 SUPPORT WELDM’TSUPPORT WELDM’T 11
R 60-99R 60-99 WEAR PLATEWEAR PLATE 11
02-50-115002-50-1150 BOLTBOLT 11 Figure 5.9 (a)Figure 5.9 (a)

65. © 2008 Prentice Hall, Inc. 5 – 65
Bills of MaterialBills of Material
Hard RockHard Rock
Cafe’s HickoryCafe’s Hickory
BBQ BaconBBQ Bacon
CheeseburgerCheeseburger
DESCRIPTIONDESCRIPTION QTYQTY
BunBun 11
Hamburger pattyHamburger patty 8 oz.8 oz.
Cheddar cheeseCheddar cheese 2 slices2 slices
BaconBacon 2 strips2 strips
BBQ onionsBBQ onions 1/2 cup1/2 cup
Hickory BBQ sauceHickory BBQ sauce 1 oz.1 oz.
Burger setBurger set
LettuceLettuce 1 leaf1 leaf
TomatoTomato 1 slice1 slice
Red onionRed onion 4 rings4 rings
PicklePickle 1 slice1 slice
French friesFrench fries 5 oz.5 oz.
Seasoned saltSeasoned salt 1 tsp.1 tsp.
11-inch plate11-inch plate 11
HRC flagHRC flag 11
Figure 5.9 (b)Figure 5.9 (b)

66. © 2008 Prentice Hall, Inc. 5 – 66
 Parts grouped into families withParts grouped into families with
similar characteristicssimilar characteristics
 Coding system describesCoding system describes
processing and physicalprocessing and physical
characteristicscharacteristics
 Part families can be producedPart families can be produced
in dedicated manufacturing cellsin dedicated manufacturing cells
Group TechnologyGroup Technology

67. © 2008 Prentice Hall, Inc. 5 – 67
Group Technology SchemeGroup Technology Scheme
Figure 5.10Figure 5.10
(a) Ungrouped Parts
(b) Grouped Cylindrical Parts (families of parts)
Grooved Slotted Threaded Drilled Machined

68. © 2008 Prentice Hall, Inc. 5 – 68
1.1. Improved designImproved design
2.2. Reduced raw material and purchasesReduced raw material and purchases
3.3. Simplified production planning andSimplified production planning and
controlcontrol
4.4. Improved layout, routing, andImproved layout, routing, and
machine loadingmachine loading
5.5. Reduced tooling setup time, work-in-Reduced tooling setup time, work-in-
process, and production timeprocess, and production time
Group Technology BenefitsGroup Technology Benefits

69. © 2008 Prentice Hall, Inc. 5 – 69
Documents for ProductionDocuments for Production
 Assembly drawingAssembly drawing
 Assembly chartAssembly chart
 Route sheetRoute sheet
 Work orderWork order
 Engineering change noticesEngineering change notices
(ECNs)(ECNs)

70. © 2008 Prentice Hall, Inc. 5 – 70
Assembly DrawingAssembly Drawing
 Shows explodedShows exploded
view of productview of product
 Details relativeDetails relative
locations tolocations to
show how toshow how to
assemble theassemble the
productproduct
Figure 5.11 (a)Figure 5.11 (a)

71. © 2008 Prentice Hall, Inc. 5 – 71
Assembly ChartAssembly Chart
1
2
3
4
5
6
7
8
9
10
11
R 209 AngleR 209 Angle
R 207 AngleR 207 Angle
Bolts w/nuts (2)Bolts w/nuts (2)
R 209 AngleR 209 Angle
R 207 AngleR 207 Angle
Bolt w/nutBolt w/nut
R 404 RollerR 404 Roller
Lock washerLock washer
Part number tagPart number tag
Box w/packing materialBox w/packing material
Bolts w/nuts (2)Bolts w/nuts (2)
SA
1
SA
2
A1
A2
A3
A4
A5
LeftLeft
bracketbracket
assemblyassembly
RightRight
bracketbracket
assemblyassembly
Poka-yokePoka-yoke
inspectioninspection
Figure 5.11 (b)Figure 5.11 (b)
Identifies the pointIdentifies the point
of productionof production
where componentswhere components
flow intoflow into
subassemblies andsubassemblies and
ultimately into theultimately into the
final productfinal product

72. © 2008 Prentice Hall, Inc. 5 – 72
Route SheetRoute Sheet
Lists the operations and times requiredLists the operations and times required
to produce a componentto produce a component
Setup Operation
Process Machine Operations Time Time/Unit
1 Auto Insert 2 Insert Component 1.5 .4
Set 56
2 Manual Insert Component .5 2.3
Insert 1 Set 12C
3 Wave Solder Solder all 1.5 4.1
components
to board
4 Test 4 Circuit integrity .25 .5
test 4GY

73. © 2008 Prentice Hall, Inc. 5 – 73
Work OrderWork Order
Instructions to produce a given quantityInstructions to produce a given quantity
of a particular item, usually to a scheduleof a particular item, usually to a schedule
Work Order
Item Quantity Start Date Due Date
Production Delivery
Dept Location
157C 125 5/2/08 5/4/08
F32 Dept K11

74. © 2008 Prentice Hall, Inc. 5 – 74
Engineering Change NoticeEngineering Change Notice
(ECN)(ECN)
 A correction or modification to aA correction or modification to a
product’s definition orproduct’s definition or
documentationdocumentation
 Engineering drawingsEngineering drawings
 Bill of materialBill of material
Quite common with long product life
cycles, long manufacturing lead times, or
rapidly changing technologies

75. © 2008 Prentice Hall, Inc. 5 – 75
Configuration ManagementConfiguration Management
 The need to manage ECNs has ledThe need to manage ECNs has led
to the development of configurationto the development of configuration
management systemsmanagement systems
 A product’s planned and changingA product’s planned and changing
components are accuratelycomponents are accurately
identified and control andidentified and control and
accountability for change areaccountability for change are
identified and maintainedidentified and maintained

76. © 2008 Prentice Hall, Inc. 5 – 76
Product Life-CycleProduct Life-Cycle
Management (PLM)Management (PLM)
 Integrated software that bringsIntegrated software that brings
together most, if not all, elements oftogether most, if not all, elements of
product design and manufactureproduct design and manufacture
 Product designProduct design
 CAD/CAM, DFMACAD/CAM, DFMA
 Product routingProduct routing
 MaterialsMaterials
 AssemblyAssembly
 EnvironmentalEnvironmental

77. © 2008 Prentice Hall, Inc. 5 – 77
Service DesignService Design
 Service typically includes directService typically includes direct
interaction with the customerinteraction with the customer
 Increased opportunity for customizationIncreased opportunity for customization
 Reduced productivityReduced productivity
 Cost and quality are still determined atCost and quality are still determined at
the design stagethe design stage
 Delay customizationDelay customization
 ModularizationModularization
 Reduce customer interaction, oftenReduce customer interaction, often
through automationthrough automation

78. © 2008 Prentice Hall, Inc. 5 – 78
 Service typically includes directService typically includes direct
interaction with the customerinteraction with the customer
 Increased opportunity for customizationIncreased opportunity for customization
 Reduced productivityReduced productivity
 Cost and quality are still determined atCost and quality are still determined at
the design stagethe design stage
 Delay customizationDelay customization
 ModularizationModularization
 Reduce customer interaction, oftenReduce customer interaction, often
through automationthrough automation
(c) Customer participation in design and
delivery such as counseling, college
education, financial management of
personal affairs, or interior decorating
Service DesignService Design
Figure 5.12
(a) Customer participation in design
such as pre-arranged funeral services
or cosmetic surgery
(b) Customer participation in(b) Customer participation in
delivery such as stress test fordelivery such as stress test for
cardiac exam or delivery of acardiac exam or delivery of a
babybaby

79. © 2008 Prentice Hall, Inc. 5 – 79
Moments of TruthMoments of Truth
 Concept created by Jan Carlzon ofConcept created by Jan Carlzon of
Scandinavian AirwaysScandinavian Airways
 Critical moments between theCritical moments between the
customer and the organization thatcustomer and the organization that
determine customer satisfactiondetermine customer satisfaction
 There may be many of these momentsThere may be many of these moments
 These are opportunities to gain orThese are opportunities to gain or
lose businesslose business

80. © 2008 Prentice Hall, Inc. 5 – 80
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
Experience Enhancers
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
Standard Expectations
Moments-of-TruthMoments-of-Truth
Computer Company HotlineComputer Company Hotline
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
Experience Detractors
Figure 5.13Figure 5.13

81. © 2008 Prentice Hall, Inc. 5 – 81
Documents for ServicesDocuments for Services
 High levels of customerHigh levels of customer
interaction necessitates differentinteraction necessitates different
documentationdocumentation
 Often explicit job instructionsOften explicit job instructions
for moments-of-truthfor moments-of-truth
 Scripts and storyboards areScripts and storyboards are
other techniquesother techniques

82. © 2008 Prentice Hall, Inc. 5 – 82
Application of DecisionApplication of Decision
Trees to Product DesignTrees to Product Design
 Particularly useful when there are aParticularly useful when there are a
series of decisions and outcomesseries of decisions and outcomes
which lead to other decisions andwhich lead to other decisions and
outcomesoutcomes

83. © 2008 Prentice Hall, Inc. 5 – 83
Application of DecisionApplication of Decision
Trees to Product DesignTrees to Product Design
 Include all possible alternatives andInclude all possible alternatives and
states of nature - including “doingstates of nature - including “doing
nothing”nothing”
 Enter payoffs at end of branchEnter payoffs at end of branch
 Determine the expected value of eachDetermine the expected value of each
branch and “prune” the tree to findbranch and “prune” the tree to find
the alternative with the best expectedthe alternative with the best expected
valuevalue
ProceduresProcedures

84. © 2008 Prentice Hall, Inc. 5 – 84
(.6)(.6)
Low salesLow sales
(.4)(.4)
High salesHigh sales
(.6)(.6) Low salesLow sales
(.4)(.4)
High salesHigh sales
Decision Tree ExampleDecision Tree Example
Purchase CAD
Hire and train engineers
Do nothing
Figure 5.14Figure 5.14

85. © 2008 Prentice Hall, Inc. 5 – 85
(.6)(.6) Low salesLow sales
(.4)(.4)
High salesHigh sales
Decision Tree ExampleDecision Tree Example
Purchase CAD
(.6)
Low salesLow sales
(.4)
High sales
Hire and train engineers
Do nothing
Figure 5.14Figure 5.14
$2,500,000$2,500,000 RevenueRevenue
- 1,000,000- 1,000,000 Mfg costMfg cost ($40 x 25,000)($40 x 25,000)
- 500,000- 500,000 CAD costCAD cost
$1,000,000$1,000,000 NetNet
$800,000$800,000 RevenueRevenue
- 320,000- 320,000 Mfg costMfg cost ($40 x 8,000)($40 x 8,000)
- 500,000- 500,000 CAD costCAD cost
- $20,000- $20,000 Net lossNet loss
EMV (purchase CAD system) = (.4)($1,000,000) + (.6)(- $20,000)

86. © 2008 Prentice Hall, Inc. 5 – 86
(.6)(.6) Low salesLow sales
(.4)(.4)
High salesHigh sales
Decision Tree ExampleDecision Tree Example
Purchase CAD
$388,000
(.6)
Low salesLow sales
(.4)
High sales
Hire and train engineers
Do nothing
Figure 5.14Figure 5.14
$2,500,000$2,500,000 RevenueRevenue
- 1,000,000- 1,000,000 Mfg costMfg cost ($40 x 25,000)($40 x 25,000)
- 500,000- 500,000 CAD costCAD cost
$1,000,000$1,000,000 NetNet
$800,000$800,000 RevenueRevenue
- 320,000- 320,000 Mfg costMfg cost ($40 x 8,000)($40 x 8,000)
- 500,000- 500,000 CAD costCAD cost
- $20,000- $20,000 Net lossNet loss
EMV (purchase CAD system) = (.4)($1,000,000) + (.6)(- $20,000)
= $388,000

87. © 2008 Prentice Hall, Inc. 5 – 87
(.6)(.6)
Low salesLow sales
(.4)(.4)
High salesHigh sales
(.6)(.6) Low salesLow sales
(.4)(.4)
High salesHigh sales
Decision Tree ExampleDecision Tree Example
Purchase CAD
$388,000
Hire and train engineers
$365,000
Do nothing $0
$0$0 NetNet
$800,000$800,000 RevenueRevenue
- 400,000- 400,000 Mfg costMfg cost ($50 x 8,000)($50 x 8,000)
- 375,000- 375,000 Hire and train costHire and train cost
$25,000$25,000 NetNet
$2,500,000$2,500,000 RevenueRevenue
- 1,250,000- 1,250,000 Mfg costMfg cost ($50 x 25,000)($50 x 25,000)
- 375,000- 375,000 Hire and train costHire and train cost
$875,000$875,000 NetNet
$2,500,000$2,500,000 RevenueRevenue
- 1,000,000- 1,000,000 Mfg costMfg cost ($40 x 25,000)($40 x 25,000)
- 500,000- 500,000 CAD costCAD cost
$1,000,000$1,000,000 NetNet
$800,000$800,000 RevenueRevenue
- 320,000- 320,000 Mfg costMfg cost ($40 x 8,000)($40 x 8,000)
- 500,000- 500,000 CAD costCAD cost
- $20,000- $20,000 Net lossNet loss
Figure 5.14Figure 5.14

88. © 2008 Prentice Hall, Inc. 5 – 88
Transition to ProductionTransition to Production
 Know when to move to productionKnow when to move to production
 Product development can be viewed asProduct development can be viewed as
evolutionary and never completeevolutionary and never complete
 Product must move from design toProduct must move from design to
production in a timely mannerproduction in a timely manner
 Most products have a trial productionMost products have a trial production
period to insure producibilityperiod to insure producibility
 Develop tooling, quality control, trainingDevelop tooling, quality control, training
 Ensures successful productionEnsures successful production

89. © 2008 Prentice Hall, Inc. 5 – 89
Transition to ProductionTransition to Production
 Responsibility must also transition as theResponsibility must also transition as the
product moves through its life cycleproduct moves through its life cycle
 Line management takes over from designLine management takes over from design
 Three common approaches to managingThree common approaches to managing
transitiontransition
 Project managersProject managers
 Product development teamsProduct development teams
 Integrate product development andIntegrate product development and
manufacturing organizationsmanufacturing organizations