SeOperation Analysis Techniques Product and S.docx

Se
Operation
Analysis
Techniques:
Product and
Service Design
and Sustainability
Seminar 7
Some Potential Cases
Patagonia: Driving Sustainable Innovation by Embracing
Tensions
B5853-PDF-ENG
https://hbsp.harvard.edu/tu/0231e3f6
Sobey's Inc: A Strategic Approach to Sustainable Seafood
Supply
W13623-PDF-ENG
https://hbsp.harvard.edu/tu/e80f493b
The Ritz-Carlton Hotel Company: The Quest for Service
Excellence
CU09-PDF-ENG
https://hbsp.harvard.edu/tu/6399f627

The Ritz-Carlton Hotel Company: The Quest for Service
Excellence, Spreadsheet
Supplement
CU11-XLS-ENG
https://hbsp.harvard.edu/tu/016088ad
https://hbsp.harvard.edu/tu/0231e3f6
https://hbsp.harvard.edu/tu/e80f493b
https://hbsp.harvard.edu/tu/6399f627
https://hbsp.harvard.edu/tu/016088ad
Design of Goods
and Services
PowerPoint presentation to accompany
Heizer, Render, Munson
Operations Management, Twelfth Edition, Global Edition
Principles of Operations Management, Tenth Edition, Global
Edition
PowerPoint slides by Jeff Heyl
5
Outline
Ø Global Company Profile: Regal Marine
Ø Goods and Services Selection
Ø Generating New Products
Ø Product Development
Ø Issues for Product Design
Ø Product Development Continuum

Outline - Continued
Ø Defining a Product
Ø Documents for Production
Ø Service Design
Ø Application of Decision Trees to Product
Design
Ø Transition to Production
▶ Global market
▶ 3-dimensional CAD system
▶ Reduced product development time
▶ Reduced problems with tooling
▶ Reduced problems in production
▶ Assembly line production
▶ JIT
Regal Marine
Seminar Learning Objectives
5.1 Define product life cycle
5.2 Describe a product development system
5.3 Build a house of quality
5.4 Explain how time-based competition is
implemented by OM

By the end of this seminar you should
be able to :
Learning Objectives
5.5 Describe how goods and services are
defined by OM
5.6 Describe the documents needed for
production
5.7 Explain how the customer participates in
the design and delivery of services
5.8 Apply decision trees to product issues
When you complete this chapter you
should be able to :
Ø Organizations exist to provide goods or
services to society
Ø Great products are the key to success
Ø Top organizations typically focus on core
products
Ø Customers buy satisfaction, not just a
physical good or particular service
Ø Fundamental to an organization's strategy

with implications throughout the operations
function
Goods and Services Selection
Ø Limited and predicable life cycles requires
constantly looking for, designing, and
developing new products
Ø Utilize strong communication among
customer, product, processes, and suppliers
Ø New products generate substantial revenue
Figure 5.1
The higher the percentage of
sales from the last 5 years, the
more likely the firm is to be a
leader.
50% –
40% –
30% –
20% –

10% –
0% –
Industry
leader
Top
third
Middle
third
Bottom
third
Position of firm in its industry
P
er
ce
nt
o
f s
al
es
fr
om
ne

w
p
ro
du
ct
s
The objective of the product decision is to
develop and implement a product strategy
that meets the demands of the marketplace
with a competitive advantage
Product Decision
Product Strategy Options
Ø Differentiation
▶ Shouldice Hospital
Ø Low cost
▶ Taco Bell
Ø Rapid response
▶ Toyota
Product Life Cycles

Ø May be any length from a few days to
decades
Ø The operations function must be able to
introduce new products successfully
Product Life Cycle
Cost of development and production
Sales revenue
ProfitLoss
Loss
Figure 5.2
Introduction Growth Maturity Decline
$
Life Cycle and Strategy
Introductory Phase
Ø Fine tuning may warrant unusual
expenses for
1) Research
2) Product development
3) Process modification and
enhancement
4) Supplier development

Product Life Cycle
Growth Phase
Ø Product design begins to stabilize
Ø Effective forecasting of capacity
becomes necessary
Ø Adding or enhancing capacity may be
necessary
Product Life Cycle
Maturity Phase
Ø Competitors now established
Ø High volume, innovative production
may be needed
Ø Improved cost control, reduction in
options, paring down of product line
Product Life Cycle
Decline Phase
Ø Unless product makes a special

contribution to the organization, must
plan to terminate offering
Product Life Cycle Costs
Costs incurred
Costs committed
Ease of change
Concept Detailed Manufacturing Distribution,
design design service,
prototype and disposal
P
er
ce
nt
o
f t
ot
al
c
os
t
100 –

80 –
60 –
40 –
20 –
0 –
Product-by-Value Analysis
Ø Lists products in descending order of
their individual dollar contribution to the
firm
Ø Lists the total annual dollar contribution
of the product
Ø Helps management evaluate alternative
strategies
Generating New Products
1. Understanding the customer
2. Economic change
3. Sociological and demographic
change
4. Technological change
5. Political and legal change
6. Market practice, professional

standards, suppliers, distributors
Scope of
product
development
team
Product Development Stages
Scope for
design and
engineering
teams
Evaluation
Introduction
Test Market
Functional Specifications
Design Review
Product Specifications
Customer Requirements
Feasibility
Concept

Figure 5.3
Quality Function Deployment
▶ Quality function deployment (QFD)
▶ Determine what will satisfy the customer
▶ Translate those customer desires into the
target design
▶ House of quality
▶ Utilize a planning matrix to relate
customer wants to how the firm is going
to meet those wants
Quality Function Deployment
1. Identify customer wants
2. Identify how the good/service will satisfy customer
wants
3. Relate customer wants to product hows
4. Identify relationships between the firm’s hows
5. Develop our importance ratings
6. Evaluate competing products
7. Compare performance to desirable technical
attributes

QFD House of Quality
Relationship
matrix
How to satisfy
customer wants
Interrelationships
C
om
pe
tit
iv
e
as
se
ss
m
en
t
Technical
evaluation
Target values
What the
customer

wants
Customer
importance
ratings
Weighted
rating
House of Quality Example
Your team has been charged with
designing a new camera for Great
Cameras, Inc.
The first action is
to construct a
House of Quality
Customer
importance
rating
(5 = highest)
Lightweight 3
Easy to use 4
Reliable 5

Easy to hold steady 2
High resolution 1
What the
customer wants
What the
Customer
Wants
Relationship
Matrix
Technical
Attributes and
Evaluation
How to Satisfy
Customer Wants
Interrelationships
A
na
ly
si
s
of
C

om
pe
tit
or
s
What the
Customer
Wants
Relationship
Matrix
Technical
Attributes and
Evaluation
How to Satisfy
Customer Wants
Interrelationships
A
na
ly
si
s

of
C
om
pe
tit
or
s
Lo
w
e
le
ct
ric
ity
re
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ire
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E
rg
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om
ic
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es
ig
n
How to Satisfy
Customer Wants
Lightweight 3
Easy to use 4

Reliable 5
High resolution 1
What the
Customer
Wants
Relationship
Matrix
Technical
Attributes and
Evaluation
How to Satisfy
Customer Wants
Interrelationships
A
na
ly
si
s
of
C
om

pe
tit
or
s
High relationship
Medium relationship
Low relationship
Relationship matrix
Lo
w
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ct
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ire
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E
rg
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om
ic
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Relationships between

the things we can do
What the
Customer
Wants
Relationship
Matrix
Technical
Attributes and
Evaluation
How to Satisfy
Customer Wants
Interrelationships
A
na
ly
si
s
of
C
om
pe
tit
or

s
Weighted rating
Lightweight 3
Easy to use 4
Reliable 5
High resolution 1
Our importance ratings 22 9 27 27 32 25
What the
Customer
Wants
Relationship
Matrix
Technical
Attributes and
Evaluation
How to Satisfy
Customer Wants

Interrelationships
A
na
ly
si
s
of
C
om
pe
tit
or
s
C
om
pa
ny
A
C
om
pa

ny
B
G P
G P
F G
G P
P P
Lightweight 3
Easy to use 4
Reliable 5
High resolution 1
Our importance ratings 22 5
How well do competing
products meet customer
wants
What the
Customer
Wants
Relationship

Matrix
Technical
Attributes and
Evaluation
How to Satisfy
Customer Wants
Interrelationships
A
na
ly
si
s
of
C
om
pe
tit
or
s
What the
Customer

Wants
Relationship
Matrix
Technical
Attributes and
Evaluation
How to Satisfy
Customer Wants
Interrelationships
A
na
ly
si
s
of
C
om
pe
tit
or
s
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
2
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House of Quality
Example
Completed
House of
Quality
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ire
m
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A
C
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ny
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Lightweight 3
Easy to use 4
Reliable 5
High resolution 1
Our importance ratings

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.
5
A
75
%
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∞
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22 9 27 27 32 25

House of Quality Sequence
Figure 5.4
Deploying resources through the organization
in response to customer requirements
P
ro
du
ct
io
n
pr
oc
es
s
Quality
plan
House
4
S
pe
ci
fic
co

m
po
ne
nt
s
Production
process
House
3
D
es
ig
n
ch
ar
ac
te
ris
tic
s
Specific
components
House

2
C
us
to
m
er
re
qu
ire
m
en
ts
Design
characteristics
House
1
Organizing for Product Development
▶ Traditionally – distinct departments
▶ Duties and responsibilities are defined
▶ Difficult to foster forward thinking
▶ A Champion
▶ Product manager drives the product

through the product development
system and related organizations
▶ Team approach
▶ Cross functional – representatives from
all disciplines or functions
▶ Product development teams, design for
manufacturability teams, value
engineering teams
▶ Japanese “whole organization”
approach
▶ No organizational divisions
▶ Product development teams
▶ Market requirements to product success
▶ Cross functional teams often involving
vendors
▶ Open, highly participative environment
▶ Concurrent engineering
▶ Simultaneous performance of product

development stages
Manufacturability and
Value Engineering
▶ Benefits:
1. Reduced complexity of the product
2. Reduction of environmental impact
3. Additional standardization of components
4. Improvement of functional aspects of the product
5. Improved job design and job safety
6. Improved maintainability (serviceability) of the
product
7. Robust design
Cost Reduction of a Bracket via
Value Engineering
Figure 5.5
Issues for Product Design
▶ Robust design
▶ Modular design
▶ Computer-aided design (CAD)
▶ Computer-aided manufacturing (CAM)
▶ Virtual reality technology
▶ Value analysis
▶ Sustainability and Life Cycle Assessment

(LCA)
Robust Design
▶ Product is designed so that small
variations in production or assembly
do not adversely affect the product
▶ Typically results in lower cost and
higher quality
Modular Design
▶ Products designed in easily segmented
components
▶ Adds flexibility to both production and
marketing
▶ Improved ability to satisfy customer
requirements
Ø Using computers to
design products and
prepare engineering
documentation
Ø Shorter development
cycles, improved

accuracy, lower cost
Ø Information and designs
can be deployed
worldwide
Computer Aided Design (CAD)
▶ 3-D Object Modeling
▶ Small prototype development
▶ Design for Manufacturing and Assembly
(DFMA)
▶ Solve manufacturing problems during the
design stage
▶ CAD through the internet
▶ International data exchange through STEP
▶ 3-D printing
Extensions of CAD
Computer-Aided Manufacturing
(CAM)
Ø Utilizing specialized computers and
program to control manufacturing
equipment
Ø Often driven by the CAD system
(CAD/CAM)

1. Product quality
2. Shorter design time
3. Production cost reductions
4. Database availability
5. New range of capabilities
Benefits of CAD/CAM
Virtual Reality Technology
Ø Computer technology used to develop an
interactive, 3-D model of a product from the
basic CAD data
Ø Allows people to ‘see’ the finished design
before a physical model is built
Ø Very effective in large-scale designs such as
plant layout
Value Analysis
Ø Focuses on design improvement during
production
Ø Seeks improvements leading either to a
better product or a product which can be
produced more economically with less
environmental impact

Sustainability and Life Cycle
Assessment (LCA)
Ø Sustainability means meeting the needs of
the present without compromising the ability
of future generations to meet their needs
Ø LCA is a formal evaluation of the
environmental impact of a product
Product Development Continuum
Ø Product life cycles are becoming shorter
and the rate of technological change is
increasing
Ø Developing new products faster can result
in a competitive advantage
Ø Time-based competition
Internal Cost of product development Shared
Lengthy Speed of product development Rapid and/
or Existing
High Risk of product development Shared

External Development Strategies
Alliances
Joint ventures
Purchase technology or expertise
by acquiring the developer
Internal Development Strategies
Migrations of existing products
Enhancements to existing products
New internally developed products
Figure 5.6
XCompeting on Response
Ø Flexibility is matching market changes in
design innovation and volumes
§ A way of life at Hewlett-Packard
Ø Reliability is meeting schedules
§ German machine industry
Ø Quickness in design,
production, and delivery
§ Johnson Electric,
Pizza Hut

Ø Purchasing technology by acquiring a firm
▶ Speeds development
▶ Issues concern the fit between the
acquired organization and product and
the host
Ø Joint Ventures
▶ Both organizations learn
▶ Risks are shared
Ø Alliances
▶ Cooperative agreements between
independent organizations
▶ Useful when technology is developing
▶ Reduces risks
Defining a Product
Ø First definition is in terms of functions
Ø Rigorous specifications are developed during
the design phase
Ø Manufactured products will have an
engineering drawing
Ø Bill of material (BOM) lists the components of
a product

Monterey Jack Cheese
(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,
General Service Administration
Ø Engineering drawing
▶ Shows dimensions, tolerances, and

materials
▶ Shows codes for Group Technology
Ø Bill of Material
▶ Lists components, quantities and where
used
▶ Shows product structure
Product Documents
Engineering Drawings
Figure 5.8
Bills of Material
BOM for a Panel Weldment
NUMBER DESCRIPTION QTY
A 60-71 PANEL WELDM’T 1
A 60-7 LOWER ROLLER ASSM. 1
R 60-17 ROLLER 1
R 60-428 PIN 1
P 60-2 LOCKNUT 1
A 60-72 GUIDE ASSM. REAR 1
R 60-57-1 SUPPORT ANGLE 1
A 60-4 ROLLER ASSM. 1
02-50-1150 BOLT 1

A 60-73 GUIDE ASSM. FRONT 1
A 60-74 SUPPORT WELDM’T 1
R 60-99 WEAR PLATE 1
02-50-1150 BOLT 1 Figure 5.9 (a)
Bills of Material
Hard Rock Cafe’s
Hickory BBQ Bacon
Cheeseburger
DESCRIPTION QTY
Bun 1
Hamburger patty 8 oz.
Cheddar cheese 2 slices
Bacon 2 strips
BBQ onions 1/2 cup
Hickory BBQ sauce 1 oz.
Burger set
Lettuce 1 leaf
Tomato 1 slice
Red onion 4 rings
Pickle 1 slice
French fries 5 oz.
Seasoned salt 1 tsp.
11-inch plate 1
HRC flag 1
Figure 5.9 (b)

Make-or-Buy Decisions
• Produce components themselves or
buy from an outside source
• Variations in
– Quality
– Cost
– Delivery schedules
• Critical to product definition
Ø Parts grouped into families with similar
characteristics
Ø Coding system describes processing and
physical characteristics
Ø Part families can be produced
in dedicated manufacturing cells
Group Technology
Group Technology Scheme
Figure 5.10
(a) Ungrouped Parts
(b) Grouped Cylindrical Parts (families of parts)
Grooved Slotted Threaded Drilled Machined

1. Improved design
2. Reduced raw material and purchases
3. Simplified production planning and
control
4. Improved layout, routing, and machine
loading
5. Reduced tooling setup time, work-in-
process, and production time
Group Technology Benefits
Documents for Production
Ø Assembly drawing
Ø Assembly chart
Ø Route sheet
Ø Work order
Ø Engineering change notices (ECNs)
Assembly Drawing
Ø Shows exploded
view of product
Ø Details relative
locations to show

how to assemble the
product
Figure 5.11 (a)
Assembly Chart
1
2
3
4
5
6
7
8
9
10
11
R 209 Angle
R 207 Angle
Bolts w/nuts (2)

R 209 Angle
R 207 Angle
Bolt w/nut
R 404 Roller
Lock washer
Part number tag
Box w/packing material
Bolts w/nuts (2)
SA
1
SA
2
A1
A2
A3
A4
A5
Left
bracket

assembly
Right
bracket
assembly
Poka-yoke
inspection
Figure 5.11 (b)
Identifies the point of
production where
components flow into
subassemblies and
ultimately into the final
product
Route Sheet
Lists the operations and times required to
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
Work Order
Instructions to produce a given quantity of a
particular item, usually to a schedule
Work Order
Item Quantity Start Date Due Date
Production Delivery
Dept Location
157C 125 5/2/16 5/4/16
F32 Dept K11
Engineering Change Notice (ECN)
Ø A correction or modification to a product’s
definition or documentation
▶ Engineering drawings
▶ Bill of material
Quite common with long product life cycles,
long manufacturing lead times, or rapidly

changing technologies
Configuration Management
Ø The need to manage ECNs has led to the
development of configuration management
systems
Ø A product’s planned and changing
components are accurately identified
Ø Control and accountability for change are
identified and maintained
Product Life-Cycle Management
(PLM)
Ø Integrated software that brings together most,
if not all, elements of product design and
manufacture
▶ Product design
▶ CAD/CAM
▶ DFMA
▶ Product routing
▶ Materials
▶ Layout
▶ Assembly
▶ Maintenance
▶ Environmental

Service Design
Ø Service typically includes direct
interaction with the customer
Ø Process – chain – network (PCN)
analysis focuses on the ways in which
processes can be designed to optimize
interaction between firms and their
customers
Process-Chain-Network (PCN)
Analysis
Figure 5.12
Process-Chain-Network (PCN) Analysis
1. Direct interaction region includes process steps
that involve interaction between participants
2. The surrogate (substitute) interaction region
includes process steps in which one participant
is acting on another participant’s resources
3. The independent processing region includes
steps in which the supplier and/or the customer
is acting on resources where each has
maximum control

Process-Chain-Network (PCN) Analysis
Ø All three regions have similar operating issues
but the appropriate way of handling the issues
differs across regions – service operations
exist only within the area of direct and
surrogate interaction
Ø PCN analysis provides insight to aid in
positioning and designing processes that can
achieve strategic objectives
Adding Service Efficiency
Ø Service productivity is notoriously low
partially because of customer involvement
in the design or delivery of the service, or
both
Ø Complicates product design
Ø Limit the options
▶ Improves efficiency and ability to meet
customer expectations
Ø Delay customization
Ø Modularization
▶ Eases customization of a service

Ø Automation
▶ Reduces cost, increases customer
service
Ø Moment of truth
▶ Critical moments between the customer
and the organization that determine
customer satisfaction
Documents for Services
Ø High levels of customer interaction
necessitates different documentation
Ø Often explicit job instructions
Ø Scripts and storyboards are other
techniques
First Bank Corp. Drive-up Teller
Service Guidelines
• Be especially discreet when talking to the 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” when speaking through
the
microphone.
• Establish eye contact with the customer if the distance allows
it.
• If a transaction requires that the customer park the car and
come
into the lobby, apologize for the inconvenience.
Application of Decision Trees to
Product Design
Ø Particularly useful when there are a series of
decisions and outcomes that lead to other
decisions and outcomes
Application of Decision Trees to
Product Design
1. Include all possible alternatives and
states of nature – including “doing
nothing”
2. Enter payoffs at end of branch
3. Determine the expected value of each

branch and “prune” the tree to find the
alternative with the best expected value
Procedure
(.6)
Low sales
(.4)
High sales
(.6) Low sales
(.4)
High sales
Decision Tree Example
Purchase CAD
Hire and train engineers
Do nothing
Figure 5.13
(.6) Low sales

(.4)
High sales
Purchase CAD
(.6)
Low sales
(.4)
High sales
Do nothing
$2,500,000 Revenue
– 1,000,000 Mfg cost ($40 x 25,000)
– 500,000 CAD cost
$1,000,000 Net
$800,000 Revenue
– 320,000 Mfg cost ($40 x 8,000)
– 500,000 CAD cost
– $20,000 Net loss
EMV (purchase CAD system) = (.4)($1,000,000) + (.6)(–
$20,000)
Figure 5.13

(.6) Low sales
(.4)
High sales
Purchase CAD
(.6)
Low sales
(.4)
High sales
Do nothing
$2,500,000 Revenue
– 1,000,000 Mfg cost ($40 x 25,000)
– 500,000 CAD cost
$1,000,000 Net
$800,000 Revenue
– 320,000 Mfg cost ($40 x 8,000)
– 500,000 CAD cost
– $20,000 Net loss
$388,000

EMV (purchase CAD system) = (.4)($1,000,000) + (.6)(–
$20,000)
= $388,000
Figure 5.13
(.6)
Low sales
(.4)
High sales
(.6) Low sales
(.4)
High sales
Purchase CAD
$388,000
$365,000
Do nothing $0
$0 Net
$800,000 Revenue

– 400,000 Mfg cost ($50 x 8,000)
– 375,000 Hire and train cost
$25,000 Net
$2,500,000 Revenue
– 1,250,000 Mfg cost ($50 x 25,000)
– 375,000 Hire and train cost
$875,000 Net
$2,500,000 Revenue
– 1,000,000 Mfg cost ($40 x 25,000)
– 500,000 CAD cost
$1,000,000 Net
$800,000 Revenue
– 320,000 Mfg cost ($40 x 8,000)
– 500,000 CAD cost
– $20,000 Net loss
Figure 5.13
Transition to Production
▶ Know when to move to production
▶ Product development can be viewed as
evolutionary and never complete
▶ Product must move from design to production
in a timely manner
▶ Most products have a trial production period

to insure producibility
▶ Develop tooling, quality control, training
▶ Ensures successful production
Transition to Production
Ø Responsibility must also transition as the
product moves through its life cycle
▶ Line management takes over from design
Ø Three common approaches to managing
transition
▶ Project managers
▶ Product development teams
▶ Integrate product development and
manufacturing organizations
PowerPoint presentation to accompany
Heizer, Render, Munson
Operations Management, Twelfth Edition, Global Edition
Principles of Operations Management, Tenth Edition, Global
Edition
Sustainability in
the Supply Chain 5
S
U

P
P
LE
M
E
N
T
Outline
Ø Corporate Social Responsibility
Ø Sustainability
Ø Design and Production for Sustainability
Ø Regulations and Industry Standards
Seminar Learning Objectives
S5.1 Describe corporate social responsibility
S5.2 Describe sustainability
S5.3 Explain the 3Rs for sustainability
S5.4 Calculate design for disassembly
S5.5 Explain the impact of sustainable
regulations on operations
By the end of this section of the
seminar you should be able to :

Corporate Social Responsibility
Ø How products and services affect people and the
environment
Ø Stakeholders have strong opinions about
environmental, social, and ethical issues
Ø Doing what’s right can be beneficial to all
stakeholders
Ø Corporate social responsibility (CSR)
Sustainability
Ø Meeting the needs of
the present without
compromising the
ability of future
generations to meet
their needs
Ø More than “going green”
Ø Includes employees, customers, community, and
company reputation
Systems View
Ø Looking at a product’s life from design to
disposal, including all the resources required

Ø The product or service itself is a small part of
much larger social, economic, and
environmental systems
Ø Understanding systems allows more informed
judgments regarding sustainability
Commons
Ø Many inputs to a production system held by
the public
Ø Common resources often misallocated
Ø Possible solutions include
1) Moving some of the common to private
property
2) Allocation of rights
3) Allocation of yield
Triple Bottom Line
Ø Consider the systems necessary to support the
three Ps: people, planet, and profit
Figure S5.1
Triple Bottom Line

Ø Decisions affect people
Ø Globalization and outsourcing complicate the
task
Ø Supplier selection and performance criteria are
important
Ø Materials must be safe and environmentally
responsible
Walmart’s Objectives
1. Improving livelihoods through the creation
of productive, healthy, and safe
workplaces
2. Building strong communities through
access to affordable, high-quality
services
3. Preventing exposure to substances that
are considered harmful or toxic
4. Promoting health and wellness
Triple Bottom Line
Ø The planet’s environment
Ø Look for ways to reduce the environmental

impact of operations
Ø Overarching objective is to conserve scarce
resources
Ø Carbon footprint and greenhouse gas
emissions (GHG)
Carbon Footprint
34.5-gram Bag of
Frito-Lay Chips
Figure S5.2
Triple Bottom Line
Ø Social and environmental sustainability do not
exist without economic sustainability
Ø Staying in business requires making a profit
Ø Alternate measures of success include risk
profile, intellectual property, employee morale,
and company valuation
Ø Social accounting can supplement financial
accounting to support economic sustainability
Design and Production for

Sustainability
Ø Life cycle assessment valuates the
environmental impact of a product, from raw
material and energy inputs all the way to the
disposal of the product at its end-of-life
Ø The goal is to make decisions that help
reduce the environmental impact of a product
throughout its entire life
Ø The 3Rs— reduce, reuse, and recycle
Product Design
Ø Design decisions affect materials, quality,
cost, processes, related packaging and
logistics, and how the product will be
processed when
discarded
Ø Incorporate systems
view to lower
environmental impact
Ø Alternative materials
Design for Disassembly
PART
RESALE

REVENUE
PER UNIT
RECYCLING
REVENUE
PER UNIT
PROCESSING
COST
PER UNIT
DISPOSAL
COST
PER UNIT
Printed circuit board $5.93 $1.54 $3.46 $0.00
Laminate back 0.00 0.00 4.53 1.74
Coil 8.56 5.65 6.22 0.00
Processor 9.17 2.65 3.12 0.00
Frame 0.00 0.00 2.02 1.23
Aluminum case 11.83 2.10 2.98 0.00
Total $35.49 $11.94 $22.33 $2.97
Harmonizer

PART
RESALE
REVENUE
PER UNIT
RECYCLING
REVENUE
PER UNIT
PROCESSING
COST
PER UNIT
DISPOSAL
COST
PER UNIT
Printed circuit board $7.88 $3.54 $2.12 $0.00
Coil 6.67 4.56 3.32 0.00
Frame 0.00 0.00 4.87 1.97
Processor 8.45 4.65 3.43 0.00
Plastic case 0.00 0.00 4.65 3.98
Total $23.00 $12.75 $18.39 $5.95
Rocker

Revenue
retrieval
Total
resale
revenue
–
Total
processing
cost
–
Total
recycling
revenue
Total
disposal
cost
+=
Revenue
retrieval for
Harmonizer
= $35.49 + $11.94 – $22.33 – $2.97 = $22.13
Revenue
retrieval for
Rocker

= $23.00 + $12.75 – $18.39 – $5.95 = $11.41
Production Process
Ø Reduce the amount of resources in the
production process
§ Energy
§ Water
§ Environmental contamination
Ø Reduce cost and environmental concerns
Logistics
Ø Reduce costs by achieving efficient route
and delivery networks
1. Getting shipments to customers
promptly
2. Keeping trucks busy
3. Buying inexpensive
fuel
Logistics
Ø Management analytics can help
Ø Evaluate equipment alternatives
Ø Life cycle ownership costs

Life Cycle Ownership Costs
VEHICLE
COST TO
BUY FUEL EFFICIENCY
OPERATING
COSTS PER
MILE
Ford TriVan $28,000 Regular Unleaded 24 mpg $.20
Honda
CityVan
$32,000 Regular
Unleaded/Battery
37 mpg $.22
Annual distance = 22,000 miles Life = 8 years Gas price =
$4.25/gallon
Total life
cycle
cost
= Cost of vehicle + +
Life cycle
cost of fuel

Life cycle
operating
cost
a) Ford TriVan
Total life-
cycle
cost
=$28,000+
22,000miles
year
24 miles
gallon
!
"
#
#
#
#
$
%

&
&
&
&
$4.25 / gallon( ) 8years( )
+ 22,000
miles
year
!
"
#
$
%
& $.20 /mile( ) 8years( )
=$28,000+$31,167+$35,200=$94,367
a) Honda CityVan
Total life-
cycle
cost
=$32,000+
22,000miles

year
37 miles
gallon
!
"
#
#
#
#
$
%
&
&
&
&
$4.25 / gallon( ) 8years( )
+ 22,000
miles
year
!
"
#
$

%
& $.22 /mile( ) 8years( )
=$32,000+$20,216+$38,720=$90,936
b) Crossover point
Total cost for Ford TriVan = Total cost for Honda CityVan
$28,000+
4.25 $
gallon
24 miles
gallon
+.20
$
mile
!
"
#
#
#
#
$
%

&
&
&
&
M miles( ) =$32,000+
4.25 $
gallon
37 miles
gallon
+.22
$
mile
!
"
#
#
#
#
$
%
&
&
&
&

M miles( )
$28,000+ .3770
$
mile
!
"
#
$
%
& M( ) =$32,000+ .3349 $
mile
!
"
#
$
%
& M( )
.0421
$
mile
!
"
#

$
%
& M( ) =$4,000
M =
$4,000
.0421 $
mile
= 95,012 miles
c) Crossover point
Crossover'point =
95,012'miles
22,000miles
year
= 4.32'years
End-of-Life Phase
Ø What happens at the
end-of-life stage?
Ø Closed-loop supply
chains or reverse

logistics
Ø Automaker’s design incorporates disassembly,
recycling, and reuse
Regulations and Industry Standards
Ø Product design
§ Food and Drug Administration
§ Consumer Products Safety Commission
§ National Highway Safety Administration
Ø Manufacturing and assembly activities
§ Occupational Safety and Health Administration
(OSHA)
§ Environmental Protection Agency (EPA)
§ State and local agencies
Ø Disassembly and disposal of hazardous
products
§ EPA
§ Department of Transportation

Ø Design for disassembly
Ø Nearly all industries have regulations
§ Commercial builders
§ Federal Safe Drinking Water Act
§ Resource Conservation and Recovery Act
Round 1Seminar Case Seminar 1 Cases UBER
TECHNOLOGIES, INC. Seminar 1 Cases FRITO-LAY:
OPERATIONS MANAGEMENT IN
MANUFACTURINGSeminar 2 Cases RAPID-LUBESeminar 2
Cases STRATEGY AT REGAL MARINESeminar 2 Cases
HARD ROCK CAFE’S GLOBAL STRATEGYSeminar 2 Cases
OUTSOURCING OFFSHORE AT DARDENSeminar 3
CasesDARDEN’S GLOBAL SUPPLY CHAINSSeminar 3
CasesSUPPLY CHAIN MANAGEMENT AT REGAL
MARINESeminar 3 CasesARNOLD PALMER HOSPITAL’S
SUPPLY CHAINSeminar 4 & 5 CasesPROJECT
MANAGEMENT AT ARNOLD PALMER HOSPITALSeminar 4
& 5 CasesMANAGING HARD ROCK’S ROCKFESTSeminar 6
CasesDE MAR’S PRODUCT STRATEGYSeminar 6
CasesPRODUCT DESIGN AT REGAL MARINESeminar 6
CasesBUILDING SUSTAINABILITY AT THE ORLANDO
MAGIC’S AMWAY CENTERSeminar 6 CasesGREEN
MANUFACTURING AND
SUSTAINABILITY AT FRITO-LAYSeminar 7
CasesSOUTHWESTERN UNIVERSITYSeminar 7 CasesTHE
CULTURE OF QUALITY AT ARNOLD PALM-ER
HOSPITALSeminar 7 CasesQUALITY COUNTS AT ALASKA
AIRLINESSeminar 7 CasesQUALITY AT THE RITZ-
CARLTON HOTELSeminar 7 CasesFRITO-LAY’S QUALITY-

CONTROLLED
POTATO CHIPSSeminar 7 CasesFARM TO FORK: QUALITY
AT DARDEN
RESTAURANTSSeminar 8 CasesREEBOK ROYAL CL
PRODUCTION IN VIETNAMSeminar 8 CasesLAYING OUT
ARNOLD PALMER HOSPITAL’S NEW FACILITYSeminar 8
CasesFACILITY LAYOUT AT WHEELED COACHSeminar 8
CasesTHE “PEOPLE” FOCUS: HUMAN RESOURCES AT
ALASKA AIRLINESSeminar 8 CasesHARD ROCK’S HUMAN
RESOURCE STRATEGY
1

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