Design of Goods

and Services

PowerPoint presentation to accompany

Heizer and Render
Operations Management, Eleventh Edition
Principles of Operations Management, Ninth Edition
PowerPoint slides by Jeff Heyl

2014
2014
Pearson
Pearson
Education,
Education,
Inc.Inc.

5-1

Goods and Services Selection

Percent of sales from
new products

50%
40%

The higher the percentage of

sales from the last 5 years, the
more likely the firm is to be a
leader.

30%
20%

How many ideas does it take to

get to a marketable product?

10%

When do you decide to produce

the product?

0%
Industry
leader

Top
third

Middle Bottom
third
third

Figure 5.1

Position of firm in its industry

2014 Pearson Education, Inc.

5-2

Product Decision
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 strategy can be differentiation, Low Cost, Responsive

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5-3

Sales, cost, and cash flow

Product Life Cycle

Cost of development and production

Sales revenue
Net revenue (profit)

Cash
flow
Negative
cash flow

Introduction

Loss

Growth

Maturity

Decline

Goal of the product mgr is to introduce new products successfully!

2014 Pearson Education, Inc.

Figure 5.2

5-4

Life Cycle and Strategy

Introductory

Growth

Maturity

Decline

Fine tuning may warrant unusual expenses for: Research,

Product development, Process modification and
enhancement, Supplier development
Product design begins to stabilize, Effective forecasting of
capacity becomes necessary, Adding or enhancing
capacity may be necessary
Competitors now established, High volume, innovative
production may be needed, Improved cost control,
reduction in options, paring down of product line
Unless product makes a special contribution to the
organization, must plan to terminate offering

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5-5

Product Life Cycle Costs

100

Costs committed

Percent of total cost

80

60

Costs incurred

40

20

Ease of change

0
Concept
design
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Detailed
design
prototype

Manufacturing

Distribution,
service,
and disposal
5-6

Generating New Products

What opportunities exist that will help us
come up with an idea for a product?

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5-7

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
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5-8

Product
Development Stages
Concept
Figure 5.3

Feasibility
Customer Requirements

Functional Specifications
Scope of
product
development
team

Product Specifications
Design Review

Scope for
design and
engineering
teams

Test Market
Introduction
Evaluation

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5-9

Quality Function Deployment

Process for turning wants into hows
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 firms hows
5. Develop customer importance ratings
6. Evaluate competing products
7. Compare performance to desirable technical
attributes
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5 - 10

QFD House of Quality

Interrelationships

What the
customer
wants

Target values

How to satisfy
customer wants

Relationship
matrix

Competitive
assessment

Customer
importance
ratings

Weighted
rating

Technical
evaluation
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5 - 11

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

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5 - 12

Interrelationships

House of Quality Example

What the
Customer
Wants

Relationship
Matrix

Analysis of
Competitors

How to Satisfy
Customer Wants

Technical
Attributes and
Evaluation

What the
customer wants

Customer
importance
rating
(5 = highest)

Lightweight

Easy to use

Reliable

Easy to hold steady

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5 - 13

Interrelationships

House of Quality Example

What the
Customer
Wants

Relationship
Matrix

Analysis of
Competitors

How to Satisfy
Customer Wants

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Ergonomic design

High number of pixels

Auto exposure

Auto focus

Aluminum components

Low electricity requirements

Technical
Attributes and
Evaluation

How to Satisfy
Customer Wants

5 - 14

Interrelationships

House of Quality Example

What the
Customer
Wants

High relationship

Relationship
Matrix

Analysis of
Competitors

How to Satisfy
Customer Wants

Technical
Attributes and
Evaluation

Medium relationship
Low relationship

Lightweight

Easy to use

Reliable

Easy to hold steady

2
Relationship matrix

High
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Education, Inc.
resolution

5 - 15

Interrelationships

House of Quality Example

What the
Customer
Wants

Relationship
Matrix

Analysis of
Competitors

How to Satisfy
Customer Wants

Technical
Attributes and
Evaluation

Ergonomic design

High number of pixels

Auto exposure

Auto focus

Aluminum components

2014 Pearson Education, Inc.

Low electricity requirements

Relationships between
the things we can do

5 - 16

Interrelationships

House of Quality Example

What the
Customer
Wants

Relationship
Matrix

Analysis of
Competitors

How to Satisfy
Customer Wants

Technical
Attributes and
Evaluation

Lightweight

Easy to use

Reliable

Our importance ratings

Easy to hold steady

Weighted rating
High resolution

2014 Pearson Education, Inc.

22

27

27

32

25

5 - 17

Interrelationships

How to Satisfy
Customer Wants

What the
Customer
Wants

Relationship
Matrix

Analysis of
Competitors

House of Quality Example

Lightweight

Easy to use

Reliable

Easyimportance
to hold steady
Our
ratings

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High resolution

22

Company B

How well do competing

products meet customer
wants

Company A

Technical
Attributes and
Evaluation

5
5 - 18

Interrelationships

How to Satisfy
Customer Wants

What the
Customer
Wants

Relationship
Matrix

Analysis of
Competitors

House of Quality Example

0.5 A

75%

2 to

2 circuits

Failure 1 per 10,000

Panel ranking

Technical
Attributes and
Evaluation

Company A

0.7

60%

yes

ok

Company B

0.6

50%

yes

ok

Us

0.5

75%

yes

ok

Target values
(Technical
attributes)

Technical
evaluation

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5 - 19

Company B

Company A

Ergonomic design

High number of pixels

Lightweight

G P

Easy to use

G P

Reliable

F G

Easy to hold steady

G P

High resolution

Panel ranking

Failure 1 per 10,000

2 to

75%

0.5 A

Target values
(Technical
attributes)

Technical
evaluation

22 9 27 27 32 25

2 circuits

Our importance ratings

2014 Pearson Education, Inc.

Auto exposure

Auto focus

Aluminum components

Completed
House of
Quality

Low electricity requirements

House of Quality Example

Company A

0.7 60% yes

ok

Company B

0.6 50% yes

ok

Us

0.5 75% yes

ok

5 - 20

House of Quality Sequence

Deploying resources through the organization
in response to customer requirements
Quality
plan

Customer
requirements

House
1

House
2

House
3

Production
process

Design
characteristics

Design
characteristics

Specific
components

Specific
components

Production
process

House
4

Figure 5.4
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5 - 21

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

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5 - 22

Organizing for Product

Development

Team (project) 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

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5 - 23

Manufacturability and
Value Engineering

Concerned with improvement of product:

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

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5 - 24

Cost Reduction of a Bracket

via Value Engineering

Figure 5.5
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5 - 25

Issues for Product Design

Robust design

Modular design
(http://www.youtube.com/watch?v=yEWOk
-5qWRk)

CAD/CAM

3D modelling, 3D printing

Value analysis - QI

Sustainability and Life Cycle Assessment

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5 - 26

Product Development
Continuum
External Development Strategies
Alliances

Figure 5.6

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
Internal
Lengthy

High
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Cost of product development

Speed of product development

Risk of product development

Shared
Rapid and/
or Existing
Shared
5 - 27

Defining a Product

First definition is in terms of functions

Rigorous specifications are developed
during the design phase
Manufactured products will have an
engineering drawing
Bill of material (BOM) lists the
components of a product

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5 - 28

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 appearancebandaged 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

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5 - 29

Engineering Drawings

Figure 5.8

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5 - 30

Bills of Material
BOM for a Panel Weldment

Figure 5.9 (a)

NUMBER

DESCRIPTION

A 60-71

PANEL WELDMT

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

LOWER ROLLER ASSM.

ROLLER
PIN
LOCKNUT

1
1
1
1

A 60-72
R 60-57-1
A 60-4
02-50-1150

GUIDE ASSM. REAR

SUPPORT ANGLE
ROLLER ASSM.
BOLT

1
1
1
1

A 60-73
A 60-74
R 60-99
02-50-1150

GUIDE ASSM. FRONT

SUPPORT WELDMT
WEAR PLATE
BOLT

1
1
1
1

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QTY

5 - 31

Bills of Material
Hard Rock Cafes
Hickory BBQ Bacon
Cheeseburger

Figure 5.9 (b)

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DESCRIPTION

QTY

Bun
Hamburger patty
Cheddar cheese
Bacon
BBQ onions
Hickory BBQ sauce
Burger set
Lettuce
Tomato
Red onion
Pickle
French fries
Seasoned salt
11-inch plate
HRC flag

1
8 oz.
2 slices
2 strips
1/2 cup
1 oz.
1 leaf
1 slice
4 rings
1 slice
5 oz.
1 tsp.
1
1
5 - 32

Group Technology Scheme

(b) Grouped Cylindrical Parts (families of parts)
(a) Ungrouped Parts
Grooved

Slotted

Threaded

Drilled

Machined

Figure 5.10
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5 - 33

Documents for Production

Assembly drawing
Assembly chart
Route sheet
Work order
Engineering change notices (ECNs)

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5 - 34

Assembly Drawing

Shows exploded
view of product

Details relative
locations to show
how to assemble
the product

Figure 5.11 (a)

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5 - 35

Assembly Chart
1
2
3
4
5
6
7
8
9

R 209 Angle
R 207 Angle
Bolts w/nuts (2)

Left
SA bracket
1 assembly

A1

R 209 Angle
R 207 Angle
Bolts w/nuts (2)

Right
bracket
SA
A2
2 assembly

Identifies the point of

production where
components flow into
subassemblies and
ultimately into the final
product

Bolt w/nut
R 404 Roller

A3

Lock washer
Part number tag

10
Box w/packing material
11
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Poka-yoke
inspection
A4
A5

Figure 5.11 (b)

5 - 36

Route Sheet
Lists the operations and times required to
produce a component
Process

Machine

Operations

Auto Insert 2

Manual
Insert 1
Wave Solder

Test 4

Insert Component
Set 56
Insert Component
Set 12C
Solder all
components
to board
Circuit integrity
test 4GY

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Setup
Time

Operation
Time/Unit

1.5

.4

.5

2.3

1.5

4.1

.25

.5

5 - 37

Work Order
Instructions to produce a given quantity of a
particular item, usually to a schedule
Work Order
Item

Quantity

157C

125

Production
Dept
F32

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Start Date
5/2/08

Due Date
5/4/08

Delivery
Location
Dept K11

5 - 38

Engineering Change Notice

(ECN)

A correction or modification to a
products definition or documentation

Engineering drawings

Bill of material

Quite common with long product life cycles,

long manufacturing lead times, or rapidly
changing technologies
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5 - 39

Adding Service Efficiency

Service productivity is notoriously low
partially because of customer
involvement in the design or delivery
of the service, or both
Complicates product design
In what ways can service delivery
become more efficient?
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5 - 40

Adding Service Efficiency

Limit the options
Improves efficiency and ability to meet
customer expectations

Delay customization
Modularization
Eases customization of a service

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5 - 41

Adding Service Efficiency

Automation
Reduces cost, increases customer
service

Moment of truth
Critical moments between the customer
and the organization that determine
customer satisfaction

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5 - 42

Documents for Services

Scripts and Storyboards

Guidelines

Decision Trees

Procedure

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5 - 43

Decision Tree Example

(.4)

Purchase CAD
$388,000

High sales

(.6) Low sales

Hire and train engineers

$365,000
(.4)
High sales

(.6)
Low sales

Do nothing $0

$2,500,000
1,000,000
500,000
$1,000,000
$800,000
320,000
500,000
$20,000

$2,500,000
1,250,000
375,000
$875,000
$800,000
400,000
375,000
$25,000
$0 Net

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Revenue
Mfg cost ($40 x 25,000)
CAD cost
Net
Revenue
Mfg cost ($40 x 8,000)
CAD cost
Net loss

Revenue
Mfg cost ($50 x 25,000)
Hire and train cost
Net
Revenue
Mfg cost ($50 x 8,000)
Hire and train cost
Net
Figure 5.13
5 - 44

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or
transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or
otherwise, without the prior written permission of the publisher.
Printed in the United States of America.

2014 Pearson Education, Inc.

5 - 45