Supply Chain - ch05

Heizer, Render, Griffin
Operations Management
Second Canadian Edition
Slides adapted by Michael Zhang
Chapter 5
Sustainability in the
Supply Chain and
the Design of Goods
and Services
Copyright © 2017 Pearson Canada Inc. 5-1

Outline
 Global Company Profile: Regal
Marine
 Goods and Services Selection
 Generating New Products
 Product Development
 Issues for Product Design
 Ethics, Environmentally Friendly
Design, and Sustainability

Outline - Continued
 Time-Based Competition
 Defining a Product
 Documents For Production
 Service Design
 Application of Decision Trees to
Product Design
 Transition to Production

Learning Objectives
When you complete this chapter you should
be able to:
1. Define product life cycle

2. Describe a product development system
3. Build a house of quality
4. Describe how time-based competition is
implemented

Learning Objectives
When you complete this chapter you should
be able to:
5. Describe how products and services are

defined by operations management
6. Describe the documents needed for
production
7. Describe customer participation in the
design and production of services
8. Apply decision trees to product issues

Regal Marine
 Global market
 3-dimensional CAD system
 Reduced product development time
 Reduced problems with tooling
 Reduced problems in production
 Assembly line production
 JIT

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 Decision
 The good or service the organization
provides society
 Top organizations typically focus on
core products
 Customers buy satisfaction, not just
a physical good or particular service
 Fundamental to an organization's
strategy with implications throughout
the operations function
Product Strategy Options
 Differentiation
 Shouldice Hospital
 Low cost
 Taco Bell
 Rapid response
 Toyota

Product Life Cycles
 May be any length from a few

hours to decades
 The operations function must
be able to introduce new
products successfully
Copyright © 2017 Pearson Canada Inc. 5 - 10

Sales, cost, and cash flow
Product Life Cycles
Cost of development and production
Sales revenue
Net revenue (profit)
Cash
flow
Negative
cash flow Loss
Introduction Growth Maturity Decline
Figure 5.1

Product Life Cycle
Introductory Phase
 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
 Product design begins to
stabilize
 Effective forecasting of
capacity becomes necessary
 Adding or enhancing capacity
may be necessary

Product Life Cycle
Maturity Phase
 Competitors now established
 High volume, innovative
production may be needed
 Improved cost control,
reduction in options, paring
down of product line

Product Life Cycle
Decline Phase
 Unless product makes a
special contribution to the
organization, must plan to
terminate offering

Product Life Cycle Costs
100 –
Costs committed
80 –
Percent of total cost
60 –
Costs incurred
40 –
20 –
Ease of change
0–
Concept Detailed Manufacturing Distribution,

design design service,
prototype and disposal
New Product Opportunities
1. Understanding the
customer
Brainstorming
2. Economic change
is a useful tool
3. Sociological and
demographic change
4. Technological change
5. Political/legal change
6. Market practice, professional
standards, suppliers, distributors
Product Development
Ideas
System
Ability Figure 5.3
Customer Requirements
Functional Specifications
Product Specifications Scope for

Scope of design and
product Design Review engineering
development teams
team Test Market
Introduction
Evaluation

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 importance ratings
6. Evaluate competing products
7. Compare performance to desirable technical
attributes
QFD House of Quality
Interrelationships
Customer
importance
How to satisfy
ratings
customer wants
assessment
Competitive
What the Relationship
customer matrix
wants
Target values Weighted

rating
Technical
evaluation
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.

Interrelationships
House of Quality Example How to Satisfy

Customer Wants
Competitors
Analysis of
What the
Relationship
Customer
Matrix
Wants
Technical
What the Attributes and
Evaluation
customer
wants Customer
importance
rating
(5 = highest)
Lightweight 3
Easy to use 4
Reliable 5
Easy to hold steady 2
Colour correction 1

Interrelationships

Customer Wants
Competitors
Analysis of
What the
Relationship
Customer
Matrix
Wants
Low electricity requirements Technical

Attributes and
Evaluation
Aluminum components
Ergonomic design
Auto exposure
How to Satisfy
Paint pallet Customer Wants
Auto focus

Interrelationships

Customer Wants
Competitors
Analysis of
What the
Relationship
Customer
Matrix
Wants
High relationship Technical

Attributes and
Evaluation
Medium relationship
Low relationship
Lightweight 3
Easy to use 4
Reliable 5
Colour corrections 1
Relationship Matrix
Interrelationships

Customer Wants
Competitors
Analysis of
What the
Relationship
Customer
Matrix
Wants
Technical
Attributes and
Evaluation
Low electricity requirements

Relationships
between the
things we can do
Aluminum components
Ergonomic design
Auto exposure
Paint pallet
Auto focus

Interrelationships

Customer Wants
Competitors
Analysis of
What the
Relationship
Customer
Matrix
Wants
Technical
Attributes and
Evaluation
Lightweight 3
Easy to use 4
Reliable 5
Colour corrections 1
Our importance ratings 22 9 27 27 32 25
Weighted
rating
Interrelationships
How to Satisfy

Customer Wants
Competitors
Analysis of
What the
Relationship
Customer
Matrix
Wants
Technical
Attributes and
Company B
Company A
Evaluation
How well do
competing products
meet customer wants
Lightweight 3 G P
Easy to use 4 G P
Reliable 5 F G
Easy to hold steady 2 G P
Colour corrections 1 P P
Our importance ratings 22 5
Interrelationships
How to Satisfy

Customer Wants
Competitors
Analysis of
What the
Relationship
Customer
Matrix
Wants
Technical
Attributes and
Failure 1 per 10,000

Evaluation
Panel ranking
Target
2 circuits
values
(Technical
2’ to ∞
0.5 A
attributes)
75%
Company A 0.7 60% yes 1 ok G
Technical
evaluation Company B 0.6 50% yes 2 ok F
Us 0.5 75% yes 2 ok G
Low electricity requirements
Aluminum components
Ergonomic design
Auto exposure
Company A
Company B
Paint pallet
Auto focus
Completed
Lightweight 3 G P
House of Easy to use 4 G P
Quality Reliable
5 F G
G P
Color correction 1 P P
Our importance ratings 22 9 27 27 32 25
Failure 1 per 10,000

Panel ranking
Target values
(Technical
2 circuits
attributes)
2’ to ∞
0.5 A
75%
Company A 0.7 60% yes 1 ok G
Technical
Company B 0.6 50%yes 2 ok F
evaluation
Copyright © 2017 Pearson Canada Inc. Us 0.5 75% yes 2 ok G
5 - 29
House of Quality Sequence
Deploying resources through the
organization in response to
customer requirements
Quality
plan
Production
process
Production process
Specific
components
House 4
Design
components
characteristics House
Specific
characteristics
3
House 2
Design
requirements
House 1
Customer
Figure 5.4
Organizing for Product
Development
 Historically – 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

Organizing for Product
Development
 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
Manufacturability and
Value Engineering
 Benefits:
1. Reduced complexity of products
2. Reduction of environmental impact
3. Additional standardization of products
4. Improved functional aspects of product
5. Improved job design and job safety
6. Improved maintainability (serviceability) of
the product
7. Robust design

Issues for Product Design
 Robust design
 Modular design
 Computer-aided design (CAD)
 Computer-aided manufacturing (CAM)
 Virtual reality technology
 Value analysis
 Environmentally friendly design

Time-Based Competition
 Product life cycles are becoming
shorter and the rate of
technological change is
increasing
 Developing new products faster
can result in a competitive
advantage

Acquiring Technology
 By Purchasing Technology by Acquiring a
Firm
 Speeds development
 Issues concern the fit between the acquired
organization and product and the host
 Through Joint Ventures
 Both organizations learn
 Risks are shared
 Through Alliances
 Cooperative agreements between
independent organizations
Defining the 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

Product Documents
 Engineering drawing
 Shows dimensions, tolerances, and
materials
 Shows codes for Group Technology
 Bill of Material (BOM)
 Lists components, quantities, and
where used
 Shows product structure

Documents for Production
 Assembly drawing
 Assembly chart
 Route sheet
 Work order
 Engineering change notices (ECNs)

Service Design
 Service typically includes direct
interaction with the customer
 Increased opportunity for customization
 Reduced productivity
 Cost and quality are still determined at
the design stage
 Delay customization
 Modularization
 Reduce customer interaction, often through
automation

Customer Participation in
Design of Services
Figure 5.12
Moments of Truth
 Concept created by Jan Carlzon of
Scandinavian Airways
 Critical moments between the
customer and the organization that
determine customer satisfaction
 There may be many of these moments
 These are opportunities to gain or
lose business

Moments of Truth:
Computer Company Hotline
 The moment of truth is the
moment that exemplifies,
enhances, or detracts from the
customer’s expectations.
 The operations manager’s task
is to identify moments of truth
and design operations that meet
or exceed the customer’s
expectations.
Documents for Services
 High levels of customer

interaction necessitates
different documentation
 Often explicit job instructions
for moments of truth
 Scripts and storyboards are
other techniques

Nova Scotia Pharmaceuticals
Guidelines for Drive-up
Customers
 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
walk up to the counter, apologize for the inconvenience.

Application of Decision
Trees to Product Design
 Particularly useful when there are a
series of decisions and outcomes
which lead to other decisions and
outcomes

Application of Decision
Trees to Product Design
Procedures
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
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 ensure producibility
 Develop tooling, quality control, training
 Ensures successful production

Transition to Production
 Responsibility must also transition as the
product moves through its life cycle
 Line management takes over from design
 Three common approaches to managing
transition
 Project managers
 Product development teams
 Integrate product development and
manufacturing organizations

Summary
 The design of goods/services creates the
fundamentals for operations to deliver to
the customer
 The operations manager must design
systems to yield competitive advantages
for the organization
 The design should be done in a cross-
functional way
 The life cycle stage of the product/service
offering decides the approach
 There are many techniques for these
activities

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Heizer, Render, Griffin

Copyright © 2017 Pearson Canada Inc. 5-1

Copyright © 2017 Pearson Canada Inc. 5-2

Copyright © 2017 Pearson Canada Inc. 5-3

1. Define product life cycle

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5. Describe how products and services are

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Copyright © 2017 Pearson Canada Inc. 5-6

The objective of the product decision

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 May be any length from a few

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Introduction Growth Maturity Decline

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Concept Detailed Manufacturing Distribution,

Product Specifications Scope for

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Target values Weighted

Your team has been charged with

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House of Quality Example How to Satisfy

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House of Quality Example How to Satisfy

Low electricity requirements Technical

Copyright © 2017 Pearson Canada Inc. 5 - 23

House of Quality Example How to Satisfy

High relationship Technical

House of Quality Example How to Satisfy

Low electricity requirements

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House of Quality Example How to Satisfy

House of Quality Example

House of Quality Example

Failure 1 per 10,000

Low electricity requirements

Failure 1 per 10,000

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 High levels of customer

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