Chapter 2:

Preplanning

 Product Development
 Process Choice

© 2006 Prentice Hall, Inc. 5–1

 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
© 2006 Prentice Hall, Inc. 5–2
 Product Strategy Options

 Differentiation
 Ikea
 Low cost
 Clean-pro
 Rapid response
 Samsung

© 2006 Prentice Hall, Inc. 5–3

 Product Life Cycles

Cost of development and production

Sales, cost, and cash flow

Sales revenue
Net revenue (profit)

Cash
flow

Negative
cash flow Loss

Introduction Growth Maturity Decline

Figure 5.1
© 2006 Prentice Hall, Inc. 5–4
 Product Life Cycle
Introduction
 Fine tuning
 Research
 Product development
 Process modification and
enhancement
 Supplier development

© 2006 Prentice Hall, Inc. 5–5

 Product Life Cycle
Growth
 Product design begins to
stabilize
 Effective forecasting of
capacity becomes necessary
 Adding or enhancing capacity
may be necessary

© 2006 Prentice Hall, Inc. 5–6

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

© 2006 Prentice Hall, Inc. 5–7

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

© 2006 Prentice Hall, Inc. 5–8

 New Product Opportunities
1. Understanding the customer
2. Economic change
3. Sociological and demographic
change
4. Technological change
5. Political/legal change
6. Market practice, professional
standards, suppliers, distributors

© 2006 Prentice Hall, Inc. 5–9

 Product Development
System
Ideas

Ability Figure 5.3

Customer Requirements

Functional Specifications

Scope of Product Specifications Scope for

product design and
Design Review engineering
development teams
team Test Market

Introduction

Evaluation
© 2006 Prentice Hall, Inc. 5 – 10
 House of Quality QFD
 Identify customer wants
 Identify how the good/service will satisfy
customer wants
 Relate customer wants to product hows
 Identify relationships between the firm’s hows
 Develop importance ratings
 Evaluate competing products
 Determine the desirable technical attributes

© 2006 Prentice Hall, Inc. 5 – 11

 QFD House of Quality
Interrelationships

How to Satisfy
Customer Wants

Competitors
Analysis of
What the
Customer Relationship
Wants Matrix

Technical
Attributes and
Evaluation

© 2006 Prentice Hall, Inc. 5 – 12

 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

© 2006 Prentice Hall, Inc. 5 – 13

 Interrelationships

House of Quality Example

How to Satisfy
Customer Wants

Competitors
Analysis of
What the
Relationship
Customer
Matrix
Wants

What the
Technical
Attributes and
Evaluation

customer
wants Customer
importance
rating
(5 = highest)
Lightweight 3
Easy to use 4
Reliable 5
Easy to hold steady 2
No double exposures 1

© 2006 Prentice Hall, Inc. 5 – 14

 Interrelationships

House of Quality Example

How to Satisfy
Customer Wants

Competitors
Analysis of
What the
Relationship
Customer
Matrix
Wants

Technical
Low electricity requirements
Attributes and
Evaluation

Aluminum components

Ergonomic design
Auto film advance
Auto exposure
How to Satisfy
Customer Wants
Auto focus

© 2006 Prentice Hall, Inc. 5 – 15

 Interrelationships

House of Quality Example

How to Satisfy
Customer Wants

Competitors
Analysis of
What the
Relationship
Customer
Matrix
Wants

High relationship (5) Technical

Attributes and
Evaluation

Medium relationship (3)

Low relationship (1)

Lightweight 3
Easy to use 4
Reliable 5
Easy to hold steady 2
No double exposures 1

Relationship matrix
© 2006 Prentice Hall, Inc. 5 – 16
 Interrelationships

House of Quality Example

How to Satisfy
Customer Wants

Competitors
Analysis of
What the
Relationship
Customer
Matrix
Wants

Technical
Attributes and
Evaluation

Relationships

Low electricity requirements

between the
things we can do

Aluminum components

Ergonomic design
Auto film advance
Auto exposure
Auto focus

© 2006 Prentice Hall, Inc. 5 – 17

 Interrelationships

House of Quality Example

How to Satisfy
Customer Wants

Competitors
Analysis of
What the
Relationship
Customer
Matrix
Wants

Technical
Attributes and
Evaluation

Lightweight 3
Easy to use 4
Reliable 5
Easy to hold steady 2
No double exposures 1
Our importance ratings 22 9 27 27 32 25

Weighted
rating
© 2006 Prentice Hall, Inc. 5 – 18
 Interrelationships

How to Satisfy

House of Quality Example

Customer Wants

Competitors
Analysis of
What the
Relationship
Customer
Matrix
Wants

Technical
Attributes and

Company A

Company B
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
No double exposures 1 P P
Our importance ratings 22 5
© 2006 Prentice Hall, Inc. 5 – 19
 Interrelationships

How to Satisfy

House of Quality Example

Customer Wants

Competitors
Analysis of
What the
Relationship
Customer
Matrix
Wants

Technical
Attributes and
Evaluation

Failure 1 per 10,000

Panel ranking
Technical
attributes

2 circuits
2’ to ∞
0.5 A

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
© 2006 Prentice Hall, Inc. 5 – 20
 House of Quality Example

Completed
House of
Quality

© 2006 Prentice Hall, Inc. 5 – 21

 House of Quality Sequence
Deploying resources through the
organization in response to
customer requirements

Quality
plan
Production
process

Production
Specific
House

process
components

components
House 4

Specific
Design
characteristics

characteristics
3
House
Design

2
requirements
Customer

House
1

Figure 5.4

© 2006 Prentice Hall, Inc. 5 – 22

 Organizing for Product
Development
 Historically – distinct departments
 Duties and responsibilities are defined
 Difficult to foster forward thinking
 Today – team approach
 Cross functional – representatives
from all disciplines or functions
 Concurrent engineering – cross
functional team
© 2006 Prentice Hall, Inc. 5 – 23
 Manufacturability and
Value Engineering
 Benefits:
1. Reduced complexity of products
2. Additional standardization of products
3. Improved functional aspects of product
4. Improved job design and job safety
5. Improved maintainability of the product
6. Robust design

© 2006 Prentice Hall, Inc. 5 – 24

 Cost Reduction of a Bracket
through Value Engineering

Figure 5.5
© 2006 Prentice Hall, Inc. 5 – 25
 Issues for Product
Development
 Robust design
 Modular design
 Computer-aided design (CAD)
 Computer-aided manufacturing (CAM)
 Virtual reality technology
 Value analysis
 Environmentally friendly design

© 2006 Prentice Hall, Inc. 5 – 26

 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

© 2006 Prentice Hall, Inc. 5 – 27

 Modular Design
 Products designed in easily
segmented components
 Adds flexibility to both production
and marketing
 Improved ability to satisfy customer
requirements

© 2006 Prentice Hall, Inc. 5 – 28

 Computer Aided Design
(CAD)
 Using computers to
design products and
prepare engineering
documentation
 Shorter development
cycles, improved
accuracy, lower cost
 Information and
designs can be
deployed worldwide

© 2006 Prentice Hall, Inc. 5 – 29

 Extensions of CAD
 Design for Manufacturing and
Assembly (DFMA)
Solve manufacturing problems during
the design stage
 3-D Object Modeling
Small prototype development
 International data exchange
through STEP
© 2006 Prentice Hall, Inc. 5 – 30
 Computer-Aided
Manufacturing (CAM)
 Utilizing specialized computers
and program to control
manufacturing equipment
 Often driven by the CAD system

© 2006 Prentice Hall, Inc. 5 – 31

 Benefits of CAD/CAM

1. Product quality
2. Shorter design time
3. Production cost reductions
4. Database availability
5. New range of capabilities

© 2006 Prentice Hall, Inc. 5 – 32

 Virtual Reality Technology
 Computer technology used to
develop an interactive, 3-D model of
a product from the basic CAD data
 Allows people to ‘see’ the finished
design before a physical model is
built
 Very effective in large-scale designs
such as plant layout

© 2006 Prentice Hall, Inc. 5 – 33

 Value Analysis
 Focuses on design improvement
during production
 Seeks improvements leading either
to a better product or a product
which can be produced more
economically

© 2006 Prentice Hall, Inc. 5 – 34

 Ethics and Environmentally
Friendly Designs
It is possible to enhance productivity,
drive down costs, and preserve
resources
The Ethical Approach
1. View product design from a systems
perspective
2. Consider the entire life cycle of the
product
© 2006 Prentice Hall, Inc. 5 – 35
 Goals for Ethical and
Environmentally Friendly
Designs
1. Develop safe and more environmentally
sound products
2. Minimize waste of raw materials and energy
3. Reduce environmental liabilities
4. Increase cost-effectiveness of complying
with environmental regulations
5. Be recognized as a good corporate citizen
© 2006 Prentice Hall, Inc. 5 – 36
 Guidelines for Environmentally
Friendly Designs

1. Make products recyclable

2. Use recycled materials
3. Use less harmful ingredients
4. Use lighter components
5. Use less energy
6. Use less material

© 2006 Prentice Hall, Inc. 5 – 37

 Legal and Industry
Standards

For Design …

 Federal Drug Administration

 Consumer Products Safety Commission
 National Highway Safety Administration
 Children’s Product Safety Act

© 2006 Prentice Hall, Inc. 5 – 38

 Legal and Industry
Standards

For Manufacture/Assembly …

 Occupational Safety and Health

Administration
 Environmental Protection Agency
 Professional ergonomic standards
 State and local laws dealing with
employment standards, discrimination, etc.
© 2006 Prentice Hall, Inc. 5 – 39
 Legal and Industry
Standards

For Disassembly/Disposal …

 Vehicle Recycling Partnership

 Increasingly rigid laws worldwide

© 2006 Prentice Hall, Inc. 5 – 40

 Process Strategies
Four basic strategies
 Process focus
 Repetitive focus
 Product focus
 Mass customization
Within these basic strategies there are
many ways they may be implemented
© 2006 Prentice Hall, Inc. 5 – 41
 Process Focus
 Facilities are organized around specific
activities or processes
 General purpose equipment and skilled
personnel
 High degree of product flexibility
 Typically high costs and low equipment
utilization
 Product flows may vary considerably
making planning and scheduling a
challenge
© 2006 Prentice Hall, Inc. 5 – 42
 Process Focus
Print Shop

High
Many variety
inputs of
outputs

© 2006 Prentice Hall, Inc. 5 – 43

 Repetitive Focus

 Facilities often organized as

assembly lines
 Characterized by modules with parts
and assemblies made previously
 Modules may be combined for many
output options
 Less flexibility than process-
focused facilities but more efficient
© 2006 Prentice Hall, Inc. 5 – 44
 Repetitive Focus
Automobile Assembly Line

Raw Modules
materials combined
and for many
module output
inputs options

Few
modules

© 2006 Prentice Hall, Inc. 5 – 45

 Process Flow Diagram
Frame tube Frame-building Frame Hot-paint
bending work cells machining frame painting
THE ASSEMBLY LINE
TESTING Engines and
Incoming parts transmissions
28 tests
From Milwaukee
on a JIT arrival
Air cleaners Oil tank work cell schedule

Fluids and mufflers Shocks and forks

Fuel tank work cell Handlebars

Wheel work cell Fender work cell

Roller testing
Crating

Figure 7.3
© 2006 Prentice Hall, Inc. 5 – 46
 Product Focus
 Facilities are organized by product
 High volume but low variety of
products
 Long, continuous production runs
enable efficient processes
 Typically high fixed cost but low
variable cost
 Generally less skilled labor
© 2006 Prentice Hall, Inc. 5 – 47
 Product Focus
Bottling Plant

Output
variation
Many in size,
inputs shape,
and
packaging

© 2006 Prentice Hall, Inc. 5 – 48

 Product Focus
D A Scrap
Nucor Steel Plant steel
Continuous caster

B
C Electric
Ladle of molten steel furnace

Continuous cast steel

sheared into 24-ton slabs
Hot tunnel furnace - 300 ft
E F

Hot mill for finishing, cooling, and coiling

H G
I

© 2006 Prentice Hall, Inc. 5 – 49

 Mass Customization

 The rapid, low-cost production of

goods and service to satisfy
increasingly unique customer
desires
 Combines the flexibility of a
process focus with the efficiency
of a product focus

© 2006 Prentice Hall, Inc. 5 – 50

 Mass Customization
Table 7.1 Number of Choices
Early 21st
Item Early 1970s Century
Vehicle models 140 260
Vehicle types 18 1,212
Bicycle types 8 19
Software titles 0 300,000
Web sites 0 46,412,165
Movie releases 267 458
New book titles 40,530 77,446
Houston TV channels 5 185
Breakfast cereals 160 340
Items (SKUs) in 14,000 150,000
supermarkets
© 2006 Prentice Hall, Inc. 5 – 51
 Mass Customization
Figure 7.5
Repetitive Focus
Modular design
Flexible equipment

Modular techniques

Mass Customization
Effective Rapid
scheduling throughput
techniques techniques

Process-Focused Product-Focused
High variety, low volume Low variety, high volume
Low utilization (5% to 25%) High utilization (70% to 90%)
General-purpose equipment Specialized equipment

© 2006 Prentice Hall, Inc. 5 – 52

 Process, Volume, and Variety
Figure 7.1 Volume
Low Repetitive High
Volume Process Volume
High Variety
one or few Process Focus Mass Customization
units per run, projects, job shops (difficult to achieve,
high variety (machine, print, but huge rewards)
(allows carpentry) Dell Computer Co.
customization) Standard Register
Changes in
Modules
modest runs,
standardized Repetitive
modules (autos, motorcycles)
Harley Davidson
Changes in
Attributes Product Focus
(such as grade, (commercial
quality, size, Poor Strategy baked goods,
thickness, etc.) (Both fixed and steel, glass)
long runs only variable costs Nucor Steel
are high)
© 2006 Prentice Hall, Inc. 5 – 53
 Comparison of Processes
Process Repetitive Product Focus Mass
Focus Focus Customization
(High-volume,
(Low volume, (Modular) low-variety) (High-volume,
high variety) high-variety)

Small Long runs, Large Large

quantity, standardized quantity, small quantity, large
large variety product made variety of variety of
of products from modules products products

General Special Special Rapid

purpose equipment purpose changeover
equipment aids in use of equipment on flexible
assembly line equipment

Table 7.2
© 2006 Prentice Hall, Inc. 5 – 54
 Comparison of Processes
Process Repetitive Product Focus Mass
Focus Focus Customization
(High-volume,
(Low volume, (Modular) low-variety) (High-volume,
high variety) high-variety)

Operators are Employees Operators are Flexible

broadly are modestly less broadly operators are
skilled trained skilled trained for the
necessary
customization

Many job Repetition Few work Custom

instructions reduces orders and job orders require
as each job training and instructions many job
changes changes in job because jobs instructions
instructions standardized

Table 7.2
© 2006 Prentice Hall, Inc. 5 – 55
 Comparison of Processes
Process Repetitive Product Focus Mass
Focus Focus Customization
(High-volume,
(Low volume, (Modular) low-variety) (High-volume,
high variety) high-variety)

Raw material JIT Raw material Raw material

inventories procurement inventories inventories
high techniques are low are low
used

Work-in- JIT inventory Work-in- Work-in-

process is techniques process process
high used inventory is inventory
low driven down
by JIT, lean
production

Table 7.2
© 2006 Prentice Hall, Inc. 5 – 56
 Comparison of Processes
Process Repetitive Product Focus Mass
Focus Focus Customization
(High-volume,
(Low volume, (Modular) low-variety) (High-volume,
high variety) high-variety)

Units move Movement is Swift Goods move

slowly measured in movement of swiftly
through the hours and unit through through the
plant days the facility is facility
typical

Finished Finished Finished Finished

goods made goods made goods made goods often
to order to frequent to forecast made to order
forecast and stored

Table 7.2
© 2006 Prentice Hall, Inc. 5 – 57
 Comparison of Processes
Process Repetitive Product Focus Mass
Focus Focus Customization
(High-volume,
(Low volume, (Modular) low-variety) (High-volume,
high variety) high-variety)

Scheduling is Scheduling Relatively Sophisticated

complex, based on simple scheduling
trade-offs building scheduling, required to
between various establishing accommodate
inventory, models from output rate to custom orders
availability, modules to meet forecasts
customer forecasts
service

Table 7.2
© 2006 Prentice Hall, Inc. 5 – 58
 Comparison of Processes
Process Repetitive Product Focus Mass
Focus Focus Customization
(High-volume,
(Low volume, (Modular) low-variety) (High-volume,
high variety) high-variety)

Fixed costs Fixed costs Fixed costs Fixed costs

low, variable dependent on high, variable high, variable
costs high flexibility of costs low costs must be
the facility low

Costing Costs usually High fixed High fixed

estimated known due to costs mean costs and
before job, extensive costs dynamic
not known experience dependent on variable costs
until after job utilization of make costing
is complete capacity a challenge

Table 7.2
© 2006 Prentice Hall, Inc. 5 – 59