Operations
Management
Chapter 5
Design of Goods
and Services
51
Outline
Goods and Services Selection Virtual Reality Technology
Product Life Cycles Value Analysis
Life Cycle and Strategy Ethics and Environmentally
Friendly Design
Generating New Products
New Product Time-Based Competition
Opportunities Purchasing Technology by
Product Development Acquiring a Firm
Product Development Joint Ventures
System
Quality Function Alliances
Deployment (QFD)
Defining a Product
Organizing for Product
Development Make-or-Buy Decisions
Manufacturability and Group Technology
Value Engineering
Issues for Product Design Documents For Production
Robust Design Service Design
Modular Design Documents for Services
Computer-Aided Design Application of Decision Trees to
(CAD)
Product Design
Computer-Aided
Manufacturing (CAM) Transition to Production
52
Product Life Cycles
May be any length from a few hours to decades
The operations function must be able to introduce new
products successfully
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 53
Product Life Cycle
Introduction Growth Maturity Decline
Fine tuning Product design Competitors Unless
may warrant begins to now product
unusual stabilize established makes a
expenses for: special
Effective High volume,
forecasting of innovative contribution
capacity production to the
Research organization,
becomes may be needed
Product necessary must plan to
development Improved cost terminate
Adding or control, offering
Process enhancing reduction in
modification capacity may options, paring
and be necessary down of
enhancement product line
Supplier
development
54
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
55
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
56
Quality Function Deployment
Identify customer wants
Identify how the good/service will satisfy customer
wants
Relate customer wants to product hows
Identify relationships between the firms hows
Develop importance ratings
Evaluate competing products
Compare performance to desirable technical
attributes
57
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
58
House of Quality Sequence
Deploying resources through the
organization in response to
customer requirements
Quality
plan
Production
process
Production
Specific
process
components House
components
4
Specific
Design House
characteristics
characteristics
3
House
Design
requirements
2
Customer
House
1
Figure 5.4
59
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 (serviceability) of the
product
6. Robust design
5 10
Issues for Product
Development
Robust design
Modular design
Computer-aided design (CAD)
Computer-aided manufacturing (CAM)
Virtual reality technology
Value analysis
Environmentally friendly design
5 11
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
5 12
Modular Design
Products designed in easily segmented
components
Adds flexibility to both production and
marketing
Improved ability to satisfy customer
requirements
5 13
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
5 14
Computer-Aided
Manufacturing (CAM)
Utilizing specialized computers and program to control
manufacturing equipment
Often driven by the CAD system (CAD/CAM)
Benefits of CAD/CAM
1. Product quality
2. Shorter design time
3. Production cost reductions
4. Database availability
5. New range of capabilities
5 15
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
5 16
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
5 17
Ethics and Environmentally
Friendly Designs
It is possible to enhance productivity, drive down
costs, and preserve resources
Effective at any stage of the product life cycle
Design
Production
Destruction
5 18
The Ethical Approach
View product design from a systems perspective
Inputs, processes, outputs
Costs to the firm/costs to society
Consider the entire life cycle of the product
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
5 19
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
5 20
Acquiring Technology
By Purchasing 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
5 21
Group Technology
Parts grouped into families with similar characteristics
Coding system describes processing & physical
characteristics
Part families can be produced in dedicated manufacturing
cells
Group Technology Scheme
(b) Grouped Cylindrical Parts (families of parts)
(a) Ungrouped Parts
Grooved Slotted Threaded Drilled Machined
Figure 5.10
5 22
Group Technology Benefits
1. Improved design
2. Reduced raw material & purchases
3. Simplified production planning & control
4. Improved layout, routing, & machine
loading
5. Reduced tooling setup time, work-in-
process, & production time
5 23
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
5 24
Service Design
(a) Customer participation in design
Service typically includes direct
such as pre-arranged funeral services
or cosmetic surgery
interaction with the customer
Increased opportunity for customization
Reduced productivity
(b) Customer participation in
Cost and quality are still determined at
delivery such as stress test for
cardiac exam or delivery of a
baby
the design stage
Delay customization
(c) Customer participation in design and
delivery such as counseling, college
Modularization education, financial management of
personal affairs, or interior decorating
Reduce customer interaction, often
through automation Figure 5.12
5 25
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
5 26
