Operations

Management
Design of Goods and Services
Chapter 5

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Principles of Operations Management, 5e, and Operations 5-1
Management, 7e
 Outline
GLOBAL COMPANY PROFILE: REGAL
MARINE
GOODS AND SERVICES SELECTION
Product Strategy Options Support Competitive
Advantage
Product Life Cycles
Life Cycle and Strategy
Product-by-value Analysis
GENERATING NEW PRODUCTS
New Product Opportunities
Importance of New Products

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Principles of Operations Management, 5e, and Operations 5-2
Management, 7e
 Outline - continued
PRODUCT DEVELOPMENT
Product Development System
Quality Function Deployment (QFD)
Organizing for Product Development
Manufacturability and Value Engineering
ISSUES FOR PRODUCT DESIGN
Robust Design
Modular Design
Computer-Aided Design (CAD)
Computer-Aided Manufacturing
Virtual Reality Technology
Value Analysis
Environmentally Friendly Design
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Principles of Operations Management, 5e, and Operations 5-3
Management, 7e
 Outline - continued
Time-Based Competition
Purchase of Technology by Acquiring Firm
Joint Ventures
Alliances
Defining the Product
Make-or-buy Decisions

Group Technology

DOCUMENTS FOR PRODUCTION
SERVICE DESIGN
Documents for Service
Application of Decision Trees to Product
Design
Transition to Production
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Principles of Operations Management, 5e, and Operations 5-4
Management, 7e
 Learning Objectives
When you complete this chapter, you should be able
to :
Identify or Define:
Product life cycle
Product development team
Manufacturabililty and value engineering
Robust design
Time-based competition
Modular design
Computer aided design
Value analysis
Group technology
Configuration management
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Principles of Operations Management, 5e, and Operations 5-5
Management, 7e
 Learning Objectives - Continued

When you complete this chapter, you should be able

to:
Explain:
Alliances
Concurrent engineering
Product-by-value analysis
Product documentation

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Principles of Operations Management, 5e, and Operations 5-6
Management, 7e
 Regal Marine

Global market
3-dimensional CAD
reduced product development time
reduced problems with tooling
reduced problems in production

Assembly line
JIT

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Principles of Operations Management, 5e, and Operations 5-7
Management, 7e
 Humor in Product Design
As the customer As Marketing
wanted it. interpreted it.

1984-1994 T/Maker Co. 1984-1994 T/Maker Co.

As Operations made it. As Engineering

designed it.

1984-1994 T/Maker Co. 1984-1994 T/Maker Co.

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Principles of Operations Management, 5e, and Operations 5-8
Management, 7e
 What is a Product?

Need-satisfying offering of an organization

Example
P&G does not sell laundry detergent
P&G sells the benefit of clean clothes

Customers buy satisfaction, not parts

May be a good or a service

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Principles of Operations Management, 5e, and Operations 5-9
Management, 7e
 Product Strategy Options

Product differentiation

Low cost

Rapid response

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Principles of Operations Management, 5e, and Operations 5-10
Management, 7e
 Generation of New Product
Opportunities
Economic change
Sociological and demographic change
Technological change
Political/legal change
Changes in
market practice
professional standards
suppliers and distributors
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Principles of Operations Management, 5e, and Operations 5-11
Management, 7e
Legislation/ Implementation Date
Electrical-Waste directive
(2006)
Telecom-data-protection
directive (mid-2003)
Biotech-Labeling laws (2003)
Warning
Pedestrian-protection
initiative (2001-2012) (when
all new cars sold in Europe
must comply)
Chemicals review (staggered
through 2012)
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Principles of Operations Management, 5e, and Operations
Management, 7e
Stated Purpose
Makes electrical equipment
easier to recycle in part by
banning some hazardous
substances
Protects privacy on e-mail and
the internet
Strengthens existing food-label
laws and introduces labeling for
animal feed containing
genetically modified content
Reduces injuries and casualties
in road accidents
Eliminates health hazards due to
chemicals
2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
5-12
Industry Criticism
Bans some common flame
retardants, raising the likelihood of
fires
Makes surfing more onerous by
restricting use of cookies to
remember peoples preferences
Encourages food processors and
supermarkets to avoid using
genetically modified ingredients, and
farmers could stop growing them
Raises costs of cars and restricts
automakers design freedom
Restricts even minute use of
dangerous substances, such as
ethanol, in products such as
cosmetics and detergents
 Product Components

Product

Brand Product
Package
(Name) Idea

Physical Quality Service

Features
Good Level (Warranty)

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Principles of Operations Management, 5e, and Operations 5-13
Management, 7e
 Product Life Cycle

Introduction
Growth
Maturity
Decline

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Principles of Operations Management, 5e, and Operations 5-14
Management, 7e
 Product Life Cycle
Introduction

Fine tuning
research
product development
process modification and enhancement
supplier development

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Principles of Operations Management, 5e, and Operations 5-15
Management, 7e
 Product Life Cycle
Growth

Product design begins to stabilize

Effective forecasting of capacity becomes
necessary
Adding or enhancing capacity may be necessary

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Principles of Operations Management, 5e, and Operations 5-16
Management, 7e
 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

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Principles of Operations Management, 5e, and Operations 5-17
Management, 7e
 Product Life Cycle
Decline

Unless product makes a special contribution,

must plan to terminate offering

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Principles of Operations Management, 5e, and Operations 5-18
Management, 7e
 Product Life Cycle, Sales, Cost,
and Profit
Cost of
Development
& Manufacture
Sales Revenue
Sales, Cost & Profit .

Profit
Cash flow
Loss
Time

Introduction Growth Maturity Decline

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Principles of Operations Management, 5e, and Operations 5-19
Management, 7e
 Percent of Sales From New Product
50%
45%
40%
35% Industry Leader
30%
25% Top
20% Third Middle
15% Third
10% Bottom
5% Third
0%
Position of Firm in Its Industry

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Principles of Operations Management, 5e, and Operations 5-20
Management, 7e
 Products in Various Stages of Life
Cycle
Sales
Growth Maturity
Introduction Roller Decline
Blades Jet Ski

Boeing
Virtual 727
Reality

Time
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Principles of Operations Management, 5e, and Operations 5-21
Management, 7e
 Few Successes
Number

2000 Ideas
1750
Market Design review,
1500 requirement Testing, Introduction
1000
Functional
1000 specifications
500 Product
500 specification
One
100 25 success!
0
Development Stage
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Principles of Operations Management, 5e, and Operations 5-22
Management, 7e
 Product-by-Value Analysis

Lists products in descending order of their

individual dollar contribution to the firm.
Helps management evaluate alternative
strategies.

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Principles of Operations Management, 5e, and Operations 5-23
Management, 7e
 Product Development Stages

Idea generation
Scope of product development team

Assessment of firms ability to carry out

Customer Requirements
Functional Specification
Product Specifications Scope of design for
Design Review manufacturability and
value engineering teams
Test Market
Introduction to Market
Evaluation

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Principles of Operations Management, 5e, and Operations 5-24
Management, 7e
 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

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Principles of Operations Management, 5e, and Operations 5-25
Management, 7e
 QFD House of Quaoity

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Principles of Operations Management, 5e, and Operations 5-26
Management, 7e
House of Quality Sequence Indicates
How to Deploy Resources to Achieve
Customer Requirements

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Principles of Operations Management, 5e, and Operations 5-27
Management, 7e
 Idea Generation Stage

Provides basis for entry into market

Sources of ideas
Market need (60-80%); engineering & operations (20%);
technology; competitors; inventions; employees
Follows from marketing strategy
Identifies, defines, & selects best market opportunities

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Principles of Operations Management, 5e, and Operations 5-28
Management, 7e
 Customer Requirements Stage

Identifies & positions key product benefits

Stated in core benefits proposition (CBP)
Example: Long lasting with more power
(Sears Die Hard Battery)
House of Quality
Identifies detailed list of product
attributes desired by customer
Focus groups or Product
Characteristics
1-on-1 interviews
Customer
Requirements

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Principles of Operations Management, 5e, and Operations 5-29
Management, 7e
 Functional Specification Stage
Defines product in terms of how the
product would meet desired attributes
Identifies products engineering
characteristics
Example: printer noise (dB)
Prioritizes engineering characteristics House of Quality
May rate product compared
to competitors Product
Characteristics

Customer
Requirements

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Principles of Operations Management, 5e, and Operations 5-30
Management, 7e
 Product Specification Stage
Determines how product will be made
Gives products physical specifications
Example: Dimensions, material etc.
Defined by engineering
drawing
Done often on computer House of Quality
Computer-Aided
Component
Design (CAD) Specifications

Product
Characteristics

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Principles of Operations Management, 5e, and Operations 5-31
Management, 7e
 Quality Function Deployment

Product design process using

cross-functional teams
Marketing, engineering, manufacturing
Translates customer preferences into specific
product characteristics
Involves creating 4 tabular Matrices or Houses
Breakdown product design into increasing levels of detail

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Principles of Operations Management, 5e, and Operations 5-32
Management, 7e
 House of Quality Example

Youve been assigned

temporarily to a QFD team.
The goal of the team is to
develop a new camera
design. Build a House of
Quality.

1984-1994 T/Maker Co.

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Principles of Operations Management, 5e, and Operations 5-33
Management, 7e
 House of Quality Example

Customer Customer
Requirements Importance

Target Values

High relationship Medium relationship Low Relationship

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Principles of Operations Management, 5e, and Operations 5-34
Management, 7e
 House of Quality Example
What the customer desires
(wall)

Customer Customer Aluminum Auto Auto

Requirements Importance Parts Focus Exposure
Light weight
Easy to use
Reliable
Target Values

High relationship Medium relationship Low Relationship

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Principles of Operations Management, 5e, and Operations 5-35
Management, 7e
 House of Quality Example

Average customer
importance rating

Customer Customer Aluminum Auto Auto

Requirements Importance Parts Focus Exposure
Light weight 3
Easy to use 2
Reliable 1
Target Values
High relationship Medium relationship Low Relationship
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Principles of Operations Management, 5e, and Operations 5-36
Management, 7e
 House of Quality Example
Relationship between customer
attributes & engineering
characteristics (rooms)

Customer Customer Aluminum Auto Auto

Requirements Importance Parts Focus Exposure
Light weight 3
Easy to use 2
Reliable 1

High relationship Medium relationship Low Relationship

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Principles of Operations Management, 5e, and Operations 5-37
Management, 7e
 House of Quality Example
Target values for engineering
characteristics (basement);
key output

Customer Customer Aluminum Auto Auto

Requirements Importance Parts Focus Exposure
Light weight 3
Easy to use 2
Reliable 1
Target Values 5 1 1
High relationship Medium relationship Low Relationship
PowerPoint presentation to accompany Heizer/Render - 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Principles of Operations Management, 5e, and Operations 5-38
Management, 7e
 House of Quality Example

Customer Customer Aluminum Auto Auto

Requirements Importance Parts Focus Exposure
Light weight 3
Easy to use 2
Reliable 1
Target Values 5 1 1
High relationship Medium relationship Low Relationship
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Principles of Operations Management, 5e, and Operations 5-39
Management, 7e
 Organizing for Product
Development

Historically distinct departments

Duties and responsibilities are defined
Difficult to foster forward thinking

Today team approach

Representatives from all disciplines or functions
Concurrent engineering cross functional team

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Principles of Operations Management, 5e, and Operations 5-40
Management, 7e
 Manufacturability and
Value Engineering

Benefits:
reduced complexity of products
additional standardization of products
improved functional aspects of product
improved job design and job safety
improved maintainability of the product
robust design

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Principles of Operations Management, 5e, and Operations 5-41
Management, 7e
 Cost Reduction of a Bracket via
Value Engineering

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Principles of Operations Management, 5e, and Operations 5-42
Management, 7e
 Issues for Product Development

Robust design
Time-based competition
Modular design
Computer-aided design
Value analysis
Environmentally friendly design

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Principles of Operations Management, 5e, and Operations 5-43
Management, 7e
 Robust Design

Product is designed so that small variations in

production or assembly do not adversely affect
the product

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Principles of Operations Management, 5e, and Operations 5-44
Management, 7e
 Modular Design

Products designed in easily segmented

components.
Adds flexibility to both production and marketing

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Principles of Operations Management, 5e, and Operations 5-45
Management, 7e
 Computer Aided Design (CAD)
Designing products at
a computer terminal or
work station
Design engineer
develops rough
sketch of product
Uses computer to
draw product
Often used with CAM
1995 Corel Corp.
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Principles of Operations Management, 5e, and Operations 5-46
Management, 7e
 Benefits of CAD/CAM

Shorter design time

Database availability
New capabilities
Example: Focus more on product ideas
Improved product quality
Reduced production costs

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Principles of Operations Management, 5e, and Operations 5-47
Management, 7e
 Extensions of CAD
Design for Manufacturing
and Assembly (DFMA)
3-D Object Modeling
CAD/CAM CAD info is
translated into machine
control instructions (CAM)

1995 Corel Corp.

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Principles of Operations Management, 5e, and Operations 5-48
Management, 7e
 Virtual Reality

Computer technology used to develop an

interactive, 3-D model of a product.
Especially helpful in design of layouts (factory,
store, home, office)

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Principles of Operations Management, 5e, and Operations 5-49
Management, 7e
 Value Analysis

Focuses on design improvement during

production
Seeks improvements leading either to a better
product or a product which can be more
economically produced.

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Principles of Operations Management, 5e, and Operations 5-50
Management, 7e
 Environmentally Friendly Designs

Benefits
Safe and environmentally sound products
Minimum raw material and energy waste
Product differentiation
Environmental liability reduction
Cost-effective compliance with environmental
regulations
Recognition as good corporate citizen

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Principles of Operations Management, 5e, and Operations 5-51
Management, 7e
 Green Manufacturing

Make products recyclable

Use recycled materials
Use less harmful ingredients
Use lighter components
Use less energy
Use less material

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Principles of Operations Management, 5e, and Operations 5-52
Management, 7e
 Time-based Competition

Product life cycles are becoming shorter.

Faster developers of new products gain on

slower developers and obtain a competitive
advantage

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Principles of Operations Management, 5e, and Operations 5-53
Management, 7e
 Product Development Continuum
External Development Strategies
Alliances
Joint Ventures
Purchase Technology or Expertise by Acquiring the
Developer
Internal Development Strategies
Migrations of Existing Products
Enhancement to Existing Products
New Internally Developed Products

Internal ----------------------Cost of Product Development --------------------- Shared

Lengthy --------------------Speed of Product Development---------------Rapid and/or
Existing
High ------------------------- Risk of Product Development ----------------------- Shared
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Principles of Operations Management, 5e, and Operations 5-54
Management, 7e
 Product Documents

Engineering drawing
Shows dimensions, tolerances, &
materials
Shows codes for Group Technology
Bill of Material
Lists components, quantities & where
used
Shows product structure

1984-1994 T/Make
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Principles of Operations Management, 5e, and Operations 5-55
Management, 7e
 Monterey Jack
(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,. Revised as of Jan. 1,
1985, General Service
Administration
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Principles of Operations Management, 5e, and Operations 5-56
Management, 7e
 Engineering Drawing Example

2-1/2
13/16
1
diameter

13/32
1/4 R
diameter
2-1/4

45 13/16

3/8 13/16 5/16

1-5/8

Scale: FULL
Bracket Drawn: J. Thomas A- 435-038

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Principles of Operations Management, 5e, and Operations 5-57
Management, 7e
 Engineering Drawings - Show
Dimensions, Tolerances, etc.

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Principles of Operations Management, 5e, and Operations 5-58
Management, 7e
 Bill of Material Example

1995 Corel Corp.

Bill of Material
P/N: 1000 Name: Bicycle
P/N Desc Qty Units Level
1001 Handle Bars 1 Each 1
1002 Frame Assy 1 Each 1
1003 Wheels 2 Each 2
1004 Frame 1 Each 2

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Principles of Operations Management, 5e, and Operations 5-59
Management, 7e
Bill of Materials Manufacturing Plant
and Fast-Food Restaurant
Bill of Material for a Panel Weldment Hard Rock Cafs Hickory BBQ Bacon
Cheeseburger

Number Description Qty Description Qty

A60-71 Panel Weldmt 1 Bun 1

Hamburger Patty 8 oz.
A 60-7 Lower Roller Assembly 1 Cheddar Cheese 2 slices
R 60-17 Roller 1 Bacon 2 strips
R 60-428 Pin 1 BBQ Onions cup
P 60-2 Locknet 1 Hickory BBQ Sauce 1 oz.
Burger Set
60-72 Guide Assem. Rear 1
Lettuce 1 leaf
R 60-57-1 Support Angle 1
Tomato 1 slice
A 60-4 Roller Assem. 1
Red Onion 4 rings
02-50-1150 Bolt 1
Pickle 1 slice
A 60-73 Guide Assm, Front 1 French Fries 5 oz.
A 60-74 Support Weldmt 1 Seasoned Salt 1 tsp
R 60-99 Wear Plate 1 11-inch Plate 1
02-50-1150 Bolt 1 HRC Flag 1
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Principles of Operations Management, 5e, and Operations 5-60
Management, 7e
 Make-or-Buy Decisions

Decide whether or not you want (or need) to

produce an item
May be able to purchase the item as a standard
item from another manufacturer

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Principles of Operations Management, 5e, and Operations 5-61
Management, 7e
Group Technology Characteristics

Parts grouped into families

Similar, more standardized parts
Uses coding system
Describes processing & physical
characteristics
Part families produced
in manufacturing cells
Mini-assembly lines

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Principles of Operations Management, 5e, and Operations 5-62
Management, 7e 1984-1994 T/Maker Co.
 Group Technology Code Example

4mm x 45 chamfer Round Rod

80mm 60mm Product Code:

1 5 3 1
112mm
Part function (round rod)
Material (steel)
Max. length (50 < L < 150)
Primary machine (lathe)

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Principles of Operations Management, 5e, and Operations 5-63
Management, 7e
 Group Technology Schemes
Enable Grouping of Parts

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Principles of Operations Management, 5e, and Operations 5-64
Management, 7e
 Group Technology Benefits
Improved product design
Reduced purchases
Reduced work-in-process inventory
Improved routing & machine loading
Reduced setup & production times
Simplified production planning & control
Simplified maintenance

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Principles of Operations Management, 5e, and Operations 5-65
Management, 7e
 Production Documents

Assembly Drawing
Assembly chart
Route sheet
Work order

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Principles of Operations Management, 5e, and Operations 5-66
Management, 7e
 Assembly Drawing
Shows exploded view of product

Head Neck

End
Cap
Handle

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Principles of Operations Management, 5e, and Operations 5-67
Management, 7e
 Assembly Chart for
A Tuna Sandwich
Tuna Fish
1
Tuna
SA1 A1
Assy
2 Sandwich
Mayonnaise
FG

Bread
3 A2

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Principles of Operations Management, 5e, and Operations 5-68
Management, 7e
 Assembly Drawing and Assembly
Chart

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Principles of Operations Management, 5e, and Operations 5-69
Management, 7e
 Route Sheet
Lists all operations
Route Sheet for Bracket
Sequence Machine Operation Setup Operation
Time Time/Unit
1 Shear # 3 Shear to 5 .030
length
2 Shear # 3 Shear 45 8 .050
corners
3 Drill Drill both 15 3.000
press holes
4 Brake Bend 90 10 .025
press

PowerPoint presentation to accompany Heizer/Render - 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Principles of Operations Management, 5e, and Operations 5-70
Management, 7e
 Work Order
Authorizes producing a given item, usually to a schedule

1984-1994 T/Maker Co.

PowerPoint presentation to accompany Heizer/Render - 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Principles of Operations Management, 5e, and Operations 5-71
Management, 7e
 Engineering Change Notice (ECN)

A correction or modification of an engineering

drawing or bill of material

PowerPoint presentation to accompany Heizer/Render - 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Principles of Operations Management, 5e, and Operations 5-72
Management, 7e
 Configuration Management

A system by which a products planned and

changing components are accurately identified
and for which control and accountability of
change are maintained

PowerPoint presentation to accompany Heizer/Render - 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Principles of Operations Management, 5e, and Operations 5-73
Management, 7e
 Service Design -
Nature of Customer Participation

PowerPoint presentation to accompany Heizer/Render - 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Principles of Operations Management, 5e, and Operations 5-74
Management, 7e
 Improving Customer Relations at
a Drive-up Window
Be especially discreet when talking with 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
Establish eye contact with the customer if the distance allows it
If the transaction requires that the customer park the car and come
into the lobby, apologize for the inconvenience.

PowerPoint presentation to accompany Heizer/Render - 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Principles of Operations Management, 5e, and Operations 5-75
Management, 7e
 Moment-of-Truth at a Computer
Company
Experience Detractors Standard Expectations Experience Enhancers
I had to call more than once to Only one local number needs to The operator was
get through. be dialed sincerely concerned and
apologetic about my
A recording spoke to me rather I never get a busy signal
problem
than a person
I get a human being to answer
He asked intelligent
While on hold, I get silence,and my call quickly and he or she is
questions that allowed
wonder if I am disconnected. pleasant and responsive to my
me to feel confident in
problem
The operator sounded like he his abilities
was reading a form of routine A timely resolution to my
The operator offered
questions. problem is offered
various times to have
The operator sounded The operator is able to explain work done, to suit my
uninterested to me what I can expect to take schedule
place
I felt the operator rushed me. Ways to avoid future
problems were
suggested
PowerPoint presentation to accompany Heizer/Render - 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Principles of Operations Management, 5e, and Operations 5-76
Management, 7e
 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.
Considerations:
Include all possible alternatives and states of nature -
including doing nothing
Enter payoffs at end of branch
Approach determining expected values by pruning tree

PowerPoint presentation to accompany Heizer/Render - 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Principles of Operations Management, 5e, and Operations 5-77
Management, 7e
 Transition to Production
First issue: knowing when to move to production!
Second: must view product development as
evolutionary, not responsibility of single
individual/department
Third: expect to need a trial production period to work
the bugs out
Fourth: recognize that responsibility must also transition

PowerPoint presentation to accompany Heizer/Render - 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Principles of Operations Management, 5e, and Operations 5-78
Management, 7e