Product Design

1
Product Design Process Selection
2
Product Service Design

• Product design must support the business strategy
• Product design defines a products
  characteristics
• Appearance, materials, dimensions, tolerances,
  performance standards

3
Product Service Design

• Service industries must define both the service
  and concept Physical elements, psychological
  benefits promptness, friendliness, ambiance
• Product and service design must match the needs
  and preferences of the targeted customer group

4
Product Service Design Steps

• Step 1 - Idea Development
• - Someone thinks of a need and a product/service
  design to satisfy it
• e.g. customers, engineering, competitors
  (benchmarking, reverse engineering), suppliers
  (Early Supplier Involvement)

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Product Service Design Steps

• Step 2 - Product Screening (only 1 out of 5 ideas
  pass screening)
• - Every business needs a formal/ structured
  evaluation process, e.g. fit with business
  strategy (Mission) fit with facility and labor
  skills (Operations), size of market (Marketing),
  contribution margin, break-even analysis, return
  on sales (Finance), ethics, environment, legal,
  etc.

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Product Service Design Steps

• Step 3 Preliminary Design and Testing -
  Technical specifications are developed,
  prototypes built, testing starts

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Product Service Design Steps

• Step 4 Final Design (only 1 out of 60 ideas are
  commercially successful)
• - Final design based on
• test results
• facility, equipment, material, and labor skills
  defined
• suppliers identified

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Break-Even Analysis Graphical Approach

• Compute quantity of goods that must be sold to
  break-even
• Compute total revenue at an assumed selling price
• Compute fixed cost and variable cost for several
  quantities
• Plot the total revenue line and the total cost
  line
• Intersection is break-even
• Sensitivity analysis can be done to examine
  changes in all of the assumptions made

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Break-even calculation A company is planning to
establish a chain of movie theaters. It estimates
that each new theater will cost approximately 1
Million. The theaters will hold 500 people and
will have 4 showings each day with average ticket
prices at 8. They estimate that concession sales
will average 2 per patron. The variable costs in
labor and material are estimated to be 6 per
patron. They will be open 300 days each year.
What must average occupancy be to break even?

• Break Even Point
• Total revenues Total costs _at_ break-even
  point Q
• Selling priceQ Fixed cost variable
  costQ
• (82)Q 1,000,000 6Q
• Q 166,667 patrons
  (28 occupancy)
• What is the gross profit if they sell 300,000
  tickets
• Profit Total Revenue Total Costs
• P 10300,000 (1,000,000
  6300,000)
• P 200,000
• If concessions average .50/patron, what is
  break-even Q now? (sensitivity analysis)
• (8.50)Q 1,000,000 6Q
• Q 400,000 patrons (67
  occupancy)

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Other Product Design Factors

• Need to Design for Manufacturing DFM
• Minimize parts
• Design parts for multiply applications
• Use modular design
• Avoid tools
• Simplify operations

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Other Design Factors

• Consider product
• life cycle stages
• Introduction
• Growth
• Maturity
• Decline
• Facility process investment depends on life
  cycle

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Other Design factors

• Old over-the wall sequential design process
  should not be used
• Each function did its work and passed it to the
  next function
• Replace with a Concurrent Engineering process
• All functions form a design team working together
  to develop specifications, involve customers
  early, solve potential problems, reduce costs,
  shorten time to market
• Remanufacturing uses components of old products
  in the production of new ones (Computers, TVs,
  Cars)

13
Process Selection

• Process selection is based on five considerations
• Type of process range from intermittent to
  continuous
• Degree of vertical integration
• Flexibility of resources
• Mix between capital human resources
• Degree of customer contact

• Process types can be
• Project Process (project build a highway job
  shop metal shop, ER)
• Batch Process (batch printing shop)
• Line Process (assembly line cars, pizza,
  cafeteria)
• Continuous Process(continuouspaper mill, oil
  refinery)

14
Process Decisions-Vertical Integration Make or
Buy

• Vertical integration refers to the degree a firm
  chooses to do processes itself- raw material to
  sales
• Backward Integration means moving closer to
  primary operations
• Forward Integration means moving closer to
  customers
• What is horizontal integration?
• A firms Make-or-Buy choices should be based on
  the following considerations
• Strategic impact
• Available capacity
• Expertise
• Quality considerations
• Speed
• Cost (fixed cost variable cost)make (fixed
  cost Variable cost)buy
• Business are trending toward less backward
  integration, more outsourcing

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Underlying Process Relationship Between Volume
and Standardization
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Differences between Intermittent and Repetitive
Operations
Decision
Intermittent Oper.
Repetitive Operation
Product variety
Great
Small
Degree of standardization
Low
High
Organization of resources
Grouped by Function
Line flow
Path of products
Varied, depends on product
Line flow
Factor driving production
Customer orders
Forecast of demand
Critical resource
Labour
Capital
Type of equipment
General purpose
Specialized
Degree of automation
Low
High
Throughput time
Longer
Shorter
Work-in-process inventory
More
Less
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Facility layouts intermittent vs. repetitive
operations
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Volume and Process Choice

• Low Volume typically means
• Project or Batch processes
• Less vertical integration
• More resource flexibility
• Less capital intensity
• Higher skilled labor
• More customer involvement
• More customized products
• Make or assemble to order strategy

• High Volume typically means
• Line/continuous processes
• More vertical integration
• Less resource flexibility
• More capital intensity
• More specialized labor
• Little to no customer involvement
• Standardized products
• Make to stock strategy

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Process Design Tools

• Process flow analysis is a technique used to
  analyze and document the sequence of steps within
  a total process uses process flowcharts --gt
  Usually the first step in Process Reengineering.
• Process Re-engineering is a structured approach
  used when major business changes are required as
  a result of
• Major new products
• Quality improvement needed
• Better competitors
• Inadequate performance

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Flowcharts for different product strategies
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Process Performance Metrics

• Measurements of different process
  characteristicstell us how the process is
  performing
• Throughput time (TT) Start -gt End (Avg. T.)
• Process velocity TT/Value-added time
• Nonvalue-added time e.g. waiting
• Productivity Output/Input
• Utilization Time used/Time available
• Efficiency Actual output/Standard output

22
Manufacturing Technology Decisions

• Simplify first, then apply appropriate technology
  
• Automation
• Automated Material Handling
• Automated guided vehicles (AGV)
• Automated storage retrieval systems (AS/RS)
• Computer-Aided Design (CAD) software
• Robotics Numerically-Controlled (NC) equipment
• Flexible Manufacturing Systems (FMS)
• Computer-Integrated Manufacturing (CIM)

23
Designing Services

• Service Characteristics
• Intangible products
• High customer contact
• Differing designs
• Substitute technology for people
• Get customer involved
• High customer attention

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Classification of services

• Quasi-Manufacturing (warehouses, distribution
  centres, environmental testing labs)
• Mixed Services (offices, banks)
• Pure Services (restaurants, schools, hospitals)

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Labour intensity vs. Customer contact

• Labour Intensity LOW HIGH
• Customer Contact LOW HIGH
• Standarization HIGH LOW
• Quasi-Manuf. Pure Serv.

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Service package (bundle)

• Physical benefits (e.g. food, tables, chairs,
  china)
• Sensual benefits (visual, smell, sounds)
• Psychological benefits (status, comfort,
  happiness)
• purchased together as part of the service