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Operations Management: Product Design

This document provides an overview of product design and development. It discusses key topics such as: - Generating new product ideas through understanding changes in customers, technology, markets etc. - The importance of new products for companies' sales and growth. - The product development process including organizing for development and ensuring manufacturability. - Issues to consider in product design like robustness, modularity, use of CAD/CAM and value analysis. - Using time to gain a competitive advantage through faster product development. - Strategies for acquiring technology externally through alliances or purchasing other firms. - Applying decision trees to product design decisions to evaluate alternatives.

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59 views39 pages

Operations Management: Product Design

This document provides an overview of product design and development. It discusses key topics such as: - Generating new product ideas through understanding changes in customers, technology, markets etc. - The importance of new products for companies' sales and growth. - The product development process including organizing for development and ensuring manufacturability. - Issues to consider in product design like robustness, modularity, use of CAD/CAM and value analysis. - Using time to gain a competitive advantage through faster product development. - Strategies for acquiring technology externally through alliances or purchasing other firms. - Applying decision trees to product design decisions to evaluate alternatives.

Uploaded by

fuad
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Operations

Management
Product design

1-1

Outline

Goods and Services Selection

Product Strategy Options Support


Competitive Advantage

Outline

Generating New Products

New Product Opportunities


Importance of New Products

Product Development

Product Development System


Organizing for Product Development
Manufacturability and Value Engineering

Outline

Issues for Product Design

Robust Design
Modular Design
Computer-Aided Design (CAD)
Computer-Aided Manufacturing (CAM)
Virtual Reality Technology
Value Analysis
Ethics and Environmentally Friendly Design

Outline

Time-Based Competition

Purchasing Technology by Acquiring a Firm


Joint Ventures
Alliances

Application of Decision Trees to Product


Design
Transition to Production

Product Design

What is product??
Top organizations typically focus on core
products

Example:

Intel

Customers buy satisfaction, not just a


physical good or particular service

Why product and service design


Competitive advantage
Example
1. Tesco allows customers to order online
2. Providing halal pharmaceutical products

Provide benefits to firms improve process


Example
1. HP redesign desktop printers have lesser
parts easy to assemble

1-7

Why product and service design


Exploit existing capabilities
Example
1. Honda motorcycle automobile lawn
equipment

1-8

Why product and service design


Block out competitors
Example
1. Gillette redesign superior shave that is
difficult to copy by competitors

1-9

Product Life Cycle and Strategy


Introduction

OM Strategy/Issues

Product design and


development critical
Frequent product and
process design
changes

Growth
Forecasting critical

Standardization

Product and process


reliability

Fewer product
changes, more minor
changes

Short production runs

Competitive product
improvements and
options

High production costs

Increase capacity

Limited models

Shift toward product


focus

Attention to quality

Maturity

Enhance distribution

Optimum capacity
Increasing stability of
process
Long production runs
Product improvement
and cost cutting

Decline
Little product
differentiation
Cost minimization
Overcapacity in
the industry
Prune line to
eliminate items
not returning good
margin
Reduce capacity

Importance of new products


Percentage of Sales from New Products

50%
40%
30%
20%
10%

Industry
leader

Top
third

Middle
third

Position of Firm in Its Industry

Bottom
third

New products at Disney


Millions of visitors

50

Magic Kingdom
Combined data only prior to 1993
Epcot
Disney-MGM Studios
Animal Kingdom

40
30
20
10
0

84

86

88

90

92

94

96

98

00

02

04

Generating new product

Understanding the
customer

Economic change

Sociological and
demographic change

Technological change

a
s
i
g
n
i
orm
t
s
n
i
a
r
B
Political/legal change
l
o
o
t
l
u
f
use
Market practice, professional standards,
suppliers, distributors

Concern with improvement of design and


specifications

Benefits:
1.
2.
3.
4.
5.
6.

Reduced complexity of products


Additional standardization of products
Improved functional aspects of product
Improved job design and job safety
Improved maintainability (serviceability) of the
product
Robust design

Cost Reduction of a Bracket via Value


Engineering

Figure 5.5

Class discussion
Can you think of a product that could be designed to
improve manufacturability

1-16

Issues for Product Development

Robust design
Modular design
Computer-aided design (CAD)
Computer-aided manufacturing
(CAM)
Virtual reality technology
Value analysis
Environmentally friendly design

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

Modular Design

Products designed in easily segmented


components
Adds flexibility to both production and marketing
Improved ability to satisfy customer requirements

Modular design at IKEA

1-20

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

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.
2.
3.
4.
5.

Product quality
Shorter design time
Production cost reductions
Database availability
New range of capabilities

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
Virtual reality at ford
Avatar movie???

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

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

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

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

Product Development Continuum


External Development Strategies
Alliances
Joint ventures
Purchase technology or expertise (Microsoft and Cisco)
by acquiring the developer
Internal Development Strategies
Migrations of existing products
Enhancements to existing products
New internally developed products
Internal
Lengthy

Cost of product development


Shared
Speed of product development
Rapid and/
or Existing

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

Service Design
(a) Customer participation in design such as
pre-arranged funeral services or cosmetic
surgery

Service typically includes direct interaction with the


customer
Increased opportunity for customization
Reduced productivity

(b) Customer participation in delivery


such as stress test for cardiac exam or
delivery of a baby

Cost and quality are still determined at the design


stage
Delay customization
Modularization

(c) Customer participation in design and delivery


such as counseling, college education, financial
management of personal affairs, or interior
decorating

Reduce customer interaction, often through


automation

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


Limits the options
Delay customization
Modularization
Reduce customer interaction, often through automation

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
Include all possible alternatives and states of
nature - including doing nothing
Enter payoffs at end of branch
Determine the expected value of each branch
and prune the tree to find the alternative with
the best expected value

Decision Tree Example


(.4)

Purchase CAD

High sales
(.6) Low sales

Hire and train engineers


(.4)
High sales

(.6)
Low sales

Do nothing
Figure 5.14

Decision Tree Example


$2,500,000
- 1,000,000
- 500,000
$1,000,000

(.4)

Purchase CAD

High sales
(.6) Low sales

Hire and train engineers

$800,000
- 320,000
- 500,000
- $20,000

Revenue
Mfg cost ($40 x 25,000)
CAD cost
Net
Revenue
Mfg cost ($40 x 8,000)
CAD cost
Net loss

(.4)

EMV (purchase CAD system)

High sales

= (.4)($1,000,000) + (.6)(- $20,000)

(.6)
Low sales

Do nothing
Figure 5.14

Decision Tree Example


$2,500,000
- 1,000,000
- 500,000
$1,000,000

(.4)

Purchase CAD
$388,000

High sales
(.6) Low sales

Hire and train engineers

$800,000
- 320,000
- 500,000
- $20,000

Revenue
Mfg cost ($40 x 25,000)
CAD cost
Net
Revenue
Mfg cost ($40 x 8,000)
CAD cost
Net loss

(.4)

EMV (purchase CAD system)

High sales

= (.4)($1,000,000) + (.6)(- $20,000)


= $388,000

(.6)
Low sales

Do nothing
Figure 5.14

Decision Tree Example


(.4)

Purchase CAD
$388,000

High sales
(.6) Low sales

Hire and train engineers


$365,000
(.4)
High sales

(.6)
Low sales

Do nothing $0

$2,500,000
- 1,000,000
- 500,000
$1,000,000
$800,000
- 320,000
- 500,000
- $20,000
$2,500,000
- 1,250,000
- 375,000
$875,000
$800,000
- 400,000
- 375,000
$25,000
$0 Net

Revenue
Mfg cost ($40 x 25,000)
CAD cost
Net
Revenue
Mfg cost ($40 x 8,000)
CAD cost
Net loss
Revenue
Mfg cost ($50 x 25,000)
Hire and train cost
Net
Revenue
Mfg cost ($50 x 8,000)
Hire and train cost
Net
Figure 5.14

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

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