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5 Design of Goods and Services Power. Point presentation to accompany Heizer and Render 5 Design of Goods and Services Power. Point presentation to accompany Heizer and Render Operations Management, 10 e Principles of Operations Management, 8 e Power. Point slides by Jeff Heyl © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 -1

Regal Marine u Global market u 3 -dimensional CAD system u Reduced product development Regal Marine u Global market u 3 -dimensional CAD system u Reduced product development time u Reduced problems with tooling u Reduced problems in production u Assembly line production u JIT © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 -2

Product Decision The objective of the product decision is to develop and implement a Product Decision The objective of the product decision is to develop and implement a product strategy that meets the demands of the marketplace with a competitive advantage © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 -3

Product Decision u The good or service the organization provides society u Top organizations Product Decision u The good or service the organization provides society u Top organizations typically focus on core products u Customers buy satisfaction, not just a physical good or particular service u Fundamental to an organization's strategy with implications throughout the operations function © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 -4

Product Strategy Options u Differentiation u Shouldice Hospital u Low cost u Taco Bell Product Strategy Options u Differentiation u Shouldice Hospital u Low cost u Taco Bell u Rapid response u Toyota © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 -5

Product Life Cycles u May be any length from a few hours to decades Product Life Cycles u May be any length from a few hours to decades u The operations function must be able to introduce new products successfully © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 -6

Sales, cost, and cash flow Product Life Cycles Cost of development and production Sales Sales, cost, and cash flow Product Life Cycles Cost of development and production Sales revenue Net revenue (profit) Cash flow Negative cash flow Introduction Loss Growth Maturity Decline Figure 5. 1 © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 -7

Product Life Cycle Introductory Phase u Fine tuning may warrant unusual expenses for 1. Product Life Cycle Introductory Phase u Fine tuning may warrant unusual expenses for 1. Research 2. Product development 3. Process modification and enhancement 4. Supplier development © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 -8

Product Life Cycle Growth Phase u Product design begins to stabilize u Effective forecasting Product Life Cycle Growth Phase u Product design begins to stabilize u Effective forecasting of capacity becomes necessary u Adding or enhancing capacity may be necessary © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 -9

Product Life Cycle Maturity Phase u Competitors now established u High volume, innovative production Product Life Cycle Maturity Phase u Competitors now established u High volume, innovative production may be needed u Improved cost control, reduction in options, paring down of product line © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 10

Product Life Cycle Decline Phase u Unless product makes a special contribution to the Product Life Cycle Decline Phase u Unless product makes a special contribution to the organization, must plan to terminate offering © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 11

Product-by-Value Analysis u Lists products in descending order of their individual dollar contribution to Product-by-Value Analysis u Lists products in descending order of their individual dollar contribution to the firm u Lists the total annual dollar contribution of the product u Helps management evaluate alternative strategies © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 12

Product-by-Value Analysis Sam’s Furniture Factory Individual Contribution ($) Total Annual Contribution ($) Love Seat Product-by-Value Analysis Sam’s Furniture Factory Individual Contribution ($) Total Annual Contribution ($) Love Seat $102 $36, 720 Arm Chair $87 $51, 765 Foot Stool $12 $6, 240 Recliner $136 $51, 000 © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 13

New Product Opportunities 1. Understanding the customer 2. Economic change 3. Sociological and demographic New Product Opportunities 1. Understanding the customer 2. Economic change 3. Sociological and demographic change 4. Technological change 5. Political/legal change rming ainsto l tool Br usefu is a 6. Market practice, professional standards, suppliers, distributors © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 14

Importance of New Products Percentage of Sales from New Products 50% 40% 30% 20% Importance of New Products Percentage of Sales from New Products 50% 40% 30% 20% 10% Industry leader Top third Middle third Bottom third Position of Firm in Its Industry © 2011 Pearson Education, Inc. publishing as Prentice Hall Figure 5. 2 a 5 - 15

Product Development Ideas System Figure 5. 3 Ability Customer Requirements Functional Specifications Scope of Product Development Ideas System Figure 5. 3 Ability Customer Requirements Functional Specifications Scope of product development team Product Specifications Scope for design and Design Review engineering teams Test Market Introduction Evaluation © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 16

Quality Function Deployment 1. Identify customer wants 2. Identify how the good/service will satisfy Quality Function Deployment 1. Identify customer wants 2. Identify how the good/service will satisfy customer wants 3. Relate customer wants to product hows 4. Identify relationships between the firm’s hows 5. Develop importance ratings 6. Evaluate competing products 7. Compare performance to desirable technical attributes © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 17

QFD House of Quality What the customer wants Target values How to satisfy customer QFD House of Quality What the customer wants Target values How to satisfy customer wants Relationship matrix Competitive assessment Customer importance ratings Interrelationships Weighted rating Technical evaluation © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 18

House of Quality Example Your team has been charged with designing a new camera 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 © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 19

House of Quality Example Interrelationships What the Customer Wants What the customer wants Lightweight House of Quality Example Interrelationships What the Customer Wants What the customer wants Lightweight Easy to use Reliable Easy to hold steady Color correction © 2011 Pearson Education, Inc. publishing as Prentice Hall Relationship Matrix Analysis of Competitors How to Satisfy Customer Wants Technical Attributes and Evaluation Customer importance rating (5 = highest) 3 4 5 2 1 5 - 20

House of Quality Example Interrelationships Relationship Matrix © 2011 Pearson Education, Inc. publishing as House of Quality Example Interrelationships Relationship Matrix © 2011 Pearson Education, Inc. publishing as Prentice Hall Ergonomic design Paint pallet Auto exposure Auto focus Technical Attributes and Evaluation Aluminum components Low electricity requirements What the Customer Wants Analysis of Competitors How to Satisfy Customer Wants 5 - 21

House of Quality Example Interrelationships What the Customer Wants High relationship (5) Medium relationship House of Quality Example Interrelationships What the Customer Wants High relationship (5) Medium relationship (3) Low relationship (1) Lightweight Easy to use Reliable Easy to hold steady Color corrections Relationship Matrix Analysis of Competitors How to Satisfy Customer Wants Technical Attributes and Evaluation 3 4 5 2 1 Relationship matrix © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 22

House of Quality Example Interrelationships What the Customer Wants Relationship Matrix Analysis of Competitors House of Quality Example Interrelationships What the Customer Wants Relationship Matrix Analysis of Competitors How to Satisfy Customer Wants © 2011 Pearson Education, Inc. publishing as Prentice Hall Ergonomic design Paint pallet Auto exposure Auto focus Aluminum components Relationships between the things we can do Low electricity requirements Technical Attributes and Evaluation 5 - 23

House of Quality Example Interrelationships What the Customer Wants Relationship Matrix Analysis of Competitors House of Quality Example Interrelationships What the Customer Wants Relationship Matrix Analysis of Competitors How to Satisfy Customer Wants Technical Attributes and Evaluation Lightweight Easy to use Reliable Easy to hold steady Color corrections Our importance ratings 3 4 5 2 1 22 9 27 27 32 25 Weighted rating © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 24

Interrelationships House of Quality Example Relationship Matrix Company A Technical Attributes and Evaluation G Interrelationships House of Quality Example Relationship Matrix Company A Technical Attributes and Evaluation G G F G P How well do competing products meet customer wants Lightweight Easy to use Reliable Easy to hold steady Color corrections Our importance ratings © 2011 Pearson Education, Inc. publishing as Prentice Hall 3 4 5 2 1 22 Company B What the Customer Wants Analysis of Competitors How to Satisfy Customer Wants P P G P P 5 5 - 25

Interrelationships House of Quality Example 2 circuits 2’ to ∞ 0. 5 A Target Interrelationships House of Quality Example 2 circuits 2’ to ∞ 0. 5 A Target values (Technical attributes) 75% Technical Attributes and Evaluation Company A 0. 7 60% yes 1 Technical evaluation Company B 0. 6 50% yes 2 Us 0. 5 75% yes 2 © 2011 Pearson Education, Inc. publishing as Prentice Hall Panel ranking Relationship Matrix Failure 1 per 10, 000 What the Customer Wants Analysis of Competitors How to Satisfy Customer Wants ok G ok F ok G 5 - 26

Company B Company A Ergonomic design Paint pallet Auto exposure Auto focus Aluminum components Company B Company A Ergonomic design Paint pallet Auto exposure Auto focus Aluminum components Completed House of Quality Low electricity requirements House of Quality Example Lightweight 3 G P Easy to use 4 G P Reliable 5 F G Easy to hold steady 2 G P Color correction P 1 P Company A Technical evaluation Company B © 2011 Pearson Education, Inc. publishing as Prentice Hall Us Panel ranking Failure 1 per 10, 000 2’ to ∞ 75% 0. 5 A Target values (Technical attributes) 2 circuits Our importance ratings 22 9 27 27 32 25 0. 7 60% yes 1 ok G 0. 6 50% yes 2 ok F 0. 5 75% yes 2 ok G 5 - 27

House of Quality Sequence Deploying resources through the organization in response to customer requirements House of Quality Sequence Deploying resources through the organization in response to customer requirements Quality plan Customer requirements House 1 House 2 House 3 Production process Design characteristics Specific components Production process House 4 Figure 5. 4 © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 28

Organizing for Product Development u Historically – distinct departments u Duties and responsibilities are Organizing for Product Development u Historically – distinct departments u Duties and responsibilities are defined u Difficult to foster forward thinking u A Champion u Product manager drives the product through the product development system and related organizations © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 29

Organizing for Product Development u Team approach u Cross functional – representatives from all Organizing for Product Development u Team approach u Cross functional – representatives from all disciplines or functions u Product development teams, design for manufacturability teams, value engineering teams u Japanese “whole organization” approach u No organizational divisions © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 30

Manufacturability and Value Engineering u Benefits: 1. Reduced complexity of products 2. Reduction of Manufacturability and Value Engineering u Benefits: 1. Reduced complexity of products 2. Reduction of environmental impact 3. Additional standardization of products 4. Improved functional aspects of product 5. Improved job design and job safety 6. Improved maintainability (serviceability) of the product 7. Robust design © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 31

Cost Reduction of a Bracket via Value Engineering Figure 5. 5 © 2011 Pearson Cost Reduction of a Bracket via Value Engineering Figure 5. 5 © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 32

Issues for Product Development u Robust design u Modular design u Computer-aided design (CAD) Issues for Product Development u Robust design u Modular design u Computer-aided design (CAD) u Computer-aided manufacturing (CAM) u Virtual reality technology u Value analysis u Environmentally friendly design © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 33

Robust Design u Product is designed so that small variations in production or assembly Robust Design u Product is designed so that small variations in production or assembly do not adversely affect the product u Typically results in lower cost and higher quality © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 34

Modular Design u Products designed in easily segmented components u Adds flexibility to both Modular Design u Products designed in easily segmented components u Adds flexibility to both production and marketing u Improved ability to satisfy customer requirements © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 35

Computer Aided Design (CAD) u Using computers to design products and prepare engineering documentation Computer Aided Design (CAD) u Using computers to design products and prepare engineering documentation u Shorter development cycles, improved accuracy, lower cost u Information and designs can be deployed worldwide © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 36

Extensions of CAD u Design for Manufacturing and Assembly (DFMA) u Solve manufacturing problems Extensions of CAD u Design for Manufacturing and Assembly (DFMA) u Solve manufacturing problems during the design stage u 3 -D Object Modeling u Small prototype development u CAD through the internet u International data exchange through STEP © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 37

Computer-Aided Manufacturing (CAM) u Utilizing specialized computers and program to control manufacturing equipment u Computer-Aided Manufacturing (CAM) u Utilizing specialized computers and program to control manufacturing equipment u Often driven by the CAD system (CAD/CAM) © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 38

Benefits of CAD/CAM 1. Product quality 2. Shorter design time 3. Production cost reductions Benefits of CAD/CAM 1. Product quality 2. Shorter design time 3. Production cost reductions 4. Database availability 5. New range of capabilities © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 39

Virtual Reality Technology u Computer technology used to develop an interactive, 3 -D model Virtual Reality Technology u Computer technology used to develop an interactive, 3 -D model of a product from the basic CAD data u Allows people to ‘see’ the finished design before a physical model is built u Very effective in large-scale designs such as plant layout © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 40

Value Analysis u Focuses on design improvement during production u Seeks improvements leading either Value Analysis u Focuses on design improvement during production u Seeks improvements leading either to a better product or a product which can be produced more economically with less environmental impact © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 41

Ethics, Environmentally Friendly Designs, and Sustainability u It is possible to enhance productivity and Ethics, Environmentally Friendly Designs, and Sustainability u It is possible to enhance productivity and deliver goods and services in an environmentally and ethically responsible manner u In OM, sustainability means ecological stability u Conservation and renewal of resources through the entire product life cycle © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 42

Ethics, Environmentally Friendly Designs, and Sustainability u Design u Polyester film and shoes u Ethics, Environmentally Friendly Designs, and Sustainability u Design u Polyester film and shoes u Production u Prevention in production and packaging u Destruction u Recycling in automobiles © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 43

Ethics, Environmentally Friendly Designs, and Sustainability © 2011 Pearson Education, Inc. publishing as Prentice Ethics, Environmentally Friendly Designs, and Sustainability © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 44

The Ethical Approach u View product design from a systems perspective u Inputs, processes, The Ethical Approach u View product design from a systems perspective u Inputs, processes, outputs u Costs to the firm/costs to society u Consider the entire life cycle of the product © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 45

The Ethical Approach u Goals 1. Developing safe end environmentally sound practices 2. Minimizing The Ethical Approach u Goals 1. Developing safe end environmentally sound practices 2. Minimizing waste of resources 3. Reducing environmental liabilities 4. Increasing cost-effectiveness of complying with environmental regulations 5. Begin recognized as a good corporate citizen © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 46

Guidelines for Environmentally Friendly Designs 1. Make products recyclable 2. Use recycled materials 3. 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 © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 47

Time-Based Competition u Product life cycles are becoming shorter and the rate of technological Time-Based Competition u Product life cycles are becoming shorter and the rate of technological change is increasing u Developing new products faster can result in a competitive advantage © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 48

Product Development Continuum EXTERNAL DEVELOPMENT STRATEGIES Figure 5. 6 Alliances Joint ventures Purchase technology Product Development Continuum EXTERNAL DEVELOPMENT STRATEGIES Figure 5. 6 Alliances Joint ventures Purchase technology or expertise by acquiring the developer INTERNAL DEVELOPMENT STRATEGIES Migrations of existing products Enhancements to existing products New internally developed products Internal Lengthy High Cost of product development Speed of product development Risk of product development © 2011 Pearson Education, Inc. publishing as Prentice Hall Shared Rapid and/ or Existing Shared 5 - 49

Acquiring Technology u By Purchasing a Firm u Speeds development u Issues concern the Acquiring Technology u By Purchasing a Firm u Speeds development u Issues concern the fit between the acquired organization and product and the host u Through Joint Ventures u Both organizations learn u Risks are shared u Through Alliances u Cooperative agreements between independent organizations © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 50

Defining The Product u First definition is in terms of functions u Rigorous specifications Defining The Product u First definition is in terms of functions u Rigorous specifications are developed during the design phase u Manufactured products will have an engineering drawing u Bill of material (BOM) lists the components of a product © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 51

Product Documents u Engineering drawing u Shows dimensions, tolerances, and materials u Shows codes Product Documents u Engineering drawing u Shows dimensions, tolerances, and materials u Shows codes for Group Technology u Bill of Material u Lists components, quantities and where used u Shows product structure © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 52

Monterey Jack Cheese (a) U. S. grade AA. Monterey cheese shall conform to the Monterey Jack Cheese (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, General Service Administration © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 53

Engineering Drawings Figure 5. 8 © 2011 Pearson Education, Inc. publishing as Prentice Hall Engineering Drawings Figure 5. 8 © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 54

Bills of Material BOM for Panel Weldment NUMBER DESCRIPTION A 60 -71 PANEL WELDM’T Bills of Material BOM for Panel Weldment NUMBER DESCRIPTION A 60 -71 PANEL WELDM’T 1 A 60 -7 R 60 -17 R 60 -428 P 60 -2 LOWER ROLLER ASSM. ROLLER PIN LOCKNUT 1 1 A 60 -72 R 60 -57 -1 A 60 -4 02 -50 -1150 GUIDE ASSM. REAR SUPPORT ANGLE ROLLER ASSM. BOLT 1 1 A 60 -73 A 60 -74 R 60 -99 02 -50 -1150 GUIDE ASSM. FRONT SUPPORT WELDM’T WEAR PLATE BOLT 1 1 © 2011 Pearson Education, Inc. publishing as Prentice Hall QTY Figure 5. 9 (a) 5 - 55

Bills of Material Hard Rock Cafe’s Hickory BBQ Bacon Cheeseburger DESCRIPTION QTY Bun Hamburger Bills of Material Hard Rock Cafe’s Hickory BBQ Bacon Cheeseburger DESCRIPTION QTY Bun Hamburger patty Cheddar cheese Bacon BBQ onions Hickory BBQ sauce Burger set Lettuce Tomato Red onion Pickle French fries Seasoned salt 11 -inch plate HRC flag 1 8 oz. 2 slices 2 strips 1/2 cup 1 oz. 1 leaf 1 slice 4 rings 1 slice 5 oz. 1 tsp. 1 1 Figure 5. 9 (b) © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 56

Group Technology u Parts grouped into families with similar characteristics u Coding system describes Group Technology u Parts grouped into families with similar characteristics u Coding system describes processing and physical characteristics u Part families can be produced in dedicated manufacturing cells © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 57

Group Technology Scheme (a) Ungrouped Parts (b) Grouped Cylindrical Parts (families of parts) Grooved Group Technology Scheme (a) Ungrouped Parts (b) Grouped Cylindrical Parts (families of parts) Grooved Slotted Threaded Drilled Machined Figure 5. 10 © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 58

Group Technology Benefits 1. Improved design 2. Reduced raw material and purchases 3. Simplified Group Technology Benefits 1. Improved design 2. Reduced raw material and purchases 3. Simplified production planning and control 4. Improved layout, routing, and machine loading 5. Reduced tooling setup time, work-inprocess, and production time © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 59

Documents for Production u Assembly drawing u Assembly chart u Route sheet u Work Documents for Production u Assembly drawing u Assembly chart u Route sheet u Work order u Engineering change notices (ECNs) © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 60

Assembly Drawing u Shows exploded view of product u Details relative locations to show Assembly Drawing u Shows exploded view of product u Details relative locations to show to assemble the product Figure 5. 11 (a) © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 61

Assembly Chart 1 2 3 4 5 6 7 8 9 10 R 209 Assembly Chart 1 2 3 4 5 6 7 8 9 10 R 209 Angle R 207 Angle Bolts w/nuts (2) Left bracket SA A 1 1 assembly R 209 Angle R 207 Angle Bolts w/nuts (2) Right SA bracket A 2 2 assembly Identifies the point of production where components flow into subassemblies and ultimately into the final product Bolt w/nut R 404 Roller A 3 Lock washer Part number tag Poka-yoke inspection A 4 Box w/packing material 11 A 5 Figure 5. 11 (b) © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 62

Route Sheet Lists the operations and times required to produce a component Process Machine Route Sheet Lists the operations and times required to produce a component Process Machine Operations 1 Auto Insert 2 2 3 Manual Insert 1 Wave Solder 4 Test 4 Insert Component Set 56 Insert Component Set 12 C Solder all components to board Circuit integrity test 4 GY © 2011 Pearson Education, Inc. publishing as Prentice Hall Setup Time Operation Time/Unit 1. 5 . 4 . 5 2. 3 1. 5 4. 1 . 25 . 5 5 - 63

Work Order Instructions to produce a given quantity of a particular item, usually to Work Order Instructions to produce a given quantity of a particular item, usually to a schedule Work Order Item Quantity Start Date Due Date 157 C 125 5/2/08 5/4/08 Production Dept Delivery Location F 32 Dept K 11 © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 64

Engineering Change Notice (ECN) u A correction or modification to a product’s definition or Engineering Change Notice (ECN) u A correction or modification to a product’s definition or documentation u Engineering drawings u Bill of material Quite common with long product life cycles, long manufacturing lead times, or rapidly changing technologies © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 65

Service Design u Service typically includes direct interaction with the customer u Increased opportunity Service Design u Service typically includes direct interaction with the customer u Increased opportunity for customization u Reduced productivity u Cost and quality are still determined at the design stage u Delay customization u Modularization u Reduce customer interaction, often through automation © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 66

Service Design Figure 5. 12 © 2011 Pearson Education, Inc. publishing as Prentice Hall Service Design Figure 5. 12 © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 67

Service Design Figure 5. 12 © 2011 Pearson Education, Inc. publishing as Prentice Hall Service Design Figure 5. 12 © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 68

Application of Decision Trees to Product Design u Particularly useful when there a series Application of Decision Trees to Product Design u Particularly useful when there a series of decisions and outcomes which lead to other decisions and outcomes © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 69

Application of Decision Trees to Product Design Procedures 1. Include all possible alternatives and Application of Decision Trees to Product Design Procedures 1. Include all possible alternatives and states of nature - including “doing nothing” 2. Enter payoffs at end of branch 3. Determine the expected value of each branch and “prune” the tree to find the alternative with the best expected value © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 70

Decision Tree Example (. 4) Purchase CAD High sales (. 6) Low sales Hire 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 © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 71

Decision Tree Example (. 4) Purchase CAD High sales (. 6) Low sales Hire Decision Tree Example (. 4) Purchase CAD High sales (. 6) Low sales Hire and train engineers $2, 500, 000 - 1, 000 - 500, 000 $1, 000 $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) High sales EMV (purchase CAD system) = (. 4)($1, 000) + (. 6)(- $20, 000) (. 6) Low sales Do nothing Figure 5. 14 © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 72

Decision Tree Example (. 4) Purchase CAD $388, 000 High sales (. 6) Low Decision Tree Example (. 4) Purchase CAD $388, 000 High sales (. 6) Low sales Hire and train engineers $2, 500, 000 - 1, 000 - 500, 000 $1, 000 $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) High sales EMV (purchase CAD system) = (. 4)($1, 000) + (. 6)(- $20, 000) = $388, 000 (. 6) Low sales Do nothing Figure 5. 14 © 2011 Pearson Education, Inc. publishing as Prentice Hall 5 - 73

Decision Tree Example (. 4) Purchase CAD $388, 000 High sales (. 6) Low 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 - 500, 000 $1, 000 $800, 000 - 320, 000 - 500, 000 - $20, 000 $2, 500, 000 - 1, 250, 000 - 375, 000 $800, 000 - 400, 000 - 375, 000 $25, 000 $0 Net © 2011 Pearson Education, Inc. publishing as Prentice Hall 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 5 - 74