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10/16/2010
1
55 Design of Goods and Services
Design of Goods and Services
5 - 1© 2011 Pearson Education, Inc. publishing as Prentice Hall
PowerPoint presentation to accompany PowerPoint presentation to accompany Heizer and Render Heizer and Render Operations Management, 10e Operations Management, 10e Principles of Operations Management, 8ePrinciples of Operations Management, 8e
PowerPoint slides by Jeff Heyl
OutlineOutline
Global Company Profile: Regal MarineGoods and Services Selection
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Product Strategy Options Support Competitive AdvantageProduct Life CyclesLife Cycle and StrategyProduct-by-Value Analysis
Outline Outline -- ContinuedContinuedGenerating New Products
New Product OpportunitiesImportance of New Products
Product Development
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pProduct Development SystemQuality Function Deployment (QFD)Organizing for Product DevelopmentManufacturability and Value Engineering
Outline Outline -- ContinuedContinued
Issues for Product DesignRobust DesignModular Design
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Computer-Aided Design (CAD)Computer-Aided Manufacturing (CAM)Virtual Reality TechnologyValue Analysis
Outline Outline -- ContinuedContinuedEthics, Environmentally Friendly Design, and Sustainability
Systems and Life Cycle PerspectivesLaws and Industry Standards
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yTime-Based Competition
Purchasing Technology by Acquiring a FirmJoint VenturesAlliances
Outline Outline -- ContinuedContinuedDefining a Product
Make-or-Buy DecisionsGroup Technology
Documents For Production
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Documents For ProductionProduct Life-Cycle Management (PLM)
Service DesignDocuments for Services
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Outline Outline -- ContinuedContinued
Application of Decision Trees to Product DesignTransition to Production
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Learning ObjectivesLearning Objectives
1. Define product life cycle2 D ib d t d l t t
When you complete this chapter you should When you complete this chapter you should be able to :be able to :
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2. Describe a product development system3. Build a house of quality4. Describe how time-based competition is
implemented
Learning ObjectivesLearning Objectives
5. Describe how products and services are defined by operations management
When you complete this chapter you should When you complete this chapter you should be able to :be able to :
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y p g6. Describe the documents needed for
production7. Describe customer participation in the
design and production of services8. Apply decision trees to product issues
Regal MarineRegal Marine
Global market3-dimensional CAD system
Reduced product development time
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Reduced product development timeReduced problems with toolingReduced problems in production
Assembly line productionJIT
The objective of the product decision The objective of the product decision is to develop and implement a is to develop and implement a
product strategy that meets the product strategy that meets the d d f th k t l ithd d f th k t l ith
Product DecisionProduct Decision
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demands of the marketplace with a demands of the marketplace with a competitive advantagecompetitive advantage
The good or service the organization provides societyTop organizations typically focus on core products
Product DecisionProduct Decision
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pCustomers buy satisfaction, not just a physical good or particular serviceFundamental to an organization's strategy with implications throughout the operations function
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Product Strategy OptionsProduct Strategy Options
DifferentiationShouldice Hospital
Low cost
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Low costTaco Bell
Rapid responseToyota
Product Life CyclesProduct Life Cycles
May be any length from a few hours to decades
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The operations function must be able to introduce new products successfully
Product Life CyclesProduct Life Cycles
and
cash
flow Cost of development and production
Net revenue (profit)
Sales revenue
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Negative cash flow
Introduction Growth Maturity Decline
Sale
s, c
ost,
a
Cash flow
Loss
Figure 5.1
Product Life CycleProduct Life CycleIntroductory PhaseIntroductory Phase
Fine tuning may warrant unusual expenses for
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1. Research2. Product development3. Process modification and
enhancement4. Supplier development
Product Life CycleProduct Life Cycle
Growth PhaseGrowth Phase
Product design begins to stabilize
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stabilizeEffective forecasting of capacity becomes necessaryAdding or enhancing capacity may be necessary
Product Life CycleProduct Life Cycle
Maturity PhaseMaturity Phase
Competitors now establishedHigh volume innovative
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High volume, innovative production may be neededImproved cost control, reduction in options, paring down of product line
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Product Life CycleProduct Life Cycle
Decline PhaseDecline Phase
Unless product makes a special contribution to the
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special contribution to the organization, must plan to terminate offering
Product Life Cycle CostsProduct Life Cycle Costs
Costs incurred
Costs committed
tal c
ost
100 –
80 –
60 –
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Costs incurred
Ease of change
Concept Detailed Manufacturing Distribution,design design service,
prototype and disposal
Perc
ent o
f to
40 –
20 –
0 –
ProductProduct--byby--Value AnalysisValue Analysis
Lists products in descending order of their individual dollar contribution to the firm
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Lists the total annual dollar contribution of the productHelps management evaluate alternative strategies
ProductProduct--byby--Value AnalysisValue Analysis
Individual Contribution ($)
Total Annual Contribution ($)
Sam’s Furniture Factory
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Love Seat $102 $36,720
Arm Chair $87 $51,765
Foot Stool $12 $6,240
Recliner $136 $51,000
New Product OpportunitiesNew Product Opportunities
1. Understanding the customer
2. Economic change3 Sociological and
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3. Sociological and demographic change
4. Technological change5. Political/legal change6. Market practice, professional
standards, suppliers, distributors
Importance of New ProductsImportance of New ProductsPercentage of Sales from New Products
50%
40%
30%
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Industry leader
Top third
Middle third
Bottom third
Figure 5.2a
20%
10%
Position of Firm in Its Industry
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Disney AttendanceDisney AttendanceFigure 5.2b
50
40
tors
Magic Kingdom
Disney-HollywoodEpcot
Animal Kingdom
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30
20
10
0
Mill
ions
of v
isit
‘93 ‘95 ‘97 ‘99 ‘01 ‘03 ‘05 ‘07
Cisco Product RevenueCisco Product RevenueFigure 5.2c
35
30
25
ars
Other
RoutersSwitches
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20
15
10
5
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Bill
ions
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olla
‘02 ‘03 ‘04 ‘05 ‘06 ’07 ‘08
Product Development Product Development SystemSystem
Functional Specifications
Customer Requirements
Ability
Ideas
Figure 5.3
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Scope of product
development team
Scope for design and engineering
teams
Evaluation
Introduction
Test Market
Design Review
Product Specifications
Quality Function Quality Function DeploymentDeployment
1. Identify customer wants2. Identify how the good/service will satisfy
customer wants3 R l t t t t d t h
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3. Relate customer wants to product hows4. Identify relationships between the firm’s hows5. Develop importance ratings6. Evaluate competing products7. Compare performance to desirable technical
attributes
QFD House of QualityQFD House of Quality
How to satisfycustomer wants
Interrelationships
itive
m
ent
What the
Customer importance
ratings
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Relationshipmatrix
Com
peti
asse
ssm
Technicalevaluation
Target values
What the customer
wants
Weighted rating
House of Quality ExampleHouse of Quality Example
Your team has been charged with designing a new camera for Great Cameras, Inc.
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The first action is to construct a House of Quality
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House of Quality ExampleHouse of Quality Example
Customerimportance
rating
What the customer
wants
What the Customer
Wants
RelationshipMatrix
TechnicalAttributes and
Evaluation
How to SatisfyCustomer Wants
Interrelationships
Ana
lysi
s of
Com
petit
ors
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rating(5 = highest)
Lightweight 3Easy to use 4Reliable 5Easy to hold steady 2Color correction 1
House of Quality ExampleHouse of Quality ExampleWhat the Customer
Wants
RelationshipMatrix
TechnicalAttributes and
Evaluation
How to SatisfyCustomer Wants
Interrelationships
Ana
lysi
s of
Com
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uire
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ents
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Low
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How to SatisfyCustomer Wants
House of Quality ExampleHouse of Quality ExampleWhat the Customer
Wants
RelationshipMatrix
TechnicalAttributes and
Evaluation
How to SatisfyCustomer Wants
Interrelationships
Ana
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Com
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High relationshipMedium relationshipLow relationship
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Lightweight 3Easy to use 4Reliable 5Easy to hold steady 2Color corrections 1
Relationship matrix
House of Quality ExampleHouse of Quality ExampleWhat the Customer
Wants
RelationshipMatrix
TechnicalAttributes and
Evaluation
How to SatisfyCustomer Wants
Interrelationships
Ana
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Com
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rem
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Relationships between the things we can do
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House of Quality ExampleHouse of Quality ExampleWhat the Customer
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TechnicalAttributes and
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Interrelationships
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Lightweight 3Easy to use 4
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Weighted rating
Reliable 5Easy to hold steady 2Color corrections 1Our importance ratings 22 9 27 27 32 25
House of Quality ExampleHouse of Quality Example
Com
pany
A
Com
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B
How well do competing products meet customer wants
What the Customer
Wants
RelationshipMatrix
TechnicalAttributes and
Evaluation
How to SatisfyCustomer Wants
Interrelationships
Ana
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Com
petit
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C C
G PG PF GG PP P
Lightweight 3Easy to use 4Reliable 5Easy to hold steady 2Color corrections 1Our importance ratings 22 5
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House of Quality ExampleHouse of Quality ExampleWhat the Customer
Wants
RelationshipMatrix
TechnicalAttributes and
Evaluation
How to SatisfyCustomer Wants
Interrelationships
Ana
lysi
s of
Com
petit
ors
Target per 1
0,00
0ki
ng5 - 37© 2011 Pearson Education, Inc. publishing as Prentice Hall
gvalues(Technical attributes)
Technical evaluation
Company A 0.7 60% yes 1 ok GCompany B 0.6 50% yes 2 ok FUs 0.5 75% yes 2 ok G
0.5
A
75%
2’ to
∞
2 ci
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House of Quality ExampleHouse of Quality Example
Completed House of Quality
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Quality Reliable 5Easy to hold steady 2Color correction 1Our importance ratings
F GG PP P
Target values(Technical attributes)
Technical evaluation
Company A 0.7 60% yes 1 ok G
Company B 0.6 50% yes 2 ok F
Us 0.5 75% yes 2 ok G
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22 9 27 27 32 25
House of Quality SequenceHouse of Quality SequenceDeploying resources through the organization in response to customer requirements
Quality l
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Figure 5.4
Prod
uctio
n pr
oces
s
plan
House 4
Spec
ific
com
pone
nts
Production process
House 3
Des
ign
char
acte
ristic
s
Specific components
House 2
Cus
tom
er
requ
irem
ents
Design characteristics
House 1
Organizing for Product Organizing for Product DevelopmentDevelopment
Historically – distinct departmentsDuties and responsibilities are defined
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Difficult to foster forward thinkingA Champion
Product manager drives the product through the product development system and related organizations
Organizing for Product Organizing for Product DevelopmentDevelopment
Team approachCross functional – representatives from all disciplines or functions
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Product development teams, design for manufacturability teams, value engineering teams
Japanese “whole organization” approach
No organizational divisions
Manufacturability andManufacturability andValue EngineeringValue Engineering
Benefits:1. Reduced complexity of products2. Reduction of environmental impact3 Addi i l d di i f d
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3. Additional standardization of products4. Improved functional aspects of product5. Improved job design and job safety6. Improved maintainability (serviceability) of
the product7. Robust design
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Cost Reduction of a Bracket Cost Reduction of a Bracket via Value Engineeringvia Value Engineering
5 - 43© 2011 Pearson Education, Inc. publishing as Prentice HallFigure 5.5
Issues for Product Issues for Product DevelopmentDevelopment
Robust designModular designComputer aided design (CAD)
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Computer-aided design (CAD)Computer-aided manufacturing (CAM)Virtual reality technologyValue analysisEnvironmentally friendly design
Robust DesignRobust Design
Product is designed so that small variations in production or assembly do not adversely affect
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assembly do not adversely affect the productTypically results in lower cost and higher quality
Modular DesignModular Design
Products designed in easily segmented componentsAdds flexibility to both production
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y pand marketingImproved ability to satisfy customer requirements
Using computers to design products and prepare engineering documentation
Computer Aided Design Computer Aided Design (CAD)(CAD)
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documentationShorter development cycles, improved accuracy, lower costInformation and designs can be deployed worldwide
Design for Manufacturing and Assembly (DFMA)
Solve manufacturing problems during the design stage
3-D Object Modeling
Extensions of CADExtensions of CAD
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3 D Object ModelingSmall prototype development
CAD through the internetInternational data exchange through STEP
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ComputerComputer--Aided Aided Manufacturing (CAM)Manufacturing (CAM)
Utilizing specialized computers and program to control
f t i i t
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manufacturing equipmentOften driven by the CAD system (CAD/CAM)
1. Product quality2. Shorter design time
Benefits of CAD/CAMBenefits of CAD/CAM
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3. Production cost reductions4. Database availability5. New range of capabilities
Virtual Reality TechnologyVirtual Reality Technology
Computer technology used to develop an interactive, 3-D model of a product from the basic CAD dataAll l t ‘ ’ th fi i h d
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Allows people to ‘see’ the finished design before a physical model is builtVery effective in large-scale designs such as plant layout
Value AnalysisValue Analysis
Focuses on design improvement during productionSeeks improvements leading either
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p gto a better product or a product which can be produced more economically with less environmental impact
Ethics, Environmentally Ethics, Environmentally Friendly Designs, and Friendly Designs, and
SustainabilitySustainabilityIt is possible to enhance productivity and deliver goods and services in an environmentally and ethically
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environmentally and ethically responsible mannerIn OM, sustainability means ecological stabilityConservation and renewal of resources through the entire product life cycle
Ethics, Environmentally Ethics, Environmentally Friendly Designs, and Friendly Designs, and
SustainabilitySustainabilityDesign
Polyester film and shoes
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ProductionPrevention in production and packaging
DestructionRecycling in automobiles
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Ethics, Environmentally Ethics, Environmentally Friendly Designs, and Friendly Designs, and
SustainabilitySustainability
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The Ethical ApproachThe Ethical Approach
View product design from a systems perspective
Inputs processes outputs
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Inputs, processes, outputsCosts to the firm/costs to society
Consider the entire life cycle of the product
The Ethical ApproachThe Ethical ApproachGoals1. Developing safe end environmentally
sound practices2. Minimizing waste of resources
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2. Minimizing waste of resources3. Reducing environmental liabilities4. Increasing cost-effectiveness of
complying with environmental regulations
5. Begin recognized as a good corporate citizen
Guidelines for Environmentally Guidelines for Environmentally Friendly DesignsFriendly Designs
1. Make products recyclable2. Use recycled materials
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3. Use less harmful ingredients4. Use lighter components5. Use less energy6. Use less material
Laws and Industry Laws and Industry StandardsStandards
For Design …For Design …
Food and Drug Administration
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Food and Drug AdministrationConsumer Products Safety CommissionNational Highway Safety AdministrationChildren’s Product Safety Act
Laws and Industry Laws and Industry StandardsStandards
For Manufacture/Assembly …For Manufacture/Assembly …Occupational Safety and Health
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Occupational Safety and Health AdministrationEnvironmental Protection AgencyProfessional ergonomic standardsState and local laws dealing with employment standards, discrimination, etc.
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Laws and Industry Laws and Industry StandardsStandards
For Disassembly/Disposal …For Disassembly/Disposal …
Vehicle Recycling Partnership
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Vehicle Recycling PartnershipIncreasingly rigid laws worldwide
TimeTime--Based CompetitionBased Competition
Product life cycles are becoming shorter and the rate of technological change is
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increasingDeveloping new products faster can result in a competitive advantage
Product Development Product Development ContinuumContinuumEXTERNAL DEVELOPMENT STRATEGIES
AlliancesJoint ventures
Purchase technology or expertiseby acquiring the developer
Figure 5.6
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InternalInternal Cost of product development SharedSharedLengthyLengthy Speed of product development Rapid and/Rapid and/
or Existingor ExistingHighHigh Risk of product development SharedShared
INTERNAL DEVELOPMENT STRATEGIESMigrations of existing products
Enhancements to existing productsNew internally developed products
Acquiring TechnologyAcquiring TechnologyBy Purchasing a Firm
Speeds developmentIssues concern the fit between the acquired organization and product and the host
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Through Joint VenturesBoth organizations learnRisks are shared
Through AlliancesCooperative agreements between independent organizations
Defining The ProductDefining The Product
First definition is in terms of functionsRigorous specifications are developed during the design phase
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developed during the design phaseManufactured products will have an engineering drawingBill of material (BOM) lists the components of a product
Engineering drawingShows dimensions, tolerances, and materialsShows codes for Group Technology
Product DocumentsProduct Documents
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Shows codes for Group TechnologyBill of Material
Lists components, quantities and where usedShows product structure
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Monterey Jack CheeseMonterey 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,
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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
Engineering DrawingsEngineering Drawings
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Figure 5.8
Bills of MaterialBills of MaterialBOM for Panel Weldment
NUMBER DESCRIPTION QTYA 60-71 PANEL WELDM’T 1
A 60-7 LOWER ROLLER ASSM. 1R 60-17 ROLLER 1R 60-428 PIN 1
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P 60-2 LOCKNUT 1A 60-72 GUIDE ASSM. REAR 1R 60-57-1 SUPPORT ANGLE 1A 60-4 ROLLER ASSM. 102-50-1150 BOLT 1A 60-73 GUIDE ASSM. FRONT 1A 60-74 SUPPORT WELDM’T 1R 60-99 WEAR PLATE 102-50-1150 BOLT 1 Figure 5.9 (a)
Bills of MaterialBills of MaterialHard Rock Cafe’s Hickory BBQ Bacon Cheeseburger
DESCRIPTION QTYBun 1Hamburger patty 8 oz.Cheddar cheese 2 slicesBacon 2 stripsBBQ onions 1/2 cupHickory BBQ sauce 1 oz
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Hickory BBQ sauce 1 oz.Burger set
Lettuce 1 leafTomato 1 sliceRed onion 4 ringsPickle 1 slice
French fries 5 oz.Seasoned salt 1 tsp.11-inch plate 1HRC flag 1
Figure 5.9 (b)
Parts grouped into families with similar characteristicsCoding system describes
Group TechnologyGroup Technology
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Coding system describes processing and physical characteristicsPart families can be produced in dedicated manufacturing cells
Group Technology SchemeGroup Technology Scheme(a) Ungrouped Parts
(b) Grouped Cylindrical Parts (families of parts)
Grooved Slotted Threaded Drilled Machined
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Figure 5.10
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1. Improved design2. Reduced raw material and purchases3. Simplified production planning and
control
Group Technology BenefitsGroup Technology Benefits
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control4. Improved layout, routing, and
machine loading5. Reduced tooling setup time, work-in-
process, and production time
Documents for ProductionDocuments for Production
Assembly drawingAssembly chart
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Route sheetWork orderEngineering change notices (ECNs)
Assembly DrawingAssembly Drawing
Shows exploded view of productDetails relative l ti t
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locations to show how to assemble the product
Figure 5.11 (a)
Assembly ChartAssembly Chart1
2
3
4
5
R 209 Angle
R 207 Angle
Bolts w/nuts (2)
R 209 Angle
R 207 Angle
SA1
SA
A1
A2
Leftbracket
assembly
Rightbracket
Identifies the point of production where components flow into subassemblies and ultimately into the
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5
6
7
8
9
10
11
Bolt w/nut
R 404 Roller
Lock washer
Part number tag
Box w/packing material
Bolts w/nuts (2)2 A2
A3
A4
A5
assembly
Poka-yoke inspection
Figure 5.11 (b)
ultimately into the final product
Route SheetRoute SheetLists the operations and times required to produce a component
Setup OperationProcess Machine Operations Time Time/Unit
1 Auto Insert 2 Insert Component 1 5 4
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1 Auto Insert 2 Insert Component 1.5 .4Set 56
2 Manual Insert Component .5 2.3Insert 1 Set 12C
3 Wave Solder Solder all 1.5 4.1components to board
4 Test 4 Circuit integrity .25 .5test 4GY
Work OrderWork OrderInstructions to produce a given quantity of a particular item, usually to a schedule
Work OrderIt Q tit St t D t D D t
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Item Quantity Start Date Due Date
Production DeliveryDept Location
157C 125 5/2/08 5/4/08
F32 Dept K11
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Engineering Change Notice Engineering Change Notice (ECN)(ECN)
A correction or modification to a product’s definition or documentation
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Engineering drawingsBill of material
Quite common with long product life cycles, long manufacturing lead times, or
rapidly changing technologies
Configuration ManagementConfiguration Management
The need to manage ECNs has led to the development of configuration management systems
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A product’s planned and changing components are accurately identified and control and accountability for change are identified and maintained
Product LifeProduct Life--Cycle Cycle Management (PLM)Management (PLM)
Integrated software that brings together most, if not all, elements of product design and manufacture
P d t d i
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Product designCAD/CAM, DFMAProduct routingMaterialsAssemblyEnvironmental
Service DesignService DesignService typically includes direct interaction with the customer
Increased opportunity for customizationReduced productivity
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Cost and quality are still determined at the design stage
Delay customizationModularizationReduce customer interaction, often through automation
Service DesignService Design
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Figure 5.12
Service DesignService Design
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Figure 5.12
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Moments of TruthMoments of TruthConcept created by Jan Carlzon of Scandinavian AirwaysCritical moments between the customer and the organization that
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customer and the organization that determine customer satisfactionThere may be many of these momentsThese are opportunities to gain or lose business
MomentsMoments--ofof--Truth Truth Computer Company HotlineComputer Company Hotline
• The technician was sincerely concerned and apologetic about my problem
• He asked intelligent questions that allowed me
Experience Enhancers
• Only one local number needs to be dialed
• I never get a busy signal
Standard Expectations
• I had to call more than once to get throughA recording spoke to me
Experience Detractors
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Figure 5.13
to feel confident in his abilities
• The technician offered various times to have work done to suit my schedule
• Ways to avoid future problems were suggested
Best
• I get a human being to answer my call quickly and he or she is pleasant and responsive to my problem
• A timely resolution to my problem is offered
• The technician is able to explain to me what I can expect to happen next
Better
• A recording spoke to me rather than a person
• While on hold, I get silence, and wonder if I am disconnected
• The technician sounded like he was reading a form of routine questions
• The technician sounded uninterested
• I felt the technician rushed me
Documents for ServicesDocuments for Services
High levels of customer interaction necessitates different documentation
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Often explicit job instructions for moments-of-truthScripts and storyboards are other techniques
First Bank Corp. DriveFirst Bank Corp. Drive--up up Teller Service GuidelinesTeller Service Guidelines
Be especially discreet when talking to the 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
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Mark lines to be completed or attach a note with instructions.Always say “please” and “thank you” when speaking through the microphone.Establish eye contact with the customer if the distance allows it.If a transaction requires that the customer park the car and come into the lobby, apologize for the inconvenience.
Application of Decision Application of Decision Trees to Product DesignTrees to Product DesignParticularly useful when there are a series of decisions and outcomes which lead to other decisions and
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which lead to other decisions and outcomes
Application of Decision Application of Decision Trees to Product DesignTrees to Product Design
1. Include all possible alternatives and states of nature - including “doing
ProceduresProcedures
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g gnothing”
2. Enter payoffs at end of branch3. Determine the expected value of
each branch and “prune” the tree to find the alternative with the best expected value
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(.6) Low sales
(.4)
High sales
Decision Tree ExampleDecision Tree ExamplePurchase CAD
Hire and train engineers
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(.6)
Low sales
(.4)
High sales
Do nothing
Figure 5.14
(.6) Low sales
(.4)
High sales
Decision Tree ExampleDecision Tree ExamplePurchase CAD
Hire and train engineers
$2,500,000 Revenue- 1,000,000 Mfg cost ($40 x 25,000)
- 500,000 CAD cost$1,000,000 Net
$800,000 Revenue- 320,000 Mfg cost ($40 x 8,000)- 500,000 CAD cost- $20,000 Net loss
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(.6)
Low sales
(.4)
High sales
Do nothing
Figure 5.14
EMV (purchase CAD system) = (.4)($1,000,000) + (.6)(- $20,000)
(.6) Low sales
(.4)
High sales
Decision Tree ExampleDecision Tree ExamplePurchase CAD
Hire and train engineers
$2,500,000 Revenue- 1,000,000 Mfg cost ($40 x 25,000)
- 500,000 CAD cost$1,000,000 Net
$800,000 Revenue- 320,000 Mfg cost ($40 x 8,000)- 500,000 CAD cost- $20,000 Net loss
$388,000
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(.6)
Low sales
(.4)
High sales
Do nothing
Figure 5.14
EMV (purchase CAD system) = (.4)($1,000,000) + (.6)(- $20,000)= $388,000
(.6) Low sales
(.4)
High sales
Decision Tree ExampleDecision Tree ExamplePurchase CAD
$388,000
Hire and train engineers$365 000
$2,500,000 Revenue- 1,000,000 Mfg cost ($40 x 25,000)
- 500,000 CAD cost$1,000,000 Net
$800,000 Revenue- 320,000 Mfg cost ($40 x 8,000)- 500,000 CAD cost- $20,000 Net loss
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(.6)
Low sales
(.4)
High sales
$365,000
Do nothing $0
$0 Net
$800,000 Revenue- 400,000 Mfg cost ($50 x 8,000)- 375,000 Hire and train cost
$25,000 Net
$2,500,000 Revenue- 1,250,000 Mfg cost ($50 x 25,000)
- 375,000 Hire and train cost$875,000 Net
Figure 5.14
Transition to ProductionTransition to ProductionKnow when to move to production
Product development can be viewed as evolutionary and never completeProduct must move from design to
d i i i l
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production in a timely mannerMost products have a trial production period to insure producibility
Develop tooling, quality control, trainingEnsures successful production
Transition to ProductionTransition to ProductionResponsibility must also transition as the product moves through its life cycle
Line management takes over from designThree common approaches to managing
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pp g gtransition
Project managersProduct development teamsIntegrate product development and manufacturing organizations
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