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SCM 352

5 Design of Goods and Services

© 2011 Pearson Education, Inc. publishing as Prentice Hall

Outline

• Company Profile: Regal Marine• Product Development System• House of Quality• DFM/Value Engineering• Moments of Truths• Decision Trees Applied to

Product Design

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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As Engineering designed it.

© 1984-1994 T/Maker Co.

As Operations made it.

© 1984-1994 T/Maker Co.

As Marketing interpreted it.

© 1984-1994 T/Maker Co.

As the Customer wanted it.

© 1984-1994 T/Maker Co.

Humor in Product Design

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• The objective of the product/service decision is to develop and implement a product/service strategy that meets the demands of the marketplace with a competitive advantage

• Customers buy satisfaction, not just a physical good or particular service

• P&G sells the benefit of clean clothes• Airlines - providing an experience rather than

transporting passengers from point A to B

What is Product/Service Design?

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Industry leader

Top third

Middle third

Bottom third

Percentage of Sales from New Products50%

40%

30%

20%

10%

Position of Firm in Its Industry

Importance of New Products

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Scope of product

development team

Scope for design and engineering

teams

Evaluation

Introduction

Test Market

Functional Specifications

Design Review

Product Specifications

Customer Requirements

Ability

Ideas

Product Development System

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House of Quality

• Identify customer wants• Identify how the good/service will satisfy

customer wants• Relate the customer’s wants to the product’s

hows• Identify relationships between the firm’s hows• Develop importance ratings• Evaluate competing products

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Relationshipmatrix

How to satisfycustomer wants

Interrelationships

Com

petit

ive

asse

ssm

ent

Technicalevaluation

Target values

What the customer

wants

Customer importance

ratings

Weighted rating

QFD House of Quality

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Your team has been charged with designing a new camera for Great Cameras, Inc.The first action is to construct a House of Quality

House of Quality Example

Completed House of Quality

House of Quality Example

Lightweight 3Easy to use 4Reliable 5Easy to hold steady 2Color correction 1Our importance ratings

Low

ele

ctric

ity re

quire

men

ts

Alu

min

um c

ompo

nent

s

Aut

o fo

cus

Aut

o ex

posu

re

Pain

t pal

let

Ergo

nom

ic d

esig

n

Com

pany

A

Com

pany

B

G PG PF 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

0.5

A75

%2’

to ∞

2ci

rcui

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r 10,

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22 9 27 27 32 25

(Principles of Operations Management, Heizer & Render, 7th Edition)

G = GoodF = FairP = Poor

What thecustomer wants?

How to SatisfyCustomer

Wants

RelationshipMatrix

CompetitorAnalysis

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DFM & Value Engineering

• Cross functional, team approach• Design for ease of manufacturing/service (DFM)• Achieve equivalent or better performance at a

lower cost while meeting customer needs • Simplify & reduce complexity - standardization• Modularity - Can parts be combined?• Improved maintainability/serviceability• Environmentally friendly design• Robust design - small variations in production

or assembly do not adversely affect product

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Moments of Truth

• Concept created by Jan Carlzon of Scandinavian Airways

• Critical moments between the customer and the organization that determine customer satisfaction

• There may be many of these moments• These are opportunities to gain or lose

business

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The technician was sincerely concerned and apologetic about my problemHe asked intelligent questions that allowed me to feel confident in his abilitiesThe technician offered various times to have work done to suit my scheduleWays to avoid future problems were suggested

Experience Enhancers

Only one local number needs to be dialedI never get a busy signalI get a human being to answer my call quickly and he or she is pleasant and responsive to my problemA timely resolution to my problem is offeredThe technician is able to explain to me what I can expect to happen next

Standard Expectations

Computer Company Hotline

I had to call more than once to get throughA recording spoke to me rather than a personWhile on hold, I get silence,and wonder if I am disconnectedThe technician sounded like he was reading a form of routine questionsThe technician sounded uninterestedI felt the technician rushed me

Experience Detractors

Moments of Truth

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• Particularly useful when there are a series of decisions and outcomes which lead to other decisions and outcomes.

• 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 & “prune” the tree to find the alternative with the best expected value

Decision Trees & Product Design

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(.6)

Low sales

(.4)

High sales

(.6) Low sales

(.4)

High sales

Purchase CAD

Do nothing

Decision Tree - Example 3, p. 177

25,000 units @ $100

25,000 units @ $100

8,000 units @ $100

8,000 units @ $100

Hire & TrainEngineers

CAD cost$500,000

Cost to hire & train engineers $375,000

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$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

Decision Tree Example

(.6) Low sales

(.4)

High sales

(.6)

Low sales

(.4)

High sales

Cost to hire & train engineers $375,000

Do nothing

CAD cost$500,000

Purchase CAD

Hire & TrainEngineers

EMV (purchase CAD system) = (.4)($1,000,000) + (.6)(- $20,000)= $388,000

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Decision Tree Example

(.6)

Low sales

(.4)

High sales

(.6) Low sales

(.4)

High sales

Purchase CAD$388,000

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

$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

Hire & Train$365,000

Thank You

Questions? ?