Goods & Services

Design

PowerPoint presentation to accompany

Heizer and Render
Operations Management, Global Edition, Eleventh Edition
Principles of Operations Management, Global Edition, Ninth Edition
PowerPoint slides by Jeff Heyl

2014
2014
Pearson
Pearson
Education
Education

5-1

Learning Objectives
1. Define product life cycle
2. Build a house of quality
3. Explain how time-based competition is
implemented by OM
4. Explain how the customer participates in
the design and delivery of services

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5-2

Goods and Services Selection

Organizations exist to provide goods or

services to society
Great products are the key to success
Top organizations typically focus on core
products http://fortune.com/fortune500/wal-mart-stores-inc-1/
Customers buy satisfaction, not just a
physical good or particular service
Fundamental to an organization's
strategy with implications throughout the
operations function

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5-3

Goods and Services Selection

Goods or services are

the basis for an
organization's
existence
Limited and predicable
life cycles requires
constantly looking for,
designing, and
developing new
products
New products generate
substantial revenue

50%
40%
Percent of sales from
new products

The higher the

percentage of sales
from the last 5 years,
the more likely the firm
is to be a leader.

30%
20%
10%
0%

Industry
leader

Top
third

Middle Bottom
third
third

Position of firm in its industry

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5-4

Product Decision
The objective of the product decision
Develop and implement a product strategy
that meets the demands of the marketplace
with a competitive advantage
Product Strategy Options Support Competitive
Advantage

Differentiation
Low cost
Rapid response:
flexibility, reliability, quickness

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5-5

Product Life Cycle

May be any length from a few days to decades
The operations function must be able to introduce new products successfully

Sales, cost, and cash flow

Cost of development and production

Sales revenue
Net revenue (profit)

Cash
flow
Negative
cash flow

Introduction

Loss

Growth

Maturity

Decline
Figure 5.2

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5-6

Life Cycle and Strategy

Introductory Phase

Fine tuning may

warrant unusual
expenses for

Growth Phase

Product design begins

to stabilize

Effective forecasting of
capacity becomes
necessary

Adding/ enhancing
capacity may be
necessary

1. Research
2. Product
development
3. Process
modification and
enhancement
4. Supplier
development

2014 Pearson Education

to accommodate the
increase in product
demand
5-7

Life Cycle and Strategy

Maturity Phase

Competitors now
established

High volume, innovative

production may be
needed

Improved cost control,

reduction in options,
paring down of product
line
for profitability and
market share

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Decline Phase

Unless product
makes a special
contribution to the
organization/ can
be sold with
unusually high
contribution

Production should be
terminated

5-8

Product-by-Value Analysis

Lists products in descending order of their

individual dollar contribution to the firm

Lists the total annual dollar contribution of

the product
**low contribution on a per-unit basis by a product may look
substantially different if it represent a large portion of the
companys sales

Helps management evaluate alternative

strategies (increase cash flow, marketing
penetration or reducing cost)

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5-9

Generating New Products

1. Understanding the customer
2. Economic change
3. Sociological and demographic
change
4. Technological change
5. Political and legal change
6. Changer brought about through
market practice, professional
standards, suppliers, distributors
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5 - 10

Quality Function Deployment

for product development

1. Identify customer wants

2. Identify how the good/service will satisfy customer
wants (characteristic,features,attributes)
3. Relate customer wants to product hows (build matrix)
4. Identify relationships between the firms hows
5. Develop customer importance ratings
->compute our importance rating

6. Evaluate competing products

7. Compare performance to desirable technical
attributes
(your & competitors)
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5 - 11

QFD House of Quality

Customer
importance
ratings

What the
customer
wants

Relationship
matrix

Our importance ratings

Target values

Weighted
rating

Technical
evaluation
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5 - 12

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

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5 - 13

House of Quality Example

Interrelationships

How to Satisfy
Customer Wants

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Relationship
Matrix

Technical
Attributes and
Evaluation

Ergonomic design

High number of pixels

Auto exposure

Auto focus

Aluminum components

Low electricity requirements

What the
Customer
Wants

Analysis of
Competitors

How to Satisfy
Customer Wants

5 - 14

House of Quality Example

Interrelationships

What the
Customer
Wants

Technical
Attributes and
Evaluation

What the
customer wants

2014 Pearson Education

Relationship
Matrix

Analysis of
Competitors

How to Satisfy
Customer Wants

Lightweight

Easy to use

Reliable

Easy to hold steady

High resolution

Customer
importance
rating
(5 = highest)

5 - 15

House of Quality Example

Interrelationships

High relationship

What the
Customer
Wants

Medium relationship
Low relationship

Lightweight

Analysis of
Competitors

How to Satisfy
Customer Wants

Relationship
Matrix

Technical
Attributes and
Evaluation

Relationship matrix
3

Easy to use

Reliable

Easy to hold steady

High resolution

How well what we do meets the customers want

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5 - 16

House of Quality Example

Relationships between
the things we can do

Interrelationships

Ergonomic design

High number of pixels

Auto exposure

Auto focus

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Relationship
Matrix

Technical
Attributes and
Evaluation

Aluminum components

Low electricity requirements

What the
Customer
Wants

5 - 17

Analysis of
Competitors

How to Satisfy
Customer Wants

High relationship = 5

What the
Customer
Wants

Medium relationship = 3
Low relationship = 1
3

Easy to use

Reliable

Easy to hold steady

High resolution

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How to Satisfy
Customer Wants

Relationship
Matrix

Technical
Attributes and
Evaluation

Lightweight

Our importance ratings

Interrelationships

Analysis of
Competitors

House of Quality Example

22

27

27

Weighted rating

32

25

5 - 18

House of Quality Example

Interrelationships

Relationship
Matrix

Company A

Technical
Attributes and
Evaluation

How well do competing products meet

customer wants
G=good , F=fair , P=poor

Company B

What the
Customer
Wants

Analysis of
Competitors

How to Satisfy
Customer Wants

Lightweight

Easy to use

Reliable

Easy to hold steady

High resolution

Our importance ratings

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22

5
5 - 19

House of Quality Example

Interrelationships

What the
Customer
Wants

Relationship
Matrix

Analysis of
Competitors

How to Satisfy
Customer Wants

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Panel ranking

Failure 1 per 10,000

2 circuits

75%

Technical
evaluation

0.5 A

Target values
(Technical
attributes)

2 to

Technical
Attributes and
Evaluation

Company A

0.7

60%

yes

ok

Company B

0.6

50%

yes

ok

Us

0.5

75%

yes

ok

G
5 - 20

Company B

Company A

Ergonomic design

Lightweight

G P

Easy to use

G P

Reliable

F G

Easy to hold steady

G P

High resolution

Panel ranking

Failure 1 per 10,000

2 to

75%

0.5 A

Target values
(Technical
attributes)

Technical
evaluation

22 9 27 27 32 25

2 circuits

Our importance ratings

2014 Pearson Education

High number of pixels

Auto exposure

Auto focus

Low electricity requirements

Completed
House of Quality

Aluminum components

House of Quality Example

Company A

0.7 60% yes

ok

Company B

0.6 50% yes

ok

Us

0.5 75% yes

ok

5 - 21

House of Quality Sequence

Deploying resources through the organization in
response to customer requirements
Show how quality effort will be deployed

satisfied by

Design
characteristics

satisfied by

satisfied by

Specific
component

Production
process

Quality
plan

Figure 5.4
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5 - 22

Organizing for Product Development

Traditionally with distinct departments

Fixed duties and responsibilities are defined

Difficult to foster forward thinking

R&Dresearch
Engineergdesign
Mnfctr engnrg
Productionproduce

A Champion

Product manager drives the product through the product

development system and related organizations

Team approach

Cross functional representatives from all disciplines or

functions
(concurrent engineering
speedier product development)
1. product development teams
2. design for manufacturability teams
3. value engineering teams

Japanese whole organization approach

No organizational divisions (not subdividing organization into different

departments)

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5 - 23

Product Development Continuum

Product life cycles are becoming shorter and the

(so do the
rate of technological change is increasing
risk & expense)

Developing new products faster can result in a

competitive advantage

Time-Based Competition:

competition based on time

rapidly developing products and moving them to

market

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5 - 24

Product Development (PD) Continuum

External Development Strategies
Alliances
Fitting issue:
Joint ventures
tech.,culture vs mission
Purchase technology or expertise
by acquiring the developer
Internal Development Strategies
Migrations of existing products
Enhancements to existing products Size,color,features
New internally developed products
Internal
Lengthy
High
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Cost of PD
Speed of PD

Shared
Rapid and/or Existing

Risk of PD

Shared
5 - 25

Product Development Continuum

Alliances

Used when new product are central to mission, but

resources are acquired and sizable risk is present.

Cooperative agreements between independent organizations

Useful when technology is developing

Reduces risks
Joint Ventures

Both organizations learn

Risks are shared( joint ownership)

Exploiting specific product opportunities that may not be

central to the firms mission
Purchasing technology by acquiring a firm

Speeds development

Issues concern the fit between the acquired organization and

product and the host
(value between the acquired org. and purchased org.)

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5 - 26

Service Design

Service typically includes direct interaction with

the customer

Process-chain-network (PCN) analysis

focuses on the ways in which processes can be

designed to optimize interaction between
firms and their customers

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5 - 27

Process-Chain-Network (PCN) Analysis

Figure 5.12
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5 - 28

Process-Chain-Network (PCN) Analysis

Direct interaction region includes process steps that
involve interaction between participants
The surrogate (substitute) interaction region includes
process steps in which one participant is acting on another
participants resources
The independent processing region includes steps in
which the supplier and/or the customer is acting on resources
where each has maximum control
All three regions have similar operating issues but the
appropriate way of handling the issues differs across regions
Service operations exist only within the area of direct and
surrogate interaction
PCN analysis provides insight to aid in positioning and
designing processes that can achieve strategic objectives
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5 - 29

Adding Service Efficiency

Service productivity is notoriously low partially because of customer
involvement in the design or delivery of the service, or both. This
complicates the product design challenge.
Ways to increase service efficiency.

Moment of truth: Critical moments between the customer and the

organization that determine customer satisfaction
Crucial relationship between the customer and the organization

Limit the options

Provide options to reduce ambiguity
Improves efficiency and ability to meet customer expectations

Delay customization (hair salon, restaurant operate)

Modularization
Eases customization of a service

Automation
Reduces cost, increases customer service
(ticketless service via kiosks,check-cashing activity via ATM)
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