module-03- product- service & process design
TRANSCRIPT
-
8/8/2019 Module-03- Product- Service & Process Design
1/69
1
Module-2 (Chapter 4)Module-2 (Chapter 4)Module-2 (Chapter 4)Module-2 (Chapter 4)Product, Process, and Service DesignProduct, Process, and Service Design
-
8/8/2019 Module-03- Product- Service & Process Design
2/69
2
OverviewOverviewOverviewOverviewq Designing and Developing Products andDesigning and Developing Products and
ServicesServicesq Process Planning and DesignProcess Planning and Designq Major Factors Affecting Process DesignMajor Factors Affecting Process Design
DecisionsDecisionsq Types of Process DesignsTypes of Process Designsq Interrelationships Among Product Design,Interrelationships Among Product Design,
ProcessProcess Design, and Inventory PolicyDesign, and Inventory Policyq Process Design in ServicesProcess Design in Servicesq Deciding Among Processing AlternativesDeciding Among Processing Alternativesq
Wrap-Up: What World-Class Companies DoWrap-Up: What World-Class Companies Do
-
8/8/2019 Module-03- Product- Service & Process Design
3/69
3
PRODUCT, PROCESS AND SERVICE DESIGNPRODUCT, PROCESS AND SERVICE DESIGNPRODUCT, PROCESS AND SERVICE DESIGNPRODUCT, PROCESS AND SERVICE DESIGN
DESIGNING ANDDESIGNING AND
DEVELOPINGDEVELOPINGPRODUCTS ANDPRODUCTS AND
SERVICESSERVICES
-
8/8/2019 Module-03- Product- Service & Process Design
4/69
4
Product/Service DesignProduct/Service DesignProduct/Service DesignProduct/Service Design
When a product/service is designed:When a product/service is designed:q The detailed characteristics of theThe detailed characteristics of the
product/service are established. product/service are established.q The characteristics of the product/serviceThe characteristics of the product/service
directly affects how the product/service can bedirectly affects how the product/service can be produced/ delivered. produced/ delivered.
q How the product/service is produced/deliveredHow the product/service is produced/delivereddetermines the design of thedetermines the design of the
production/delivery system. production/delivery system.
-
8/8/2019 Module-03- Product- Service & Process Design
5/69
5
Product/Service DesignProduct/Service DesignProduct/Service DesignProduct/Service Design
Product / service design directly affects :Product / service design directly affects :q Product / service qualityProduct / service qualityq Production / delivery costProduction / delivery costq
Customer satisfactionCustomer satisfaction
-
8/8/2019 Module-03- Product- Service & Process Design
6/69
6
Product/Service Design and DevelopmentProduct/Service Design and DevelopmentProduct/Service Design and DevelopmentProduct/Service Design and Development
q Sources of Product InnovationSources of Product Innovationq Developing New Products/ServicesDeveloping New Products/Servicesq Getting Them to Market Faster Getting Them to Market Faster q Improving Current Products/ServicesImproving Current Products/Servicesq
Designing for Ease of ProductionDesigning for Ease of Productionq Designing for QualityDesigning for Qualityq Designing and Developing New ServicesDesigning and Developing New Services
FOLLOWING ARE RELEVENT :
-
8/8/2019 Module-03- Product- Service & Process Design
7/69
7
Sources of Product/Service InnovationSources of Product/Service InnovationSources of Product/Service InnovationSources of Product/Service Innovation
q CustomersCustomersq ManagersManagersq MarketingMarketingq OperationsOperationsq EngineeringEngineeringq Research and Development (R&D)Research and Development (R&D)
q Basic researchBasic researchq Applied researchApplied research
-
8/8/2019 Module-03- Product- Service & Process Design
8/69
8
Steps in Developing New ProductsSteps in Developing New ProductsSteps in Developing New ProductsSteps in Developing New Products
1.1. Technical and economic feasibility studiesTechnical and economic feasibility studies2.2. Prototype designPrototype design3.3. Performance testing of prototypePerformance testing of prototype
4.4. Market sensing/evaluation and economic evaluationMarket sensing/evaluation and economic evaluationof the prototypeof the prototype5.5. Design of production modelDesign of production model
6.6. Market/performance/process testing and economicMarket/performance/process testing and economicevaluation of production modelevaluation of production model
7.7. Continuous modification of production modelContinuous modification of production model
-
8/8/2019 Module-03- Product- Service & Process Design
9/69
9
Steps in Developing New ProductsSteps in Developing New ProductsSteps in Developing New ProductsSteps in Developing New Products
1.1. Technical and Economic FeasibilityTechnical and Economic FeasibilityStudiesStudies
q Determine the advisability of Determine the advisability of establishing a project for developingestablishing a project for developingthe productthe product
q
If initial feasibility studies areIf initial feasibility studies arefavorable, engineers prepare an initialfavorable, engineers prepare an initial prototype design prototype design
-
8/8/2019 Module-03- Product- Service & Process Design
10/69
10
Steps in Developing New ProductsSteps in Developing New ProductsSteps in Developing New ProductsSteps in Developing New Products
2.2. Prototype DesignPrototype Designq This design should exhibit the basicThis design should exhibit the basic
form, fit, and function of the finalform, fit, and function of the final product productq It will not necessarily be identicalIt will not necessarily be identical
to the production modelto the production model
-
8/8/2019 Module-03- Product- Service & Process Design
11/69
11
Steps in Developing New ProductsSteps in Developing New ProductsSteps in Developing New ProductsSteps in Developing New Products
3.3. Performance Testing of PrototypePerformance Testing of Prototypeq Performance testing andPerformance testing and
redesign of the prototyperedesign of the prototypecontinues until this design-test-continues until this design-test-
redesign process produces aredesign process produces asatisfactorily performingsatisfactorily performing prototype prototype
-
8/8/2019 Module-03- Product- Service & Process Design
12/69
12
Steps in Developing New ProductsSteps in Developing New ProductsSteps in Developing New ProductsSteps in Developing New Products
4.4. Market Sensing/Evaluation and Economic EvaluationMarket Sensing/Evaluation and Economic Evaluationof the Prototypeof the Prototype
q Accomplished by demonstrations to potentialAccomplished by demonstrations to potentialcustomers, market test, or market surveyscustomers, market test, or market surveys
q If the response to the prototype is favorable,If the response to the prototype is favorable,economic evaluation of the prototype is performedeconomic evaluation of the prototype is performedto estimate production volume, costs, and profitsto estimate production volume, costs, and profits
q
If the economic evaluation is favorable, the projectIf the economic evaluation is favorable, the projectenters the production design phase.enters the production design phase.
-
8/8/2019 Module-03- Product- Service & Process Design
13/69
13
Steps in Developing New ProductsSteps in Developing New ProductsSteps in Developing New ProductsSteps in Developing New Products
5.5. Design of Production ModelDesign of Production Modelq The initial design of the productionThe initial design of the production
model will not be the final design;model will not be the final design;the model will evolvethe model will evolve
-
8/8/2019 Module-03- Product- Service & Process Design
14/69
14
Steps in Developing New ProductsSteps in Developing New ProductsSteps in Developing New ProductsSteps in Developing New Products
6.6. Market/Performance/Process Testing andMarket/Performance/Process Testing andEconomic Evaluation of Production ModelEconomic Evaluation of Production Model
q The production model should exhibit:The production model should exhibit:q low costlow costq reliable qualityreliable qualityq superior performancesuperior performanceq the ability to be produced in the desiredthe ability to be produced in the desired
quantities on the intended equipmentquantities on the intended equipment
-
8/8/2019 Module-03- Product- Service & Process Design
15/69
-
8/8/2019 Module-03- Product- Service & Process Design
16/69
16
Managing Product Development ProjectsManaging Product Development ProjectsManaging Product Development ProjectsManaging Product Development Projects
q
About 5% of all new-product ideas survive toAbout 5% of all new-product ideas survive to production, and only about 10% of these are production, and only about 10% of these aresuccessful.successful.
q It is best to cancel unpromising new-product/serviceIt is best to cancel unpromising new-product/servicedevelopment projects early!development projects early!
q Employees often become emotionally caught up inEmployees often become emotionally caught up inthese projects and are overly optimisticthese projects and are overly optimistic
q An impartial management review board is needed for An impartial management review board is needed for periodic reviews of the progress of these projects. periodic reviews of the progress of these projects.
-
8/8/2019 Module-03- Product- Service & Process Design
17/69
17
Getting New Products to Market FasterGetting New Products to Market FasterGetting New Products to Market FasterGetting New Products to Market Faster
q
Speed creates competitive advantagesSpeed creates competitive advantagesq Speed saves moneySpeed saves moneyq Tools to improve speed:Tools to improve speed:
q
Autonomous design and development teamsAutonomous design and development teamsq Computer-aided design/computer-aidedComputer-aided design/computer-aided
manufacturing (CAD/CAM)manufacturing (CAD/CAM)q Simultaneous (concurrent) engineeringSimultaneous (concurrent) engineering
-
8/8/2019 Module-03- Product- Service & Process Design
18/69
18
Tools to Improve Speed to MarketTools to Improve Speed to MarketTools to Improve Speed to MarketTools to Improve Speed to Market
q Autonomous Design and Development TeamsAutonomous Design and Development Teamsq Teams are given decision-making responsibilityTeams are given decision-making responsibility
and more freedom to design and introduce newand more freedom to design and introduce new products/services products/services
q Time-to-market has been slashed dramaticallyTime-to-market has been slashed dramaticallyq Enormous sums of money have been savedEnormous sums of money have been savedq Teams do not have to deal with the bureaucraticTeams do not have to deal with the bureaucratic
red tape ordinarily required to obtain approvalsred tape ordinarily required to obtain approvals
-
8/8/2019 Module-03- Product- Service & Process Design
19/69
-
8/8/2019 Module-03- Product- Service & Process Design
20/69
20
Tools to Improve Speed to MarketTools to Improve Speed to MarketTools to Improve Speed to MarketTools to Improve Speed to Market
q
SimultaneousSimultaneous(Concurrent)(Concurrent)EngineeringEngineering
Economic and TechnicalEconomic and TechnicalFeasibility StudiesFeasibility Studies
Product/Product/Service IdeasService Ideas
Production Process DesignProduction Process DesignProduct/Service DesignProduct/Service Design
Produce and MarketProduce and MarketNew Product/ServiceNew Product/Service
ContinuousInteraction
-
8/8/2019 Module-03- Product- Service & Process Design
21/69
21
Improving the DesignImproving the Designof Existing Products/Servicesof Existing Products/Services
q Focus is improving performance, quality, andFocus is improving performance, quality, andcostcost
q Objective is maintaining or improving marketObjective is maintaining or improving marketshare of maturing products/servicesshare of maturing products/services
q Little changes can be significantLittle changes can be significantq Small, steady (continuous) improvements canSmall, steady (continuous) improvements can
add up to huge long-term improvementsadd up to huge long-term improvementsq Value analysisValue analy sis is practiced, meaning designis practiced, meaning design
features are examined in terms of their features are examined in terms of their cost/benefit (value).cost/benefit (value).
-
8/8/2019 Module-03- Product- Service & Process Design
22/69
22
Designing for Ease of ProductionDesigning for Ease of Production
q
Ease of ProductionEase of Production ((ManufacturabilityManufacturability ))q SpecificationsSpeci fications - Precise information about the- Precise information about the
characteristics of the productcharacteristics of the productq TolerancesTolerances - Minimum & maximum limits on a- Minimum & maximum limits on a
dimension that allows the item to function asdimension that allows the item to function asdesigneddesigned
q StandardizationStandardization - Reduce variety among a group of - Reduce variety among a group of
products or parts products or partsq SimplificationSimp lification - Reduce or eliminate the complexity- Reduce or eliminate the complexity
of a part or productof a part or product
-
8/8/2019 Module-03- Product- Service & Process Design
23/69
23
Designing for QualityDesigning for QualityDesigning for QualityDesigning for Quality
q Crucial element of product design is itsCrucial element of product design is itsimpact on qualityimpact on quality
q Quality is determined by the customersQuality is determined by the customers perception of the degree of excellence of perception of the degree of excellence of the product/services characteristicsthe product/services characteristics
q
Chapter 7 covers the principles of Chapter 7 covers the principles of designing products/services for qualitydesigning products/services for quality
-
8/8/2019 Module-03- Product- Service & Process Design
24/69
24
Designing and Developing New ServicesDesigning and Developing New ServicesDesigning and Developing New ServicesDesigning and Developing New Services
Three general dimensions of service design are:Three general dimensions of service design are:q Degree of Standardization of the ServiceDegree of Standardization of the Service
q Custom-fashioned for particular customers or Custom-fashioned for particular customers or basically the same for all customers? basically the same for all customers?
q Degree of Customer Contact in Delivering the ServiceDegree of Customer Contact in Delivering the Serviceq High level of contact (dress boutique) or low levelHigh level of contact (dress boutique) or low level
(fast-food restaurant)?(fast-food restaurant)?q
Mix of Physical Goods and Intangible ServicesMix of Physical Goods and Intangible Servicesq Mix dominated by physical goods (tailors shop) or Mix dominated by physical goods (tailors shop) or by intangible services (university)? by intangible services (university)?
-
8/8/2019 Module-03- Product- Service & Process Design
25/69
25
Designing and Developing New ServicesDesigning and Developing New ServicesDesigning and Developing New ServicesDesigning and Developing New Services
q
Differences Between New Service and New ProductDifferences Between New Service and New ProductDevelopmentDevelopment
q Unless services are dominated by physical goods,Unless services are dominated by physical goods,their development usually does not requiretheir development usually does not requireengineering, testing, and prototype building.engineering, testing, and prototype building.
q Because many service businesses involveBecause many service businesses involveintangible services, market sensing tends to beintangible services, market sensing tends to be
more by surveys rather than by market tests andmore by surveys rather than by market tests anddemonstrations.demonstrations.
-
8/8/2019 Module-03- Product- Service & Process Design
26/69
26
ProcessProcessPlanning and DesignPlanning and Design
-
8/8/2019 Module-03- Product- Service & Process Design
27/69
27
Inputs:Inputs: Product/Service InformationProduct/Service Information Production System InformationProduction System Information Operations StrategyOperations Strategy
Process Planning & Design:Process Planning & Design: Process-Type SelectionProcess-Type Selection Vertical Integration StudiesVertical Integration Studies
Process/Product StudiesProcess/Product Studies Equipment StudiesEquipment Studies Production Procedures StudiesProduction Procedures Studies Facilities StudiesFacilities Studies
Outputs:Output s: Process TechnologyProcess Technology FacilitiesFacilities Personnel EstimatesPersonnel Estimates
Process Planning and Design SystemProcess Planning and Design SystemProcess Planning and Design SystemProcess Planning and Design System
-
8/8/2019 Module-03- Product- Service & Process Design
28/69
28
PRODUCT, PROCESS AND SERVICE DESIGNPRODUCT, PROCESS AND SERVICE DESIGNPRODUCT, PROCESS AND SERVICE DESIGNPRODUCT, PROCESS AND SERVICE DESIGN
MAJOR FACTORSMAJOR FACTORS
AFFECTINGAFFECTINGPROCESS DESIGNPROCESS DESIGN
DECISIONSDECISIONS
-
8/8/2019 Module-03- Product- Service & Process Design
29/69
-
8/8/2019 Module-03- Product- Service & Process Design
30/69
30
Nature of Product/Service DemandNature of Product/Service DemandNature of Product/Service DemandNature of Product/Service Demand
q
Production processes must have adequate capacity toProduction processes must have adequate capacity to produce the volume of the products/services that produce the volume of the products/services thatcustomers need.customers need.
q Provisions must be made for expanding or Provisions must be made for expanding or contracting capacity to keep pace with demandcontracting capacity to keep pace with demand
patterns. patterns.q Some types of processes are more easily expandedSome types of processes are more easily expanded
and contracted than others.and contracted than others.q Product/service price affects demand, so pricingProduct/service price affects demand, so pricing
decisions and the choice of processes must bedecisions and the choice of processes must besynchronized.synchronized.
-
8/8/2019 Module-03- Product- Service & Process Design
31/69
31
Degree of Vertical IntegrationDegree of Vertical IntegrationDegree of Vertical IntegrationDegree of Vertical Integration
q
Vertical integrationVertical integr ation is the amount of the productionis the amount of the productionand distribution chain that is brought under theand distribution chain that is brought under theownership of a company.ownership of a company.
q This determines how many production processes needThis determines how many production processes needto be planned and designed.to be planned and designed.
q Decision of integration is based on cost, availabilityDecision of integration is based on cost, availabilityof capital, quality, technological capability, and more.of capital, quality, technological capability, and more.
q Strategic outsourcingStrategi c outsourcing (lower degree of integration) is(lower degree of integration) isthe outsourcing of processes in order to react quicker the outsourcing of processes in order to react quicker to changes in customer needs, competitor actions, andto changes in customer needs, competitor actions, andtechnology.technology.
-
8/8/2019 Module-03- Product- Service & Process Design
32/69
32
Production FlexibilityProduction FlexibilityProduction FlexibilityProduction Flexibility
q
Product flexibilityProduct flexibility -- ability of the production (or -- ability of the production (or delivery) system to quickly change from producingdelivery) system to quickly change from producing(delivering) one product (or service) to another.(delivering) one product (or service) to another.
q Volume flexibilityVolume flexibility -- ability to quickly increase or -- ability to quickly increase or reduce the volume of product( or service) producedreduce the volume of product( or service) produced(or delivered).(or delivered).
-
8/8/2019 Module-03- Product- Service & Process Design
33/69
33
Degree of AutomationDegree of AutomationDegree of AutomationDegree of Automation
q
Advantages of automationAdvantages of automationq Improves product qualityImproves product qualityq Improves product flexibilityImproves product flexibilityq
Reduces labor and related costsReduces labor and related costsq Disadvantages of automationDisadvantages of automation
q Equipment can be very expensiveEquipment can be very expensiveq Integration into existing operations can be difficultIntegration into existing operations can be difficult
-
8/8/2019 Module-03- Product- Service & Process Design
34/69
34
Product/Service QualityProduct/Service QualityProduct/Service QualityProduct/Service Quality
q
Old viewpoint high-quality products must be madeOld viewpoint high-quality products must be madein small quantities by expert craftsmenin small quantities by expert craftsmenq New viewpoint high-quality products can be mass- New viewpoint high-quality products can be mass-
produced using automated machinery produced using automated machineryq Automated machinery can produce products of Automated machinery can produce products of
incredible uniformityincredible uniformityq The choice of design of production processes isThe choice of design of production processes is
affected by the need for superior quality.affected by the need for superior quality.
-
8/8/2019 Module-03- Product- Service & Process Design
35/69
35
PRODUCT, PROCESS AND SERVICE DESIGNPRODUCT, PROCESS AND SERVICE DESIGNPRODUCT, PROCESS AND SERVICE DESIGNPRODUCT, PROCESS AND SERVICE DESIGN
TYPES OFTYPES OFPROCESSPROCESSDESIGNSDESIGNS
-
8/8/2019 Module-03- Product- Service & Process Design
36/69
36
Types of Process DesignsTypes of Process DesignsTypes of Process DesignsTypes of Process Designs
q Product-FocusedProduct-Focusedq Process-FocusedProcess-Focusedq Group Technology / Cellular Group Technology / Cellular
ManufacturingManufacturing
-
8/8/2019 Module-03- Product- Service & Process Design
37/69
37
Product-FocusedProduct-FocusedProduct-FocusedProduct-Focusedq
Processes (conversions) are arranged based onProcesses (conversions) are arranged based onthe sequence of operations required to producethe sequence of operations required to producea product or provide a servicea product or provide a service
q
Also called Production Line or AssemblyAlso called Production Line or AssemblyLineLineq Two general formsTwo general forms
q
Discrete unit automobiles, dishwashersDiscrete unit automobiles, dishwashersq Process (Continuous) petrochemicals,Process (Continuous) petrochemicals,
paper paper
-
8/8/2019 Module-03- Product- Service & Process Design
38/69
38
PurchasedPurchased
Components,Components,SubassembliesSubassemblies
Product-FocusedProduct-FocusedProduct-FocusedProduct-Focused
2222
3311
44
1
77
66
55
ComponentsComponents Subassem.Subassem.
AssembliesAssemblies
Product/Material FlowProduct/Material Flow
Production OperationProduction Operation
A s s
e m b l
i e s
A s s
e m b l
i e s
Raw MaterialRaw Material ComponentsComponentsC o m p o n .
C o m p o n .
S u b a s s e m .
S u b a s s e m .
Raw MaterialRaw Material
Fin. GoodsFin. Goods
-
8/8/2019 Module-03- Product- Service & Process Design
39/69
-
8/8/2019 Module-03- Product- Service & Process Design
40/69
40
Process-FocusedProcess-FocusedProcess-FocusedProcess-Focused
q
Processes (conversions) are arranged based on theProcesses (conversions) are arranged based on thetype of process, i.e., similar processes are groupedtype of process, i.e., similar processes are groupedtogether together
q Products/services (jobs) move from departmentProducts/services (jobs) move from department(process group) to department based on that particular (process group) to department based on that particular
jobs processing requirements jobs processing requirementsq Also called Job Shop or Intermittent ProductionAlso called Job Shop or Intermittent Productionq
ExamplesExamplesq Auto body repair Auto body repair q Custom woodworking shopCustom woodworking shop
-
8/8/2019 Module-03- Product- Service & Process Design
41/69
41
Process-FocusedProcess-FocusedProcess-FocusedProcess-Focused
CuttingCutting AssemblyAssembly SandingSanding FinishingFinishingPlaningPlaning
DrillingDrilling
ShapingShaping
TurningTurning
1111 5555 7777
3333
2222
1111 6666
3333
6666
4444
2222Job AJob AJob AJob A
Job BJob B
4444 5555
Custom Woodworking ShopCustom Woodworking Shop
-
8/8/2019 Module-03- Product- Service & Process Design
42/69
42
Process-FocusedProcess-FocusedProcess-FocusedProcess-Focused
q
AdvantagesAdvantagesq High product flexibilityHigh product flexibilityq Lower initial investment levelLower initial investment level
q DisadvantagesDisadvantagesq Higher labor-skill requirementsHigher labor-skill requirementsq More worker trainingMore worker trainingq More supervisionMore supervisionq More complex production planning and controllingMore complex production planning and controlling
-
8/8/2019 Module-03- Product- Service & Process Design
43/69
43
Group Technology/Cellular ManufacturingGroup Technology/Cellular ManufacturingGroup Technology/Cellular ManufacturingGroup Technology/Cellular Manufacturing
q
Group TechnologyGroup Technologyq Each part produced receives a multi-digit code thatEach part produced receives a multi-digit code that
describes the physical characteristics of the part.describes the physical characteristics of the part.q Parts with similar characteristics are grouped intoParts with similar characteristics are grouped into
part families part familiesq Parts in a part family are typically made on theParts in a part family are typically made on the
same machines with similar toolingsame machines with similar tooling
-
8/8/2019 Module-03- Product- Service & Process Design
44/69
-
8/8/2019 Module-03- Product- Service & Process Design
45/69
45
Group Technology/Cellular ManufacturingGroup Technology/Cellular ManufacturingGroup Technology/Cellular ManufacturingGroup Technology/Cellular Manufacturing
q
Advantages (relative to a job shop)Advantages (relative to a job shop)q Process changeovers simplifiedProcess changeovers simplifiedq Variability of tasks reduced (less training needed)Variability of tasks reduced (less training needed)q
More direct routes through the systemMore direct routes through the systemq Quality control is improvedQuality control is improvedq Production planning and control simpler Production planning and control simpler q Automation simpler Automation simpler
-
8/8/2019 Module-03- Product- Service & Process Design
46/69
46
Group Technology/Cellular ManufacturingGroup Technology/Cellular ManufacturingGroup Technology/Cellular ManufacturingGroup Technology/Cellular Manufacturing
q
DisadvantagesDisadvantagesq Duplication of equipmentDuplication of equipmentq Under-utilization of facilitiesUnder-utilization of facilitiesq
Processing of items that do not fit into a familyProcessing of items that do not fit into a familymay be inefficientmay be inefficient
-
8/8/2019 Module-03- Product- Service & Process Design
47/69
47
Group Technology/Cellular ManufacturingGroup Technology/Cellular ManufacturingGroup Technology/Cellular ManufacturingGroup Technology/Cellular Manufacturing
q
Candidates for GT/CM are job shops having:Candidates for GT/CM are job shops having:q A degree of parts standardizationA degree of parts standardizationq Moderate batch sizesModerate batch sizes
-
8/8/2019 Module-03- Product- Service & Process Design
48/69
48
Product/Process Design & Inventory PolicyProduct/Process Design & Inventory PolicyProduct/Process Design & Inventory PolicyProduct/Process Design & Inventory Policy
q
Standard Products and Produce to Stock Standard Products and Produce to Stock q Sales forecasts drive production scheduleSales forecasts drive production scheduleq Maintain pre-determined finished-goods levelsMaintain pre-determined finished-goods levelsq
MRP forecast drives material orderingMRP forecast drives material orderingq Custom Products and Produce to OrderCustom Products and Produce to Orderq Orders set production schedule and drive materialOrders set production schedule and drive material
deliveriesdeliveriesq Design time (Design time ( preproduction planning preproduction planning ) may be) may be
required before production can be scheduledrequired before production can be scheduled
-
8/8/2019 Module-03- Product- Service & Process Design
49/69
49
PRODUCT, PROCESS AND SERVICE DESIGNPRODUCT, PROCESS AND SERVICE DESIGNPRODUCT, PROCESS AND SERVICE DESIGNPRODUCT, PROCESS AND SERVICE DESIGN
PROCESSPROCESS
DESIGN INDESIGN IN
SERVICESSERVICES
-
8/8/2019 Module-03- Product- Service & Process Design
50/69
50
Process Design in ServicesProcess Design in ServicesProcess Design in ServicesProcess Design in Services
q
Some of the factors important in process design for Some of the factors important in process design for products are also important in services: products are also important in services:q Nature (level and pattern) of customer demand Nature (level and pattern) of customer demandq Degree of vertical integrationDegree of vertical integrationq Production flexibilityProduction flexibilityq Degree of automationDegree of automationq Service qualityService quality
-
8/8/2019 Module-03- Product- Service & Process Design
51/69
51
Process Design in ServicesProcess Design in ServicesProcess Design in ServicesProcess Design in Services
q
Three schemes for producing and delivering servicesThree schemes for producing and delivering servicesq Quasi-ManufacturingQuasi-Manufacturingq Customer-as-ParticipantCustomer-as-Participantq
Customer-as-ProductCustomer-as-Product
-
8/8/2019 Module-03- Product- Service & Process Design
52/69
52
Process Design in ServicesProcess Design in ServicesProcess Design in ServicesProcess Design in Services
q
Quasi-ManufacturingQuasi-Manufacturingq Physical goods are dominant over intangiblePhysical goods are dominant over intangible
serviceserviceq Production of goods takes place along a productionProduction of goods takes place along a production
linelineq Operations can be highly automatedOperations can be highly automatedq Almost no customer interactionAlmost no customer interactionq Little regard for customer relationsLittle regard for customer relationsq Example banks checking encoding operationExample banks checking encoding operation
-
8/8/2019 Module-03- Product- Service & Process Design
53/69
53
Process Design in ServicesProcess Design in ServicesProcess Design in ServicesProcess Design in Services
q
Customer-as-ParticipantCustomer-as-Participantq Physical goods may be a significant part of thePhysical goods may be a significant part of the
serviceserviceq Services may be either standardized or customServices may be either standardized or customq High degree of customer involvement in theHigh degree of customer involvement in the
process processq Examples: ATM, self-service gas stationExamples: ATM, self-service gas station
-
8/8/2019 Module-03- Product- Service & Process Design
54/69
54
Process Design in ServicesProcess Design in ServicesProcess Design in ServicesProcess Design in Services
q
Customer-as-ProductCustomer-as-Productq Service is providedService is provided through personal attention tothrough personal attention to
the customer the customer q Customized serviceCustomized service onon the customer the customer q High degree of customer contactHigh degree of customer contactq There is a perception of high qualityThere is a perception of high qualityq Customer becomes the central focus of the processCustomer becomes the central focus of the process
designdesignq Examples: medical clinic, hair salonExamples: medical clinic, hair salon
-
8/8/2019 Module-03- Product- Service & Process Design
55/69
-
8/8/2019 Module-03- Product- Service & Process Design
56/69
56
PRODUCT, PROCESS AND SERVICE DESIGNPRODUCT, PROCESS AND SERVICE DESIGNPRODUCT, PROCESS AND SERVICE DESIGNPRODUCT, PROCESS AND SERVICE DESIGN
DECIDINGDECIDING
AMONGAMONGPROCESSINGPROCESSINGALTERNATIVESALTERNATIVES
-
8/8/2019 Module-03- Product- Service & Process Design
57/69
57
Deciding Among Processing AlternativesDeciding Among Processing AlternativesDeciding Among Processing AlternativesDeciding Among Processing Alternatives
q
Batch Size and Product/Service VarietyBatch Size and Product/Service Varietyq Capital RequirementsCapital Requirementsq Economic AnalysisEconomic Analysis
q
Cost Functions of Alternative ProcessesCost Functions of Alternative Processes
q Break-Even AnalysisBreak-Even Analysisq Financial AnalysisFinancial Analysis
Process Design DependsProcess Design DependsProcess Design DependsProcess Design Depends
-
8/8/2019 Module-03- Product- Service & Process Design
58/69
58
Process Design DependsProcess Design Dependson Product Diversity and Batch Sizeon Product Diversity and Batch Size
Process Design DependsProcess Design Dependson Product Diversity and Batch Sizeon Product Diversity and Batch Size
Small
Batch Size
Large
Few Number of Product Designs Many
ProductProductFocused,Focused,DedicatedDedicatedSystemsSystems
ProductProductFocused,Focused,
BatchBatchSystemSystem
Process-Focused,Process-Focused,Job ShopJob Shop
Cellular Cellular ManufacturingManufacturing
-
8/8/2019 Module-03- Product- Service & Process Design
59/69
59
Capital RequirementsCapital RequirementsCapital RequirementsCapital Requirements
q
The amount of capital required tends to differ for The amount of capital required tends to differ for each type of production processeach type of production processq Generally, the capital required is greatest for product-Generally, the capital required is greatest for product-
focused, dedicated systemsfocused, dedicated systemsq Generally, the capital required is lowest for process-Generally, the capital required is lowest for process-
focused, job shopsfocused, job shopsq The amount of capital available and the cost of capitalThe amount of capital available and the cost of capital
are important considerationsare important considerations
lE i A l i
-
8/8/2019 Module-03- Product- Service & Process Design
60/69
60
Economic AnalysisEconomic Analysis
q
Cost Functions of Processing AlternativesCost Functions of Processing Alternativesq Fixed CostsFixed Costs
q Annual cost when production volume is zeroAnnual cost when production volume is zeroq
Initial cost of buildings, equipment, and other Initial cost of buildings, equipment, and other fixed assetsfixed assets
q Variable CostsVariable Costsq Costs that vary with production volumesCosts that vary with production volumesq Labor, material, and variable overheadLabor, material, and variable overhead
f lfC F i f P i Al i
-
8/8/2019 Module-03- Product- Service & Process Design
61/69
61
Cost Functions of Processing AlternativesCost Functions of Processing AlternativesCost Functions of Processing AlternativesCost Functions of Processing Alternatives
Annual Cost of Production ($000)Annual Cost of Production ($000)
UnitsUnitsProducedProducedPer YearPer Year
100,000100,000 250,000250,000
Cellular Cellular ManufacturingManufacturing
PreferredPreferred
AutomatedAutomatedAssembly LineAssembly Line
PreferredPreferred
JobJob
ShopShopPreferredPreferred
500500
1,0001,000
2,0002,000
1,5001,500
J o b S h
o p J o b
S h o p
C e l l u l a r
M a n u f.
C e l l u l a r
M a n u f.
A u to m. Asse m b l y
L i ne
A u to m. Asse m b l y
L i ne
-
8/8/2019 Module-03- Product- Service & Process Design
62/69
-
8/8/2019 Module-03- Product- Service & Process Design
63/69
lE i A l iE i A l iE i A l i
-
8/8/2019 Module-03- Product- Service & Process Design
64/69
64
Economic AnalysisEconomic AnalysisEconomic AnalysisEconomic Analysis
q
Break-Even AnalysisBreak-Even Analysisq Widely used to analyze and compare decisionWidely used to analyze and compare decision
alternativesalternativesq Can be displayed either algebraically or Can be displayed either algebraically or
graphicallygraphicallyq Disadvantages:Disadvantages:
q Cannot incorporate uncertaintyCannot incorporate uncertaintyq
Costs assumed over entire range of valuesCosts assumed over entire range of valuesq Does not take into account time value of moneyDoes not take into account time value of money
B k E A l iB k E A l iB k E A l iB k E A l i
-
8/8/2019 Module-03- Product- Service & Process Design
65/69
65
Break-Even AnalysisBreak-Even AnalysisBreak-Even AnalysisBreak-Even Analysis
q
ExampleExampleBreak-Even Points of Processes A, B, and C,Break-Even Points of Processes A, B, and C,
assuming a $6.95 selling price per unitassuming a $6.95 selling price per unit
Q = FC / (p-v)Q = FC / (p-v)A: Q = 120,000 / (6.95 - 3.00) = 30,380 unitsA: Q = 120,000 / (6.95 - 3.00) = 30,380 unitsB: Q = 90,000 / (6.95 - 4.00) = 30,509 unitsB: Q = 90,000 / (6.95 - 4.00) = 30,509 units
C: Q = 80,000 / (6.95 - 4.50) = 32,654 unitsC: Q = 80,000 / (6.95 - 4.50) = 32,654 units
Process A has the lowest break-even point.Process A has the lowest break-even point.
E i A l iE i A l iE i A l iE i A l i
-
8/8/2019 Module-03- Product- Service & Process Design
66/69
66
Economic AnalysisEconomic AnalysisEconomic AnalysisEconomic Analysis
q
Financial AnalysisFinancial Analysisq A great amount of money is invested in productionA great amount of money is invested in production
processes and these assets are expected to last a processes and these assets are expected to last along timelong time
q The time value of money is an importantThe time value of money is an importantconsiderationconsideration
q Payback periodPayback periodq net present valuenet present valueq internal rate of returninternal rate of returnq Profitability indexProfitability index
-
8/8/2019 Module-03- Product- Service & Process Design
67/69
W U W ld Cl P iW U W ld Cl P tiW U W ld Cl P tiW U W ld Cl P ti
-
8/8/2019 Module-03- Product- Service & Process Design
68/69
68
Wrap-Up: World Class PracticeWrap-Up: World Class PracticeWrap-Up: World Class PracticeWrap-Up: World Class Practiceq
Fast new product introductionFast new product introduction
q Design products for ease of productionDesign products for ease of productionq Refine forecastingRefine forecastingq Focus on core competencies ... less verticalFocus on core competencies ... less vertical
integrationintegrationq Lean productionLean productionq Flexible automationFlexible automationq
Job shops move toward cellular manufacturingJob shops move toward cellular manufacturing
q Manage information flow ..... automate and simplify!Manage information flow ..... automate and simplify!
d f d l ( h )End of Mod le 2 (Chapter 4)
-
8/8/2019 Module-03- Product- Service & Process Design
69/69
End of Module-2 (Chapter 4)End of Module-2 (Chapter 4)