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Operations Management

(New Product Development)

Submitted To:
Sir. Tahir Aziz Khan

Submitted By:
Syed Izhar (FA09-MBA-146)
Fahad Raza (FA09-MBA-034)
Faizan Usmani (FA09-MBA-082)
M. Awais Noman (FA09-MBA-076)
M. Omer Rasheed (FA09-MBA-094)
Rao Bakht Yawar (FA09-MBA-125)

COMSATS Institute Of Information


Technology, Lahore.
Project Title : New Product Development

Product: Seat Attachable Massager (SAM)

Problem Statement: To provide relaxed and comfortable


mean of traveling to the customers and help them
avoid any damage to back bone.

Project Objective:
To bring technology in reach of customers
To delight our customers with comfortable traveling
experience.
Phase 0: Planning
Marketing
Articulate market opportunity
The market for accessories in the automotive industry is large and complex, despite
continuing consolidation. Auto market is one of the largest segments in world trade.
Changing models, improving fuel efficiency, improving safety and health awareness,
cutting costs and enhancing user comfort without compromising quality are the most
important challenges of the auto industry in a fast globalizing world.

The first phase of automotive assembling in Pakistan started in 1950 with Bed Ford
truck followed by Ford Prefect, Ford Cortina and Dodge Dart. The 2nd phase of
Automobile assembly started in 1983 with the introduction of FX 800 CC Suzuki Car.
In 1989 Pak. Suzuki changed the Model of FX 800 CC with Mehran 800CC. Pak
Suzuki thereafter in 1992 introduced Khyber 1000 CC and 1300 CC Margalla but the
indigenization (transform things to fit the local culture) levels from 1983 to 1995 were
not significant (i.e. Mehran 30%, Khyber 20%, and Margalla, 15%). In 1993, Indus
Motors Company Ltd., Karachi introduced Toyota Corolla. Honda Atlas cars (Pak)
Ltd Lahore in 1994 introduced Honda Civic having 1300CC engine capacity. Indus
Motors, Dewan Farooq Motors and Pak Suzuki introduced smaller Cars i.e. Cuore,
Cultus and Santro of engine capacities 850 cc, 1000 cc respectively in 2000.
In Pakistan context there are 9 cars in 1,000 persons which is one of the lowest in the
emerging economies which itself speaks of high potential of growth in the auto sector
and more so in the car production. Rising per capita income with changing
demographic distribution and an anticipated influx of 30 to 40 million young people
in the economically active workforce in the next few years provides a stimulus to the
industry to expand and grow. Resale of locally assembled cars is better due to
availability of spare parts and after sales services and warranty.

Define market segments


The automobile industry in Pakistan can be broadly categorized into following
segments:
• Cars and Light Commercial Vehicles (LCVs).
• Two and Three Wheelers.
• Tractors.
• Trucks and Buses.
• Vendor Industry.
The industry operates under franchise and technical cooperation agreements with
Japanese, European and Korean manufacturers. The target segment for SAM is Cars
and Light Commercial Vehicles (LCVs). Let’s take a look at the figures of target
segment;

Apart from these figures there are second hand vehicles in this segment which have
no statistical records as to how much second hand vehicles are there in this segment
but they are also included in SAM’s targeted segment.

Design
Consider product platform and architecture

SAM’s main components are following;


• Air Bags
• Vibrators
• Leather Sheets
• Rubber Sheets
• Strips & Buckles
• Remote Control
• Air Bags Pump
• Thread

Manufacturing
Identify production constraints

Production of SAM is heavily dependent upon the suppliers as almost all of the
components used in SAM are bought ready made and then they are assembled and
packaged by SAM production team. Following are the constraints in production of
SAM;
• Different type of supplier for different components
(Days required for each component to reach production facility)
Air Bags ---------------------------- 2
Vibrators---------------------------- 2
Leather Sheets---------------------- 3
Rubber Sheets---------------------- 3
Strips & Buckles------------------- 1
Remote Control-------------------- 5
Air Bags Pump--------------------- 2
Thread------------------------------- 1

• Power Shortage in country


• Limited capital.
• Limited storage capacity.

Set supply chain strategy

SAM is targeted at middle class having vehicles of normal quality. The supply chain
is the life line of any business. SAM production team has identified best suppliers of
the components for their product. Suppliers are managed in such a way so as the
production remains continuous. For this purpose 5% of raw material is kept in
inventory at all the time. Production area has a storage capacity which is used as 90%
and 10% is kept free for any future increased demand. Orders will be received from
car accessories shops and product will be provided on time as promised. Initially to
promote SAM, we will use this channel but with the passage of time we will like to
convince big companies to be our direct buyers so that SAM is provided by car
manufacturing company along with the car.

Phase1: Concept Development


Collect customers needs
SAM is targeted at the following types of customers;

Those who drive or travel long distance.


Those who have back bone problem.
Those who want to avoid backbone problem.
Those who want to relax after getting tired.
A brief survey from car drivers in university showed positive results in favor of SAM.

Identify competitive products


SAM is in direct competition with all other massagers i.e either built in massagers in
some cars or other massagers which are movable. SAM competes its competitors on
cost. Cost of SAM is low as compared to other massagers’ reason being its simpler
design. SAM is designed in simple way but quality of the massage it provides is as
good as any other.

Develop industrial design concepts


Stitching machines from China have the capacity to work efficiently and reduce cost
by employing lesser human resource as compared to carrying out production
manually or by-hand. Single machine has the capacity of stitching 20 massagers per
hour. The facility will have 2 such machines.

Cutting machines will cut rubber and leather as per design. 2 cutting machines will be
at the production facility.

Components inside the SAM will be placed manually before it is finally stitched.

Packaging of SAM is performed manually and then the product is immediately


delivered to the retailers.

Estimating manufacturing cost


Following are the cost analysis of SAM;
Per Component Cost:
Component Cost(Rs.)
Air Bags (4x100) 400
Vibrator (3x200) 600
Leather Sheet 650
Rubber Sheet 350
Strips & Buckles 250
Remote Control 1000
Air Pump 250
Thread 50
Total 3550

SAM
Sales Budget
For the Three Months
January February March Total
Projected Sales 1000 1000 1000 3000
Unit Price(Rs.) 4500 4500 4500 4500
Total Projected 4500,0 4500,0 4500,0 135,000
Sales(Rs.) 00 00 00 ,00

SAM
Direct Labour Budget
For the Three Months
January February March
Projected Production 1050 1050 1050
X Direct Labour Hours 0.33 0.33 0.33
Total Direct Labour Hours 346.5 346.5 346.5
X Direct Labour Cost 25 25 25
Total Direct Labour 8662. 8662. 8662.
Cost(Rs.) 5 5 5
SAM
Manufacturing Overhead Budget
For the Three Months
January February March
Projected Variable
Overhead 150,000 150,000 150,000
Projected Fixed Overhead 50,000 50,000 50,000
Total Projected 200,0 200,0 200,0
Overhead(Rs.) 00 00 00

SAM
Selling & Administrative Expense Budget
For the Three Months (Rs.)
January February March
60,0 60,0 60,0
Salaries 00 00 00
Rent 50000 50000 50000
Advertising 100,000 100,000 100,000
Telephone 5000 5000 5000
20 20
Other 0,000 0,000 200,000
Total 406,00 406, 406,
Expenses 0 000 000

SAM
Costs
For the Three Months
January February March
Projected Direct 37,27 37,27 37,27
Materials(3550X1050) 500 500 500
8662. 8662. 8662.
Projected Direct Labour 5 5 5
200,0 200,0 200,0
Projected Manu. Overhead 00 00 00
393161 393161 393161
Total 2.5 2.5 2.5

Estimated Profit:
4500,000 – (3931612.5+406,000) = Rs. 157837.5/-