2

Product Design

Weeks 2 (chapter 5)

Operations Management, Sustainability and Supply Chain

Management,
Global Edition, Eleventh Edition, PEARSON
Jay Heizer and Barry Rander
 Textbook for
Used

Operations Management, Sustainability and

Supply Chain Management,
Global Edition, Eleventh Edition, PEARSON
Jay Heizer and Barry Rander
 Outline

 Goods and Services Selection

 Generating New Product
 Product Development
 Issues for Product Design
 Product Development Continuum
 Definition a Product
 Service Design
 Global Company Profile
regal MARINE
 Good and Services Selection

 Global firms like Regal Marine know that the basis for
an organization’s existence is the good or service it
provides society. Great products are the keys to
success. Many companies focus on only a few
products.

 Honda focus its core competency is engine.

 Intel focus is on microprocessors
 Michelin is on tires
 Good and Services Selection
50% –

40% –
Percent of sales from new

The higher the percentage of sales from

30% – the last 5 years, the more likely the firm is
products

to be a leader.

20% –

10% –

0% –
Industry Top Middle Bottom
leader third third third

Position of firm in its industry © 2014 Pearson Education

 Product Decision

The objective of the product decision is to develop

and implement a product strategy that meets the
demands of the marketplace with a competitive
advantage

As one of the 10 decision of OM, product strategy may focus on

developing a competitive advantage via differentiation, low cost, rapid
response or a combination of these
 Product Strategy Option Support
Competitive Advantage
Product selection is choosing the good or service to provide customers or clients.
For instance, hospitals specialize in various types of patients and medical
procedures. A hospital’s management may decide to operate a general-purpose
hospital or a maternity hospital or, as in the case of the Canadian hospital
Shouldice, to specialize in hernias.

a
Service
b c
organizations like Taco-Bell has Toyota’s
Shouldice develop and strategy is rapid
Hospital executed a low- response to
differentiate cost strategy changing
themselves through product consumer
through their design demand
product
 a

c
 Product Life Cycle

Product are born. They live and they die.

They are cast aside by a changing society.
It may be helpful to think of a product’s life
as divided into four phases. Those phases
are introduction, growth, maturity and
decline
Sales, cost, and cash flow
Product Life Cycle
Cost of development and production
Sales revenue
Net revenue (profit)

Cash
flow

Negative
cash flow Loss

Introduction Growth Maturity Decline

© 2014 Pearson Education

 Product-by-Value Analysis

A list of product, in descending order of

their individual dollar contribution to the
firm, as well as the total annual dollar
contribution of the product

A product –by-value report allows management to evaluate possible

strategies for each product
 Generating New
Products
1. Understanding the customer
2. Economic change
3. Sociological and demographic change
4. Technological change
5. Political and legal change
6. Market practice, professional standards,
suppliers, distributors
Operations managers must be aware of these dynamics and be able to anticipate
changes in product opportunities, the products themselves, product volume and
product mix
 product DEVELOPMENT

Product Development System

Optimum product development depends not only
on support from other parts of the firm but also on
the succesful integration of all the OM decision,
from product design to maintenance
 Quality Function Deployment
(QFD)

A process for determining customer requirements

(customer “wants”) and translating them into the
attributes (the “hows”) that each functional area can
understand and act on

House Of Quality (HOQ)

A part of the quality function deployment process
that utilizes a planning matrix to relate customer
“wants” to “how” the firm is going to meet those
“wants”
 Product Development Stages

Concept

Feasibility

Customer Requirements Scope for

Scope of design and
Functional Specifications engineering
product
teams
development Product Specifications
team
Design Review
Introduction
Test Market
Evaluation
Introduction

Evaluation
© 2014 Pearson Education
Quality Function Deployment (QFD)
1. Identify customer wants
2. Identify how the good/service will satisfy customer wants
3. Relate customer wants to product hows
4. Identify relationships between the firm’s hows
5. Develop customer importance ratings
6. Evaluate competing products
7. Determine the desirable technical attributes, your
performance and the competitor’s performance against
these attributes
 Relationship
House Of Quality
between the
things we can do

G = good
Customer F = fair
What the importance
customer ratings P = poor
What we can do
wants

assessment
Competitive
How well what we do
meets the customer’s
wants (Relationship
matrix

Target values Weighted

rating
Technical
evaluation

© 2014 Pearson Education

 Defining a Product

 A good or service is defined in terms of its

functions.
 The product is then designed and the firm
determines how the functions are to be
achieved.
 Engineering drawing
A drawing that shows the dimensions, tolerances, material and
finishes of a component.
 Bill of material (BOM)
A list of the hierarchy of components, their description and the
quantity of each required to make one unit of a product
 Application of Decision
Trees
to Product Design
Decision trees can be used for new-product decision as
well as for a wide variety of other management problem
when uncertainty is present.
 EXAMPLE

Silicon, Inc. a semiconductor manufacturer, is investigating the

possibility of producing and marketing a microproccesor.
Undertaking this project will require either purchasing a sophisticated
CAD system or hiring and training several additional engineers. The
market for the product could be either favorable or unfavorable.
Silicon, Inc., of cource, has the option of not developing the new
product at all. With favorable acceptance by the market, sales would
be 25,000 processors selling for $100 each. With unfavorable
acceptance, sales would be only 8.000 processors selling for $100
each. The cost of CAD equipment is $500.000, but that of hiring and
training three new engineers is only $375.000. However,
manufacturing costs should drop from $50 each when manufacturing
without CAD to $40 each when manufacturing with CAD.
The probability of favorable acceptance of the new microprocessor is
0.40, the probability of unfavorable accptance is 0.60.
 Pembelian Penjualan $2,500,000 Pendapatan
CAD $388.000 Tinggi - 1.000.000 Biaya peoduksi ($40 x 25.000)

(0,4) - 500.000 Biaya CAD
$1.000.000 Pendapatan bersih

$800,000 Pendapatan
(0,6) - 320.000 Biaya peoduksi ($40 x 8.000)
Penjualan - 500.000 Biaya CAD
Rendah -$20.000 Pendapatan bersih

Merekrut dan Penjualan $2,500,000 Pendapatan

melatih Insinyur Tinggi - 1.250.000 Biaya peoduksi ($50 x 25.000)
$365.000 
(0,4) - 375.000 Biaya CAD
$875.000 Pendapatan bersih

$800,000 Pendapatan
(0,6) - 400.000 Biaya peoduksi ($50 x 8.000)
Penjualan  - 375.000 Biaya CAD
Rendah $25.000 Pendapatan bersih
Tidak melakukan apa-apa
$0

 $0 Pendapatan bersih
 Thankyou very much
Operations Management, Sustainability and Supply Chain
Management,
Global Edition, Eleventh Edition, PEARSON
Jay Heizer and Barry Rander