لخّصلي

.Three basic strategies include

Make-to-stock: in anticipation of demand

Assemble-to-order; built from standard components on order

Make-to-order; produce to customer specification at time of order

Product and Service Strategy Options

Delivery Time

Shipping

Make-to-Stock

Processing

Assembly

Product Inventory

Delivery Time

Assembly

Delivery Time

Assembly

Shipping

Assemble-to-Order

Processing

Product Inventory

Processing

Make-to-Order

Product Inventory

Shipping

2010 Wiley

24

Flowchart for Different Product Strategies at Antonio's Pizzaria

(a) Make-to-stock strategy

Ingredie nts

Customer Order

Delivery

Make Dough

b) Assemble-to-order strategy

Ingredients

Make Dough

Prepare

Assemble Pizza

Bake

Finished goods imento ry

Customer Order

Assemble Pizza

Prepare Crust

Work-in-progress inventory

of

"erust"

Bake

Delivery

ic) Make-to-orderstategy

Customer

Ingredients

Make Dough

Prepare Crust

Assemble Pizzas

Bake

Delivery

2010 Wiley

25

Design of Services

Service design is unique in that the service and entire service concept are being designed .must define both the service and concept

• Physical elements, aesthetic & psychological benefits

e.g. promptness, friendliness, ambiance

Product and service design must match the needs and preferences of the targeted customer group

Designing Services vs Products?These include automation, automated material handling devices, CAD, NC, FMS, and CIM

Designing services have more complexities than manufacturing, because service produce an intangible product and typically have a high degree of customer contact.These firms have a high degree of service standardization, have higher sales volumes

are typically less labor intensive.

Concurrent Engineering

Old "over-the-wall” sequential products design process

Each function did its work and passed it to the next function

Improved Concurrent Engineering

process All functions form a design team that develops specifications, involves customers early, solves potential problems, reduces costs, & shortens time to market

Product Design & Process

Selection - defined

Product characteristics

design – the process of defining all of the companies product

Product design must support product manufacturability (the ease with which a product can be made)

Product design defines a product’s characteristics of:

appearance, materials,

dimensions,

tolerances, and performance standards.

Process Selection – the development of the process necessary to produce the designed product.

2010 Wiley

(a) Sequential design: Walls between functional areas

Product concept

Performance specs

Design specs

Manufacturing specs

Customers

Marketing personnel

(b) Concurrent design: Walls broken down

Design engineer

Manufacturing engineer

Production personnel

Design team

2010 Wiley

The Product Design Process

Step 1 - Idea Development - Someone thinks of a need and a

product/service design to satisfy it: customers, marketing, engineering, competitors, benchmarking, reverse engineering

Step 2 - Product Screening - Every business needs a formal/structured evaluation process: fit with facility and labor skills, size of market,

contribution margin, break-even analysis, return on sales

Step 3-Preliminary Design and Testing - Technical specifications are developed, prototypes built, testing starts Step 4- Final Design - Final design based on test results, facility,

equipment, material, & labor skills defined, suppliers identified
Product Design Process

Idea developments selection affects

. Product quality

. Product cost

Customer satisfaction

Overall manufacturability - the ease with

which the product can be made

2010 Wiley

5

Product Screening Tool- Break Even Analysis

Computes the quantity of goods company needs to sell to cover its costs

QBE F/ (SP- VC)

.QBE-Break even quantity

.F-Fixed costs

.SP- selling price/unit

VC- Variable cost

2010 Wiley

Product Screening Tool - Break Even Analysis con't

Break-even analysis considers two functions of Q Q

= number of units sold

Total cost - sum of fixed and variable cost

Total cost = F+ (VC)*Q

Revenue - amount of money brought in from sales

Revenue = (SP) *Q

Profit total revenue -total cost -F+(VC)0

(SPIO

QBE=

2010 Wiley

Break-Even Example:

Fred Boulder, owner of Sports Feet Manufacturing, is considering whether to produce a new line of footwear. Fred has considered the processing needs for the new product as well as the market potential. He has also estimated that the variable cost for each product manufactured and sold is $9 and the fixed cost per year is $52,000.

(a) If Fred offers the footwear at a selling price of $25, how many pairs must he sell to break even? (b) If Fred sells 4000 pairs at the $25 price, what will be the contribution to profit?

Solution:

(a) To compute the break-even quantity:

Q= SP-VC

$52,000

E 3250 pairs $25-$9

The break-even quantity is 3250 pairs. This is how much Fred would have to sell to cover costs. (b) To compute the contribution to profit with sales of 4000 pairs, we can go back to the relation ship between cost and revenue:

Profit total revenue -total cost

= (SP)Q- [F+ (VC)Q]

Profit $25(4000) – [$52,000 + $9(4000)]

=$12,000

The contribution to profit is $12,000 if Fred can sell 4000 pairs from his new line of footwear.

Process Selection

Product design considerations must include the process

Intermittent processes:

Processes used to produce a variety of products with different processing requirements in lower volumes. (such as healthcare facility)

Repetitive processes:

.Processes used to produce one or a few standardized products in high volume. (such as a cafeteria, or car wash

2010 Wiley

Product-Process Grid

Low

1. Project Process

(Custom job shop: Customer tailoring; Construction)

2. Batch Process

(Education classes; Bakery; Printing shop)

3. Line Processes

(Assembly lines: Cafeteria)

4. Continuous Processes

(Oil Refinery;

plant)

INTERMITTENT OPERATIONS

REPETITIVE OPERATIONS

Process Types

Process types can be:

Project process - make a one-at-a-time product exactly to customer specifications

Batch process - small quantities of product in groups or batches based on customer orders or specifications

Line process - large Continuous process -

standard product

quantities of a standard product very high volumes of a fully

.Process types exist on a continuum

O2010 Wiley

11

Intermittent VS. Repetitive Facility

Layouts

(a) Intermittent Operations (resources grouped by function)

Department

Department B

Department

E

Department

D

(b) Repetitive Operations (resources arranged in sequence)

inbound

materials

Work station

Work station 2

Department

C

Department

F

Work station 3

finished product

2010 Wiley

12

Process Selection Considerations

Process selection is based on five

principal considerations

Product-Process Grid

Degree of vertical integration

Flexibility of resources

Mix between capital & human resources

Degree of customer contact
2010 Wiley

13

Decision

Product variety

Degree of standardization

Organization of resources

Path of products through

facility

Factor driving production

Critical resource

Type of equipment

Degree of automation

Throughput time

Work-in-process

inventory

Intermittent Operations

Great

Low

Grouped by function

In a varied pattern, depending on product needs

Customer orders

Labor-intensive

operation (worker skills important)

General-purpose

Low

Longer

More

Repetitive Operations

Small

High

Line flow to accommodate processing

needs

Line flow

Forecast of future demands

Capital-intensive

operation (equipment automation, technology

important)

Specialized

High

Shorter

Less

2010 Wiley

14

Process Decisions-Vertical Integration Make or Buy

Vertical integration refers to the degree a firm chooses to do processes itself- raw material to sales

Backward Integration means moving closer to primary operations

. Forward Integration means moving closer to customers

A firm's Make-or-Buy choices should be based on the following

considerations:

Strategic impact

Available capacity

Expertise

Quality considerations

Speed

Cost (fixed cost+ variable cost)make = Cost (fixed cost + Variable cost)buy [see Ch 4] Business are trending toward less backward integration, more outsourcing

2010 Wiley

&

Product Life Cycle also affects decisions

Product life cycle -series of changing product demand

Consider product

life cycle stages

Introduction

Growth

Maturity

Decline

Facility & process investment depends on life

Early Stages of Product Life Cycle

Later Stages of Product Life Cycle

Maturity

Growth

Decline

2010 Wiley

17

Metrics Example: At Zelle's Dry Cleaning, it takes an average of 3 hours to dry clean & press a shirt, with value-added time estimated at 110 min, Workers are paid for a 7-hour workday but work 5 hr/day, accounting for breaks and lunch. Zelle's completes 25 shirts per day, while the industry standard is 28 for a comparable facility.

Process Velocity (Throughput Time)/(Value-added time)

0 minutes/shirt)/(110 minutes/shirt)-1.90

Labor Utilization (Time in UseV/(Time Available) =(5 hr)/(7 hr) = .786 or 78.6%

Efficiency (Actual Output/(Standard Output)

(25 shirts/day)/(28 shirts/day) = .89 or 89%

2010 Wiley

Throughput Time

A basic process performance metric is throughput time. A lower throughput time means that more products can move through the system. One goal of process improvement is to reduce throughput time.

Linking Product Design & Process Selection

Product design and process selection are directly linked

Type of product selected defines type of operation required

Type of operation available defines broader organizational aspects such as

.Equipment required

Facility arrangement

Organizational structure

Begin

Customer Enters and Waits to Place Order

Long

Lost Sale No

Keep

Waiting?

Yes

Area

No

Customer Places

Waits for Order

Long

No

Order Arrives

Lost SaleNo

Keep

Waiting?

Yes Ye

Ves

Possible Area

Yes

Wait Lost SaleNo Order2

2010 Wiley

Possible Problem

Area

Correct? Yes

Linking Product Design & Process Selection con't

Impact of Product Life Cycle:

-Intermittent and repetitive operations typically focus on producing products in different stages of the product life cycle.

-Intermittent is best for early in product life; repetitive is better for later when demand is more predicable

2010 Wiley

Linking Product Design & Process Selection, con't

Impact of Competitive Priorities: Intermittent operations are typically less competitive on cost than repetitive operations.

2010 Wiley

Product and Service Strategy

Type of operation is directly related to product and service strategy.

.Three basic strategies include

Make-to-stock: in anticipation of demand

Assemble-to-order; built from standard components on order

Make-to-order; produce to customer specification at time of order

Product and Service Strategy Options

Delivery Time

Shipping

Make-to-Stock

Processing

Assembly

Product Inventory

Delivery Time

Assembly

Delivery Time

Assembly

Shipping

Assemble-to-Order

Processing

Product Inventory

Processing

Make-to-Order

Product Inventory

Shipping

2010 Wiley

24

Flowchart for Different Product Strategies at Antonio's Pizzaria

(a) Make-to-stock strategy

Ingredie nts

Customer Order

Delivery

Make Dough

b) Assemble-to-order strategy

Ingredients

Make Dough

Prepare

Assemble Pizza

Bake

Finished goods imento ry

Customer Order

Assemble Pizza

Prepare Crust

Work-in-progress inventory

of

"erust"

Bake

Delivery

ic) Make-to-orderstategy

Customer

Ingredients

Make Dough

Prepare Crust

Assemble Pizzas

Bake

Delivery

2010 Wiley

25

Design of Services

Service design is unique in that the service and entire service concept are being designed .must define both the service and concept

• Physical elements, aesthetic & psychological benefits

e.g. promptness, friendliness, ambiance

Product and service design must match the needs and preferences of the targeted customer group

Designing Services vs Products?

. Services are different from manufacturing as they;

. Produce intangible products

. Involve a high degree of customer contact

Type of service is classified according to degree of

customer contact

Quasi-manufacturing –

pure services – mixed services.

2010 Wiley

27

Quasi-manufacturing

Services with low customer contact are called "quasi manufacturing."

These firms have a high degree of service standardization, have higher sales volumes

are typically less labor intensive.

These firms have almost no face-to-face contact with customers and are in many ways similar to manufacturing operations.

Examples include warehouses, distribution centers.

2010 Wiley

Pure services

Services with high customer contact are called "pure services."

These firms have high face-to-face contact

are highly labor intensive.

There is low product standardization, as each customer has unique requirements

Mixed services

Services that combine elements of both of these extremes are called "mixed services."

Some parts of their operation have face-to-face customer contact, though others do not.

Example: offices, banks, and insurance firms.

2010 Wiley

30

Service Design Matrix

Service Characteristics

.Pure services

Quasi-Manufacturing

Mixed services

Service Package

The physical goods

The sensual benefits

The psychological benefits Differing designs

Substitute technology for people

.Get customer involved High customer attention

Remanufacturing

Uses components of old products in the production of new ones and has:

Environmental benefits

Cost benefits

Good for:

.Computers, televisions, automobiles

High

Low

Pure

Services

Restaurants

Health-care facilities Schools Hospitals

Mixed Services

Offices

Banks Insurance firms

Quasi Manufacturing

Warehouses

Distribution centers Environmental testing labs Back office facilities

Degree of Customer Contact

2010 Wiley

Low

High

Uses components of old products in the production of new ones and has:

. Environmental benefits

Cost benefits

Good for:

Computers, televisions, automobiles

O2010 Wiley

32

Chapter 3 Highlights

Product design is the process of deciding on the unique characteristics and features of a company's product.

Process selection is the development of the process necessary to produce the product being designed.

Steps in product include idea generation, product screening, preliminary design and testing, and final design.

Break-even analysis is a tool used to compute the amount of goods that

have to be sold just to cover costs.

Production processes can be divided into two broad categories: intermittent and repetitive operation.

2010 Wiley

Chapter 3 Highlights con't

Product design and process selection decisions are linked

Process flow charts is used for viewing the flow of the processes involved in producing the product

Different types of technologies can significantly enhance product and process design. These include automation, automated material handling devices, CAD, NC, FMS, and CIM

Designing services have more complexities than manufacturing, because service produce an intangible product and typically have a high degree of customer contact.

2010 Wiley