chapter 3 product & process design part 1: product design
TRANSCRIPT
Chapter 3Product & Process Design
Part 1: Product Design
Product/Service Design Process
A process that defines the Appearance and features, Quality characteristics, Spec limits and target levels Inputs (labor, capital, materials) Transformation process Supply chain – suppliers, channels of
distribution
of a product/service that a company is planning to produce.
Steps in Product Design Process
Idea Development Product Screening Preliminary Design and Testing Final Design
Idea Development
Someone thinks of a unsatisfied need
Then someone thinks of a product/service to satisfy it e.g. customers, marketing,
engineering, reverse engineering
Idea Development 2006 Industrial Design Excellent
Awards (IDEAs) Winners - (BW, 7/10/06, p. 77)
“Bumpbrella” Concept Umbrella Company: RKS Design An inflatable umbrella that uses a
bicycle pump in the center for the arm.
A totally new design looking for a company to make it.
Idea Development
2-Second Tent Designer: Decathlon, France Spring hoops allow you to throw
this 2-person tent into the air, and it opens before hitting the ground.
Two second to open, 15 seconds to close.
Idea Development
Idea Development
“How Failure Breeds Success” (BW, 7/10/06, p. 48) “Everyone fears failure. But
breakthroughs depend on it.” “Innovation requires risk-taking.” “Many companies have found success
in the ashes of the memorable misses.”
Idea Development
McDonald’s Hula Burger (1962) Cheese-topped grilled pineapple on a
bun for Chicagoans who avoided eating meat on Fridays.
Big flop! McDonald’s decided to try something
less extreme: Came up with tastier hamburger-fee
alternative: the Filet-O-Fish, now a McDonald’s classic.
Idea Development Ford’s biggest mistake – 1958 Edsel—lead
to its greatest success. Edsel was called the “Titanic of the auto
industry.” Came in two sizes – big and bigger Overhyped, oversized, overpriced.
Idea Development
Idea Development Designed based on a “hunch” about what
consumers want. Abandoned in 1960, just after 2,800 cars
produced. Ford substituted “research” for
“hunches.” Found out that consumers wanted style
and affordability Result? 1964 Mustang
Idea Development How do companies get employees to come
up with creative and innovative ideas? By shifting from risk-adverse culture to a
risk-taking culture. In risk-taking culture, employees are
encouraged to Explore, Experiment, Foul-up, sometimes Then repeat.
Idea Development
Shift not easy Fear of blame for mistakes makes
employees want to play it safe and not take risks.
Companies must design performance-management systems that reward risk-taking.
Coca-Cola, Intuit, GE
Idea Development Coke’s Head of Marketing, Strategy,
and Innovation, Mary Minnick idea development strategy Stop thinking in terms of existing drink
categories Start thinking broadly abut why people
consume beverages in the first place. Then come up with products that
satisfy those needs before the competition.
Step 2 - Product Screening Screen ideas Some screening criteria are
fit with existing facilities and labor skills,
size of potential market, expected market share, share of potential market expected profit, break-even point
Step 3 – Preliminary Design and Testing Suppliers involved, Transformation process is designed, Prototype built,
Tricycle developed system for digitally modeling carpets and textiles so manufactures can make prototypes of new designs without making samples for architects and interior designers.
Cuts development costs. (BW, 7/10/06, p.81) Prototype tested for
Functionality Acceptance by potential customers
Design and Testing
Corning Developed new chip in 1998 that would
help in DNA research Killed in 2001 Customers had not been brought in early
enough to help assess its marketability. Market potential was too small to break-
even in a reasonable amount of time.
Step 4 – Final Design
Prototype design is modified based on test results
Final design approved Production begins
Product Design Process vs. Deming’s PDCA Cycle?
PDCA P = plan D = do C = check (or
study) A = act
Product Design Idea development Product screening Preliminary design
and testing Final design
How is Product Design Process Related to Deming’s PDCA Cycle?
Plan Idea Development Product screening
Do Preliminary Design and Testing
Check, Act Final Design
Good Product Design Process Should:
Design products/services that match the needs and preferences of the targeted customer group
Design products that are as easy as possible to make (product manufacturability).
Use concurrent engineering
Product Manufacturability
Achieve it by Simplification
Minimize number of parts
Standardization Design parts for multiply products
Modular (prefabricated) design
Product Manufacturability Matsushita, Electronic Giant in Japan One division has 7 factories that make
35 million phone, fax machines, printers and other products annually.
1,500 shape and color variations in phones alone
Engineers had to rearrange as many as 77 circuit-board parts for each new model.
Product Manufacturability
Setting up production for every type of board was too time consuming.
Company designed a new circuit board that would need only slight changes for each model.
Reduced cycle time and lowered defect rate to under 1%.
Product Manufacturability
Bo Andersson, GM’s head of purchasing, wants GM cars to share more parts, the way Japanese automakers do.
Shared parts results in fewer parts Fewer parts saves millions. Also want to ax many of GM’s 3,200
suppliers by weeding out weak suppliers.
Product Manufacturability Andersson is asking:
Why do we have two dozen different seat frames when Toyota has only two? Answer?
Why do we have 12 V6 engines when Toyota has just a few?
Progress has been made: GM once had 20 fuel pumps, now it has
5. Wants to use savings to make better
interiors.
Product Manufacturability
Goal is twofold: to make one part for many models To reduce number of components in
each part.
Product Manufacturability GM discovered that door hinges on
big SUVs and trucks could be made out of 3 components instead of 5.
This would save $21 a truck, or about $100 million over several years.
Designing a new hinge requires months of testing, which is costly.
Must weight costs and benefits.
“Over-the–wall” vs. Concurrent Engineering Design Process
Old “over-the-wall” sequential design process should not be used
Each function did its work and passed it to the next function
Replace with a Concurrent Engineering, where cross functional design teams work together to
involve customers early, develop specifications, solve potential problems, reduce costs, & shorten time to market
Concurrent Engineering
Concurrent Engineering
GMs North American operations had completely separate engineering groups for cars and trucks.
Within each group, there were separate teams for almost every type of vehicle.
Each team worked independently
Concurrent Engineering
Engineers and designers had no idea how much money was being wasted making different version of the same things.
Andersson is pushing a company wide effort to break down silos and get divisions talking to one another about how to share parts and save money.
Global Trends in Design
China, Twain, Korea, Hong Kong companies are committing huge resources to product design in order to build global brands. (BW, 7/10/06, p. 77)
They’re competing less and less on price and more on differentiation and value to consumer.
Coke’s Design Process Anticipate the customer
Coke’s marketers are encouraged to think more creatively about consumer’s needs
Retool tired brands Cost of launching new brands is
expensive Reposition existing brands
Coke used its Tab brand to create a new energy drink for women
Using Sprite name for a new energy drink in France.
Coke’s Design Process
Engage partners Coke brings bottlers into the decision-
making process to get their input and brings them on board from the outset.
Don’t fear failure
Product Screening Tool – Break-Even Analysis
Is expected sales large enough to exceed the break-even point?
Break-even point (BE) is the number of units of a product/service that a company must sell to cover its total cost.
Break-even point is where total revenue equals total cost, or profit equals zero.
Break-Even Analysis
Total Revenue = Total cost
or
Profit = Total Revenue – Total Cost = 0
Notation
Q = expected sales in number of units sold
SP = selling price per unit F = Total fixed costs VC = Variable cost per unit
Notation
Total Revenue = (SP)*Q
Total Cost = Total Fixed Cost + Total
Variable Cost Total fixed costs = F
Total Variable Cost = (VC)*Q
Total Cost = F + (VC)*Q
Finding the Break-Even Point
Total Revenue = Total cost
(SP)*Q = F + (VC)*Q
(SP)*Q - (VC)*Q = F
Q(SP - VC) = F
Q = QBE = F/(SP - VC)
Break-Even Decision Rule
If Q > QBE, Total Rev. > Total Cost and Profit > 0
If Q < QBE, Total Rev. < Total Cost and Profit < 0
Break-Even Analysis
Example 1 A company is planning to introduce a
new product. The expect to sell 875 units of the new
product. The sales price is set at $25 per unit. The fixed cost of producing the product
is $10,000. The variable cost per units is $15. Should the company develop the new
product?
Solution to Example 1
Q = expected salesSP = selling price per unit =$25F = Total fixed costs = $10,000VC = Variable cost per unit = $15
Solution to Example 1
units 000,1
15$25$
000,10$
VCSP
FQBE
Solution to Example 1 If the company sells 1,000 units of the
new product, it will breakeven. If the company expects to sell more
than 1,000, it will make a profit. If the company sells less than 1,000
units, it will incur a loss. Since the company expects to sell 875
units, which is less than the BE quantity, the company should not develop the new product.
Example 2 A company is planning to establish a chain
of movie theaters. It estimates that each new theater will cost approximately $1 Million. The theaters will hold 500 people and will have 4 showings each day with average ticket prices at $8. They estimate that concession sales will average $2 per patron. The variable costs in labor and material are estimated to be $6 per patron. They will be open 300 days each year.
Example 2
1. What must average occupancy be to break-even?
2. What is the annual capacity utilization rate?
3. What is the chains profit if they sell 300,000 ticket next year?
Solution 1. What must average occupancy be to break-even?
Q = ticket sales per year Total cost = $1,000,000 Ticket SP = $8 Concession sales/patron= $2 Sales revenue/patron = $8 +
$2 = $10 VC = $6
yearper ticket 000,250
6$10$
000,000,1$
VCSP
FQBE
Solution 1. What must average occupancy be to break-even?
Solution 2. What is the capacity utilization rate?
Annual Capacity (AC) = 4 shows per day x 300 days per year x 500 people = 600,000 patrons
Capacity utilization rate (CUR) = (QBE/AC) x 100%
CUR = (250,000/600,000) x 100% = 41.7%
Solution 3. What is the chains profit if they sell 300,000 ticket next year?
Total Revenue = 10Q
Total Cost = 1,000,000 + 6Q
Profit = Total Revenue – Total
Costs
Profit = $10Q – (1,000,000 + $6Q)
= -1,000,000 + 4Q
Solution 3. What is the chains profit if they sell 300,000 ticket next year?
Q = 300,000
P = -1,000,000 + 4(300,000)
= $200,000
Product life cycle Due to changing product demand
over time Stages of product life cycle stages
Introduction Growth Maturity Decline
Is it long enough to justify launching new product?
Product life cycle
Product life cycle
Where is break-even point on product life cycle?
The earlier it is on the product life cycle, the ???