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Page 1: Design Goods Slides

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Mini-Presentation

Describe an example of product or service Describe an example of product or service design from your experiencedesign from your experience

3 to 4 minutes presentation3 to 4 minutes presentation

Great opportunity to secure your Great opportunity to secure your participation grade!participation grade!

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Outlines: Design of Goods and Services Trend in New Product/Service Design and Trend in New Product/Service Design and

DevelopmentDevelopment Product Life Cycles, Life Cycle and StrategyProduct Life Cycles, Life Cycle and Strategy Product Design and Development SystemProduct Design and Development System Sequential Design and Concurrent EngineeringSequential Design and Concurrent Engineering Application of Decision Tree to Product DesignApplication of Decision Tree to Product Design Quality Function Deployment (QFD): Quality Function Deployment (QFD):

Translating Customer Attributes into Product Translating Customer Attributes into Product Characteristics:Characteristics:

Organizing for Product DevelopmentOrganizing for Product Development

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Product Life Cycles

Introduction Growth Maturity Decline

Standardization

Less rapid product changes - more minor changes

Optimum capacity

Increasing stability of process

Long production runs

Product improvement and cost cutting

Little product differentiation

Cost minimization

Over capacity in the industry

Prune line to eliminate items not returning good margin

Reduce capacity

Forecasting critical

Product and process reliability

Competitive product improvements and options

Increase capacity

Shift toward product focused

Enhance distribution

Product design and development critical

Frequent product and process design changes

Short production runs

High production costs

Limited models

Attention to quality

Best period to increase market share

R&D product engineering critical

Practical to change price or quality image

Strengthen niche

Cost control critical

Poor time to change image, price, or quality

Competitive costs become critical

Defend market position

OM

Str

ateg

y/Is

sues

Com

pany

Str

ateg

y/Is

sues

HDTV

CD-ROM

Color copiers

Drive-thru restaurants Fax machines

Station wagons

Sales

3 1/2” Floppy disks

Internet

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Product Life Cycle, Sales, Cost, and Profit

Sale

s, C

ost &

Pro

fit

.

Introduction Maturity DeclineGrowth

Cost ofDevelopment

& ManufactureSales Revenue

Time

Cash flowLoss

Profit

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Product Life CycleIntroduction

Fine tuningFine tuning researchresearch product developmentproduct development process modification and enhancementprocess modification and enhancement supplier developmentsupplier development

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Product Life CycleGrowth

Product design begins to stabilizeProduct design begins to stabilize Effective forecasting of capacity becomes Effective forecasting of capacity becomes

necessarynecessary Adding or enhancing capacity may be Adding or enhancing capacity may be

necessarynecessary

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Product Life CycleMaturity

Competitors now establishedCompetitors now established High volume, innovative production may be High volume, innovative production may be

neededneeded Improved cost control, reduction in options, Improved cost control, reduction in options,

paring down of product lineparing down of product line

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Product Life CycleDecline

Unless product makes a special contribution, Unless product makes a special contribution, must plan to terminate offeringmust plan to terminate offering

Successful example of reviving product’s Successful example of reviving product’s profitability in the decline stage: profitability in the decline stage: Tamagochi, simple-function cameraTamagochi, simple-function camera

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Design and Development Criteria

PRODUCT/SERVICE QUALITYPRODUCT/SERVICE QUALITYDesign-measured customer satisfactionDesign-measured customer satisfactionConformance--Actual results versus specificationsConformance--Actual results versus specificationsFeaturesFeaturesDurabilityDurabilityServiceability and othersServiceability and others

TIME TO MARKET (DEVELOPMENT SPEED)TIME TO MARKET (DEVELOPMENT SPEED)Elapsed time from conception to launchElapsed time from conception to launchTime required to recover investmentsTime required to recover investments

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Design and Development Criteria

DESIGN AND DEVELOPMENT COSTSDESIGN AND DEVELOPMENT COSTSOne-time development costsOne-time development costsTotal costs to the customer (design, development, Total costs to the customer (design, development, and manufacturing)and manufacturing)

GENERALGENERALPercentage of sale from new productsPercentage of sale from new productsMarket share (new and sustaining)Market share (new and sustaining)

REGULATION AND STANDARDSREGULATION AND STANDARDSISO 9000ISO 9000UL, CCIB, FAC, IEEEUL, CCIB, FAC, IEEE

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Product Development Stages

Idea generationIdea generation Assessment of firm’s ability to carry outAssessment of firm’s ability to carry out(Form Product Development Team)(Form Product Development Team) Customer RequirementsCustomer Requirements Functional SpecificationFunctional Specification Product SpecificationsProduct Specifications Design ReviewDesign Review Test MarketTest Market Introduction to MarketIntroduction to Market EvaluationEvaluation

Scope of design for manufacturability and value engineering

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As Engineering designed it.

© 1984-1994 T/Maker Co.

As Operations made it.

© 1984-1994 T/Maker Co.

As Marketing interpreted it.

© 1984-1994 T/Maker Co.

As the customer wanted it.

© 1984-1994 T/Maker Co.

Product Development without Coordination

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Managing Design and Development Process Planning, organizing, staffing, leading, and

controlling the limited resources SEQUENTIAL DESIGN AND DEVELOPMENT

Before 1985, most American firms have organized their product design and development process sequentially. The sequence typically emerges as each functional area completes its part of the project before passing on the results to the next operation.

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Managing Design and Development Process SHORTCOMINGS:SHORTCOMINGS:

Frequent engineering changes Frequent engineering changes (before and after product launch)(before and after product launch)

Ineffective communication Ineffective communication Lack of prospective thinking.Lack of prospective thinking. Longer design and development lead timeLonger design and development lead time

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Managing Design and Development Process CONCURRENT DESIGN AND CONCURRENT DESIGN AND

DEVELOPMENT (CONCURRENT DEVELOPMENT (CONCURRENT ENGINEERING)ENGINEERING)

This method sets up a comprehensive This method sets up a comprehensive process for completing the steps in design process for completing the steps in design and development through a continuing and development through a continuing involvement of cross-functional teams of involvement of cross-functional teams of organization members. organization members.

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Managing Design and Development Process MAIN BENEFITS:MAIN BENEFITS:

Shorter development cycleShorter development cycle

Better cross-functional communicationBetter cross-functional communication

TeamworkTeamwork

Clear perspective.Clear perspective. In practice, concurrent engineering and In practice, concurrent engineering and

sequential process are both important sequential process are both important

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72-Seat Regional Propeller Aircraft: Q400 Project

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Snapshot of Aircraft DevelopmentBeginning in spring 1996, about 380 engineers and professionals from Bombardier and its major suppliers work together in a football-size design department for the Joint Definition Phase of Q400. In this phase, all major disciplines involved in aircraft design are represented. They included engineering, design, tooling, manufacturing, marketing, sales, procurement, customer/field support, spare parts, training, publications and many more. This phase also involved refining project objectives and further negotiations. Such a co-location of company engineers and suppliers benefits both parties. It facilitates superior communication among all functions and leverages suppliers' knowledge so that new process technology can be incorporated into product development.

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Snapshot of Aircraft Development

Milestones in this 6-month JDP, including different Deign Reviews, were to determine specific targets for delivering the commitments. These iterative and interactive loops are to drive and check the detailed timing and specs from all areas. When this process was completed, it was subject to a series of Participant Exit Reviews to freeze every interface design of different structures and systems. When the Project Director accepted that review, the representatives and suppliers involved could then exit the JDP process to complete their detailed design of items under their responsibility and prepare for production.

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Quality Function Deployment

Suitable for product design process using Suitable for product design process using cross-functional teamscross-functional teams e.g. marketing, engineering, manufacturinge.g. marketing, engineering, manufacturing

Translates customer preferences into specific Translates customer preferences into specific product characteristicsproduct characteristics

Involves creating 4 tabular ‘Matrices’ or ‘Houses’Involves creating 4 tabular ‘Matrices’ or ‘Houses’ Breakdown product design into increasing levels Breakdown product design into increasing levels

of detailof detail

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In each House of Quality

Identify customer Identify customer wantswants Identify Identify howhow the good/service will satisfy the good/service will satisfy

customer wantscustomer wants.. Relate the customer’s Relate the customer’s wantswants to the product’s to the product’s

howhowss.. Identify relationships between the firm’s Identify relationships between the firm’s howhowss.. Develop importance ratingsDevelop importance ratings Evaluate competing productsEvaluate competing products

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The goal of the QFD The goal of the QFD team is to design and team is to design and develop a new camera. develop a new camera. Start from building a Start from building a House of Quality.House of Quality.

© 1984-1994 T/Maker Co.

House of Quality Example

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High relationship Medium relationship Low Relationship

CustomerRequirements

CustomerImportance

Target Values

House of Quality Example

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House of Quality Example

High relationship Medium relationship Low Relationship

CustomerRequirements

CustomerImportance

Target Values

Light weightEasy to useReliable

What the customer desires (‘wall’)

AluminumParts

AutoFocus

AutoExposure

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House of Quality Example

High relationship Medium relationship Low Relationship

CustomerRequirements

CustomerImportance

Target Values

Light weightEasy to useReliable

AluminumParts

AutoFocus

AutoExposure

3

12

Average customer importance rating

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House of Quality Example

High relationship Medium relationship Low Relationship

CustomerRequirements

CustomerImportance

Target Values

Light weightEasy to useReliable

AluminumParts

AutoFocus

AutoExposure

321

Relationship between customer attributes & engineering characteristics (‘rooms’)

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House of Quality Example

High relationship Medium relationship Low Relationship

CustomerRequirements

CustomerImportance

Target Values

Light weightEasy to useReliable

AluminumParts

AutoFocus

AutoExposure

321

5 1 1

Target values for engineering characteristics (‘basement’);

key output

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House of Quality Example

High relationship Medium relationship Low Relationship

CustomerRequirements

CustomerImportance

Target Values

Light weightEasy to useReliable

AluminumParts

AutoFocus

AutoExposure

321

5 1 1

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Figure 5.5

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Quality Function Deployment

The Quality Function Deployment (QFD) tool is used to meet customers’ requirements throughout the design process and also in the design of production systems. It is a customer-driven quality planning process to guide design, manufacturing, and marketing of goods.

QFD was developed in 1972 at Mitsubishi’s Kobe shipyard site.

Xerox and Ford initiated the use of QFD in the United States in 1986.

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Quality Function Deployment

Chrysler also employed the QFD methodology in 1986 in the design and development of its LH-platform cars (Chrysler Concord, Eagle Vision, Dodge Intrepid). It used QFD along with concurrent engineering and utilization of design-for-manufacturing principles and design-of-experiments methods. The overall results were quite impressive: the design cycle took 36 months versus 54 to 62 months before; prototype cars were ready 95 days before the production lunch. Customer approval rating and sales have been very good.

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Manufacturability and Value Engineering

Main goals:Main goals: reduce complexity of productsreduce complexity of products Increase level of standardization among Increase level of standardization among

productsproducts improve key functions of each productimprove key functions of each product improved job design and job safetyimproved job design and job safety improved maintainability of the productimproved maintainability of the product Green and ethical products Green and ethical products

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Uncertainty in Product Design

Cost for develop a new product is highCost for develop a new product is high The associated results, such as demand, The associated results, such as demand,

competition, performance remain uncertain competition, performance remain uncertain at the time decisions have to be madeat the time decisions have to be made

Require OM tools to facilitate decision Require OM tools to facilitate decision making in the early stage of product making in the early stage of product developmentdevelopment

Decision Tree is one of the most popular Decision Tree is one of the most popular tool tool

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Few SuccessesFew Successes

0

500

1000

1500

2000

Development Stage

Number

1000

Market requirement

Design review,Testing, Introduction

25

Ideas1750

Product specification

100

Functional specifications

One success!

500

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Decision Tree Analysis Decision tree analysis may be effectively used for Decision tree analysis may be effectively used for

strategic product decisions.strategic product decisions. A decision tree contains:A decision tree contains:

Decision NodesDecision Nodes: from which one or several : from which one or several decisions alternatives can be chosendecisions alternatives can be chosenChance NodesChance Nodes (state of nature): out of which one (state of nature): out of which one or several states of nature (events, outcomes) will or several states of nature (events, outcomes) will occuroccurEnd NodesEnd Nodes: at the end of the decision tree, where : at the end of the decision tree, where payoffs are being developedpayoffs are being developedArrowsArrows: that connect nodes and identify the : that connect nodes and identify the sequence of decisions on the tree. sequence of decisions on the tree.

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Group Exercise: Introducing New Product Construct the decision tree in detailConstruct the decision tree in detail

Identify the value of each nodeIdentify the value of each node

Explain your decision making processExplain your decision making process

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Decision Tree Analysis

Analyzing new product introduction with Analyzing new product introduction with decision trees involves following steps:decision trees involves following steps:

Define the problem.Define the problem. Structure or draw the decision tree.Structure or draw the decision tree. Assign probabilities to the Chance Nodes Assign probabilities to the Chance Nodes

(states of nature).(states of nature). Payoffs are calculated at the End NodesPayoffs are calculated at the End Nodes

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Decision Tree Analysis

Estimate payoffs for each Chance Node by Estimate payoffs for each Chance Node by calculating the expected value over all calculating the expected value over all alternatives and associated probability.alternatives and associated probability.

Solve the problem by working backwards, Solve the problem by working backwards, that is, starting at the right of the tree and that is, starting at the right of the tree and working back to decision nodes on the left.working back to decision nodes on the left.

Identify the best alternative (decision) with Identify the best alternative (decision) with the highest expected value.the highest expected value.

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AgeTree IncAgeTree, Inc. has developed a promising new product. The company’s management faces three choices: It can sell the idea of the new product to a company for $40,000, it can hire a consultant to study the market and then make a decision, or it can arrange financing for directly manufacturing the product.

The study will cost AgeTree $25,000, and its management believes that there is about 2/3 of chances that a favorable market will be found. If the study is favorable, the company can sell the idea for $40,000, or it can manufacture the product. But even if a favorable market is found and the company manufactures the product, the chance of an ultimately successful production is about 60%. In this case, the company plans to sell 10,000 units of the product with a price of $50 each. The estimated fixed cost will be $190,000 and the variable cost will be $10 per unit. In case of unsuccessful results, the company will be able to sell approximately a half of its original number of units with the same price and costs.

If the study is unfavorable, the management figures that it can still sell the idea for $40,000. Even with an unfavorable study, the company can still manufacture the product, but a successful product can be expected about once in every ten new-product introductions with the same results as those in case of the favorable study.

If the AgeTree’s management decides to manufacture the product without the study, there is only a 1-in-4 chances of its being successful. The results will be exactly the same as previously mentioned.

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Agetree Inc

Sell idea

Study

Manufacture directly

(0.67) favorable

(0.33) unfavorable

Sell idea

Sell idea

Manufacture

Manufacture

(0.6) success

(0.4) fail

(0.1) success

(0.9) fail

(50-10)*10,000-190,000=210,000

(50-10)*5,000-190,000=10,000

(0.25) success

(0.75) fail

40,000

40,000-25,000=15,000

40,000-25,000=15,000

(50-10)*10,000-190,000 -25,000=185,000

(50-10)*5,000-190,000 -25,000=-15,000

(50-10)*10,000-190,000 -25,000=185,000

(50-10)*5,000-190,000 -25,000=-15,000

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