Production Design and Process
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Transcript of Production Design and Process
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Chapter 3 - Product Design &
Process Selection
Operations Management
by
R. Dan Reid & Nada R. Sanders
3rd Edition Wiley 2007PowerPoint Presentation by R.B. Clough UNH
M. E. Henries - UAA
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Learning Objectives Define product design and its strategic
impact on organization
Describe steps to develop a productdesign
Using break-even analysis as a tool in
selecting between alternative products Identity different types of processes
and explain their characteristics
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Learning Objectives -
continued Understand how to use a process flowchart
Understand how to use process performance
metrics Understand current technology advancements
and how they impact process and productdesign
Understand issues impacting the design ofservice operations
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Product Design Product design the process of defining all of the
companies product characteristics
Product design must supp0ort product manufacturability(the ease with which a product can be made)
Product design defines a products characteristics of;
appearance,
materials,
dimensions,
tolerances, and
performance standards
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Design of Services versus
Goods 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
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Product & Service Design Product design and process selection
affects
Product quality
Product cost
Customer satisfaction Overall manufacturability the ease
with which the product can be made
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The Product Design Process Step 1 - Idea Development
- Someone thinks of a need and a product/service design to satisfy it
e.g. customers, marketing, engineering, competitors,
benchmarking, reverse engineering Step 2 - Product Screening
- Every business needs a formal/structured evaluation process
e.g. 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
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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
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Product Screening Tool
Break-Even Analysis Break-even analysis also includes calculating
Total cost sum of fixed and variable cost
Total cost = F + (VC)*Q
Revenue amount of money brought in fromsales
Revenue = (SP) * Q
Q = number of units sold
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Break-Even Analysis: Graphical Approach Compute quantity of goods that
must be sold to break-even
Compute total revenue at anassumed selling price
Compute fixed cost and variablecost for several quantities
Plot the total revenue line andthe total cost line
Intersection is break-even
Sensitivity analysis can be doneto examine changes in all of theassumptions made
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Break-even calculation: A company is planning to establish a chain of movietheaters. It estimates that each new theater will cost approximately $1 Million. Thetheaters will hold 500 people and will have 4 showings each day with average ticketprices at $8. They estimate that concession sales will average $2 per patron. Thevariable costs in labor and material are estimated to be $6 per patron. They will be
open 300 days each year. What must average occupancy be to break-even?
Break-Even Point
Total revenues = Total costs @ break-even point Q
Selling price*Q = Fixed cost + variable cost*Q
($8+$2)Q= $1,000,000 + $6*Q
Q = 250,000 patrons (42% occupancy)
What is the gross profit if they sell 300,000 tickets
Profit = Total Revenue Total Costs
P = $10*300,000 (1,000,000 + $6*300,000)P = $200,000
If concessions only average $.50/patron, what is break-even Q now? (sensitivity analysis)
($8.50)Q = 1,000,000 - $6*Q
Q = 400,000 patrons (67% occupancy)
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Factors Impacting Product Design Need to Design for
ManufacturingDFM
Series of guidelines to
follow in order to producea product easily and
profitably
Simplification - Minimize
parts
Standardization
Design parts for multiply
applications
Use modular design
Simplify operations
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Factor In Product Life Cycle Product life cycle
series of changingproduct demand
Consider product
life cycle stages Introduction
Growth
Maturity
Decline
Facility & processinvestment depends onlife cycle
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Concurrent Engineering Old over-thewall sequential
design process should not be used
Each function did its work and passed it to
the next function
Replace with a Concurrent
Engineering process
All functions form a design team working
together to develop specifications, involve
customers early, solve potential problems,
reduce costs, & shorten time to market
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Process Selection Product design considerations must
include the process
Two broad process classificationsinclude Intermittent operations produce a
variety of products in lower volumes
Repetitive operations produce one ora few standardized products in highvolume
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Process Selection
Process selection is based on fiveconsiderations
Type of process; range from intermittent tocontinuous
Degree of vertical integration
Flexibility of resources Mix between capital & human resources
Degree of customer contact
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Process Selection
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 orspecifications
Line process large quantities of a standardproduct
Continuous process very high volumes of a fullystandard product
Process types exist on a continuum
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Underlying Process RelationshipBetween Volume and StandardizationContinuum
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Differences between Intermittentand Continuous Operations
Decision Intermittent Operation Continuous Operation
Product variety Great Small
Degree of standardization Low HighOrganization of resources Grouped by Function Line flow
Path of products Varied, depends on product Line flow
Factor driving production Customer orders Forecast of demand
Critical resource Labor CapitalType of equipment General purpose Specialized
Degree of automation Low High
Throughput time Longer Shorter
Work-in-process inventory More Less
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Designing Processes
Process design tools include
Process flow analysis
Process flowchart
Design considerations include
Make-to-stock strategy
Assemble-to-order strategy
Make-to-order strategy
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Process Design Tools
Process flow analysis isa tool used to analyze anddocument the sequence ofsteps within a totalprocess. Usually first step
in Process Reengineering. Process Re-
engineering is astructured approachused when majorbusiness changes are
required as a result of: Major new products Quality improvement
needed Better competitors Inadequate
performance
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Facility Layout and Process Choice
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Process Performance Metrics
Determining if a process is functioningproperly is required
Determination requires measuringperformance
Process performance metrics
measurement of different processcharacteristics that tell us how a process isperforming
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Process Performance Metrics
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Linking Product Design &Process Selection
Product design and process selection directlylinked
Type of product selected defines type ofoperation required
Type of operation available defines broaderorganizational aspects such as
Equipment required Facility arrangement
Organizational structure
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Linking Design & Process Selection
Organizational Decisions appropriate for different types of operations
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Intermittent VS. Repetitive Layouts
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Product and Service Strategy
Type of operation is directly related toproduct 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
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Product and Service Strategy Options
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Process Decisions-Vertical Integration& Make or Buy
Vertical integrationrefers to the degree a firm chooses to doprocesses itself- raw material to sales Backward Integration means moving closer to primary operations
Forward Integration means moving closer to customers
A firms Make-or-Buychoices should be based on the followingconsiderations: Strategic impact
Available capacity
Expertise
Quality considerations
Speed
Cost (fixed cost + variable cost)make = Cost (fixed cost + Variable cost)buy
Business are trending toward less backward integration, moreoutsourcing
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Manufacturing Technology Decisions
Simplify first then apply appropriate technology
Information Technology: ERP, GPS, RFID
Automation
Automated Material Handling:
Automated guided vehicles (AGV)
Automated storage & retrieval systems (AS/RS)
Flexible Manufacturing Systems (FMS)
Robotics & Numerically-Controlled (NC) equipment
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E-manufacturing
Web-based environment creates numerousbusiness opportunities to include; Product design collaboration Process design collaboration
Computer-aided design uses computergraphics to design new products
Computer-integrated manufacturing
integration of product design, processplanning, and manufacturing using anintegrated computer system
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How Are Services Differentfrom Manufacturing
Services are different frommanufacturing as they;
Produce intangible products
Involve a high degree of customer contact
Type of service is classified according to
degree of customer contact
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Designing Services
Service Characteristics
Pure services
Quasi-Manufacturing
Mixed services Service Package
The physical goods
The sensual benefits
The psychologicalbenefits
Differing designs Substitute technology for
people
Get customer involved
High customer attention
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Product Design and ProcessSelection Across the Organization
Strategic and financial of product designand process selection mandates
operations work closely across theorganization Marketing is impacted by product that is
produced
Finance is integral to the product designand process selection issues due tofrequent large financial outlays
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Product Design and Process SelectionAcross the Organization - continued
Strategic and financial of product design andprocess selection mandates operations work
closely across the organization Information services has to be developed to match
the needs of the production process
Human resources provides important input to the
process selection decisions for staffing needs
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Chapter 3 Highlights
Product design is the process of deciding on the uniquecharacteristics and features of a companys productProcess selection is the development of the processnecessary to produce the product being designed.
Steps in product include idea generation, productscreening, preliminary design and testing, and final design
Break-even analysis is a tool used to compute the amountof goods that have to be sold just to cover costs.
Production processes can be divided into two broad
categories: intermittent and repetitive operation project tobatch to line to continuous
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Chapter 3 Highlights
Product design and process selection decisions arelinked
Process flow charts is used for viewing the flow of
the processes involved in producing the Different types of technologies can significantly
enhance product and process design. These includeautomation, automated material handling devices,CAD, NC, FMS, and CIM
Designing services have more complexities thanmanufacturing, because service produce anintangible product and typically have a high degreeof customer contact.
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The End
Copyright 2007 John Wiley & Sons, Inc. All rights reserved.Reproduction or translation of this work beyond that permittedin Section 117 of the 1976 United State Copyright Act withoutthe express written permission of the copyright owner is
unlawful. Request for further information should be addressedto the Permissions Department, John Wiley & Sons, Inc. Thepurchaser may make back-up copies for his/her own use onlyand not for distribution or resale. The Publisher assumes noresponsibility for errors, omissions, or damages, caused by theuse of these programs or from the use of the information
contained herein.