Chapter Four

4.1

Goods and Service Design

1
 Cont’d …
Goods and Service Development process:
Idea generation – Commercialization
Product design: the process of deciding on the unique
characteristics and features of the company’s product
Sources of Ideas for Products and Services
Internal
Employees
i n g i sa
i n s t o r m
Marketing department Bra l t o o l
usef u
R&D department
External
Customers
2 Competitors, Suppliers
 Concepts to Consider:
Product life cycle effect ( character & strategy)
Product levels Analysis ( core – potential)
Reasons to reconsider product design:
1. Understanding the customer’s demand shift
2. Economic cycle change (the boom & the recession)
3. Sociological and demographic change
4. Technological change
5. Political/legal change
6. Market practice, professional standards, suppliers,
distributors
3
 Product Development System

Ideas

Ability

Customer Requirements
Scope of Functional Specifications Scope for
product design and
Product Specifications
development engineering
team Design Review teams
Test Market

Introduction

Evaluation
4
 Quality Function Deployment
 Identify customer wants
 Identify how the good/service will satisfy customer
wants
 Relate customer wants to product how's
 Identify relationships between the firm’s how's
 Develop importance ratings
 Evaluate competing products
 Compare performance to desirable technical attributes

5
 Organizing for Product Development
 Historically – distinct departments
 Duties and responsibilities are defined
 Difficult to foster forward thinking
 A Champion
 Product manager drives the product through
the product development system and related
organizations

6
 Cont’d …
 Team approach
 Cross functional – representatives from all
disciplines or functions
 Product development teams, design for
manufacturability teams, value engineering teams
 Japanese “whole organization” approach
 No organizational divisions

7
Manufacturability and Value Engineering
 Benefits:
1. Reduced complexity of products(irreducible complexity)
2. Additional standardization of products
3. Improved functional aspects of product
4. Improved job design and job safety
5. Improved maintainability (serviceability) of the product
 Lower costs:
Lower inventories (fewer, standardized components)
Less labor required (simpler flows, easier tasks)
 Higher quality:
Simple, easy-to-make products means fewer opportunities to
make mistakes
8
 Reverse Engineering
Reverse engineering: the dismantling and
inspecting of a competitor’s product to
discover product improvements.

9
 Product Design: Related Issues
Product Life Cycles
Standardization
Benefits and disadvantages
Key trade-off: Variety vs. volume
Design for mass customizations
Reliability
Robust Design: Design that results in products or
services that can function over a broad range of
conditions: Insensitive to environmental factors either in
manufacturing or in use
10
 Advantage of Standardization
Fewer parts to deal with in inventory & manufacturing
Reduced training costs and time
More routine purchasing, handling, and inspection
procedures
Orders fill able from inventory
Opportunities for long production runs and automation
Need for fewer parts justifies increased expenditures on
perfecting designs and improving quality control
procedures.
11
 Disadvantage of ….
Designs may be frozen with too many imperfections
remaining.
High cost of design changes increases resistance to
improvements.
Decreased variety results in less consumer appeal.

12
 R&D
Organized efforts to increase scientific knowledge or
product innovation & may involve:
Basic Research advances knowledge about a subject
without near-term expectations of commercial
applications.
Applied Research achieves commercial applications.
Development converts results of applied research into
commercial applications.

13
 Mass Customization
A strategy of producing standardized goods or services,
but incorporating some degree of customization
Implications
Product implications—modular design
Process implications—postponement
Sales implications—internet

14
 Reliability …
 Reliability: The ability of a product, part, or system to perform its
intended function under a prescribed set of conditions
 Failure: Situation in which a product, part, or system does not
perform as intended
Improving reliability ….
• Component design
• Production/assembly techniques
• Testing ; Redundancy/backup
• Preventive maintenance procedures
• User education; System design

15
 Operations strategy Vs. Product Development
The four recommendations of operations strategy in the
area of product/service development:
1. Invest in R&D
2. Shift some emphasis away from short term performance
to long term performance
3. Work toward a continual improvement approach rather
than a “big bang” approach
4. Work to shorten the product development cycle

16
 The difference between goods & Services
Tangible – intangible
Services cannot be inventoried
Services created and delivered at the same time —
customer is in the system
Location and layout important to services
Customers bring more variety
Services are more labor intensive
Services have low barrier to entry

17
 Continuum of Characteristics
More like a More like
manufacturing a service
organization organization

• Physical, durable product • Intangible, perishable product

• Output can be inventoried • Output cannot be inventoried
• Low customer contact • High customer contact
• Long response time • Short response time
• Regional, national or • Local markets
• Small facilities
International markets
• Large facilities • Labor intensive
• Capital intensive • Quality not easily measured
• Quality easily measured
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 Quality Function Deployment
QFD: An approach that integrates the “voice of the
customer” into the product and service development
process.

Even if quality is in the eye of the beholder, however

incorporating the preferences & desires of the customers in
product design process is key to win the competition easily

19
 Thank You

20
CHAPTER
4.2
Process Selection
and
Facility Layout
Though product design is important for a
company, it cannot be considered separately
from the selection of the process
21
Introduction

Process selection
Deciding on the way production of goods or services
will be organized
Process selection occurs as a matter of course when a
new product or service is being planned, OR
 it also occurs periodically due to technological in
equipment
Major implications
Capacity planning
Layout of facilities
Equipment
22
Design of work systems
Process Selection and Systems Design

Facilities and
Forecasting Capacity Equipment
Planning

Product and Layout

Service Design

Process
Technological Selection Work
Change Design

23
Process Strategy

• Key aspects of process strategy

– Capital intensive – equipment/labor
– Make or buy decision
– Process flexibility
– Adjust to changes
– Design
– Volume
– Technology

24
Process Selection
Variety
How much Batch
Flexibility
What degree
Job Shop Repetitive
Volume
Expected output
Continuous

25
Process Types
Job shop
Small scale, it varies with varying customer
specification. (E.g. health care, automobile
maintenance)
Batch
Moderate volume of similar products ( E.g. ice
cream bakeries, canneries)
Repetitive/assembly line: allows some customization
High volumes of standardized goods or services (E.g.
car designs, TV designs),
Continuous
26
Very high volumes of non-discrete goods (E.g.
Product – Process Matrix
Process Type Customizati Semi- Standardiza Highly
on standardiza tion Standardizatio
tion n
Job Shop Appliance Not
repair feasible
Emergency
room
Batch Commercial
bakery
Classroom
Lecture
Repetitive Automotive
assembly
Automatic
carwash
Continuous Not Oil refinery
feasible Water
(flow) purification
Product – Process Matrix

Dimension Job shop Batch Repetitive Continuous

Job Very High Moderate Low Very low
variety
Process Very High Moderate Low Very low
flexibility

Unit cost Very High Moderate Low Very low

Volume of Low Low- High Very high
output Moderate
 Facilities Layout
Layout: the configuration of departments, work centers, and
equipment, with particular emphasis on movement of work
(customers or materials) through the system
Planning:
For the location of all machines, utilities, employees work
stations, customer service areas, material storage areas, offices and
computer rooms.
For the flow patterns of materials and people around , into and
within buildings.
Importance of Layout Decisions
 Requires substantial investments of money and effort (materials
handling cost)
 Involves long-term commitments (easier communication)
 Has significant impact on cost and efficiency of short-term
29 operations (space & labor efficiency)
The Need for Layout Decisions
Inefficient operations: High Cost; Bottlenecks
Changes in the design of products or services
The introduction of new products or services
Accidents; Safety hazards
Changes in environmental or other legal requirements
Changes in volume of output or mix of products
Changes in methods and equipment
Morale problems

30
Basic Layout Types
Product layouts; Process layouts; Fixed-Position layout;
and Combination layouts
1. Product layout
Standardized processing operations to achieve smooth,
rapid, high-volume flow
Uses progressive steps by which the product is made
2. Process layout
Similar equipment or functions are grouped together
A part being worked on them travels, according to the
established sequence of operations, from area to area,
where the proper machines are located for each
operation.
3. Fixed Position layout
Product or project (by virtue of its bulk or weight)
31
remains stationary, and workers, materials, and
Product Layout
Product Layout
(sequential)
Raw Work Work Work
Materials Station 1 Station 2 Station 3 Finished
OR Item
Customers

Used for Repetitive Processing

Repetitive or Continuous

32
Adv. Disadv.
High rate of output Higher initial capital investment
Low material handling cost in special purpose machine
High utilization of labor and (SPM)
equipment  Poorly skilled workers may not
Established routing and maintain equipment or quality of
scheduling output
Routing accounting and  Lesser flexibility of physical

purchasing resources.
Low cost of material handling, Highly susceptible to shutdowns
due to straight and short route Needs preventive maintenance
and absence of backtracking Individual incentive plans are
Lower manufacturing cost per impractical
33 unit
Process Layout

Process Layout
(functional)

Dept. A Dept. C Dept. E

Dept. B Dept. D Dept. F

Used for Intermittent processing

Job Shop or Batch

34
 Advantage Disadvantage
In-process inventory
Can handle a variety of
costs can be high
processing requirements Material handling slow
Not particularly
and inefficient
vulnerable to equipment More skilled labor is
failures
required
Equipment used is less
Special attention for each
costly
product or customer
Possible to use individual
Accounting and
incentive plans
purchasing are more
High degree of machine
involved
utilization
35
Fixed position layout
Adv. Disadv.
 The investment on As the production period
layout is very small being very long so the
capital investment is very
 The layout is flexible as high
Very large space is
change in job design and required for storage of
operation sequence can material and equipment
be easily incorporated near the product
As several operations are
 Adjustments can be often carried out
made to meet shortage of simultaneously so there is
possibility of confusion
materials or absence of and conflicts among
workers by changing the different workgroups
36 sequence of operations.
 Mixed layout
Is the combination of the above layout systems.
 It is an eclectic layout systems as it takes the
characteristics of the above layout systems.
Other Service Layouts
Warehouse and storage layouts
Retail layouts
Office layouts

37
Design Product Layouts: Line Balancing

Line
Line Balancing
Balancing isis the
the process
process of
of assigning
assigning tasks
tasks to
to
workstations
workstations in
in such
such aa way
way that
that the
the workstations
workstations have
have
approximately
approximately equal
equal time
time requirements
requirements

Goal:
Goal:
To
To obtain
obtain task
task groupings
groupings that
that represent
represent equal
equal time
time
requirements.
requirements. ItIt minimizes
minimizes the
the idle
idle time
time along
along the
the line
line
and
and results
results in
in high
high utilization
utilization ofof labor
labor and
and equipment
equipment

38
Cont’d …
 Cycle time (CT) – the
Tasks Time (in
maximum time allowed at minute)
each work station to
complete its set of tasks on a A 0.1
unit B 0.7
Suppose the work required to
fabricate a certain product C 1.0
can be divided into five D 0.5
elemental tasks
E 0.2
Sum of t 2.5
Cont’d …
Determinants in line balancing
Number of the minimum theoretical work stations (N)
Desired demand (output) rate
Operating time per day (OT) … etc
Assign tasks to work Task Immediate Task
follower time in
stations according to minute
greatest number of
following tasks. In case A B 0.2
of a tie use a tie breaker B E 0.2
of assigning the task with C D 0.8
the longest processing D F 0.6
time first E F 0.3
F G 1.0
G H 0.4
H end 0.3
Sum 3.8
Cont’d…
Using the information contained in the table shown, do
each of the following
Draw a precedence diagram
Assuming an 8hrs working day, compute the cycle time
needed to obtain an output of 400 units per day
CT= OT/D
Determine the minimum number of work stations needed
N= D x/OT
 Determine output capacity (max vs min)
OC= OT/CT
 Line Balancing Rules
Some Heuristic (intuitive) Rules:
Assign tasks in order of most following tasks.
Count the number of tasks that follow
Assign tasks in order of greatest positional weight.
Positional weight is the sum of each task’s time and
the times of all following tasks.
Tie breaker- assign the task with longest task time

43
Designing Process Layouts
Information Requirements:
1. List of departments
2. Projection of work flows
3. Distance between locations
4. Amount of money to be invested
5. List of special considerations
6. Location of key utilities

44
 Process Layout

Milling

Assembly
& Test Grinding

Drilling Plating

Process Layout - work travels

to dedicated process centers

45
 Functional Layout

222 222 222

111 Drill Grind
Mill

22
444 3333

222
444

1111 2222 Assembly

33
33

44
111 333
33

44
333
33

4
111
333
3

111
Heat 111 Gear
333 Lathes
treat cutting 444

46
 Cellular Manufacturing Layout
Lathe Mill Drill Heat Gear
-1111 -1111
treat cut

Heat

Assembly
222222222 Mill Drill Grind- 2222
treat

Heat
3333333333 Lathe Mill Grind- 3333
treat

44444444444444 Mill Drill Gear - 4444

cut

47
 THANK YOU

48
 Chapter
8 4.3

Location Planning

49
 Need for Location Decisions
Marketing Strategy
Cost of Doing Business
Growth Pattern
Depletion of Resources
 they commit organizations to long lasting financial,
employment and distribution patterns.
Location decisions has an impact on investment
requirements, operating costs and revenues

50
Location Decisions
 The importance of location
Competition
Cost
Hidden effect
Opportunity costs
 Market Related Factors
Locations of demand or competition
 A poor choice of location might result in:
Excessive transportation cost
Shortage of qualified labor
Loss of competitive advantage
Inadequate supplies of raw materials

51
Location Decisions
Steps in Making Location decisions
Decide on the criteria
Identify the important factors
Develop location alternatives
Evaluate the alternatives
Make selection

In general firms seek profitable locations that also

provide suitable or attractive environment to employees.
Location Factors (General)
Tangible Cost Factors
Availability of Multiple Modes of Transportation
Material oriented location
Market oriented location
Labor availability and costs
Utilities
Energy availability and costs
Water availability and costs
Site and construction costs
Taxes

53
Location Factors (Particulars)
Intangible Factors
Zoning and legal regulations
Pollution control
Community Attitudes
Public opinion (noise, smoke, odor)
Expansion potential
Access roads and transportation facilities
Living conditions
Costs of living, housing, etc

54
Nature of Location Decisions
Strategic Importance
Long term commitment/costs
Impact on investments, revenues, and
operations
Supply chains

Objectives
Profitpotential
No single location may be better than
others
Identify several locations from which to
choose
Options
55
Expand existing facilities
Service & Manufacturing Considerations
Manufacturing/Distribution Service/Retail

Cost Focus Revenue focus

Transportation modes/costs Demographics: age,

income, etc
Energy availability, costs Population/drawing area

Labor cost/availability/skills Competition

Building/leasing costs Traffic volume/patterns

Customer access/parking
Service locations

Nearness to raw material is usually not a factor,

nor is concern about processing requirements,
but customer access is usually a prime
consideration
Retail Facility Location
The major criterion used in
locating a retail facility is the
volume of demand.
Population in a given area
Median Age
Median Income
Traffic counts at the potential
site
Public Service Facility Location
Difficulty of measuring “social-costs” or “social
benefits”
Average distance or time traveled by the users of the
facility
Maximum distance or travel time between the facility
and its intended population
 Emergency Facility Location

The objective is to locate the facility so that the

maximum response time to any point of demand is
minimized.
 Location Evaluation Methods

Some decision tools:

1. Factor-rating method
2. Location break-even analysis (Cost-Profit-Volume)
3. Center of gravity method
4. Transportation model

60
 1. Factor-Rating Method
 It is the most widely used location technique
 It is used for service & industrial locations
 It rates locations using two categories of factors:
1. Tangible (quantitative) factors, like cost
2. Intangible (qualitative) factors, like labor skill and schools

Steps of the Factor-Rating Method:

1. List relevant factors
2. Assign importance weight to each factor (such as 0 – 1)
3. Develop a score-scale for the factors (such as 1 – 100)
4. Score each location using factor scale
5. Multiply scores by weights for each factor, then total
6. Select location with maximum total score
61
 2. Location Break-Even Analysis
Method of cost-volume analysis used for industrial locations
Steps for Break-Even Analysis
1. Determine fixed & variable costs for each location
2. Plot total cost for each location
3. Select location with lowest total cost for expected production
volume

Exercise: You’re an analyst for AC Delco. You’re considering a new

manufacturing plant in Jimma, Bonga, or Bedele. Fixed costs per
year are 30m, 60m, & 110m respectively. Variable costs per case
are 750, 450, & 250 respectively. The price per case is 120. What
is the best location for an expected volume of 2,000 cases per year?

62
 3. Center of Gravity Method
 It finds the location of a single distribution center serving several
destinations.
 It is used primarily for services and distribution centers.
It considers:
 Location of existing destinations: Markets, retailers etc.
Volume to be shipped.
 Shipping distance (or cost). Assumes shipping cost/unit/mile
is constant .

Steps for the Center of Gravity Method:

1. Place existing locations on a coordinate grid
• Grid can have an arbitrary origin & scale (maintain relative distances)
2. Calculate X & Y coordinates for ‘center of gravity’ using the given formulas
• They give the X & Y location of distribution center
• This location minimizes the transportation cost
63
 3. Center of Gravity Method Equations

le m
X Coordinate: ro b
is p
t h
xQ i i S o lve
x i

Q i
i

Y Coordinate:
yQ i i
y i
xi = x coordinate of location i
Q i
i
yi = y coordinate of location i
Qi = Volume of goods moved to or from location i

64
 4. Transportation Model

• Finds amount to be shipped from

several sources to several destinations.
• Used primarily for industrial locations.
• The solution uses linear programming
– Objective: Minimize total shipping costs
– Constraints
• Production capacity at source (factory)
• Demand requirement at destination

65
 Thank You

66