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What and How to Produce
• Product design is to determine what to produce or to offer.
• Process selection is to determine how the product is produced or offered.
Product Design
• Product design defines all aspect of the product to be offered to customers, such as material, measurement, dimension, specification, appearance, performance, components, …
• Product must be consistent with the Business strategy
• Product design is a joint work of marketing, operation and engineering.
Where the Idea Comes from?
• The driving force of the idea of a new product is customer.
• Competitors are also a source of idea.– Reverse engineering on competitor’s
product
• Suppliers are the third source of idea in product design.
Product Screening
• Evaluating the alternatives of a new product in terms of operation, marketing, and finance, and select one.
Break-Even Analysis
• A technique to compute the amount of goods a company needs to sell to cover the cost.
• At break-even point, QBE, total revenue is equal to total cost.
VCSP
F
cost) able(unit variprice) selling(unit
cost fixed
BEQ
Example (p.61)
• Data about a new line of footwear:– Initial investment: $52,000.– Cost of making each pair: $9.
• If it is sold at $25/pair, how many pairs must be sold to break even?
• If 4,000 pairs were sold, what would be the profit?
B-E Analysis in Product Screening
• For each product in each assumed situation, selling price and fixed cost for example, a break-even amount is calculated.
• By comparing the break-even amounts, the alternative products with low performance can be screened out.
Procedure of Product Design
Step 1 - Idea DevelopmentStep 2 - Product ScreeningStep 3 – Preliminary Design and TestingStep 4 – Final Design
Process Selection
• Process selection is to determine how to organize the production or delivery of the product.
Types of Process
• Intermittent Operation– Is used to produce a variety of products
with different processing requirements in lower volumes.
• Repetitive Operation– Is used to produce one or a few
standardized products in higher volumes.
Alternatives of Process
• Based on product standardization (variety) and product volume:
Project process (unit production);Batch process;Line process;Continuous process.
Production / Customer Interface
• Three alternative strategies for production/customer interface:
Make-to-stockAssemble-to-orderMake-to-order
Example (p.73)
• Data about Frantz Title Company:– It takes 4 hours to get a title ready on average, in
which the value-added time is about 30 minutes;– During 8 hours working time of an officer, only 6
hours are committed to work, taking lunch and break times out;
– The company processes 8 titles per day on average, with an industry standard of 10 titles for a comparable facility.
• Determine process velocity, labor utilization and efficiency for the company.