MANAGEMENT OF GOODS AND SERVICES - IT …people.wku.edu/bradley.fink680/class/cit492/mod1.pdfManagement of Goods and Services 1 1/31/13 Executive Summary As a manager, decisions need

MANAGEMENT OF

GOODS AND

SERVICES

“Look for your choices, pick the best one, then go with it”

Peter Drucker

Brad Fink

1 February 2013

Management of Goods and Services

1

1/31/13

Executive Summary

As a manager, decisions need to be made on a daily basis; fortunately there are tools to help

us out along the way. Some of these tools are a House of Quality and a Decision Tree. Other

managers are concerned with production, shipping and taking orders, to help provide a service,

Bill of Material and Assembly Charts need to be constructed. The following are just small

examples of what may be encountered in our world of business.

The company needs to make a decision in the wristwatch design and make comparisons to

the watches of the competition; a house of quality is going to be the best solution to the dilemma.

In order for a company in the inventory control, ordering and shipping of parts a bill of

material is needed. This will also help the consumers order replacement parts in order to save

them money. A bill of material is needed for a pair of eyeglasses with a case.

An assembly chart for a table lamp is needed in order to ensure all items are present and

inspected before packaging. The assembly chart is designed to help the company and

manufacturer succeed in this task. Along with the assembly chart more often than not, an

assembly drawing and a set of detailed instructions will accompany the assembly chart.

Residents of Mill River have fond memories of ice skating at a local park. An artist has

captured the experience in a drawing and is hoping to reproduce it and sell framed copies to

current and former residents. He needs to make a decision tree to see which route he will take.


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Contents

Problem Topic Page Number

5.1 Wrist Watch House of Quality………….. 3

5.5 Eyeglasses & Case Bill of Material…….. 7

5.8 Table Lamp Assembly Chart…………….8

5.13 Mill River……………………………… 11

Summary …………………………………………………………. 13

Index……………………………………………………………….. 14

Reference……………………………………………………………. 15


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Customer Importance Rating Scale: 1 2 3 4 5

Bad Fair Good

Wristwatch House of Quality (5.1)

A house of quality is needed to give the consumer’s a better product based on characteristics

they feel that is important. The House of Quality, shown in figure 1.6 is all based on not only the

consumers wants, but an evaluation of the competition as well. But before the house can be

constructed, several steps need to be addressed;

1. What the consumer wants.

2. What the company can do to meet the consumers wants.

3. How well the company can meet the consumers wants

4. An assessment of the competition.

5. Find the targets values (Technical attributes).

6. Find the technical evaluation.

1. The customer’s wants are surveyed from an importance rating scale. Figure 1 shows this

from a (1-5 rating), 1 being low and 5 being high.

Reasonable Prices 5

Comfort 4

Durability 5

Sleek Design 3

Weight 1

What the consumer

wants in a rating

scale.

Figure 1 -What the customer wants.


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Once the consumers wants are identified, the next step is to figure out what the company can

do to meet those needs. Figure 1.1 shows how the company is going to do this.

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2. Once the company has decided what they can do to meet the needs of the consumer, now it is

time to grade themselves as shown in figure 1.2.

5

3 2 2 4

3

4 4

3 4 4

25 12 26 24 32 0

3. Now that the company has graded themselves, another important task is to grade their

competition. Again, a numbering scale is shown for the competition in figure 1.3.

Ways to give the

consumer what

they want

Figure 1.1 -What the company can do.

The company graded

number times the

customer’s

importance rating

Figure 1.2 -How well the company can meet the

customers wants.


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1 5

4 4

2 5

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2 3

4. The target values are what changes to the wristwatch will be acceptable, (weights: minimum

or maximums) changes in dimensions and changes in materials. This is shown in figure 1.4..

5. At the bottom of the house is specific data that will show the company’s focus, this is the

technical data, as well as the competition. As seen in figure 1.5, the technical evaluation will

show the distinct values pertaining to the product.

Target Values

(Technical

Attributes)

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Competition Assessment 5 = Good 3 = Fair 1 = Poor

Figure 1.3 -Assessment of the competition

Figure 1.4 -Company target values


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The last step is to put everything together. Now that all the steps are together, we can now

add the roof, the relationship between the things we can do. Figure 1.6 will show all steps put

together and how decisions are made in an organization.

Technical

Evaluation

(Projected)

0.6 30% yes 5 yes G Company

0.1 20% yes 2 No F Competition A

0.6 40% No 3 No F Competition B

Figure 1.5 -Technical evaluation

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5 5 1 5

4 3 2 2 4 4 4

5 3 2 5

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1 3 4 4 2 3

25 12 26 24 32 0

0.6 30% yes 5 yes G

0.1 20% yes 2 No F

0.6 40% No 3 No F

Our Importance Rating

Target Values

(Technical Attributes)

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Weight

Reasonable Prices.

Comfort.

Durability

Company

Competition A

Competition B

1= Low

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Technical Evaluation

(Projected)

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What the Customer Wants

What we can do to meet the Customer's needs.

Competitive Assessment5 = Good3 = Fair1 = Poor

CustomerImportance Rating Scale : 1 2 3 4 5

Bad Fair Good

How well we can meet the customers wants

Good

Fair

Poor

Figure 1.6 -Wristwatch House of Quality

Relationship between

the things we can do


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Eye Glasses and Case Bill of Material (5.5)

When a general repair of eyeglasses is needed, it is cheaper to

simply replace one or more single parts versus purchasing a new pair

of eyeglasses. Below, in Table 1 is a bill of material for a pair of

eyeglasses and a case. This information is also significant for

inventory control and ordering and shipping parts.

Item # National Stock # (NSN) Description

Qty.

1 8412-01-249-0016 Glasses, eye, metal, gold

1

2 6721-00-428-3147 Case, plastic, black, eye glasses

1 3 8412-01-249-0017 Frame, metal, gold 1 4 8401-01-249-0021 Bracket, temple, metal, gold / L 1 5 8401-01-249-0022 Bracket, temple, metal, gold /R 1 6 8401-01-249-0031 Lens, left, poly, unfinished 1 7 8401-01-249-0032 Lens, right, poly, unfinished 1 8 8401-01-245-1313 Pad, nose, “D” shape, silicone,

L/R

2

10 6952-00-346-0198 Screw, temple, metal gold 2 11 6952-00-346-0020 Screw, Pad nose, metal gold 2

Table 1 -Bill of material eyeglasses with container case


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Table Lamp Assembly Chart (5.8)

As more and more products are being purchased and sold, necessary procedures are needed

for the product to make it onto the shipping trucks and into the stores with no mistakes. One

document that helps the packers and inspectors accomplish this is an assembly chart, seen in

Figure 2. This is nothing more than a diagram that shows how the product is packed prior to

shipping and assembled.

1

2

3

A1

4

5

6

7

8

9

A2

A3

A4

10

0 9

11

0 9

A5

A6

Inspection

point

Lamp Base

½” Hex Bolt

½” Flat Washer

Lamp Post w/stud bolt

Lamp Harp

Lamp Shade

Lamp Finial

Pull Chain Socket

Electrical Cord

Part Number Tag

Box w/ packing Material

Figure 2 -Table lamp

assembly chart

Schematic form of

how a product is

prepaired


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Along with a product’s assembly chart is an assembly drawing, these are provided to help

give the consumer a better idea how to properly put the product together in accordance with

manufacturer’s specifications. Figure 2.1 shows an assembly drawing of the table lamp which

corresponds to the assembly chart in Figure 2.

Electrical plug 7b(To wall outlet)

932

1

4

5 8

6

7

1. Lamp Base

2. ½” Hex Bolt

3. ½” Flat Washer

4. Lamp Pole w/ ½” Stud Bolt

5. Lamp Harp

6. Lamp Shade

7. Lamp Finial

8. Pull Chain Socket on/off

9. Electrical Cord, Plug type

a

b

Figure 2.1 -Table lamp assembly drawing


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1. Insert end of electrical cable &a) through ½” washer (6).

2. Guide electrical cord (7a) through ½” hex nut (5).

3. Guide electrical cord (7a) into and through lamp post (3).

4. Insert bottom of lamp post (3) on the top of the lamp base (4).

5. Tighten the lamp post (3) using the ½” hex nut, ensuring the ½”

washer is between the hex nut (6) and the bottom of the lamp base

(4).

6. Using a ½” open end wrench, (not included) tighten clockwise.

7. Insert lamp harp (1) on top of lamp post (3), ensure the electrical

cord (7) is protruding approximately 3 inches.

8. Insert the electrical cord (7a) into the bottom socket of pull chain

socket on/off (2). (Note do not force it in; listen for a click to ensure

it is locked in place).

9. Screw the pull chain socket on/off (2) into the top of the lamp post

(3) 2 full turns.

10. Place the lamp shade (8) on top of the lamp harp (1).

11. Tighten the lamp finial (9) over the top of the lamp hade (8), using

the lamp harp (1) bolt stud.

WARNING: DO NOT EXCEED A 100 WATT LIGHT BULB, DOING SO MAY CAUSE

INJURY TO SELF, LAMP OR CAUSE A FIRE.


In order to ensure the product is assembled correctly, the manufacturer will attach a detailed

set of instructions that correspond to the product assembly chart. Figure 2.2 shows the detailed

assembly instructions associated to both assembly chart and assembly drawing.

Figure 2.2 -Table Lamp Assembly Instructions


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Mill River (5.13)

Residents of Mill River have fond memories of ice skating at a local park. An artist has

captured the experience in a drawing and is hoping to reproduce it and sell framed copies to

current and former residents. He thinks that if the market is good he can sell 400 copies of the

elegant version at$125 each. If the market is not good, he will sell only 300 at $90 each. He can

make a deluxe version of the same drawing instead. He feels that if the market is good he can

sell 500 copies of the deluxe version at $100 each. If the market is not good, he can sell only

400 at $70 each. In either case, production costs will be approximately $35,000. He can also

choose to do nothing. If he believes there is a 50% probability of a good market, what should he

do? Why?

Mill River Decision Tree

\

Elegant Drawing

Deluxe Drawing

Do Nothing

Zero Net

$50,000 Revenue ( $125 x 400 )

$35,000 Production Cost

$15,000 Net Profit

$27,000 Revenue ( $90 x 300 )


-$8,000 Net Profit

Good

Market

Bad

Market

$50,000 Revenue ( $125 x 400 )


$15,000 Net Profit

$27,000 Revenue ( $90 x 300 )


-$7,000 Net Profit

Good

Market

Bad

Market

Figure 3 -Mill River Decision Tree


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Mill River (5.13)

Both elegant and deluxe options give the same profit of $15,000 in a good market; however

in a bad market the elegant has a bigger loss. So he should automatically forget about the elegant

drawing. No matter what the outcome, there is still a 50% chance of the market going either

way. Figure 3.1 will show that he should go with the deluxe drawing based on a 50% bad or

good market.

Based on the decision tree and the analysis, he should definitely dismiss the elegant drawing

plan and move forward with the deluxe drawing plan.

Deluxe good market: 50% x $15,000 = $7,500

Deluxe bad market: 50% x (-$7,000) = (-$3,500)

$7,500

- $3,500

$4,000

So, with a 50% market variable, the deluxe drawing has a very good

chance of making a profit of $4,000.

Figure 3.1 -Mill River decision tree analysis


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Summary

When a problem needs to be solved, a company can use a decision tree to help the company

make the right choices in order to satisfy the customer’s wants and keep ahead of the

competition, all with an easy to design matrix that can be produced with various software

applications most companies already have on hand.

Once a decision has been made to produce a product, it is rational to say, parts will break

either from normal wear and tear or damaged from negligence, having a parts list will prove

particularly useful for the purpose of ordering and shipping as shown from the eyeglasses and

case, bill of material.

When large quantities of a product are being packed in preparation of shipping, an assembly

chart is an excellent way to help inspectors ensure all materials are present and ultimately packed

before sending it out for purchase. Along with the assembly chart if required, is an assembly

drawing, an easy to read pictorial of how the manufacturer designed the product to be assembled.

When asking yourself, do I start a business, do I expand what I already have, do I just do

nothing; a decision tree will help answer these questions. Once your decision tree is constructed,

all that is left is to analyze the data; the decision tree will help with a difficult situation.


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Index

Assembly Chart A graphic means of identifying how components flow into subassemblies and

final products.

Bill of Material A list of components, their description, and the quantity of each item required to

make one unit of a product.

Decision Tree A decision support tool that uses a tree-like graph or model of decisions and their

possible consequences, including chance event outcomes, resource costs

House of Quality is a diagram, resembling a house, used for defining the relationship between

customer desires and the firm/product capabilities.

http://en.wikipedia.org/wiki/Customer


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Reference

Figure 2 (Table Lamp) images courtesy of www.images.goggle.com.

Quote “Look for your choices, pick the best one, then go with it”-- Pat Riley.

http://www.images.goggle.com/

Documents

MANAGEMENT OF GOODS AND SERVICES - IT …people.wku.edu/bradley.fink680/class/cit492/mod1.pdfManagement of Goods and Services 1 1/31/13 Executive Summary As a manager, decisions need