Product Process and Service Design

PRODUCTION AND OPERATIONS MANAGEMENT PRODUCTION AND OPERATIONS MANAGEMENT

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Product,

Process

and

Service design

• Product design and development

• Process planning and process design

• Production processes,

• Service Operations

• Production Technology

• Problems

PRODUCT DESING AND DEVELOPMENT

Product design is defined as the determination and specification of the parts of a product and their interrelationship so that they became a unified whole. It may also be defined as the idea generation, concept development, testing and manufacturing or implementation of a physical object or service.

A product is designed to perform a particular function or set of functions effectively and reliably, to be economically manufacturability, to be profitably salable, to suit the purposes and the attitudes of the consumer, and to be durable, safe, and economical to operate,

BENEFITS OF PRODUCT DESIGN AND DEVELOPMENT

1. Attract new customers with an improved, larger product line.2. Retain current customers through continuous product improvement.3. Identify alternate designs.4. Determine and reduce product limitations

CLASSIFICATION OF PRODUCT DESIGN

1. Customized product design Eg. Boilers, turbines2. Standard product desing Eg. Coolers, fans, television


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CONTRIBUTION OF FUNCTIONAL AREAS TO PRODUCT D&D

MARKETINGCustomer needs

Information on competitors &Their products desirability

Of specific product features

PURCHASINGAvailability of cost of material

Supplier with designcapabilities

FINANCEAvailable investment

fundsFinancial feasibility

projectedIn house

LEGALLegal environment

patentsOPERATIONS

Resource flexibility product serviceabilityProcess capabilities

PRODUCTDESIGN

R & DTechnological

advances

H.RSkills requiredTraining plancompetencies


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STAGES IN PRODUCT D&D

Idea generation

Feasibility study

ProductFeasible?

Preliminarydesign

Finaldesign

Process planningPrototype

Design and ManufacturingSpecifications

Manufacturing


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PHASES IN PRODUCT D & D

I. PHASE -1- CONCEPTUAL DESIGNa) Production specificationb) Design Concept

II. PHASE-2- FEASIBILITYa) Proof-of-concept prototypeb) Alpha prototype

III. PHASE-3-DEVELOPMENT AND DESIGNa) Beta prototypeb) Pre-production

IV. PHASE-4-INTRODUCTION

V. PHASE-5 STANDARDIZATION

V1. PHASE-6 – SUCESSION PLANNING


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PRODUCT LIFE CYCLE

Introduction Growth Maturity Decline

Level o

f effort

Research Product Development Process

Modification And Enhancement

SupplierDevelopment

CapacityDetermination/Enhancement

High volumeProduction

WithInnovation

Cost controlReductionIn options

TerminationOf productionIf necessary


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CADD (COMPUTER AIDED DRAFTING AND DESIGN)

CADD involves both software and sometimes special purpose hardware, current packages range from 2D vector based drafting systems to 3D parametric surface and solid design modellers.

AREAS OF USE

1. Architecture2. Mechanical (MCAD)3. Ship building.4. Electronic and Electrical (ECAD)5. Apparel and Textile CAD


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PROCESS DESIGNProcess design can be the design of new facilities or it can be modifications expansion of existing facilities

PROCESS PLANNINGProcess planning is concerned with planning the transformation needed to convert materials into finished goods. These steps are designed in sequence in order to produce the desired level of output

MAJOR FACTORS EFFECTING PROCESS DESIGN

• Nature of Product and Service Demand• Degree of Vertical Integration• Product flexibility• Degree of Automation• Product/Service quality


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PROCESS PLANNING AND DESIGN SYSTEM

INPUTS

•Product/Service Information-Product/service demand-Prices/volumes-patterns-Competitive environment-Consumer wants/needs-Desired product characteristics

•Production system information-Resource availability-Production economics-Known technologies-Technology that can be acquired-predominant strengths & weakness

•Operation Strategy-Positioning strategies-Competitive weapons needed-Outsourcing plans-allocation of resources

PROCESS PLANNING & DESIGN Process-type selection-Coordinated with strategies•Vertical integration studies-Vendor capabilities-acquisition decisions-make-or-buy decisions•Process/product studies-Major technological steps-Minor technological steps-Product simplification-Product standardization-product design for producibility•Equipment studies-Level of automation-Linkages of machines-equipment selection-tooling•Production procedures •studies-Production sequence-Material specifications-Personal requirements•Facilities studies-Building designs-layout of facilities

OUTPUTS•Process Technology-Design ofSpecificProcess-LinkagesAmong processes•Facilities-Building Design-layout ofFacilities-selectionOf equipment•Personal Estimates-skill levelRequirements-training/retraining


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PROCESS LIFE CYCLE

Startup Rapid Growth Maturation

Time Commodity

Job Shop

Batch Assemblyline

Continuousflow


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TYPES OF PROCESS DESIGN• Product focused Production System

RM-Raw material FG- Finished goodsC – Components PC- Purchased componentsSA- Sub assemblies

2 4

1 35

1

6

RM

RM

C

C

SA

SA

A FG

PC


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2) Process focused production system

3) Group Technology / Cellular Manufacturing

cutting Drilling Shaping Assembly Sanding Finishing

1

1

2

2

2 3

3

4

5

5 6

6 7

7

JOB-A

JOB-B


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3) Group Technology / Cellular Manufacturing

Saw 2

Lathe 3

Grinder 2

Drill 1

Mill 2

Weld 3

FG

RM


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DECIDING AMONG PROCESS ALTERNATIVES

1) Dependence of process design on product diversity and batch size

2) Capital requirement for process design3) Economic analysis of production process4) Cost function of processing alternatives

Product Focused

Dedicated

ProductFocused

BatchSystem Cellular

Manufacturing

Process-FocusedJob Shop

Sm

allB

atch sizeLarg

e

Number of product designs


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BREAK-EVEN ANALYSIS/COST VOLUME PROFIT MODEL

VOLUME OF OUTPUT

FIXED COST

COSTS OR

INCOME

PR

OF

ITT

OT

AL

VC

TO

TA

L F

C

BEO

BEPBEC

Sales Revenue line

Total cost line

Margin of

Safety

ProfitRegion

LossRegion


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• ASSUMPTIONS IN BREAK-EVEN ANALYSIS

1) Selling price per unit of output will remain constant throughout the volume of output

2) There is a linear relationship between sales volume and costs ie. There are no whole sale rates.

3) Costs can be divided into two categories-fixed costs and variable costs4) Production and sales quantities are equal i.e. there is no inventory.5) No other factor will influence the cost except the quantity of out put.

ANALYTICAL CALCULATIONS

Let F = Fixed costs Q = Quantity of output produced and sold s = Selling price per unit of output v = Variable price per unit of output sQ = S = Sales revenue (income) for quantity QvQ = V = Variable costs for quantity QTotal costs = Fixed costs + Variable costs = F + vQ

At Break even pointTotal costs = Total income F + vQ = sQ where Q = Break even output s-v = Contribution per unit Q (BEP) = F / s-v = Fixed Cost / Contribution/unit of O/P


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PROFIT VOLUME (P/V) RATIO

measures the profitability in relation to sales. Higher the P/V ratio more profitable will be the product

P/V Ratio = ( Contribution / Total Sales Revenue ) X 100

= {(Total Sales Revenue – Total Variable costs) / Total sales revenue} X 100

ANGLE OF INCIDENCE

Large angle of incidence indicates large profitl and extremely favourable business positions.

MARGIN OF SAFETY

Large margin of safety indicates that the business can earn profit even if there is a great reduction in output

Margin of Safety ={( Actual sales – Break even sales) / Actual sales} X 100

CONTRIBUTION At any given volume of output, if contribution is greater than the fixed costs,

profit will result. Contribution always equals fixed cost at Break even output

Contribution = Sales Revenue – Variable costs


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USES OF BEA

• Break even chart helps the management to know at a glance the profits at different levels of output

• Useful in determining the minimum output necessary to break even and go after profit

• The effects of altering selling price or the effects of controlling costs on the profits earned can be quickly understood by looking at the chart

• It helps comparing the profitability of tow or more proposals• It helps in computing the output required to maintain a particular level of

profit• It helps in taking decisions regarding production, plant locations, make or

buy components etc.

LIMITATIONS OF BEA

• The major assumption of B.E analysis is that the whole of the production output is sold, which may not be so in reality.

• BEA assumes that all costs can easily be classified as Fixed or Variable for the whole range of production costs. In some cases it is very difficult to ascertain the nature of the cost

• BEA assumes that profits depend only on selling price and sales volume ignoring the fact that they are also affected by technological changes, price volume discounts, etc

• It is suitable only when the firm produces only one type of product.


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Problems

1) The production processes A,B, and C leave the following cost structure

Process FC/Year VC/Year

A Rs. 1,20,000 Rs. 3

B Rs. 90,000 Rs. 4 C Rs. 80,000 Rs. 4.50

a) What is the most economical process for a volume of 8,000 units per year?

a) What is the annual break-even quantity for the process A,B and C of selling price of the product is Rs. 6.95 per unit?


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Problems

2) The production processes automated (A), cellular manufacturing ( C ), and job shop (J) have the following structure.


A Rs. 1,100,00 Rs. 2

C Rs. 80,000 Rs. 4 J Rs. 75,000 Rs. 5


b) At what volume would each of the processes be preferred?c) What is the annual break-even quantity for the automated process (A) if the selling price of the product is Rs. 14 per unit?


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Problems

3) The production processes automated (A), cellular manufacturing ( C ), and job shop (J) have the following structure.


A Rs. 1,25,000 Rs. 2.50

C Rs. 85,000 Rs. 4.00 J Rs. 75,000 Rs. 5.00


b) If the product is sold at Rs. 6/ unit, to earn a profit of Rs. 50,000, how much you need to produce and sell?


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4) Mr. Mendoza is the production Manager at airsoft athletic shoes, a manufacturer of high end running shoes. Mr. Mendoza would like to automate the process of gluing the rubber soles onto shoe uppers, a process currently being performed manually.

Five companies offer automated machines that perform this processes, but they vary in initial cost and operating cost. Due to ever changing competition in the running shoe industry. Airsoft’s sales vary substantially from year to year and are difficult to forecast accurately.

Mr. Mendoza feels that part of his machine selection analysis should be to evaluate the annual cost of each machine. The uncertainty of annual sales volume has made the comparison of annual cost more difficult than he anticipated. Mr. Mendoza has decided that it would be most useful to obtain a range of annual volumes in which each machine would be the preferred alternative. The annual fixed cost and the variable cost per shoe for each machine are shown below

Process FC/Year VC/shoe

A Rs. 20,500 Rs. 0.83 B Rs. 28,200 Rs. 0.59

C Rs. 21,100 Rs. 0.85 D Rs. 11,900 Rs. 0.99 E Rs. 29,600 Rs.0.68a) Rearrange the machine cost information in order of increasing annual FC.

Are any machines clearly inferior to any other machines? If so, eliminate them from further analysis

b) For what range of annual volumes is each machine the preferred alternative, based only on annual cost ?

c) What factors other than the annual cost should be considered in selecting the machine

Documents

Product Process and Service Design