Product Development

Product Selection and Development Stages

• Figure 5.4, pg. 138
 Quality Function Deployment (DFD)

• QFD: The process of

– Determining what are the customer “requirements” /
“wants”, and
– Translating those desires into the target product design.
• House of quality: A graphic technique for defining the
relationship between customer desires and the developed
product (or service)
(Discuss Example 1: pgs 139-140)
 Deploying the Quality Effort

• Discuss Figure 5.5

• The final outcome: Product Excellence, i.e., determining
what the customer wants and providing it!
Organizing the Product Development Effort
• The traditional US approach (department-based):
Research & Development => Engineering => Manufacturing =>
Production
Clear-cut responsibilities but lack of communication and “forward
thinking”!
• The currently prevailing approach (cross-functional team-based):
Product development (or design for manufacturability, or value
engineering) teams: Include representatives from:
– Marketing
– Manufacturing
– Purchasing
– Quality assurance
– Field service
– (even from) vendors
Concurrent engineering: Less costly and more expedient product
development
 Manufacturability and Value Engineering
• Promote improved designs and product specifications through the
R&D, design and production stages of the product development,
by seeking to
– Control the product complexity
– (further) standardize the employed components
– Improve job design and job safety
– Improve the product maintainability / serviceability
– promote robust design practices
 Some current issues in product design
• Robustness: the insensitivity of the product performance to
small variations in the production or assembly process =>
ability to support product quality more reliably and cost-
effectively.
• Modularity: the structuring of the end product through easily
segmented components that can also be easily interchanged or
replaced => ability to support flexible production and product
customization;increased product serviceability.
• Environmental friendliness:
– Safe and environmentally sound products
– Minimizing waste of raw materials and energy
– Reducing environmental liabilities
– Increasing cost-effectiveness of complying with
environmental regulations
– Being recognized as good corporate citizen.
– (example: BMW-Figure of pg. 145)
 The time factor: Time-based competition
• Some advantages of getting first a new product to the market:
– Setting the “standard” (higher market control)
– Larger market share
– Higher prices and profit margins
• Currently, product life cycles get shorter and product
technological sophistication increases => more money is
funneled to the product development and the relative risks
become higher.
• Product development strategies for time-based competition
(Figure 5.7, pg. 147)
 Documenting Product Designs
• Engineering Drawing: a drawing that shows the dimensions,
tolerances, materials and finishes of a component. (Fig. 5.9)
• Bill of Material (BOM): A listing of the components, their
description and the quantity of each required to make a unit of a
given product. (Fig. 5.10)
• Assembly drawing: An exploded view of the product, usually via a
three-dimensional or isometric drawing. (Fig. 5.12)
• Assembly chart: A graphic means of identifying how components
flow into subassemblies and ultimately into the final product. (Fig.
5.12)
• Route sheet: A listing of the operations necessary to produce the
component with the material specified in the bill of materials.
• Engineering change notice (ECN): a correction or modification of
an engineering drawing or BOM.
• Configuration Management: A system by which a product’s planned
and changing components are accurately identified and for which
control of accountability of change are maintained
 Documenting Product Designs (cont.)
• Work order: An instruction to make a given quantity (known as
production lot or batch) of a particular item, usually to a given
schedule.
• Group technology: A product and component coding system that
specifies the type of processing and the involved parameters,
allowing thus the identification of processing similarities and the
systematic grouping/classification of similar products. Some
efficiencies associated with group technology are:
– Improved design (since the focus can be placed on a few
critical components
– Reduced raw material and purchases
– Improved layout, routing and machine loading
– Reduced tooling setup time, work-in-process and production
time
– Simplified production planning and control
 “Make-or-buy” decisions
• Deciding whether to produce a product component “in-
house”, or purchase/procure it from an outside source.
• Issues to be considered while making this decision:
– Quality of the externally procured part
– Reliability of the supplier in terms of both item quality
and delivery times
– Criticality of the considered component for the
performance/quality of the entire product
– Potential for development of new core competencies of
strategic significance to the company
– Existing patents on this item
– Costs of deploying and operating the necessary
infrastructure
 A simple economic trade-off model for
the “Make or Buy” problem
Model parameters:
• c1 ($/unit): cost per unit when item is outsourced (item price,
ordering and receiving costs)
• C ($): required capital investment in order to support internal
production
• c2 ($/unit): variable production cost for internal production (materials,
labor,variable overhead charges)
• Assume that c2 < c1
• X: total quantity of the item to be outsourced or produced internally
Total cost as c1*X
a function of X
C+c2*X

X
X0 = C / (c1-c2)
 Example: Introducing a new (stabilizing)
bracket for an existing product
• Machine capacity available
• Required “infrastructure” for in-house production
– new tooling: $12,500
– Hiring and training an additional worker: $1,000
• Internal variable production (raw material + labor) cost:
$1.12 / unit
• Vendor-quoted price: $1.55 / unit
• Forecasted demand: 10,000 units/year for next 2 years

X0 = (12,500+1,000)/(1.55-1.12) = 31,395 > 20,000

Buy!
Evaluating Alternatives in Product Design
through Decision Trees
• Decision Trees: A mechanism for systematically pricing all
options / alternatives under consideration, while taking into
account various uncertainties underlying the considered
operational context.
(Example 3)
 The Silicon Inc. Example
• Developing and marketing a new microprocessor
• Company Options:
– Purchase a sophisticated CAD system: $500,000 =>
manufacturing cost: $40/unit
– Hiring and training three new engineers: $375,000 =>
manufacturing cost $50/unit
– do nothing!
• Possible market responses:
– Favorable: 25,000 units sold at $100 each – 40%
chances
– Unfavorable: 8000 units sold at $100 each – 60%
chances
• Pick an option that maximizes the expected monetary
value (EMV)