Product Development

1. Product Development

2. Product Selection and Development Stages • Figure 5.4, pg. 138

3. 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)

4. Deploying the Quality Effort • Discuss Figure 5.5 • The final outcome: Product Excellence, i.e., determining what the customer wants and providing it!

5. 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-functionalteam-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

6. 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

7. 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)

8. 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)

9. 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

10. 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

11. “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

12. 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 c1*X Total cost as a function of X C+c2*X C X X0 = C / (c1-c2)

13. 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!

14. 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)

15. 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)