Operations MGT (Chap 1-3).ppt Management

Describes what Operations Management is all about

1. Course Name: Operations Management

2. Course Outline Chapter 1: Introduction- operations management concepts Chapter 2- Operations and operations strategy Chapter 3- Productions systems design Production and service design Process selection Capacity planning Facility layout Design of work systems Location analysis

3. Chapter 4: Operations planning and control Planning and control activities Material resource planning Aggregate production planning Chapter 5: Quality management

4. Chapter One Introduction

5. Organization and functions of business organization What is organization ? Organizations may be defined in various ways: A group of people who work interdependently toward some purpose . A consciously coordinated social unit, composed of two or more people, that functions on a relatively continuous basis to achieve a common goal or set of goals

6. Based on the very objectives/goals for which they are perusing, organizations may be classified into business and non-business organizations Business organizations are those that work with profit motives In pursuit of their (profit) objectives organizations undertake different set of activities called functions . Of these functions the three basic functions common to all business organizations are: marketing, finance, and operations.

7. Marketing – is responsible for assessing consumer wants and needs, and selling and promoting the organization’s goods or services. It generates demand for organization’s product. Finance is responsible for securing financial resources at favorable prices and allocating those resources throughout the organization, as well as budgeting, analyzing investment proposals , and providing funds for operations . Production/operations –is responsible for producing the goods or providing the services offered by the organization. operations is the core of what the organization does. Note : specific activities constituting these functions may vary depending nature of organization.

8. 1- 8 Operations Management for a Manufacturer Operations Finance/ Accounting Marketing Production Control Manufacturing Quality Control Purchasing

9. 1- 9 Operations Management for an Airline Operations Finance/ Accounting Marketing Ground Support Flight Operations Facility Maintenance Catering

10. Operations and operations Management? What is operations? Operations is that part of a business organization that is responsible for producing goods and/or services . Production of goods results in a tangible output , such as automobile, refrigerator anything that we can see or touch. Delivery of service , on the other hand, generally implies an act such as physician’s examination, TV and auto repair, etc Services are activities that provide some combination of time, location, form, or psychological value .

11. Since there are relatively few pure goods or pure services , companies usually sell product packages , which are a combination of goods and services. There are elements of both goods production and service delivery in these product packages. This makes managing operations more interesting, and also more challenging .

12. Goods-service Continuum Products are typically neither purely service- nor purely goods-based Goods Services Surgery, Teaching Songwriting, Software Development Computer Repair, Restaurant Meal Home Remodeling, Retail Sales Automobile Assembly, Steelmaking

13. Systems perspective of operations /

14. The essence of the operations function is to add value during the transformation process: Value-added is the term used to describe the difference between the cost of inputs and the value or price of outputs . In nonprofit organizations, the value of outputs (e.g., highway construction, police and fire protection) is their value to society ; the greater the value-added, the greater the effectiveness of these operations. In for-profit organizations, the value of outputs is measured by the prices that customers are willing to pay for those goods or services.

15. Comparison of manufacturing and service operations It is argued that Manufacturing (producing goods) and service (service delivery) are often different in terms of what is done but quite similar in terms of how it is done . Consider these points of comparison: Degree of customer contact. Many services involve a high degree of customer contact , although services such as Internet providers, utilities, and mail service do not. When there is a high degree of contact, the interaction between server and customer becomes a “moment of truth” that will be judged by the customer every time the service occurs.

16. Labor content of jobs. Services often have a higher degree of labor content than manufacturing jobs do, although automated services are an exception. Uniformity of inputs. Service operations are often subject to a higher degree of variability of inputs. Each client, patient, customer, repair job, and so on presents a somewhat unique situation that requires assessment and flexibility. Conversely, manufacturing operations often have a greater ability to control the variability of inputs, which leads to more-uniform job requirements.

17. Measurement of productivity. Measurement of productivity can be more difficult for service jobs due largely to the high variations of inputs. For instance, one doctor might have a higher level of routine cases to deal with, while another might have more difficult cases. Hence, unless a careful analysis is conducted, it may appear that the doctor with the difficult cases has a much lower productivity than the one with the routine cases.

18. Quality assurance. Quality assurance is usually more challenging for services due to the higher variation in input, and because delivery and consumption occur at the same time . Unlike manufacturing, which typically occurs away from the customer and allows mistakes that are identified to be corrected , services have less opportunity to avoid exposing the customer to mistakes.

19. Inventory . Many services tend to involve less use of inventory than manufacturing operations: So the costs of having inventory on hand are lower than they are for manufacturing. However, unlike manufactured goods, services cannot be stored . Instead, they must be provided “on demand.”

20. Wages. Manufacturing jobs are often well paid, and have less wage variation than service jobs, which can range from highly paid professional services to minimum-wage workers. Is this true in our context? Ability to patent. Product designs are often easier to patent than service designs, and some services cannot be patented, making them easier for competitors to copy.

21. Typical differences between production of goods and provision of services

22. Similarities Though goods and services are different in many respects ,there are many similarities between managing the production of managing services . Forecasting and capacity planning to match supply and demand. Process management. Managing variations. Monitoring and controlling costs and productivity. Supply chain management. Location planning, inventory management, quality control, and scheduling.

23. What is operations management? Operations management is the management of systems or processes that create goods and/or provide services. A primary function of an operations manager is to guide the operations systems by decision making. It involves making operations related decisions: both system design and system operation related decisions

24. Certain decisions affect the design of the system , and others affect the operation of the system . System design involves decisions that relate to system capacity, the geographic location of facilities, arrangement of departments and placement of equipment within physical structures, product and service planning, and acquisition of equipment. These decisions usually, but not always, require long-term commitments . Moreover, they are typically strategic decisions .

25. System operation involves management of personnel, inventory planning and control, scheduling, project management, and quality assurance. These are generally tactical and operational decisions. Feedback on these decisions involves measurement and control.

26. Production/operations and productivity Production is the creation of goods and services Creation of goods and services involves conversion of inputs (resources) into desired outputs. At the core of the objectives this conversion process need to satisfy is Productivity What is productivity?

27. Productivity is a relationship between the output (product/service) and input (resources consumed in providing them) of a business system. The ratio of aggregate output to the aggregate input is called productivity. Productivity = output/Input The ratio of output produced to the input resources utilized in the production For survival of any organization, this productivity ratio must be at least 1. If it is more than 1, the organization is in a comfortable position.

28. Why focus on productivity? It helps to cut down cost per unit and thereby improve the profits ( next slide- Productivity and profit ) Gains from productivity can be transferred to the consumers in the form of lower priced Products or better quality products. These gains can also be shared with workers or employees by paying them at higher rate. A more productive entrepreneur can have better chances to exploit expert opportunities. It would generate more employment opportunity.

29. Overall productivity reflects the efficiency of production system as: More output is produced with same or less input. The same output is produced with lesser input. More output is produced with more input. The proportional increase in output being more than the proportional increase in input.

30. Productivity and profit If the outputs and input for the period for which productivity is measured, are expressed in financial terms (value of output), then under such restrictive assumptions one can write: Aggregate output =Gross Sales=G Aggregate input=Cost =C Total Productivity=P= G/C ---------(Eq.1) From the definition of profit, we have; Profit= π = G-C ------------------(Eq.2)

31. By dividing Eq.2 by C, we get π /C = G/C – 1 So from Eq.1 (as G/C= P), we can rewrite ( π /C = G/C – 1) as π /C =P-1 = π = (P-1)*C Hence, mathematically, ratio of profit to cost will be productivity index minus 1. Ratio of profit to cost positive only when productivity index exceeds 1. For Zero profit ( π =0), P=1 For a Loss, ( π < 0), P <1 For a profit, ( π > 1) ,P>1 Zero profit will give a productivity value of 1, while a loss will give productivity value less than 1 .The profit to cost ratio indicates the increase in productivity.

32. Productivity Measurement: Productivity may be measured either on aggregate basis or on individual basis , which are called total and partial measure & multifactor. Total productivity Index/measure = Total output/ Total input = Total production of goods and services / ( Labour+material+capital+Energy+management )

33. Partial productivity indices, depending upon factors used, it measures the efficiency of individual factor of production.

34. Example The input and output data for an industry given in the table. Find total, partial and multifactor (for human and material only) productivity measures. Output and Input production data in dollar ($) Output $ 13,500 Inputs Human $3,000 Material $153 Capital $10,000 Energy $540 Other Expenses 1,500 $1,500

35. Answer Total productivity = $13,500/$15,193= 0.89 Partial productivity (Human)= $13,500/$3000= 4.5 Partial productivity capital =$13,500/$10,000=1.35 Multifactor productivity (Human and material) =$13,500/$(3000+153)=4.3    

36. Example two XYZ company is the producer of apple crates to be sold to growers. With its current equipment, the company has been able to produce 240 crates per logs. It currently purchases 100 logs per day , and each requires 3 labor hours to process. It believes that it can hire a professional buyer who can buy a better quality log at the same cost. If this is the case, the company can increase its production to 260 crates per 100 logs. With the new level of production, its labor hours will increase by 8 hours per day. What will be the impact on productivity if the buyer is hired?

37. Answer: Current labor productivity= 240 crates/(3hrs/log* 100logs) = 240/300 = 0.8 crates per hour Labor productivity with buyer= 260 crates/ ((3hrs/log*100logs) + 8hrs) = 260/308 = 0.844 crates per hour Productivity improvement= (0.844-0.8)/0.8= 5.5% Driving force for productivity improvement is better decision at the input of the operations system

38. Some examples on measurement of partial measures of productivity in other fields: Businesses Productivity measure Restaurant Customers (Meals) per labour hour Retail Store Sales per square foot Utility plant Kilowatts per ton of coal Paper mill Tons of paper per cord of wood

39. Techniques for Productivity Improvement: An organization take a number of key steps toward improving productivity. Some of this may include: 1. Developing productivity measure for all operations: measurement is the first step in managing and controlling an operation 2. Establishing reasonable goal for productivity improvement 3. Looking at the system as a whole in deciding which operations is most critical: it is important to identify the bottleneck and make improvement to it .

40. 4. Develop methods for achieving productivity improvement : this may include soliciting ideas from workers, reexamining the way work is done, and the like. Two points worth considering may be : Improving Work content through method study: work content means the amount of work “contained in” a given product or process measured in man-hour or machine-hour and Minimizing Ineffective time: the time for which the worker or machine or both are idle due to the shortcomings of the management or the worker.

41. 5. winning management support and encouragement for productivity improvement action 6. Measuring improvement and take further corrective action if the result of measurement demands it

42. CHAPTER TWO OPERATIONS AND OPERATIONS STRATEGY

43. What is strategy? Strategies are plans for achieving organizational goals. A plan or set of intentions that will set the long-term direction needed to ensure future organizational success. Strategy is the direction and scope of an organization over the long-term, which achieves advantage in a changing environment through its configuration of resources with the aim of fulfilling stakeholder expectations.

44. Strategy involves the interplay of three elements : the organization’s external environment , its resources and its objectives (expectations of its stakeholders). Operations management is principally concerned with the organizational resources. The way that the operations function manages resources will impact both the way that the organization interacts with its external environment and its ability to meet the needs of its stakeholders. Thus, operations management is an integral part of an organization’s strategy.

45. Levels of strategy 1. Corporate level strategy : Corporate level strategy is the highest level of strategy. It sets the long-term direction and scope for the whole organization . Concerned with such issues like: What businesses should the firm be in? How resources will be allocated between them, and How relationships between the various business units and the corporate centre should be managed. How to make the corporation as a whole add up to more than the sum of its business parts?

46. Types of corporate strategy There are three major types of strategies /grand/ at a corporate level : Growth strategy Stability strategy Defensive strategy/Retrenchment 46

47. Growth strategies- The growth strategy seeks to significantly increase a firm's revenues or market share can be classified into two categories: Concentration within existing industries or diversification i nto other lines of business or industries. 47

48. Stability Strategies A corporation may choose stability over growth by continuing its current activities without any significant change in direction. Often, this may be used for a relatively short period, after which further growth is planned. Although sometimes viewed as a lack of strategy , the stability family of corporate strategies can be appropriate for a successful corporation operating in a reasonably predictable environment. 48

49. Retrenchment Strategies This strategy is used to reverse a negative trend. 49

50. Business level strategy focuses on improving the competitive position of a business unit’s products or services within the specific industry where business unit operates. Can be competitive (battling against all competitors for advantage) and /or cooperative (working with one or more competitors to gain advantage against other competitors ). Business-level strategy

51. primarily concerned with how a particular business unit should compete within its industry, and what its strategic aims and objectives should be. In single business organizations, business level strategy is synonymous with corporate level strategy .

52. In selecting a business-level strategy, the firm determines: 1 Who will be served? 2 What needs those target customers have that it will satisfy? 3 How those needs will be satisfied

53. Business-level strategies are intended to create differences between the firm ’ s position relative to those of its rivals To position itself, the firm must decide whether it intends to: Perform activities differently — to achieve lower cost: cost based strategy Perform different (and valuable) activities: differentiation strategy or Find niche market that others are not currently looking after: Focus strategy These three strategies are considered as generic strategies

54. cost leadership strategies are based on a firm’s ability to provide a product or service at a lower cost than its rivals. A low –cost strategy then produces a competitive advantage when the firm can earn a higher profit margin that result from selling products at current market prices .

55. Cost saving actions required by this strategy: Building efficient scale facilities Tightly controlling production costs and overhead Simplifying production processes and building efficient manufacturing facilities Minimising costs of sales, R&D and service Monitoring costs of activities provided by outsiders

56. Differentiation A differentiation strategy is an integrated set of actions designed to produce goods or services that customers perceive as being different in ways that are important to them The firm may produce non-standardized products for customers who value differentiated features more than they value low cost The ability to sell goods or services at a price that substantially exceeds the cost of creating its differentiated features allows the firm to outperform rivals and earn above-average returns

57. A focus strategy is an integrated set of actions designed to produce or deliver goods or services that serve the needs of a particular competitive segment Focus strategies are designed to help a firm target a specific niche within an industry . These niches could be a particular buyer group, a narrow segment of a given product line, a geographic or regional market, or a niche with distinctive, special taste and preference.

58. Firms can build a focus in one of two ways. They can adopt a cost- based focus in serving a particular niche or segment of the market, or They can adopt a differentiation based focus

59. Functional Level Strategy Functional strategy is the approach taken in a functional area to achieve corporate and business unit objectives and strategies by maximizing resource productivity. Operations strategies Marketing strategies Financial strategies HR strategies…….

60. Functional level strategy : The bottom level of strategy is that of the individual function (operations, marketing, finance, etc.) Concerned with how each function contributes to the business strategy , what their strategic objectives should be and. how they should manage their resources in pursuit of those objectives

61. Levels of strategy summary

62. Operations and operations strategy Operations Strategy : a plan for the design and management of operations functions is developed after the business strategy focuses on specific capabilities which give it a competitive edge – competitive priorities Guides actions and decisions of operations functions

63. The strategic decisions and actions taken within its operations have a direct impact on the success of business strategies How ?

64. Literatures argue that there are five operations performance o bjectives: Cost: The ability to produce at low cost. Quality: The ability to produce in accordance with specification and without error. Speed: The ability to do things quickly in response to customer demands and thereby offer short lead times between when a customer orders a product or service and when they receive it. Dependability: The ability to deliver products and services in accordance with promises made to customers (e.g. in a quotation or other published information).

65. Flexibility: The ability to change operations. Flexibility can comprise up to four aspects : The ability to change the volume of production. The ability to change the time taken to produce The ability to change the mix of different products or services produced. The ability to innovate and introduce new products and services

66. Excelling at one or more of these operations performance objectives can enable an organization to pursue a business strategy based on a corresponding competitive factor or priority . That is how an organization can choose a competitive strategy that matches to the competitive edge that operations provides

67. It is also important to note that the success of any particular business strategy depends not only on the ability of operations to achieve excellence in the appropriate performance objectives, but also on customers valuing the chosen competitive factors on which the business strategy is based. Hence, matching operations excellence to customer requirements lies at the heart of any operations based strategy.

68. It is unlikely that any single organization can excel simultaneously at all of the five operations performance objectives. Trying to do so is likely to lead to confusion if operations mangers pursue different objectives at different times. This lack of clarity is likely to lead to suboptimal performance and result in a failure to excel in any of the operations performance objectives

69. Consequently, organizations need to choose which performance objectives they will give priority to. This may result in having to ‘Trade-off ’- less than excellent performance in one aspect of operations in order to achieve excellence in another. It is worth noting, that some operations management scholars reject the concept of the tradeoff . They point to the ability of some organizations to outperform their competitors on multiple dimensions - better quality, greater dependability and a faster response and lower costs.

70. Ferdows and de Meyer’s (1990) ‘ Sandcone ’ model of operations excellence- argue that certain operational capabilities enhance one another , enabling operations excellence to be built in a cumulative fashion they maintain that there is an ideal sequence in which operational capabilities should be developed. The starting point, the base of the sandcone is excellence in quality . On this should be built excellence in dependability , then flexibility (which they take to include speed), then cost . Efforts of enhancing the previously started one should continue whilst building the next

71. Your reflection on sandcone model? Which one is more sensible or realistic: tradeoff or sandcone model’s thesis? Should organization go for all capabilities or focus only on few or one?

72. How organizations perceive strategic role or importance of operations? Skinner (1985) argues that operations could become a ‘ Formidable Competitive Weapon ’ if the function was allowed to play a full strategic role in the organization. However, organizations may not be uniform in the assignment of strategic place to operations- may be due to inappropriate expectations of and attitudes towards operations as Skinner argues.

73. Four-stage model Hayes and Wheelwright’s (1984) Four-stage model of the strategic role of operations Argue that operations can be categorized into four stages based on their strategic role (reflection of organization’s attitude towards their operations) Stage 1: Internally Neutral : The operations function is internally focused and reactive. The best that the organization hopes for is that operations ‘ don’t screw up ’. Stage 1 organization is characterized by a reactive approach to operations management

74. Stage 2- Externally Neutral: The operations function tries to be as good as the competition , or to achieve parity with industry norms . Such an organization is likely to benchmark its operations against its competitors, and adopt best practice A stage 2 organization manages its operations by seeking to emulate those of its competitors As they always adopt OM techniques in the wake of industry leaders, they are never likely to have developed the same level of expertise in their application .

75. Stage 3- Internally Supportive: The operations function seeks to provide credible support for the organization’s business strategy . An operations strategy will be developed which will be derived from, and support, the business strategy. The organization’s operations are likely to be amongst the best in its industry. A stage 3 organization has an operations strategy that is linked to and derived from its business strategy.

76. Stage 4- Externally Supportive: The operations function provides the basis of competitive advantage for the organization , by setting the standard in their industry. The operations function is likely to aim to be world class by seeking to emulate best practice wherever it is to be found. Operations will be seen as the means of exceeding customer expectations by delighting the customer. Operations will be managed proactively to drive the business strategy of the organization. A stage 4 organization uses its operations excellence as the basis for its business strategy – an operations-based strategy .

77. The four stage model is underpinned by the belief that an organization’s operations can provide a source of competitive advantage. It can only do this if the operations function is managed strategically. As such, the proponents argue that, all organizations should aspire to reach the highest level possible, ultimately reaching stage 4.

78. 79 Operations Strategy – Designing the Operations Function

79. Evaluating operations strategy .

80. Operations strategy – Process: how it emerges? Operations strategy might come about in a top-down or a bottom-up process with regard to business and corporate strategies. Similarly, an operations strategy might be developed in response to market requirements (i.e. market-led ) or be based on the capabilities of its operations resources (i.e. operations-led ) This gives rise to four perspectives on operation strategy

81. Top-down: The top-down perspective is one in which the operations strategy is derived from, and is supportive of the organization’s business strategy An operations strategy that the organization uses to realize its business strategy. This concept is in line with that of the Hayes and Wheelwright stage 3 organization.

82. The process of developing an operations strategy would be that of identifying an operation’s task given the business strategy it is supposed to support For instance, if the organization’s business strategy is one of offering low prices , then the operation’s task should be one of achieving low costs in operations. If the business strategy is based on offering customers fast delivery , the operations task should be one of achieving speed in operations

83. Bottom-up The bottom-up perspective is one which sees operations strategy emerging through a series of actions and decisions taken over time within operations. These actions and decisions might at first sight appear somewhat haphazard , as operations managers respond to customer demands, seek to solve specific problems, copy good practices in other organizations, etc. However, they can build over time to form a coherent pattern recognizable as an operations strategy .

84. Market-led The market-led perspective is one in which the operations strategy is developed in response to the market environment in which the organization operates. Organization’s operations strategy should be linked to its marketing strategy by considering how its products and services win orders in the market place.

85. The aim is to identify any gaps between market requirements for particular products and services and the performance of the organization’s operations in delivering those products and services. First the market requirements for the product or service are analyzed in terms of various competitive factors (such as cost, quality, reliability) The performance of the organization’s operations against those factors is then assessed . An operations strategy should be developed which will enable operations to match the level of performance required by customers in each of the competitive criteria.

86. Operations-led The operations-led perspective is one in which its excellence in operations is used to drive the organization’s strategy. This is in line with the Hayes and Wheelwright stage 4 organization and fits with the resource-based view (RBV) of strategy that currently dominates the strategic management literature.

87. The premise of the RBV is that superior performance comes from the way that an organization acquires, develops and deploys its resources and builds its capabilities rather than the way it positions itself in the market place Thus, the process of strategy development should be based on a sound understanding of current operational capabilities and an analysis of how these could be developed in the future.

88. Operations strategy – Context: key decision areas What then are the key decision areas of operations management that need to be considered when an organization is developing an operations strategy? Major strategic decision areas in operations can be conveniently divided into ten categories under two broad headings: structure (the physical attributes of operations; the hardware) and infrastructure (the people and systems of operations; the software).

89. The structural decision areas comprise : Facilities: These decisions are concerned with: where to locate production facilities, how large each facility should be, what goods or services should be produced at each location, what markets each facility should serve, etc

90. Capacity: the capacity of operations and their ability to respond to changes in customer demand. These decisions are concerned with the use of facilities , for example through shift patterns, working hours and staffing levels. Decisions about capacity will affect the organization’s ability to serve particular markets from a given location

91. Process technology : the technology of the equipment used in operations processes. For example, the degree of automation used, the configuration of equipment, and so on. Supply network : the extent to which operations are conducted in-house or are outsourced. Decisions about vertical integration are also concerned with the choice of suppliers, their location, the extent of dependence on particular suppliers, and how relationships with suppliers are managed.

92. Infrastructure decision areas comprise : Planning and Control : the systems used for planning and controlling operations. Quality : quality management policies and practices. Work Organization: organizational structures, responsibilities and accountabilities in operations. Human Resources: recruitment and selection, training and development, management style. New Product Development : the systems and procedures used to develop and design new products and services. Performance Measurement : financial and non-financial performance management and its linkage to recognition and reward systems.

93. Heizer enlists ten critical decision areas for operations management Goods and service design. Quality. Process and capacity design. Location Layout design. Human Resources and Job Design Supply Chain Management Inventory Scheduling Maintenance

94. CHAPTER THREE PRODUCTION/ O PERATIONS SYSTEM DESIGN

95. 3.1 Product and Service Design What is product design? Product design is the process of creating a new product to be sold by a business to its customers. A very broad concept, it is essentially the efficient and effective generation and development of ideas through a process that leads to new products . Organizations that have well-designed products or services are more likely to realize their goals than those with poorly designed products or services.

96. Degree of Newness Product or service design change can range from the modification of an existing product or service to an entirely new product or service: Modification of an existing product or service. Clone of a competitor’s product or service. New product or service.

97. Why product/service design? To be competitive by offering new products or services. To make the business grow and increase profits . As an alternative to downsizing (specially when productivity gains result in the need for fewer workers) Sometimes product or service design is actually redesign - necessitated by customer complaints, accidents or injuries, excessive warranty claims, or low demand or A desire to achieve cost reductions in labor or materials can also be a motivating factor. To utilize market opportunities arising from changes in the environment

98. Key Questions Is there demand for it? Can we do it? Do we have the necessary knowledge, skills, equipment, capacity, and supply chain capability? Manufacturability (for product design): The capability of an organization to produce an item at an acceptable profit. Ease of fabrication and/or assembly Serviceability (for service design): The capability of an organization to provide a service at an acceptable cost or profit. Ease of providing services

99. Legal or regulatory consideration- What are the potential liability issues, ethical considerations, environmental impact? Cultural factors- Product designers in companies that operate globally also must take into account any cultural differences of different countries or regions Does it make sense from an economic standpoint?- costs, and profits Life-cycle factors

100. Product life cycle

101. 1. Introduction stage Characterized by Low demand because the costumer don’t know much about the product. Low sales volume Very low or negative profit The organization has to invest heavily in advertisement to make the product familiar to the costumers. if proper care is not taken, there is chances to product failure

102. 2.Growth The product next enters a stage at rapid growth. Early in this stage (due to acceptability of the product by the costumer) there is drastic jump in sales and profit rise. only limited or no competition. During this stage the mandate for operation is somehow to keep up with demand; efficiency is less of concern.

103. 3.Maturity During this stage, sales level off and profit begins to decline. New competition create to cut costs and ultimately on unit profit margin. Now operation must stress on efficiency, although marketing can ease the pressure by intensifying to differentiate the product. 4.Decline At last the existing product enters to a declining stage and becomes obsolete. Either demand despisers or a better less expensive product emerge.

104. Life cycle suggest when to eliminate the existing product and introduce a new one. This life cycle varies greatly from product to product.

105. Sources of Ideas for products and Services design/redesign Ideas for new and improved products or services can come from a wide range of sources including: Employees (brainstorming and other methods) Customers –complaints, warranty claims, suggestions for some features additions or dropping Competitors ( Reverse Engineering )-purchasing a competitor’s product and then carefully dismantling and inspecting it, searching for ways to improve it Research and Development (R&D)

106. PHASES IN PRODUCT DESIGN AND DEVELOPMENT Product design and development generally proceeds in a series of phases Feasibility analysis. Feasibility analysis entails market analysis (demand), economic analysis (development cost and production cost, profit potential), and technical analysis (capacity requirements and availability, and the skills needed). Also, it is necessary to answer the question,: Does it fit with the mission? It requires collaboration among marketing, finance, accounting, engineering, and operations.

107. Product specifications. This involves detailed descriptions of what is needed to meet (or exceed) customer wants Process specifications. Once product specifications have been set, attention turns to specifications for the process that will be needed to produce the product. Alternatives must be weighed in terms of cost, availability of resources, profit potential, and quality.

108. Prototype development. With product and process specifications complete, one (or a few) units are made to see if there are any problems with the product or process specifications . Design review. At this stage, any necessary changes are made or the project is abandoned. Market test. A market test is used to determine the extent of consumer acceptance . If unsuccessful, the product returns to the design review phase. Product introduction: The new product is promoted. Follow-up evaluation: Based on user feedback, changes may be made or forecasts refined.

109. product design related concepts 1. Degree of Standardization Standardization refers to the extent to which there is absence of variety in a product, service, or process. Benefits: Standardized products are immediately available to customers. Standardized products mean interchangeable parts, which greatly lower the cost of production while increasing productivity Making replacement or repair relatively easy compared with that of customized parts. Design costs are generally lower

110. reduced time and cost to train employees and reduced time to design jobs. scheduling of work, inventory handling, and purchasing and accounting activities become much more routine, and quality is more consistent.

111. Disadvantages: The reduction in variety hence limiting the range of customers to whom a product or service appeals. A risk that a competitor will introduce a better product or greater variety and realize a competitive advantage.

112. 2. Designing for Mass Customization: A strategy of producing basically standardized goods , but incorporating some degree of customization . This can be done through: Delayed differentiation: a postponement tactic: the process of producing, but not quite completing, a product or service, postponing completion until customer preferences or specifications are known.

113. Modular design A form of standardization in which component parts are grouped into modules that are easily replaced or interchanged. For mass customization, modular design enables producers to quickly assemble products with modules to achieve a customized configuration for an individual customer, within short time.

114. Advantage of modular design of equipment compared with non-modular design : Failures are often easier to diagnose and remedy because there are fewer pieces to investigate. Ease of repair and replacement; the faulty module is conveniently removed and replaced with a good one. The manufacture and assembly of modules generally involve simplifications: fewer parts are involved, so purchasing and inventory control become more routine, fabrication and assembly operations become more standardized, and training costs often are relatively low.

115. 3. Robust Design: is a design that results in products or services that can function over a broad range of conditions (range of tolerance). The more robust a product or service, the less likely it will fail due to a change in the environment in which it is used or in which it is performed. Hence, the more designers can build robustness into the product or service, the better it should hold up, resulting in a higher level of customer satisfaction.

116. Design for manufacturing (DFM). Designs take into account the organization’s capabilities, when designing a product. Design for recycling (DFR). Design facilitates the recovery of materials and components in used products for reuse. Design for assembly (DFA). Design focuses on reducing the number of parts in a product and on assembly methods and sequence. Design for disassembly (DFD). Design so that used products can be easily taken apart (using snap-fits wherever possible).

117. Concurrent engineering: Bringing manufacturing design and manufacturing personnel together early in the design phase to achieve smooth transition from product design to production , and to decrease product development time. The group can be enlarged to include suppliers and marketing and purchasing personnel.

118. Quality deployment function (QDF)- is a structured approach for integrating the voice of customers into the product or service development process. The purpose is to ensure that customer requirements are factored into every aspect of the production or delivery process. Once the requirements are known, they must be translated into technical terms related to the product or service.

119. Reliability and Availability Reliability is a measure of the ability of a product, part, or system to perform its intended function under a prescribed set of conditions. In effect, reliability is a probability . If an item has a reliability of .90, this means that it has a 90 percent probability of functioning as intended. The probability it will fail is .1 or 10 percent. Hence, it is expected that, on the average, 1 of every 10 such items will fail or, equivalently, that the item will fail, on the average, once in every 10 trials.

120. QUANTIFYING RELIABILITY Reliability is quantified with using the degree probability: Probability is used in two ways. 1. The probability that the product or system will function when activated. 2. The probability that the product or system will function for a given length of time . The first of these focuses on one point in time and is often used when a system must operate for one time or a relatively few number of times. The second of these focuses on the length of service .

121. Finding the Probability of Functioning When Activated Determining that probability when the product or system consists of a number of independent components requires the use of the rules of probability for independent events Independent events have no relation to the occurrence or nonoccurrence of each other. Rule1. If two or more events are independent and success is defined as the probability that all of the events occur , then the probability of success is equal to the product of the probabilities of the events.

122. Example: Suppose a room has two lamps, but to have adequate light both lamps must work (success) when turned on. Assume one lamp has a probability of working of .90, and the other has a probability of working of .80. The probability that both will work is .90* .80 = .72. Note: Many products and systems have a large number of component parts that must all operate, and some way to increase overall reliability is needed. One approach is to use redundancy in the design. This involves providing backup parts for some items.

123. Rule 2. If two or more events are involved and success is defined as the probability that at least one of them occurs, the probability of success is 1- P (all fail). Example There are two lamps in a room. When turned on, one has a probability of working of .90 and the other has a probability of working of .80. Only a single lamp is needed to light for success. The probability of success is 1- ((1- .90)*(1-.80))= .98.

124. Finding the Probability of Functioning for a Given Length of Time The second way of looking at reliability considers the incorporation of a time dimension: Probabilities are determined relative to a specified length of time (next slide) The probability that equipment or a product put into service at time 0 will fail before some specified time, T, is equal to the area under the curve between 0 and T. Reliability is specified as the probability that a product will last at least until time T ( no failure before time T ) ; and is equal to the area under the curve beyond T.

125. Estimating these probabilities calls for information about the MTBF (my be obtained from historical data) Mean time between failures (MTBF): The average length of time between failures of a product or component. The time between failures (infant mortality or failure due to some defects) is generally believed to be exponential distributed

126. An exponential distribution is said to be completely defined when a single parameter , i.e., the distribution mean, or the mean time between failures is known Given the mean (MTBF), probability that a product lasts a specified time before failing can be determined using the following formula:

127. Example By means of extensive testing, a manufacturer has determined that its Super Sucker Vacuum Cleaner models have an expected life that is exponential with a mean of four years. Find the probability that one of these cleaners will have a life that ends a. After the initial four years of service. b. Before four years of service are completed. c. Not before six years of service.

128. a. Given: MTBF= 4 , T= 4 P ( no failure before time T ≥ 4 ) = ? = 0.3679 b. P (failure before T=4 year) = 1- p ( no failure before time T ≥ 4 ) = 1- 0.3679 = 0.6321 c. P (no failure before T ≥ 6) = 0.2231

129. The previously discussed methods of capturing reliability is meant for failures due to some defects in the making of the product ( infant mortality case )- e.g., defective component Products may also wear-out after serving some period of time. Literature suggest normal distribution for modeling product failure due to wear-out That is, product failure times due to wear-out are assumed to be normally distributed with mean μ and standard deviation δ

130. Some features of normal distribution 1. about 68.27% of the measurements fall within the range of 1SD about the mean 2. about 95.45% of the measurements fall within the range of 2SD about the mean 3. about 99.73% of the measurements fall within the range of 3SD about the mean

131. Steps to reliability (probability that a product survives certain period before experience failure due to wear) estimation: 1. obtain a probability that service life will not exceed some value T, by computing z value and referring to corresponding probability

132. 2. Subtract this probability from 1 (100 percent) t o find the reliability for time T

133. Example: The mean life of a certain ball bearing can be modeled using a normal distribution with a mean of six years and a standard deviation of one year. Determine each of the following: a. The probability that a ball bearing will wear out before seven years of service. b. The probability that a ball bearing will wear out after seven years of service (i.e., find its reliability).

134. Given, mean (μ) = 6 years, SD (δ)= 1 year a. T=7 years P (T ≤ 7) = ? Z= (7-6)/1 = 1 Area under normal curve with Z=+1 = 0.5 + (0.6827/2) = 0.8413 = probability that the wear-out comes within 7 years time to cause a failure b. Probability that a product survives 7 years (without experiencing wear) = 1-0.8413)= 0.1587

135. AVAILABILITY A related measure of importance to customers, and hence to designers, is availability. It measures the fraction of time a piece of equipment is expected to be operational (as opposed to being down for repairs). Availability can range from zero (never available) to 1.00 (always available).

136. Companies that can offer equipment with a high availability factor have a competitive advantage over companies that offer equipment with lower availability values. Availability is a function of both the mean time between failures and the mean time to repair. The availability factor can be computed using the following formula:

137. A copier is able to operate for an average of 200 hours between repairs, and the mean repair time is two hours. Determine the availability of the copier. MTBF 200 hours and MTR 2 hours Availability = MTBF/(MTBF+MTR)= 200/202)=0.99 Note: availability increases as the mean time between failures increases. availability also increases as the mean repair time decreases.