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Chapter 6 Product Development: A Team Approach

Chapter 6 Product Development: A Team Approach. IDS 605 Busing. Product Development. Product Development is a process which generates concepts, designs, and plans to create services and goods to meet customer needs 1. Analyze market to assess need 2. Design product

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Chapter 6 Product Development: A Team Approach

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  1. Chapter 6Product Development:A Team Approach IDS 605 Busing

  2. Product Development Product Development is a process which generates concepts, designs, and plans to create services and goods to meet customer needs 1. Analyze market to assess need 2. Design product 3. Design process for making product 4. Develop plan to market product 5. Develop plan for full-scale production 6. Analyze financial feasibility Transparency 6.1

  3. Product Life Cycle Transparency 6.2 (Exhibit 6.1)

  4. Increasing Importance ofProduct Development (Slide 1 of 2) 1. Customers demand greater product variety 2. Advances in technology make rapid introduction of replacement products possible 3. These factors have a multiplicative factor on the number of new products a firm must introduce Transparency 6.3a

  5. Increasing Importance ofProduct Development (Slide 2 of 2) • Example: • If the number of products a firm sells increases from 1 to 3, • If the product life cycle for each product declines from 10 to 5 years • Then, the number of new products introduced over a 10 year period increases from: Transparency 6.3b

  6. Global trade initially involved shipping existing products to foreign countries Followed by location of production facilities in foreign countries Organizations develop strategies which consider the world-wide marketplace Organizations develop products and production systems for global distribution Global Aspects of Product Design Transparency 6.4

  7. Mortality Rate of New Products Transparency 6.7 (Exhibit 6.3)

  8. Marketing’s Role inProduct Development (Slide 1 of 3) • Examine needs of potential customers • Study markets for existing products • Consider emerging technologies to create new products for new markets Transparency 6.8a

  9. Marketing’s Role inProduct Development (Slide 2 of 3) • Measure consumer needs to determine • Features • Market size • Market price • Performance characteristics • Work with R & D to create imaginative new products Transparency 6.8b

  10. Marketing’s Role inProduct Development (Slide 3 of 3) • Measure competitive pressure • Measure other factors in external environment • Economic conditions • Status of technology • Social, legal and political factors Transparency 6.8c

  11. Product Design Product design shapes the product. Concepts drawn from market research are transformed into features, characteristics and performance Transparency 6.10

  12. Product Technology • Product technology = application of practical or industrial arts to develop new or improved products Transparency 6.11

  13. Bill of Materials • Describes type and quantity of each component needed to build the good • Bill of Materials for a Pencil Transparency 6.14

  14. Ethical Issues in Product Design • Safe products • Ethics and potential for law suits encourage • Fail safe features • Safety devices reducing risk of improper operation • Correct problems with product design promptly Transparency 6.19

  15. Issues in DeterminingMethod of Production • Required machinery • Sequence of operations • Facility layout • Procedures and job training • Safety of employees Transparency 6.23

  16. Human Engineering (Slide 1 of 2) • Consideration of people in the design of products and facilities • Ergonomics enhance functional effectiveness of product and improve the health, safety and satisfaction of the user Transparency 6.25a

  17. Human Engineering (Slide 2 of 2) • Strategic advantage: improve product comfort and safety which improves its value to customer • Operating advantage: increases productivity by making a job easier • Legal advantage: makes products and facilitates safer which reduces law suits Human Engineering Transparency 6.26b

  18. Role of Operations Management • Produce product • As design • By process selected • With available equipment, people and materials • Overcoming problems in full-scale production • Facility design and layout • Material management • Training Transparency 6.26

  19. Role of Suppliers inProduct Development • Customers and suppliers share design responsibilities and capabilities • Involved suppliers respond more quickly and better meet the needs of the customer • Suggest alterations in product design for better quality and lower cost • Improved participation to benefit overall product design GM Transparency 6.27

  20. Role of Finance inProduct Design • Capital formation • Evaluation of product and profit potential Transparency 6.28

  21. Information for Decision Making Product design decisions require significant amounts of information beginning with market research studies through the final launch of the product. This information is critical to effective decision making. Transparency 6.29

  22. Quality Function Deployment (QFD) • Technique used to: • Focus the attention of the product development team on the quality object • Focus attention on customer needs • Customer requirements are “attributes” • Each attribute or group of attributes are assessed • Attributes are then translated into design characteristics Transparency 6.31

  23. Chapter 8Process Selection: Volume Drives Costs and Profits IDS 605 Busing

  24. Process Selection • Process selection includes: • Technical issues–basic technology used to produce a service or good • Volume or scale decision–using the proper amount of mechanization to leverage the organization’s work force Work Force MECHANIZATION Transparency 8.1

  25. Product Design, Process Selection, and Capacity Decisions Transparency 8.2 (Exhibit 8.1)

  26. Understanding the Scale Factor • Economies of scale doctrine • most efficient size for a facility • most efficient size for a firm • Put a large volume of the same product across the same equipment or fixed cost base. • Economies of scope occurs when a large volume and high variety of products are produced by the same equipment for fixed cost base Transparency 8.5

  27. Scale Factor: Cost-VolumeProfit Model (Slide 1 of 3) TR= (SP) (Xs) TR = Total Revenue SP = Selling price/unit Xs = Number of units sold TC = FC + (VC) (Xp) TC = Total cost FC = Fixed cost VC = Variable cost/unit Xp = Number of units produced Transparency 8.6a

  28. Scale Factor: Cost-VolumeProfit Model (Slide 2 of 3) The profit (P) equation is P = TR -TC P = SP(Xs) - {FC + VC(Xp)} If X= Xs = Xp, then P = SP(X) - {FC + VC(X)} P = SP(X) - VC(X) - FC P + FC = (SP - VC)(X) Transparency 8.6b

  29. Scale Factor: Cost-VolumeProfit Model (Slide 3 of 3) Solve for X as follows: X = If C is defined as contribution/unit, then C = (SP - VC). Then the equation becomes X= (P + FC) (SP - VC) (P + FC) C Transparency 8.6c

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