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Chapter 6 Product Development: A Team Approach

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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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product development
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

product life cycle
Product Life Cycle

Transparency 6.2

(Exhibit 6.1)

slide4

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

increasing importance of product development slide 2 of 2
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

global aspects of product design
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

mortality rate of new products
Mortality Rate of New Products

Transparency 6.7

(Exhibit 6.3)

marketing s role in product development slide 1 of 3
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

marketing s role in product development slide 2 of 3
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

marketing s role in product development slide 3 of 3
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

product design
Product Design

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

Transparency 6.10

product technology
Product Technology
  • Product technology = application of practical or industrial arts to develop new or improved products

Transparency 6.11

slide13

Bill of Materials

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

Transparency 6.14

ethical issues in product design
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

issues in determining method of production
Issues in DeterminingMethod of Production
  • Required machinery
  • Sequence of operations
  • Facility layout
  • Procedures and job training
  • Safety of employees

Transparency 6.23

human engineering slide 1 of 2
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

human engineering slide 2 of 2
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

role of operations management
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

role of suppliers in product development
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

role of finance in product design
Role of Finance inProduct Design
  • Capital formation
  • Evaluation of product and profit potential

Transparency 6.28

information for decision making
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

quality function deployment qfd
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

process selection
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

understanding the scale factor
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

scale factor cost volume profit model slide 1 of 3
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

scale factor cost volume profit model slide 2 of 3
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

scale factor cost volume profit model slide 3 of 3
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

cost volume profit model
Cost-Volume-Profit Model

Transparency 8.7

(Exhibit 8.2)

assumptions of the cost volume profit model
Assumptions of theCost-Volume-Profit Model
  • Sales volume is equal to production volume
  • Total cost and total revenue are linear functions of volume
  • Historical data on costs and selling price are representative of what will happen in the future
  • The organization has only one product

Transparency 8.8

cost structure of low volume producer
Cost Structure of Low-Volume Producer

Transparency 8.10

(Exhibit 8.3)

cost structure of high volume producer
Cost Structure ofHigh-Volume Producer

Transparency 8.11

(Exhibit 8.4)

operating leverage
Operating Leverage

Transparency 8.12

(Exhibit 8.5)

characteristics of the process alternatives
Characteristics of theProcess Alternatives

Transparency 8.14

(Exhibit 8.7)

process flows before and after applying group technology slide 1 of 2
Process Flows Before and After Applying Group Technology (Slide 1 of 2)

Transparency 8.15a

(Exhibit 8.8)

slide59

Process Flows Before and After Applying Group Technology (Slide 2 of 2)

Transparency 8.15b

(Exhibit 8.8)

problems with managing large unfocused operations slide 1 of 2
Problems with Managing Large, Unfocused Operations (Slide 1 of 2)
  • Growing facilities add more levels of management and make coordination and control difficult
  • New products are added to the facility as customers demand greater product variety
  • Hidden overhead costs increase as managers add staff to deal with increased complexity

Transparency 8.17a

problems with managing large unfocused operations slide 2 of 2
Problems with Managing Large, Unfocused Operations (Slide 2 of 2)
  • The result is higher operating costs
    • Productive time is being taken to do setups
    • More mistakes are made by attempting to manage increasing complexity with control systems designed for a single product facility

Transparency 8.17b

focused factory
Focused Factory
  • Smaller facility (less than 500 employees) concentrates on one or few products
  • Limits scope of operations to a few process technologies
  • Strives only for highest level of quality
  • Strives for simplicity in management and control

Transparency 8.18