Product Development

Major Topics

• The product portfolio of a company concretizes its mission• A description of the product selection and development process and the

involved issues• The interaction between product and (production) process development

and its implications on the product design• The role of time in product development• Formal characterization / documentation of the product structure and

attributes and their role in the production process design and operation• Economic decisions and their analysis through some basic quantitative

models– “Make or Buy”: Balancing fixed and variable costs– Decision Trees: A quantitative approach to risk management

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 => ProductionClear-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

X

Total cost asa function of X

C

C+c2*X

c1*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)