Session 7

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 Goods and Services Selection
► Organizations exist to provide goods or services to society
► Great products are the key to success
► Top organizations typically focus on core products
► Customers buy satisfaction, not just a physical good or
particular service
► Fundamental to an organization's strategy with
implications throughout the operations function
 Goods and Services Selection
► Goods or services are the basis for an organization's existence
► Limited and predicable life cycles requires constantly looking for,
designing, and developing new products
► New products generate substantial revenue
Goods and Services Selection
50% –

40% –

Percent of sales from

The higher the percentage of sales

new products
30% – from the last 5 years, the more
likely the firm is to be a leader.

20% –

10% –

0% –
Industry Top Middle Bottom
leader third third third

Position of firm in its industry

 Product Decision

The objective of the product decision is to develop and

implement a product strategy that meets the demands of
the marketplace with a competitive advantage
Product Strategy Options

► Differentiation
► Shouldice Hospital
► Low cost
► Taco Bell
► Rapid response
► Toyota
Product Life Cycles

► May be any length from a few days

to decades
► The operations function must be able
to introduce new products
successfully
Product Life Cycle Costs
100 –
Costs committed

80 –

Percent of total cost 60 –

Costs incurred

40 –

20 –
Ease of change

0–

Concept Detailed Manufacturing Distribution,

design design service,
prototype and disposal
 Product-by-Value Analysis

► Lists products in descending order of their individual dollar contribution

to the firm
► Lists the total annual dollar contribution of the product
► Helps management evaluate alternative strategies
 Generating New Products
1. Understanding the customer
2. Economic change
3. Sociological and demographic change
4. Technological change
5. Political and legal change
6. Market practice, professional standards, suppliers, distributors
Product
Concept
Development Stages
Feasibility Figure 5.3

Customer Requirements

Functional Specifications

Product Specifications Scope for

Scope of design and
product Design Review engineering
development teams
team Test Market

Introduction

Evaluation
The Product Design Process
• Companies continuously bring new products to market
• Product design is integral to success
• Product design differs significantly depending on the industry
• Companies often outsource major functions
• Contract manufacturer: an organization capable of manufacturing and/or
purchasing all the components needed to produce a finished product

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 Core Competency
• Core competency: the one thing a company can do better than its
competitors
• A core competency has three characteristics:
• It provides potential access to a wide variety of markets
• It increases perceived customer benefits
• It is hard for competitors to imitate

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Examples of Successes in Design
• Sun Microsystems designs the SPARC chips used in its high-performance
workstations but subcontracts the fabrication of those chips to specialized
chip makers (while maintaining ownership of the intellectual property).

• A pharmaceutical company may purchase information on genetic targets

from a genomics company, contract with a specialist in combinatorial
chemistry for rapid synthesis and screening of candidate compounds, and
even utilize a contract research organization to conduct clinical trials but
retain ownership of the intellectual property (patents, experimental data,
trademarks, etc.) of the drug that eventually comes to market.
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 Examples of Successes in Design
• Dell has developed a set of highly specialized systems that support its make-to-order
operating strategy. Dell has created a set of proprietary logistical processes that range from
the design of its web page through its information systems infrastructure (a process that has
proved difficult for others to imitate). Dell owns the data about what people are buying and
in which combinations. It also has been vertically integrated into final assembly facilities
that are designed to efficiently produce in lot sizes of one. Finally, while it outsources
components, Dell uses longer-term relationships with its suppliers and links them into its
information system to support quick response.

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Brainstorming: A General Method for
Problem Solving
• Defer judgment
• Build on the ideas of others
• Stay focused on the topic
• One person at a time
• Go for quantity
• Encourage wild ideas
• Be visual

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Designing for the Customer

House of Quality

Ideal
Quality Function Value Analysis/
Deployment
Customer Value Engineering
Product

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Quality Function Deployment
1. Identify customer wants
2. Identify how the good/service will satisfy customer wants
3. Relate customer wants to product hows
4. Identify relationships between the firm’s hows
5. Develop customer importance ratings
6. Evaluate competing products
7. Compare performance to desirable technical attributes
Quality Function Deployment
• Interfunctional teams from marketing, design engineering, and
manufacturing

• Begins with listening to the customer

• Uses market research
• Customer preferences are defined and broken down into customer
requirements

• House of quality

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QFD House of Quality
Interrelationships
Customer
importance
How to satisfy
ratings
customer wants

Competitive
assessment
What the Relationship
customer matrix
wants

Target values Weighted

rating
Technical
evaluation
 QFD House of Quality
High relationship (5)
Trade-off Matrix Medium relationship (3)
Customer
importance ratings Low relationship (1)
Design Characteristics
say 1 to 9 (Things WE can do)
A
B

Competitive
assessment
What the Relationship
customer Matrix ( High, Medium, Low)
wants

Importance rating

Target values

Technical
evaluation

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 Example
• House of quality for a steam iron
Competitive Assessment of
Customer Requirements

Customer Requirements
Presses quickly 9
Removes wrinkles 8
Doesn’t stick to fabric 6
Irons
well
Provides enough steam 8
Doesn’t spot fabric 6
Doesn’t scorch fabric 9
Heats quickly 6
Automatic shut-off 3
Easy and safe

Quick cool-down 3
Doesn’t break when dropped 5
to use

Doesn’t burn when touched 5

Not too heavy 8
Competitive Assessment of
Customer Requirements
Competitive Assessment
Customer Requirements 1 2 3 4 5
Presses quickly 9 B A X
Removes wrinkles 8 AB X
Doesn’t stick to fabric 6 X BA
Irons
well
Provides enough steam 8 AB X
Doesn’t spot fabric 6 X AB
Doesn’t scorch fabric 9 A XB
Heats quickly 6 X B A
Automatic shut-off 3 ABX
Easy and safe

Quick cool-down 3 X A B
Doesn’t break when dropped 5 AB X
to use

Doesn’t burn when touched 5 AB X

Not too heavy 8 X A B
From Customer

Time required to reach 450º F

Time to go from 450º to 100º
Protective cover for soleplate
Requirements

Material used in soleplate

Flow of water from holes

Energy needed to press

Thickness of soleplate
to Design

Automatic shutoff
Number of holes
Size of soleplate
Weight of iron

Size of holes
Characteristics
Customer Requirements
Presses quickly - - + + + -
Removes wrinkles + + + + +
Doesn’t stick to fabric - + + + +
Irons
well

Provides enough steam + + + +

Doesn’t spot fabric + - - -
Doesn’t scorch fabric + + + - +
Heats quickly - - + -
Automatic shut-off +
Easy and safe

Quick cool-down - - + +
Doesn’t break when dropped + + + +
to use

Doesn’t burn when touched + + + +

Not too heavy + - - - + -
Energy needed to press
Weight of iron
-

Size of soleplate
+

Thickness of soleplate
Material used in soleplate
-

Number of holes
+

Size of holes
+
Tradeoff Matrix

Flow of water from holes

Time required to reach 450º
Time to go from 450º to 100º
Protective cover for soleplate
Automatic shutoff
 Objective
measures

Targets
Estimated cost

Design changes
Iron B
Iron A

Estimated impact
Our Iron (X)
Units of measure

3
3
2
4
3

Energy needed to press

ft-lb

*
3
4
lb

Weight of iron
1.2
1.7
1.2
1.4

*
3
4

Size of soleplate
in.

9x5
8x4

8x5
8x4

*
3
4
4
1

3
2

Thickness of soleplate
cm

*
4
5
T

Material used in soleplate

ty

SS
SS
MG

*
3
4
ea

Number of holes
35
27

30
27

3
3

Size of holes
15
15
15

3
2

Flow of water from holes

0.7
0.3
0.5
mm oz/s

*
4
5

Time required to reach 450º

50
35

30
45
sec
Targeted Changes in Design

*
4
5

Time to go from 450º to 100º

sec

600
350

500
500

5
3
N
N
N

Protective cover for soleplate

2
0
Y
Y
Y

Automatic shutoff
Y/N Y/N
Completed House of Quality

SS = Silverstone
MG = Mirorrglide
T = Titanium
 Other Exercise
• An auto manufacturer that would like to improve the design of the car
door
 QFD: An Example from the Auto Industry
QFD involves converting the expectations and demands of the customers
into clear objectives, which are then translated into the vehicle
specification. For example, Top speed found that passengers became
uncomfortable if the car rolled more than two degrees and side
acceleration exceeded 13.2 feet per second squared. These data were used
to help define design criteria for the chassis engineers.

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