Product Design and Process Selection

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Product Design and Process Selection
Based on slides for Chase Acquilano and Jacobs,
Operations Management, McGraw-Hill
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What is a Product?

• A product is a package of
• Goods
• Services
• Experiences
• Ongoing Relationships
• A product has
• Tangible attributes
• Intangible attributes

• Examples
• Automobile
• Airplane trip
• Diamond Ring
• Restaurant Meal
• Dishwasher
• College Education
• Tax Preparation
• Basketball Game

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Product Design Issues

• Value analysis/value engineering
• Obtain better performance at lower cost
• Two Design Approaches
• Over the Wall Approach vs. Concurrent Engineering
• Complexity of design
• Implications??
• Reliability
• How can it be increased?
• Standardization
• Advantages disadvantages?
• Modular design
• Advantages disadvantages?
• Environmental Implications

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Exercise

• Pick several products and list some issues that
  need to be considered in its design and
  manufacture
• Include aesthetic, manufacturability, after-sales
  service issues among others
• Deliverable
• List and present to the class

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Process Selection
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Process Structures

• Continuous Processing
• Repetitive (assembly lines)
• Manufacturing cells
• Batch processing
• Job Shops
• Projects

continuous or semi-continuous
intermittent
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Example Job Shop
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Example Batch Processing
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Example Assembly Line Processing
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Example Continuous Processing
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Manufacturing
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Break-Even Analysis

• Some managerial questions
• How much should we produce to break even?
• For a specific volume, should we manufacture the
  product ourselves, or outsource?
• For machine alternatives A and B, at what volumes
  should we use machine A and at what volumes,
  machine B?

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Break-Even Analysis (example)

• Sale Price 300
• Option 1
• Purchase 200 Demand
• Option 2
• Lathe 80,000 75 Demand
• Option 3
• Machine center 200,000 15 Demand

Purchase vs. Lathe? Lathe vs. Machining Center?
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Calculations

• Purchase versus Lathe
• 200 Demand 80,000 75 Demand
• (200 Demand) - (75 Demand) 80,000
• 125 Demand 80,000
• Demand 80,000/125 640 units
• so less than 640 units, purchase 640 of
  greater, use Lathe

• Lathe versus Machine Center
• 80,000 75 Demand 200,000 15 Demand
• Demand 120,000/60 2,000 units
• so less that 2000 units use the Lathe 2000 or
  more use the machining center

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Break Even Analysis Example

• You are starting a new business and your fixed
  costs are estimated to be 500,000. Your product
  sells for 100 and costs you 50 to manufacture.
  What is the breakeven point? If you sell 15,000
  units, what will be your profit?
• Answer Break Even Value is 10,000 and Profit is
  250,000

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Break Even Analysis Formulas

• Total Revenue Total Cost
• P x F V x implies
• BEP(x) F/P-V
• Profit TR-TC (P-V) x F
• Breakeven between two machines
• F1 V1 x and F2 V2 x -- assume F2 gt F1 V2
  lt V1
• (F2 F1) / (V1 V2)
• Note F Fixed Cost P Price V Variable Cost

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Break Even Analysis Example

• In your business you are considering two
  machines. Machine 1 costs 500,000 and has a
  variable per unit cost of 50 per item. Machine 2
  has a fixed cost of 200,000 and has a variable
  per unit cost of 80 per item. What is the
  break-even volume for the two machines. If a
  friend tells you to use Machine 2 if the volume
  is 5,000 items, is she right or wrong?
• Answer Break Even Value is 10,000

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Break Even Analysis Graphical Answer
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Summary

• Production Strategies
• Process focused gtgtgt Product focused
• Other alternatives Project, Cellular
• Technology
• Break-even Analysis