Assignment
Chapter 5 discusses product strategy options: Cost, Focus, and Differentiation!
In this assignment you will research three different products from three different industries and explain how each product is using one of the described strategies. Please be thorough in your explanation for each example. This assignment will be a minimal of five pages double-spaced and including title and reference pages.
5 – *
© 2014 Pearson Education, Inc.
Design of Goods and Services
PowerPoint presentation to accompany
Heizer and Render
Operations Management, Eleventh Edition
Principles of Operations Management, Ninth Edition
PowerPoint slides by Jeff Heyl
5
© 2014 Pearson Education, Inc.
5 – *
© 2014 Pearson Education, Inc.
Outline
Global Company Profile: Regal Marine
Goods and Services Selection
Generating New Products
Product Development
Issues for Product Design
Product Development Continuum
*
5 – *
© 2014 Pearson Education, Inc.
Outline – Continued
Defining a Product
Documents for Production
Service Design
Application of Decision Trees to Product Design
Transition to Production
*
5 – *
© 2014 Pearson Education, Inc.
Learning Objectives
Define product life cycle
Describe a product development system
Build a house of quality
Explain how time-based competition is implemented by OM
When you complete this chapter you should be able to :
*
5 – *
© 2014 Pearson Education, Inc.
Learning Objectives
Describe how products and services are defined by OM
Describe the documents needed for production
Explain how the customer participates in the design and delivery of services
Apply decision trees to product issues
When you complete this chapter you should be able to :
*
5 – *
© 2014 Pearson Education, Inc.
Global market
3-dimensional CAD system
Reduced product development time
Reduced problems with tooling
Reduced problems in production
Assembly line production
JIT
Regal Marine
© 2014 Pearson Education, Inc.
*
5 – *
© 2014 Pearson Education, Inc.
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
*
5 – *
© 2014 Pearson Education, Inc.
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
*
5 – *
© 2014 Pearson Education, Inc.
Goods and Services Selection
Figure 5.1
The higher the percentage of sales from the last 5 years, the more likely the firm is to be a leader.
Industry leader
Top third
Middle third
Bottom third
Position of firm in its industry
Percent of sales from new products
50% –
40% –
30% –
20% –
10% –
0% –
*
5 – *
© 2014 Pearson Education, Inc.
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 Decision
*
5 – *
© 2014 Pearson Education, Inc.
Product Strategy Options
Differentiation
Shouldice Hospital
Low cost
Taco Bell
Rapid response
Toyota
*
5 – *
© 2014 Pearson Education, Inc.
Product Life Cycles
May be any length from a few days to decades
The operations function must be able to introduce new products successfully
*
5 – *
© 2014 Pearson Education, Inc.
Product Life Cycle
Negative cash flow
Figure 5.2
Introduction Growth Maturity Decline
Sales, cost, and cash flow
Cost of development and production
Cash flow
Net revenue (profit)
Sales revenue
Loss
*
5 – *
© 2014 Pearson Education, Inc.
Life Cycle and Strategy
Introductory Phase
Fine tuning may warrant unusual expenses for
Research
Product development
Process modification and enhancement
Supplier development
*
5 – *
© 2014 Pearson Education, Inc.
Product Life Cycle
Growth Phase
Product design begins to stabilize
Effective forecasting of capacity becomes necessary
Adding or enhancing capacity may be necessary
*
5 – *
© 2014 Pearson Education, Inc.
Product Life Cycle
Maturity Phase
Competitors now established
High volume, innovative production may be needed
Improved cost control, reduction in options, paring down of product line
*
5 – *
© 2014 Pearson Education, Inc.
Product Life Cycle
Decline Phase
Unless product makes a special contribution to the organization, must plan to terminate offering
*
5 – *
© 2014 Pearson Education, Inc.
Product Life Cycle Costs
Costs incurred
Costs committed
Ease of change
Concept Detailed Manufacturing Distribution,
design design service,
prototype and disposal
Percent of total cost
100 –
80 –
60 –
40 –
20 –
0 –
*
5 – *
© 2014 Pearson Education, Inc.
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
*
5 – *
© 2014 Pearson Education, Inc.
Generating New Products
Understanding the customer
Economic change
Sociological and demographic change
Technological change
Political and legal change
Market practice, professional standards, suppliers, distributors
*
5 – *
© 2014 Pearson Education, Inc.
Product Development Stages
Figure 5.3
Scope for design and engineering teams
Evaluation
Introduction
Test Market
Functional Specifications
Design Review
Product Specifications
Customer Requirements
Feasibility
Concept
*
5 – *
© 2014 Pearson Education, Inc.
Quality Function Deployment
Identify customer wants
Identify how the good/service will satisfy customer wants
Relate customer wants to product hows
Identify relationships between the firm’s hows
Develop customer importance ratings
Evaluate competing products
Compare performance to desirable technical attributes
*
5 – *
© 2014 Pearson Education, Inc.
QFD House of Quality
Relationship
matrix
How to satisfy
customer wants
Interrelationships
Technical
evaluation
Target values
What the customer
wants
Customer importance ratings
Weighted rating
*
1
5 – *
© 2014 Pearson Education, Inc.
House of Quality Example
Your team has been charged with designing a new camera for Great Cameras, Inc.
The first action is
to construct a
House of Quality
*
5 – *
© 2014 Pearson Education, Inc.
House of Quality Example
Customer
importance
rating
(5 = highest)
Lightweight 3
Easy to use 4
Reliable 5
Easy to hold steady 2
High resolution 1
What the customer wants
What the Customer
Wants
Relationship
Matrix
Technical
Attributes and
Evaluation
How to Satisfy
Customer Wants
Interrelationships
Analysis of
Competitors
*
5 – *
© 2014 Pearson Education, Inc.
House of Quality Example
What the Customer
Wants
Relationship
Matrix
Technical
Attributes and
Evaluation
How to Satisfy
Customer Wants
Interrelationships
Analysis of
Competitors
Low electricity requirements
Aluminum components
Auto focus
Auto exposure
High number of pixels
Ergonomic design
How to Satisfy
Customer Wants
*
5 – *
© 2014 Pearson Education, Inc.
House of Quality Example
Lightweight 3
Easy to use 4
Reliable 5
Easy to hold steady 2
High resolution 1
What the Customer
Wants
Relationship
Matrix
Technical
Attributes and
Evaluation
How to Satisfy
Customer Wants
Interrelationships
Analysis of
Competitors
High relationship
Medium relationship
Low relationship
Relationship matrix
*
5 – *
© 2014 Pearson Education, Inc.
House of Quality Example
Low electricity requirements
Aluminum components
Auto focus
Auto exposure
High number of pixels
Ergonomic design
Relationships between the things we can do
What the Customer
Wants
Relationship
Matrix
Technical
Attributes and
Evaluation
How to Satisfy
Customer Wants
Interrelationships
Analysis of
Competitors
*
5 – *
© 2014 Pearson Education, Inc.
House of Quality Example
Weighted rating
Lightweight 3
Easy to use 4
Reliable 5
Easy to hold steady 2
High resolution 1
Our importance ratings 22 9 27 27 32 25
What the Customer
Wants
Relationship
Matrix
Technical
Attributes and
Evaluation
How to Satisfy
Customer Wants
Interrelationships
Analysis of
Competitors
*
5 – *
© 2014 Pearson Education, Inc.
House of Quality Example
Company A
Company B
G P
G P
F G
G P
P P
Lightweight 3
Easy to use 4
Reliable 5
Easy to hold steady 2
High resolution 1
Our importance ratings 22 5
How well do competing products meet customer wants
What the Customer
Wants
Relationship
Matrix
Technical
Attributes and
Evaluation
How to Satisfy
Customer Wants
Interrelationships
Analysis of
Competitors
*
5 – *
© 2014 Pearson Education, Inc.
House of Quality Example
What the Customer
Wants
Relationship
Matrix
Technical
Attributes and
Evaluation
How to Satisfy
Customer Wants
Interrelationships
Analysis of
Competitors
Target values
(Technical attributes)
Technical evaluation
Company A 0.7 60% yes 1 ok G
Company B 0.6 50% yes 2 ok F
Us 0.5 75% yes 2 ok G
2 circuits
Failure 1 per 10,000
Panel ranking
0.5 A
75%
2’ to ∞
*
5 – *
© 2014 Pearson Education, Inc.
House of Quality Example
Completed House of Quality
Low electricity requirements
Aluminum components
Auto focus
Auto exposure
High number of pixels
Ergonomic design
Company A
Company B
Lightweight 3
Easy to use 4
Reliable 5
Easy to hold steady 2
High resolution 1
Our importance ratings
G P
G P
F G
G P
P P
Target values
(Technical attributes)
Technical evaluation
Company A 0.7 60% yes 1 ok G
Company B 0.6 50% yes 2 ok F
Us 0.5 75% yes 2 ok G
0.5 A
75%
2’ to ∞
2 circuits
Failure 1 per 10,000
Panel ranking
22 9 27 27 32 25
*
5 – *
© 2014 Pearson Education, Inc.
House of Quality Sequence
Figure 5.4
Deploying resources through the organization in response to customer requirements
Production process
Quality plan
House 4
Specific components
Production process
House 3
Design characteristics
Specific components
House 2
Customer requirements
Design characteristics
House 1
*
5 – *
© 2014 Pearson Education, Inc.
Organizing for Product Development
Traditionally – distinct departments
Duties and responsibilities are defined
Difficult to foster forward thinking
A Champion
Product manager drives the product through the product development system and related organizations
*
5 – *
© 2014 Pearson Education, Inc.
Organizing for Product Development
Team approach
Cross functional – representatives from all disciplines or functions
Product development teams, design for manufacturability teams, value engineering teams
Japanese “whole organization” approach
No organizational divisions
*
5 – *
© 2014 Pearson Education, Inc.
Manufacturability and
Value Engineering
Benefits:
Reduced complexity of the product
Reduction of environmental impact
Additional standardization of components
Improvement of functional aspects of the product
Improved job design and job safety
Improved maintainability (serviceability) of the product
Robust design
*
5 – *
© 2014 Pearson Education, Inc.
Cost Reduction of a Bracket via Value Engineering
Figure 5.5
*
5 – *
© 2014 Pearson Education, Inc.
Issues for Product Design
Robust design
Modular design
Computer-aided design (CAD)
Computer-aided manufacturing (CAM)
Virtual reality technology
Value analysis
Sustainability and Life Cycle Assessment (LCA)
*
5 – *
© 2014 Pearson Education, Inc.
Robust Design
Product is designed so that small variations in production or assembly do not adversely affect the product
Typically results in lower cost and higher quality
*
5 – *
© 2014 Pearson Education, Inc.
Modular Design
Products designed in easily segmented components
Adds flexibility to both production and marketing
Improved ability to satisfy customer requirements
*
5 – *
© 2014 Pearson Education, Inc.
Using computers to design products and prepare engineering documentation
Shorter development cycles, improved accuracy, lower cost
Information and designs can be deployed worldwide
Computer Aided Design (CAD)
*
5 – *
© 2014 Pearson Education, Inc.
Design for Manufacturing and Assembly (DFMA)
Solve manufacturing problems during the design stage
3-D Object Modeling
Small prototype
development
CAD through the
internet
International data
exchange through STEP
Extensions of CAD
*
5 – *
© 2014 Pearson Education, Inc.
Computer-Aided Manufacturing (CAM)
Utilizing specialized computers and program to control manufacturing equipment
Often driven by the CAD system (CAD/CAM)
*
5 – *
© 2014 Pearson Education, Inc.
Product quality
Shorter design time
Production cost reductions
Database availability
New range of capabilities
Benefits of CAD/CAM
*
5 – *
© 2014 Pearson Education, Inc.
Virtual Reality Technology
Computer technology used to develop an interactive, 3-D model of a product from the basic CAD data
Allows people to ‘see’ the finished design before a physical model is built
Very effective in large-scale designs such as plant layout
*
5 – *
© 2014 Pearson Education, Inc.
Value Analysis
Focuses on design improvement during production
Seeks improvements leading either to a better product or a product which can be produced more economically with less environmental impact
*
5 – *
© 2014 Pearson Education, Inc.
Sustainability and Life Cycle Assessment (LCA)
Sustainability means meeting the needs of the present without compromising the ability of future generations to meet their needs
LCA is a formal evaluation of the environmental impact of a product
*
5 – *
© 2014 Pearson Education, Inc.
Product Development Continuum
Product life cycles are becoming shorter and the rate of technological change is increasing
Developing new products faster can result in a competitive advantage
Time-Based Competition
*
5 – *
© 2014 Pearson Education, Inc.
Product Development Continuum
Figure 5.6
Internal Cost of product development Shared
Lengthy Speed of product development Rapid and/
or Existing
High Risk of product development Shared
External Development Strategies
Alliances
Joint ventures
Purchase technology or expertise
by acquiring the developer
Internal Development Strategies
Migrations of existing products
Enhancements to existing products
New internally developed products
*
5 – *
© 2014 Pearson Education, Inc.
Product Development Continuum
Purchasing technology by acquiring a firm
Speeds development
Issues concern the fit between the acquired organization and product and the host
Joint Ventures
Both organizations learn
Risks are shared
*
5 – *
© 2014 Pearson Education, Inc.
Product Development Continuum
Through Alliances
Cooperative agreements between independent organizations
Useful when technology is developing
Reduces risks
*
5 – *
© 2014 Pearson Education, Inc.
Defining a Product
First definition is in terms of functions
Rigorous specifications are developed during the design phase
Manufactured products will have an engineering drawing
Bill of material (BOM) lists the components of a product
*
5 – *
© 2014 Pearson Education, Inc.
Monterey Jack Cheese
(a) U.S. grade AA. Monterey cheese shall conform to the following requirements:
(1) Flavor. Is fine and highly pleasing, free from undesirable flavors and odors. May possess a very slight acid or feed flavor.
(2) Body and texture. A plug drawn from the cheese shall be reasonably firm. It shall have numerous small mechanical openings evenly distributed throughout the plug. It shall not possess sweet holes, yeast holes, or other gas holes.
(3) Color. Shall have a natural, uniform, bright and attractive appearance.
(4) Finish and appearance—bandaged and
paraffin-dipped. The rind shall be sound,
firm, and smooth providing a good
protection to the cheese.
Code of Federal Regulation, Parts 53 to 109, General Service Administration
*
5 – *
© 2014 Pearson Education, Inc.
Engineering drawing
Shows dimensions, tolerances, and materials
Shows codes for Group Technology
Bill of Material
Lists components, quantities and where used
Shows product structure
Product Documents
*
5 – *
© 2014 Pearson Education, Inc.
Engineering Drawings
Figure 5.8
*
5 – *
© 2014 Pearson Education, Inc.
Bills of Material
BOM for a Panel Weldment
Figure 5.9 (a)
NUMBER DESCRIPTION QTY
A 60-71 PANEL WELDM’T 1
A 60-7 LOWER ROLLER ASSM. 1
R 60-17 ROLLER 1
R 60-428 PIN 1
P 60-2 LOCKNUT 1
A 60-72 GUIDE ASSM. REAR 1
R 60-57-1 SUPPORT ANGLE 1
A 60-4 ROLLER ASSM. 1
02-50-1150 BOLT 1
A 60-73 GUIDE ASSM. FRONT 1
A 60-74 SUPPORT WELDM’T 1
R 60-99 WEAR PLATE 1
02-50-1150 BOLT 1
*
5 – *
© 2014 Pearson Education, Inc.
Bills of Material
Hard Rock Cafe’s Hickory BBQ Bacon Cheeseburger
Figure 5.9 (b)
DESCRIPTION QTY
Bun 1
Hamburger patty 8 oz.
Cheddar cheese 2 slices
Bacon 2 strips
BBQ onions 1/2 cup
Hickory BBQ sauce 1 oz.
Burger set
Lettuce 1 leaf
Tomato 1 slice
Red onion 4 rings
Pickle 1 slice
French fries 5 oz.
Seasoned salt 1 tsp.
11-inch plate 1
HRC flag 1
*
5 – *
© 2014 Pearson Education, Inc.
Parts grouped into families with similar characteristics
Coding system describes processing and physical characteristics
Part families can be produced
in dedicated manufacturing cells
Group Technology
*
5 – *
© 2014 Pearson Education, Inc.
Group Technology Scheme
Figure 5.10
(a) Ungrouped Parts
(b) Grouped Cylindrical Parts (families of parts)
Grooved Slotted Threaded Drilled Machined
*
5 – *
© 2014 Pearson Education, Inc.
Improved design
Reduced raw material and purchases
Simplified production planning and control
Improved layout, routing, and machine loading
Reduced tooling setup time, work-in-process, and production time
Group Technology Benefits
*
5 – *
© 2014 Pearson Education, Inc.
Documents for Production
Assembly drawing
Assembly chart
Route sheet
Work order
Engineering change notices (ECNs)
*
5 – *
© 2014 Pearson Education, Inc.
Assembly Drawing
Shows exploded view of product
Details relative locations to show how to assemble the product
Figure 5.11 (a)
*
5 – *
© 2014 Pearson Education, Inc.
Assembly Chart
Figure 5.11 (b)
Identifies the point of production where components flow into subassemblies and ultimately into the final product
1
2
3
4
5
6
7
8
9
10
11
SA
1
SA
2
A1
A2
A3
A4
A5
R 209 Angle
R 207 Angle
Bolts w/nuts (2)
R 209 Angle
R 207 Angle
Bolt w/nut
R 404 Roller
Lock washer
Part number tag
Box w/packing material
Bolts w/nuts (2)
Left
bracket
assembly
Right
bracket
assembly
Poka-yoke inspection
*
5 – *
© 2014 Pearson Education, Inc.
Route Sheet
Lists the operations and times required to produce a component
Setup Operation
Process Machine Operations Time Time/Unit
1 Auto Insert 2 Insert Component 1.5 .4
Set 56
2 Manual Insert Component .5 2.3
Insert 1 Set 12C
3 Wave Solder Solder all 1.5 4.1
components
to board
4 Test 4 Circuit integrity .25 .5
test 4GY
*
5 – *
© 2014 Pearson Education, Inc.
Work Order
Instructions to produce a given quantity of a particular item, usually to a schedule
Work Order
Item Quantity Start Date Due Date
Production Delivery
Dept Location
157C 125 5/2/08 5/4/08
F32 Dept K11
*
5 – *
© 2014 Pearson Education, Inc.
Engineering Change Notice (ECN)
A correction or modification to a product’s definition or documentation
Engineering drawings
Bill of material
Quite common with long product life cycles, long manufacturing lead times, or rapidly changing technologies
*
5 – *
© 2014 Pearson Education, Inc.
Configuration Management
The need to manage ECNs has led to the development of configuration management systems
A product’s planned and changing components are accurately identified and control and accountability for change are identified and maintained
*
5 – *
© 2014 Pearson Education, Inc.
Product Life-Cycle Management (PLM)
Integrated software that brings together most, if not all, elements of product design and manufacture
Product design
CAD/CAM, DFMA
Product routing
Materials
Assembly
Environmental
*
5 – *
© 2014 Pearson Education, Inc.
Service Design
Service typically includes direct interaction with the customer
Process – chain – network (PCN) analysis focuses on the ways in which processes can be designed to optimize interaction between firms and their customers
*
5 – *
© 2014 Pearson Education, Inc.
Process-Chain-Network (PCN) Analysis
Figure 5.12
5 – *
© 2014 Pearson Education, Inc.
Process-Chain-Network (PCN) Analysis
Direct interaction region includes process steps that involve interaction between participants
The surrogate (substitute) interaction region includes process steps in which one participant is acting on another participant’s resources
The independent processing region includes steps in which the supplier and/or the customer is acting on resources where each has maximum control
5 – *
© 2014 Pearson Education, Inc.
Process-Chain-Network (PCN) Analysis
All three regions have similar operating issues but the appropriate way of handling the issues differs across regions
Service operations exist only within the area of direct and surrogate interaction
PCN analysis provides insight to aid in positioning and designing processes that can achieve strategic objectives
5 – *
© 2014 Pearson Education, Inc.
Adding Service Efficiency
Service productivity is notoriously low partially because of customer involvement in the design or delivery of the service, or both
Complicates product design
5 – *
© 2014 Pearson Education, Inc.
Adding Service Efficiency
Limit the options
Improves efficiency and ability to meet customer expectations
Delay customization
Modularization
Eases customization of a service
5 – *
© 2014 Pearson Education, Inc.
Adding Service Efficiency
Automation
Reduces cost, increases customer service
Moment of truth
Critical moments between the customer and the organization that determine customer satisfaction
5 – *
© 2014 Pearson Education, Inc.
Documents for Services
High levels of customer interaction necessitates different documentation
Often explicit job instructions
Scripts and storyboards are other techniques
*
5 – *
© 2014 Pearson Education, Inc.
First Bank Corp. Drive-up Teller Service Guidelines
Be especially discreet when talking to the customer through the microphone.
Provide written instructions for customers who must fill out forms you provide.
Mark lines to be completed or attach a note with instructions.
Always say “please” and “thank you” when speaking through the microphone.
Establish eye contact with the customer if the distance allows it.
If a transaction requires that the customer park the car and come into the lobby, apologize for the inconvenience.
*
5 – *
© 2014 Pearson Education, Inc.
Application of Decision Trees to Product Design
Particularly useful when there are a series of decisions and outcomes which lead to other decisions and outcomes
*
5 – *
© 2014 Pearson Education, Inc.
Application of Decision Trees to Product Design
Include all possible alternatives and states of nature – including “doing nothing”
Enter payoffs at end of branch
Determine the expected value of each branch and “prune” the tree to find the alternative with the best expected value
Procedure
*
5 – *
© 2014 Pearson Education, Inc.
Decision Tree Example
Figure 5.13
(.6)
Low sales
(.4)
High sales
(.6) Low sales
(.4)
High sales
Purchase CAD
Hire and train engineers
Do nothing
*
5 – *
© 2014 Pearson Education, Inc.
Decision Tree Example
EMV (purchase CAD system) = (.4)($1,000,000) + (.6)(– $20,000)
Figure 5.13
(.6) Low sales
(.4)
High sales
Purchase CAD
(.6)
Low sales
(.4)
High sales
Hire and train engineers
Do nothing
$2,500,000 Revenue
– 1,000,000 Mfg cost ($40 x 25,000)
– 500,000 CAD cost
$1,000,000 Net
$800,000 Revenue
– 320,000 Mfg cost ($40 x 8,000)
– 500,000 CAD cost
– $20,000 Net loss
*
5 – *
© 2014 Pearson Education, Inc.
Decision Tree Example
$388,000
EMV (purchase CAD system) = (.4)($1,000,000) + (.6)(– $20,000)
= $388,000
Figure 5.13
(.6) Low sales
(.4)
High sales
Purchase CAD
(.6)
Low sales
(.4)
High sales
Hire and train engineers
Do nothing
$2,500,000 Revenue
– 1,000,000 Mfg cost ($40 x 25,000)
– 500,000 CAD cost
$1,000,000 Net
$800,000 Revenue
– 320,000 Mfg cost ($40 x 8,000)
– 500,000 CAD cost
– $20,000 Net loss
*
5 – *
© 2014 Pearson Education, Inc.
Decision Tree Example
Figure 5.13
(.6)
Low sales
(.4)
High sales
(.6) Low sales
(.4)
High sales
Purchase CAD
$388,000
Hire and train engineers
$365,000
Do nothing $0
$0 Net
$800,000 Revenue
– 400,000 Mfg cost ($50 x 8,000)
– 375,000 Hire and train cost
$25,000 Net
$2,500,000 Revenue
– 1,250,000 Mfg cost ($50 x 25,000)
– 375,000 Hire and train cost
$875,000 Net
$2,500,000 Revenue
– 1,000,000 Mfg cost ($40 x 25,000)
– 500,000 CAD cost
$1,000,000 Net
$800,000 Revenue
– 320,000 Mfg cost ($40 x 8,000)
– 500,000 CAD cost
– $20,000 Net loss
*
5 – *
© 2014 Pearson Education, Inc.
Transition to Production
Know when to move to production
Product development can be viewed as evolutionary and never complete
Product must move from design to production in a timely manner
Most products have a trial production period to insure producibility
Develop tooling, quality control, training
Ensures successful production
*
5 – *
© 2014 Pearson Education, Inc.
Transition to Production
Responsibility must also transition as the product moves through its life cycle
Line management takes over from design
Three common approaches to managing transition
Project managers
Product development teams
Integrate product development and manufacturing organizations
*
5 – *
© 2014 Pearson Education, Inc.
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher.
Printed in the United States of America.
174 P A R T 2 | D E S I G N I N G O P E R AT I O N S
A process chain is a sequence of steps that accomplishes an activity, such as building a home,
completing a tax return, or preparing a sandwich. A process participant can be a manufac-
turer, a service provider, or a customer. A network is a set of participants.
Each participant has a process domain that includes the set of activities over which it has
control. The domain and interactions between two participants for sandwich preparation are
shown in the PCN diagram (Figure 5.12). The activities are organized into three process
regions for each participant:
1. The direct interaction region includes process steps that involve interaction between par-
ticipants. For example, a sandwich buyer directly interacts with employees of a sandwich
store (e.g., Subway, in the middle of Figure 5.12).
2. The surrogate (substitute) interaction region includes process steps in which one partici-
pant is acting on another participant’s resources, such as their information, materials,
or technologies. This occurs when the sandwich supplier is making sandwiches in the
restaurant kitchen (left side of Figure 5.12) or, alternately, when the customer has access
to buffet ingredients and assembles the sandwich himself (right side of the figure). Under
surrogate interaction, direct interaction is limited.
3. The independent processing region includes steps in which the sandwich supplier and/or
the sandwich customer is acting on resources where each has maximum control. Most
make-to-stock production fits in this region (left side of Figure 5.12; think of the firm that
assembles all those prepackaged sandwiches available in vending machines and conveni-
ence stores). Similarly, those sandwiches built at home occur to the right, in the customer’s
independent processing domain.
All three process regions have similar operating issues—quality control, facility location and lay-
out, job design, inventory, and so on—but the appropriate way of handling the issues differs across
regions. Service operations exist only within the area of direct and surrogate interaction.
From the operations manager’s perspective, the valuable aspect of PCN analysis is insight
to aid in positioning and designing processes that can achieve strategic objectives. A !rm’s
operations are strategic in that they can de!ne what type of business the !rm is in and what
value proposition it desires to provide to customers. For example, a !rm may assume a low-cost
strategy, operating on the left of Figure 5.12 as a manufacturer of premade sandwiches. Other
!rms (e.g., Subway) adopt a differentiation strategy with high customer interaction. Each of
the process regions depicts a unique operational strategy.
Process chain
A sequence of steps that ac-
complishes an identifiable purpose
(of providing value to process
participants).
Figure 5.12
Customer Interaction Is a Strategic Choice
Sandwich supplier
Assemble sandwich
Supplier’s process domain
Prepare sandwiches
at factory for resale
at convenience stores
Make sandwich in restau-
rant kitchen from menu
offerings with modest
modifications
Assemble custom
sandwich at Subway
as customer orders
Customer assembles
sandwich from buffet
offerings
Assemble sandwich at
home using ingredients
from refrigerator
Independent
processing
Independent
processing
Surrogate
interaction
Surrogate
interaction
Direct
interaction
Direct
interaction
Sandwich consumer
Consumer’s process domain
LO7 Explain how the
customer participates in
the design and delivery of
services
M05_HEIZ1145_11_SE_C05.indd 174 07/11/12 7:25 PM