Lecture Fundamentals of operations management (4/e): Chapter 3 - Davis, Aquilano, Chase

DAVIS
F   O   U   R   T   H       E   D   I   T   I   O   N

AQUILANO
CHASE

chapter 3

New Product and Service 
Development, and Process 
Selection

© The McGraw-Hill Companies, Inc., 2003

PowerPoint
Presentation
by
Charlie
Cook


Chapter Objectives
Chapter Objectives
• Illustrate the importance of the development of new
products and services to a firm’s competitiveness.
• Identify the various types of new products that are
developed by companies.
• Introduce the new product design process and the
concept of a product’s life cycle.
• Demonstrate the necessity of concurrent product and
process design as a new product or service is

developed.
• Present a framework for understanding how new
services are developed and introduced
into the
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marketplace.
Fundamentals of Operations 
Companies, Inc., 2003
Management 4e 
3–2


Managerial Issues
Managerial Issues
• Product life cycles becoming shorter.
–The need to bring products to market more
quickly and efficiently.

• Conducting product development on a
continuous basis.
–New products may represent a majority of sales
and profits.

Fundamentals of Operations 
Management 4e 

© The McGraw­Hill 
Companies, Inc., 2003
3–3

Why the Emphasis on New 
Why the Emphasis on New 
Goods and Services
Goods and Services
• Increased Competition
–Improved worldwide telecommunications
–Lower trade barriers (import duties and tariffs)
and the creation of trade organizations (NAFTA
and European Union)
–Faster transportation of goods

• Advances in Technology
–Products become obsolete faster.
–Improved manufacturing processes (CAD and
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CAM and industrial robots)
Fundamentals of Operations 
Companies, Inc., 2003
Management 4e 
3–4


The Benefits of Introducing 
The Benefits of Introducing 
New Products Faster
New Products Faster
• Greater Market Share
–Early entry captures large initial market share.

• Price Premiums
–Ability to initially charge more for new products.

• Quick Reaction to Competition
–Rapid response to competitor’s new products.

• Set Industry Standards
–Initial product sets market/industry standards.
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Fundamentals of Operations 
Companies, Inc., 2003
Management 4e 
3–5


The Impact of Speed to Market on Sales
The Impact of Speed to Market on Sales

Fundamentals of Operations 
Management 4e 

© The McGraw­Hill 
Companies, Inc., 2003
Exhibit 3.1a
3–6


The Impact of Speed to Market on 
The Impact of Speed to Market on 
Profit Margins

Profit Margins

Fundamentals of Operations 
Management 4e 

© The McGraw­Hill 
Companies, Inc., 2003
Exhibit 3.1b
3–7


The Impact of Speed to Market on Profits
The Impact of Speed to Market on Profits

Fundamentals of Operations 
Management 4e 

© The McGraw­Hill 
Companies, Inc., 2003
Exhibit 3.1c
3–8


Categories of New Products
Categories of New Products
• Incremental or Derivative Products
–Are hybrids or enhancements of existing
products.
–Require minimal changes in design or process,
allowing for quick development.

–Require fewer resources to develop new
features or functions.
–Help ensure near-term cash flows by
maintaining current market share.

Fundamentals of Operations 
Management 4e 

© The McGraw­Hill 
Companies, Inc., 2003
3–9


Categories of New Products
Categories of New Products
• Next Generation or Platform Products
–Represent new “system” solutions for
customers.
• Require more resources to develop.
• Are key to continued product revenue growth.

• Breakthrough or Radical Products
–Create new product categories as core
businesses.
–Require substantial design and process change.
–Render existing products obsolete in long-term.
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Fundamentals of Operations 
Companies, Inc., 2003
Management 4e 

3–10


The Trend toward Shorter 
The Trend toward Shorter 
Product Development Times
Product Development Times

Fundamentals of Operations 
Management 4e 

Source: Data: Product Development & Management
Association, Business Week, January 27, 1997, p. 6.

© The McGraw­Hill 
Companies, Inc., 2003
Exhibit 3.2
3–11


The New Product 
The New Product 
Development (NPD) Process
Development (NPD) Process
• New Product Development Process
–The method by which new products evolve from
conceptualization through engineering to
manufacturing and marketing.

• Market Success Depends on NPD

–Continuously generate new product ideas.
–Convert ideas to reliable functional designs.
–Ensure that the designs are readily producible.
–Select the processes most compatible with
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customer needs.
Fundamentals of Operations 
Companies, Inc., 2003
Management 4e 
3–12


Sequential Flow of Activities in 
Sequential Flow of Activities in 
Product Design and Process Selection
Product Design and Process Selection

Source: Reprinted with the permission of the Free Press, an imprint of Simon &
Fundamentals of Operations 
Schuster from Fast Cycle Times: How to Align Purpose, Strategy, and Structure
for Speed by Christopher Meyer. Copyright © 1993 by Christopher Meyer.
Management 4e 

© The McGraw­Hill 
Companies, Inc., 2003
Exhibit 3.3
3–13


The New Product 

The New Product 
Development (NPD) Process
Development (NPD) Process
• Concurrent Engineering
–The simultaneous and coordinated efforts of all
functional areas which accelerates the time to
market for new products.

Fundamentals of Operations 
Management 4e 

© The McGraw­Hill 
Companies, Inc., 2003
3–14


Concurrent Engineering Approach to NPD
Concurrent Engineering Approach to NPD

Fundamentals of Operations 
Management 4e 

© The McGraw­Hill 
Companies, Inc., 2003
Exhibit 3.4
3–15


The New Product Development
The New Product Development

 (NPD) Process (cont’d)
 (NPD) Process (cont’d)
• Idea Generation
–Market pull: the “voice of the customer” in
providing feedback to determine product
specifications.
–Technology push: a product developed by the
firm’s R&D is “pushed” into the market.

• Concept Development
–Initial product design developed and tested.
–Analysis of the market and customer
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requirements.
Fundamentals of Operations 
Companies, Inc., 2003
Management 4e 
3–16


The New Product Development 
The New Product Development 
(NPD) Process (cont’d)
(NPD) Process (cont’d)
• Quality Function Deployment (QFD)
–The process for translating customer
requirements into a product’s design.

• Voice of the Customer
–Customer feedback is used in QFD process to

determine product specifications.
–Customer attributes:
• Product needs
• Product preferences

Fundamentals of Operations 
Management 4e 

© The McGraw­Hill 
Companies, Inc., 2003
3–17


The New Product Development 
The New Product Development 
(NPD) Process (cont’d)
(NPD) Process (cont’d)
• House of Quality
–The part of the QFD process that uses customer
feedback for product design criteria.
–Use of QFD teams
• Identify important customer attributes.
• Design superior product.
• Shorten product design time.
• Facilitate interfunctional cooperation.

Fundamentals of Operations 
Management 4e 

© The McGraw­Hill 

Companies, Inc., 2003
3–18


Completed 
Completed 
House of Quality 
House of Quality 
Matrix
Matrix
for a Car Door
for a Car Door

Fundamentals of Operations 
Exhibit 3.5
Management 4e 

© The McGraw­Hill 
Companies, Inc., 2003
3–19


The New Product Development 
The New Product Development 
(NPD) Process (cont’d)
(NPD) Process (cont’d)
• New Product Planning
–Build models of new product.
–Test new elements and components.
–Conduct detailed investment and financial

analyses of product’s anticipated life cycle.

Fundamentals of Operations 
Management 4e 

© The McGraw­Hill 
Companies, Inc., 2003
3–20


The New Product Development 
The New Product Development 
(NPD) Process (cont’d)
(NPD) Process (cont’d)
• Design for Manufacturability (DFM)
–Choosing manufacturing methods and
materials.
–Minimizing the number of individual parts:
• Reduces assembly time.
• Increases reliability.

– Setting product specifications.
• Output from the design activity that states all
criteria for building a product.

Fundamentals of Operations 
Management 4e 

© The McGraw­Hill 
Companies, Inc., 2003

3–21


Design Change to Reduce
Design Change to Reduce
the Number of Parts in a Bracket
the Number of Parts in a Bracket

Fundamentals of Operations 
Management 4e 

© The McGraw­Hill 
Companies, Inc., 2003
Exhibit 3.6
3–22


Process Selection in Manufacturing
Process Selection in Manufacturing
• Types of Processes
–Project process
• Process that focuses on making one-of-a-kind
products.

–Intermittent process
• Process that produces products in small lot sizes
(e.g., job and batch operations).

–Line-flow process
• Continuous process that produces high volume,

highly standardized products (e.g., assembly-line
and continuous operations).

Fundamentals of Operations 
Management 4e 

© The McGraw­Hill 
Companies, Inc., 2003
3–23


Types of Processes
Types of Processes

Fundamentals of Operations 
Management 4e 

© The McGraw­Hill 
Companies, Inc., 2003
Exhibit 3.7
3–24


Process Selection in Manufacturing
Process Selection in Manufacturing
• The Product-Process Matrix
–High production volumes and narrow product
lines make specialized equipment and
standardized materials economically feasible.
• Remaining in a process niche after the product

cycle has advanced to its next stage dooms a firm
to market failure.

Fundamentals of Operations 
Management 4e 

© The McGraw­Hill 
Companies, Inc., 2003
3–25