Product

1
Product Process Design

• BUSM 361

2
Product Design

• WHAT to produce
• PD determined by competitive strategy
• Avg. 60 70 of profits come from newest
  products.
• Profit life cycle
• Calculators
• Computers
• DVDs
• Much of engineering product design
• Managements job is to make choices.
• Based on what?

3
Product Robustness
4
Expected Monetary Value
5
Process Design

• HOW to produce
• PD determined by competitive strategy
• Process continuum
• Customization vs. Volume
• Response vs. cost

6
Process Continuum
7
Process-Focused Strategy(high variety / low
volume)
8
Process Focused Strategy - Pros Cons

• Advantages
• Greater product flexibility
• More general purpose equipment
• Lower initial capital investment
• Disadvantages
• More highly trained personnel
• More difficult production planning control
• Low equipment utilization (5 to 25)

9
Product-Focused Strategy(low variety / high
volume)
10
Product-Focused Strategy Pros Cons

• Advantages
• Lower variable cost per unit
• Lower but more specialized labor skills
• Easier production planning and control
• Higher equipment utilization (70 to 90)
• Disadvantages
• Lower product flexibility
• More specialized equipment
• Usually higher capital investment

11
Repetitive-Focused Strategy (some variety /
moderate volume)
12
Capacity

• Why dont you drive your Ferrari 200mph at all
  times?
• What is the optimal hotel occupancy?

13
Capacity

• Capacity Total Output under perfect conditions
• Effective Capacity Some of Perfection
• Efficiency Actual Output ? Effective Capacity
• Expected Capacity Capacity X Effective X
  Efficiency

14
Managing Existing Capacity
Capacity Management
Demand Management

• Vary prices
• Vary promotion
• Change lead times(e.g., backorders)
• Offer complementary products

• Vary staffing
• Change equipment processes
• Change methods
• Redesign the product for faster processing

15
Complementary Products
16
Tools for Managing Capacity

• Forecasting (chap. 4)
• EMV (chap. 5)
• Expected Capacity (prob. 7.10)
• Break Even Point (prob. 7.22)
• Net Present Value
• Annuity prob. 7.31
• Varying income stream prob. 7.38