5
C H A P T E R
Design of Goods and Services
DISCUSSION QUESTIONS
1. Explicit documentation accomplishes two things:
(a) It provides the information necessary to produce (capacity,
training, routing, costs, etc.) the product in the appropriate
AACSB: Analytical thinking
3. Investment, market share, product life cycle, and breadth of
the product line are all linked to the product decision.
LO 5.2: Describe a product development system
delivery systems, and JIT manufacturing.
LO 5.2: Describe a product development system
AACSB: Application of knowledge
6. Joint ventures are combined ownership between two firms to
7. Japanese—integrate product development into one organiza-
tion; Traditional—different phases of development done in dis-
tinct departments; Champion (or Product Manager)—a manager
shepherds the product through the development process; Teams—
product development teams, design for manufacturability teams,
such as strength, stress, and heat transfer.
LO 5.2: Describe a product development system
AACSB: Reflective thinking
10. A bill of material lists the components, their description, and
AACSB: Application of knowledge
13. The moment of truth is the moment that exemplifies,
detracts from, or enhances the customer’s expectations.
14. House of quality is a rigorous method aimed at that specific
result. It identifies customer wants, and relates them to product
56 CHAPTER 5 DESI GN OF GOO D S A N D SE R V I C E S
CAD allows more designs to be developed, evaluated, and submitted
to production faster. It does this by fostering evaluation of options
faster and simultaneously provides a more analytical evaluation that
AACSB: Application of knowledge
17. Direct interactions in PCN analysis are those steps that
every service has some kind of document to authorize or at least
formalize that the service be done.
LO 5.6: Describe the documents needed for production
AACSB: Application of knowledge
ETHICAL DILEMMA
We begin with an observation regarding toys and torts. (Some of
However, when you manufacture for children, you produce
for the improvident, the impetuous, and the irresponsible. As a
judge put it: “the concept of a prudent child, God forbid, is a
quarter-inch rubber rivet, it could have tried to tough it out or luck
it out in the well–known “do nothing and wait and see.” However,
the company was sensitive not only to the constraints of the law
SCROLL BARS)
ACTIVE MODEL 5.1: Decision Tree
1. For what range of probabilities of high sales should we pur-
chase the CAD system?
Any probability above .27
2. “Favorable market sales” has been defined as 25,000 units.
CHAPTER 5 DES I G N O F GO O D S A ND SE R VI C E S 57
END–OF-CHAPTER PROBLEMS (PROBLEMS WITH ASTERISKS
ARE IN MYOMLAB ONLY; PROBLEMS WITH # SYMBOLS ARE
NOT IN MYOMLAB)
5.1
Product Alpha: 1,000 units $2,500 = $2,500,000
Introductory
Product Bravo: 1,500 units $3,000 = $4,500,000 Growth
Tablet (growth phase):
◼ Increase capacity and improve balance of production
system
◼ Attempt to make production facilities more efficient
Hand calculator (decline phase):
◼ Concentrate on production and distribution cost reduction
◼ Attempt to develop improved product
◼ Attempt to develop supplementary product
◼ Unless product is of special importance to overall com-
58 CHAPTER 5 DESI GN OF GOO D S A N D SE R V I C E S
5.5# For an existing organization, the student should build a
house of quality, entering the wants on the left and entering the
Source: American Supplier Institute; www.amsup.com/qfd/chart.html.
CHAPTER 5 DES I G N O F GO O D S A ND SE R VI C E S 59
5.7# Individual answer for a bicycle customer in the style of
Problem 5.4.
5.9 A typical bill of material is shown here:
(a)
Bill of Material for a Pair of Glasses in a Case
Part Number
Description
Quantity
G1001
Sun Ban Large in Black Case
1
CBL101
Black Leather Case
1
BF101
Black Leather Front
1
BB101
Black Leather Back
1
BC101
Black Leather Pocket Clip
1
SBL101
Sun Ban Large Glasses
1
SFA101
Frame Assembly
1
SF101
Alloy Frame
1
RL101
Right Sun Ban Large Lens
1
LL101
Left Sun Ban Large Lens
1
LTA101
Left Temple Assembly—Large
1
LT101
Left Temple
1
LTH101
Left Temple Hinge
1
LTE101
Left Temple Ear Pad
1
RTA101
Right Temple Assembly—Large
1
RT101
Right Temple
1
RTH101
Right Temple Hinge
1
RTE101
Right Temple Ear Pad
1
S1001
Hinge Screws
2
(b) There are obviously a very large number of possibilities.
A Quiznos honey-bacon-turkey club, regular size, uses a
toasted 6 bun (white or wheat), two slices of bacon, 3
ounces of smoked sliced turkey, 2 Tbsp. shredded lettuce,
1 Tbsp. chopped onion, and 1/2 oz. honey-mustard sauce.
It is wrapped in a 12 square deli paper.
5.8# House of quality sequence for ice cream:
60 CHAPTER 5 DESI GN OF GOO D S A N D SE R V I C E S
5.10 An assembly chart for the eyeglasses is shown below:
5.11# Services need documents for the transition to production.
Creative students may have fun with this assignment, and you
may have students who have actually done “cold calls” for a firm
CHAPTER 5 DES I G N O F GO O D S A ND SE R VI C E S 61
5.12 Assembly chart for a table lamp:
Plain croutons
cups
Grated fresh Parmesan cheese
5.13* Complete the bill of materials.
Bill of Material for “Chicken Caesar Salad”
Description
Quantity
Chicken Caesar Salad
1
Salad
1
Whole roasted chicken, skinned
1
Torn romaine lettuce
1
4
1
lb
Red bell pepper strips
1 cup
Vinaigrette
Olive oil
3 tblsp
Garlic clove, crushed
1
Fresh lemon juice
1
2
1
tblsp
Worcestershire sauce
2 tsp
Dijon mustard
2 tsp
Sugar
1
4
tsp
Salt
1
4
tsp
Black pepper
1
4
tsp
2 oz
Match each number in the assembly chart with corresponding
component or activity.
62 CHAPTER 5 DESI GN OF GOO D S A N D SE R V I C E S
5.14* Bill of material for a wooden pencil with eraser:
Description
Quantity
Pencil
1
Wood half
2
Graphite rod
1
Band
1
Eraser
1
Yellow paint
1 gram
Glue
1 gram
5.15* Bill of material for a table:
Table
Table
1
Table Top
1
Frame:
Back
1
Front
1
Left Side
1
Right Side
1
Bracket
4
Bolt
4
Washer
4
Nut
4
Legs:
Legs
4
Casters
4
5.16* Bill of material for a computer mouse (GeniMouse):
Bill of Material for GeniMouse
Part Number
Description
Quantity
GM1001
GeniMouse
1
SC004
Phillips Head No.12 0.5 inch. Screw
1
TA101
Top Mouse Assembly
1
CB101
Center Button
1
CBC101
Center Button Clip
1
RB101
Right Button
1
LB101
Left Button
1
PB101
Palm Base
1
BA101
Base Assembly
1
IA101
Idler Assembly
1
IS101
Idler Spring
1
IR101
Idler Roller
1
MB101
Ball
1
BW101
Base Ball Washer
1
BP101
Base Rest Pads
5
BA101
Board Assembly
1
CA101
Cable Assembly
1
DB101
Digital Board
1
CW101
Control Wheel
2
GML101
GeniMouse Label
1
5.17* Sample bill of materials for a mechanical pencil:
ID
Description
Quantity
A1
Mechanical Pencil
1
B1
Top half
1
C1
Top casing
1
C2
Pocket clip
1
C3
Plunger cap
1
C4
Plunger
1
C5
Small spring
1
C6
Brass guide
1
C7
Brass Clamp
1
C8
Eraser
1
B2
Lower half
1
C9
Bottom casing
1
C10
Guide
1
C11
Rubber Finger Grip
1
5.18# (a)
For computer repair service, customer interaction is a strategic
choice.
(b) Parts (b) and (c) should be prepared in a style similar to
part (a).
5.19#
All 10 strategic OM decisions are impacted by where the process
occurs in the PCN diagram. Comparing just 1 of these 10 deci-
sions, product design:
(a) Sandwich manufacturer must commit to product
decisions based on historical data of user preferences,
implying more risk because of no immediate interaction
or feedback with the consumer.
(b) Direct interaction requires that the sandwich maker
must build a system and hire personnel capable of
making sandwiches for an end user who may literally
be coaching the sandwich maker (“more mustard, no
onions”) as the sandwiches are made.
(c) Sandwich buffet commits to purchase, prepare, and
sanitarily display the sandwich components that may
(or may not) be selected by the end user.
5.20#
Considering the computer repair options presented in Problem 5.18:
Moving to the left is likely to be most efficient in terms of
CHAPTER 5 DES I G N O F GO O D S A ND SE R VI C E S 63
5.21
5.23
64 CHAPTER 5 DESI GN OF GOO D S A N D SE R V I C E S
5.25 The decision tree is shown here:
CHAPTER 5 DES I G N O F GO O D S A ND SE R VI C E S 65
5.26# The modified decision tree and the revenue, costs, and
associated payoff for the new process are shown below. This
presentation mimics the decision tree in Solved Problem 5.1.
However, as the revised process will yield no defective units the
branch for Design B is no longer necessary. Noting that both
approaches result in the same costs may be a worthwhile exercise
for some students.
66 CHAPTER 5 DESI GN OF GOO D S A N D SE R V I C E S
5.27
Outcome calculations:
()()()()()()
()()()()
()()()
90 10
$100,000 500 300 $1.20 500 300 $1.30
100 100
$100,000 $162,000 $19,500 $42,500
70 30
$100,000 150,000 $1.20 150,000 $1.30
100 100
$100,000 $126,000 $58,500 $32,500
EM V K 1 .80 42,500 .20 32,500 $27,
− + − =
− + − =
− + − =
− + − = −
= + − =
500
CHAPTER 5 DES I G N O F GO O D S A ND SE R VI C E S 67
CASE STUDY
DE MAR’S PRODUCT STRATEGY
1. De Mar’s product is primarily service. There is a tangible
product (air conditioners and plumbing components—pipe,
valves, faucets, blowers, ductwork, etc.), but the distinguishing
product is service.
LO 5.5: Describe how goods and services are defined by OM
AACSB: Application of knowledge
2. Marketing needs to support the product by selling a special,
◼ Process strategy: How the product is prepared and deliv-
ered will impact customer satisfaction. In addition to instal-
lation and/or repair issues like packaging, neatness, and
cleanup will all be part of the process.
◼ Location: May not be critical at De Mar because the prod-
uct is delivered.
VIDEO CASE STUDY
PRODUCT DESIGN AT REGAL MARINE
The 7-minute video available from Pearson, filmed specifically for
this text, supplements the written case.
1. The concept of product life cycle applies to Regal Marine because
Regal is constantly under pressure to introduce new products—and
those products have life cycles of relatively few years. As the
video suggests, it is a matter of typically less than 5 years before a
boat is out of style and its life cycle terminated. This is a long life
LO 5.2: Describe a product development system
AACSB: Application of knowledge
4. The payoff from CAD is not only evident in efficiency, crea-
tive designs, and styling but in production of the code necessary
for the numerical machines, such as the machines used to make
the plugs (molds) in Washington State and for those applications