Tutorial Chapter 4: Product

and Process Design

Presented by

Dr Noor Ajian Mohd Lair

Senior Lecturer
Mechaincal Engineering Program
Faculty of Engineering
Universiti Malaysia Sabah

Office No 43, 2nd floor

Ext: 3422
email: [email protected]
 Quality Function Deployment
(QFD) House of Quality
Interrelationships
Customer
importance
How to satisfy
ratings
customer wants

What the Relationship

customer matrix
wants

Target values Weighted

rating
Technical
evaluation
© 2014 Pearson Education, Inc. 5-2
 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

© 2014 Pearson Education, Inc. 5-3

 Interrelationships

House of Quality Example How to Satisfy

Customer Wants

Competitors
Analysis of
What the
Relationship
Customer
Matrix
Wants

Technical
Attributes and
Evaluation

What the
customer wants
Customer
importance
rating
(5 = highest)
Lightweight 3
Easy to use 4
Reliable 5
Easy to hold steady 2
High resolution 1

© 2014 Pearson Education, Inc. 5-4

 Interrelationships

House of Quality Example How to Satisfy

Customer Wants

Competitors
Analysis of
What the
Relationship
Customer
Matrix
Wants

Technical
Attributes and
Evaluation
Low electricity requirements

Aluminum components

High number of pixels How to Satisfy

Ergonomic design
Customer Wants
Auto exposure
Auto focus

© 2014 Pearson Education, Inc. 5-5

 Interrelationships

House of Quality Example How to Satisfy

Customer Wants

Competitors
Analysis of
What the
Relationship
Customer
Matrix
Wants

High relationship Technical

Attributes and
Evaluation
Medium relationship
Low relationship

Lightweight 3
Easy to use 4
Reliable 5
Easy to hold steady 2
High resolution 1

Relationship matrix
© 2014 Pearson Education, Inc. 5-6
 Interrelationships

House of Quality Example How to Satisfy

Customer Wants

Competitors
Analysis of
What the
Relationship
Customer
Matrix
Wants

Technical
Attributes and
Evaluation

Relationships between
the things we can do

Low electricity requirements

Aluminum components

High number of pixels

Ergonomic design
Auto exposure
Auto focus

© 2014 Pearson Education, Inc. 5-7

 Interrelationships

House of Quality Example How to Satisfy

Customer Wants

Competitors
Analysis of
What the
Relationship
Customer
Matrix
Wants

Technical
Attributes and
Evaluation

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

Weighted rating

© 2014 Pearson Education, Inc. 5-8

 Interrelationships

How to Satisfy

House of Quality Example

Customer Wants

Competitors
Analysis of
What the
Relationship
Customer
Matrix
Wants

Technical
Attributes and
Evaluation

Company B
Company A
How well do competing
products meet customer
wants

Lightweight 3 G P
Easy to use 4 G P
Reliable 5 F G
Easy to hold steady 2 G P
High resolution 1 P P

Our importance ratings 22 5

© 2014 Pearson Education, Inc. 5-9

 Interrelationships

How to Satisfy

House of Quality Example

Customer Wants

Competitors
Analysis of
What the
Relationship
Customer
Matrix
Wants

Technical
Attributes and
Evaluation

Failure 1 per 10,000

Panel ranking
Target values
(Technical

2 circuits
attributes)

2’ to ∞
0.5 A

75%
Company A 0.7 60% yes 1 ok G
Technical
evaluation Company B 0.6 50% yes 2 ok F

Us 0.5 75% yes 2 ok G

© 2014 Pearson Education, Inc. 5 - 10
 House of Quality Example

Low electricity requirements

Aluminum components

High number of pixels

Ergonomic design
Auto exposure

Company A

Company B
Auto focus
Completed
Lightweight 3 G P
House of Easy to use 4 G P

Quality Reliable
Easy to hold steady
5
2
F G
G P
High resolution 1 P P
Our importance ratings 22 9 27 27 32 25

Failure 1 per 10,000

Target values

Panel ranking
(Technical
attributes)

2 circuits
2’ to ∞
0.5 A
75%
Company A 0.7 60% yes 1 ok G
Technical
Company B 0.6 50% yes 2 ok F
evaluation
© 2014 Pearson Education, Inc. Us 0.5 75% yes 2 ok G 5 - 11
 Product Design
PROBLEM
• Silicon Inc, a semiconductor manufacturer, is investigating the
possiblity of producing and marketing a microprocessor.
Undertaking this project will require either purchasing a
sophisticated CAD system or hiring and training serveral additional
engineers. The market for the product could be either favorable or
unfavorable. Silicon Inc. of course, has the option of not developing
the new product at all.
• With the favorable acceptance by the market, sales would be 25,000
processors selling for $100 each. The cost of CAD unfavorable
acceptance, sales would be only 8,000 processors selling for $100
each. The cost of CAD equipment is $500,000, but hiring and
training three new engineers is only $375,000. However,
manufacturing costs should drop from $50 each when
manufacturing without CAD to $40 each when manufacturing with
CAD
• The probability of favorable acceptance of the new microprocessor
is 0.40 and the probablity of unfavorable acceptance is 0.60.
 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

© 2014 Pearson Education, Inc. 5 - 13

 Application of Decision Trees
to Product Design
Procedure
1. Include all possible alternatives and
states of nature - including “doing
nothing”
2. Enter payoffs at end of branch
3. Determine the expected value of each
branch and “prune” the tree to find the
alternative with the best expected value

© 2014 Pearson Education, Inc. 5 - 14

 Decision Tree Example
(.4)
Purchase CAD
High sales

(.6) Low sales

Hire and train engineers

(.4)
High sales

(.6)
Low sales
Do nothing

Figure 5.13
© 2014 Pearson Education, Inc. 5 - 15
 Decision Tree Example
$2,500,000 Revenue
(.4) – 1,000,000 Mfg cost ($40 x 25,000)
Purchase CAD – 500,000 CAD cost
High sales
$1,000,000 Net

$800,000 Revenue
(.6) Low sales – 320,000 Mfg cost ($40 x 8,000)
– 500,000 CAD cost
Hire and train engineers – $20,000 Net loss

(.4)
High sales
EMV (purchase CAD system) = (.4)($1,000,000) + (.6)(– $20,000)

(.6)
Low sales
Do nothing

Figure 5.13
© 2014 Pearson Education, Inc. 5 - 16
 Decision Tree Example
$2,500,000 Revenue
(.4) – 1,000,000 Mfg cost ($40 x 25,000)
Purchase CAD – 500,000 CAD cost
$388,000 High sales
$1,000,000 Net

$800,000 Revenue
(.6) Low sales – 320,000 Mfg cost ($40 x 8,000)
– 500,000 CAD cost
Hire and train engineers – $20,000 Net loss

(.4)
High sales
EMV (purchase CAD system) = (.4)($1,000,000) + (.6)(– $20,000)
= $388,000
(.6)
Low sales
Do nothing

Figure 5.13
© 2014 Pearson Education, Inc. 5 - 17
 Decision Tree Example
$2,500,000 Revenue
(.4) – 1,000,000 Mfg cost ($40 x 25,000)
Purchase CAD – 500,000 CAD cost
$388,000 High sales
$1,000,000 Net

$800,000 Revenue
(.6) Low sales – 320,000 Mfg cost ($40 x 8,000)
– 500,000 CAD cost
Hire and train engineers – $20,000 Net loss
$365,000
$2,500,000 Revenue
(.4) – 1,250,000 Mfg cost ($50 x 25,000)
High sales – 375,000 Hire and train cost
$875,000 Net

$800,000 Revenue
(.6) – 400,000 Mfg cost ($50 x 8,000)
Low sales – 375,000 Hire and train cost
Do nothing $0 $25,000 Net

$0 Net Figure 5.13

Therefore, HeEducation,
© 2014 Pearson shouldInc.purchase the CAD as the expected profit ($388,000) is5 - 18
 Product Design Example
▶ King Electronics has two design options for her new line
of high resolution cathode ray tubes for CAD. The life
cycle sales forecast for the CRT is 100,000 units.
▶ Design A has 0.90 probability of yielding 59 good CRTs
per 100 and a 0.10 probability of yielding 64 good CRTs
per 100. This design will cost $1,000,000.
▶ Design option B has a 0.80 probability of yielding 64
good units per 100 and a 0.20 probabiltiy of yielding 59
good units per 100. This design will cost $1,350,000.
▶ Good or bad, each CRT will cost $75. Each good CRT
will sell for $150. Bad CRTs are destroyed and have no
salvage value. We ignore any disposal cost in this
problem.

© 2014 Pearson Education, Inc. 5 - 19

 Product Design Example
▶ Solution:
$150x100,000x59/100 Revenue
(.9) – 750,000 Mfg cost ($X)
Design A – 1000,000 Design A cost
EP=$425,000 59% Good
$350,,000 Net

$150x100,000X64/100 Revenue
(.1) 64% Good – 750,000 Mfg cost ($X)
–1000 ,000 Design A cost
Design B $1100,000 Net
EP=$600,000
$150x100,000x64% Revenue
(.8) – 7500,000 Mfg cost ($ x ,000)
64% Good – 1350,000 Design B cost
$750,000 Net

$150x100,000x54% Revenue
(.2) – 7500,000 Mfg cost ($ x ,000)
54% Good – 1350,000 Design B cost
$o,000 Net

Therefore, select design B as the expected profit is higher of $600,000 than

design B of $425,000
© 2014 Pearson Education, Inc. 5 - 20
 Crossover Chart Example
▶ Kleber Enterprise would like to evaluate
three accounting software product (A, B
and C) to support changes in its internal
accounting processes. The costs of the
software are shown in the table below:
DOLLARS VARIABLE COSTS
REQUIRED PER ACCOUNTING
TOTAL FIXED COST REPORT
Software A $200,000 $60
Software B $300,000 $25
Software C $400,000 $10

© 2014 Pearson Education, Inc. 7 - 21

 Crossover Chart Example
▶ Evaluate three different accounting software
products
1. Develope the Cost Equations
DOLLARS VARIABLE COSTS
REQUIRED PER ACCOUNTING
TOTAL FIXED COST REPORT
Software A $200,000 $60
Software B $300,000 $25
Software C $400,000 $10
Y  200,000  60V  SoftwareA
Y  300,000  25V  SoftwareB
Y  400,000  10V  SoftwareC
2. Plot the graph
Y  200,000  60V  SoftwareA Y  300,000  25V  SoftwareB

1st point: V=0 , Y = 200,000 1st point: V=0 , Y = 300,000

2nd point:
© 2014 Pearson Education, Inc. V = 10,000 Y =800,000 2nd point: V = 10,000 Y =$00,000
5 - 22
 Crossover Charts
Variable
costs
Variable Variable
$ costs $ costs $
Fixed costs Fixed costs
Fixed costs
Low volume, high variety Repetitive High volume, low variety
Process A Process B Process C

400,000
300,000
200,000
Fixed cost Fixed cost Fixed cost
Process A Process B Process C
Figure 7.3
(2,857) V1 V2 (6,666) Volume
© 2014 Pearson Education, Inc. 7 - 23
 Crossover Chart Example
▶ Evaluate three different accounting software products
3. Calculate crossover points between software A and B
and between software B and C

( )
200,000 + 60 V1 = 300,000 + 25 V1 ( )
35V1 = 100,000
V1 = 2,857
Software A is most economical from 0 to 2,857 reports

( )
300,000 + 25 V2 = 400,000 + 10 V2( )
15V2 = 100,000
V2 = 6,666

Therefore,
 Software A is most economical from 0 to 2,857 reports
 Software B is most economical from 2,857 to 6,666 reports
Pearson
© 2014 Software BInc.
Education, is most economical for more than 6,666 reports 7 - 24
 Process Design: Example
▶ Bogot Copy Shop has a volume of 125,000
black and white copies per month. Two sales
people have made presentations to the manager
for machines of equal quality and reliability. The
Print Shop 5 has a cost of $2,000 per month and
a variable cost of $0.03 per copy. The other
machine (a Speed Copy 100) will cost only
$1,500 per month but the toner is more
expensive, driving the cost per copy up to
$0.035. If cost and volume are the only
considerations, which machine should the
company purchase?
▶ Solution:

© 2014 Pearson Education, Inc. 5 - 25

 Process Design: Example
▶ Bogot Copy Shop has a volume of 125,000 black and white copies
per month. Two sales people have made presentations to the
manager for machines of equal quality and reliability. The Print
Shop 5 has a cost of $2,000 per month and a variable cost of $0.03
per copy. The other machine (a Speed Copy 100) will cost only
$1,500 per month but the toner is more expensive, driving the cost
per copy up to $0.035. If cost and volume are the only
considerations, which machine should the company purchase?
▶ Solution:
1. Develop the Total Cost Equations.
Fixed Cost($) Variable Cost ($)
Print Shop 5
Speed Copy 100

Yprint shop 5 =
Y speed copy 100 =
© 2014 Pearson Education, Inc. 5 - 26
 Process Design: Example
▶ Solution:
2. Using graph, plot the Equations and identified
the significance intersection point/s
1st Equation 2nd Equation
1st point 1st point
v=0
v=0
y=
y= 2nd point
2nd point v=
v= y=
y=
© 2014 Pearson Education, Inc. 5 - 27
3. Calculate the intersection point/s value/s:

2,000  0.03 X  1500  0.035 X

2,000  1,500  0.035 X  0.03 X
X  100,000

The Speed Copy 100 is economical for quantity less than 100,000
copies and the Print Shop 5 is more economical for quantity more
than 100,000 copies. Therefore, since the company expects his
volume to exceed 100,000 copies (expect 125,000 copies), he
should purchase the Print Shop 5

© 2014 Pearson Education, Inc. 5 - 28

 The End

© 2014 Pearson Education, Inc. 5 - 29