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    Economic analysis

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    Ken Chang, a production analyst for SharpEase Company, has prepared the following information for the production of a new electric pencil sharpener. Prepare an assembly chart for the product.

    Component List for Model D-41 Sharpener

    Component Description
    Component Code Predecessor Component
    Code (*) Inspection Required after Component
    Is Installed?
    1. Motor 318 --- N
    2. Grinding assembly 290 318 N
    3. Base 256 290 N
    4. Housing 155 --- N
    5. Electric cord 310 155 N
    6. Screws (3) 199 256, 310 N
    7. Rubber feet (4) 175 199 N
    8. Shavings tray 225 175 Y
    9. Packaging 110 225 N

    * The code or codes of the component or components that must immediately precede this component.

    Product, Process, and Service Design
    Lecture Notes
    To succeed companies must build the needed infrastructure to accomplish the following tasks:
    1. Quickly develop and design new products of superior quality and commit to a policy of continuously improving the designs of existing products.
    2. Build flexible production systems capable of producing products of near perfect quality and low cost that can be quickly changed to accommodate customer needs.
    When a product or service is designed the detailed characteristics of the product/service are established. The design directly affects how the product can be produced or the service delivered. How a product is produced determines the design of the production system. Because of these implications, it is extremely important that the design be excellent at the beginning. Taking this further, the product/service design affects the product/service quality which is customer satisfaction, and the production /delivery cost. As an example one might consider the M-16 rifle which is used by the US armed forces. Based on my experience as an automatic weapons designer in a much earlier life, the original design of the M-16 rifle, although unique in design, violated several good design practices for automatic weapons. Because of its design, it was prone to malfunctioning in dirty conditions, needed to be cleaned frequently to be reliable, and was prone to inadvertent discharging (firing). In order to improve its reliability, ammunition tolerances had to be tightened resulting in higher ammunition costs, modifications to the M-16's design were made to help offset some of the original design problems, and changes to the maintenance manuals, procedures and practices were completed. The original deficiencies were never fully corrected, just helped. Throughout the product life cycle of the M-16 these additional costs will be present because of the limitations of the basic design.
    Where Do New Product Ideas Originate
    Sources of new product ideas are many, which include customers, managers, marketing, operations, engineering, and research and development from both basic and applied research. Steps in the development process begin with technical and economic feasibility studies, prototype design, performance testing of the product or service, market sensing and further economic evaluation, finalization of the production model design, further testing, and then further design modifications as needed.
    Only about 5% of all new product ideas survive to production and only about 10% of these are successful.
    Getting New Products to Market Faster
    We want to get new products to market faster because of gaining a competitive advantage and because reduced time saves development costs. Techniques or tools that are utilized to improve the development time include autonomous design and development teams, computerized design and manufacturing, and simultaneous (concurrent) engineering. It is important that the process of development involve the resources so that the development is completed correctly the first time. For instance, if the design is right the first time, the need for value engineering, redesign for production, and other repetitive steps are not necessary, saving both time and money. In other words, the design of the product and the process proceed simultaneously.
    Existing Products and Services
    Once a product or service has been in production or been offered, the product or service is continually reviewed for improvements. The focus now is on improving performance, quality, and cost because all can lead to increased competitiveness for the organizations. For mature products, the objective may be maintaining or improving market share. Most design features are examined and decisions made in terms of their cost/benefit payback (value). In earlier lecture notes it was mentioned that Japanese firms succeed because they sweat the details. Small, steady improvements can add up to huge long-term improvements. This is one of the basic tenets of "quality management" which will be presented in a later chapter.
    Design of services include the dimensions of degree of standardization, degree of customer contact, and mix of physical goods and intangible services. Unless services are dominated by physical goods, their development usually does not require engineering, testing and prototype building. Instead, the development would focus on the process of how the service was delivered. Market sensing tends to be more by surveys than by market tests and demonstrations.
    Process Design
    Process design is how the product is manufactured or the service delivered. Factors affecting process design include the nature of the demand, degree of vertical integration desired, production flexibility, degree of automation, and the product/service quality. The three basic types of process design are product focused, process focused, and group technology/cellular manufacturing. Product focus would be similar to production lines. Process focused arrangements are arranged based on types of process which I think of as "departmentalized arrangements". Cellular processes are when parts with similar characteristics are grouped into part families where each part family is manufactured in the same area. Products made in the "product focus" arrangement would follow the same path. A cafeteria would be organized more like a "product focus" arrangement. Each person would go through the cafeteria line in order, taking the same route. A department store would represent the "process type". Each customer takes a different path, going to the individual departments where they want to purchase items. In services, three schemes exist for producing and delivering services. These are quasi-manufacturing, customer-as-participant, and customer-as-product.
    Deciding among alternatives involves analyzing such factors as batch-size and product/service variety, capital requirements, and economic analysis. Problems assigned in this chapter will look at several of these factors.

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