Essay About Level Of Product Quality And Kind Of Capacity

Homework
Critical QuestionsIs there demand for it? Conduct primary research, in person or on phoneIs my design a “vitamin” or a “pain killer”? AKA is it actually good for you or just nice to have?Can we build it?What level of product quality is appropriate?Does it make economic sense?Design ConsiderationsReasons for product design/redesign?Economic – Reduced demand from recessionary economySocial/demographic – Products for aging population, home designPolitical – Low income apts in NY high-risesCompetitiveCost/availability of raw materialTechnological – Speed, footwear, carsValue Analysis – An examination of the functions of parts and materials in an effort to reduce cost or improve performance of a product (don’t memorize)Could a cheaper part or material be used? Say no if it reduces quality, or safetyIs the function necessary?Can the function of two or more parts be performed by a single part for a lower cost?Can a part be simplified?Can product specifications be relaxed?Objectives of product/service designPrimary focusCustomer satisfactionUnderstanding what the customer wantsSecondary focusFunctionCostQualityAppearanceEase of productionEase of maintenanceLegal, ethical, environmentalLegal (FDA or Product Liability)Ethical – Releasing products with defects/potential hazardsTime constraintsEnvironmental – Emission of vehiclesOther issuesProduct life cycleShort: Phones (1-2 years), Fashion (Seasonal)Long: Soda and candyHow much standardization?Capacity – Upper limit on load that an operating unit can handleEquipment – More equipment or more sophisticatedSpace – Leasing vs. BuyingEmployee skillsQuestions:What kind of capacity is needed? Production, financial, etc.How much is needed?When is it needed?How much will it cost?How will it be funded? Loan, donations, investors, grants, vendor financedReturn on investment? Cost of capitalWhat are the potential benefits and risks? Degree of business certainty? Rate of change of demand?Profits and time forfeited to implement capacity changes? AKA opportunity costsCapacity Decisions Capacity decisions affect:Ability to meet future demandOperating costs – Excess capacity can mean higher unit costs because overhead and fixed costs are spread over a smaller amount of productionCompetitiveness – Excess capacity can be a competitive advantage because they have the % capacity to make a product quicker than othersEase of management excess – Excess capacity operation is easier to manageGlobalization adds complexity – Time becomes more of an issueDefine and MeasureDesign capacity – Max output rate than an operation or facility is designed for; very general approach to developing a projectEffective capacity: Design capacity – Allowances for personal time, scrap, and maintenanceActual output – Rate actually achieved in units/day, month, or year Effective CapacityDeterminantsFacility size and layoutProduct designProcess factors – batch processingHuman skills and experienceCompany policy factors, whether overtime allowed, holidaysOperational factors – Differences in equipment type, inventory stocking decisions, quality controlExternal factors – Environmental regulationsEfficiency and UtilizationEfficiency = Actual output/Effective capacityAnswer is expressed as a percentageUtilization = Actual output/Design capacityAnswer also expressed as a percentage Steps for Capacity PlanningForecast capacity requirementsLong term – Overall level of capacity and factors in cycles, seasonality, trendsShort term – Variations from seasonal, random, irregular fluctuations in demandSeasonal demand:Yearly – HalloweenMonthly – State paychecks, social securityWeekly – RestaurantsDaily – Public transportation.Calculating processing requirements. 1 machine operates 8 hours a day and 252 days/yearProductAnnual demand in unitsProcessing time/unitProcess time needed (calculate it)15007 hours3500 hours21009 hours900 hours39003 hours2700 hoursCalculating process time needed = 3500 + 900 + 700 = 7100 hoursDivide process time by 1 machine’s capacity: 1 machine can do 8 hours x 252 days = 2016 hours. 7100/2016 = 3.5 = 4 (Round up to 4 because you can’t buy half a machine)Service CapacityCapacity AlternativesIn house aka in your facilityOutsource aka obtain goods/service from external supplierHow to make that choice?Available capacityExpertiseQuality ConsiderationsNature of demand – Wide fluctuation, smaller orders outsourcedCostRisk Capacity StrategyCalculationsManager has the option to buy 1, 2, or 3 machines. Variable costs are $17/unit, revenue is $74/unit. Projected annual demand is 670-750 units. How many machines should he buy?# of machinesAnnual fixed costsAnnual output1$10,2000-4002$17,000401-7003$20,000701-1100QBEP = 10,200/74-17 = 179 units QBEP = 17,000/74-17 = 299 unitsQBEP = 20,000/74-17 = 351 unitsIs projected annual output greater than the breakeven point? Yes for all.What is minimum # of machines to meet demand? Only 3 machines meets that requirement.