Strategy execution
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SEMINAR7.pdf
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Operation Analysis
Techniques: Product and
Service Design and Sustainability
Seminar 7
Some Potential Cases
Patagonia: Driving Sustainable Innovation by Embracing Tensions B5853-PDF-ENG https://hbsp.harvard.edu/tu/0231e3f6
Sobey's Inc: A Strategic Approach to Sustainable Seafood Supply W13623-PDF-ENG https://hbsp.harvard.edu/tu/e80f493b
The Ritz-Carlton Hotel Company: The Quest for Service Excellence CU09-PDF-ENG https://hbsp.harvard.edu/tu/6399f627
The Ritz-Carlton Hotel Company: The Quest for Service Excellence, Spreadsheet Supplement CU11-XLS-ENG https://hbsp.harvard.edu/tu/016088ad
Design of Goods and Services
PowerPoint presentation to accompany Heizer, Render, Munson Operations Management, Twelfth Edition, Global Edition Principles of Operations Management, Tenth Edition, Global Edition
PowerPoint slides by Jeff Heyl
5
Outline
Ø Global Company Profile: Regal Marine Ø Goods and Services Selection Ø Generating New Products Ø Product Development Ø Issues for Product Design Ø Product Development Continuum
Outline - Continued
Ø Defining a Product Ø Documents for Production Ø Service Design Ø Application of Decision Trees to Product
Design Ø Transition to Production
▶ Global market ▶ 3-dimensional CAD system
▶ Reduced product development time ▶ Reduced problems with tooling ▶ Reduced problems in production
▶ Assembly line production ▶ JIT
Regal Marine
Seminar Learning Objectives
5.1 Define product life cycle 5.2 Describe a product development system 5.3 Build a house of quality 5.4 Explain how time-based competition is
implemented by OM
By the end of this seminar you should be able to :
Learning Objectives
5.5 Describe how goods and services are defined by OM
5.6 Describe the documents needed for production
5.7 Explain how the customer participates in the design and delivery of services
5.8 Apply decision trees to product issues
When you complete this chapter you should be able to :
Ø Organizations exist to provide goods or services to society
Ø Great products are the key to success Ø Top organizations typically focus on core
products Ø Customers buy satisfaction, not just a
physical good or particular service Ø Fundamental to an organization's strategy
with implications throughout the operations function
Goods and Services Selection
Ø Limited and predicable life cycles requires constantly looking for, designing, and developing new products
Ø Utilize strong communication among customer, product, processes, and suppliers
Ø New products generate substantial revenue
Goods and Services Selection
Goods and Services Selection
Figure 5.1
The higher the percentage of sales from the last 5 years, the more likely the firm is to be a leader.
50% –
40% –
30% –
20% –
10% –
0% – Industry leader
Top third
Middle third
Bottom third
Position of firm in its industry
P er
ce nt
o f s
al es
fr om
ne
w p
ro du
ct s
The objective of the product decision is to develop and implement a product strategy that meets the demands of the marketplace
with a competitive advantage
Product Decision
Product Strategy Options
Ø Differentiation ▶ Shouldice Hospital
Ø Low cost ▶ Taco Bell
Ø Rapid response ▶ Toyota
Product Life Cycles
Ø May be any length from a few days to decades
Ø The operations function must be able to introduce new products successfully
Product Life Cycle
Cost of development and production Sales revenue
ProfitLoss Loss
Figure 5.2
Introduction Growth Maturity Decline
$
Life Cycle and Strategy
Introductory Phase Ø Fine tuning may warrant unusual
expenses for 1) Research 2) Product development 3) Process modification and
enhancement 4) Supplier development
Product Life Cycle
Growth Phase
Ø Product design begins to stabilize Ø Effective forecasting of capacity
becomes necessary Ø Adding or enhancing capacity may be
necessary
Product Life Cycle
Maturity Phase
Ø Competitors now established Ø High volume, innovative production
may be needed Ø Improved cost control, reduction in
options, paring down of product line
Product Life Cycle
Decline Phase
Ø Unless product makes a special contribution to the organization, must plan to terminate offering
Product Life Cycle Costs
Costs incurred
Costs committed
Ease of change
Concept Detailed Manufacturing Distribution, design design service,
prototype and disposal
P er
ce nt
o f t
ot al
c os
t 100 –
80 –
60 –
40 –
20 –
0 –
Product-by-Value Analysis
Ø Lists products in descending order of their individual dollar contribution to the firm
Ø Lists the total annual dollar contribution of the product
Ø Helps management evaluate alternative strategies
Generating New Products
1. Understanding the customer 2. Economic change 3. Sociological and demographic
change 4. Technological change 5. Political and legal change 6. Market practice, professional
standards, suppliers, distributors
Scope of product
development team
Product Development Stages
Scope for design and engineering
teams
Evaluation
Introduction
Test Market
Functional Specifications
Design Review
Product Specifications
Customer Requirements
Feasibility
Concept
Figure 5.3
Quality Function Deployment
▶ Quality function deployment (QFD) ▶ Determine what will satisfy the customer ▶ Translate those customer desires into the
target design ▶ House of quality
▶ Utilize a planning matrix to relate customer wants to how the firm is going to meet those wants
Quality Function Deployment
1. Identify customer wants 2. Identify how the good/service will satisfy customer
wants 3. Relate customer wants to product hows 4. Identify relationships between the firm’s hows 5. Develop our importance ratings 6. Evaluate competing products 7. Compare performance to desirable technical
attributes
QFD House of Quality
Relationship matrix
How to satisfy customer wants
Interrelationships
C om
pe tit
iv e
as se
ss m
en t
Technical evaluation
Target values
What the customer
wants
Customer importance
ratings
Weighted rating
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
House of Quality Example
Customer importance
rating (5 = highest)
Lightweight 3
Easy to use 4
Reliable 5
Easy to hold steady 2
High resolution 1
What the customer wants
What the Customer
Wants Relationship
Matrix
Technical Attributes and
Evaluation
How to Satisfy Customer Wants
Interrelationships
A na
ly si
s of
C om
pe tit
or s
House of Quality Example What the Customer
Wants Relationship
Matrix
Technical Attributes and
Evaluation
How to Satisfy Customer Wants
Interrelationships
A na
ly si
s of
C om
pe tit
or s
Lo w
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ct ric
ity re
qu ire
m en
ts
A lu
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um c
om po
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s
A ut
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A ut
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re
H ig
h nu
m be
r o f p
ix el
s
E rg
on om
ic d
es ig
n
How to Satisfy Customer Wants
Lightweight 3
Easy to use 4
Reliable 5
Easy to hold steady 2
High resolution 1
House of Quality Example What the Customer
Wants Relationship
Matrix
Technical Attributes and
Evaluation
How to Satisfy Customer Wants
Interrelationships
A na
ly si
s of
C om
pe tit
or s
High relationship
Medium relationship
Low relationship
Relationship matrix
House of Quality Example
Lo w
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ct ric
ity re
qu ire
m en
ts
A lu
m in
um c
om po
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s
A ut
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A ut
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H ig
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r o f p
ix el
s
E rg
on om
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es ig
n
Relationships between the things we can do
What the Customer
Wants Relationship
Matrix
Technical Attributes and
Evaluation
How to Satisfy Customer Wants
Interrelationships
A na
ly si
s of
C om
pe tit
or s
House of Quality Example
Weighted rating
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
What the Customer
Wants Relationship
Matrix
Technical Attributes and
Evaluation
How to Satisfy Customer Wants
Interrelationships
A na
ly si
s of
C om
pe tit
or s
House of Quality Example
C om
pa ny
A
C om
pa ny
B
G P
G P
F G
G P
P P
Lightweight 3
Easy to use 4
Reliable 5
Easy to hold steady 2
High resolution 1
Our importance ratings 22 5
How well do competing products meet customer wants
What the Customer
Wants Relationship
Matrix
Technical Attributes and
Evaluation
How to Satisfy Customer Wants
Interrelationships
A na
ly si
s of
C om
pe tit
or s
House of Quality Example What the Customer
Wants Relationship
Matrix
Technical Attributes and
Evaluation
How to Satisfy Customer Wants
Interrelationships
A na
ly si
s of
C om
pe tit
or s
Target values (Technical attributes)
Technical evaluation
Company A 0.7 60% yes 1 ok G
Company B 0.6 50% yes 2 ok F
Us 0.5 75% yes 2 ok G
2 ci
rc ui
ts
Fa ilu
re 1
p er
1 0,
00 0
P an
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nk in
g
0. 5
A
75 %
2’ to
∞
House of Quality Example
Completed House of Quality
Lo w
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qu ire
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ts
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C om
pa ny
A
C om
pa ny
B
Lightweight 3
Easy to use 4 Reliable 5
Easy to hold steady 2 High resolution 1
Our importance ratings
G P
G P F G
G P P P
Target values (Technical attributes)
Technical evaluation
Company A 0.7 60% yes 1 ok G
Company B 0.6 50% yes 2 ok F
Us 0.5 75% yes 2 ok G 0.
5 A
75 %
2’ to
∞
2 ci
rc ui
ts F
ai lu
re 1
p er
1 0,
00 0
P an
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an ki
ng
22 9 27 27 32 25
House of Quality Sequence
Figure 5.4
Deploying resources through the organization in response to customer requirements
P ro
du ct
io n
pr oc
es s
Quality plan
House 4
S pe
ci fic
co
m po
ne nt
s
Production process
House 3
D es
ig n
ch ar
ac te
ris tic
s
Specific components
House 2
C us
to m
er
re qu
ire m
en ts
Design characteristics
House 1
Organizing for Product Development
▶ Traditionally – distinct departments ▶ Duties and responsibilities are defined ▶ Difficult to foster forward thinking
▶ A Champion ▶ Product manager drives the product
through the product development system and related organizations
Organizing for Product Development
▶ Team approach ▶ Cross functional – representatives from
all disciplines or functions ▶ Product development teams, design for
manufacturability teams, value engineering teams
▶ Japanese “whole organization” approach
▶ No organizational divisions
Organizing for Product Development
▶ Product development teams ▶ Market requirements to product success ▶ Cross functional teams often involving
vendors ▶ Open, highly participative environment
▶ Concurrent engineering ▶ Simultaneous performance of product
development stages
Manufacturability and Value Engineering
▶ Benefits: 1. Reduced complexity of the product 2. Reduction of environmental impact 3. Additional standardization of components 4. Improvement of functional aspects of the product 5. Improved job design and job safety 6. Improved maintainability (serviceability) of the
product 7. Robust design
Cost Reduction of a Bracket via Value Engineering
Figure 5.5
Issues for Product Design
▶ Robust design ▶ Modular design ▶ Computer-aided design (CAD) ▶ Computer-aided manufacturing (CAM) ▶ Virtual reality technology ▶ Value analysis ▶ Sustainability and Life Cycle Assessment
(LCA)
Robust Design
▶ Product is designed so that small variations in production or assembly do not adversely affect the product
▶ Typically results in lower cost and higher quality
Modular Design
▶ Products designed in easily segmented components
▶ Adds flexibility to both production and marketing
▶ Improved ability to satisfy customer requirements
Ø Using computers to design products and prepare engineering documentation
Ø Shorter development cycles, improved accuracy, lower cost
Ø Information and designs can be deployed worldwide
Computer Aided Design (CAD)
▶ 3-D Object Modeling ▶ Small prototype development
▶ Design for Manufacturing and Assembly (DFMA)
▶ Solve manufacturing problems during the design stage
▶ CAD through the internet ▶ International data exchange through STEP ▶ 3-D printing
Extensions of CAD
Computer-Aided Manufacturing (CAM)
Ø Utilizing specialized computers and program to control manufacturing equipment
Ø Often driven by the CAD system (CAD/CAM)
1. Product quality 2. Shorter design time 3. Production cost reductions 4. Database availability 5. New range of capabilities
Benefits of CAD/CAM
Virtual Reality Technology
Ø Computer technology used to develop an interactive, 3-D model of a product from the basic CAD data
Ø Allows people to ‘see’ the finished design before a physical model is built
Ø Very effective in large-scale designs such as plant layout
Value Analysis
Ø Focuses on design improvement during production
Ø Seeks improvements leading either to a better product or a product which can be produced more economically with less environmental impact
Sustainability and Life Cycle Assessment (LCA)
Ø Sustainability means meeting the needs of the present without compromising the ability of future generations to meet their needs
Ø LCA is a formal evaluation of the environmental impact of a product
Product Development Continuum
Ø Product life cycles are becoming shorter and the rate of technological change is increasing
Ø Developing new products faster can result in a competitive advantage
Ø Time-based competition
Product Development Continuum
Internal Cost of product development Shared Lengthy Speed of product development Rapid and/
or Existing High Risk of product development Shared
External Development Strategies Alliances
Joint ventures Purchase technology or expertise by acquiring the developer
Internal Development Strategies Migrations of existing products
Enhancements to existing products New internally developed products
Figure 5.6
XCompeting on Response
Ø Flexibility is matching market changes in design innovation and volumes § A way of life at Hewlett-Packard
Ø Reliability is meeting schedules § German machine industry
Ø Quickness in design, production, and delivery § Johnson Electric,
Pizza Hut
Product Development Continuum
Ø Purchasing technology by acquiring a firm ▶ Speeds development ▶ Issues concern the fit between the
acquired organization and product and the host
Ø Joint Ventures ▶ Both organizations learn ▶ Risks are shared
Product Development Continuum
Ø Alliances ▶ Cooperative agreements between
independent organizations ▶ Useful when technology is developing ▶ Reduces risks
Defining a Product
Ø First definition is in terms of functions Ø Rigorous specifications are developed during
the design phase Ø Manufactured products will have an
engineering drawing Ø Bill of material (BOM) lists the components of
a product
Monterey Jack Cheese (a) U.S. grade AA. Monterey cheese shall conform to the following
requirements: (1) Flavor. Is fine and highly pleasing, free from undesirable flavors and odors.
May possess a very slight acid or feed flavor. (2) Body and texture. A plug drawn from the cheese shall be reasonably firm.
It shall have numerous small mechanical openings evenly distributed throughout the plug. It shall not possess sweet holes, yeast holes, or other gas holes.
(3) Color. Shall have a natural, uniform, bright and attractive appearance. (4) Finish and appearance—bandaged and
paraffin-dipped. The rind shall be sound, firm, and smooth providing a good protection to the cheese.
Code of Federal Regulation, Parts 53 to 109, General Service Administration
Ø Engineering drawing ▶ Shows dimensions, tolerances, and
materials ▶ Shows codes for Group Technology
Ø Bill of Material ▶ Lists components, quantities and where
used ▶ Shows product structure
Product Documents
Engineering Drawings
Figure 5.8
Bills of Material BOM for a Panel Weldment
NUMBER DESCRIPTION QTY
A 60-71 PANEL WELDM’T 1
A 60-7 LOWER ROLLER ASSM. 1 R 60-17 ROLLER 1 R 60-428 PIN 1 P 60-2 LOCKNUT 1
A 60-72 GUIDE ASSM. REAR 1 R 60-57-1 SUPPORT ANGLE 1 A 60-4 ROLLER ASSM. 1 02-50-1150 BOLT 1
A 60-73 GUIDE ASSM. FRONT 1 A 60-74 SUPPORT WELDM’T 1 R 60-99 WEAR PLATE 1 02-50-1150 BOLT 1 Figure 5.9 (a)
Bills of Material Hard Rock Cafe’s Hickory BBQ Bacon Cheeseburger
DESCRIPTION QTY
Bun 1 Hamburger patty 8 oz. Cheddar cheese 2 slices Bacon 2 strips BBQ onions 1/2 cup Hickory BBQ sauce 1 oz. Burger set
Lettuce 1 leaf Tomato 1 slice Red onion 4 rings Pickle 1 slice
French fries 5 oz. Seasoned salt 1 tsp. 11-inch plate 1 HRC flag 1
Figure 5.9 (b)
Make-or-Buy Decisions
• Produce components themselves or buy from an outside source
• Variations in – Quality – Cost – Delivery schedules
• Critical to product definition
Ø Parts grouped into families with similar characteristics
Ø Coding system describes processing and physical characteristics
Ø Part families can be produced in dedicated manufacturing cells
Group Technology
Group Technology Scheme
Figure 5.10
(a) Ungrouped Parts (b) Grouped Cylindrical Parts (families of parts)
Grooved Slotted Threaded Drilled Machined
1. Improved design 2. Reduced raw material and purchases 3. Simplified production planning and
control 4. Improved layout, routing, and machine
loading 5. Reduced tooling setup time, work-in-
process, and production time
Group Technology Benefits
Documents for Production
Ø Assembly drawing Ø Assembly chart Ø Route sheet Ø Work order Ø Engineering change notices (ECNs)
Assembly Drawing
Ø Shows exploded view of product
Ø Details relative locations to show how to assemble the product
Figure 5.11 (a)
Assembly Chart
1
2
3
4
5
6
7
8
9
10
11
R 209 Angle
R 207 Angle
Bolts w/nuts (2)
R 209 Angle
R 207 Angle
Bolt w/nut
R 404 Roller
Lock washer
Part number tag
Box w/packing material
Bolts w/nuts (2)
SA 1
SA 2
A1
A2
A3
A4
A5
Left bracket
assembly
Right bracket
assembly
Poka-yoke inspection
Figure 5.11 (b)
Identifies the point of production where components flow into subassemblies and ultimately into the final product
Route Sheet Lists the operations and times required to produce a component
Setup Operation Process Machine Operations Time Time/Unit
1 Auto Insert 2 Insert Component 1.5 .4 Set 56
2 Manual Insert Component .5 2.3 Insert 1 Set 12C
3 Wave Solder Solder all 1.5 4.1 components to board
4 Test 4 Circuit integrity .25 .5 test 4GY
Work Order
Instructions to produce a given quantity of a particular item, usually to a schedule
Work Order
Item Quantity Start Date Due Date
Production Delivery Dept Location
157C 125 5/2/16 5/4/16
F32 Dept K11
Engineering Change Notice (ECN)
Ø A correction or modification to a product’s definition or documentation
▶ Engineering drawings ▶ Bill of material
Quite common with long product life cycles, long manufacturing lead times, or rapidly
changing technologies
Configuration Management
Ø The need to manage ECNs has led to the development of configuration management systems
Ø A product’s planned and changing components are accurately identified
Ø Control and accountability for change are identified and maintained
Product Life-Cycle Management (PLM)
Ø Integrated software that brings together most, if not all, elements of product design and manufacture
▶ Product design ▶ CAD/CAM ▶ DFMA ▶ Product routing ▶ Materials
▶ Layout ▶ Assembly ▶ Maintenance ▶ Environmental
Service Design
Ø Service typically includes direct interaction with the customer
Ø Process – chain – network (PCN) analysis focuses on the ways in which processes can be designed to optimize interaction between firms and their customers
Process-Chain-Network (PCN) Analysis
Figure 5.12
Process-Chain-Network (PCN) Analysis
1. Direct interaction region includes process steps that involve interaction between participants
2. The surrogate (substitute) interaction region includes process steps in which one participant is acting on another participant’s resources
3. The independent processing region includes steps in which the supplier and/or the customer is acting on resources where each has maximum control
Process-Chain-Network (PCN) Analysis
Ø All three regions have similar operating issues but the appropriate way of handling the issues differs across regions – service operations exist only within the area of direct and surrogate interaction
Ø PCN analysis provides insight to aid in positioning and designing processes that can achieve strategic objectives
Adding Service Efficiency
Ø Service productivity is notoriously low partially because of customer involvement in the design or delivery of the service, or both
Ø Complicates product design
Adding Service Efficiency
Ø Limit the options ▶ Improves efficiency and ability to meet
customer expectations Ø Delay customization Ø Modularization ▶ Eases customization of a service
Adding Service Efficiency
Ø Automation ▶ Reduces cost, increases customer
service Ø Moment of truth ▶ Critical moments between the customer
and the organization that determine customer satisfaction
Documents for Services
Ø High levels of customer interaction necessitates different documentation
Ø Often explicit job instructions Ø Scripts and storyboards are other
techniques
First Bank Corp. Drive-up Teller Service Guidelines
• Be especially discreet when talking to the customer through the microphone.
• Provide written instructions for customers who must fill out forms you provide.
• Mark lines to be completed or attach a note with instructions. • Always say “please” and “thank you” when speaking through the
microphone. • Establish eye contact with the customer if the distance allows it. • If a transaction requires that the customer park the car and come
into the lobby, apologize for the inconvenience.
Application of Decision Trees to Product Design
Ø Particularly useful when there are a series of decisions and outcomes that lead to other decisions and outcomes
Application of Decision Trees to Product Design
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
Procedure
(.6)
Low sales
(.4)
High sales
(.6) Low sales
(.4)
High sales
Decision Tree Example
Purchase CAD
Hire and train engineers
Do nothing
Figure 5.13
(.6) Low sales
(.4)
High sales
Decision Tree Example
Purchase CAD
(.6)
Low sales
(.4)
High sales
Hire and train engineers
Do nothing
$2,500,000 Revenue – 1,000,000 Mfg cost ($40 x 25,000)
– 500,000 CAD cost $1,000,000 Net
$800,000 Revenue – 320,000 Mfg cost ($40 x 8,000) – 500,000 CAD cost – $20,000 Net loss
EMV (purchase CAD system) = (.4)($1,000,000) + (.6)(– $20,000)
Figure 5.13
(.6) Low sales
(.4)
High sales
Decision Tree Example
Purchase CAD
(.6)
Low sales
(.4)
High sales
Hire and train engineers
Do nothing
$2,500,000 Revenue – 1,000,000 Mfg cost ($40 x 25,000)
– 500,000 CAD cost $1,000,000 Net
$800,000 Revenue – 320,000 Mfg cost ($40 x 8,000) – 500,000 CAD cost – $20,000 Net loss
$388,000
EMV (purchase CAD system) = (.4)($1,000,000) + (.6)(– $20,000) = $388,000
Figure 5.13
(.6)
Low sales
(.4)
High sales
(.6) Low sales
(.4)
High sales
Decision Tree Example
Purchase CAD $388,000
Hire and train engineers $365,000
Do nothing $0
$0 Net
$800,000 Revenue – 400,000 Mfg cost ($50 x 8,000) – 375,000 Hire and train cost
$25,000 Net
$2,500,000 Revenue – 1,250,000 Mfg cost ($50 x 25,000)
– 375,000 Hire and train cost $875,000 Net
$2,500,000 Revenue – 1,000,000 Mfg cost ($40 x 25,000)
– 500,000 CAD cost $1,000,000 Net
$800,000 Revenue – 320,000 Mfg cost ($40 x 8,000) – 500,000 CAD cost – $20,000 Net loss
Figure 5.13
Transition to Production
▶ Know when to move to production ▶ Product development can be viewed as
evolutionary and never complete ▶ Product must move from design to production
in a timely manner ▶ Most products have a trial production period
to insure producibility ▶ Develop tooling, quality control, training ▶ Ensures successful production
Transition to Production
Ø Responsibility must also transition as the product moves through its life cycle
▶ Line management takes over from design Ø Three common approaches to managing
transition ▶ Project managers ▶ Product development teams ▶ Integrate product development and
manufacturing organizations
PowerPoint presentation to accompany Heizer, Render, Munson Operations Management, Twelfth Edition, Global Edition Principles of Operations Management, Tenth Edition, Global Edition
Sustainability in the Supply Chain 5
S U
P P
LE M
E N
T
Outline
Ø Corporate Social Responsibility Ø Sustainability Ø Design and Production for Sustainability Ø Regulations and Industry Standards
Seminar Learning Objectives
S5.1 Describe corporate social responsibility S5.2 Describe sustainability S5.3 Explain the 3Rs for sustainability S5.4 Calculate design for disassembly S5.5 Explain the impact of sustainable
regulations on operations
By the end of this section of the seminar you should be able to :
Corporate Social Responsibility
Ø How products and services affect people and the environment
Ø Stakeholders have strong opinions about environmental, social, and ethical issues
Ø Doing what’s right can be beneficial to all stakeholders
Ø Corporate social responsibility (CSR)
Sustainability
Ø Meeting the needs of the present without compromising the ability of future generations to meet their needs
Ø More than “going green” Ø Includes employees, customers, community, and
company reputation
Systems View
Ø Looking at a product’s life from design to disposal, including all the resources required
Ø The product or service itself is a small part of much larger social, economic, and environmental systems
Ø Understanding systems allows more informed judgments regarding sustainability
Commons
Ø Many inputs to a production system held by the public
Ø Common resources often misallocated Ø Possible solutions include
1) Moving some of the common to private property
2) Allocation of rights 3) Allocation of yield
Triple Bottom Line
Ø Consider the systems necessary to support the three Ps: people, planet, and profit
Figure S5.1
Triple Bottom Line
Ø Decisions affect people Ø Globalization and outsourcing complicate the
task Ø Supplier selection and performance criteria are
important Ø Materials must be safe and environmentally
responsible
Walmart’s Objectives
1. Improving livelihoods through the creation of productive, healthy, and safe workplaces
2. Building strong communities through access to affordable, high-quality services
3. Preventing exposure to substances that are considered harmful or toxic
4. Promoting health and wellness
Triple Bottom Line
Ø The planet’s environment Ø Look for ways to reduce the environmental
impact of operations Ø Overarching objective is to conserve scarce
resources Ø Carbon footprint and greenhouse gas
emissions (GHG)
Carbon Footprint
34.5-gram Bag of Frito-Lay Chips
Figure S5.2
Triple Bottom Line
Ø Social and environmental sustainability do not exist without economic sustainability
Ø Staying in business requires making a profit Ø Alternate measures of success include risk
profile, intellectual property, employee morale, and company valuation
Ø Social accounting can supplement financial accounting to support economic sustainability
Design and Production for Sustainability
Ø Life cycle assessment valuates the environmental impact of a product, from raw material and energy inputs all the way to the disposal of the product at its end-of-life
Ø The goal is to make decisions that help reduce the environmental impact of a product throughout its entire life
Ø The 3Rs— reduce, reuse, and recycle
Product Design
Ø Design decisions affect materials, quality, cost, processes, related packaging and logistics, and how the product will be processed when discarded
Ø Incorporate systems view to lower environmental impact
Ø Alternative materials
Design for Disassembly
PART
RESALE REVENUE PER UNIT
RECYCLING REVENUE PER UNIT
PROCESSING COST
PER UNIT
DISPOSAL COST
PER UNIT Printed circuit board $5.93 $1.54 $3.46 $0.00
Laminate back 0.00 0.00 4.53 1.74
Coil 8.56 5.65 6.22 0.00
Processor 9.17 2.65 3.12 0.00
Frame 0.00 0.00 2.02 1.23
Aluminum case 11.83 2.10 2.98 0.00
Total $35.49 $11.94 $22.33 $2.97
Harmonizer
Design for Disassembly
PART
RESALE REVENUE PER UNIT
RECYCLING REVENUE PER UNIT
PROCESSING COST
PER UNIT
DISPOSAL COST
PER UNIT Printed circuit board $7.88 $3.54 $2.12 $0.00
Coil 6.67 4.56 3.32 0.00
Frame 0.00 0.00 4.87 1.97
Processor 8.45 4.65 3.43 0.00
Plastic case 0.00 0.00 4.65 3.98
Total $23.00 $12.75 $18.39 $5.95
Rocker
Design for Disassembly
Revenue retrieval
Total resale
revenue –
Total processing
cost –
Total recycling revenue
Total disposal
cost +=
Revenue retrieval for Harmonizer
= $35.49 + $11.94 – $22.33 – $2.97 = $22.13
Revenue retrieval for
Rocker = $23.00 + $12.75 – $18.39 – $5.95 = $11.41
Production Process
Ø Reduce the amount of resources in the production process
§ Energy § Water § Environmental contamination
Ø Reduce cost and environmental concerns
Logistics
Ø Reduce costs by achieving efficient route and delivery networks 1. Getting shipments to customers
promptly 2. Keeping trucks busy 3. Buying inexpensive
fuel
Logistics
Ø Management analytics can help Ø Evaluate equipment alternatives Ø Life cycle ownership costs
Life Cycle Ownership Costs
VEHICLE COST TO
BUY FUEL EFFICIENCY
OPERATING COSTS PER
MILE Ford TriVan $28,000 Regular Unleaded 24 mpg $.20
Honda CityVan
$32,000 Regular Unleaded/Battery
37 mpg $.22
Annual distance = 22,000 miles Life = 8 years Gas price = $4.25/gallon
Total life cycle cost
= Cost of vehicle + + Life cycle
cost of fuel
Life cycle operating
cost
Life Cycle Ownership Costs
a) Ford TriVan
Total life- cycle cost
=$28,000+ 22,000miles
year
24 miles gallon
!
"
# # # #
$
%
& & & &
$4.25 / gallon( ) 8years( )
+ 22,000 miles year
!
" #
$
% & $.20 /mile( ) 8years( )
=$28,000+$31,167+$35,200=$94,367
Life Cycle Ownership Costs
a) Honda CityVan
Total life- cycle cost
=$32,000+ 22,000miles
year
37 miles gallon
!
"
# # # #
$
%
& & & &
$4.25 / gallon( ) 8years( )
+ 22,000 miles year
!
" #
$
% & $.22 /mile( ) 8years( )
=$32,000+$20,216+$38,720=$90,936
Life Cycle Ownership Costs b) Crossover point
Total cost for Ford TriVan = Total cost for Honda CityVan
$28,000+ 4.25 $
gallon
24 miles gallon
+.20 $ mile
!
"
# # # #
$
%
& & & &
M miles( ) =$32,000+ 4.25 $
gallon
37 miles gallon
+.22 $ mile
!
"
# # # #
$
%
& & & &
M miles( )
$28,000+ .3770 $ mile
!
" #
$
% & M( ) =$32,000+ .3349 $
mile !
" #
$
% & M( )
.0421 $ mile
!
" #
$
% & M( ) =$4,000
M = $4,000
.0421 $ mile
= 95,012 miles
Life Cycle Ownership Costs
c) Crossover point
Crossover'point = 95,012'miles
22,000miles year
= 4.32'years
End-of-Life Phase
Ø What happens at the end-of-life stage?
Ø Closed-loop supply chains or reverse logistics
Ø Automaker’s design incorporates disassembly, recycling, and reuse
Regulations and Industry Standards
Ø Product design
§ Food and Drug Administration § Consumer Products Safety Commission § National Highway Safety Administration
Regulations and Industry Standards
Ø Manufacturing and assembly activities § Occupational Safety and Health Administration
(OSHA) § Environmental Protection Agency (EPA) § State and local agencies
Regulations and Industry Standards
Ø Disassembly and disposal of hazardous products
§ EPA § Department of Transportation
Ø Design for disassembly
Regulations and Industry Standards
Ø Nearly all industries have regulations § Commercial builders § Federal Safe Drinking Water Act § Resource Conservation and Recovery Act
