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05/01/92

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Business, Engineering schools begin joint venture in manufacturing

STANFORD - "They keep acting like MBAs," complained Carlos Sierra, a Stanford University master's student in engineering. "Every time we have an idea, they pull out their calculators and say it costs too much!"

Sierra shouldn't have been all that surprised. The objects of his dismay, Scott Lucas and Jeff Donnelly, are MBAs - or they will be after commencement in June. They, were partners with engineering students Sierra and Sandor Nagy in a class project for a new two-quarter course called "Integrated Design for Manufacturing and Marketability."

For six months, the students spent a good percentage of their waking hours together, getting down and dirty in the machine shop, where they and four other teams of MBAs and engineers built prototype home can crushers to sell to a simulated market. By the end of winter quarter, the "suits" from the business school were floating terms like "CAD" and "cam" while the "gearheads" from engineering talked market share and bottom line.

Suffering through culture shock of the MBA-engineer variety was worth it for Sierra's team. After building a half-dozen prototypes - the first "wouldn't even crush a paper cup," Sierra recalls - his team beat out the others, finishing first in simulated annual profits.

Like the can crusher, the course was a prototype joint venture between the schools of Business and Engineering. sponsored by the Stanford Integrated Manufacturing Association, it was developed and team-taught by faculty from the two schools: David Beach, professor of mechanical engineering; William Lovejoy, associate professor of operations management; and V. "Seenu" Srinivasan, Ernest C. Arbuckle Professor of Marketing and Management Science.

"What we hoped to do in the class," Lovejoy said, "was to develop in MBAs an appreciation for the process of design and manufacture, and to develop in engineers an appreciation of the constraints placed on design and manufacture by a competitive economic context."

To that end, the MBAs learned such machining fundamentals as turning and milling, and such manufacturing ideas as production planning and design for quality. The engineers boned up on the basics of accounting systems and market research.

The class was purposely composed of equal numbers of MBA students and master's students in engineering, as were the teams. Each team was required to develop its product from concept to design to working prototype.

The teams competed against each other in round-robin fashion, simultaneously pitting their products against two can crushers currently on the market. Except for the real crushers (and barring industrial espionage in the machine shop), the students knew nothing about their competitors' products. The goal was to reap the highest net profits.

The students first did a formal market survey to identify what potential customers would look for in a can crusher and, using a market-research technique called conjoint analysis, determined what tradeoffs they were likely to make. Price, size, safety, ease of use and durability all ranked high with consumers.

"The conjoint analysis allows the teams to assess the market share potential of different design ideas in the presence of competition," Srinivasan said.

The customer information was fed into a computer program that also took note of production costs and product pricing. The resulting data, as well as rankings by a panel of experts in industrial design, were used to simulate consumer choice and to determine the teams' final standings.

The teams made their own tradeoffs. One secured its hold on the high end of the market by sacrificing price for convenience. Its upscale, electrically powered model cost $38 to produce and was priced at $60. Thanks chiefly to the votes of the design panel, the "yuppie" crusher came in second.

Another prototype that aimed high hit bottom. Although it boasted a classy, art deco design, this mechanical model couldn't compete with the electric crusher for ease of operation, and its $20 price tag was too high to challenge less expensive models. It came in last.

First and third place went to prototypes that aimed at the middle of the market. Both models were wall mounted; both, though mechanical, were fairly easy to use. The winner cost $7 to produce and the third-place finisher, $6.

The simplest model of all came in fourth. Made from sheet metal, it required grown-up muscle power to work. Thanks to its minimal production cost (under $3), it fared well in the price- sensitive segment of the market simulated by the computer, but came in last with the convenience-oriented design panel.

And how did the prototype course fare? In the last two class sessions, students evaluated their experiences and made suggestions for next year's class. Basically, they want more, sooner. They suggested design coaching up front, even before the market surveys, and putting students into the machine shop to start on their prototypes well before the second quarter.

One of the most real-world aspects of the course is its competitiveness. But both students and faculty felt that the need to be secretive stifled worthwhile communication across teams.

"Next year," said Lovejoy, "we'll finish the competition earlier and leave significantly more time for student discussion. This year, all concerned were reluctant to allow the course to end."

But, then, the course didn't exactly end. There was a barbecue at the end of winter quarter, a beer party when everyone got back from spring break and a class T-shirt lest anyone forget. A couple of the MBA students are getting together with Dave Beach at the machine shop for an ad hoc welding class; one MBA is working with Lovejoy and Beach to design a commercial production process for his team's can crusher; and two MBA students and two engineers have joined in a real-life project under the guidance of Srinivasan. Srinivasan isn't free to tell what the product is, but he will say that a company is already interested.

As for the MBAs acting like MBAs and the engineers acting like, well, gearheads?

"The background and experience of the team members provided a rich environment, one in which business and engineering concepts could be combined to their best advantage," said one of the engineers. " 'Integrated' is in the title of the course and 'integrated' is what makes the teams and the course work."

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