Unit 4 DB OM

SteelTiger4

LC7LC8MGMT640Phase4.ppt

Home >Business & Finance homework help >Marketing homework help >Unit 4 DB OM

Live Chat #4

Prof. Lori Forrest

Phase IV – Group Project

Phase 4 Individual DB Due Saturday by 11:59 PM

Peer Responses Due Tuesday

Late assignments? – contact me

Work

Smart

The

End

Management would like to just implement one of Deming's points each year. First, which of the points do you think is most important and why? Secondly, do you believe that this methodology would be effective? Why or why not?

Post your comments to at least two other postings. Each comment must be at least 150 words in length. Use the 2X2 matrix to comment (e.g., two things you liked about the posting and two things the student could have included to improve the posting, including errors or excluding erroneous information).

Group Project

The transportation costs for the Ultamyacin are high, but so are the costs of building an entirely new manufacturing facility. A description of the processes is listed. The company does not know how to proceed but is beginning to embrace TQM thinking. To encourage this new direction, you want to bring more information and analysis to the next management meeting. You believe Deming's steps could be applied here, as well as process mapping to determine what the company should do next.

Group Portion (Small Group Discussion Board):

Research each of Deming's 14 points for management. Then, on the Discussion Board, include the following items:

Which of the points do you think are most important, and why?

If management were to implement one of Deming's points each year, do you believe that this methodology would be effective? Why or why not?

Create an ideal process map with minimal waste. How will the new process meet each of Deming's 14 points?

Summary Portion:

From the group discussion, submit the following:

A document that contains the streamlined, optimum process map

A second document that explains the following:

How the new process will address each of Deming's 14 points, as compared to the old process

How your team has optimized the process

Managerial and employee goals and communication processes to reach each of Deming's Points in the future

Within your group, you may divide Deming's points to summarize the findings and submit those documents.

Group Project

Two documents need to be submitted

Individual submissions: Research Deming’s points to answer the task list questions AND create a process Map – current process/New Process

Group Submission:

Answering:

a. How the new process will address each of Deming's 14 points, as compared to the old process

b. How your team has optimized the process

c. Managerial and employee goals and communication processes to reach each of Deming's Points in the future

Recommend Teams to Assign Points to each Team Member to complete

Group Project

Small Group DB submission:
Research each of Deming's 14 points for management. Then, on the Discussion Board, include the following items:
Which of the points do you think are most important, and why?
If management were to implement one of Deming's points each year, do you believe that this methodology would be effective? Why or why not?
Create an ideal process map with minimal waste. How will the new process meet each of Deming's 14 points?

Group Project – Individual Questions

Group Project – Process Map

Walter A. Shewhart - Developed statistical control process methods to distinguish between random and nonrandom variation in industrial processes to keep processes under control.
Joseph M. Juran - Emphasized the importance of producing quality products through an approach focused on quality planning, control, and improvement.
Armand Feigenbaum - Proposed the concept of “total quality control,” making quality everyone’s responsibility
Philip Crosby - Preached that “quality is free.”
Genichi Taguchi - Emphasizes the minimization of variation (Concerned with the cost of quality to society)
W. Edwards Deming - Identified 14 points critical for improving quality

Create constancy of purpose toward product quality to achieve organizational goals.
Refuse to allow commonly accepted levels of poor quality.
Stop depending on inspection to achieve quality.
Use fewer suppliers, and select them based on quality and dependability instead of price.
Instill programs for continuous improvement of costs, quality, service, and productivity.
Train all employees on quality concepts.
Focus supervisions on helping people to do a better job.
Eliminate fear, create trust, and encourage two-way communication between workers and management.
Eliminate barriers between departments, and encourage joint problem solving.
Eliminate the use of numerical goals and slogans to make workers work harder.
Use statistical methods for continuous improvement of quality and productivity instead of numerical quotas.
Remove barriers to pride of workmanship.
Encourage education and self-improvement for everyone.
Clearly define management's permanent commitment to quality and productivity.

Which of the 14- points of Deming do you think is most important and why?

Implementation

is easier said

than done –

What is action plan?

Value Stream Mapping Defined

All the actions (both value-added and non value-added) currently “required” to produce a product, where a product could be a service (i.e. information) or a tangible good (i.e. a dispenser), and/or
The simple process of directly observing the flows of information and materials as they now occur, summarizing them visually, and then envisioning a future state with much better performance.

Information example could be the help desk.

Value Stream Analysis Example

Value Stream Analysis–
Cross Functional Example

Also know as swim lanes…

Purpose of Value Stream Mapping

Enable people to see the flow of material and information through the Value Stream.

Identify sources of MUDA (waste) and other opportunities to improve.

Identify financial opportunities within the current state.

Provide leadership clarity and responsibility to transform current state to future.

Helps you visualize the process and to create the vision

Common language

Decisions based on facts, not gut feel

Why do we call it a Value Stream?

Value assumes that you are creating something of value that a customer is willing to pay for.

Stream refers to a sequential flow of activities needed to create work units and deliver them to the customer.

VSM Deliverables (Outputs)

Current State Map – How it is
Future State Map – How it could be
Action Plan – The steps required to move us from the Current State to the Future State
Measure & Review – Did it work?
Repeat

What are the outputs of the process?

Three Main Areas of Focus

Material Flow
Information Flow
People/Process
Customers
Internal
External
Processes
Upstream
Downstream

WASTE IDENTIFICATION EXAMPLE

PO Autosourcing Project

Current State Process

Waste Identified

Buyer navigates through five pages within PeopleSoft

Waiting Waste

Rework Waste

Processing Waste

Motion Waste

Processing Waste

Motion Waste

Desired Future State Process

Source:

Davis, Aquilano, & Chase, Fundamentals of Operations Management, 4e

Describing quality from the perspective of the customer’s

Continuous rise in the level of quality for today’s goods and services.

Problems encountered in managing service quality

Identifying quality measurements that are most critical to customers

Preventing the costs of poor quality products and services

Customer loyalty that is more and more based on quality

Quality in Goods

Performance

Features

Reliability

Durability

Conformance

Serviceability

Aesthetics

Perceived quality

Quality in Services

Tangibles

Reliability

Responsiveness

Competence

Courtesy

Credibility

Security

Access

Communication

Understanding the customer

Example: Business Opportunity

How a Reduction in Errors in Loan Applications Affects Customers and the Business.
Discussion Points on Value Creation
Growth
Competitive Advantage
Loyalty – Value Creation Opportunity
Reduced Costs

Opportunity	Customer Impacts	Business Impact
Error Reduction in Loan Application	Reduce Time to Process Loan Applications Improve Customer Satisfaction	Reduced Transaction Cost Increased Capacity Reduced Transaction Errors Reduced Number of Bad Loans Increased Employee Satisfaction

Process Output Indicators
CTQ’s & CTP’s

VOB

_____

Business

Issues

______

CBR’s

______

CTP’s

_______

CTQ’s

_______

Output

Indicators

VOC

_____

Customer

Issues

______

CCR’s

______

Why Use It?
Identifies the CTQ characteristics
A CTQ has the following features:
Critical to the customer’s perception of quality
It can be measured
Specification can be set to tell whether the CTQ has been achieved
What does it do?
Links customer needs (VOC) data collected with drivers

Critical-to-Quality Tree

SOURCE: iSixSigma Magazine

Need Drivers CTQs

Good Customer Service

Knowledgeable CSR

Friendly CSR

Short Wait

Answers by by CSR are correct

CSR can answer questions without further research

Researched information is returned quickly

Customers are not interrupted

Customers are greeted by name

Customers are transferred immediately to the person who can help them

Time on hold is minimal

Metrics drive behavior
Customers are critical to future success
SIPOC has highlighted customers, suppliers, and process steps leading to potential metrics.
Important to talk to customers and stakeholders to identify THEIR requirements.
Not all voices are equal: users versus buyers.
Market segmentation

VOC as Requirements

Why do we care so much about our customers? Why not just do what makes the most sense for the business? Make the least expensive product and deal with customer returns? This is truly how some business managers “feel” but most know that being successful means putting your customers first, regardless how far out some of their requirements may seem.

Pareto Chart

The Pareto chart was introduced in the 1940s by Joseph M. Juran, who named it after the Italian economist and statisti- cian Vilfredo Pareto, 1848–1923. It is applied to distinguish the“vital few from the trivial many” as Juran formulated the purpose of the Pareto chart. It is closely related to the so- called 80/20 rule– “80% of the problems stem from 20% of the causes,” or in Six Sigma terms“80% of the poor values in

Y stem from 20% of the Xs.”

In the Six Sigma improvement methodology, the Pareto chart has two primary applications. One is for selecting appropriate improvement projects in the define phase. Here it offers a very objective basis for selection, based on, for example, frequency of occurrence, cost saving and improvement potential in process performance.

The other primary application is in the analyze phase for identifying the vital few causes (Xs) that will constitute the greatest improvement in Y if appropriate measures are taken.

A procedure to construct a Pareto chart is as follows:

1) Define the problem and process characteristics to use in the diagram.

2) Define the period of time for the diagram– for example, weekly, daily, or shift. Quality improvements over time can later be made from the information determined within this step.

3) Obtain the total number of times each characteristic occurred.

4) Rank the characteristics according to the totals from step 3.

5) Plot the number of occurrences of each characteristic in descending order in a bar graph along with a cumu- lative percentage overlay.

6) Trivial columns can be lumped under one column des- ignation; however, care must be exercised not to omit small but important items.

Cause & Effect / Fishbone Diagram

Allows a team to identify, explore, and graphically display, in increasing detail, important possible causes related to a problem or condition to discover its root cause(s).

Enables a team to focus on the content of the problem, not on the history of the problem or differing personal interests of the team members.

Creates a snapshot of the collective knowledge and consensus of a team around a problem. This builds support for the resulting solutions.

Focuses the team on causes, not symptoms.

Utilize tool – Ask Why 5 Times?

Fishbone Diagram

(1) Cause-and-effect diagram

An effective tool as part of a problem-solving process is the cause-and-effect diagram, also known as the Ishikawa diagram (after its originator) or fishbone diagram. This technique is use- ful to trigger ideas and promote a balanced approach in group brainstorming sessions where individuals list the perceived sources (causes) with respect to outcomes (effect). The effect is written in a rectangle on the right-hand side, and the causes are listed on the left-hand side. They are connected with arrows to show the cause-and-effect relationship.

Metrics & Reporting

Track expected performance
Define project value and ROI
Management tool for decision making
Should report on actionable business drivers

Define reporting frequency based on feedback from end-user
Seek to understand how the data will be used before developing reporting

Balanced Scorecard

Revised

	Weekly Performance					January	Status	3 Months Rolling Actuals
Cost	Week 1	Week 2	Week 3	Week 4	Week 5	Target/Goal		October	November	December
# of Purchase Orders Issued	2.5	2.4	2.6			2.4	Red	3.2	2.4	2.5
# of Releases	19.6	20.8	19.6			19 Hours	Yellow	21.1	17.1	17.4
# of Change Orders	$ 17,953	$ 17,500	$ 16,758			$ 17,000	Green	$ 17,929	$ 16,660	$ 16,738
Inventory On-Hand - Raw Material $$	$ (62)	$ (48)	$ (28)			$ (100)	Green	$ (187)	$ (323)	$ (398)
MRO Expense $$
# of Items Created
Purchase Price Variance (Fav) $$	$ (62)	$ (48)	$ (28)			$ (100)	Green	$ (187)	$ (323)	$ (398)
Quality
# of Rejects	99.1%	98.0%	94.0%			99.5%	Green	99.9%	99.0%	99.5%
Cycle Count Accuracy
Cycle Count Items	94.0%	96.0%	96.5%			98.0%	Green	99.0%	99.2%	99.7%
# of Receiving Issues
# of Active Stock Items vs. N/SP
# of Items Reviewed
# of Attachments	$ 232	$ 263	$ 455			$ 595	Red	$ 828	$ (82)	$ 628
Delivery
Material Issued $$	200	225	189			700	Green	789	900	450
Material Issued - Item Count	99.9%	99.7%	100.0%			100.0%	Yellow	100.0%	99.9%	99.8%
Pick Release to Ship (Hours)	8	3	6			0	Red	7	19	11
	$ 927	$ 918	$ 913			$ 3,500	Yellow	$ 3,595	$ 3,415	$ 3,919
On-Time Delivery (Suppliers)	90.5%	88.0%	88.0%			95.0%	Red	0.0%	82.0%	90.0%
Process Improvement
ERS Voucher Accuracy	200	225	189			700	Green	789	900	450
PO Auto Sourcing %	200	225	189			700	Green	789	900	450
Supplier Tracking Issues Logged	200	225	189			700	Green	789	900	450
Consignment / VMI

Draft

	Weekly Performance					January	Status	3 Months Rolling Actuals
Cost	Week 1	Week 2	Week 3	Week 4	Week 5	Target/Goal		October	November	December
Storeroom Personnel Per Item	2.5	2.4	2.6			2.4	Red	3.2	2.4	2.5
# of Purchase Orders Issued	19.6	20.8	19.6			19 Hours	Yellow	21.1	17.1	17.4
Inventory On-Hand - Raw Material $$	$ 17,953	$ 17,500	$ 16,758			$ 17,000	Green	$ 17,929	$ 16,660	$ 16,738
Purchase Price Variance (Fav) $$	$ (62)	$ (48)	$ (28)			$ (100)	Green	$ (187)	$ (323)	$ (398)
# of Change Orders	$ (62)	$ (48)	$ (28)			$ (100)	Green	$ (187)	$ (323)	$ (398)
Quality
First Pass Yield - Internal	99.1%	98.0%	94.0%			99.5%	Green	99.9%	99.0%	99.5%
Cycle Count Accuracy
Incoming Supplier Quality Performance (SQP)	94.0%	96.0%	96.5%			98.0%	Green	99.0%	99.2%	99.7%
Warranty - External $$	$ 232	$ 263	$ 455			$ 595	Red	$ 828	$ (82)	$ 628
Delivery
Material Issued $$	200	225	189			700	Green	789	900	450
Material issued on Time %	99.9%	99.7%	100.0%			100.0%	Yellow	100.0%	99.9%	99.8%
Complaints Logged	8	3	6			0	Red	7	19	11
Pick Release to Ship (Hours)	$ 927	$ 918	$ 913			$ 3,500	Yellow	$ 3,595	$ 3,415	$ 3,919
On-Time Delivery (Suppliers)	90.5%	88.0%	88.0%			95.0%	Red	0.0%	82.0%	90.0%
Process Improvement
ERS Voucher Accuracy	200	225	189			700	Green	789	900	450
PO Auto Sourcing %	200	225	189			700	Green	789	900	450
Supplier Tracking Issues Logged	200	225	189			700	Green	789	900	450
Consignment / VMI	200	225	189			700	Green	789	900	450

Technical Quality versus Functional Quality

- Technical quality refers to the core element of the good or service.

- Functional quality refers to the customer’s perception of how the good functions or the service is delivered.

Expectations and Perceptions

Another approach is to measure how satisfied customers are with the service they received

Their satisfaction is relative to:

Prior expectations about the service

Perception of how well the service was provided

Satisfaction = (Perception of Performance) – (Expectation)

Additional aspects of Quality

By definition:

Framework for identifying quality components that are related to producing both high quality products and low quality components, with the goal of minimizing the total cost of quality.

Three major Categories:

Cost of Prevention

Cost of Detection/Appraisal

Cost of Failure

Cost of Quality

Cost of Prevention - Before

Cost associated with the development of programs to prevent defectives from occurring in the first place

What’s included?

Investments – technology, machinery, education (training programs)

Cost of Detection/Appraisal - During

Cost associated with the test and inspection of subassemblies and products after they have been made

What’s included?

Material inspection, test throughout the production process

Cost of Failure - After

Cost associated with the failure of a defective product

Includes customer complaints

Internal failure costs – cost incurred when defects are produced

External failure costs - cost incurred after delivery

Total Quality Management (TQM)

An approach for integrating quality at all levels of an organization

Organization-wide initiative encompassing all functional areas and levels within the organization.

Focuses on producing high quality goods and services.

Dealing with Quality Initiatives

Four Elements

Leadership - Top management vision, planning and support
Employee involvement - employees assume responsibility for inspecting the quality of their work.
Product/Process Excellence - Involves product design quality and monitoring the process for continuous improvement.
Continuous Improvement - A concept that recognizes that quality improvement is a journey with no end and that there is a need for continually looking for new approaches for improving quality.

TQM Elements

Lack of a company-wide definition of quality.
Lack of a formalized strategic plan for change.
Lack of a customer focus.
Poor inter-organizational communication.
Lack of real employee empowerment.
Lack of employee trust in senior management.
View of the quality program as a quick fix.
Drive for short-term financial results.
Politics and turf issues.

Obstacles to TQM Implementation

Production vs. Service Operations

What is different about service operations?
Customer Presence and Participation
Using Customers as Labor
When the Product is an Experience
Difficulties in Stocking a Service
Intangibles

Most services have an element of product-based operations integrated with service delivery. A pure service operation does not exist. Methods which may be used to design, implement and evaluate product operations are relevant to service.

Situations faced by service operations managers may be less significant and/or less frequently encountered by the production/manufacturing manager. The points at which comparisons can be made include:

Customer Presence and Participation

Using Customers as Labor

When the Product is an Experience

Difficulties in Stocking a Service

Intangibles

Print Page 5, 6, & 7…

Defining Expectations

Clearing establish the outcome of a process
Benefits of Defining the Expectations for a Process
Establishes a standard for decision making
Provides a mechanism for resolving interdepartmental conflicts
Allows for “Thinking Outside the Box”
Useful in evaluating new technology
Expectations Should Include
Cost
Time between demand and delivery
Environment
Level of Service
Level of Customer Support
Description of customer’s experience
Quality of the product or service

Clearly establishing the outcome of a process is highly desirable..but it is often overlooked.

Understanding the Customer

Who is the Customer?
A Customer can be an individual or a group
A Customer can be the next step in the process
A process can have multiple customers with differing needs
Determining What the Customer Wants
Focus Groups
Demographic data
Customer History
Industry Trends
Customer Surveys
Complaints / Feedback

Page 9 & 10

Design of a Product or Service

The point when engineering / designers and makers / deliverers is the point at which conflict can occur
Creative ideas or nice designs do not always deliver a profit
Operations managers bring valuable problem-solving skills to the design review
Can we produce it as designed?
Design should account for the limitations and constraints of existing equipment, capacity, facilities and expertise
Service design should concentrate on utilization and efficiency in addressing demand variation and customer participation

Page 11

Think about things like, can these new products be made alongside old products using existing technology?

Page 14…

Operations Finance Reporting

Cost of Failure
Pulse Reporting
Supplier Performance Reports
Quality Reporting
On-Time Delivery Reporting
Cost Savings

Cost of Failure - Background

Failure

So how we define the true cost of a product or service?

Sheet1

	Open Ideas feed to machine
	$13 M	Funnel (Yellow/Red Projects)
Internal Plan $$	$ 8M	Planned Hedges (Green Projects)
Committed $$	$ 4M	(Green Projects)
Answer =	$4M with $4M hedge

Sheet2

Project Name	Annual Savings 000s	2010 Savings	Q1	Q2	Q3	Q4
Engineering - Cost Savings	3,581	1,847	- 0	61	857	929
Materials - Cost Savings	3,801	3,561	820	608	900	1,233
Cost Avoidance / Working Capital	1,120	- 0	- 0	- 0	- 0	43
Total Projects	8,502	5,408	820	669	1,757	2,205
Cost of Quality		Unproductive / Waste
Overhead	Prevention, Quality
Production Cost		Productivity

Sheet3

Quality Control

Failure




Cost of Quality
Overhead	Prevention, Quality	Prevention, Quality
Production Cost
Cost of Product or Service
if we were to do it Right the
1st Time

Here is where one of my favorite subjects comes into play. Quality control overlaps with Lean and Six Sigma efforts to eliminate waste and reduce variation.

Cost of Quality Components

Prevention Costs
Appraisal Costs
Continuous Improvement Efforts
“Cost of Failure” (COF)
Internal Failure Costs
External Failure Costs
Lost Opportunity Costs

Prevention Costs…

The costs of all activities specifically designed to prevent poor quality in products and services.
Keep problems from occurring.
Cost of quality activities performed before production starts.
Examples…employee training, design for quality or manufacturability…

Prevention Costs Examples

Marketing/Customer/User Marketing Research
Customer Perception Surveys
Contract/Document Review
Product/Design Development
Design Quality Progress Review
Design Support Activities
Product/Service Design Qualification Test
Field Trial
Supplier Reviews/Ratings
Purchase Order Technical Data Review
Supplier Quality Planning
Operations Prevention Costs

Operations Process Validation
Operations Quality Planning
Design of Measurement/Control Equipment
Operator Quality Education
Operator Process Control
Quality Administrative Salaries and Expenses
Quality Program Planning
Quality Performance Planning and Reporting
Quality Education
Quality Improvement
Quality Systems Audits

Can you all think of any other prevention related costs? For a new company, many of these actually “cost” money to develop and design…

Appraisal Costs

Costs associated with measuring, evaluating or auditing products or services to ensure conformance to quality standards and performance requirements
Cost of quality activities conducted during production or upon completion of production.
Measuring and monitoring production processes and output

Appraisal Costs Examples

Purchasing Appraisal Costs
Receiving / Incoming Inspection and Test
Measurement Equipment
Qualification of Supplier Product
Source Inspection and Control Programs
Manufacturing Appraisal Costs
Planned Inspections, Tests, Audits
Checking Labor
Product or Service Quality Audits
Inspection and Test Materials
Set-up Inspections and Tests

Measurement Equipment Expense
Maintenance and Calibration Labor
Outside Endorsements and Certifications
External Appraisal Costs
Field Performance Evaluation
Special Product Evaluations
Evaluation of Field Stock and Spare Parts
Review of Test and Inspection Data
Special Testing
Process Control Measurement
Laboratory Support

Continuous Improvement Costs

Costs associated with training staff to focus on operational excellence. This includes ensuring that employees at all levels of the organization understand their impact on the bottom line.
Lean and Six Sigma efforts focused on process improvements.
Costs associated with efforts around monitoring and controlling, best practices centers around dedicated resources.

Cost of Failure – Internal Costs

Failure costs occurring due to discovery of defects in process but prior to product / service delivery or shipment.
Cost of fixing or disposing of defective products before delivery to customer.
Cost of quality activities triggered by discovery of defects “in-house.”

COF – Internal Costs Examples

Design Corrective Action
Rework - Design Change
Scrap – Design Change
Purchasing Failure Costs
Purchased Material Reject Disposition
Purchased Material Replacement Costs
Supplier Corrective Action
Rework of Supplier Rejects
Uncontrolled material losses
Manufacturing Failure Costs
Material Review / Corrective Action

Disposition Costs
Troubleshooting / Failure Analysis
Investigation Support Costs
Operations Corrective Action
Failure to Transfer from Design to Manufacturing
Rework
Repair
Reinspection / Retest Costs
Poor Characterization
Poor Optimization
Poor Communication
Poor Documentation

Cost of Failure – External Costs

Costs incurred due to defects discovered (by the customer) after the product has been shipped or the service has been delivered.
Cost of quality activities triggered by discovery of defects after delivery to customers.
Examples: Warranty claims, Field Service, Help Desk Calls, Returns and Allowances

COF – External Costs Examples

Customer Complaint Investigation
Returns / Refunds
Field Service / Retrofit
Recalls
Warranty Claims

Help Desk Calls
Liability Costs
Penalties
Customer / User Goodwill
Other External Failure Costs

COF – Lost Opportunity Examples

Failure to Enter a New Market Because of….
Delayed Market Entry
Lost Sales
Lost Customers
Additional Shifts, Lines, Plants Due to Poor Productivity

Competitor Obtains Patent Rights Before We do
Reliability Issues
Safety Issues
Ergonomic Issues
Legal Issues

Cost of Failure Quantified

Goal =

2.5%

Sheet1

	Open Ideas feed to machine
	$13 M	Funnel (Yellow/Red Projects)
Internal Plan $$	$ 8M	Planned Hedges (Green Projects)
Committed $$	$ 4M	(Green Projects)
Answer =	$4M with $4M hedge

Sheet2

Project Name	Annual Savings 000s	2010 Savings	Q1	Q2	Q3	Q4
Engineering - Cost Savings	3,581	1,847	- 0	61	857	929
Materials - Cost Savings	3,801	3,561	820	608	900	1,233
Cost Avoidance / Working Capital	1,120	- 0	- 0	- 0	- 0	43
Total Projects	8,502	5,408	820	669	1,757	2,205
Cost of Quality
Overhead	Prevention, Quality	Prevention, Quality
Production Cost
		Cost of Product or Service
		if we were to do it Right the
		1st Time

Sheet3

	2009	2010
Net Sales	$ 1,049,159	$ 947,163
Costs
Returns	7,102	4,673
Cancellations	5,331	11,470
Special Allowances	3,536	3,347
Expedite / Airfreight	8,373	7,394
Scrap	3,822	2,961
Rework	2,563	4,276
Overtime	16,822	15,497
Warranty Expense	14,079	15,054
E&O	5,020	6,437
Total Costs	$ 66,648	$ 71,109
COF % of Sales	6.4%	7.5%

Cost of Failure Trend

COF YTD / Net Sales = Cost of Failure %

Chart1

Jan	Jan
Feb	Feb
Mar	Mar
Apr	Apr
May	May
Jun	Jun
July	July

Actual

Goal

4.8%

5.4%

5.5%

6.0%

4.8

2.5

5.4

2.5

5.5

2.5

5.7

2.5

5.1

2.5

4.5

2.5

Sheet1

	Actual	Goal
Jan	4.8	2.5
Feb	5.4	2.5
Mar	5.5	2.5
Apr	6	2.5
May	5.7	2.5
Jun	5.1	2.5
July	4.5	2.5

Problem Solving Example

What you need to do is look at total numbers of “failures”…then seek to root cause the why? For example if your issue was “inconsistent order information”, you could institute an order verification process. Your customer service manager might tell you that it would have an impact on the Order Entry errors of 80%. If, for example, your issue was “sales override”, you could implement a process that required executive approval for equipment returns, possibly creating a checklist.

This type of problem solving can be done for any failures…

Chart1

Jan

Feb

Mar

Apr

May

Equipment Returns by Month

120

Sheet1

	Equipment Returns by Month
Jan	61
Feb	21
Mar	120
Apr	54
May	41
	To resize chart data range, drag lower right corner of range.

Chart1

Order Entry

Sales Override

Customer Error

Other

Pareto by Category

171

Sheet1

	Pareto by Category
Order Entry	171
Sales Override	53
Customer Error	20
Other	53
	To resize chart data range, drag lower right corner of range.

Closing Thoughts…

Good Customer

Service

Knowledgeable

CSR

Friendly CSR

Short Wait

Answers by by

CSR are correct

CSR can answer

questions without

further research

Researched

information is

returned quickly

Customers are not

interrupted

Customers are

greeted by name

Customers are

transferred

immediately to the

person who can

help them

Time on hold is

minimal

JanuaryStatus

Cost

Week 1Week 2Week 3Week 4Week 5Target/Goal

OctoberNovemberDecember

Storeroom Personnel Per Item2.52.42.62.4Red3.22.42.5

# of Purchase Orders Issued19.620.819.619 HoursYellow21.117.117.4

Inventory On-Hand - Raw Material $$17,953$ 17,500$ 16,758$ 17,000$ Green17,929$ 16,660$ 16,738$

Purchase Price Variance (Fav) $$(62)$ (48)$ (28)$ (100)$ Green(187)$ (323)$ (398)$

# of Change Orders(62)$ (48)$ (28)$ (100)$ Green(187)$ (323)$ (398)$

Quality

First Pass Yield - Internal99.1%98.0%94.0%99.5%Green99.9%99.0%99.5%

Cycle Count Accuracy

Incoming Supplier Quality Performance (SQP)94.0%96.0%96.5%98.0%Green99.0%99.2%99.7%

Warranty - External $$232$ 263$ 455$ 595$ Red828$ (82)$ 628$

Delivery

Material Issued $$200225189700Green789900450

Material issued on Time %99.9%99.7%100.0%100.0%Yellow100.0%99.9%99.8%

Complaints Logged8360Red71911

Pick Release to Ship (Hours)927$ 918$ 913$ 3,500$ Yellow3,595$ 3,415$ 3,919$

On-Time Delivery (Suppliers)90.5%88.0%88.0%95.0%Red0.0%82.0%90.0%

Process Improvement

ERS Voucher Accuracy200225189700Green789900450

PO Auto Sourcing %200225189700Green789900450

Supplier Tracking Issues Logged200225189700Green789900450

Consignment / VMI200225189700Green789900450

Weekly Performance3 Months Rolling Actuals

Cost of QualityUnproductive / Waste

Overhead

Prevention,

Quality

Production CostProductivity

20092010

Net Sales

1,049,159$ 947,163$

Costs

Returns

7,102 4,673

Cancellations

5,331 11,470

Special Allowances

3,536 3,347

Expedite / Airfreight

8,373 7,394

Scrap

3,822 2,961

Rework

2,563 4,276

Overtime

16,822 15,497

Warranty Expense

14,079 15,054

E&O

5,020 6,437

Total Costs

66,648$ 71,109$

COF % of Sales

6.4%7.5%