W10_LUCKY_ROOT CAUSE OF POOR ON TIME PERFORMANCE USING PARETO ANALYSIS

W10_LUCKY_ ROOT CAUSE OF POOR ON TIME DELIVERY PERFORMANCE USING PARETO ANALYSIS

1.      Problem Recognition, Definition, Root Cause Analysis and Evaluation

 

(i)                 Problem Recognition

At a recent Supplier Delivery Performance Workshop, the subject firm was presented with a 36 per cent score in line with the scoring formula for on time delivery against a total of 464 Purchase Order line items awarded to the firm. The scoring is quite low compared to other competing firms who scored 75% and 95% respectively for purchase order line items of over 1000.

(ii)               Problem Definition

Identify the causal factor(s) that offer the greatest potential for improvement by showing their relative frequency or size in a descending bar graph, and on which to focus efforts.

(iii)             Root Cause Analysis and Evaluation

I am using the popular Pareto Analysis[i] to do this. The methodology is based on the Pareto principle commonly called the 80-20 rule, or the law of the vital few which states that roughly 80% of the effects, for many events, come from 20% of the causes. Stated conversely, a vital 20% of the causal factors principally attribute to the poor on time delivery performance.

I will follow the nine step process^[ii]  of deciding which problem to learn more about, choose the causes to be monitored, compared and ranked, choose the most meaningful unit of measurement, choose the time period for study, gather necessary data, compare relative frequency of possible causal factors under each problem category, chart the problem categories/frequencies, draw the cumulative percentage line and interpret results.

2.      Development of feasible alternatives (causal factors)

There are three basic types of causes comprising of Physical causes (tangible material failure), Human causes (People did or did not do something) and Organizational causes (Faulty System/process or policy). Consistent late delivery of Purchase Order line items, Consistent late receipt of goods from overseas, Consistent late placement of order, Late pick up of Purchase Order and Infrequent check for available Purchase Order with the customer procurement department constitute the next level causal factors.

3.      Development of outcomes for each alternative

The outcomes for each alternative were presented in an earlier blog (W8). The summary is as follows:

Using the 5 Whys ^[iii] approach:

Delay in part number clarification issues – Late start of process - Poor Time management -Lack of planning –             Lack of know-how    

Late dispatch of materials -    Parts not in stock -Manufacturing time -Lack of raw materials -       Supplier issues

Low work output –     Inefficient work methodology - Poor Time management - Lack of planning – Lack of know-how

Late arrival at customer’s location      –Late notification - Dearth of information - Inefficient communication system – Poor customer relationship

Irregular visit to customer to pick POs –Lack of routine -  Poor Time management -Lack of planning – Lack of know-how

4.      Selection Criteria

The selection criteria comprise of the following:

A meaningful unit of measurement that I want to adopt is the frequency of occurrence, and the time period of the study is the past 12 months (year 2012, the year the poor performance score pertains).

5.      Analysis and Comparison of the alternatives

Since all of the major causal factors (headers) are related to physical, human and organizational causes, I will go a step down to the next level of causal factors in search of some form of differentiation.

Using the details in section 3 above as the source data (from author), the relative frequencies of main problem category and of each causal factor can be listed as shown in the tables below.

 

Problem Category	Main Problem Categorization
Delay in part number clarification issues	Human Factor
Late start of process	Human Factor
Poor Time management ( 3 times)	Human Factor
Lack of planning ( 3 times)	Human Factor
Lack of know-how ( 3 times)	Human Factor
Late dispatch of materials	Human Factor
Parts not in stock	Human/Organizational
Manufacturing time	Human/Physical/Organizational
Lack of raw materials	Human/Physical/Organizational
Supplier issues	Human Factor
Low work output	Human/Physical Factor
Inefficient work methodology	Human Factor
Late arrival at customer’s location	Human Factor
Late notification	Human Factor
Dearth of information	Human Factor
Inefficient communication system	Human Factor
Poor customer relationship	Human Factor
Irregular visit to customer to pick POs	Human Factor
Lack of routine	Human Factor
Main Problem Category (Headers)	Frequency	Percent (%)
Physical Causes	3	12
Human Causes	19	76
Organizational Causes	3	12
TOTAL	25	100

Table 1: Relative Frequency of Main Problem category Header (By Author)

Causal Factors under the Human Factor Categorization (Header)	Frequency	Percent (%)
Delay in part number clarification issues	1	4
Late start of process	1	4
Poor Time management	3	12
Lack of planning	3	12
Lack of know-how	3	12
Late dispatch of materials	1	4
Parts not in stock	1	4
Manufacturing time	1	4
Lack of raw materials	1	4
Supplier issues	1	4
Low work output	1	4
Inefficient work methodology	1	4
Late arrival at customer’s location	1	4
Late notification	1	4
Dearth of information	1	4
Inefficient communication system	1	4
Poor customer relationship	1	4
Irregular visit to customer to pick POs	1	4
Lack of routine	1	4
TOTAL	25	100

Table 2: Relative Frequency of each Causal Factor (By Author)

 

 

 

6.      Selection of preferred alternative (The Vital Few Causal Factors to focus on)

Using data from Table 2 above, rearranging the causal factors with starting with the highest the table below is developed.

Causal Factors under the Human Factor Categorization (Header)	Frequency	Cumulative    %	Cut Off %
Poor Time management	3	12%	0.8
Lack of planning	3	24%	0.8
Lack of know-how	3	36%	0.8
Delay in part number clarification issues	1	40%	0.8
Late start of process	1	44%	0.8
Late dispatch of materials	1	48%	0.8
Parts not in stock	1	52%	0.8
Manufacturing time	1	56%	0.8
Lack of raw materials	1	60%	0.8
Supplier issues	1	64%	0.8
Low work output	1	68%	0.8
Inefficient work methodology	1	72%	0.8
Late arrival at customer’s location	1	76%	0.8
Late notification	1	80%	0.8
Dearth of information	1	84%	0.8
Inefficient communication system	1	88%	0.8
Poor customer relationship	1	92%	0.8
Irregular visit to customer to pick POs	1	96%	0.8
Lack of routine	1	100%	0.8

Table 3: Rearranging the Relative Frequency of each Causal Factor (By Author)

Using data from Table 2 above,  listing the categories in descending order from left to right on the horizontal line (with bars above each causal factor indicating its frequency) and unit of measure on the vertical line, the chart below is developed.

 

 

 

 

 

 

Chart 1: Plotting the Cumulative frequency and cutoff 80% line (Pareto Analysis) (Author)

As can be seen from the chart, the tallest bars are the biggest contributor to the overall problem of poor on time delivery performance (cut off by the 80% line). Therefore, dealing with this category of human causal factors first makes common sense.

7.      Performance monitoring and post evaluation of results

I would need to address the poor time management, lack of planning skills and technical know-how by proposing training for all procurement personnel in basic business management skills including basic project management skills, and monitor and evaluate the results six months down line. That means, to monitor the results, I would need to do a similar exercise to compare the results of the implemented solutions to this current status[iv].

Reference

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[i] Duggirala, P. (2009). Pareto Charts – How to do pareto analysis using Excel? Retrieved from  http://chandoo.org/wp/2009/09/02/pareto-charts/

[ii] Brassard, M. & Ritter D. (2010). Chapter 15 Pareto Chart Focus on key problems (pp.122 – 135). The Memory Jogger 2 (2^nd edition). USA:GOAL/QPC

[iii] Mindtools, (2012). Root Cause Analysis Tracing a problem to its origin. Retrieved from http://www.mindtools.com/pages/article/newTMC_80.htm

 

[iv] Brassard, M. & Ritter D. (2010). Chapter 15 Pareto Chart Focus on key problems (P.128). The Memory Jogger 2 (2^nd edition). USA:GOAL/QPC