Know Your Business is in Control!

Every business owner wants a smooth running business that produces products and services that more than satisfy their customers upon first use (it works when you turn it on) providing high reliability (here it works each and every time). However, we have all had purchasing experiences that conflict with this view where the product or service purchased did not perform to expectations or where repeat purchases varied from one purchase to the next. What methods are available to help owners and leadership teams manage a business that can improve their ability to produce high quality products and services?

Variation
The core objective to producing products and services that are the same, each and every time, is controlling the variation that is present in the materials, documentation, people, machines, environment, etc. involved in producing or delivering the end product. Every business process suffers some degree of variation.  The question is “Is the
variation significant enough to cross a threshold that results in a quality or reliability issue “?

The intended goal of any process is to perform or operate at full potential. Variation in the process will compromise the full potential objective. Where the variation exceeds thresholds the item produced will be nonconforming to specifications and will need to be reworked to return within specifications or scrapped as waste.

Statistical Process Control (SPC)
It is possible to apply statistical tools to measure a process and monitor critical steps that will measure the degree to which the process is in control producing material or services that conform to specifications.  Using Statistical Process Control (SPC), the emphasis is on prevention versus inspection after the product is produced or service has been performed.

The primary purpose of SPC is to eliminate process waste. Data is collected from the process and reported in a control chart.  This usually requires documenting or flow charting the process to identify key process points critical to knowing if the process can produce conforming parts that meet specification.

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The control chart above records measurements over time.  The distribution of data points is shown at the left in the normal distribution curve/histogram which represents the degree in which the process is in control.  The more normal the bell curve the closer the process is to stability and operating in control.

A normal bell curve will define the mean of the data and the range of the expected data produced by the process. A normal curve will contain 99.7% of the process variation, which will occur within three standard deviations of the mean of the data.

Process stability
Data points that appear above or below the red or blue limit lines indicate the presence of an “assignable cause” of variation.  Data points within the lines are due to variation that are expected to be part of the process and are called “common.” Examples of an assignable cause might be a new operator, new material, or equipment malfunction that needs to be addressed immediately to make sure the process can be returned to control and stability.

A process may be stable and in control but it may still produce defective or unsatisfactory service. The process cannot be further improved to eliminate defects unless the “system” in which the process operates is changed.  Changing the system might include improved operator training, use of higher performance tools, improved documentation or higher quality incoming material for example. Employees cannot change the system.  Only management, who is responsible for the system, can dictate changes – people, training, tools, equipment, or material – that will improve the process.

Defect Analysis and Elimination
Tracking a process with a control chart is part of the process to eliminate waste.  A critical part of successfully eliminating waste is identifying what should be worked on first based on the frequency of occurrence. A Pareto Diagram is used to identify the number in which defects occur in a descending order in a process.

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The goal is to focus on the highest order defect and eliminate the reason for the defect. As the frequency of this defect decreases or disappears, attention is then focused on the next most significant defect.  With good execution the number of defects will decrease, waste will decrease and the process will become more productive and efficient.

Application
I have described just a few of the tools and principles of using SPC to reduce and eliminate waste from a process.  The benefits of this early detection system reduce if not eliminate the need for traditional inspection. The following lists several examples of how SPC was used successfully to reduce waste and improve the process.

Examples

  • Boeing requires suppliers to use SPC tools to control their processes.  Successful suppliers that can present data that demonstrates that their processes are in control can deliver their parts directly to the plane assembly location (right where the parts are installed on the plane) avoiding incoming inspection by Boeing, which reduces cost, investment in inventory waiting for inspection and reduced assembly cost due to the absence of defective material.
  • SPC was used by a supplier to Boeing to identify that returned failures were not due to the original manufacturing process, but due to the absence of testing related parts produced at Boeing. See “Get the Facts.”
  • Japan industries adopted SPC during the rebuild of their industrial infrastructure after World War II.  Once perfected, Japanese cars were recognized for their consistent quality and extended reliability.  Using SPC many critical processes were improved so that parts produced were well within their design tolerances so that transmissions, for example, ran quieter and internal parts were subjected to less stress resulting in longer life and lower cost of use.

Other Applications
The examples above were very manufacturing centric, but the principles and tools can be applied to a variety of business processes.

For example:

  • How quickly does paperwork pass through each department or group in your business?
  • What causes the paperwork to get bogged down?
  • How many defects or incomplete forms are processed and where do they originate?
  • If you run or use a phone support service, then:
    • How quickly are the calls processed?
    • How long do people wait to be serviced?
    • What issues are people calling about and what are the root causes of their problems?
    • Do you survey customers to see if they are satisfied or not and why not?
  • What is the response time of your web site?
    • How many clicks does it take to get to a decision to buy?
    • What areas of your web site are being used versus those that are not, and why?

In each of these non-manufacturing examples the focus is on waste on the part of your employees or your customers. Eliminating wasted effort and non-value-add operations and your productivity will increase dramatically. Eliminating waste will also have a dramatic impact on employee morale and enthusiasm, for they know when they are involved in inefficient operations.

Summary
Is SPC appropriate for your business? Yes, businesses are a function of one or more processes that are subject to variation.  While many of the examples above are manufacturing related, the principles and tools can be applied to other non-manufacturing business models resulting in less waste, improved profitability and greater customer satisfaction.  Many franchise models have used SPC techniques to perfect their business processes so that the franchise can be deployed consistently resulting in quick adoption by their target customer group, positive cash flow and stable profitability.

As an owner or part of the leadership team, you should be familiar with SPC principles and techniques. If your business is not geared toward prevention of waste, you will not be as productive, efficient or appreciated by your customers as you could be. Know your processes are under control and that you have an active program to monitor and continuously improve them. Know that your business processes are under control.

Adopt and implement SPC techniques so that your business can move toward and achieve its full potential.

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