Seven Basic Quality Tools

Transcription

1 Pareto Analysis 1

2 Seven Basic Quality Tools 1. Process Mapping / Flow Charts* 2. Check Sheets 3. Pareto Analysis 4. Cause & Effect Diagrams 5. Histograms 6. Scatter Diagrams (XY Graph) 7. Control Charts 2

3 Topics I. Pareto Principle II. III. IV. Performing a Pareto Analysis Constructing a Pareto Chart Pareto: Frequency Vs. Cost Analysis Pareto Analysis Exercise Using QETools V. Pareto Drill Down 3

4 I. Pareto Principle Pareto* Principle provides the foundation for the concept of the vital few and a trivial many. Examples: Quality a small percentage of defect categories (causes) will constitute a high % of the total # defects. Cost a small percentage of components will constitute a high % of total product cost. Others: Inventory, absenteeism, downtime. *Note: Wilfredo Pareto 19 th Century Italian economist studying wealth who observed that a large proportion of wealth is owned by a small percentage of the people. Pareto principle was later applied to quality by J.M. Juran. 4

5 80/20 Rule Pareto principle is sometimes referred to as the 80/20 rule. In quality, this rule suggests that ~20% of defect categories will account for ~80% of the total number of defects. Vital Few Trivial Many 5

6 II. Pareto Analysis Ranking of data by importance in descending frequency (highlights most significant concern) Pareto - New Bid Delays Insufficient customer spec's Requirement change by cust Unknown test requirements Wait for application review Pricing info not available Research similar product pricing Wait for engineering resources Wait for sales resources Quote package incorrect Data base search errors Frequency 6 Example: Reasons for Delays in Preparing New Product Bids

7 First, Obtain Frequency Sum Data for Each Category From check sheet, create a table of categories and occurrences (i.e., frequency). Example: Reasons for Delays in Preparing New Bids Reasons for Delays Frequency Insufficient customer specifications 56 Internal pricing information not available 18 Wait for application review kickoff 5 Requirement change by customer 30 Quote package filled out incorrectly 45 Wait for engineering resources 8 Wait for sales processing resources 10 Research for similar product pricing 10 Unknown test requirements 11 Data base search errors 3 Total 196 7

8 Second, Create a Pareto Table Sort in Descending Order (by Freq or Relative Freq) Compute Relative and Cumulative Frequencies Relative Frequency ~ Frequency / Total (56/196=29%) Cumulative Freq % ~ Running total of % (29% + 23% = 52%) Reasons for Delays Freq Rel Freq, % Cum Freq Cum Rel Freq, % Insufficient customer spec's 56 29% 56 29% Requirement change by cust 45 23% % Unknown test requirements 30 15% % Wait for application review 18 9% % Pricing info not available 11 6% % Research similar product pricing 10 5% % Wait for engineering resources 10 5% % Wait for sales resources 8 4% % Quote package incorrect 5 3% % Data base search errors 3 2% % Total % 8

9 Pareto Chart Left Y-axis Frequency or Relative Frequency Right Y-axis Nothing or cumulative percentage line. 30% 25% 20% 15% 10% 5% 0% 120% 100% 9 Rel Freq % Cumulative Freq % 80% 60% 40% 20% 0% Insufficient customer spec's Requirement change by cust Unknown test requirements Wait for application review Pricing info not available Research similar product pricing Wait for engineering resources Wait for sales resources Quote package incorrect Data base search errors

10 III. Pareto Analysis: Frequency Versus Cost (or Severity) Pareto Analysis may be performed using: Frequency of occurrence (expressed as a frequency count or relative frequency %), Or Total cost, Or Severity, adverse outcome, or avoidability Note: the most frequently occurring item may not be the most important item to address first. 10

11 Assessing Cost Impact Suppose a hospice has the following Pareto Frequency Analysis for Medicare denials. If the cost for an occurrence varies by category, one may weigh the categories by multiplying the frequency by estimated cost per occurrence (e.g., average cost). Category Frequency Cost per Total Occur Cost Inc supervisory visit Not recipient Unsigned election Non-terminal disease Unsigned Certification Unmet Level of Care Unmet Plan of Care

12 Pareto: Cost Vs. Frequency Would the priorities be different based on a cost analysis? By denial Medicare billed for Higher cost than expected based on criteria. By cost of denial TOTAL 200 Category TOTAL Category Frequency Total Cost Relative Frequency Relative Frequency Cumulative Frequency Inc supervisory visit % 56.5% Not recipient % 79.5% Unsigned election % 85.5% Non-terminal disease % 91.0% Unsigned Certification 8 4.0% 95.0% Unmet Level of Care 6 3.0% 98.0% Unmet Plan of Care 4 2.0% 100.0% Cumulative Frequency Unmet Level of Care % 49.0% Unsigned Certification % 77.3% Inc supervisory visit % 87.8% Not recipient % 94.2% Non-terminal disease % 96.7% Unsigned election % 98.7% Unmet Plan of Care % 100.0% 12

13 IV. Lecture Exercise: Pareto Analysis for Loan Turndowns Defect Categories for Loan Turndowns Closing costs too high, selling home, change in marital status, change in job status, not saving enough, lost interest, interest rate is too high, miscellaneous. Using the data file, pareto.xls create a pareto table of frequency, relative frequency (%), and cumulative frequency, and then a Pareto Chart. 13

14 Exercise: Pareto Analysis Step 1: Sum by Defect Category Using QE Tools perform Binary Cross Tabulation to obtain frequency counts for each category for loan check sheet data. Step 2: Run a Pareto Analysis Using the Sum Data from Step 1, create a pareto table and chart. 14

15 Step 1: Binary Cross Tabulation Using check sheet data (see sample of data below) for the different loan turndown categories, select: QETools >> Tabulation >> Binary Cross Tabulation Note: only first 9 rows are shown from file pareto.xls 15

16 Binary Cross Tabulation Example From binary cross tabulation, QETools automatically creates new data columns for categories and frequency counts in Datasheet Auto Save Categories Sum to Datasheet 16

17 Step 2: Pareto Analysis Select: QETools >> Graphical Tools >> Pareto 17

18 Pareto Table: Results TOTAL 132 Category Frequency Relative Cumulative Frequency Frequency HighClosingCosts % 47.7% Selling_home % 75.8% Change_marital % 87.9% Change_job 5 3.8% 91.7% Insuff_Saving 4 3.0% 94.7% Lost_interest 3 2.3% 97.0% rate-too-high 3 2.3% 99.2% miscellaneous 1 0.8% 100.0% 18

19 Pareto Chart by Relative Frequency (with Cumulative Frequency Line) Based on the following chart, what is the most common loan turndown reason? Pareto Chart 60.0% 100.0% 50.0% 90.0% 80.0% 40.0% 30.0% 20.0% Relative Frequenc Cumulative Frequenc Or, use Frequency 10.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% 0.0% HighClosingCosts Selling_home Change_marital Change_job Insuff_Saving Lost_interest rate-too-high miscellaneous Category 19

20 V. Pareto Drill Down If data set includes stratification or grouping variables, one may perform a Pareto Drill Down. Drill Down Approach Subset data for a single item (or items) such as high closing costs. Subset data by some value of grouping variables (e.g., Branch=C, or Branch = C and Closing Costs) Here is the loan turndown data stratified by the worst branch (C) and by Loan Officer. Loan-Off-C Closing-Costs-C C-1 2 C-2 10 C-3 0 C-4 2 C-5 8 C-6 0 C-7 0 C-8 6 C-9 2 C-10 2 Occurrences by Loan Officer 20

21 Pareto Drill Down by Branch Decomposition of data. 70 Stratify High Closing Costs by 4 Branches (C Worst) # Turn downs Closing Costs Too High # Turn Downs for High Closing Costs Branch C Branch B Branch D Branch A 21

22 Pareto Drill Down by Loan Officer Decomposition from a system level down. 70 Stratify High Closing Costs by 4 Branches (C Worst) # Turn downs Closing Costs Too High # Turn Downs for High Closing Costs Frequency 4 Branch C Branch B Branch D 2 Branch A Stratify Branch C Closing Costs by Loan Officer C-2 C-5 C-8 C-1 C-10 C-4 C-9 C-3 C-6 C-7 22

23 Summary Pareto Analysis provides a visual tool to highlight most critical issues. Pareto analysis often involves a drill down to find root causes. 5 Whys? Keep asking why? In the loan turndown example, have we found the root cause yet? Note: 3 Loan Officers have most closing cost turndowns. 23

24 Pareto Analysis Define Phase Pareto Charts also may be used for project scoping using numerical data during the Define phase. Common usage Pareto Cost Analysis Example: if the potential scope encompasses several bars on the Pareto chart, the project may be over-scoped. 24