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Exhibit 5 An example of a Pareto chart, which shows where Aztec needs to focus its energy to solve shipping problems Based on this Pareto chart, by reducing late shipments they can reduce the majority of shipping problems This is an example of the 80/20 rule of thumb (roughly 80% of an overall effect can often be traced back to about 20% of all contributing causes of influences)
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Understanding the Situation
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To understand a situation, you must have clarity regarding what is happening and identify the measurable magnitude of the opportunity or issue This should include information such as frequency, cost, delays, trends, etc One of the best tools to accomplish this task is the cause-andeffect diagram
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Cause-and-Effect (Fishbone) Diagram
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The cause-and-effect diagram (also called a fishbone diagram because of the way it looks) is used to represent the relationship between the effect of a problem or situation and all the possible causes of that effect The cause-and-effect diagram can be more effectively created when
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Appendix: Planning Toolkit
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populated with the information gained from brainstorming, check sheets, and Pareto diagrams
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When used The cause-and-effect diagram can be used to sort out and identify possible root causes of a problem It can also be used to identify causes of a desirable effect, a variation called reverse cause and effect This is useful to understand the positive impacts of a situation and what works well
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1 Create an effect statement Write it in a box at the far right of a flip chart 2 Choose categories of possible causes Potential categories: materials, methods, machines, environment, procedures, technology, or human factors Use four to five major categories that help people think creatively 3 Construct the diagram and brainstorm causes Draw the skeleton of the diagram and label each major branch with a category Following the rules of brainstorming, ask Under this category, what is causing (the effect) to happen Be specific Post all ideas that branch off the appropriate category 4 Brainstorm causes of the causes After brainstorming causes, go to the next level by asking, What causes this cause Post these ideas as branches off of the original cause A third or fourth level may be necessary Keep digging! 5 Analyze the completed diagram Look for causes that appear repeatedly, for causes that the team feels are most significant, and for causes that are likely candidates for further analysis using data collection and fact-gathering
Example of a Cause-and-Effect Diagram
The small manufacturing company determined that the cause of late shipments was its focus area and decided to use a cause-and-effect diagram to identify specific causes and contributors to the late shipment issue This tool (Exhibit 6) will help to identify causes, effects, and improvement opportunities that will provide the information required to keep the business plan objectives on track
Manager s Guide to Business Planning
METHODS
Orders batched Pick lists illegible
ns bo d ib ce r r la te rep in Pr not
EQUIPMENT
Forklift unavailable
ft kli or t f ns en ow qu kd Fre brea
Lack of maintenance plan
Late Shipments
People not trained No No t a cur trai ssi ric nin gn ulu g ed m
Order increase at end of month
HUMAN FACTORS
ENVIRONMENT
Exhibit 6 A cause-and-effect diagram for identifying the causes of late shipments
Ranking or Prioritizing for Decisions
This tool is designed to support decision making, which will then lead into the action plan Use of the prioritization matrix will create a confidence factor in the accuracy of the decision and increase the speed of decisions
Prioritization Matrix
The prioritization matrix is used because it s an effective tool for analysis and decision making It helps prioritize actions so resources can be assigned and action plans can be developed In this example, assume that there are five team members participating in the exercise The results are displayed in Exhibit 7 1 Develop a list of criteria to apply to the options Use wording that reflects a desired outcome, eg, low cost to implement, quick to implement, easily accepted
Appendix: Planning Toolkit
2 Create a matrix List the options vertically and the criteria horizontally 3 Rank the criteria Each one of five members rank orders the criteria by distributing the total value of 10 among them (eg, a member might give the criterion low cost to implement a 3 and quick to implement a lesser value of 2, while easily accepted by users receives a 5) Add up the ranking values of all members to compute a composite criterion ranking score (eg, if five team members rank low cost to implement with a 2, 3, 2, 4, and 3, then its composite criterion score is 14) Place this composite criterion score in the appropriate cells of the matrix 4 Rank the options Each group member rank orders the options according to how well they meet each criterion, from most to least preferred Add everyone s rankings together (eg, if low cost to implement is ranked 2, 2, 3, 2, and 1 by the five team members, its composite score is 10) Reorder the list of options based on their composite scores, from high to low Give the highest-numbered option a value of one, the next highest a value of two, etc, until all options are ranked per each criterion Place each option s ranking number in the appropriate cell 5 Compute the individual importance score for each option under each criterion Multiply the composite criterion ranking score by the option ranking (eg, a composite criterion score of 14 times an option ranking of 3 = 42) 6 Compute the total ranking scores across all criteria Once individual scores have been calculated for all options under each criterion, add scores together across all the criteria The option with the highest number becomes the highest priority and the remaining options can be ranked in order of decreasing priority
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