Why You Need Statistical Process Control
Continuing this series more understanding is provided on how measurement improves business performance. In previous articles we have used Total Quality Management to reduce lead-time, Activity Based Costing and Design for Manufacturability to reduce costs and time to market. This article focuses on Statistical Process Control (SPC). It will cover: Why you need SPC; Where you need SPC; When you need SPC; and How to get started using SPC.
WHY YOU NEED SPC
There are two ways to increase profits. Increase sales and/or reduce costs. It has been demonstrated in studies by several capital goods manufacturers that sales to new customers cost as much as 20 times more than sales to existing customers. World Class organizations compete in essentially five areas: Price, Delivery, Features, Quality and Customer Service. It would then stand to reason that a customer, who is satisfied, better yet enthusiastic about your product, will not only continue to buy from you in the future but will recommend your product to others. Quality is the key to long term customer satisfaction, e.g. increased sales. Quality is also one of the keys to reduced cost.
Reduced process variation is why SPC is such a powerful tool to lower costs and enhance customer satisfaction. Process variation creates a ripple effect that disrupts the synchronous manufacturing flow. An example of this is the situation where a part fails and must be scrapped. The extra cost associated with this failure is a significant expense. First, the defective part must be disposed of. There is the cost of the original raw material, the labor applied so far, and the cost of disposal.
Next, are the costs associated with replacing the scrapped part. A replacement order may be required, additional raw material may have to be ordered or at the very least more used from inventory. The part, now late, must be expedited through to catch up with the higher level assembly. Finally, if the part cannot be replaced fast enough there is the cost of a delayed shipment because the part was not available. When you add up all the costs, internal failure takes a large chunk out of your profit. SPC helps you reduce variation and this reduces costs!
SPC can help in avoiding internal failure costs by monitoring the process with control charts. A control chart is a graph of samples taken periodic all y. As you can see in the Figure 1, the X -axis is time, and the Y-axis is the value of the measurement. There are two other lines on the basic X-BAR control chart. Those are the Upper Control Limit and the Lower Control Limit. These lines are calculated based on the sample size being measured and a table of values. A companion chart called a range chart identifies the amount of variation in each sample taken. This is useful to characterize the scatter effect of each sample. A tight range in combination with an X-BAR sample that is at the mean is the best indicator of a process under control.
"Work relentlessly to achieve designs that can be produced consistently; demand consistency from the factory" HBR CIRM Mfg. Proc- Genichi Taguchi
Before we go any further, there are three basic a
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ssumptions involved in using control charts. The first is that the process design is controllable. The second is that the process is capable of holding the dimensions required by the product design. The third is that the samples are normally distributed. Click this link to see a sample pattern that might appear on a control chart. Table 1 is the description of some patterns and their possible causes. Table 1 is from Quality Planning& and Analysis - Juran/Gryna Chapter 14. One place SPC doesn't work well is in Research and Development.
PATTERN DESCRIPTION POSSIBLE CAUSES
(A) Normal Random Variation
(B) Lack of Stability Assignable causes (tool, material, operator, over control)
(C) Cumulative Tool wear, depletion trend of reagent
(D) Cyclical Different work shifts, voltage fluctuation, seasonal effects
(E) Sudden change Change in material or in level operator, new machine setting, over control
Table 1. Variability Patterns
WHERE YOU NEED SPC
SPC is one of those rare tools that can be applied to every process in the business. The establishment of a Process Performance Measure (PPM) (aka KPI) and its associated average value is the key to where it can be used. For example, Customer Service could use it to monitor the amount of time a customer is on hold (PPM) compared to the target of two minutes or less. SPC could be used to track the number of data entry errors in accounting, or the variation from an established target value for any process.
WHEN YOU NEED SPC
If your internal failure cost (Quality is Free by Philip B. Crosby) is excessive, it is time for SPC. Process variability is EXPENSIVE! It reduces the profit margin by stealing productive time, by high scrap costs, and by the inability to potentially charge a premium for quality products. Quality is a strategic competitive weapon. It is also a requirement for doing business in Europe. The IS09000 regulations require that complete process control records be maintained. IS09000, for those of you who are not familiar with the term, is a body of regulations from the International Standards Organization. A company that wants to sell products in Europe is most likely required by the purchasing company to be registered.
"Barbara Sloan, a spokeswoman in the U.S. for the European Community (EC), emphasizes that there are no legal requirements that European companies demand ISO 9000 registration from suppliers. But she acknowledges that such requests are becoming a commercial fact of life." Managing Automation - March 1992
In the United States the ISO9000 audit is performed by an RAB certified auditor. The Registrar certifies the initial conformance to standard and does semi-annual follow-up audits required to maintain the registration. Underwriters Labs, AT&T Quality Registrar and TUV are three of about forty ISO qualified registrars in the United States. IS09000 has become the minimum standard for quality for World Class manufacturing, as it guarantees a certain level of process control record keeping and continuous improvement.
It is estimated that approximately 98,000 company/sites have been passed the registration audit in the United States. The United Kingdom has over 29,000 registered. Audit costs range from $10,000 to $100,000 depending on the auditor and the number of employees in the requesting company.
Those of you considering what it takes to win a Malcolm Baldrige Quality award will also need SPC as part of the winning combination. The standard in the U.S. is called Q90 from the ASQ.
Building in quality from the start is the least expensive way to produce a product.
"Quality Function Deployment (QFD) provides a mechanism for determining customer requirements and translating them into relevant technical language that each functional and organizational level can understand and act upon. It starts with the 'voice of the customer' at the concept stage and carries through manufacturing with highly detailed instructions for production process control or for how front-line employees will provide a service." TOTAL QUALITY An Executives Guide for the 1990's Ernst & Young
HOW TO GET STARTED
"All right we know what Quality is. How do we get it?" ZEN AND THE ART OF MOTORCYCLE MAINTENANCE, Robert M. Persig
1. Reading is a low cost, simple and effective way to begin! What to read? Here's a short list from the APICS CIRM materials:
TOTAL QUALITY An Executive's Guide for the 1990s. Quality Planning and Analysis and one that I especially like ... QUALITY OR ELSE - THE REVOLUTION IN WORLD BUSINESS, Lloyd Dobyns & Clare Crawford-Mason
2. Join the ASQ; their Quality Progress magazine is worth the cost of membership alone.
3. Define a Mission Statement - In terms of CUSTOMER needs and how they will be fulfilled by the organization.
4. Document your business processes - Do they optimize the mission statement? Where is there redundancy or waste that can be eliminated?
5. Train your people to use SPC. Explain why it's good for them, for the company and for your customers.
6. Measure your processes. Is the process under control? Use flow charts, Pareto analysis, cause and effect diagrams and ask why five times to get to root causes. Use control charts to monitor the process.
7. Finally, revise the process. Take advantage of the empowerment of your people to reduce waste and costs.
Mike has over 30 years of experience as a practitioner, consultant and educator in a variety of industries. He has published articles in the APICS Performance Advantage, The Better Management Journal and is a speaker at APICS International Conferences and chapter meetings, Project Management and ASQ meetings. Most recently, he was a Senior Project Manager (PMP) and Six Sigma Black Belt in the Assurance Solution Division of Agilent Technologies; prior to that he was the WW Professional Services Program Manager for New Systems Products at Agilent. He helps clients increase their Return on Investment for their ERP systems.