vo EN Al RightsReserved . One or wrt prison Ks he pubis SPC Press Twos Fos (5) 889010 tse: nan The ane Dist Jacket Photograph otha te ae ‘Sotnch telescope itor st of Yechnagy and Gadi permascn CONTENTS, Introduction Preface tothe Second Edition Data Are Random and Miscellaneous Presenting Data in Content ‘Time Series Graphs Tally Plows Comparing Tie Sess [Numeric Summaries of Ones Aveopes [Nemerial Summaries of Dae: Range “The First Principle for Understanding Data Summary Knowledge Is Orderly and Cumulative Compartons to Specitions CCompanzons 9 Averges Shenlat’s Approach o Iaerpeting Date Understanding the Trade Defiste The Second Principle for Underanding Dats Summary The Purpose af Analy Ie sight Char for Indvidl Vals and Moving Ranges Finding the Moving Ranges The Two Graph inant Char (Comping Limite Foran ink Chast Tmverpreding she Xin Char A Char for On-Time Shipmcas The Premium Freighe Dat Se Whats The Difference Monthly Receipes Summaty 4 15 B » PsC Four: ‘The Best Analysis I the Simplest Analysis renin Feige Revisit Production Volumes Fit Time Approval Ross ‘There it Nothing New Unc the Sun Pound Scrapped (OSHA Repowables The Rest of the Story Summary But You Have to Use the (On-Time Closings of Aesounss Hot Merl Material Cone Spill Sumtingy ight Data Sie Look What You've Been Missing Less What Should You Do Now The Transformation Whar Should You Do Sang Tomovion? Bur fe Cane Be Thus Eay, Can I? Appendices “These Types af Action. A Chanttersaton of Predicate Proce ‘A Charsctezation of n Unprdicable Proves For Further Reding ink Chars Using the Mian Moving ange init Chars Using he Average Movieg Range Why Not Ure p-Char? A Modest Propo We Ais Broke, Dons File Index o st as 0s 107 na ua 7 23 135 16 130 134 136 be. 133 INTRODUCTION We live in the “laformation Age,” and much of tht information comes t0 us in the form of numbers. Indeed, wherever we look we ae surrounded by ever increasing mountains of dati—indexee and polls marker epores and leading indicator, government sepors, balnees of| ‘his and imbalances ofthat, data showing that food enuses cancer and ‘cures smoking Yer in sive of the increate in database and spreadsheets in spite of| the speed with which one ean be tied into nerworls to acces lly and repore data, wear old that our productive filing, our manufactur ng base is eroding, and our economy it geting werker. While we hive cater and lager number evunching machines, and incseasing aces 10 hese machines, and while we are making grea strides in many areas of| bse science, we are told chat our technological edge i slipping and tha others ae taking the lead in trnilecrng scientific knowledge into applied products for scien’s use Closer ro home, businessmen ae Gnding that while sey have move ets than ever befor, they sll do not know what these numbers mean. If che numbers changed for che beter compared eo last mooth, then just waic—they will change for the worse soon enough, If the numbers actully changed forthe wortecompated to lat month, chen he apocalype ie at hand and all re doomed! ‘The bos isin despait— ‘Don'ejurt stand thee, do something!” You have to come up with an explanation of why che numbers were 2 bady or eee find & scapegoat, by 0:30 tomorrow motning. Moreover—how ate you going to keep these bad numbers feom happening agsin? How are you going to getC Understanding Variation / Managing Chas the workers to work harder! “And Pharaoh said “You ate ley! You will be given no sts. bur you mast produce the same tally of bricks cach day." And 10 ic goes, month afier month, world wiehoue end. From the dawn of time until the present there is nothing new under the sun—jurt mote of, De DR mw Te problem with our information age was sucinedy ated by Daniel Boorstin when he std: “Information is random and miscela- ‘ous, bur knowledge is orderly and cumslaive.” Before information ‘an be useful it must be analyzed, interpreted, and assimilated. In shor. raw data have co be digested before they ean be well This proces of digesting daca has been widely neglected all levls ‘of our educational system. Managers and workers, educators and st amen, financial analysts and bankers, doctors and nurses, and especially lswyess and jouenaiss all have onc thing in common. They come out of heir educational experience knowing how co add, subtract, mulcipl, and divide, er they have mo sundentancding of how to digest nusnbrs to extract the Rnowledge thar may te lacked up inside the data. In fat. this shorcoaning i also seen ta lesser extent, among engincers and scientists, This deficiency has been called "sum: ‘naive is noe a failure with arithmetic, but cs nstead a lure wo know hhow to wie the basic tols of sithmeic co understand data. Numeral dents, accountants and busin al aiveté” Numerical naiveré is not addresed by the traditional courses in the primary or secondary schools, nor isi addeesed by advanced courses in mathe. matics, Thi is shy even highly educated individuals cam be numerical Fortunately, the cure for numerical naiveé is very simple. T Principles are easy to grasp and the vchniques are very easy «0 imp! ¢ iment. This book was writen 10 help organizations overcome the elects of numerical naveré The use of the echniques presented in this book can have profound consequences both for individuals and for organizations, These tech rigues have been thoroughly proven in over 70 years of practice in all walks of life, However. until these techniques are actually put ince nothing wll happen. Namerislnaiveré can only be overcome theough practice. This book will tell you how to go about it. “The ral world wil give you the opportunities for practic.sinderstonding Variation / Managing Choos ACKNOWLEDGMENTS | would like o thank those who have helped and encousaged me in binging this book to completion. First among these is Frances ‘Wheeler who faithfully read and re-read the mateil, catching mis takes, making suggestions, and asking for clarifications at those points where the prose was obscure. Other readers include Prony Ward and Wade Meyercord. In addition, thete is Steve Cab who encouraged sme to bogin this work, and Tom Sands and Bob Kaspriyk who made ‘many helpful suggestions in the early drafts. Finaly, shee is Bob LLucke who kindly checked all of the computations, The contsbutions ofthese individuals have made this hook «beter book Introduction PREFACE TO THE SECOND EDITION This edition includes thece new appendices and an index that were notin the orignal version. In addition I have eaken thie opportunity co update the nomenclature throughout the book. The orginal version sed the tadtional labels which have boon used during the past 50 ysars However, since this book i ut dhe nontraditional applications of the proces be ranageral snd ad ch ‘appropriate 1 we words chat ae more descrip hereore throughout this book thé following changes in wording have beer made “Control chars" have become “process behavior chars A “in-contol proces has become “predictable process.” An “out-of-concol proce" has become an “unpredictable process.” ‘Aa “ouroF-contel point” has Become « “point outside the limi” ‘An “in-contolpoins” has become a “point inde the limits.” [And vatiation is described as being either “routine” or “exeeptionl F what i intended. Thus, jargon has been replaced by ordinary wouds and phrases having the intended connotat The intent of these changes is ro remove the baties of inappropriate terminology, and hereby to make this powerful approach more scce sible o those wh are noe familiar with the tational jargon Those zeaders who would ike more infoumtion about the rationale this change in somenclacure will find the appendix tiled “A by Modes: Proposal” to be of incre.c Understanding Varin / Managing Chaos ONE DATA ARE RANDOM AND MISCELLANEOUS Recently the U.S. Trade Balance for February showed a deficit of 1.4 billion dollars. Asa deseriptive valu, shit deficit meine chat the US irmporeed goods worth 11.4 billion dollars more thas it exported uring this parucule month, Clea, 2 trade balance deficit ofthis sie iebad. bur whae dos it mean about che age picture? Ave hing gesting, ewer ot worse? Comparisons are needed in onde ro make sete ofthis, ov eal, his ei ebay was A iin dg ache et for ayo theme year Ti cmpaion wos sige ‘ings pesing oe —bewre Tower: the Febuary dei of 14 bilon wat 1.6 lion wale than the defor Febrny ofthe prev yea This competion oud sgps hae ings egg ete Ina econ yea you wold ado bth comprions © being ade eating te ld concson ht theater "The problem with both of the comparisons above is chit limired caste Whe wiv ped tot and plc hes a Ea a “Sgr come and whe ah he compro above ae oe tee conde, No eomation boaten eo vue be gba ‘simple compaton beresen che caren gue and ome peo va canioc fill ips ad camigaheTekaior oF any time sete, Yetna Understanding Variation Managing Chace Figure 12: The World According othe Monthly Report In the words of Myron Tribus: - epee opoyycs monl rp | Meme scraper bree phaser ** "Neverticles, managers use these mooshlyeepors to any Explanations ars egies for any fires a they “shoul be. Repous have oe ween Accon pln for deling ‘be robin values have to Be ine ad then che values had beer improve hae! that mean! 7 All of the preceding examples show a common tre to provide some \ contextual background forthe inerpreaion of any gen umber This ‘urges prope and corece—you simply cannot make sense of any number without contextual bats. Yer the waditons temp te provide ie contextual basis ate often faved in-thircxcuton. ‘The most coma that of med comparison C PRESENTING DATA IN. CONTEXT _ _ While iis simple and exey to compare ons aumber with another Tay ace limited umber, such comparions atc limiced ang RK" They a i because ofthe amoune of dat sed, and they are weak because bah of ambers se subject wo te varion thai ineviaDly pind i real e both the Gretta ad the ealrsalue ate aubiet 5s vaiton, wil day be diffcl odetmine just how much of the difrence heweea the alr de how much, any of he ete shis author's hunch ta {coche monthly epat by sione who gored of having to expan the [Up and down movement of the comparison berween monly vals ~The yeatodate values will, athe yer progres, show fest variation Terence doe I changes in the process, youro-date Figures wee ist added such comparisons seal i din scope beat they donot us he pat data in ane ‘Well ifTimied comparisons ace not enough, tien how abut snply (Cpreseatng all ofthe values in a able? While this is useful, iis noe Enough to provides complete analy Jin F& Mar Apr Nay Jon Jl Aug Sep Om Nov De oer 187 GO 1A HS SM MA ML 126 160 117 106 Isis 100 14 7995 40 M8 105 2 92 11 104 105 1988 ($ itions) Figure 13: Monthly U.S. Trade Deficits 19 ‘While ables of values may be wed co presen al ofthe relevant dats they sie not ensy surearine. Tee dificale to digest the inf coniainc i GRIEG purere NTtcove, that whichc Understanding Varian / Managing Chaos ited is generally hard to communicate ro othet. ‘The human mind just des not doa very good job of abrrbing lage amos of dt. Bik aa Saas jeuon 18 19 20 2122 23 26-25-26 27 28 29 0 91 32 38 0 fnmeruas tt 29 54 59°35 dt Ae 8 MG ae aH ‘etn ELE RES ESOA nmenee 14 38 16 5 hs, the traditional ways of communicating with numbers—limited ‘comparisons and tables of data—both have severe dawbacks. The ual ‘compatitons are narrowly focused and weak, while ables present an abundance of extrancous details, C,,, The tlaton to shee problems es in si from a digi eepresen “ation of data oa form that ie more fienly co humansgraphs Graphs can remove che exeancous deal given by tables of numbers hile they focus on the intresting bits of information which may be com tained within che data. Graghs provide de conte for interpeting the ‘euzent vale because they eI indude all ofthe relevant they do tht vial ia digital manner which snes te inf Fe are two basic graphe which have proven thei worth in ehis respect—the time seis graph andthe ally plow. ffi rmeearhe) TIME SERIES GRAPHS Time sever raph (or renning record) typically have months (or yas) ‘marked off on the horizontal axis and posible values marked off. om the vertical axis, As you move from left o righe there is a pasageof time: C (One Data are Rand and Micsonene Changes in he ine series een a you she ap om hee 0 ther By ily comparing th cen wa he pled wee fr he posing monte you can lyse i the care ve “hein ere gph forthe US, Trade Dein 1967 ad 1988s shown in Pre 13. The poph in Figure 13 uggs the computed wah 1987 thre ight eben igh imponemen in 198. Figure 15: Monthly US. Trade Defies 1997-1998 The time series graph for che home suns pet season for both Babe Ruth and Roger Matis are shown in Figure 1.6, These graphs show the ecords of 60 aad 61 home rns in the context ofthe eaters ofthese 190 baseball players, Time ste plots communicate the content ofa data st more guicldy and completely than do cables of values,Understanding Variation / Managing Chaos 2, comparisons ofthe curent vale with ancher vale ate the most co tmon pp of comparions encountered or evample ial al government fgues ae subjected to tit ‘ype of compaion when they se tepored in the press. The ie or {his month is compared wo the vale rom the receding mon IF this ‘mont valu has changed forthe beer ching are ooking up TF this ton vale has changed forthe morse, watch cu! Ta similar veins automobie sales re led and reported every 10 days These values lay compared othe sls ies for dhe sme 10-day pid from the previous ynt, Do you emerber how ses were ding during this 10-day period lst year? OF couse you don So what isthe bass or making uch» comparison? Why wold hs com pation provide addiional insighe Inco she cult sles gure? Comptons of Tissot are balton the implict assumption hats {ets notial” You do el how normals yer was do ur” ode tend 6g bse da fie ale we Jo en lve readily ith spots da\Conade the record forthe numberof home Set cee emarineseets eee ee ee tala ec ES veces cr ler sw Rose Mtns hover tee oe Nene bake a Een rena ee aoe ds conmcand ort be he er Mant eed Samp tare ncon wh be aes Lever eee Tsefupatcn tral fone a Se ila he nee tice ie cc Se ase pe ee Sina eooel'n [hr poe Boe aS cipayocmt wee ion was perfectly appropriate. However, 1927 sexony From 1961 10 1990, (One Dats are Rana and Misenens Finally, think about the tational way in which business data are packaged in the monthly reports—eeveral pages of table: of numbers, tbuained fiom computer printouts, and reduced down to 2 size that 90 tone over 45 can read without cei bifocals. A typieal monthly report igh look ike dhe one shown in Figue 1.1 ny Repay 2p Meee ec my on Sas a = 2s. ees BE Gomwspeimee as ae 0 Ce te vio henmsamiaet) tae Be ‘ar ee 88 ‘A-Typial Monthly Management Report For each line, this monthly La) gives dhe curren vale, — (2) lists plan or average vale, (2) compares the carene valu otis plan or average value, (4) compares the current vale othe val forthe sine month as year, ves the current year-to-date value (6) compares this year-o-date value with «plano average valu, and (7) compass the current and previous year-to-date values. “The four comparisons in his list are the ones most commonly used, CCllecively they try to provide some sre af content for interpresing the current values, However, since each of hese four comparison is limited, hey may provide contradictory messagesC LUndrstonng Variation Managing Chaos CTAUY PLOTS A tally pls (oe histogram) issimaply an accusation ofthe difeent ‘lcs hey occur without yng to dipay the time order sequsice A mark is placed beside a possible value each cime cat value 8 observed in the sequence. If the posible valucs are witten on the horizon oxin shen che vertical axis wil represent the fequencis for the diferent values ‘observed. A simple tally plor ofthe number of home runs per season for ‘Babe Ruth and Roger Matis is shown in Figue 17. Figure 1.7: Histograms, or Tally Pols of Home Runs Fer Season gorenine ‘The ally plow Simpre he dasa shown onthe dime ste In this cate the compiesion mak i ide by ee comparison dee’ Babe Ruth's 60 homerun season was simply ic high point ofan oussaading ‘acer. Roger Maris’ 61 home sun seion was, by any measure erst sional. Sil; Roger did it 61 home rns in 15GL. But shoul shi be stcsibuted solely to his personal skill?” This question can only be answered by considering an even broader conte c (One Date are Rad and Mines COMPARING TIME SERIES Addivionalinsighc may sometimes be pained by using two time sete raps together. Figure 1.8 shows the home runs per season for both Roger Maris and Mickey Mantle, Figuce 18: Home Runs for Roger Matis nd Mickey Mantle Roger Maris and Mickey Mane weteeamnnes oi 1960 01966. The way shes ro running record move up and down together sugges ‘hac the number of home runs Ric by each was subject to some extemal fluence. One possible explanation is that they Faced essentially the ‘amet of pitches each aaron Perhaps the nuber of home ans ie by these erelaggeswene up and down a the quality ofthe prching wal vatiod CORTES 0 ex Whaieer heSlind fr pull, che values ate beer unde ‘ood when chy ae placed it a broader contextc Understanding Variation Managing Coe NUMERICAL SUMMARIES OF DATA: AVERAGES In addition to ime sevice graphs and lly plo i is vecasonaly wss- fal to compure numerical summaries of ast of data. OF couse the basic ‘numerical summary isthe avithmetic average. This average is simply the sum ofthe values divided by the numberof values. A genetic symbol for theaverage of sof values wil be g ‘This symbol is commonly zead as "X-bas” oy The average is said to be a metre ofthe lction ofthe set of values Babe Ruch averaged 41.1 home eune pr seston between 1918 and 1934. Roger Maris averaged 22.9 home runs per season between 1957 and 1968. And Mickey Mantle averaged 29.7 home runs pe season benween 1951 and 1968. ate tan a eoo m 6 fo boo Figure 19: Averages for Theee Histograms werage is a measure of location, its common to use s¥er- see310 compe ove data seu The et with the greater average Toph (0 “exceed” the other. While such comparisons may be helpful, hey ‘mutt be used with cation, After all, for any given data Se, ose ofthe value wall nor i ——— ro thenverge € (One Duta ae Random and Micelles NUMERICAL SUMMARIES OF DATA: RANGES. A measure ofthe dtpersion ofa se of vals the cange. ‘The range it efined asthe maximum value minus the minimum value. ‘The genetic symbol fo she ange is R ‘The range of the number of home runs pet sean for Babe Ruth i = 49 for these 17 seasons. ‘The ange of che numberof home uns pt seston for Roger Maris is R = 56 for these 12 scsons. The range foe Mickey Mandle's 18 seasons i R= 41. (Here the eange does lil besides remind the eader dha the numbers of home runs pr scison dil deviate fiom che avenge) ae Rah Q soe mo 6 fo Bop St Figere Lite Ranges for The Histograms While other messures of location and dispersion exist, the average © and che range wil be sufficient forthe applications inthis book,Undertaning Variation / Managing Chios THE FIRST PRINCIPLE FOR UNDERSTANDING DATA Many yeas ago Dr. Wer Shewaze gave ovo rules for the presenta tion of daa, They are the basis for hones statistics and shouldbe wed as 2 guide in every presentation of data. His two rule are paraphrased and ‘iscussed below. ‘Shewhart’s Rule One forthe Presentation of Data: Data should alse be presented in rch away ‘har prserse the evidente in the date Jor all he prediction hat might be made fom thse data ‘This cule suggests several chings. First ofall a table of the values should accompany most graphs. Second, 1 tbleof values is no sufiient “i coy che big piccure. We are visually oriented and tables of data are visually boring. graph (such as a sime series graph or a histogram) should accompany any table, Third, the context for the daca shouldbe ‘completely and fully described. This would include the answers to: Who collected the das? How were the dats collected? When were the data collec? Where were che data colleced? What do these values tepte- sen And if the daca ate computed values, how were the values com ted From the raw inputs? Has there een a change ia the formula over a graph is woich’2thousand words, then an annotated graph with this supporting information is easly worth ten thousand words, While shore summaries of asec of value may be equied, they should always be backed up with annotated graphs. Data cannot be divorced from theit ‘context withou the danger of disoction, ~ ¢ (One / Data are Random end Misiones Shona’ ale Two for he Presenatin of Da When nigra hiram is wed amar dt the sen al nll te min ting ey ein the hee wouldnt taf date ere preted atin te Averages cages, andhsorams all cic the ime order for the data Ihe timer forthe dts shows woe wo of dein perm, ther the cbscurngof this pera by the use of aerags ranges othe ogame cm min the wer Since all dna ocala di will have aimeorder Insome css his imeode the ena coment wich en be prod in the proentatin : “These les of Dr. Shewharts can be summa in one owing principe which the ft pinpe for sadetanding ar and commu wing wih da HE FIRST PRINCIPLE FOR UNDERSTANDING DATA at ave meaning ‘er fim ti ome Thice consequences ofthis fst principle are + Thatta ne who cannot, o- will not, provide the content or thi gurs. + Stop reporting compartons besween pit of values ctenp as part of « brondercomparion, 1 Stare using graphs co present current values in context,SUMMARY Understanding Variation / Managing Chaos No comparzon berween two valu can be pabal ‘Management epors ae full of limited comparisons Graphs make data more accesible the human and ‘than do table, ‘Numerical summaries of data may supplement ge bur they can never teplace them No data have meaning apar from ther context, TWO KNOWLEDGE IS ORDERLY AND CUMULATIVE Many yeas ago, David Chambers found the fllowing time series ‘on the wall ofthe ofice ofthe president ofa shoe company. Here was a simple and powerful presentation of dat in concert. The eat nthe ‘etc ans was “Daily Pereentage of Defective Pats.” Joop ne ela nu, Dai sd he pent wy he ad he gah on he wall THe pds condregy pod thas heb ea one ioe kel we panes ng is ning pn pa BALES sh AG Evident SRR EU RE cebiy t askche pede this, beaut he pened aoe the chat on wl td ten awl Someta be hohe 6s¢ Understanding Variation / Managing Chans = Sp Data Analysis, Inerpreation > Y pu Transformation oxap igare2: Making Sens of Data Ia Process Even though the preside had his data diplayed in wttable graphic fens nd ag be the date ingore ee ‘se then psig ah day hed nat gts a ear toe ‘xd intent then Or tes he didn havea orm wap of wang shen —he just uied a seatoFche-panu analy [No mae whit se da and nose how the ve se aang [| and presented, you must aways use some method of anajni wo sence LL wichan interpretation ofthe dae " ° Data have tobe fie ip some manne make them nigile This ir ils person's experience pls hr prep. 5 more formalized and Tes subjec. fe but there will aleys be Some hod SF ann” Wexpetones {he bas For iniopeting hed, shen the intpation ie re 2 she manage pat eipttivie. rahe canentseuton woeeade ion oF Re da may wll he manager’ expevience, then his iateap inconee, Tkewise Uewed)ssrampions or awed preruppestion cre abe rl in awed inccions. Howeves, in the sake of slate aprons dt ge se che sei-fshe-pane approach and, inthe end, soit ali oy ‘ome dys appear obebecer than okey ‘Thi foeus OF his chpicr wil lupe he vaious ways people ana- {edie Fin, oro of he move cominon methods of imerpreung C Too / Knowledge Orderly end Cumulative daa—compations to specifications, and comparons to averages be outlined: Nex, the procs behavior char appraach Wo the inais and interpretation of data will be presented and concasted with the common approaches. Finally the Fundamental diffecnce between the common approaches and che proets behavior chart appcoch wil be highighed by the econd pine fr understanding date (E7020 DE COMPARISONS TO SPECIFICATIONS soa, budgets, and tages at ll specifications. The ides of ‘ompating sianagement data to plan, goal, or budgets was teansfered che manufacturing pracie of comparing product mes This ype of eomparson defines the Aiecly Fr suremens with speciation limi, postion of the current value relative ro some value (ponsibly arbitrary), with the outcome being a judgment that the cutrene value is either acceptable ot unaccepable (iherimspoc or outof spec). The fact chat ‘hit approach co the analysis of data wil alway esl ina favorable or an unfavorable outcome wil inevitably lead 2 binary world view “Those i favorable figures get 3 pat on the back, and those with unfvorable se with favorable figures are Figures ger kicked litle lower down, ‘doing okay” while the others are “in wouble Ungoraie Favorable Re way weet a oe SS | ote pln Figure 23: The Binary World View ofthe Specification ApproachUnderstoning Variation / Managing Chaos A natural consequence ofthis specification approach tothe interpre tation of management data is theddenis ith which you can change from a sae of bik to'a sate of torment. As long as you sre “doing okay” ther is no reason t9 worry, so st back, ean and le things cake cate of themselves. However! thénéver you se in wouble, “dont just stand there—do something!” Thus, the specification approach tothe interpretation of daca will nevcably resule alecaang with perinds of nen pate This apie athens approach is completely “shihecial'o continual Timprovement “The ipecion spponh a bk gud ses nad, In onder te duinguh kets dee ei will so think of specestone he management dea ling is edifice ~ First there ate specifications which are facts of life—does the bottom line show a prof ora la? he er gwing w lc eae ores Ths Ei eay wo ndenand Of ee einer 2 "co ie only iis knoen to bee ahh bie ee | fmt biog somes sp Nexc thee are he psifcons needed fr planing. Preisions and badges wosld spay lm hs enon Sot igo ts neve be abr. Fgucs eed for pasty shold ae beng saponins of pan dat pls the peanesenon ih kl fare condone. Moreover, pcos fed bade n e Setken at nges. The uncrsininsofenendg he ne bow a into the Furure makes chese values ‘afatiable as targets. Predictions need \bnowisdge, and they should be wed for gues an eet \adgrent and blame Foal, thee ne pccions which we aia nme es That ac uly difien fiom the speifeacnns ee hn ae fetes While che valerie otto encpr ae ae tanh rea necesay, arbitrary numerical eargts ae neither helpful nor neces sary. Infact they ae often detsimenal 2 Ts dinictinn war maby Hey Nee ah Din Diem in periods of beni elec C Tw / Koulaige is Ondey a Camative LO, This Far and No Further! epost Figure 24: The Origin of Many Specifications Specifications ae the Voice ofthe Customer When the specification isa fat of life, or a figure needed for planning icis useful know how the current values compare tothe speifiatons, When the specification ivan asbitary numerical goal, then i can be very dangerous to compate it sagunse che eutrent value. For example consider an atbitrary production ‘acget. If this month's value is above the target the foreman may be rempred ro stockpife he excess and use i aginst next months qua. TF this months value is low, chen he may be tempted to ship marginal of incomplete items in order to make up the deficit a In one plant wher i became clese cht they would not meet the arrest month's production quot, the foreman would send s Yorklif to the warchouse to bring back skids of finished product. There unite ‘would then be unpacked, londed on che conveyor, and sent down the “Patna Bsn Jets pang ne hice emt eeC Understontng Variation Managing Chaos Backingline, As thse unis pase down seine the tomate counts ‘would count chem as finished unite As rol ofthis cxsene the {depureent would fave another “ppod” muah andthe taco eed Snot have to “explana bad vale.” ‘Of course atthe end ofthe yo the warehouse inventory was shore by aboot «milion dlls worth of hn ished product. The showage 5 he plane manag MA" Waurly te new plat manager was nervous, He monitored the outine pant dies very cael, seeking explanation forall values which were unfavorable relative fo he targets. Since he pruetopecorm was maintained, he Production foreman eontaued as before, nat the endo the foe yo the wachoute wat agua about milion dels short on inventory. The second plant manager ed The new plant manage was sry nervous. He Wt nvenony air only three months OF eure the warehouse was about t suanes of milion shor. At shi poin the manager ook action he bal § foie? sound the plant sie and placed guards a the gate, Ae another tee ‘months he had anather inventory done--now they were» halfsailon shor fo the year In derprstion the manager Dui» ee aroued che varchoute ise and placed + guard on the gue. While this lly stopped the Siiskage inthe warehouse che prauction figure tok 2 comidenbledve ces Novice how the emphasis upon the production age was she ‘xgin ofall ofthe euro in his case. People were fred ond hace, smoney was spent all ease the production foreman didnt te ae £© exphin, month afte month, why they hed nt tnt the roducron quota, When peopl ate prenzed co mesa age luther thoes says hey cn proce ae They can work o improve the system, They ean distor the system, Or they cen disoo the dat ae 5 nie ame p wi ch ee es pm (i C Too / Knoulale Ondery at Cumulative Before you can improve ay ase you mut ten 1 the oie of thease the Vio the Pcs). Then you mus undewtand how the inputs affect the opus ofthe system” aly you mat be able to Chung she inputs and posy the em) i onder to ahi the deated ree This wil requ suseained fo, contany of pp, nd an environment mre continual improvenen he spering pls. Comparing ube secon il at ad the inp tment of the pose. Spelicons tthe Vo ofthe Carma a th Vie ofthe Proc The psa apponch dos ot eel sy inh ine how the pos Soifouonly compare dso he econ ten ou wl e nse improe the sc, ad wl ene ee with le at so was of meting yout ga. hen erent le i cnpacdtan :Peary ame trge h binay word ew which seomqueee ofthe pecixton spptsch wil avays cent tempaon to mk the tae lok forbes And dono asus ear than woking to ingmreteems eapre ‘Thercre wlile i pecan approach will you whe you sree atl} ¥u ow you porte adit wil nel you fo f+ out ofthe nin whch Jou find ourcle Whi the setfeoon :pprouch may be wei when the pecans efoto Ge ‘ered for panning the aprsch becomes merges hen thee atone aby george COMPARISONS TO AVERAGES fe There ate some figures for which the only posible speciation is perfection. We want no accident. We want no spill, We want no workers injured. In such ege is imponible to compute a percent di ference fom earget—even computers cannot divide by zero. Soin oderUnderstanding Variation Managing Chas to have a contextual comparzon, you will often find the eutent values compared to an average val, . ‘When values are compared oan averags itt ot uncommon to heat 2 manager as for an explanation than, ay five percent fom the average, OF course, this is just sophia ‘ated way of saying tht one should expece all ofthe values to fll at, oF very close to, che average. I enough prestue i applied, chose responsible for coning’ip with the “explanations” wil tke ep to avid having co do so inthe future, They will begin so practice one ofthe wo simple “cover your anatomy” techniques” tir he stem or distort the dit Also like the specification approach, the average value approach has te outcomes. You wil find the cuzren value tobe either “above aver hier the erent value varies more 182" or “below average.” Ofcourse snce the average i genecally neat the -mid-poine of asx of data, you should expect to be above average about half the time, and to be below average about half the cme, A flue «0 appreciate this simple fact often leads co headlines familiar coals “Half the — in th ete are below average.” Whee tis the reading sors for seudents, the reine: office deparkment, or the brakes om dump tmucks, half of them are bound to be below average on any given day of week Ava consequence, the averge value approach will make people feel good abouc half the time, and i wll make them fel bat sbout half the time. So, the average value approach ro interpreting data has about the same consequences as the specification approach it has a binay ou ‘come and it yields some knowledge of where the curren value sand fel- ative toa fixed reference point. While che speciation approach com- pares she current value with the Voie of the Customer, the average vl ‘approach compares che curtent valu with «value from the proces ite Unfortunately, che average vale is only par of the Voive of the Process Thies why che average value approach cannot flly convey the ifr, tion concained inthe cutent value C Ts / Kowlee Onder and Cuma SHEWHART'S APPROACH TO INTERPRETING DATA ‘We anlyae numbers in det to kaow when a change as acute in cour proceses of systems. We want to know about such changes in 4 tidy manners hat we can respond appropsnely. While this sounds rather saighfrbrd thee is complication the numbers an change ven when our proces does ot, Soin our anal of tubers, we nd tohave away to diinguishchowe changes inthe nrnbers hat present Changer in out proces from hoe that a exnill oie. Te this end Walter Shewhacr nade 3 cucldinction Deween to ype of vation inthe numbers. Some vration is routine run-of che tl, and wo be expected even when the proc ha nt changed Other ‘arson it exepional, ouside thé bound of routine, and therfore ro beinerpreted ara signal of proces lange. And inorder fo separate variation nt thee eo components he created dhe consol chan (wich 1s T noted in che peice, i now bing ile a proces behavior cha). The proces behavior chan begos with the data plowed ina ie series. A cent lines added a «visual reference for detecting shifts ot trends, and limits are computed from the data. These limits ate placed symmetaly on either side of the ental line that ditance which wll dow them fle ou vial all of th oie variation, : eye ir tte : Senter byte Rowen reenter Figure 25: Process Behavior Char for Diy Percentage of Defective Pass B- C Understanding Veriton / Managing Chaos ‘The key to the effectiveness ofthe process behavior chasis coneined in the way in which dhe limite ae computed from the data. (These eae lations will be described inthe nex chapter) By characterizing the extent ‘of routine variation, the limits on a process behavior chat allow you to diferenciateberween routine variation and exceptional variation. I, over a reasonably long period of ime, ll of the point fill within the limite of a process behavoe chart, and ifthe point ate well-bchaved, chen the pro= cess can be said ro display nothing but rouine variation, When his hap pens the process canbe thought ofa being predictable within those limm= its, and i is reasonable vo expect shat, unless something is changed, ic wll ‘continue 0 operate this way in the Future. Thu, the limite om a process bbchavior chart allow you to characterize the behavior of your process 4¢ predictable or unpredictable, and define how much routine vacation you should expect inthe furare. Since prediction i the esence of manage ment, this abiley to know what to expect when a proces is behaving predictably is invaluable, However, when point fill outside the limits of proces behavior chart she are interpreted assigns of exceptional vatition. Exceptional variation isatibuted co asignable causes which by definition, dominate the many common cuss of routine variation, Therefore, when a process displays exceptional variation, i will he worchile see to identi the assignable cause of hae exceptional variation, 0 that you ean climinate is effect upon your process. In other words, the presence of exceptional variation i sgaal chat there ate dominane cause-and-effect elationships which affec your process and which you ae no effectively controling Since you would tot Keowgly allow + dominant cause-and-effect rela tionship to exist without attempting 9 control or compensate for iin some manner, is reasonable to say tha exceptional variation isan in cation of assignable causes chat have exaped your arension. ‘Thus, by separating coutine variation from exceptional varatios behavior chart allows you to learn abour dominant cause-and-effect rel tionships chat may have been overlooked inthe past. As you take ation to eliminate the effect of asignable causes from your process you will the process C ‘Tio / Krstlage Ondery ant Cumulative Plt yearn elitr lve Figure 26: Process Behavior Char for Daly Percentage of Defective Pls find chat your proces wil operate more consistently, more prdicably, and more reliably.” Therelore the proces: behavior chart can be wed (0 rain dhe esental informacion needed ro improve your process when it is subject ro exceptional varistion, “The proces behavior char in Figure 2.6 shows a time series which cons of 67 consecutive pointe. The fact that the values remain within ‘he computed limits and the fc that theve i 99 obvious rend, noe any this long requence of points above ot Below the cent line, suggests proce may be considered to be predictable. Based on this chat, it ‘would appear tht wna the proce ir chenged in some fundamental way. the plane will continue go produce anywhere from 7% defective w 30%,” dsfaive ech day, with along-zcem average of about 19% defective ‘Notice how the process behavior chart has helped to interpret the daca Fie the caret used to characterize the behavior ofthe datt—ace they predicrable or not? Second, the pracers behavior chact allows the manager to predict what wo expec in the Fucure—the amount of outing ‘ation defined by the lie the Voie ofthe Paces aq Finally, notice che diflerence bensees the president's inerpretation of shete data and the interpretation based on the proces behavior char. Somedays only appeared ta be beter than other! Thirty-seven daye were “woue than average” (he above 18.7%), and 30 days were "beter than sverige” uc the proce sons na evidence of any changes daring he past 67 doy In wth, both the “good” days snd the “bad” days came fom the aLnderstonaing Veriton Managing hace ‘same proces. Unles, and uni, chs undesying proces is changed in some fundamental manner, the president will coninge to pls values hich average about 19% defecive. Looking for differences besween the "good" days and the “bad” days wil simply be a wast of time, UNDERSTANDING THE TRADE DEFICITS ‘The USS Trade Defic forthe fee en months of 1987 ae given in Figure 27. In ths peti ehe deficit gor wore (increased) relative tothe preceding month six mes, and ic improved (decreased) only thece times. ‘While the year started with a deficit of 107 billion dalle, by Ocsober this had worsened oa dfc of 16 bilon dels Surly hija «tion for eloom and doom, ed TA ti BG Me ts kd Soe me BS ‘igure 27: Time Series Graph for US. Trade Deficit 1987 ‘As each of ches values was reported they would invariably be accom panied by statements like “the U.S. erade balance defice increased (or decreased) last month to value of — billion dollars” According to the news, the trade balance is always incieaing or decreasing, It arly ever sys the same, But how much of chs churning around is spay and how mach of tis jus nae? ‘We begin by placing the data for 1987 on a process behavior chart. ‘The use of one year's worth of daa is exzentilly arbitery, but we have historically used the calendae to arbiterly subdivide all sors of time 2s Tw / Knowledge Onder ant Camuatioe “4 v Tim RD Mir hoe May eM Aug Sp O8 Nov Om ¢ ‘ Figure 28: Process Behavior Chart for Monthy US. Trade Deficits in 1987 series, and we hal, no dou, continue todo 30 inthe farure. While ic may be habical, cere is nothing magic abou the use of year's worth of Anta The average defce for 1987 was 12.75 bili dollars. Using the technique which is descibed in the next chapter, ic can be sen that, thse on the amoune of month-to-month variation, the dec could vary fiom 8.32 billion o 17.18 billion without representing a real departure 1 the average of 12.75 billion "The chart in Figure 2.8 shows né evidence ofa sustained trend. The efit are noe systematically geting beuet, nor are they systematically ‘grting worse For the year ae whole, his chart shows no clear-cut evi- ‘dence of change. Some monthe appear ro be better than others, bu his indicates that it willbe a waste to analyze any one month to see What is different from preceding months. You shoald wae all the ‘months of 1987 2 if they came from the same system. The daca for 1988 are shown in Figure 2.9, There values could be plowed agsinet the limite shown ia Figure 28 above, This is done in Figures 2.10 and 2.11 he Sp Ov Bw oe jn Fe Mw Aw May J 3968S lions) Figure 29: Monthly U.S. Trade DefiUnderstanding Variation / Monging Cas TEMAWSJASOND] Fw Figore 210: Process Behavior Chat for U.S, Trade Deficits, 1987-early 1968 Figure 2.10 shows that by March af 1988 shere was definite evidence ofan improvement. The March dfcc is Below the lower limit of 8.32 Before a single month ean be sid to signal a change inthe time series, ‘har single value mast go beyond one ofthe two linia. This happens ia March of 1988. Now that we have definite evidence of a change, how do we interpret the char?’ One method is to look atthe sequence of points adjacent othe point outside che imie which ae aio onthe same side of ‘the central ine as the poine outde the limit. This sequence is shown in Figure 2.11 ‘The incespetation ofthis sequence could be exprese es follows. A change i erly indicated in March of 1988—i may have begun ay caly a8 November of 1987-—and it continued thioughout the test of 1986, Thus, there is definite evidence char che cade deficic improved duting Figure 211: Process Behavior Chart for US. Trade Deficits 1987-1988 C ‘Tuo / Kowal Onder ond Comte 1988, compared with 1987. We could now recompute limits for 1988, and wee dhem Co evaluate Further monthly values foe signs of improve= ‘ent or deterioration, THE SECOND PRINCIPLE FOR UNDERSTANDING DATA The proces behave chac approach ro the aa of data is more owed chan cher the speciation approach or the average value {oproach. Italo is findamenly diferent, Instead of atemping {ich a meaning 10 cach nd every specif vale ofthe ime sre the proces behavior chart concentats onthe behuvior ofthe undedyng proce. Iti therfore, more fondant and more compichentve This is why the proces behavior chat jel ove insight and peer understanding than che specification approach or the average value approach. ka The process behavior char uses the ime series define the Voice of the Process. Ie also gives the user a way 10 know whether iis safe co ‘extrapolate into the near Furuse. Moreoves,whcnéver ii easonable to make this extrapolation, the process behavior char alo defines the ange of values that you are likely to see inthe near ftuce, The specication approach and the average value approach do none of these ching, The process behavior chart does all of chese things Because ic cakes, ‘aration inte scout, Variation is the nandem and mscelancous compo: nent shat inderis the simple and limited comparvons. “The “noise” in ‘roduced by routine variation is what confses and coisa compations bowen single values. nil you can allow fr the nose in atime seis, You cannot fully understand just what may be indicated by a single value, 1s the current value 2 “sgoal” that something has changed, or docs the ‘uttene value differ from the'haroric average by nothing but “nose”? »c The answer to this question isthe exvence of making sense of any value Understanding Varition/ Managing Cacs {roma time series Of course, before you an ever hope to answer this questioa, you wll have to have some historic values. Next you will have to ie thee his- tori values to determine jst wha the effets of “noite” might befor this Particular time seis. Then, and only then can you begin to diferentate berween the noise of routine variation and the signals of exceptional var ation. This whole proces may be summatizd in the second principle of “understanding and communicating with data, ‘THE SECOND PRINCIPLE FOR UNDERSTANDING DATA | wide ery dase conan nae, some det set may conan signal Therefore, before you can detect a signal | wisin any given dataset, | A mt fist fier ot the nase ‘The process behavior chart filters ou the noise of routine variation by the construction ofthe limits. Signal of exception variation are ind ‘ated by poins which fill outside the limits or by obviows non-randony patterns ofvariaon around the ental ine This distinction berwcen signals and not ithe foundation for evesy ‘meaaingful ana of data. Ie also defines the wo mistakes which you fan make when you snale dat The fist mistake is chat of interpreting routine variation as a mean ingfl deparure fom the past—interpreting nite as fi wer «signal ‘Since this mistake wil lead to actions which are, ae best inappoopsace and at wort, completely contrary tothe prope couse of vcton the ms, take is a source of ware and los every day. The second mistake consists of nor recognizing when s change has ‘curred im a processing to detect a igual when iti proent This 0 C Ton / Kalas is Orel and Comaatioe mistake is most often found in conjunction with the specification approach w analysis. The undedyin proces changes, but che values are ssl within the specication limits, 1 no one nocces Cleary, you may avoid the frst mistake by never reacting to any value a fit were a signal, buc this will guarantee many mites of the second kind’ Likewise, you may avoid the second type of mistake by reacting ro evry point as fie wee asgnal, but shir guarantees many mie cakes of the fist kind. yn pa “Those who do not make the disinction between signals and noise wil inevitably be bssed in one dretion othe other. So they wil make snore mistakes of one type oF the other. The process behavior chart swikesabalanee between these rwo eros. ‘The use of the limits to Her cout the noise of touine vrition wll minimize the verurenes of both . This is why those who do nor use process behavior charts to analyze ac wilalvay be ata disadvantage compared to those who do, Unles and until, you make th discon beeen signals and noe you wl temnin unable propely aaa ad inept dats The Scood Pri ciple of Understanding Daa show why every eoive dee analp !in by separating the potential signal rom che probable nae And proces behavior chats ae the simplest method tat hat evs eget vented eparateprenialsigals ftom rouble no Before you can we dat justly any actin, you mt be able wo + potential signal within she data Otherwise you ae key wo be note. Nob ds and lice atic on xx tom 4 interp 0 why should you try co sun your business by listening to, and tempting to incerpet, static?Understanding Variation / Managing Chios SUMMARY ‘The interpretation of data requites a method of analysis, * Variation isthe random and miscellaneous componest shar undermines the simple and limited comparisons, ‘The specification approach always results in a binary world view — you ar always ether “operting okay” ot els “in trouble” Specifications which re arbitrary aureril tages are detrimenal and counte;productive There are cree way to mee a goal 1. Temprove dhe ysei, 2. Distorethe sytem, of 3. Distore the dacs. * eis important o distinguish berween the Voie ofthe Customer and the Voie of the Proce, ‘The specification approach doesnot conser the Voice of the Paces ‘The specification pprosch and the average value approach ‘tempt to atachs mening upon eh and every vale + The proce behavior chare ‘oncentates upon the behavior of che undedying process + A process behavior char defines the Voice ofthe Process. + Prediction requtesknowledge—explanation does no. A predictable proces displays routine vaiaion + An unpredcable procs displays both ouine vation tnd exception vasinion +The ise mistake in inerpreing dais vo imerpee noite si wee signal “The second mise in interpreting dati ofl ro detect sigh when fis presen + Process behavior chars ike a balance beeween these wo mises, THREE THE PURPOSE OF ANALYSIS IS INSIGHT Dia at genely colt a bass fo action. Howeves, ene potas eeparaed um probs ne th scons een may Seoul consent with the dat ‘Ths, te pope we of dae rei tha you hve snl nd ive meth of ai which Fraps pret as om poate "The flowing example ar inended wo tat how you cn we proces bch care opin ing inde, For pup feo Paton, the tadkional approaches to manapement daa willbe how ogi the proces behavior char Each of the siweon eed Below acy happened Sine tse ge ale el people a compa, armen iui i oe pre con- dey, In cey ce et the cape ae te te oi Tet nthe moth sport uy which sb Sow Fig 1a i teprodued in gue 3. When ced wth ele ofUnkestng Veron Mang Ce unbes uch tha in Fig 3.1 mos pale ep es the percent Aifeence column xe which number have angel te mek The eit sige ot thor wes whch hae changed mote dca td qusion wy tay have change enti epantoy ie het x shay SAN TY uy oot fie “et Oe NE ea, Es Oetmemomewcy a Sto att me Ns oa Feteermwaits ey ao “ay a Oh cag 28 Neate om mle SB eo erp Woy (508 Yatedwe vis TevIO rescn owe Sie an oh EV AE van ch CS msctnvamadnty is ae xe cat no aye toy meme” Bh ate Ce ae to TlPeacinconsnee 13a eae oh cae ae mie 83 22, 2c, wee — om fit So oie Es Bee Onimcacpatioomncs) Oe 3 eta nase wa” we ote a Figure 3: A Typical Management Report Of course dere are three problems with the use of percent diferences 8 a bass for interpreting the values in 4 monthly cepone, Fist the size ofthe percee diflerence wll partly depead upon the ‘magnitude ofthe base number—a ten unit change fom 100 to 110 ir « 1086 change, yet 2 ten nie change from 300 t9 310 is a 3.3% change Percentages show the relative sie of a change rather than the aceal ariount of change. "Therefore, comparing one percentage change with, andthe is nos a reliable way to find the intresting parts of te Sects itdos not ake int acount he dence inthe baz naren Pa % ¢ ‘The / The Paras of Analysis Insight Second, the practice of comparing linc in a monthly report by com paring the size ofthe percene differences assumes that all lines should show the sime amount of relive variation month to month. Yer in sty collection of time series, each time series will hve itt own inherent mount of month-to-month variation. Some lines will show luge per cen diferences month to month, and others wll show small percent dif ferences from month to month. Therefore, comparing pecent differ. ences will guarantee chat some lines eeccive more attention than they deserve while others recive le attention than they deserve - ‘Third, when considering che percent differences bused upon 4 com [ parison of the current value wth last yea’ value a large percent difer- fence may be due to an wmasu ove én he pat rather than an wna tale inthe praent yee eno = 7 All ofthese probléms make the comparison of percent differences a weak and unreliable guide co Finding che potenial signals within the data Nevertheless, itis a common practic, s0 we shal wei to acect coven lines ou of the monthly report for dicusion ‘As we san the percent diferenee column under the July portion of the monthly sepor thre li’ scind out." itst-time approval are down 23 percent in-proces inventory is up 42 percent, and on-time osngr af counts i down 21.8 percent, PROCESS BEHAVIOR CHARTS FOR INDIVIDUAL VALUES AND MOVING RANGES Since the monthly meeting would probably focus on the 42 percent \nctease inthe in-proces inventory value for Department 17, we will seo begin with chi ine fiom the monthly report. Fira we wil consider the ‘sual approach co interpreting managemenc data, and dhco we will use ‘hese values to illustrate the consrtion ofa proces behavior char.Understanding Vartion/ Managing Chace rr _ ita “FY aca, FEO Tero rota: ot fe Ya dn "SH! dis pan Ge roawshy init) mt? aetd vied aie Roa naa Figure 32: insanely for Bape 7 Jn July the i-proces invery vale was 28. This wa he ages vale fo in proces ivetory vet recorded in Deparment 17. Tae “alc wa 12% above th var yc a and ev 0 above the plan vale which sey bad For his yer ar whose Yesrsordatinprocs ines uns 5.9% above a on an 3.6% above plow mot bed alae {you had responsibly fc Deparment 17 and wee shown these data whar wuld you do? When yu hate rbd mane oe You ually eo prepare repre ‘The man problem wih the wt pon” pprosch i tec seed ints preperation. Tho sors ofen brome work offeteg whose only purpose walls menage to peend ta something tring done bos perceived pose Tne the "wate cpr” approach hat problem wth he data ae, lanes neni res nce nd eer lied managed Tecan ony be changed by astans which afer the siuiex Hover, miny of tee cues wl a fax eden ourpes od the proces 5, fy ae or cae peste es he JP proc inventory may haves dina et on sna oer cane Sse of he procs sucha production somes, (Remembthe ce Lyra mectings gel) OF coun the whole “wit spo” approach i bed upon the sumption cache in proce nena wee flys be itasgnlor bias note How an ou kaon? C ‘The The Purpose of Anais insight Figere 33 In Process inventory Values re you can detect a potential signal within the data you mst first, fier out the probable noise. And co fer out noise you mus sat with the pas data, The table in Figure 3.3 shows the in-process inventory vl tes for Deparemene 17 forthe past 31 months, The average of the 24 values fr Veare One and Two is 20.04. This me-serie graph of the in process ‘alu was used athe cent ine in the inventory values seen in Figure 3.4 EMAMTIASOND]FWAMIJASONO]#MANTT Figure 34: Time Series for Monthly tn-Poces ventory A glance at Figure 34 shows no longterm tends, nor any other sys temas pacterns.6 So while the time seis grag add 0 our understand 1p of the data a whole, isl doesnot answer the question of whether ‘or nor the July value i excepional. ‘To answer this question we vill have #0 fter ou the routine moth-t9-month vation, which means tht we shall have 9 measure dhe enonth“o-nonthvaiation. ‘Theyhme no oder mang co inndecqont pig nerLUnderstoning Variation Managing Chaos FINDING THE MOVING RANGES _ ‘To messure the month-to-month vaiation we compute che dife ences between the succesive monthly values, These values ae called moving ranges. They are compute inthe lowing manne. SRE ESET oe STEW EE ogee Figure 35: Moving Ranges for n-Process Inventory for Year One ‘The difference becween the Janusty value of 19 and he February value oF 27 i 8, chu the Best moving ange i 8 The next moving range is 7. Tei he difeence between che February value of 27 andthe March value of 20, ‘The thed moving ange is 4. Ie ir the difence beeween dhe March value of 20 and the Apri value of 16, Continuing inthis manser, using all 31 values from Figuee 3.3, we ‘obtain the 30 moving ranges shown in Figue 3.6 ee PEPE ee Figure 3.6: Moving Ranges for ln-Proces Inventory ‘The time seis graph ofchese moving range it shown in Figute 3.7. ‘These moving ranges diecty measure the month-to-month variation. ‘Theic average wil be called the Average Moving Range. The cent line for the time series graph of the moving ranges s commonly taken t0 be the Average Moving Range GQ | c ‘hoe / The Purp of Analy night i f FMAM] | AS OND] FwaM) PAPOND] FMAMIT Figure 3.7. Graph of the Moving Ranges THE TWO GRAPHS IN AN XMR_ CHART To construct a process behavioe chart for Individual Valuer and Moving Range (an Xo chart) we begin with the two time series graph shown in Figues 34 and 3.7. Fic these two graphs are shown together, sin Figure 3.8 ny 8 t aA uf ile B BAY AN ay “| TEMAMT TASOND] PMAMTTASONDTEMAMTT Figure 38: Combined Time Series GraphsUnderstanding Variation Managing Chaos “The cme seies for individual values ie sometimes refered 1 25 “che chart.” The time seis forthe moving ranges is sometimes telered 9 a “the range char," “the moving nenge chart.” Once the time series sraphs for the individual values and che moving ranges have been ‘onsteucted, the central lines fo each gragh ate computed. The average ofthe individual value is the wrual central line for the X-chare. The Average Moving Range isthe usual cenial line for the moving range chart. The average for Years One and Two is 20.04, and the Average ‘Moving Range is 4.35. These lines ae shown in Figure 3.8, COMPUTING UMITS FOR AN Xv CHART To obtain the Upper Range Limit for the moving range chart you ‘must multiply the Average Moving Range by a sealing factor of 3.27, ‘This value of 3.27 is the number required co caver the average tinge inc an appropriate upper bound fr ranges. The value of 3.27 h 4 con stant for this ype of proces behavior chare Upper Range Limit = URL = 3.27 « wR = 3270435 = 14.2 This Upper Range Limit is plored ar «horizon line on the moving ‘ange portion ofthe combined graph. This line is shown in Figure 3.9, ‘The limits for the Chare for Individual Values (the Achar) ace ‘commonly called che Natural Procs Limit. They ate eetcted on the ‘ental line. The distance from the cntel line o either ofthese less computed by multiplying the Average Moving Range bya second salng factor: 2.66, The value of 266 is constant for this type of process behavior chare—ie i the value requited to convert the Average Moving Range int the appropriate amount of spread forthe running record of individual value. 0 ¢ The 1 The Purpose of Analysis sight pa eny TEMAMTTASOND 1 FwaM] TATOND J FMAMTT 12 perf fw wen Mote Ay NA eet AY o Figure 39: Upper Limit for Moving Range Chart Upper Natural Procs Limits found by Gest multiplying the Average Moving Range by 2.66 and thea adding the product to the cen talline of he Xchaee. Upper Natural Proves Limit = X + (266 x wih ) = 2004 + (266% 435) = 316 ‘The Lovwrr Nature! Prcas Limits found by First multiplying the Average Moving Range by 2.66 and then subtracting the product fom the ental ine oF the ¥-chare Lower Natural Poces Limit « X — (2.66 x wR) = 2004 ~ (266%435) = 85 These Natural Process Limits are ploted on the individual values Potton ofthe combined graph. ‘The complete Xf chat is shown in Figure 3.10,LUnderstoning Veriton Managing Chaos et og TEMAM)TASONO]# MAM] ASONO]FWAMTT Figure 3.10: oni Chart for la-Proces Inventory INTERPRETING THE AMR CHART _ ‘The interpretation ofthe proces behavior chart in Figure 3.10 is follows. ‘The month-to-month variation is sen on the moving range portion of the char. The Upper Range Limit of 14.2 means that if he amount of in-process inventory changes (up or down) by more than 1420 pounds from one month to the next, den you should look for aa expla tation. A change ofthis amount fom one moath to the next is excessive, and itis key wo be che dcet renal of some asignable cause ‘The actual monthly values are seca on the individual values portion ‘ofthe chart. The limit on this part of che char define how lage ot how small a single monthly value muse be before ic epresents a definite depar- tue fom the historic average. Here, a monthly value in exces of 31.6 2 € ‘The | The Purpose of Analysis sight would be 2 sgnal shat dhe aroun of in-procesnvenory bad shied Upward. Liev, a monthly vale below 8° would be ten signal aa dowavar shi Incite ese you would be jusifed tn lokig for Sasi ese of such she Thi he Jy vac of 28 i or, by ele signal Ther ino eve dence of 09 rel change i the proces ince Thi eas that "sing fran explanation forthe Jul value wold bean cere ior The man inthemoon wold be trl epaceton te eee’ in a writen por, Now some may fel dsconceted when they sce limits for individual values which go ffom 8.5 1031.6. Surely we can hold the in-process inventory mote tiesdy’than that! Bue that ie pectely what cannot be done. Atleast cannor be done unless fundamental changes a made in the underlying proces. The Natural Process Limits are the Voice ofthe Proce. They define what the procs wll deliver as lng as continues pera asconseny a posible ‘When a proces is operated prdicably ic is abo operating a consis- ‘emmy as posible. The process doesn't eslly care whether or not you ike she Natutal Process Limits, nd it cerainly doe not hnow what the spec iieations may be (specifications should be thought oft the Voice ofthe Cunomet, which is diincl diferent from the Voice ofthe Proc). ‘Therefore ifthe manager of Departient 17 isued + decee chat the ia-proces inventory should ner vary by more than + 20 percent from is sverage valu, what would happen? A 20 percent vation rom value .2F 20.0 is 1600 co 24.0. Ts this process going ro operate within these li is? The process behavior chat says that i ha not done so in the pase andi should noc be expected todo so in the fature—at least not without ‘ome fundamental change inthe undedying proces, Thus, such a decree wilsimply encourage the workers in Department 17 to distort the system orto distort the data, Such dees, by themselves do nothing o change ‘or improve the system. Likewise, dssatsictiod with the Natur] Process Limits cannot be sured by fining some akermative method for computing the Nacueal *Understanding Variation / Managing hans Process Limits. Any method that cults in appreciably diferen limits is simply incotrec.? The Voice ofthe Process wil still be defined by the limits compured in the manner given above “Therefore ifyou are not pleated with the amount of variation shown, by che Natural Process Limits, then you mst goto work on the system, to change the underlying process, eather than setting atbitary goals jaw- boning the workers, or looking for alternative ways of compucing the limi i SSpuseelaetoam cog DPhp ni, gel The of Fe es ‘eran pe Seed ion wi tos ek | EMAMI PASOWDI FMAMTTASOND) FMAM) Tile shen shone te hy en fo thon Fe 310 hy C Thre / The Parse of nals i sight A CHART FOR ON-TIME SHIPMENTS Now rerura tothe monchly report for July (Figure 3.1) and look for the line with the smallest percent differences. The line for “on-time shipments” is che winner in this eategory. In most discussions of the mosthly report his ne woud get ie moe than acura ance, , - Monty Rep ay iu heme ama Ea Rina” aa a oo te SE SE ER LBS Figure 31: On-Time Shipments for July In July, 91.0% ofthe shipments wet shipped on time, This is 3% Below the historic average, and 0.9% below the vale fr ls July. The year-to-date vale it 90.8% shipped on time, which i 0.6% below the "verge and 0.3% below last year, Thus, by shes ional compar sons the op-time shipment performance slighty below, but een cially unichanged from last year. Nothing to get excited about here—or is there? How can you know? Pere sen dIBON ‘We shal pu thes data on an Nw chart The aw data forthe past. 31 months ae shown in Fgute 312. The percentage of on-time ship- meat for ach month is computed by dividing the ctl numberof ship ‘nents int the ttl number of shipments which were made on or before thecusromer request daeUnderstanding Variation / Managing Chaos Percentage On-Time Shipmens, Depasment 20 sentra mat _ ee BOB ed #8 Ge #8 ae Boog sete ca i iced Hog gE Ey a a Figure 312 The On-Time Shipments Data ‘The limits will be based, somewhat acbicsly, upon dhe data for Year ‘Two. Columns two and thee of Figure 3.12 show that 2225 ofthe 2497 shipments in Yess Two were shipped oa time, for an annual percniage .2F 91.30%, This value willbe used atthe cena ine for the divide ales. Using che 12 moving ranges for Yer Two, the Average Moving Range is computed robe 0.317. This value will be used av the contre line forthe moving range. ae The Te Pepe dls sight ning these values, che Natural Paces Limits are computed as UNL = 915306 (266 x.317) » 92.14% NPL = 9130-0265 ¥.317) = 90.46% ‘Aad the Upper Range Limit forthe moving ange char wl be: URL = 327 10317 « Los ‘The XR cha: forthe on-time shipments is show in Figure 3.13. Ie would be interpreted as follows. Allowing forthe month to month vata ‘ion if the shipping process was operating as consinenely as posible with san average of 91.30 percent on-time shipment, then the monthly ralues should fall beeween 90.46 percent and 92.14 percent. Monson, the va for successive months should fer by no more than 1.037 percentage “J EMAMTTASOND) FwAMTTASOND] FMAM] VAC Figure 313: Xu Chat for On-Time Sh Sic of he individual vals and on ofthe moving ranges fluid the ine shown in Figure 3.13. Thuy once the soutee ans ond asion hasbeen kc no eeu els eo Yon i this tine wesw be de chne de, The scvlee be Natal Proces Lind sould be ued sige You boda hee ”Understanding Veriton Managing Chaos looked for an explanation of why the pescentage of on-time shipments dropped during these months The six values outside the Natucal Process Limits ate exceptional “The process i trying to ell you that it has «problem. Something was happening in the Summer of Year One, in Masch of Year Two, and in April and May of Year Thiee. This something could reoccur, and it could be worse nex cme + You have already missed three opporcunive to improve this proces +The process has already done all shat it can do to alert you co the presence ofthis problem, How many more signals are you going to miss before this problem cares you to lose large acount? If you concentrate on the percent differences in the monthly report (Figure 3.11) you ate no ikely ro ever be aware of cis probiem uns icis already oo late Process behavior charts ae the way to liten to your process. When you listen to the Voice of the Procest at eevealed by process behavior chars, you cas often detect signals cht you would otherwise mis THE PREMIUM FREIGHT DATA Thee / The Parse of Aras i sight wee Be a ee ee Ee se of 8 #8 me ee aes eee eee ee Sn one = & so A tne sembly ad manacosing iy recive housnds of shipment fom agg uplench month, Morte te ipmen se eer GREAT Seon chpel by se igh le own sri gh When se perl ang! ak es bekown sole we of ees and igre Gan Fg Dt nce te Bib thewaspraton manag igure 344 The Premivn Freight Data “The transportation manager began by placing the data for the frst year on an XB chase? For Year One, 4,247 of the 60,720 shipments were shipped by ar. ‘This gives an average of 699 percent. The Average Fath wh pads pri ne i ene ge °Undestouing Variation / Moning Caos Figure 315: Xm Chat fr Premium Freight Moving Range fr Year One is 128 percent. Using these aus th Xn arc wil have the lini shown in Figure 3.1, Clea, the percentage of premium Fight shipments has changed dcng this period. The large shift bereen Api and May ofthe frst year esuls ia moving ange whichis above the Uppee Range Limit ‘This signifi & beak in the time sce. When ths happen tis peo Priate wo ask what happened between Api and May ofthe fist yar Upon inveignton the wansprtation manager found tht series of smectngs beoween manufacturing, purchasing and transportation had been held duing April In these mestng se of guidlines had boon developed for en ro use, and when not se premium fight, Th luring Apel they had changed he sytem Te term he it foe ‘months didnot come fom the sme yom athe dts for be lst zig ‘month of Year On. Based on this infcration, the manager revised the lime forthe chat by deleting che ie fou values andthe fe four moving ranges om the computations. The revised imi char is cen Figure 3.16 Ke Thre / The Parpasef Analysis sight Figure 316: Revised Xwit Chart for Year One uidelines forthe use of premium fcight had the desiced effect. ‘Allowing fr the month-to-month variation, the percentage of pemium figh« shipments might go as high as 7.6 perce, or drop to 3.3 percent, buc at the end of Year One ie was averaging about 5.5 perent rather han the 10 percent or so seen at he stat ofthe year. Moreover, the per atages of premium fcigh appear to be predictable, This predicablity wakes ic much easier vo budge and pla, The limits shown in Figure 3.16 were chen applied to the remainder of the vime series, This Xm char ie shown in Figute 3.17. There we ‘ans thatthe guidelines continued tobe effective forthe better part of Year Two, ‘Understanding Variation / Managing Chase LEMAMTTASOND} FwaujJASONO) FMAM) ) “sy I wid A Vee A Figure 317: XmR Chart for Pemiom Freight Data However, inthe ls thice month of Year Two, and continuing inco Year Thee, the percentage of premium fight shipments has definitly increased. ‘Thus, the guidelines worked for bout 17 monchs and then Something changed. The char doesnot tell ws what changed, but edocs tell us that a change hae occured and when i happened ‘The moving range for May of Year Thesis above the lait, which suggests another break inthe time series. Subsequent co this lage mov ing range we sce chee large values on the Xchart- Thus it woul appear that in addition to the change in October of Year Two, thee was another change in this sytem in May of Year Thies ‘This las inczeae inthe percentage of premium frcighe drew accion ‘0 icf by crossing che boundary from single digi values to double digit values. Transitions of this type are easier to spot in the monthly reports and thus the general manager arked forthe uansportation depasrmenc to look into theese of premium Right. If sll ofthese values were 30 unite smaller, this cansiion ftom zingle digit to double digits would not have ‘eceurted, and the second signal would have probably gone unnoticed s+ well 92 rs Tin The Pape Anis ght . 1 ying we proce behavior char each ine tie, he | angen hs plae mine sono spt none worth gale | They sme tha hin guidincs wee moshing long ae thet ted Sie woe Ae Dr: Doning has od ths dy = SO WHAT'S THE DIFFERENCE? _ In the first example (in-process inventories) the manage assumed that large percent diference had wo eepreent a signa, Yee an analysis of the data revealed that there was no signal. The high value was well within ‘he Natural Process Limits, and therefore shouldbe considered to be tou tine. By interpreting routine variation ata signal, the manager caused those who were atked to explain note to waste both time and efor, ‘Mistake like this can led 0 the dtorion ofthe system or the distortion ofthe dita. Thus, this misake ware time, wasted source, and wasted emotional energy—all of which could bave been beter wed in working ‘0 improve the sytem. Ta the second example (on-time shipments) signals were mised by the tradicional approach because of che aml percent diferences shown in the monthly report. A mised signal ran opportunity wasted. The process tied to indicate cat there was problem, but no one noticed. ‘When no fone notices a problem, iis likely to persist and may even grow Bigger ‘While ic remains unnocied i wil sill have a detimeatal effect upon operations. This wil resul in increased cost, decreased slab, snd Potential loss of busines. In che cas of the on-time shipments, the prob- ‘em will have o get much larger before i will be noticed using the tend tional techniques. By tha ie i may be to late wo rept the damage done Tn the third example (ptemium fright) the managers did finally ‘notice something happening—long after the initial change. With theUnderstanding Variation / Managing Choe traditional approach they fnlly found something happening between April and May of Yar Thice. While he proces behavior char shows that something happened betwen Api and May, alo shows a change around Ociober of Year Two which was mised by the wadtinal approach Ta any sady succes wil fen depend wpon knowing whar questions wo ak The proces behavior chare unsurpassed for Focusing data 50 that che wer can formulate the ineeting and inporane questions. So what’ the dference benween the aditional, ited comparitons and the proces behuvioe char? The difience bruce npetition and Irowldge. ‘The wadiiona approach inevitably resls in wasted ffor and rinsed opportunites ‘The ui of tadionl approaches gusantes an exces of both kinds of mistakes people make when inerpreting dt More often than necetary, manages incrpet some bic of oie a sige sal, and thereby waste time and reaoure n looking fran explanation that doesnot exit. On the other hand, many signals and the oppor rity for improvement which these signals represent ate mised by the teadiional approach “The proces behavior char flrs ou the probable nite inorder to leche pote signa in any data se. By filtering out che noe, the ‘process behavior chare wll minimize the numberof mes that you wil Interpret abi of noises fe were + signal By exon the potential signals vo sand out, the proces bchavior chace wl also minimize che trumber of times tha you will miss sigoal. Thus, proces behavior charts are che beginning of knowledge beau they help you to ask he Fight quesions Everybody needs this kindof help a \e Thre The Purp of Analysis sight MONTHLY RECEIPTS Premium payments constitutes major portion ofthe income for a regional insurance company, The company tracks premium payments on ‘monthly bass and includes cher in their monthly ceport ‘The ecipts fom policies in force forthe fst six months of Year One, in thousands of dolls, are listed in Figue 3.18 Recep fom Poses in Force (Thovsand of Dali) Jan Feb Mar Ape May un Ver One 13463 13.468 1345615458 13.405 13455 Moving anges 3 2 7 to Figure 3.18: Monthly Receipts for insurance Company ‘The average of these monthly receipts is 13,460.8. ‘The Average Moving Range is 7.2. These values tel inthe Xn chat shown in Fig- ure 319. [igure 349: Fiat XR Chart for Monthly ReceiptsLUnderstoting Veriton toning Chaos Given the current level of aiviny, and the amount of moath-o ‘month variation, you could expect the monthly receipts to vaty From 13,441.7 to 13.480.0. The month-to-month changes should average shout 7.2 thousand, and any month-to-month change which exceeds 23.5 thousand is signal ofa change ‘The receipes forthe nex six months are shown in Figure 3.20, These six value average 13465.0, Have the auonhlycecsipts increased? While you may be pleased that the vals at, in general larger than before, the real question i whether or not collecrons have actually increased —oe it ‘his just an aberration chat har no underlying assignable cause? The easy way 0 answer this question isto use the process bchavior char. The 12 values for Year One are shown on an XmR chart in Figere 3.21. The limits shown came fom the Xf chart in Figure 3.19. Recipes rom Paice Fone (Thousand of Dla) Il Aug Sep Oct Nov Dee YerrOne 1546213483 13461 13406 13478 13.470, foving Ranges 7S Figure 320: Monthly Receipts for insurance Company Figure 2.21: Second Xml Chart for Monthly Receipts 56 EO ire / The Pape Analysis i ight ‘While the total secepts for che second sx months ae greater shan for the fit six month, there is no evidence chat this nerease in due to any real change inthe sytem chat generates theve revenues, Twa ways that signal might have made iuelf known are, single monthly vile beyond a limit or atleast chee out of four consecutive values which at loser to tone ofthe limits than they ae co the cetel line.” Neither ofthese sgn sre sen in Figure 3.2. Since thee is no evidence that che second six months ate appreciably Ailferent from the first six months, you might decide wo use all 12 monthe ‘0 reve che computed limite, The average forall 12 months ic 3,462.9 and the Average Moving Range is 7.73. The Upper Natural Procest Limit is found to be 13,483.5. The Lower Natural Process Limit i found wo be 13,4424. The Upper Range Limit for the moving ranges ie found to be 25.3. ‘Thus, the individual monthly colleetions can wary fiom 13,442 to 13,463 without signaling a change in the sytem. These lis are wed in Figure 3.23. The collections for the next si months ae shown in Figure 3.2. Recep fom Polis im Fore (Thousand of Deller) Jan Reb Mar Ape May Jun YarTwo 13459 1387 13446 13489 1K4l8 130 MoringRanges "Md ge Figure 12% Monthly Receipts fc Insurance Company ‘These values from Year Two ae included withthe 12 values from Year One onan XR char: in Figure 3.23 line rn cl eee See ie ycnacanaraie aca io et cnn thin oa hina). ng cvsuene Pao te be habia aan cree ena Seo aieUndrstanng Variation Moning hans me NV SAN wane »] men Ae SA” ee The values for April and june are below the Lower Narural Proce Limit. Even ifthe April value had not been outside the limits, dhe vals for Febniary, Macch and May would have signaled a shift. These three values are an example ofthe 3 out of 4 closer to the limit than to the cena line cue ‘Thus, chere i dear and definive evidence thatthe collections have Aropped, and thet this drop ie due to some change in the undedying ys tem thae generate thee revenues. This change i too Large wo have oc curred by chance. es very likely tht there is an assignable cause, and it wil be worthwhile to discover ust what this assignable cause may be. ‘Since the system has changed, the lat five osx var could be ured to compute new limite for use with furure values. The data from Year (One is no longer characteristic of the proces. Continuing this way the wale for exch month can be ported at ie becomes available. Signal wil be detected as soon at they become clear and pronounced, and limits can be eve a8 appropriate to epesent che curse seats of the aystern ot process, Useful limits may be constructed using as few as five ors con secutive vas, ‘The / The Paro of alii ht Large percent difeences do not necessarily indicat a signal ‘Small percent diffrence donot necessarily indicate a lack ofa signal Points outside che lice are signale—they ae opportunities to dis Cover how to improve a process. (A large moving range signifies brea in the orginal time series) Shewhar argued, and expeti= ence has shown, chat iis economically worehwhile co investigate all uch signal of exceptional variation. “The proces behavior chat focuses data so that che use wil ak the inerestng and importanc questions. [single value beyond the limits of a proces behavior chat is signal Another pactern which i taken tobe a signal consis of alas chree ‘out of four consecutive values which ate closer co one ofthe limits than they ae othe cent line The process behavior chat filters out the probable noise in order ste the potential signal in any dataset By fileeting out the noise, the process behavior chart minimizes che numberof mes that you wil interpre bit oF noite a fic were A ignal. By causing the potential signals to stand out, che process behavior hare will alo minimize the number of times chat you miss 2 sign Process behavior charts are the begining of knowledge because they help you to ask therght questions. FoUnderstanding Variation Managing Chaos Formulas or Char for livid! Vacs nd Moving Ranges at: Use the individual alco compute she Avena, This value wl be the cena line fo the Neha FOUR Find che moving anger and eae eae THE BEST ANALYSIS 1S THE SIMPLEST ANALYSIS Te py eg ag oop 28 WHICH GIVES and add the product tothe Average. THE NEEDED INSIGHT UNPL = + (266% wR) “To find the Lower Natural Process Limit forthe X'charts multiply the Average Mosing Range by 2.66 sand subrac the product fram the Average. LINDL =F — (2.66 x mR) ‘To find the Upper Range Limit for the ms chart rmipy che Average Moving Range by 3.27, The tradvonal limited compaisons, in which «current vale is “e exprened a perenage of tome other valu, can aither filter out noise ORL « 327 x a nor highlight potential signa Lange perce diferences may be de to noise and sal percent diferences may represen signal Managem who + The mullite constants of 2.66 and 3.27 sen inthe equations expat nar colateheal stad orca eet a above ac seaing factors needed v convert the Average Moving wiiginmeerdealereia Cormega tinge ange int the vals you need to obain the appsopiat its The prevout chapters have tempted to oun the need for soar. foreach portion ofthe Xk char, ing the probable nos from the porn signals. This chapter will eon + Uefa imis may beconsruced with teva feo vals. tinue with examples of how ths may be accomplished wth management +The uncertaingy ia the computed limits decreases asthe amount of and administrative dara data used to compute che limi increases.Understanding Variation /Moagig Caos PREMIUM FREIGHT REVISITED ‘You should always cemember that shere ace several ways co mestute mort proceser. Consider the Premium Freight Daca from the previous haptec—instead of tracking the percentage of shipments, we could have teackad the percentage of shipping costs due ro premium fight. ‘These data are given in Figur 4.1. “These financial data ae expressed as percentages because the unequal numberof shipments each month makes che direct comparison of the costs hard to interpret. By expressing eich monch's premium eight ‘cost ata percentage ofthat months tor eight cor, the cote are ad juste force different level of acivy. ‘This conversion of ew numbers, Int rates and percentage soften necesry before you can fmeaninglly compare she month-to-month values. However itis imporeane to make tute thatthe adjustments are appropriate for any given tie serie, "The moving ranges in Figure 4.2 were computed using the percent. ager shown in Figure 4.1 om ri Gon ecg Yer Jan Fob Mar dpe May Jn J Aug Sep Ost Nor Dee Figure 41: Percentages of Shipping Costs Due to Premium Freight C Four / The Best Analysis the Sinlest Analysis Wing Ranga renin Fgh Go Fnags Yer Ian Rb Mie Awe Map Jeo Aug Sep Nov Dae Figure 42 Moving Ranges for Premium Freight Cont Percentages Baucd om the analysis ofthe percentage of premium fcight shipments in the previous chapter, we already know to look for @ breik berween April and May of Year One. The deop in percentages is dramatic, and the moving ange of 104 in May stands out like a giant. Since the earlier analysis (on page 51) used che data form May to December of Year One to establish the limits forthe Xo chart, we shall do the same with these ara, For these cight months the average ofthe individual value i 21.65 escent andthe average ofthe seven corresponding moving range is 256 pesceat. These values eel inthe allowing limits. FMAM) )ASOND FMAM |ASONDI FMAM f nom MN nr geet Figure 43: Xm Char for Premium Freight CostsC Understanding Variation / Managing Chase Upper Natur ProcesLinit «B+ (266% WB) = 2165 + (26664256) = 2846 Lower Navral Prcea Limit « R (266398) = 2165~ (266x256) = 1484 Upper Range Limit = URL. « 3274mR ~ 4274256 = 837 The Xi chart for chee data is shown in Figures 43 and 4.5. This chart reveals the same dramatic and definite diference berween April and ‘May of Year One which was seen in Figure 3.17. This change was iden tified asthe result of new guidelines for the ue of premium freight, However, there are some differences between the Xe char in Figure 4.3, and that in Figure 3.17 (which is shown below as Figure 44). For ‘example, compare the Xcharin Figure 45 with that in Figure 44 rey Figure 4: Xn Char for Percent Premium Freight Shipments C Four / The Best Analysis se Simplest Analysis While both Figures 4.4 and 45 indicate che the usage of premium fright has increased in Year Thee compared to Year Tw, they show the firs poine outside the limits ia diferent months, ‘The percentage of ait shipment signaled a change in Oczaber of Year Two, while che percent. ag of cous for ar Freight signaled «change in December of Yeur Two Thus, these two representations of the pretium fight tell the same cove story, bus they dfer inthe deal, The A-chare in Figure 45 shows char the premium costs became erty higher than 21.65 percent in December of Year Two. However, wen we lok at the null which contains he poines outside che limits we sce thatthe run Began in Sepeembes. Thus, while there was a detectable signal i December of Year Two, che problem could have begun at caly September of Year Two Baye Le FMAM) SASONDS FMAM) JASOND) EAM) J Figures: Run of Elevated Promium Freight Costs ‘Thus, both the premium shipment time series and the premium cost ime eis show a change inthe later part of Yeur Two. Something hap- ened wo change che system at shat time. With sch srong evidence of shange, you can begin co ask che right questions which will hopefully revel the assignable cause ofthis shi. Ifyou do mor we proces bebevoy ‘hares then its unlikely the ou will eee bei ina tely mene, 6oo Understanding Variation Managing Chaos Finally, che premium shipmene time sevies in Figure 4.4 shows an audicional shift in May of Yer Three, The premium cont time series in Figure 4.5 does not show a corresponding increase. Therefore, the change sen i the peemiam shipment datas likely to be concentrated in the smaller (and chespet) shipments, In both Figure 4.4 and Figure 43, she Natural Process Lime helped ‘o separate the probable nose om the potential signals. They helped to define when the process acrually changed for the worse. Yet, in both graphs the fc ha hee had ben «change inthe recent month at appar ‘ent from «simple inspection ofthe time tris graph inelf The init just helped to laity whac the graph revealed. The sequence of elevated val- tes during the las eight co ten months was apparent without the limits, ‘This type of signal is alo recognized and should be used, Whenever eight or mre suceive wae fil onthe rare side of the cen- tral in, safe ry thatthe tre rei bas sifed aay for the central line. This rule is often weed even when none of the individual points all ‘outside the computed limits. Eight or more successive value on one side ofthe central line i roughly che same at gtting eight or more heads ot tails in sucesion when toting a coin. The odds forthe later event ate ‘commonly cited at ess than 1 out of 128. Thus, with odds that are longer than 100 to 1, eight or mote successive points onthe same side of the central line are most logically interpreted as signal rather than as Four The Best alysis the Singlet Analyis PRODUCTION VOLUMES (One company had a management information system which would allow every manager co access eurent data forall of the routine mesoures cof plane activey, Now they could all se, ona daily and weekly basis, he levels of activity in each of the vatious production facies —no ote icing wat che end of the month for big surprises! OF eoure everyone was proud ofthis new sysem, and they were delighted to have the fasten taneous feedback After the management information sytem had been in place for afew ‘months one manager decided to ple the weelly production volume for his plan. This plane consisted of continuous chemical proces, un on 4 2&hour, seven-day pee week bits. The production volumes, sported in thousands of dolla, are shown in Figure 46 Figure 46; Plant «2 Weekly Production Volumes Can you se any problem withthe dat in Figute 4.62 Remember, managers tradivonally have uted the cutent value to sscertain how they are doing. This table ie much more comprehensive han a simple limited comparison. Do you see anything unusual in the dria the rable above? Eyebaling the data in dhe manner suggested here can be called enh 1s by smart you ae gong soak up the daa and then you wll understand i ’ Analysis by osmosis is not very reliable because it allows different people co detet differen dhings in the same daa set. Instead of using oUnderstanding Variation /Manging Cis analysis by otmosis, ti aways much beter to graph your data. The time series raph fo thee weekly production volumes is shown below: NAMA a Figuce 47: Weekly Production Volumes fr Plant 2, / How much easier it io deter patcrns wich 2 graph “The manager knew chat ths plan was esentlly running at capaci. “The implied spikes in production simply could not be a characteristic of the physical proces. Yer the pikes area characeitc ofthe ime sre “They pessise If they are not par of the production process, then they mst be par of the eporting proces. Then the manager noticed the pe- ‘od ofthe spikes, Each spike coresponds tothe last werk in 2 month. People were getting behind on their data enty duing the month, and _gevting aught up ac the end ofeach month. So even though the state-of heart management information sytem would gve the managers up-1o- date data roughou each month, che values were not ealy up to dite "The moral to thie story et ruse no data before its ime. In this sy- em the dats have to age before they can be used "This example serves to illustrate che way in which graphic presenta- tions communicate the convene ofa dataset so much more effectively than table of vals, Tables of values tend to overwhelm the usr with all kinds ofexrancous dens, Graphs tend to sweep away the exrancous decals and reveal any interesting sracrares presen inthe data. This is ‘why the proces behavior chat represents such 2 major advance in under- Sanding dats—icie bated upon 2 graph which preserves the time order information. € our ( The Best Analysis the Simplest Analysis tn some eases, such as this one, the signals are so cles-cut and eaty to understand that you will 99 need to compute limits. The eyeball will ‘acualy filter out che noise. When this happens, che graph is generally {lfc co communicate ee results FIRST TIME APPROVAL RATES Recuring tothe original Monthly Report for July the ise Time Approval Rate for Department 12 showed a curren value that was 23% below the average value. Department 12 makes batches of compound Fach batch is exted for conformity to specications. If evry component in ehe compound is within its specification range onthe fis est, chen the butch is approved on frat test. Batches which are not approved on. fine test ace then rewotked ro ring them into speciation. “The Fits Time Approval Rae for July is 548, meaning thar 46% of | he batches had to be reworked. This is 23% below average and 103% below last July’s value. ‘These comparisons make July look like a bad month, Howeves, fr the year, the department is ight on carget wih respect to both the average and lst yea. ‘Once agai, the information provided in she monthly eeport is only a small piece ofthe overall picture. The comparisons are limited and hard to interpret. Does a 54% fis time approval for July represent an {nual condition or not? How ean you know? Monty Repo Jy a ae, Metrannaee TasoUnderstanding Variation / Managing Chaos ‘The First Time Approval Rete for the past 31 months ate shown in Figure 4.10. Is hece any problem with thee data? ie App f eparee Yer Jun Feb Mar Age May Jon Jal Aug Sip Oct Now Dee Two 8 @ B Sl mw SR GS ws The @ 6 7 5 Figure 49: Fist Time Approval Rates for Department 2 . . g ae fl I ae | /\ HTT Th eal a UTRERTT SON) paar Tas oNBT AACR Figure 410: Time Series Graph for First Time Approval Rates ‘Whar pater exists in the data shown in Figure 4.10? Would you be surprised to lean tha while che monthly Ficse Time Approval Rates ae ‘only used in the local plant, the quarterly rats are reperced to corprate Ieadguarter? What does this piece of infocnaton ad co the ieerprees tion of the graph in Figure 4.102 Hiow does Department 12 achieve such outstanding results every third month? And, if dhey can doit every thind month, with such regu laity and predicate, why can’ they do i every month? c Four / The Best Analysis the Simplest Analysis Upon inquiry, ie turned out chat Depactment 12 was under an immense amount of presture co make tre thatthe quately rate was neat 70% so thatthe plane would not recive any “special” stention from corporate herdquartes. They dutifly complied by changing the system In the chitd month ofeach quarer—they would run a special "preini~ rary test” on each batch. I the preliminary test showed the batch to be out of specifications chen addtional work was done before they would take the "fist cet” sample. Ia thie way they would boos the Fit Time Approval Rate for the third month and for the quarter as a whole. Nobody at corporate headquarters asked any questions, so everybody in Department 12 was happy. Isnt ic gest wha creativity in the workplace The graph shows clealy chat there ae wo different es of data being mixed together here. The data from the fet wo months ofeach quartet rages about 60%. “This is a more acurate indicator of what this Aepartment is really doing. IF the thd month from each quarter is Mine te! z TERAMT TAT OND, igure 63: Mor In-Process Inventory Vals [Ac this point the manager mighe well decide to change his seategy— ro mote Mr. Nie Guy. What this group needs ia cough manager A AN, ai Noma eg TawauT) SOND LLAMIT Figure 6 19 Months of In-Proees Inventories So, in July of Year Two, when the in-process inventory hit a valu of 25, the manager swings inte high ge, He calls everybody in and reads them the toe act, He demands tha they do something to keep the inLUnerstonding Variation / Managing Caos process inventories down, Following thie tantrum, the personnel of Department 17 keep 2 low profile. Shore of hiding material in the datk corners ofthe plant they don’t know how to reduce che in-process iven- tory. So they hold their breath and hope che inventory evel wll drop. Ta ANF, “Tania | ATOWDT PHAN ASOND]E Figure 65: 26 Months of n-Process Inventories ‘Ad wha isthe boss likely to think about allthis? He gave thie de pparement an award and then he watched thing ge worse. Then he rsd them rot act and warched cinge get beter. While nothing was done to change the sytem during the pas seven months, the manger i el likely to decide thatthe recent “improvement” ate duc to his intervention in July of Year Two. Obviously Pharaoh was right! Tough management work! RRM ‘Wha is wrong with both of dhese conclusions abou what works and what doesae work? Both are examples of superstitious learning. Both ae based on the interpretation ofthe high values and low values signal, Hlowever, as the process behavior chart in Figure 6.6 clearly and plainly shows, nome af hse ndividualvaluer were renal ‘Six / Look What You's Bars Missing of AEM AN nel a Tian] J ASOND] FMAM Figure 6: XmR Chat forthe in-Frocess inventory ‘While che numerical values at different fram month to month, they all represent the same underlying system. The high values do not repre seac anything diferenc than do the low value. They should all be ice. preted alike, Inexpeting che low valu as indicative of good performance wea an example of interpreting noe as it were a signal, Incerpeeting the high value as indicative of poor performance i alo an example of in terpeting noise as iit were atignal. Both interpretations are completely virong. Both lead ¢o the wrong actions, and both mistakes mislead the ‘manages in his understanding of what has happened. Unfortunately, most managers are proud of thee ability to ineepret, ea if ie were a signal. They consider this ro be ana 'No matter how eloquent the explanation, no mater how convincing the ogi, noise is sill nose. Any atcemp to exphin noise is merely an tercte in wighilthinking-the eeu i pure ction which will have no ‘contac with ely, Proce behavior chara are the imple wy to filter ot the nie which is pretenim all date vt, The flare owe process behavior chars t ancyee Time rier i ome of the br ae: known 20 max increase ets, te effort, sand ler morale.Understanding Variation Maneging Oacs LESSONS, 1. Data have no meaning apart from their context. Das presented without «context are effectively rendered mean ingles. Monthly reports da not «ypielly provide an adequae TL. Before you can interpret data you must havea method of analysis. 4 Comparizons to specifications, goals, and targets do nox provide ‘rational context for analyse nor do they encourage constancy off purpose. They encourage a binary worldview in which you ae cither "operating okay” or are “in ouble” These comparions do not allow you to separate potential signals from probable noize. They lealy do not consider che impact of variation upon the data. They simply ignore variation and weat every fucuation as asignal, Comparisons to average values are only sighdy berer than com- parsons to specifications. Hee the proceso outcome is charac terized as being ether “above average” or “below average” There compatzone do not allow you to separate potential signals fom probable noite, They ltrlly do not consider the impact of vai ‘tion upon the data. They simply ignote variation and tet every ‘Bucruation at signal Process bchavioe charts provide a ewer approach to the analysis of data, They overcome the shortcomings of che other a proaches because they explicitly consider the effects of vataton upon the data. By characterising all variation a either routine (which is prediceable) or at exceptional (and therefore unpre Aicesble) the procest behavior chart shift the emphasis away fom the reuls and oward the behavior of the aytem which produced the ces, This shift in emphasi ic a msjor step on the road of continual improvement Six / Look Wt You've Beot Ming ‘when a sytem is predictable, ci already performing 2s con- sintenly as posible. Looking for assignable caures is 3 wate of time and effort. Instead, you can meaningfully work on making improvements and modifications tothe proces. ‘When a system is unpredictable, i will be futile to ery and ie prove or modify the process. Instead you must sek to identify the asignable causes which afer the ster, The failure to diringush berween these two different courses of action isa major source of confusion and wasted fore in basinest today. IIL, While all data contain noise, some data contain signals Before you can decet a signal, you must filter out che noite. "There have been many differen statistic techniques invented to separate pocential signals fom probable noise. OF all ofthese techniques the proces behavior chat isthe exsist ro use. IV, The purpose of analysis insight ‘The best analyse i the simplest analysis which provides che needed insight. When the proces Bchavioe char is used in con junction with histograms, flow charts, cause and effet diagrams, Pareto chars, and running records itis possible ro obtain from ‘the data thoe insights which will emi hidden fiom those who continue to use the traditional nays.Understanding Variation / Managing Cans Sie / oak What Yo Baon Ming WHAT SHOULD YOU DO NO’ Stasis has never been spectator spore. Process behavios chart at so exeption. You should ef you can compute the limits and construc an Kink chat. 1, The US. Trade Deficits fr the ls half of 1988 ae showa in Figure 6.7. Use the data of Figure 67, and the blank form in Figure 68 cf fc th ime seria graph forthe U.S. Trade Deficits forthe ls ball ‘of 1988 ‘ade Defeis 2) jl Ae tysn_t05_uz__92_101_104_105 Figure 67 Monthly US. Trade Deficits, 2988 (Sbiions) 2, Use the data in Figute 6.7 to compute che monthly moving ranges. Note that moving ranges ate defined to be poiive values, and are found by computing the dffscnces beeen sczeive values. Weite thon valu in he space provided in Figue 6.8, and plot che running record of the moving ranges. 3, Compute de average rade deft for the ase half of 1988, 4. Compute the Average Moving Range 5. Compute the Narural Process Limits forthe Xchaet using the for ‘mulas on page 60 ox on page 137 Figuce 88: Form for Xmk Chart, 1 Ploc the limit fiom Figure 68 on Figure 6.10. 4. The US. Trade Deficits forthe first half of 1989 are shown on the cnet page in Figure 6.9. Plc thee values and their moving ranges on the fom given in Figure 6.10 usUnderstanding Variation / Managing Chios Six / ook Wa You've Bee Mising fe Rb Mar Ape May Jon THE TRANSFORMATION ‘Tete isan obstacle on the path fom awareness co understanding iw 87872089690 Figute69: Monthly US, Trade efits, 199965 billions) a order to move beyond awareness, you must fist begin to pace the states eciguc Ie ion afer you ue thee wok hat you begin a to undestand just how they work and why they work. Onoe this under ‘Canding ha taken root you can bepia to actually explain the phenomena ealed by the tools, This feedback cycle continues and becomes the ovr way of thinking which i the Basi for continual improvement. In thors, you must Sst act—in order 1 understnd-—in order to explin— inorder tobe able co at fletvely 2) 3 Explaining Process Behavior Figure 60: Foam for Xu Chart There are two indications of shifts in Figure 6.10. The fis shift was favorable, nd the second was unfavorable. 9, When i thie fvorableshife dace? Figure 6a: The Leap of 10, When might this favorable shift ave begun? — 11. When i the unfavorable shife detected?WHAT SHOULD YOU DO STARTING TOMORROW?: LUnderslaning Variation Managing Chass “Write outa ist ofthe measures that you routinely se. ‘What kinds of dats do you have at your disposal? ‘Out ofthe list above, identify those measure that you we Some measures will be reported for your information, other measures will be the numbers thar you actualy ws. Pick ewo or three measures chat you actually ute and stare (0 plo chem on a process behavior char. "You may begin there charts withthe cutrent values, or you may go back and use historical values to ger stared. Either way, se the chat to learn what che woie of your current process may bbe. You have to begin chastng something i onder to practice the way of thinking that is pare ofthis whole approach co undercanding variation, ‘Ask yourself you ae collecting he right dat. Both the data you collect and the data you report need to be useful, correct, and undistorted by artificial boundaries, Data ‘which desribe the activity are beter chan daca which describe Side effects of the proces. Likewise, data which concern those things which che manager can coauol are more useful chan mere epor card data ose upon This will immediatly require, among other things a tansor mation ofthe monchly management epor. cexpreting data within their contest. Six / Loa What You've Bo ising Filter out the noise of routine vaiation before interpreting any value a a potential signal of exceptional variation. ‘The flare to do so is « matk of numerical nuveré, and che ive ae fir game forthe con acti, Ceaser ak for explanations of nie. Inthe absence ofan identifiable signa, che curene value canoe be sa to differ for the preceding values. In the absence ofa decectable signal no amount of explanation, however well ‘worded and rezoned, can be supported by the data Understand that no matter how the results may stack up agains the specifications a process which is predictable ic per forming s consistently si posibly can in ite current config For more about this see “Ife Ain't Broke, Don's Fix I” inthe appendices. Always distinguish berween the Voie ofthe Process and the Voice of che Customer. ‘You cannot begin to get these two voices into alignment until you understand how they dies, Help others take action on asignable cases, Knowing che assignable case sony the Gist ep. Detrimental assignable causes need tobe eliminated, Beneficial ones need to bbe made pare ofthe proces.Understanding Variation Moneging Clos BUT IT CAN'T BE THAT EASY, CAN IT? Yes iccan (One company had a monthly production meeting, Several managers ‘would get together each month, review the figures, and plan che produc- tion schedule for the next month. Halfof dese managers had to fly fom ‘one location to another for this meeting. Berween the meeting isl, the preparation time for those onsite, andthe evel time for dhe others his seeting took over one fall day our ofthe month foreach manager who! sttended, ‘As the production personnel got mote familie with process behave the monty chars, the production manager began to plc the figures for production meeting on charts. Asche group of managers got comfortable ‘with dhe process Behavior chars, and came to understand ther, they quit reacting to routine monthly variation ari each swing was signal. As they ceased co tamper wih the proces, che meting stared ro get shorter, Finally hey no longer nceded ro have a fceto-ace meeting, The dis cussion needed to set she production plan for the next month could now] bbe handled with + conference cll. OF couse, che conference call repre sented a significa savings in time and money forall concerned ‘Aer about a year ofthe canference cil, the group was sufficient comfortable to shift ra the ute of emi to develop the monthly plan, ‘This change represented further savings i time for virally all of the managers involved, Together, chee change esenially gave each man ager an cts day each month! “The breakthrough for thi group was the graphic presentation ofthe data and the application of che saisia thinking which is par and par ‘el of the proces behavior chart, ‘Some sem to think char the zluton to thee problems could’ this simple. Well, iis and iin’. The actual technique, she compu Six / Look What Youve Bern Mising son andthe graph ae que snpe nde. The way of thinking the tndenanding of taion which moines he ehniqueendenrpes the inert of he alas ob clad, Ths wl ake Boh tine and pace Tees tans ping. Therein hoa, Millon of people have proven bythe own cxprece over the 60 year hc proces ints ore Teepe under Sanding and wing dai no on i. The queon bt er wheter oF Soden wl woh ate wht on 9 lke ‘There's nothing to ie but vo doit Those who do mat we pros behavior chets have ao advanage over those wh oi, i i \ oh€ Understanding Varian / Managing Cas 0 Mt W. vu. Vill a x APPENDICES Three Type of Action [ACCharcteization ofa Predicable Process ‘A Characeriation ofan Unpredictable Process For urther Reading mB Charts Using the Median Moving Range Xia Chare Using che Average Moving Range Wy Noc Us p-Chaes? ‘A Modest Proposal Ife Ain Broke, Done Fee Index 1s 126 30 134 136 37 138 139 4 153, 2a Understanding Variation / Managing Caos Aponte, ¢ THREE TYPES OF ACTION 1. Specifications ar for taking action onthe provers outcomes to separate the acceptable outcomes fiom the unacecptable ourcomer after theft. ‘he Voice ofthe Caster. 2, Process Behavior Charts are for taking ation onthe procest— to look for assignable cautes of exceptional variation when the ae present, with an eye toward proces improvement, and wefan fom looking for assignable cases when they ae absent, (he Voice of the Proce, 3. Actions to Align the Two Voices are appropriate— hile thie hasbeen ied inthe past, the lack of well-defined Voice f the Process has made alignment difficl to achieveUnderstanding Veriton /Maneging aos ‘A CHARACTERIZATION OF A PREDICTABLE PROCESS _ 1. When a procs is predictable the variation in the proces outcomes, tr products wil be esendally the came day after day. Figure At: The Past Pedi the Future 2, When a proces is predictable we can find Nacaral Process Limits ‘which wll Bracket vitally al of the process outcomes. These lis may be considered tobe the Voice ofthe Process £/ a |r | Lower Natoral LUppes Natural ‘Procese init ees Li Appendices C |. If the Voice of the Process i not propel aligned withthe Voice of the Conor heasome faction of fe procs outcome wl be rence We ioe con encom 5) “grrr dpa day heb ction nononfning wil esi week to week or month ro oath. ms Tomorrow Today ~~ Figure A: Misalignment Between Voie of Process and Voice of Caster 4. When a proces is predictable allo he outcomes ae consequences of the common causes of routine vation, Seeking a special expla tion for the extence of any outcomes that may be unaceepable will bea waste of ime Routine Variation due to Common Causes ue ‘ecpableOvtcemes | Linacepable yes Specicion Figure A4: Routine Vasiation Can Generate Both Good and Bad Product¢ “When a proces is predictable she oly way to tackle che problem of Meee fle outcomes sto work to bing He voces ito alignment Fhe he proces wil hove so be modified, or the specieatons wil favo be changed. Understanding Veriton Managing Chas oeeem in Se _ Popes 46. When a proces is predictable the outcomes will vary within the [Natural Proca Limits without regard forthe Specification Lit. on upper cee = Pe Figure AS: Aligning the Voices Ney Uppet Figure A.6: No Mater What the Specifications — "The Process Can Do No Batter Than "The Voie ofthe ProcessUnderstanding Variation Managing Cos A CHARACTERIZATION OF [AN UNPREDICTABLE PROCESS 1. An unpredicable proces will diplay both sosine variation and Ao eeeret titi. The rune vaon wil be die common Serra the exceptional variation wil be actibuted co assignable SaaS “Glace snigaable cases wil, by their vey nature, dominate FreSSinmon canes the cxcepional vatation wil dominate the rou (Gnewaration and the process wll behave unpredictably. Figure A7: An Unpredictable Process 0 € Arpotice ven ifthe past production has been 100 percent conforming, 8 tpredicable process wil defy all of our temps to characterize the Fite outcomes, The data shown below came from an unpredictable production proces Mondays Prducton “ues roduction _— = tell ten... ? 2 2 Tharadys and Fay Production Figure A&: One Week's Worth of Production€ LUnderstonng Veriton Manoing Chaos 5. When a proces is unpredictable the process behavior chart will detect the presence ofthe asignable cases. Each and etry signal on pro ‘Re Fichaniorcharerepreemts an opporcanity co gtin more insight aro your proces. Figure As: Points Outside the Linits Are Signals 4. Shewhart constructed the process behavoe char in auch a way cha ic er lnoc always be economical co epend che time co identify the Trigable causes asocated with che points ouside the limi Snowy Figure Al0: Is Anybody Listening? 2 Arpondices C 5. When a proces is unpredicuble, the outcomes will vay without regard for ether the Natural Process Limi of the Specification Timi ‘Spee it Sone Limit pea Figure A.1: When the Process is Unpredictable “about the Best You Can Says "Tomorrow Is Another Day” ws¢ Understanding Variation Managing hans FOR FURTHER READING __ ‘The Deming Dimension Henry Nese 7 ‘A fst historical perepacie which also cal explains che tenes «he Deming plosphy. This book taches us the anowers that we ned 0 ‘hic our had work and bes efforts ay be rewarded wih sucess athe: Se SPC Pres, Kroll, Tenses Fourth Generation Management: The New Business Consciouness Ty Bran eine How the evasion in management an the revolution in quality ae converging aod what mean for busines and the nation, Rested rad “ MeGev New Yo SPC atthe Exquire Club by Donald. Wher wa goup of workin ight sd the simple os 0 improve oe ese ei stac tro Yor rayon brag 'ShC res Rosle, Teme Deming Ma at Work Mia When Practical applications of the Deming management medhod in fr fom a over the indi peu. PT Puram Pblhing Geoup, New York Ont of te Cri Fe Sete Ding “The source bok for Dr Deming’ pilosophy. Best when red in coo- junction with The Deming Dimenion MIT CAES Pes, Cambri Ma 2 Arpenics Building Continual Improvement by Donald, Weslo sod Shel R. Pong This book wat writen asa sequel to Undentandig Vario. th Key to ‘Managing Chane fils in the dete thse are nwded for contneal limprovement inthe service indastey andthe sdiinisativearest of Your ‘organization ‘56 Prs, Krai Temesce Understanding Sutil Proces Control Second Ed ty Donald) Whee nd Deid & Chanten Voted “One of hts op books on quali This teak che new send pr toe tho won te sb Be Sona techniques Tho tox Gen expan both te ta nd te plop ‘using manufacturing and process industry examples. eemisea 3A Kile, Teese Deming’ Road t9 Continual Inprovement ty Witham We Scherer Undeanding Profound Knowee inva a eelutin in thought Operating Profound Knowisge ques an colton in pact Bh ofthese reuremens st aldose nt auc bok shes ow ‘hese concep a be oto woo in out busines ‘SPC ean Koil, Tense The New Economics ‘oy W. Edd Deming Thisis De. Deming’s sequel to Out fe Cri Bost when ead afer The Deming Dimemiom ad Out of the Cai MIT CAES Pres, Camb, Mas. The Improvement Guide ‘by Gerald. Langley. Kevin M. Nolan, Thom W. Nolen, Ciford L Norman, and Loyd P.Provore ‘A valuable source book fr the nuts and bol ofconinsalimprove- mene via the Plan, Do, Study, Act te Joe Bs Publhe San Fic asUnderstanding Veriton / Managing Chaos XMR_CHARTS USING THE MEDIAN MOVING RANGE + Use the individual values o compute the Average X. “This value wil be the central line forthe Xchar.= + Find she moving ranges and ~ obtain the Median Moving Remge, mi. “This ale willbe the cent in for che mR cha To ind the Upper Natura Proces Limit for he X hare oukipy the Median Moving Rang by 3.14 “dade producto the Average. © UNPL = ¥ + (314 x mi) ‘To find the Lower Natural Process Limit for he Xba: lily the Median Moving Range by 3:14 “nd nbat he product from the Avoge inp =~ (34 x wR) +) To find the Upper Range Limit forthe mi Chast snulkipy the Median Moving Range by 3.87 URL = 387 x mR “The mulkplicative constants of 3.4 and 3.87 sen in the equation above sre de sling factors needed to convert the median moving range] Bou Gn obain dhe appropiate limi on exch portion ofthe chat. 1 Tae computation he Malin f India! Vu ay be wed i place fhe ‘ie na Ya 16 Arpenies _XMR_CHARTS USING THE AVERAGE MOVING RANGE ‘+ Use the individual values to compute the Average, Z. ‘This value will beth central ine forthe X chart. Find the moving ranges and comput the Average Moving Range “his vale willbe the cent lin fo she mcr. To find the Upper Natural Process Limit forthe X char ‘multiply the Average Moving Range by 2.66 and add the product ro the Average UNPL « % + (266 x wR) *+ To find che Lower Natural Process Limit forthe Xchar: ultply the Average Moving Range by 2.66 and subeact the product fom the Average INPL » X ~ (2.66 x mi) + To6ind the Upper Range Limit forthe mi chart multiply the Average Moving Range by 3.27 URL = 3.27 x wR ‘The muliplcaive constants of 2.66 and 3.27 seen in the equations howe are the scaling factors needed to convert the Average Moving ange 0 you cn obtain he appropri ints on each potion of he© etnerstantng Variation Managing hans ra 0% o} ae. WHY NOT USE P-CHARTS? — Many woud be tempted o wea pcre with he oie shipment an ets wa the pcm ght shipment dita on ag dar eon tme closing data on ges 62-69. Hower Ieee elem with ding s»—nane}, the aumptons of cece ti iy el ae nt eed. In pata, the prs aia ee Déngom ne at conan tt aaa pty of ipmen bing pe ya mt 2 mens in oy gen month an ie probably of eS ng ded oi ne eat or el 35 pe pare a a esl ood thin cach Cine re seer enc of sere sing conned wl Fd fa binomial ebay model nd wll ale Spi noe lr sti Ga i orton an optus? Only whes th bina praia raat Fishin 8 Vez SE pseaecan aces 2 okay ae pees SE ee proocn ofir ional po Cea aT and she Poi cps teas tpt bi nada Fan 2 enol a a a Wk char wii coun asd dae? Anvcing oe eS ple became aro Ta Se A Sacer oda alu he Xm chart wil Fee otc chars, when they would be approprite Fe ei ecagl chara iappropine, che XR car Fe era an emp spposch ae thin Bi Han er uty model, Theor f you do 20t kao to Pa pot model odo nota 1 oy a ea uch wh yor coon bued da. 138 Appendices C A. MODEST PROPOSAL “The body of cechniques commonly known at Statistical Proest Con- teol have been around for over 70 years. However, fiom the very beg ting, and continuing down to the present, chere has been considerable Confsion about the nature and puspose of SPC. I belive this is because Inaay have sought to reihape SPC according to their own background sand experience, ‘Some hear the words Statitical Process Control and immediately think of clasial statistical procedures. They uy to fit SPC ino this, ‘eamework of mathematical models, probably distibutions, estimates of parameters, tess of hypotheses, and confidence levels. OF course, Sven tis group trie to share thet version of SPC they are met with that Tame toa lack of comprehension which isthe fate of clasial sates But statisticians are acustomed eo ejection, so this is nohing new ‘Others hear the words Saisial Process Control and mentally inset 3 liyphen berween the Ist wo worde-—SPC is choughe of as 2 manual ‘echnique for “proces-byphen-conteol." ‘The objective is co mina che anes quo for 2 process, It is merely 4 process-monitoring techniques something tobe ised after you have already gocen the proces into a st- isactory state. "And, since this what SPC is about, woulda'c you ike to know about some of the nea algorithmic proces-conolvechnigues tnd process-modeling techniques that have been developed in the past few year” This group would be glad to encoll you in «seminar or sel you Some software. But once agai, there is hurdle of culy mathemati {al proportions to be overcome. ‘The fant of heart need noc apply. “Thove without calulus should not enter ino ths door. 'Athed group uses the word “contol” te denote conformance to pec ‘fications, and so when they hear the words Seaistial Proce Control they chink about eying co produce product within specifications. Given, 139¢ this pespeccve, they think of SPC as a complex route oa simple objec- tive. and accordingly they ey to simplify SPC. This group tends to want to bypass the computations based on the data and instead use che speci Cations t set ation limits, While tht simpliciy sels well, i has the lunforunate characteristic of completly misrepresenting what SPC is ll bout. ‘Those who wse these simplified approxches may meet with some Timited success, but because their objective falls shore of what can be done, because they do noc sck to get che most ou of thes processes, they donot reap the benefits availble fom SPC. The rey fills shor of the promise, and the users return to sorting asa way of life—make enough ‘self and some otis likly robe good. "And then there sche group that i confused by the thee groups above “They do not understand the fisecwo interpretations of SPC, but they presume that there mutt be romething to all the mathematics, and s0 ‘hey eneumbe: SPC with ll ors of distibucional assumptions, cautions, and requirements. These superstious eestictions on how and when to le SPC become obstacles and impediment that discourage all but the most determined wer. Enough of this nonsense! Suaistical Process Control is not about static, is not about “procese-hyphen-contol,” and itis nor about ‘Conformance 0 specifications. While SPC can be used inal ofthese sways iis much move than any one of these marow interprecaions. Its, iz beare about geting the mot from your process. Is about the Continual improvement of proceses and outcomes. And iti ist and Foremost, «way of thinking with some ool atached. "While ie sexy to focus onthe tool, and while ic is easy co teach the tools, the vols ae secondary tothe way of thinking. Lean the tool and you will have nothing. You will not know what to do. You will not now how to use the tools effectively. ‘Lear and practice the way of chinking chat undesgirds che rools and] ‘you will begin an unending journey of continual improvement. Without major capital expenditures you will cover how to increase both quali tnd productivity, and thereby ro improve your competitive poston LUndrtanding Variation Managing Cos 0 Append C This is nota theory. This has been proven ime afer time, But of course the sucess companies af reluctant to share this secret with ther competitors (ven their competitors could understand i). "And ths is where the nomenclaare get in the way. As outlined above, along a we wie the words Satta Proces Contol we wil Stimulate people o think abou echsique fr manag hear 930 {As Tong as we all hour “contol chars" we wil continue tobe misun- dkestood at described above simply because ofthe may diferent conno- tation of the word contol. ‘The words “out of contol” wil generally bring to mind the image of dingrunded woke going eanyatd choot ing his flow worker, On theater hard. the words “in contol” are cued o mean "under my cont” and “in pecifeation” Se to undewtand jus wha Shewhar meant when he wsed the word contol” we sunt i nm definition “A phenomenon wl ea tobe concrlled when, through the ue of pst experince, seein predict at ast within limits, how the phenomenon wil vary in the tre” Hee we se thas pedicabliy te eenc of Shewhar’'s se ofthe word contol A phenomenon thats contol is predictable, and conver, 2 phenomenon cat snot controled is wapredicble. Consider how the sense of Shewharts defnicon i unchanged by the fllowing paraphrase: ‘A proce wl be id bepredble wen, hough the ue of ps experince swe can deri, a et within init, how the proc wil beeen the acre The substitution of these four words does ot change the thst of Shewhar’s iden, bac it does vil some ofthe confusion that hi ginal ‘word ave engendered. Thus the conto cari, infect, prac behavior cart. Kc exam ines the data fom a procs ose if the proces is predicableo anpre- Pa€ she exon table, When» procs is uapeicable it wil play the op se cs te rout of asignable cua. When 4 poe pe Free aN gay the rome marion ati ccc of com tr, node to bens win he ears and nnd of thers nd ce em tw eajy the benef f Shen reno, consider Ching te llowing termine. Understanding Variation / Managing Cos Instead of Stata Process Control, talk about Methods of Continual Improvement. “This has che advanage of focusing atention onthe job of making things Beer by geting the mos out of our cutent ats and po cae a oppose to merely monitoring the proces to mainsin the satu qe. Instead of contol chats, «all about process behavior chars “This has the advantage of avoiding the baggage associated with the word "contol" while corety dscibing how 1 use the char o ge the ost out of an existing proces. Insead ofan in-contol proces, tallesbouta predicuble proces Instead of n oucofcontel proces, tall about an unpredicable proces. ‘All wo often the words “in-contol” ae used to describe a situation where all ofthe product fills within dhe specification limits. ‘The words “pelicable” and “unpedicable” do ot cary the same connotations eis eny to make a distinction berween 2 “predictable proces” and} “acceptable product” Appendices C Innead of an oucef-contol point talkeabour a point outside the limi Instead ofa in-contal point, tall sbout a pine inside dhe limi This simply replaces emotionally loaded terms with descriptive phates Instead of contol limits fr individual values, talk about natural process iis Instead of contol imi for averages, talk about Lit for averages (Upper Average Limi, Lower Average Limi Tnstead of control imi for sanges tak about limit for ranges (Upper Range Limit, Lower Range Limi) “These changes are not as hatd to get used to ar they might seem at frst, and they avoid the red-herrng of “conwl imi.” Finally, I mute acknowledge chat che idea of better terminology is not mine slone. Process behavior charts came fiom Dr. Sophronia Ward, [Narural process limits ceme from Profesor David S. Chambers. Pre- dictabe and unpredictable was the suggestion of Mike Kazef. ‘Ace yeas of working for a beter undertanding using the traditional terminology Ihave finally come ro che poine tac lam convinced that a new terminology is necestay to cleay and eflecivly communicate the ppurpote and we ofthe powerful techniques of Continual Improvement. f h 16Canestanting Varin tong Ot EIT AINT BROKE. DON'T FIX IT For many hundreds of yats the phese if ain’ broke, dn’ fit has summarized the predominane approach to proces operation, From the physician's admonition to de no harm, to the slightly more positive [hori she scaly whee get the grace there isa common theme of dlifereriting between the things that need robe acended v0 and chose that do not. When your proces is in trouble, then you should do Something about that ouble, but when your proces is operating okay, then eave ie alone-and every process can be characterized as iter being jn rouble or at operting okay "Trouble is unully fairly eny so identify. A piece of equipment isin trouble when ie ceaes to operate, With 2 production process, rouble nay be defined by too much nonconforming product. With a sevice process, uouble may const of too many complaints, or rework rate tha is too high. Whatever che situation, eouble is whatever upsets the ‘oss andthe absence of rouble is generally cen to bea sign chat things sre operating okay. Nongonfoonng ono ieimble (Operating fay Figure A12: The Traditional Definition of Trouble Cf couse, whenever you aein trouble you wll recognize the need eo do something toalleite che wouble—no one wil argue agains fixing broken proces, So don’e just rand there, do something! Buy a new technology, undertake a major process upgrade, form problem-solving team, or reengineer che proces! 7 Aponte ‘Ths, we have the squeaky wheel approach to process operation. secks relief when the wouble becomes intolerable, bu otherwise ic avoids rocking the boat a lng 28 the process is thought o be operating okay. The squciky wheel approsch ir driven by the unacceptable outcomes, and ulimately, i is based on a pesiminc view of the effects of your inte vestion—you could make things wore, 0 waie wail the outcomes are s0 bad tae anything you do will constiute an improvement. Evencually you may get beyond this; you may develop enough exper- ‘sein operating your own proces that you will fel comforable in uying to improve your proces even before it tin trouble. When this happens you will get to the poin of rweaking your process even when itis operat~ ing okay. Thus, we could expres the um of centuties of conventional wisdom a “gnre Cr reah) the good process tnd rengincer the bd proces, “This statement summarize the traditional approach to process manage ae or eT Se > pot Figure A.13: Squeaky Wheel improvement ‘While cis tational approach does pay heed to the srap ete, i does sot incorporate the effecs of variation. And the effects of variation lead ‘o + second definition of what constitutes trouble; «definition chat ix based upon the way the proces behaves over cme. In particular, carne ot that che behavior of every process ca be characterized a being ether predictable (within limi) or unpredictable us