What is an issue tree and how

to use it?
Practical guide with examples

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What is an issue
tree?

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Issue tree is one of the most important tools
used in management consulting

Bottom-up approach Top-down approach Backward logic

Compounded effect Issue Tree Priorities

Benchmarks 80/20 rule Opportunity Tree

KPIs and business Theory of constraints

drivers and bottlenecks

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 Issue tree is a concept that will help you guess in a structured
manner the problems, reasons causing those problems and on
the basis of this decide what should be analyzed
Analysis to be
Area of analysis Suspected problems Possible reasons performed

Possible Reason 1 Analysis 1

Problem 1

Possible Reason 2 Analysis 2

Area 1

Possible Reason 3 Analysis 3

Problem 2

Possible Reason 4 Analysis 4

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It helps you do a lot of things….

Guess in a structured manner

Set priorities
the problems

See what you have to do to Coordinate a group of

check certain hypotheses Business Analysts

Show to other the whole Not to get lost in analyses you

picture do

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 Let’s have a look at
examples of issue trees

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We will start with an example of
logistics in a chicken producer…

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 Have a look at an issue tree example for a chicken meat
producer. We guess that he has 3 problems in Logistics
Analysis to be
Area of analysis Suspected problems Possible reasons performed

High costs of transport per ton of

goods

Big level of waste and breakage in

Transport
transport

Low usage of resources

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 Then for those problems we try to guess the reasons causing them

Analysis to be
Area of analysis Suspected problems Possible reasons performed

Badly designed routes

High costs of transport per ton of

Too big fuel usage
goods

No shipments on the way back

Badly designed method of packaging

which makes the product prone to
damage
Big level of waste and breakage in
Transport
transport

Speed not adjusted to the product

Badly organized work and schedule of

deliveries

Low usage of resources

Limitation on delivery time of finished
goods

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 Finally we come up with analyzes we have to carry to prove or
disprove these hypotheses (that certain reason is causing certain
problem
Analysis to be
Area of analysis Suspected problems Possible reasons performed
Analysis of designed routes, their
Badly designed routes length and the influence of possible
changes

High costs of transport per ton of Analysis of fuel usage and kilometers
Too big fuel usage
goods covered by vehicles

Analysis of load carried on the way

No shipments on the way back
back

Badly designed method of packaging Analysis of correlation between type

which makes the product prone to of packaging and percentage of
damage damaged
Big level of waste and breakage in
Transport
transport
Analysis of time spent on the way and
Speed not adjusted to the product
kilometers covered in that time

Badly organized work and schedule of Analysis of level of overtime, daily

deliveries organization of drivers work

Low usage of resources

Limitation on delivery time of finished Analysis of Clients’ preferences on
goods delivery time
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Now let’s have a look at an issue
tree for a Retailer….

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When you are talking about Retail you should
have a look a the following areas

Retail chain development Expansion model

Product Range / Category

In-store process
Range Management

Pricing HR especially trainings

Logistic / Supply Chain

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 Below you can see example of issue tree in Retail
Chain Development

Analysis to be
Area of analysis Suspected problems Possible reasons performed
Low LFL due to cannibalization (on- Analyze the change in sales after opening
line, new stores in old locations) new stores / on-line introduction

Low growth in sales

Analysis of number of openings vs
Few new openings in locations
availability of new places

Increasing rents due not proper usage Analysis of rents vs comparable

of purchasing power competition
Retail chain Decreasing EBITDA of new stores
development Salaries growth vs rotation – comparison
Growing salaries to keep low rotation
with competition

No support from the shopping malls Analysis of contracts with shopping malls

High cost of building new stores

Not optimized formats, expensive Analysis of cost per 1 sq. m, number of
fixtures fixtures, cost per fixtures

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 Below you can see example of issue tree for Retail
where we cover Product Range Management
Analysis to be
Area of analysis Suspected problems Possible reasons performed
Too many supplier of Category A that Analyze of number of suppliers and their
undermines your purchasing power share in sales vs market

Low margin on Category A

Analysis of Private Labels potential –
Lack of Private Labels
benchmarks and potential supplier

Usage of middlemen instead of direct Analysis of whom we buy from Category B

suppliers and the whole value chain
Product Range Low margin on Category B
Management
Improper planning and allocation by
Analysis of planning and allocation process
stores

Improper planning and allocation by

Analysis of planning and allocation process
stores
High inventory cost
Analysis of lead times, deliverability on-
Non-responsive supply chain
time, level of breakage

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