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Gemini Skills Workshop

Analytical Problem Solving

August 1998

- 2 -Anal Prob ol v5.ppt

• Understand the key steps in the problem solving process.

• Learn tools and techniques that are availablefor each step of the process.

Learning objectives


Analytical Problem Solving

“The significant problems we face cannot be solved at the same level of thinking we were at

when we created them”- Albert Einstein

“The difficult is what takes a little time; the impossible is what takes a little longer”

- Fridtjof Nansen


As consultants we need to have a structured approach to problem-solving

• We work in groups.

• We work with complex problems.

• Other consultants or clients may have to continue our work (e.g. in later phases of the project or when implementing the solution).

– Need to know “where we are” and what has been done

– Need to understand the process that leaded to the result/recommendation

• A structured approach helps the client follow “where we are”

• Our solution will be shared with people that did not take part in the problem solving process.

• It is easy to miss a step.

• Current steps often seem less important than future steps.


Key steps in the problem solving process

1. Determine criteria

2. Determine decision process

Implement Solution

Follow-upand

Measure

Determine Decision

Criteria

Evaluate Solutions

Identify Solutions

InvestigateCauses

ClarifyProblem

1. Determine what we know and what we don’t

2. Gather information

3. Identify constraints

4. Determine if you should proceed

1. Measure expected benefits

2. Collect feedback

3. Incorporate feedback into ongoing work

1. Identify possible causes

2. Design tests

3. Perform tests

4. Determine causes or re-test

5. Determine to proceed

1. Determine solution approach

2. Develop solutions

1. Compare with decision criteria

2. Decide on solution(s)

3. Validate

1. Prepare action plans

2. Prepare follow-up plan and measures

3. Implement

There are many variations of this process, but these are the basic steps you should follow.

There are many variations of this process, but these are the basic steps you should follow.


Clarify the problem

Implement Solution

Follow-upand

Measure

Determine Decision

Criteria

Evaluate Solutions

Identify Solutions

InvestigateCauses

ClarifyProblem

1.Determine what we know and what we don’t

2.Gather information

3.Identify constraints

4.Determine if you should proceed

Steps

• What we know/What we don’t

• 5 W`s and 1 H(What, Where, When, Who, Why and How)

• 5 Whys

• SWOT (strengths, weaknesses, opportunities, threats)

Tools (examples)

STEP 1: CLARIFY PROBLEM


Clarifying the problem is the most important step in this process

• A problem can be defined as a gap between where we are and where we want to be. This gap should be measurable.

• Be aware that “perception is reality”. Although some client problems we encounter are very logical and factual, such as machine breakdowns, most client issues are based on people’s perceptions of problems, such as poor customer service.

• Because of this, most problems will no require an optimal solution, but will have many adequate solutions.

• Ensure that the problem statement accurately depicts the client situation. It will determine your entire course of action.



These are the steps involved in clarifying the problem

What We Know What We Don’t Know

What Customers are complaining about Are requests being lost, forgotten, or not lack of responsiveness answered initially?

Who Only customers with urgent E-mail, voicemail,or telephone requests or rush orders communications?

Where Headquarters Customer place of origin

When Problem only in last two months

Why No documentation of requests or System error? Not recorded by service orders agent? Message not received?

How

1. Determine what we know and what we don’t. Using a table with What, Who, When, Where, How, and Why can help define what information needs to be gathered.

Example: Urgent customer requests are not being addressed.

STEP 1: CLARIFY PROBLEM - EXAMPLE


Steps to clarify problem (continued)

2. Gather the information you need in order to define the problem statement. You may begin to identify possible causes, but that should really be done at a later step.

3. Identify constraints - Who is the client for this problem and what is important to that client? Consider time frame (short-term vs long-term), costs, resources required, level of effort vs value-added, etc.

4. Define the problem statement. Validate the problem with the client. Do we agree that this is really the problem at hand?

5. Determine how to proceed. Seriously consider if the time and effort involved creates enough benefit or if this problem will disappear as the result of other activities.

Most importantly, this step frames the investigation before we begin tackling the causes.

Most importantly, this step frames the investigation before we begin tackling the causes.



One very easy way to understand and define a problem is to ask “Why?” 5 times (5 Whys)

Real Client Example:

• Why are we shipping orders late? Because we can’t meet our production schedule.

• Why can’t we meet our production schedule? Because we are constantly changing it.

• Why do we change it?To accommodate late orders from our customers.

• Why do we have late orders?Because many of our customers don’t know what their orders are by the order cut-off date.

• Why do we have a cut-off date?So we can create a production schedule and meet our shipping dates.

Client problems may require several iterations of the 5 Whys.Client problems may require several iterations of the 5 Whys.

STEP 2: INVESTIGATE CAUSES - EXAMPLE


Strengths, Weaknesses, Opportunities, and Threats (S.W.O.T.) can clarify complex issues and define direction

– S.W.O.T. analysis is a general tool that can be used across key areas:• Product mix• Profit/pricing• Promotions• Space management• Supply chain

– Definitions:

Exploited strategic capabilities and/or market positioning providing a competitive advantage in the market place.

Exploited strategic capabilities and/or market positioning possessed by competitors creating a competitive disadvantage in the market place.

Unexploited strategic capabilities and/or market positioning which could provide a competitive advantage in the market place.

Unexploited strategic capabilities and/or market positioning which could provide a competitor a competitive advantage in the market place.

Strengths

Opportunities

Weaknesses

Threats


Investigate causes ( or perform analysis)

Implement Solution

Follow-upand

Measure

Determine Decision

Criteria

Evaluate Solutions

Identify Solutions

InvestigateCauses

ClarifyProblem

1. Identify possible causes

2. Design test

3. Perform test

4.Determine causes or retest

5. Determine to proceed

Steps• Hypothesis

• Surveys and interviews

• Fishbone (cause and effect)

• Pareto

• Root cause analysis tools

• DuPont tree

• Financial, statistical, database analyses

Tools (examples)

We use two general methods to approach problems - using analogies to previous experience and breaking the problem down into smaller pieces.

We use two general methods to approach problems - using analogies to previous experience and breaking the problem down into smaller pieces.

STEP 2: INVESTIGATE CAUSES


Step 2 is to investigate causes of the problem

1. Identify possible causes. We need to do this in order to carve out a manageable piece of work by narrowing the scope of the problem to the most probably causes.

There are many tools we can use to investigate causes. The two basic ways to analyse problems for causes are:

– Use analogies. We naturally relate the current problem to our previous experiences. As experts, we should be able to develop plausible hypotheses to explain the problem.

– Break the problem into smaller subsets of problems (chunking). In conjunction with our hypotheses we can also dissect the problem into its variable components and determine which of these components is most likely to be causing the problem.



Now we are ready to test our possible causes

2. Design tests or analytics. Tests can include surveys, interviews, process flows, pareto analyses, control charts, etc. it is unlikely that you will have to create an entirely new analytic because so many already exist, in Gemini and externally. Well-designed tests should directly prove or disprove hypotheses and should consider one problem variable at a time.

3. Perform tests. Ensure that the test will not be a burden for the client and that they want to do it. Otherwise, the results may not be accurate.

4. Determine causes based on test results. (Or re-test, if necessary)

5. Determine how to proceed. Is the cause within our sphere of influence? How does it compare with our constraints?

It seems logical that the next stop would be to develop solutions. but to make our time more effective, we should plan ahead to determine what a “good” solution looks like.

It seems logical that the next stop would be to develop solutions. but to make our time more effective, we should plan ahead to determine what a “good” solution looks like.



The Fishbone or Cause and Effect Diagram is simple tool for investigating causes

Man

No gasLost keysWrong fuel

Machine

Bad chokeWorn out

LemonVapor Lock

No oil

Dead battery• Left lights on• Bad Switch• Electrical

Material

Out of tune

No antifreeze

Methods

Don't know how to start

• Rental

Repo'd

Too cold

Parts Stolen

Gets wet in the rain

Milieu (Environment)

CAUSES FOR A CAR NOT TO START:

Car will not start


“5“ M fishbone - Man, Machine, Materials, Methods and Milieu (Environment)

“5“ M fishbone - Man, Machine, Materials, Methods and Milieu (Environment)


Supply Chain fishbone is an ‘mental model’ for looking at a business

Order Fulfilment

Performance Measures

Distribution Logistics

Supply ChainEffectiveness

Raw material packaging

Procurement

Purchasing & Vendor Mtg.

PartnershipSupplier selectionPerformance

measuresEDI

Vendor alliancesSourcing terms

Certification Auditing

Lead timeSupplier base

reduction New product development

Contractor management

MROQuality material

JITTQM

Forming consortiumsAll-in-one cost

Transportation

Cycle time Management reports

Information Mgt.

Common databases Networking

Accessibility Transparenting

Real time Bar coding

Aligned with operations User training

Timing of processing Cycle time

Measurements Reliability

Data accuracy Trust in the system

Data capture

Production Control, Inventory

Capacity Reliability

Safety stock Maintenance

Lead time Reliability

Change over Cycle time

BOM Quality

Monitoring turns Labour training

Forecasting Complexity

Stock accuracyScheduling

Standardised coding Labour climate

Real time Data accuracy

Consumption rate

OrderOrder size

EDIFrequency

Cost orderBar coding

PricingSegmentation

Know your customerVerification

Perfect ordersLead time on orders

Transportation costsOrder processing

ECRPayment terms

PromotionsDistribution/logistics

Accounts receivablesOrder error rate

InventoriesDiscounts

Credit controlVendor mgt.

Order status recordCustomer

Modes & lead times

Return logistics

Driver tracking

Labour climateModes of freight & packing

Driver training

Warehousing

Transportation

Vehicle maintenance

Network/routing

DRP optimisation

Cost of fuel

LTL vs. FTLRegulations

Intermodel networks

Electronic tracking

Inventory management

Insurance

Cross-docking

Damaged goodsService point

Outsourcing

Scheduling

Goods in transit

Sourcing

HVOV’s Connectivity to other core processes

Break-even time

Sales & op. planning

Customer loyalty

Corporate scorecard

Planning & objective setting

CSF’s

OEE

KPI’s

SOP’s

ABM

End-to-end measuresCost of quality

Quality & availability of measures

Budget variances Tracking & reporting

Compensation rewards

Total consumption systems

Continuous improvement

Cycle time

MTBF/MTTF



A “DuPont” tree is a structured way to look at causes

Cost of capitalCost of capital

EarningsEarnings

EVAEVA

BetaBeta

Risk premiumRisk premium

Risk-free rateRisk-free rate

Ave cost of capital

Ave cost of capital

RevenueRevenue

CostsCosts

Cost of equityCost of equity

Cost of debtCost of debt

Total debtTotal debt

Total equityTotal equity

PricePrice

VolumeVolume

MaterialsMaterials

ProductionProduction

OverheadsOverheads

MarketingMarketing

SalesSales

Capital employed



We rely heavily on surveys and interviews to gain information quickly - Example Culture Survey

Please complete the following questions by circling the appropriate number on a scale from 1 to 6, where 1=strongly disagree and 6=strongly agree. Answer the statements according to the ‘way it is’ in your organisation at the moment on the left column. Then move to the right-hand column and respond according to ‘the way it should be’ in your opinion. There are no right or wrong answers. Please answer all questions from your own perspective.

Strongly disagree Disagree Agree Strongly Agree

1 2 3 4 5 6

Strongly disagree Disagree Agree Strongly Agree

1 2 3 4 5 6

1. People here act when they see things that need to be done

2. People in this organisation try to resolve their differences constructively

3. People here readily accept responsibility for their actions and decisions

4. Cost is one of the most important factors taken into account before decisions are made here

5. Inconsistencies exist between what is said and done. Managers don’t ‘walk the talk’

6. People here constantly explore new and better ways of doing things

7. People here listen to customers and respond to their needs

8. There is a concerted effort to perform better than the competition

Please circleThe way it is

1 2 3 4 5 6

1 2 3 4 5 6

1 2 3 4 5 6

1 2 3 4 5 6

1 2 3 4 5 6

1 2 3 4 5 6

Please circleThe way it should be

1 2 3 4 5 6

1 2 3 4 5 6

1 2 3 4 5 6

1 2 3 4 5 6

1 2 3 4 5 6

1 2 3 4 5 6


Focus Interview GuideGeneral Information

1) Years with Company:: _______________________________

Years in current position: _______________________________

Number of reports: _______________________________

2) a) What is your understanding of your company’s top three business objectives?

b) What is your company’s vision?

3) a) What are your group’s top three business objectives?

b) How are they (or will they be) measured?

efer back to the scope graphic on page 1 if the concept of GTS is not clear.)

4) What do you consider to be your group’s three greatest strengths?

OverallYour Group

We use focus interviews on every Analysis and Design project


We can use this principle to determine where to focus our improvement efforts

We can use this principle to determine where to focus our improvement efforts

Pareto’s Law states that 20% of the sources cause 80% of the problem

No one Answers Phone

Routed to wrong person

Don’t know the answer

Don’t return calls

Unhelpful DiscourteousGum chewing

Hard to understand

Customer Complaints about our Customer Service

5

10

15

20

25

30

$35M

0

Nu

mb

er o

f O

ccu

rren

ces/

mo

nth

Customer Service Complaints Pareto Analysis

2 2 1 1 1


Determine Decision Criteria

Implement Solution

Follow-upand

Measure

Determine Decision

Criteria

Evaluate Solutions

Identify Solutions

InvestigateCauses

ClarifyProblem

1.Determine criteria

2.Determine decision process

Steps

• Decision modelling

• RACI charting

• Criteria weighing

• Quadrant analysis

Tools (examples)

STEP 3: DETERMINE DECISION CRITERIA


The third step is to determine our decision criteria

• Determine the decision criteria. Refer back to the constraints. Consider:

– Needs vs. wants

– Long-term vs. short-term

– Interim steps

– Risks

– Costs

– Timing

– Desired benefits

– Ranking or prioritizing the decision criteria (most important to least important)

• Determine decision process. Who needs to be involved in the decision? Who has final say? What method will we use - voting, client chooses, numerical rankings, a dart board?

Doing this now avoids looking foolish later.Doing this now avoids looking foolish later.

STEP 3: DETERMINE DECISION CRITERIA


Quadrant Analysis provides a framework for making decisions

– Quadrant analysis is a general tool that can be used across different levels of analysis:• Corporate portfolios• Customers• Products

Sleepers Winners

Questionables Opportunity Gaps

MarketShare

MarketGrowth

– You can compare any two axes relevant to your problem:• Quality vs. cost• Market share vs. market potential• Volume vs. margin


And then helps determine possible actions based on your findings - Example Quadrant Decision Matrix

QuadrantPossible

Category Roles Possible Actions

Opportunity gaps(Higher growth/low share)

Profit contributorVariety image

• Review planograms - are category and fastest movers underspaced?• Review pricing mix - is pricing of key items too high versus market?• Review promotions - are category and key items under-promoted versus market?• Review product mix - is mix wrong for target customer segments? Any new, faster-

moving items not being carried?• Tie-in promotions with higher margin consumption items

Winners(High share/higher growth)

Traffic drawCash generatorPrice image

• Continue current programs• Increase promotional support• Review space management to ensure minimal out-of-stock potential• Add good performing items not carried but available in market• Be first with new items• Review pricing and gross margins to see if selected price reductions can enhance

image and increase growth and share

Profit contributorTransaction builder

• Review product mix versusSleepers(Good share/lower growth)

Questionables(Low share/lower growth)

Profit contributorVariety image

• Review product mix versus market (variety index)• Delete poorest performance items (brands, flavors, sizes)• Raise prices if appropriate• Promote category to meet market• Minimize space allocated



Implement Solution

Follow-upand

Measure

Determine Decision

Criteria

Evaluate Solutions

Identify Solutions

InvestigateCauses

ClarifyProblem

1.Determine solution approach

2.Determine solutions

Steps

• Various Gemini methodologies

Tools (examples)


Finally, we can develop solutions

1. Determine solution approach. This can be almost anything, like:– Brainstorming

– Benchmarking

– Best practices

– Modelling techniques, e.g., decision modelling, business modelling, process modelling

– Vision engineering

– Organisation design

– Any number of Gemini methodologies

2. Develop solutions. It is good practice to develop alternative scenarios, if applicable.

STEP 4: IDENTIFY SOLUTIONS


Key Performance IndicatorAverage

BenchmarkBenchmark

Range

• Purchasing function expense as a percentage of sales

• Purchasing function expense as a percentage of purchase value

• Purchasing headcount as a percentage of total company headcount

• Active suppliers per purchasing employee

• Percentage of all active suppliers that account for 90% of total purchase value

• Average actual time to develop/negotiate a contract

• Percent of deliverables received on-time within the most recent 12 month period

0.3 %

1.2 %

1.1%

50

20%

9 wks

88%

0.06% -> 3.0%

0.7% -> 7.0%

0.3% -> 4.5%

6 -> 182

5% -> 75%

2 -> 26 wks

63% -> 98%

1: Median = 392: Median = 91

1

2

Source: Center for Advanced Purchasing Status

Benchmarking can provide a gauge of “what good looks like” - Purchasing KPI Benchmarks


We can also benchmark best practices - Purchasing Best Practices

• Partnering: establishes 3-5 year contracts with suppliers

• Partnering: 70% of North American Automotive Operations’ contracts are long term (3-5 years)

• New product development: with preferred suppliers, Ford uses “black box” design responsibility. Ford specifies a parts function and lets suppliers figure out the best way to manufacture it

• Partnering: suppliers participate in developing design guidelines for new products

• Supplier management: communications sector trimmed its supplier base from 4,200 in 1985 to 1,155 in 1989

• Technology: supports a common global database for critical material purchases

• Supplier management: has created “Motorola University”, an education and training center in Schaumburg, Illinois where suppliers and its own employees brush up on basic quality concepts as well as learn the more advanced techniques in quality control

• Outboard Marine Corporation

• Ford Motor Company

• Motorola

Company Best Practice/Strength

Source: Purchasing



Implement Solution

Follow-upand

Measure

Determine Decision

Criteria

Evaluate Solutions

Identify Solutions

InvestigateCauses

ClarifyProblem

1.Compare with decision criteria

2.Decide on solution(s)

3. Validate

Steps

• Impact/Effort matrix

Tools (examples)

STEP 5: EVALUATE SOLUTIONS


Evaluating solutions becomes easy because we have already laid the groundwork

1. Follow the decision process and compare with decision criteria

2. Decide on solution(s)

3. Validate solutions with initial constraints and your sphere of influence

STEP 5: EVALUATE SOLUTIONS


An Impact/Effort Matrix is a useful tool for prioritizing work and identifying “early wins”

Level of effort required

Lev

el o

f im

pac

t (r

esu

lts)

Low High

High

Action 1

Action 2

Action 6

Action 3

Action 5

Action 4



Implement Solution

Follow-upand

Measure

Determine Decision

Criteria

Evaluate Solutions

Identify Solutions

InvestigateCauses

ClarifyProblem

1.Prepare actionj plans

2.Prepare followup plan and measures)

3. Implement

Steps

• Workplans

• RACI charting

Tools (examples)


Step 6 is to implement the solution(s)

1. Prepare action/implementation plans. Include responsibilities and time frames

2. Prepare follow-up plan and measures

3. Do it!

STEP 6: IMPLEMENT SOLUTIONS



Implement Solution

Follow-upand

Measure

Determine Decision

Criteria

Evaluate Solutions

Identify Solutions

InvestigateCauses

ClarifyProblem

1.Measure expected benefits

2.Collect feedback

3. Incorporate feedback into ongoing work

Steps

• Key performance indicators

• Balanced Scorecard

• Benefits dashboard

Tools (examples)


Don’t forget to measure and follow-up!

1. Measure improvements and compare with expected benefits

2. Collect feedback

3. Incorporate feedback into on-going work

STEP 7: MEASURE AND FOLLOW UP

You will learn more about performance measurement in later sessionsYou will learn more about performance measurement in later sessions


In everything we do, Plan (think) - Do - Review

THINK

Implement Solution

Follow-upand

Measure

Determine Decision

Criteria

Evaluate Solutions

Identify Solutions

InvestigateCauses

ClarifyProblem

THINK REVIEWDO DO THINK DO

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