Distribution Center On-Time Delivery Example (Part B)
The previous post described Part A of the Distribution Center On-Time Delivery Example. It illustrated Off-Target and Common-Cause Variation. This part of the example illustrates Special-Cause and Structural variation. The control chart in Figure 2 of Part A shows a Lower Control Limit (LCL) of about 88% on-time deliveries. This means that Common-Cause variation would rarely result in a weekly on-time delivery percentage lower than 88%.
Shawn formed a team to study the process and improve it. While monitoring the process the weekly on-time delivery percentage fell to 73%. Something had happened to increase the variation. Figure 3 shows this drop in on-time delivery performance. The team reviewed the distribution center activities and found that a division supplying the distribution center announced a price increase. Customers responded by submitting additional orders to avoid the price increase. This one-time increase in volume caused the distribution center to fall behind in filling orders because it was unprepared to handle the additional work. Also, this one-time increase in volume is an example of Special-Cause variation.
Figure 3
The team responded by developing an improvement policy. They determined that one could predict the weekly work load given the state of orders on Wednesday. The improvement policy provided for overtime hours based on the orders received and remaining work on Wednesday. Figure 4 shows the result. The average on-time percentage rose to 98.5%. The new LCL became 97%. However, subsequent results showed two weeks, Special-Cause weeks, where the volume was so heavy even the improvement policy could not handle the heavy demand. These were end-of-quarter weeks. Figure 4 shows them as weeks 39 and 52.
Figure 4
These end-of-quarter weeks shown in Figure 4 are examples of Structural variation. Structural variation is a blend of common and predictable special causes. Structural variation is due to causes that operate as an inherent part of the system as common causes do. However, on a control chart, they appear to be due to special causes. But their occurrence is predictable.
The four types of variation defined by Britz, Emerling et al (2000, p. 34) are:
· Off-Target variation occurs when the process average is not equal to its target value.
· Common-Cause variation is the variation exhibited by the process while operating in its best manner.
· Special-Cause variation results from the intervention of causes that are unplanned and undesirable.
· Structural variation is variation inherent in the system but appears to be due to special causes on a control chart. However, the causes of Structural variation are predictable.
References
1. Britz, G. C., D. W. Emerling, et al. (2000). Improving Performance Through Statistical Thinking. Milwaukee, WI, ASQ Quality Press.
