Category Management Toolkit Cause and Effect Analysis

Cause and Effect Analysis Summary 2

What is Cause and Effect Analysis? Cause and effect analysis is a basic problem-solving technique to clarify issues and identify root causes, and comprises a two stage process: 1. Define and agree the specific demand problem. 2. Understand the demand drivers associated with the issue. In a Demand Management context the outputs from a cause and effect analysis can show the relationship between the demand issue, causes and business impact. To summarise, cause and effect analysis: Assists a team to reach a common understanding of a complex problem Expands the team’s thinking and considers all potential causes Defines the major categories or sources of root causes Enables a team to organise and analyse relationships and interactive factors Identifies factors that could improve a process

Where does it fit in with Category Management? Gather Category Information Conduct Strategic Analysis Develop the Category Strategy

What is included in this guide? 5 Ws and 2Hs 5 Whys Cause and Effect Diagram (CED and CEDAC)

Which processes does the tool apply to? Demand Management Useful for: Strategic Sourcing, Supplier Relationship Management

Which other tools link to this guide? Brainstorming Problem solving Quick Win Planning Matrix Analysis

Cause and Effect Analysis 3

5 Ws and 2Hs We have seen how brainstorming can help generate ideas from a large group of participants, which may throw up many different business problems or solutions to explore further. Should the project team be working from this initial brainstorming list then the first step will be to clarify the issues raised using a very structured tool that asks a specific set of questions regarding a previously prepared problem or opportunity statement. The issue must be specified in more detail before the Cause and Effect Diagram (CED) can be effectively used. The purpose of the 5Ws and 2Hs method is to examine and question a process or problem for the purpose of gaining improvement ideas. It engages a team in discovering overlooked issues or causes and can help identify potential problems or opportunity breakthroughs. During the Gather Internal and External Data stages of the Category Management process the project team’s focus will be problem definition. Step-by-step procedure 1. Display a prepared problem or opportunity statement to the team. For example “Reduce demand for rail travel”. 2. Describe the 5W2H chart and its headings of Issue, 5W2H Question, and Consider. 3. Participants respond with questions and countermeasures for completing the chart. Use additional flip-chart paper to record a large number of responses. 4. The demand problem statement is fed into the CED process.

What does the 5W2H output look like? The project team should develop a clear definition of the demand issue using the framework below. Often a fuller appreciation of the nature of the demand is gained from working through these sample questions. Reduce demand for rail travel Issue 5W2H Question Purpose

Why …..do we use rail travel?

Activity

What ….are the activities involved in booking travel? ….are people doing whilst they travel? Where ….do staff travel from and to?

Place Staff Time

Who ….is travelling and who books the tickets? When ….are the rail journeys booked? ….at what time are people travelling?

Method

How ….are the rail journeys booked?

Cost

How much ….what is the cost of rail travel?

Date:

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Heading Descriptions • Issue: helps to focus the team on why the questions are being asked. For example, Why – explores the issue in terms of its perceived purpose. • 5W2H Question: the list is worked through systematically to build a clear problem statement. • OPTIONAL THIRD HEADING “Consider”: prompts the team to think of key business areas which should be targeted from the responses given i.e. re-engineering, revise schedules.

Example, resulting demand statement: Rail travel is used by management and directors to attend internal meetings with customers or project teams. 25% of rail journeys are booked independently and the remainder (75%) are booked via the central travel office by phone and email. Most rail journeys are booked 2 days before the date of travel, for travel during 7am and 9am and the total cost is £150,000 per annum.

Five Whys This technique establishes the root cause of a problem by repeatedly asking the question “why” (five is a good rule). Once it becomes difficult to respond to “why?” the probable cause may have been identified. This tool is used to complete the ‘causes’ on the Cause and Effect Diagram (CED) which is described below. It will enable the facilitator to determine the relationship between the root cause and the resulting effects. This will assist in identifying the most appropriate solution to a problem and the benefits the solution will bring and how that cause can be removed to improve the process. This tool starts or verifies a data collection process around an abnormal condition or situation. Step-by-step procedure 1. Complete a problem statement by describing a perceived problem in specific terms. For example, “The aeroplane crashed”. 2. Ask the first “why” question. Why does this situation occur? 3. Continue to ask “why” questions until the root causes are identified. This process may take more than “five whys”! 4. Capture discussions using a flipchart or brown paper. 5. Write a next step statement for solving the problem, or edit the causes on the CED.

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Hints and Tips • When asking “five whys” do not switch to asking “who”. This focus is on the process of the problem, not the person involved.

• Continue to ask “why” beyond the arbitrary five times if necessary to get to the root cause of the problem.

What does a Five Whys output look like? We recommend that the five whys tool is used to determine causes to build the CED (see below). The output will then be fed into the Cause boxes on the CED. To capture five whys output then you could use the following format: State a (perceived) problem: “The aeroplane crashed” Ask Why 1 Why did the aeroplane crash? Response: Because the pilot ejected. Ask Why 2: Why did the pilot eject? Response: Because the wing fell off. Ask Why 3: Why did the wing fall off? Response: Because of a stress fracture. Ask Why 4: Why was there a stress fracture? Response: Because our maintenance procedures were not applied. Ask Why 5: Why were our maintenance procedures not applied? Response: Because our maintenance procedures were not known to the servicing depot. The root cause was the lack of knowledge of the maintenance procedures in the servicing depot.

Cause and Effect Diagram (CED and CEDAC) This technique, otherwise known as Fish-bone or Ishikawa diagram, focuses the project team’s efforts in defining the causes of the problem. It assists in the common understanding of a complex problem and expands the team’s thinking to consider all potential causes.

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The tool will result in a logical representation of a problem, broken down into its elements. This will provide an understanding of: What has happened Why it happened What can be done to prevent it happening again Step-by-step procedure 1. Reach consensus on a problem to be analysed. See example, “Missed claim deadlines”. This is the Effect. 2. Determine the broad areas of enquiry in which the causes of the effect being investigated may lie. Place one in each enquiry box. 3. Brainstorm possible causes for each area of enquiry using the Five Whys methodology or 5W2H tools (described above) and enter them in a fish-bone fashion by drawing arrows to the main arrow (enquiry) as shown in the example. 4. Continue to ask questions using the Five Whys tool to search for root causes. Insert and connect potential causes to the various other contributing factors i.e. “Approvals” or “Layoffs”. 5. When ideas or causes can no longer be identified, further analyse the diagram to identify additional data collection requirements for problem solving.

What does a Cause and Effect Diagram look like? Problem: Missed claim deadlines Date: xx Mar 06

Potential causes

People

Procedures

Facilities Old

Policy

No post room Outdated technology

Delays Workflow

Lack of space

im t ab Da

Lack of Motivation

Conflict

Repro

C la

ls va pro Ap

Untrained

Low Staff

Instructions

as e

Cost cutting

Turnaround time

Supplier

Schedule

No follow-up

un ic a te

Materials

Co mm

Environment

£

Low stock

Work ethic

La te

Lay of f s

Morale

Measurement

Missed Claim Deadlines

7 Hints and Tips • Do not overload areas of enquiry. Establish another category if more detail is desired.

VARIATION: Cause and Effect Diagram Adding Cards (CEDAC) Step-by-step procedure Steps 1 – 5 see CED above. 6. The diagram is posted in a hallway or on bulletin boards for others to examine and possibly add their causes or ideas on available cards / post-its to the respective categories on the diagram. 7. After a specified period of time, the diagram is removed and revised to include the additional information. A completed, smaller diagram is reposted with a thank you note.

How do we take this problem solving forward? The team now advances to the next step of further analysis, additional data collection, and problem solving using the CED / CEDAC diagrams as a reference point to prove the hypotheses

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