Gemini Skills Workshop

1. Analytical Problem Solving Gemini Skills Workshop August 1998

2. Learning objectives • Understand the key steps in the problem solving process. • Learn tools and techniques that are availablefor each step of the process.

3. 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

4. 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.

5. Key steps in the problem solving process Determine DecisionCriteria Follow-upandMeasure ClarifyProblem InvestigateCauses Identify Solutions Evaluate Solutions Implement Solution 1. Determine what we know and what we don’t 2. Gather information 3. Identify constraints 4. Determine if you should proceed 1. Identify possible causes 2. Design tests 3. Perform tests 4. Determine causes or re-test 5. Determine to proceed 1. Determine criteria 2. Determine decision process 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 1. Measure expected benefits 2. Collect feedback 3. Incorporate feedback into ongoing work There are many variations of this process, but these are the basic steps you should follow.

6. Clarify the problem Steps Tools (examples) 1. Determine what we know and what we don’t 2. Gather information 3. Identify constraints 4. Determine if you should proceed • 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) STEP 1: CLARIFY PROBLEM Determine DecisionCriteria Follow-upandMeasure ClarifyProblem InvestigateCauses Identify Solutions Evaluate Solutions Implement Solution

7. 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.

8. STEP 1: CLARIFY PROBLEM - EXAMPLE These are the steps involved in clarifying the problem 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. What We KnowWhat We Don’t Know WhatCustomers 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

9. STEP 1: CLARIFY PROBLEM 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.

10. STEP 2: INVESTIGATE CAUSES - EXAMPLE 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.

11. 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. Strengths Weaknesses 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. Opportunities Threats 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:

12. Investigate causes ( or perform analysis) Steps Tools (examples) • Hypothesis • Surveys and interviews • Fishbone (cause and effect) • Pareto • Root cause analysis tools • DuPont tree • Financial, statistical, database analyses 1. Identify possible causes 2. Design test 3. Perform test 4.Determine causes or retest 5. Determine to proceed STEP 2: INVESTIGATE CAUSES Determine DecisionCriteria Follow-upandMeasure ClarifyProblem InvestigateCauses Identify Solutions Evaluate Solutions Implement Solution We use two general methods to approach problems - using analogies to previous experience and breaking the problem down into smaller pieces.

13. 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.

14. STEP 2: INVESTIGATE CAUSES 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.

15. STEP 2: INVESTIGATE CAUSES - EXAMPLE The Fishbone or Cause and Effect Diagram is simple tool for investigating causes CAUSES FOR A CAR NOT TO START: Man Machine Dead battery No gas • Left lights on • Bad Switch • Electrical Bad choke Lost keys Worn out Wrong fuel Lemon No oil Vapor Lock Car will not start Don't know how to start Out of tune Too cold • Rental Parts Stolen No antifreeze Repo'd Gets wet in the rain Methods Material Milieu (Environment) “5“ M fishbone - Man, Machine, Materials, Methods and Milieu (Environment)

16. Purchasing & Vendor Mtg. Production Control, Inventory Partnership Supplier selection Capacity Reliability EDI Performance measures Safety stock Maintenance Sourcing terms Vendor alliances Lead time Reliability Information Mgt. Certification Auditing Common databases Networking Change over Cycle time Supplier base reduction Lead time Accessibility Transparenting BOM Quality Contractor management New product development Real time Bar coding Forecasting Complexity Quality material MRO Aligned with operations User training Monitoring turns Labour training TQM JIT Timing of processing Cycle time Scheduling Stock accuracy All-in-one cost Forming consortiums Data accuracy Trust in the system Real time Data accuracy Transportation Procurement Measurements Reliability Standardised coding Labour climate Cycle time Data capture Management reports Consumption rate Modes & lead times Driver training Cycle time Corporate scorecard Transportation Return logistics CSF’s MTBF/MTTF Vehicle maintenance Warehousing OEE Planning & objective setting Network/routing Driver tracking KPI’s Break-even time DRP optimisation Labour climate SOP’s Sales & op. planning Cost of fuel Modes of freight & packing ABM Customer loyalty Regulations LTL vs. FTL Cost of quality End-to-end measures Outsourcing Intermodel networks Compensation rewards Quality & availability of measures Scheduling Electronic tracking Budget variances Tracking & reporting Goods in transit Insurance Sourcing Inventory management Continuous improvement Total consumption systems HVOV’s Cross-docking Service point Damaged goods STEP 2: INVESTIGATE CAUSES - EXAMPLE Supply Chain fishbone is an ‘mental model’ for looking at a business Raw material packaging Supply Chain Effectiveness Order size Order Frequency EDI Bar coding Cost order Segmentation Pricing Verification Know your customer Lead time on orders Perfect orders Order processing Transportation costs Payment terms ECR Distribution/logistics Promotions Order error rate Accounts receivables Discounts Inventories Vendor mgt. Credit control Customer Order status record Connectivity to other core processes Performance Measures Order Fulfilment Distribution Logistics

17. STEP 2: INVESTIGATE CAUSES - EXAMPLE A “DuPont” tree is a structured way to look at causes Price Revenue Volume Sales Earnings Materials Production Costs EVA Overheads Marketing Risk-free rate Capital employed Beta Cost of equity Cost of capital Risk premium Total equity Ave cost of capital Cost of debt Total debt

18. 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 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 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

19. We use focus interviews on every Analysis and Design project • Focus Interview Guide • General 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? Your Group Overall

20. Pareto’s Law states that 20% of the sources cause 80% of the problem Customer Service Complaints Pareto Analysis $35M 30 25 20 Number of Occurrences/month 15 10 5 2 2 1 1 1 0 No one Answers Phone Routed to wrong person Don’t know the answer Unhelpful Don’t return calls Hard to understand Gum chewing Discourteous Customer Complaints about our Customer Service We can use this principle to determine where to focus our improvement efforts

21. Determine Decision Criteria Steps Tools (examples) 1. Determine criteria 2. Determine decision process • Decision modelling • RACI charting • Criteria weighing • Quadrant analysis STEP 3: DETERMINE DECISION CRITERIA Determine DecisionCriteria Follow-upandMeasure ClarifyProblem InvestigateCauses Identify Solutions Evaluate Solutions Implement Solution

22. 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.

23. Sleepers Winners Questionables Opportunity Gaps 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 • You can compare any two axes relevant to your problem: • Quality vs. cost • Market share vs. market potential • Volume vs. margin MarketShare MarketGrowth

24. And then helps determine possible actions based on your findings - Example Quadrant Decision Matrix Quadrant PossibleCategory Roles Possible Actions Opportunity gaps (Higher growth/low share) Profit contributor Variety 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 draw Cash generator Price 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 Sleepers (Good share/lower growth) Profit contributor Transaction builder • Review product mix versus Questionables (Low share/lower growth) Profit contributor Variety 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

25. Key steps in the problem solving process Steps Tools (examples) 1. Determine solution approach 2. Determine solutions • Various Gemini methodologies Determine DecisionCriteria Follow-upandMeasure ClarifyProblem InvestigateCauses Identify Solutions Evaluate Solutions Implement Solution

26. STEP 4: IDENTIFY SOLUTIONS 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.

27. Benchmarking can provide a gauge of “what good looks like” - Purchasing KPI Benchmarks Average Benchmark Benchmark Range Key Performance Indicator • • 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 2 1: Median = 392: Median = 91 Source: Center for Advanced Purchasing Status

28. We can also benchmark best practices - Purchasing Best Practices • Company Best Practice/Strength • Outboard Marine Corporation • Ford Motor Company • Motorola • 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 Source: Purchasing

29. Key steps in the problem solving process Steps Tools (examples) 1. Compare with decision criteria 2.Decide on solution(s) 3. Validate • Impact/Effort matrix STEP 5: EVALUATE SOLUTIONS Determine DecisionCriteria Follow-upandMeasure ClarifyProblem InvestigateCauses Identify Solutions Evaluate Solutions Implement Solution

30. 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

31. Action 4 Action 3 Action 1 Action 5 Action 6 Action 2 An Impact/Effort Matrix is a useful tool for prioritizing work and identifying “early wins” High Level of impact (results) High Low • Level of effort required

32. Key steps in the problem solving process Steps Tools (examples) 1. Prepare actionj plans 2.Prepare followup plan and measures) 3. Implement • Workplans • RACI charting Determine DecisionCriteria Follow-upandMeasure ClarifyProblem InvestigateCauses Identify Solutions Evaluate Solutions Implement Solution

33. STEP 6: IMPLEMENT SOLUTIONS 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!

34. Key steps in the problem solving process Steps Tools (examples) 1. Measure expected benefits 2.Collect feedback 3. Incorporate feedback into ongoing work • Key performance indicators • Balanced Scorecard • Benefits dashboard Determine DecisionCriteria Follow-upandMeasure ClarifyProblem InvestigateCauses Identify Solutions Evaluate Solutions Implement Solution

35. STEP 7: MEASURE AND FOLLOW UP 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 You will learn more about performance measurement in later sessions

36. In everything we do, Plan (think) - Do - Review Determine DecisionCriteria Follow-upandMeasure ClarifyProblem InvestigateCauses Identify Solutions Evaluate Solutions Implement Solution THINK DO THINK DO THINK DO REVIEW