Root Cause Analysis Essay
A thorough analysis of our metrics for the last couple of years has shown that our inventory turns are currently trending behind other retailers and similar business types in the industry. As an organization we must look internally to identify the business processes or systemic limitations occurring that limit our ability to remain competitive in our market. To achieve this result we will conduct a root cause analysis (RCA) to aid in identifying the inefficiencies that exist within our supply chain.
To facilitate this process there are many different types of tools available to organizations, including the 5 Why method, Fault Tree Analysis, Interrelation Diagrams, Ishikawa Diagrams (Fishbone, Cause and Effect) and many others. As we began our analysis one of the methods we used was the 5 why process; this technique begins with the incident itself and the team continues asking “Why? ” until they arrive at what is believed to be the root cause. Ideally the end result of utilizing sound root cause analysis practices should be effective corrective action.
The end result of effective corrective action should be improved processes, and ultimately improved customer satisfaction. Regardless of the nonconformity’s source, organizations that only take action on the incidents are bound to repeat the same ineffective corrective actions over and over again. By applying good investigative tools and taking the appropriate action in regards to the causes of problems, repeat issues can become a thing of the past. As we conducted our 5 why analysis process the below questions allowed us to drill down into some of the impeding issues from the viewpoint of our Divisional Managers. Why Analysis: Question 1. Why do you feel our inventory turns currently fall behind other major retailers and similar business types? We are unable to make timely decisions based on the information we have available in our business systems. Question 2. Why are our Buyers and Merchandise managers not provided with the pertinent information to make timely business decisions? All reporting is ad hoc and has to be requested on a schedule therefore making it untimely for analysis, this information should be pushed to our managers and made available daily.
Question 3. Why do we not have the required business data available to make efficient and timely decisions? Our current system reporting structure is independent and not connected to our replenishment systems. Information has to be pulled from many systems and consolidated. Question 4. Why are our replenishment systems not connected? For years we have pieced together different replenishment platforms for various end users at the store level as well as warehouse personnel that enter emergency orders when needed.
This practice has resulted in a non-integrated system of applications that does not feed a central database. Question 5. Why are our replenishment systems insufficient? Our replenishment system structure including the reporting systems are piece-meal applications that do not connect to our other systems for merchandise, financial and space planning. Each system solves an individual problem but does not function as an enterprise solution. In addition to 5 why method we also used the Ishikawa Fishbone diagram to further brainstorm and illustrate the cause and effects discovered.
The Fishbone Diagram is a neat visual tool. It helps with the brainstorming process of determining causes and root causes. It also provides a quick visual representation of cause density. It’s called the fishbone diagram, because when you’re starting out, it has a sideway tree look to it which resembles a fish skeleton. Sometimes it’s called a cause and effect diagram or Ishikawa diagram because of what it depicts and who came up with the diagram, respectively.
For this part of our root cause analysis our project team met with Divisional Managers from each directorate, our goal was to narrow down specific and actionable causes of why our inventory turns have fell behind and to the inefficiencies that exist in our supply chain. Over a period of 3 months several meetings were held where each participant was encouraged to bring their ideas to the table in regards to any deficiencies that exist within our operations and suggest solutions for addressing those concerns. Figure 1. Ishikawa Diagram developed from multiple interviews with Divisional Merchandise Managers and Buyers.
Root Cause Analysis Recap: Problem statement: Inventory turns fall behind other major retailers and similar business types. As a result of our thorough analysis which consisted of several working meetings and brainstorming sessions with our Merchandise Managers we were able to establish a framework for the issues we believe to be affecting the business. As outlined above the teams identified several reasons for this. We lack a joint forecasting tool to provide long range planning with suppliers and connectivity to all replenishment systems.
We also do not have a planning tool to integrate merchandise, financial and space planning, and we use multiple and diverse replenishment and receiving systems. Cumbersome methods are used for determining economic order quantities and optimum price breaks and there is insufficient visibility of data causing inefficiencies throughout our supply chain. As we begin the next phase of this process we will need to look for solutions that will allow for a more robust and intergrated replenishment and reporting system.