Reference no: EM132247203

SMALLVILLE SHORT-HAUL LINES, INC.

SmallVille Short-Haul Lines, Inc. (MSL), is a small independently-owned narrow-gauge railway in Montana. It supplies contract transportation services to many mining firms, hauling ore and mining equipment. One of its principal customers, Cranford Consolidated Products (CCP), is actively improving quality by using the Malcolm Baldrige Criteria. In an effort to improve supplier quality, Cranford mandated, last year, that all suppliers provide factual evidence of quality improvement efforts that lead to highly capable processes.

As part of its supplier development program, CCP held a seminar for all its suppliers to outline this initiative and provide initial assistance. The executive officers of MSL participated in this seminar and recognized that SSL was seriously lacking in its quality improvement efforts. More importantly, Jeff Blaine, who was the purchasing manager at CCP, told them privately that many errors had been found in SSL's shipping documents. CCP would not continue to tolerate this high number of errors; and if no improvements were made, it would seek transportation services elsewhere.

Rob Langford, president and CEO of SSL, was concerned. During an off-site meeting, he and other MSL executives developed a comprehensive blueprint to help SSL develop a total quality focus. One of the key objectives was to establish an SPC effort to gain control of key customer-focused processes and establish priorities for improvement.

The Billing Study After Process Improvement

In a good-faith attempt to respond to CCP's feedback, SSL turned its attention to its billing input errors and worked on them over the following six months. To gain some understanding of the situation, SSL conducted an initial (base case) study by sampling 20 bills of lading, each day, over a 20-day period. Initial results were dismal, with defective bills averaging a horrible 60 percent!

After process improvement and an intensive effort to train shipping clerks not to make errors, the company was ready to make another study to determine what progress had been made. The first set of tables in the SmallVille Case-initial worksheet in the Excel workbook C08CaseData on the Student Companion Site shows the results of the initial study. The work-sheet SmallVille Case-Revised shows the results of the second study, after improvements were made. Both studies revealed that field employees were correcting the errors as they found them. In both cases, rework was costing the company almost $2 per error, but the number of errors had been substantially reduced between the two studies. However, field employees still were not always catching the errors, which led to field service and other problems. Discussion Questions

I. At this point, MSL is unsure of how to interpret these results. You have been hired as a consultant by the executive committee to analyze these data and provide additional recommendations for integrating SPC concepts into SSL's quality system. Using the results from the base case data, determine the performance, that is, the process capability, in a qualitative and quantitative sense, of the billing input. What is the average rate of defective bills? Is the process in control? What error rates might the company expect in the future? What general conclusions do you reach?

2. Perform the same statistical analysis with the second set of data. How do the results differ? What is the average rate of defective bills? Is the process in control? What error rates might the company expect in the future? What general conclusions do you reach?

The Billing Study, Part Il

The revelations from the initial study had been Starfling. The results from the second study were encouraging, but not yet where the company wanted to be. Rob SmallVille personally led a group problem solving session to address the root causes of the current error rate. During this session, the group members constructed a cause-and-effect diagram to help determine the causes of incorrect bills of lading.

Eight categories of causes were identified:

I. Incomplete shipper name or address

2. Incomplete consignee name or address

3. Missing container type

4. Incomplete description of freight

5. Weight not shown on bill of lading

6. Improper destination code

7. Incomplete loader's signature information

8. Inaccurate piece count

Using Deming's plan-do-study-act process, the group at SmallVille designed a plan to examine all bills of lading over a 25-day period and count the number of errors in each of these categories. They repeated the study six months later to determine what progress, if any, had been made in error reduction. The second table in the SmallVille Case-Initial worksheet and the second table in the worksheet SmallVille Case-Revised show the data for the distribution of billing errors for these studies. Rob thought that the p-chart developed in the first study and reapplied to the second study provided significant information about the process; however, he was curious to find out whether another method could tell them more about the nature of the defects they were encountering.

Discussion Questions

3. After developing p-charts for the first and second studies, you decide to analyze the data to determine whether the system is in control by constructing another appropriate control chart (other than a p-chart) that could better tell you about the nature of the defects. You also decide that it would be wise to construct a Pareto diagram to gain additional insight into the problem, and suggest recommendations to reduce billing errors. Analysis by using the three charts from 4. Complete you’re each of the two studies to advise Rob and his managers at SmallVille on the next steps. How do the results differ from the first to the second study? Is the process in control? What error categories have improved? Which ones might the company need to work on immediately in order to bring about further improvements? What general conclusions do you reach?