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	<title>Pyzdek Institute &#187; figure 1</title>
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		<title>Selecting Winning Projects</title>
		<link>http://www.sixsigmatraining.org/introduction-to-six-sigma/selecting-winning-projects.html?source=rss</link>
		<comments>http://www.sixsigmatraining.org/introduction-to-six-sigma/selecting-winning-projects.html#comments</comments>
		<pubDate>Wed, 16 Sep 2009 20:55:46 +0000</pubDate>
		<dc:creator>Thomas Pyzdek</dc:creator>
				<category><![CDATA[Introduction to Six Sigma]]></category>
		<category><![CDATA[Leading Six Sigma]]></category>
		<category><![CDATA[Six Sigma Projects]]></category>
		<category><![CDATA[assumption]]></category>
		<category><![CDATA[computer software product]]></category>
		<category><![CDATA[constraint]]></category>
		<category><![CDATA[crystal ball]]></category>
		<category><![CDATA[decision variables]]></category>
		<category><![CDATA[development group]]></category>
		<category><![CDATA[figure 1]]></category>
		<category><![CDATA[finance manager]]></category>
		<category><![CDATA[initial investment]]></category>
		<category><![CDATA[present value analysis]]></category>
		<category><![CDATA[probability]]></category>
		<category><![CDATA[project selection]]></category>
		<category><![CDATA[relevant factors]]></category>
		<category><![CDATA[research and development]]></category>
		<category><![CDATA[sigma projects]]></category>
		<category><![CDATA[six-sigma]]></category>
		<category><![CDATA[spreadsheet model]]></category>
		<category><![CDATA[success rate]]></category>
		<category><![CDATA[success rates]]></category>
		<category><![CDATA[theory of constraints]]></category>

		<guid isPermaLink="false">http://www.sixsigmatraining.org/?p=1958</guid>
		<description><![CDATA[An exciting computer software product known as Crystal Ball Pro by Decisioneering makes it possible to select winning projects by factoring in all of the relevant factors. It does so by simulating various scenarios thousands of times, then choosing those that perform best.]]></description>
			<content:encoded><![CDATA[<p><em><span style="color: #ff0000;">Software helps select the best projects.</span></em></p>
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<p align="LEFT"><strong><span style="font-family: Tahoma,Verdana,Arial,Helvetica; font-size: small;">I</span></strong>n a previous column I discussed how Six Sigma projects should be selected using the theory of constraints (TOC). After attempting to do so, most discover yet another constraint: money. In most organizations there are more opportunities for improvement than one can afford to pursue. If it isn&#8217;t money, some other resource will be in short supply, such as talent. And as if that weren&#8217;t bad enough, the task is further complicated by uncertainty of the payoff from the projects and their probability of success.</p>
<p align="LEFT">An exciting computer software product known as Crystal Ball Pro by Decisioneering makes it possible to select winning projects by factoring in all of the relevant factors. It does so by simulating various scenarios thousands of times, then choosing those that perform best.</p>
<p align="LEFT">For example, the research and development group of a major public utility has identified eight possible Six Sigma projects. A net present value analysis has computed:</p>
<ul>
<li> The expected revenue for each project, if it&#8217;s successful</li>
</ul>
<ul>
<li> Its estimated probability of success</li>
</ul>
<ul>
<li> Its required initial investment</li>
</ul>
<p align="LEFT">Using these figures, the finance manager has computed the expected return and the expected profit for each project. Unfortunately, the available budget is only $2 million, and selecting all projects would require a total initial investment of $2.8 million. Thus, the objective is to determine which projects will maximize the total expected profit while staying within the budget limitation. Complicating this decision is the fact that both the expected revenue and success rates are highly uncertain. Figure 1 shows a spreadsheet model for this problem.</p>
<p><strong><span style="font-family: Tahoma,Verdana,Arial,Helvetica;">Figure 1: Project Selection Spreadsheet</span></strong></p>
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<p align="LEFT">The decision variables in column H are binary; that is, they can only assume the values zero (do not fund the project) and one (fund the project.) The assumption variables are in the &#8220;Expected Revenue&#8221; and &#8220;Success Rate&#8221; columns. Crystal Ball Pro will use simulation to evaluate a range of values for these two columns. The total profit, shown in cell G19, is a forecast variable whose values depend on the assumption and decision variables. The idea is to find the combination of projects (determined by the decision variables) that maximize total profit, taking into account the variation in expected revenue and the probability of success.</p>
<p align="LEFT">The project selection spreadsheet isn&#8217;t quite good enough given that the number of possible sets of projects is too large to identify by trial-and-error. Crystal Ball Pro can help here too. It includes a<br />
program, called OptQuest, which will perform a search to find the optimal package of projects (see Figure 2).</p>
<p><strong><span style="font-family: Tahoma,Verdana,Arial,Helvetica;">Figure 2: Progress Toward a Solution</span></strong></p>
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<p align="LEFT">The best solution OptQuest found (in a search that I limited to 10 minutes) is to fund all projects except 3 and 5 (see Figure 3). The expected net profit is $1.54 million. Note that the distribution of total profit includes a number of scenarios that would result in a net loss. This occurs because OptQuest was asked to find the solution that maximized expected (average) total profit, but it can limit searches to profitable software solutions too.</p>
<p><strong><span style="font-family: Tahoma,Verdana,Arial,Helvetica;">Figure 3: Results</span></strong></p>
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		<title>Thinking Outside the Box</title>
		<link>http://www.sixsigmatraining.org/statistical-tools-for-six-sigma/thinking-outside-the-box.html?source=rss</link>
		<comments>http://www.sixsigmatraining.org/statistical-tools-for-six-sigma/thinking-outside-the-box.html#comments</comments>
		<pubDate>Sun, 07 Jun 2009 07:54:16 +0000</pubDate>
		<dc:creator>Thomas Pyzdek</dc:creator>
				<category><![CDATA[Six Sigma Tools]]></category>
		<category><![CDATA[Statistical Tools for Six Sigma]]></category>
		<category><![CDATA[assortment]]></category>
		<category><![CDATA[caption]]></category>
		<category><![CDATA[choices]]></category>
		<category><![CDATA[control charts]]></category>
		<category><![CDATA[diagonals]]></category>
		<category><![CDATA[dozens]]></category>
		<category><![CDATA[electronics products]]></category>
		<category><![CDATA[figure 1]]></category>
		<category><![CDATA[holes]]></category>
		<category><![CDATA[linear combinations]]></category>
		<category><![CDATA[many things]]></category>
		<category><![CDATA[measurements]]></category>
		<category><![CDATA[microchips]]></category>
		<category><![CDATA[Principal-Components-Analysis]]></category>
		<category><![CDATA[spc]]></category>
		<category><![CDATA[statistical approach]]></category>
		<category><![CDATA[statistical software packages]]></category>
		<category><![CDATA[statistical technique]]></category>
		<category><![CDATA[transistors]]></category>
		<category><![CDATA[variation]]></category>

		<guid isPermaLink="false">http://www.sixsigmatraining.org/?p=1341</guid>
		<description><![CDATA[The &#8220;P&#8221; in SPC stands for process, not product. A common problem with SPC is that the world appears too complicated for a statistical approach to work. In complex electronics products, for example, circuit boards may have thousands of holes and microchips may have millions of transistors. Plotting control charts of each and every dimension [...]]]></description>
			<content:encoded><![CDATA[<p><span style="color: #ff0000;"><em>The &#8220;P&#8221; in SPC stands for process, not product.</em></span></p>
<p><strong><span style="font-family: Tahoma,Verdana,Helvetica; font-size: small;">A</span></strong> common problem with SPC is that the world appears too complicated for a statistical approach to work. In complex electronics products, for example, circuit boards may have thousands of holes and microchips may have millions of transistors. Plotting control charts of each and every dimension is clearly not feasible. What can be done?</p>
<p style="text-align: left;">To answer this question, consider a simple product: the box in Figure 1. How many things could we measure on this box? It turns out, a great many. Length, width and height are obvious choices. But we could also measure the diagonals on all six sides, interior diagonals front-to-back and back-to-front, linear combinations of these measurements and a great many more. We could conceivably come up with dozens of measurements on this simple box.</p>
<p><a href="http://www.sixsigmatraining.org/images/spc2.gif?source=rss"><img class="float-right" title="Figure 1" src="http://www.sixsigmatraining.org/images/spc2.gif" alt="" width="201" height="175" /></a></p>
</p>
<p>But&#8211;and this is critical&#8211;we don&#8217;t need these measurements to control the box <em>process</em>. The &#8220;P&#8221; in SPC stands for process, not product. When we focus on the product, we lose sight of the fact that we&#8217;re not trying to control the product. Control of the box process may be a great deal more simple than controlling the product. And if we control the process properly, the product will take care of itself.</p>
<p>The statistical technique known as principle components analysis can help us determine just what is important and what is not. Most statistical software packages can perform PCA. To illustrate the approach, I measured an assortment of boxes (see figure 2). The measurements I obtained are shown (in inches) in Table 1.</p>
<p><a href="http://www.sixsigmatraining.org/images/spc3.gif?source=rss"><img alt="" src="http://www.sixsigmatraining.org/images/spc3.gif" title="Figure 2" class="float-right" width="205" height="184" /></a></p>
<p>When these data are crunched through PCA, we find that three principle components explain 99 percent of the variation in the data set: Component No. 1 explains 76.9 percent of the variation, component No. 2 explains 14.1 percent, and component No. 3 explains 8 percent. The PCA clearly shows that these three components are associated with A, B and C respectively. Thus, the &#8220;box process&#8221; can be characterized almost entirely by controlling these three characteristics. If we do that, the other dimensions will be OK, too.</p>
<p>When these data are crunched through PCA, we find that three principle components explain 99 percent of the variation in the data set: Component No. 1 explains 76.9 percent of the variation, component No. 2 explains 14.1 percent, and component No. 3 explains 8 percent. The PCA clearly shows that these three components are associated with A, B and C respectively. Thus, the &#8220;box process&#8221; can be characterized almost entirely by controlling these three characteristics. If we do that, the other dimensions will be OK, too.</p>
<p><a href="http://www.sixsigmatraining.org/images/spc_table1.gif?source=rss"><img alt="" src="http://www.sixsigmatraining.org/images/spc_table1.gif" title="Figure 2" class="float-right" width="420" height="177" /></a></p>
<p>An example of using this approach in the real world involves CNC machining. A defense plant machined parts for use in guided missiles. The parts were extremely complex, with thousands of holes, cutouts, etc. on each. However, when the data were analyzed using PCA, it was determined that four principle components accounted for nearly all of the process variation. Further study showed which measurements were correlated with each principle component.</p>
<p>From this, the engineers determined that, for all the apparent complexity, the machining process was, in fact, quite simple. The four principle components corresponded with the machining center&#8217;s four axes of movement: X, Y and Z movement of the bed, and the rotation of the table on which the parts were mounted. SPC could be accomplished by selecting those features most difficult to position in each axis of movement. Often, a single feature could measure more than one axis; for example, a hole furthest from the &#8220;home&#8221; position in both the X and Y axes. The result: One or two control charts suffice for the control of a process placing thousands of features.</p>
<p>Note that the features selected for SPC may be of little or no importance to the product itself. In fact, some parts were designed with &#8220;process control features&#8221; that were later removed from the part entirely. This makes sense when remembering that P stands for <em>process</em>, not product. If you keep that in mind, the complexity you face might just evaporate before your eyes.</p>
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