Why is Managing Variation Important?

Operational efficiency drives profit, return on investment, and ultimately, shareholder value. Companies that can bring well-designed new products to market quickly, operate efficiently with minimal overhead, and design and produce high-quality products with minimal scrap or rework are those that will succeed and grow. A critical aspect of quality is variation in product dimensions and features and its impact on the performance, cost, and safety of a product. Variation in production impacts many aspects of operational efficiency including inventory, waste, touch time, warranty/product returns, and capacity utilization. Ultimately, variation reduces profit. In order to compete in today's marketplace, organizations must proactively manage the impact of variation on their product and operations.

What is the Challenge?

During our observation of the quality initiatives of many companies, we noticed an interesting contradiction. Most companies talked about the importance of designing and building robust, high-quality products produced at a low cost, but they continually fell short in applying known tools to achieve this, instead releasing and producing less-than-robust products with low initial yields and ongoing warranty issues. Our hypothesis is that companies know how to use quality improvement tools but fail to determine where to apply them.

Three interrelated issues face companies implementing quality-improvement efforts. First, companies often do not apply limited resources effectively. Second, teams do not know how to agree on the most critical issues and reach consensus on how to address them. Third, quality typically is addressed on a part-by-part basis rather than by optimizing quality and its impact across the entire product.

What is Variation Risk Management?

Variation risk management (VRM) can be used to address these challenges. VRM refers to the proper allocation of limited resources to variation control and reduction efforts in order to improve quality and reduce cost as efficiently and effectively as possible. In other words, given a large number of opportunities to apply variation-reduction and control tools, variation risk management identifies the best opportunities on which to focus. Variation risk management can be applied either proactively, during product development, or to an existing product being manufactured. Variation risk management integrates all functional groups impacting product quality including design engineering, manufacturing, quality, system engineering, customers, procurement, and suppliers.

Analytics has used quantitative methods to help many product-development and production organizations effectively and efficiently reduce the total impact and cost of variation. The VRM methodology has helped companies identify key areas for improvement, significantly reduce cost, and improve quality. It has been used as a guide to applying Six Sigma and robust design to get the best returns. The tools of VRM have been applied to a wide range of products and technologies including aircraft, automotive, engine design, medical devices, electro-mechanical devices, optical assemblies, printed wiring boards, and micro-electronics.