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About this lesson

All processes have variation. A portion of management's responsibility is to control that variation to be within acceptable levels. This lesson provides a background in the management discipline of SPC, with a focus on the role of Shewhart and Deming.

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Variation and Control
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Quick reference

Variation and Control

All processes have variation. A portion of management's responsibility is to control that variation to be within acceptable levels. This lesson provides a background in the management discipline of SPC, with a focus on the role of Shewhart and Deming – two of the pioneers in the development of SPC.

When to use

All process have variation, so an analysis to understand and control variation is always appropriate.  SPC is a proven business discipline to understand variation and provide guidance on control of that variation.

Instructions

Process variation exists in all processes.  A management goal of many 21st business managers is to identify the sources of variation and control the levels of variation within a process.  Variation leads to unpredictable performance.   Accommodating this unpredictability and the associated defects leads to economic losses for both the company and their customers.  In addition, this unpredictability can generate high levels of customer dissatisfaction.  Therefore controlling variation is an imperative for many companies.  SPC is a proven method for identifying and controlling variation.

Walter Shewhart

SPC was formulated by Walter Shewhart in the 1920s.  He explained the concept of special cause variation and common cause variation.  This led to the creation of control charts for monitoring process performance to determine the presence and magnitude of each.  In addition, he created the process capability indices to show whether the process could meet the customer’s expectations. 

 

Shewart demonstrated his theories in Department of Defense arsenals and then with Defense contractors during World War II.  The widespread adoption and success of SPC during this time turned it into a standard business management process for manufacturing operations.

Edward Deming

SPC was further developed by one of Shewhart’s students, Edward Deming.  Deming used SPC in the USA Department of Agriculture during the 1930s where he found the need to add the sampling theories and principles to SPC.  He worked with Shewhart in the Defense industry during World War II.  However, Deming is best known for his work after the war.

 

Deming went to Japan as part of the USA government’s initiative to rebuild Japan following the war.  In particular, he worked closely with Japanese automotive manufacturers and transformed that industry into a global power that was leading with their competitive advantage in quality.  While in Japan, Deming expanded the principles of SPC to become a full blown management discipline and not just a quality control tool.  He developed his System of Profound Knowledge that relied on SPC principles to address improvements in all business processes.  Deming found that management failures and weaknesses accounted for 85% of the variation in business processes.  By applying these principles, that variation could be identified and eliminated or controlled.

Hints & tips

  • Variation always exists – so identify it, understand it, and control it
  • SPC can be applied to any business process, and often has a larger impact on administrative and support processes since they seldom have established quality control procedures.
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  • 00:04 Hi, I'm Ray Sheen.
  • 00:06 I'll start our discussion of statistical process control with a review of
  • 00:09 the background and foundation of variation and statistical control.
  • 00:15 Let's look at what those terms mean in a business setting.
  • 00:18 Everything we do in business is done with a process.
  • 00:21 It maybe a well documented process or it maybe totally ad hoc.
  • 00:25 But if you do it on a regular basis in your business
  • 00:28 you can consider it to be a process.
  • 00:30 A fundamental characteristic of every physical process
  • 00:33 is that there is variation present.
  • 00:35 The time you take to perform the process varies from one time to the next.
  • 00:40 The quality of the output may vary.
  • 00:42 That's due in part to the fact the business world around you is varying.
  • 00:46 Is it morning or evening?
  • 00:48 Monday or Friday?
  • 00:49 Who did the process this time?
  • 00:51 Were there distractions present?
  • 00:52 Variation is inherent in everything we do in business.
  • 00:56 That variation means there is an element of uncertainty in every business process.
  • 01:01 When that uncertainty is outside of the allowable or
  • 01:04 expected boundaries, we have a defect.
  • 01:07 Either for the company or the customer.
  • 01:09 And that defect leads to economic losses for the company, the customer or both.
  • 01:14 In the diagram shown, the average value is between the upper spec limit and
  • 01:18 the lower spec limit.
  • 01:19 But the spread of variation shows that
  • 01:22 a significant portion of the results are below the lower specification limit.
  • 01:27 As you read the management literature and 21st century business journals,
  • 01:30 you'll find that there is a theme of identifying and controlling variation.
  • 01:34 Digitization and
  • 01:36 artificial intelligence is supposed to give a faster and more reliable process.
  • 01:41 That means less variation.
  • 01:43 Improved customer service is supposed to reduce variation and
  • 01:46 defects that reach the customer.
  • 01:48 The Lean Six Sigma initiative is just one of the ways that managers
  • 01:52 seek to identify and control variation.
  • 01:55 Statistical process control, or SPC, is a methodology with a set of metrics and
  • 02:00 tools for controlling variation in the business processes.
  • 02:05 Let's talk about the history of SPC,
  • 02:07 and we'll start with the founder, Walter Shewhart.
  • 02:10 Shewhart worked at Bell Labs in 1920s and 30s.
  • 02:13 It is while he was working there that he developed the theories and
  • 02:17 principles that eventually came to be known as statistical process control.
  • 02:21 He developed control charts as a means for tracking process variation and
  • 02:25 determining if that variation was predictable.
  • 02:28 We'll look at a number of different control charts later in this course.
  • 02:31 He also developed the continuous improvement cycle of Plan-Do-Check-Act
  • 02:36 which is such a key aspect in today's lean Six Sigma methodology.
  • 02:40 Another important contribution to our understand of variation and control was
  • 02:44 the realization that variation could come from special causes or common causes.
  • 02:49 Knowing the source and type of variation is the key to applying effective process
  • 02:53 control versus tampering with the process and making the performance even worse.
  • 02:59 But Shewhart wasn't just a theoretician.
  • 03:01 He was also teaching at Princeton University, and his writings and
  • 03:05 teachings caught the eyes of the government of the United States.
  • 03:08 The Department of Defense started to try Shewhart's ideas
  • 03:11 with the defense contractors in the 1930's and 1940's.
  • 03:13 And was used as part of the nation's defense industry during World War II.
  • 03:19 Let's continue on now from the founder of SPC to the SPC evangelist, Ed Deming.
  • 03:25 Deming was one of Shewhart's students.
  • 03:27 He took SPC into the agricultural department of the USA government
  • 03:31 here in the 1930's and had tremendous success.
  • 03:34 One of the areas of SPC that he expanded and codified were sampling plants.
  • 03:39 These were essential in the agricultural setting since it was impossible
  • 03:43 to measure or evaluate every plant.
  • 03:45 As the war effort of World War II expanded,
  • 03:48 Deming was pulled into the defense circle, and worked with a number of defense
  • 03:51 contractors to improve their manufacturing processes.
  • 03:55 When the war ended, Deming was asked to join in an effort to rebuild Japan.
  • 04:00 He worked with automotive manufacturers in Japan to apply the principles of SPC and
  • 04:05 his broader management to discipline known as the system of his profound knowledge.
  • 04:09 Deming was the catalyst to move SPC from a quality control tool
  • 04:13 to management discipline and business strategy.
  • 04:16 He showed how these principles worked in any business department
  • 04:19 not just in manufacturing.
  • 04:21 He became a world renowned individual and
  • 04:23 it's safe to say that he changed the way business is managed.
  • 04:28 So given the history lesson let's go back and look at process variation.
  • 04:32 Deming demonstrated that the level of variation within business processes could
  • 04:36 be controlled if management focused on the correct things.
  • 04:40 The SPC methodology is a set of tools and
  • 04:42 measures that enables managers to do just that.
  • 04:46 The insight that can be obtained by applying SPC to business processes
  • 04:50 tells management what type of variation exists and
  • 04:53 can lead them to the causes of that variation so that it can be controlled.
  • 04:57 According to Deming, 85% of the variation that he saw in processes was due
  • 05:02 to managerial practices, not variation from equipment, people, suppliers, or
  • 05:07 the processes and procedures.
  • 05:09 If a business truly wants to control variation, management must understand how
  • 05:13 to statistically analyze and manage the business processes.
  • 05:17 SPC is not, it's just a quality control tool for inspectors.
  • 05:20 It is a management tool.
  • 05:23 SPC provides the tools and measurements to understand and process variation.
  • 05:29 Which is the first step to enabling management to effectively control
  • 05:32 variation.

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