Pareto Analysis

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CASE STUDY: “Rework”Is No Work at All
We have been appointed as a Six Sigma breakthrough improvement team to look into rework costs and inefficiencies in the company’s invoicing process. Our breakthrough improvement team consists of representatives from the groups that provide the billing information and the groups that process the invoices. At our first meeting, we listed the major steps involved in the process and began constructing a flow diagram. Next, we looked at each step and began detailing the kinds of problems that are detected there. Finally, we listed specific activities that take place to resolve the individual problems that arise. On our completed flow diagram, we identified nine rework loops in the invoicing process.

To estimate the cost associated with rework, each team member took responsibility for one of the rework loops. The assignment was twofold: (1) conduct a two-week study to tally the number of invoices that go through that rework loop, and (2) take the detailed rework activities, identify who is involved, and determine how much time is spent in that activity.

We decided against performing a detailed “time-and-motion” study. Instead, we agreed that reasonable estimates could be generated by the “jury method”—simply ask the people involved to come up with a consensus estimate of the time it takes to complete the activity.

To convert these time estimates into dollars, one of the team members volunteered to meet with someone from the personnel department to determine the average salaries of the various clerks, supervisors, and managers who get involved in the rework loops. (We have a number of clerical salary levels in our company, and we designate them as “Grade 1,” “Grade 2,” etc., with the higher salaries going to the higher grades.)

We have conducted our studies and are meeting again. Today, we will be analyzing our problem tallies and time estimates. (See the accompanying table of data. The first line has the...
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