The Impact of Variability -  By Eric Maass

 Running a business would be amazingly simple in the absence of variability.  Business owners would know exactly what to expect today and ten years from today because there would be no change.  In the absence of variability, businesses would have straightforward ways to optimize sales, profits, and customer satisfaction because they could precisely anticipate all of the influential factors.

 Let's imagine a bakery business that has no business variability.  Day after day, customers order a total of 324 cakes, 112 pies, and 1234 loaves of bread.  In addition, customers arrive at the bakery at the exact same time every day.  The number of orders and time these orders were placed last Monday were exactly the same as Thursday two months ago, and the same can be said of every other day.

 In this scenario, it is easy to plan how much flour, milk, eggs, and other ingredients you need to purchase and keep in stock.  All the equipment and people work on the same timetable every day without any variability, so every cake, pie, and loaf of bread is produced to the customers' expectations and is ready and waiting for them when they arrive.

 Business is good because sales, manufacturing, and customer satisfaction are all at their best.  For example, you can prepare all the right products just in time for when the customers want them, so the customers can be in and out of your bakery within minutes.  You have only satisfied customers, who are glad you anticipated their needs and didn't waste their time.

 In the absence of variability, this story would be found in almost any industry, service, or business.  If there was no variability, then once you had a model for how things progress over time you would have no variability from your expectations, no uncertainty. You could be certain of what would happen under any selected circumstances.

 New product development would be fast, easy, and rapidly transferred to production.  Through a simple set of experiments, you would find what you need to change in order to make your bread, or your integrated circuits or your cellular phones, the best possible, and then you would make the change with full confidence that the product will be better just as the experimentation proved.  Without variability, there could be no differences in the final product that the experimentation didn’t anticipate.

 Engineering also would be straightforward.  You could optimize manufacturing because making one pie, or integrated circuit, and making more is as simple as putting the product on a copy machine.  There would be no need to anticipate defects (or dissatisfied customers as a result of this defect) because there would be no variability in the way the product turned out.

 Accounting would be simple.  You would know what to expect each month in sales and expenditures, so you only need to analyze the financial data once to see how to minimize your costs and choose the best price. Making profits would be almost like having your own private mint.

 Unfortunately, no business is immune to the effects of variability.  It is this very uncertainty of what to expect which makes manufacturing, engineering, and running a business so much more challenging. Because we daily see the effects of variability on our businesses, why is the importance of variability so hard for some people to grasp?  The focus of Six Sigma is on variability because it is the uncertainty of business which concerns us all. 

 What is important to the Customers that can be impacted by Variability?  Customers are concerned with performance (products must work), system performance (products must work in the customer’s systems), reliability (products must continue to work), delivery (products are available when needed or expected), price (products must cost a fair, reasonable, and competitive amount), and responsiveness (products must be accompanied by service that provides answers and help when requested).

 Variance shows up in many aspects of an organization’s products, processes and services.  Here are some examples of Variances associated with each of these expectations:

Performance:

• Variance of key parameters in manufacturing
• Sensitivity of design to Variance

System Performance:

• Sensitivity of design to manufacturing variability in system
• Sensitivity of design to the environment

Reliabilty:

• Variance of manufacturing parameters that impact durability
• Variance of processing that can introduce defects
• Sensitivity of design to the environment (e.g.: humidity, temperature)

Delivery:

• Variance and uncertainty in demand for the product
• Variance in capacity, and demand for other products in line
• Variance in Yield
• Variance in Cycle Time

Price:

• Uncertainty in customers’ expectations, competitors’ pricing
• Variance in manufacturing costs

Responsiveness:

• Variance in response time