Process Capability Guide

Crystal Ball 7.
3
Process Capability Guide
Crystal Ball Process Capability Guide, Version 7.3.1
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Contents
Welcome to the Crystal Ball process capability features
How this guide is organized ..................................................................... 1
Conventions used in this manual .................................................................... 2
Getting help .................................................................................................... 2
Technical support and more ........................................................................... 3
Technical support ..................................................................................... 3
Training .................................................................................................... 3
Consulting ................................................................................................. 3
Chapter 1: Process Capability Overview

Crystal Balls process capability features ......................................................... 6
Quality improvement methodologies ............................................................. 7
Methodologies for improving processes Six Sigma ............................. 7
Methodologies for improving design DFSS ......................................... 9
Methodologies for adding value Lean principles ................................ 9
How Crystal Ball supports quality ................................................................. 10
Chapter 2: Improving Process Quality Tutorial 1

Overview ........................................................................................................ 14
Improving process quality Tutorial 1 ....................................................... 14
Overall approach .................................................................................... 14
Using the Loan Processing model .......................................................... 17
Start Crystal Ball ..................................................................................... 17
Activate the process capability features .................................................. 18
Set the sampling seed value .................................................................... 19
Open the example model ....................................................................... 19
Review the parts of the model ................................................................ 20
Review the assumptions .......................................................................... 20
Review the forecast ................................................................................. 23
Run the simulation ................................................................................. 24
Analyze the simulation ............................................................................ 24
Investigate improvement possibilities .................................................... 26
Chapter 3: Improving Design Quality Tutorial 2

Overview ........................................................................................................ 32
Packaging pump design Tutorial 2 .......................................................... 32
Overall approach .................................................................................... 32
Using the DFSS Liquid Pump model ..................................................... 35
Start Crystal Ball ..................................................................................... 36
Activate the process capability features .................................................. 36
Set the sampling seed value .................................................................... 37
Open the example model ....................................................................... 37
Review the parts of the model ................................................................ 39
Crystal Ball Process Capability Guide i

Contents4
Run the simulation ................................................................................. 41
Analyze the simulation ........................................................................... 41
Adjust the model .................................................................................... 43
Using OptQuest to optimize quality and cost ........................................ 45
Chapter 4: Lean Examples and More

This chapter analyzes two Lean quality models in depth and summarizes sev-
eral other models with quality impact included among the example mod-
els shipped with Crystal Ball. ................................................................. 49
Overview........................................................................................................ 50
Value Stream Analysis a Lean example ................................................... 50
Model description .................................................................................. 51
Using the model ..................................................................................... 53
The Hidden Factory A Lean / Six Sigma Example .................................. 57
Other quality-related example models ......................................................... 59
Critical Path / Time-to-Market Analysis ................................................. 59
Six Sigma Project Selection .................................................................... 61
Simulation with Design of Experiments ................................................. 62
Piston Displacement ............................................................................... 64
Cost-based Stack Tolerance Analysis ...................................................... 68
Workforce Planning with Queuing ......................................................... 70
Appendix A: Capability Metrics

Capability metrics overview .......................................................................... 74
Capability indices ................................................................................... 74
Z scores and sigma levels ........................................................................ 75
Defect probabilities and rates ................................................................. 75
Shift and capability metrics .................................................................... 75
Capability metrics list.................................................................................... 76
Appendix B: How Do I...

Activating Crystal Balls process capability features ..................................... 80
Setting specification limits and targets ......................................................... 81
Charts and process capability ....................................................................... 81
Extracting capability metrics ........................................................................ 82
Extracting capability metrics automatically ........................................... 82
Extracting capability metrics manually .................................................. 83
Including capability metrics in reports......................................................... 83
Saving and restoring results with capability metrics..................................... 84
Index ............................................................................................................ 85
ii Crystal Ball Process Capability Guide

1
Welcome to the Crystal Ball process capability features
This version of Crystal Ball introduces a new set of process capability features
that support quality improvement methodologies such as Six Sigma, DFSS
(Design for Six Sigma), and Lean principles.
These features are listed in Crystal Balls process capability features on

page 6. They are activated by choosing a single checkbox in the Run
Preferences dialog. Only users who have activated these features will see
related data in dialogs, charts, and reports. For instructions, see Appendix B.
How this guide is organized

The Process Capability Guide introduces Crystal Balls process capability
features and suggests ways you can use them in your quality program. This
Guide includes the following:
Chapter 1 Process Capability Overview

An overview of various quality methodologies and how Crystal Ball
supports them.
Chapter 2 Improving Process Quality Tutorial 1
An example that demonstrates how to use Crystal Ball for process quality
improvement.
Chapter 3 Improving Design Quality Tutorial 2
An example that demonstrates how to use Crystal Ball to save time and
costs in the design phase of projects.
Chapter 4 Lean Examples and More
Examples that show how Crystal Ball can improve quality and eliminate
waste and rework using Lean techniques, plus an overview of other
Crystal Ball example models that support quality improvements.
Appendix A Capability Metrics
Definitions of the capability metrics calculated for Crystal Ball forecasts
when the process capability features are activated and at least one
specification limit is included in the forecast definition.
Appendix B How Do I...
A summary of how to activate and use Crystal Balls process capability
features.
Crystal Ball Process Capability Guide 1

Introduction
Index
An alphabetical list of subjects and corresponding page numbers.
For information about how to use all features of Crystal Ball, see the Crystal
Ball Getting Started Guide and the Crystal Ball User Manual.
Conventions used in this manual

This manual uses the following conventions:
Text separated by > symbols means that you select menu options in the
sequence shown, starting from the left. The following example means that
you select the Exit option from the File menu:
1. Select File > Exit.
Steps with attached icons mean that you can click the icon instead of
manually selecting the menu options in the text. For example:
2. Select Define > Define Assumption.
Ctrl-c means that you hold down the Ctrl key and type c. Capitalization is
important; Ctrl-c and Ctrl-C are two different key sequences.
A key sequence without hyphens means you type the sequence in the
order shown but not simultaneously. For example,
Ctrl-q N means that you press the Ctrl key and type q simultaneously,
and then type N.
This icon indicates special instructions or information for users of Excel
2007.
Crystal Ball Note: Screenshots were taken in Microsoft Excel 2003 on Windows XP
Professional. Due to round-off differences between various system configurations, you
might obtain slightly different calculated results than those shown in the examples.
Getting help
As you work in Crystal Ball, you can display online help in a variety of ways:
Click the Help button in a dialog.

Click the Help button in the Crystal Ball toolbar in Excel.
In the Excel menubar, choose Help > Crystal Ball > Crystal Ball Help.
In the Distribution Gallery and other dialogs, press F1.
2 Crystal Ball Process Capability Guide

1
In Excel 2007, click Help at the right end of the Crystal Ball ribbon. Note that
if you press F1 in Excel 2007, Excel help appears unless you are viewing the
Distribution Gallery or another Crystal Ball dialog.
Technical support and more

Oracle offers a variety of resources to help you use our products.
Technical support
Technical Support is available for all registered customers with a current
maintenance agreement and a valid license authorization code. There are a
number of ways to reach Technical Support described in the README file in
the Crystal Ball installation folder. Online, see:
http://support.crystalball.com
Training
The Crystal Ball Training group offers a variety of courses throughout the
year to help improve how you make decisions. For more information about
Crystal Ball courses, call one of these numbers Monday through Friday,
between 8:00 a.m. and 5:00 p.m. Mountain Time: 1-800-289-2550 (toll free in
US) or +1 303-534-1515, or visit our Web site:
http://www.crystalball.com/training
Consulting
The Crystal Ball Services group provides consulting services including the full
range of risk analysis techniques from simulation, optimization, advanced
statistical analysis and exact probability calculations, to strategic thinking,
training, expert elicitation, and results communication to management. To
learn more about these consulting services, call 1-800-289-2550 Monday
through Friday, between 8:00 A.M. and 5:00 P.M. Mountain Time or see our
Web site at:
http://www.crystalball.com/consulting

Introduction

Chapter 1
Process Capability Overview
In this chapter
Crystal Balls process capability features
Quality improvement methodologies
How Crystal Ball supports quality
This chapter gives an overview of several quality methodologies including Six Sigma,
Design for Six Sigma (DFSS), and Lean principles and summarizes how Crystal Ball
supports these and similar quality programs.

Chapter 1 | Process Capability Overview
Crystal Balls process capability features

This version of Crystal Ball introduces a new set of process capability features
that support quality improvement methodologies such as Six Sigma, DFSS
(Design for Six Sigma), and Lean principles.
You can use the Welcome screen or the Statistics tab of the Run Preferences
dialog to activate these features. Once they are activated, you can:
Add upper and lower specification limits and target values to forecast
definitions.
Display the Capability Metrics view in the forecast window, in addition to
the basic Frequency, Cumulative Frequency, Reverse Cumulative
Frequency, Statistics, Percentiles, and Goodness of Fit views.
Use Crystal Balls Split View feature to display the Capability Metrics view
to the right of one of the forecast chart views. This is the default.
View marker lines for specification limits and the target value on forecast
charts.
Extract capability metrics to a worksheet using Analyze > Extract Data or
the Auto Extract forecast preferences.
Include capability metrics in reports.
Include several capability metrics in OptQuest, if you have Crystal Ball
Professional or Premium Edition, and specify them as objectives or
requirements.
The following chapters demonstrate how these features support quality
programs. See Appendix B for a summary of how to activate and use them.

1 Quality improvement methodologies
Quality improvement methodologies

Starting about 1975, competitive pressures on manufacturers encouraged
them to discover new quality methodologies. Leading companies developed a
variety of techniques to save costs and time by improving processes, designing
more effectively, and increasing the value of product modifications.
Some of the most successful methodologies have been Six Sigma, Design for
Six Sigma (DFSS), Lean principles, and similar tools for quality improvement.
The following sections summarize several of these. Tutorials in the following
chapters demonstrate how Crystal Ball can be used to support them.
Methodologies for improving processes Six Sigma

Broken processes reduce quality in a variety of organizations, from banking to
manufacturing to healthcare, and more. In the United States, Six Sigma is
probably the best known of these process improvement methodologies,
although other techniques have similar goals and effectiveness in the field.
Six Sigma is a methodology for improving processes to achieve any or all of

the following goals:
Reducing the defect rate to 3.4 per million (outside the range of 6
standard deviations above and below the mean)
Creating improvements of 70% or better
Using the Define-Measure-Analyze-Improve-Control methodology of
information gathering, analysis, and action
Producing rapid improvement of an organizations financial bottom-
line.
Six Sigma methodology is data-driven and focuses on the relationship
between system inputs and outputs, both of which can vary. The inputs, or
independent variables, are symbolized by X; the outputs, or dependent
variables, are symbolized by Y. The goal of a Six Sigma program is to yield
maximum quality and minimum variation in Y by controlling variation in all
the X variables, the factors that influence it.
Six Sigma teams talk about the hidden factory of workers behind the scenes
who rework defects and perform other extra tasks to make up for broken
processes. Six Sigma programs achieve their goals by discovering the hidden
factory in their organization and releasing its workers for more productive
tasks.

More about DMAIC

DMAIC is the acronym for the following phases of virtually all Six Sigma
programs:
Define Observing procedures, financials, defect rates, and so on to

select a project and then creating a problem statement with a measurable
outcome.
Measure Determining current performance levels and the amount of
variation within them. Short-term (ST) variation is more random, while
long-term (LT) variation is less random and more apt to fit to a normal
curve or some other probability distribution.
Analyze Discovering how closely process measures map to process
requirements generated from the Voice of the Customer (VOC). This
mapping is called capability, expressed through capability metrics.
Improve Using the capability metrics, observations and experiments to
design and implement process improvements.
Control Designing a plan to measure output results and implementing
feedback loops to change the output if measures exceed desired control
targets and variation limits.
Six Sigma offshoots and related methodologies

Besides basic Six Sigma practices for improving business and organizational
processes, other methodologies have been developed to tackle other
problems:
Design for Six Sigma (DFSS) concerns the proactive design, development,
and marketing of new products, services, and processes. Its five phases are
Define, Measure, Analyze, Design, and Verify (DMADV).
Lean principles techniques seek to increase value by improving the flow
of value stream activities and reducing waste. Other Lean principles
include just-in-time delivery driven by customer pull not push and a
constant, incremental search for perfection (sometimes called kaizen).
The following sections describe these techniques. Crystal Ball can help
support them as well as basic Six Sigma and similar process improvement
practices.

1 Quality improvement methodologies
Methodologies for improving design DFSS

Design for Six Sigma (DFSS) developed following the success of Six Sigma
and other process improvement methodologies. If a similar multi-phase
improvment technique could be applied to design, costs and time could be
saved by eliminating waste and unnecessary prototyping. Successful designs
could move to production quicker, reducing costs and increasing an
organizations competitive edge. DFSS proved to be a successful tool for
improving design in a variety of settings.
DFSS has five phases:
Define Describing the proposed product or other opportunity

Measure Accurately assessing customer requirements and performance
specifications
Analyze Formulating product design options to meet customer
requirements and prioritizing design options based on known process
capability, performance, and probability of technical success
Design Designing and developing a robust and optimized product to
meet customer quality requirements
Validate Testing the design to ensure that it is performing as planned
and meeting customer requirements
The ultimate mission of DFSS is to address general Six Sigma goals of
meeting customer needs while minimizing variation and to accomplish this as
early in the development cycle as possible.
For an example of DFSS in action, see Chapter 3, Improving Design Quality

Tutorial 2.
Methodologies for adding value Lean principles

The Lean approach to quality focuses on eliminating waste, improving
efficiency, and increasing value. Producing only what can be used immediately
by downstream processes is an important Lean principle; pull or demand
directs workflow to yield just-in-time delivery of needed components or
finished product. By most accounts, Lean production began with the Toyota
Corporation as the company discovered ways to compete successfully without
the huge infrastructure typically found in automobile manufacturers in the
United States.
Lean practitioners use value stream mapping to identify process steps with
the greatest impact on the overall product. Then, Lean projects are created to

improve those processes. The hidden factory is a major target for Lean
programs, as practitioners seek to eliminate rework and scrap.
Improvements are often implemented incrementally following relatively

informal analysis within a pure Lean setting. To help with analysis, Lean
principles are often used with statistical methodologies such as Six Sigma. See
Chapter 4, Lean Examples and More, for examples of how Crystal Ball can
be used for analysis within Lean projects.
How Crystal Ball supports quality

Crystal Ball is most helpful in phases of quality improvement programs where
uncertainty and variation have the greatest impact. In the Define phase, for
example, cost savings forecasting, project cost estimation, and resource
scheduling are all subject to uncertainty. These types of analyses are ideal
targets for simulation.
In the Analyze and Improve phases, the focus is variation. Simulation can
help reduce the variation around tolerances or process steps.
In any phase, defining model inputs (Xs) as a distribution of values yields a

more realistic range of results. Then, the results (Ys), defined as Crystal Ball
forecasts, can be analyzed as demonstrated in the following chapters of this
guide.
By default, the forecast certainty range is automatically set to the upper and
lower specification limits (USL and LSL), if at least one of them is entered for
the forecast. Then, you can tell at a glance the probability of output falling
within them, 99.49% in the example in Figure 1.1. Split View shows capability
metrics to the right of the forecast chart.
Documentation Note: Appendix A summarizes and defines the Crystal Ball capability
metrics. You should find this information helpful as you review the other examples in this
Guide.

1 How Crystal Ball supports quality
Figure 1.1 Piston Displacement forecast chart
Capability Metrics view indicates whether the forecast distribution is normal,

to guide your interpretation of the capability metrics. For example, Z metrics
always appear, although they are generally used only for normal distributions.
The Z-total metric indicates the sigma level of quality. In this example, the
level is 2.37 sigmas. For this forecast, 8,824 units per million will be outside
the specification limits. The Cp and Cpk values are less than one, which
suggests that the quality level is lower than 3 sigmas. For a more detailed
discussion of the capability metrics, see Appendix A. To cycle among other
views, such as Statistics and Percentiles, press the Spacebar.
Crystal Ball Note: By default, Crystal Ball applies a 1.5 sigma Z-score shift value
when calculating capability metrics. If your organization uses a different value or does
not use a Z-score shift value, be sure to adjust this setting in the Capability Options
dialog (page 80).
Crystal Balls sensitivity charts are also helpful to quality practitioners. They
show which inputs, or assumptions, have the greatest impact on the selected
forecast. For example, the following sensitivity chart shows that Connecting
Rod Length has the greatest effect on the Piston Displacement forecast shown
in the previous figure.

Figure 1.2 Piston Displacement sensitivity chart
Crystal Balls data extraction and reporting capabilities are also helpful in
quality analysis. For example, you can automatically extract capability metrics
to a prominent location in your model for immediate access to current sigma
levels and other important measures.
If you have Crystal Ball Professional or Premium Edition, OptQuest and the
Crystal Ball Developer Kit add further power to your arsenal of quality
improvement tools.
When you define certain cells as Crystal Ball decision variables, you can then
optimize them with OptQuest and copy the new, optimal values back into
your Crystal Ball model. For example, Using OptQuest to optimize quality
and cost, beginning on page 45, shows how you can use OptQuest to adjust
several controllable inputs simultaneously to yield a set of optimal results.
Visual Basic for Applications (VBA) developers can use the Crystal Ball
Developer Kit to support quality projects in a variety of creative ways. One
example is Value Stream Analysis a Lean example on page 50. This
model uses the Developer Kit to create a color-coded dashboard that
highlights which process steps are lowest in quality and which are most
important to the process output.
For other ways to apply Crystal Ball to your own quality improvement
projects, review the examples in this guide and examine the other models
supplied with Crystal Ball and posted at www.crystalball.com.

Chapter 2
Improving Process Quality Tutorial 1
In this chapter
Overview
Improving process quality Tutorial 1
This chapter shows how to use Crystal Ball in the Analyze and Improve phases of Six Sigma
and other process quality improvement methodologies.
The next chapter, Improving Design Quality Tutorial 2, shows how to use Crystal Ball
in design quality programs such as Design for Six Sigma (DFSS).

Chapter 2 | Improving Process Quality Tutorial 1
Overview
Six Sigma and other process improvement methodologies strive to save costs
and time by minimizing process variation and reducing rework. Six Sigma has
five phases for gathering information, analyzing it, and implementing
suggested improvements: Define, Measure, Analyze, Improve, Control. These
phases are defined on page 8. When accomplished successfully, these process
improvement techniques can produce rapid and large improvements in an
organizations financial bottom-line.
The tutorial in this chapter shows how Six Sigma techniques can be used with
Crystal Ball to discover inconsistencies and reduce variation in a banks loan
processing system.
Improving process quality Tutorial 1

Suppose you are assigned the task of improving loan processing quality at a
bank. You want to minimize average processing time, keeping below the
banks target. At the same time, you want to evaluate and improve processing
time consistency.
Overall approach
Define You plan to talk with stakeholders in various departments to
learn how they are currently working, how they view of the problem, and
what outcome they hope to see.
Measure You will determine current processing times and the amount
of variation within them.
Analyze You plan to use Crystal Ball to help you discover process
capability, or how closely the processing times map to process
requirements.
Improve You will use information gathered in the previous phases to
design and implement improvements in processing time and consistency.
Control You need to ensure permanent improvements by setting up a
system of feedback loops to continuously measure process results and
change the output if measures exceed desired control targets and control
limits.
In the Define and Measure phases, you obtain and use information to build a
Crystal Ball model. Then, you use Crystal Ball to simulate real-world
variations that occur in processing loans. Finally, you can use sensitivity

1 Improving process quality Tutorial 1
analysis and further optimization to arrive at the best balance between time
and consistency.
The following sections give details of each phase.
Define phase
The banks loan processing procedures involve six steps:
Customer inquiry
Loan application
Document verification and processing
Loan underwriting
Loan closing
Loan disbursement
You interview staff involved with each step and learn that marketing and
management groups are hoping for completion of all six steps within 96
working hours. Loan specialists at each step express a concern that processing
times for upstream steps vary widely. While they feel confident they can
improve their own area, they have no control over these time variations in
other areas.
Based on these interviews, you establish both the target and upper
specification limit (USL) at 96 hours. There is no lower specification limit
(LSL), although consistency (the sigma level) seems to be an issue. You decide
to obtain more concrete data.
Measure phase
You document time and time variation data for each processing step, as
follows:
Customer Inquiry involves the creation of an initial rate quote following

the first customer contact by phone, in-person visit, or the Internet.
Historical data indicates this cycle time is lognormally distributed with a
mean of one hour and a standard deviation of 0.25 hours.
Loan Application involves the completion of forms by customers, with or
without staff assistance. This step takes from one to five eight-hour days,
but usually takes three days.
Document Verification and processing occurs in the bank, where a loan
specialist reviews credit data, presents loan alternatives to customers, and
independently verifies information. This step usually takes between two

and four eight-hour days. However, about two out of ten times, the loan is
suspended and takes between four and six days for additional reviews and
documentation.
Underwriting, or loan approval, usually takes from one hour to 8 hours.
All lengths of time have the same likelihood of occurrence.
Loan Closing includes the preparation of the final documentation,
locking in an interest rate, and arranging where to deposit funds.
Historical data show that this step has a mean of two days, but you dont
yet know how the data are distributed.
Loan Disbursement, moving the funds to the customers bank, usually
takes 16 hours, with some variation. Two-thirds of disbursement times fall
within 12 and 20 hours.
After gathering this information, you decide to load it into Excel and use
Crystal Ball to analyze it.
Analyze phase
During the Analyze phase, you create an Excel workbook that includes
historical data on loan closing times. Then, you can capture the time and
variation information for each step as a Crystal Ball assumption. Finally, you
can define overall processing time as a Crystal Ball forecast. When the
simulation runs, you can view capability metrics to gain insight into the
degree of process variation, or inconsistency. You can also generate a
sensitivity chart to learn more about the main sources of inconsistency.
Using the Loan Processing model beginning on page 17 shows how to use a
Crystal Ball model in the Analyze and Improve phases to accomplish your
quality goals.
Improve phase
You can experiment with the effects of changing the main sources of
inconsistency. If you have Crystal Ball Professional or Premium Editions with
OptQuest, you can also define decision variables and optimize for the shortest
processing time and least time variation.
Control phase
You set up a system of measuring cycle times for each step and analyzing them
on a regular basis. You run a Crystal Ball simulation on real data once a
month with a program of corrective actions to take whenever results exceed
desired limits by a specified amount.

Using the Loan Processing model

This section shows how to construct a model that effectively simulates each
step of the loan process with dual goals of minimizing processing time and
maximizing time consistency. Then, you run the model and analyze the
output using Crystal Balls process capability features.
Crystal Ball Note: If you are new to Crystal Ball, be sure to work through the tutorials
in the Crystal Ball Getting Started Guide to learn about basic Crystal Ball features.
As you work through this tutorial, dont worry about making mistakes;
recovery is as easy as backing up and repeating the steps. If you need
additional help, see the Crystal Ball online help. You can click the Help
button in each dialog or choose Help > Crystal Ball > Crystal Ball Help.
In this tutorial, you will:
Start Crystal Ball

Activate the process capability features
Set the sampling seed value
Open the example model
Review the parts of the model
Review the assumptions
Review the forecast
Run the simulation
Analyze the simulation
Investigate improvement possibilities
Start Crystal Ball

If Crystal Ball is not already started, start it as usual. Choose Start > [All]
Programs > Crystal Ball 7 > Crystal Ball. Or, start Excel if you have used the
Crystal Ball Application Manager to set Crystal Ball to open each time you
start Excel.
If the Crystal Ball Welcome screen appears, check Quality in the upper left,
and then click Use Crystal Ball at the right.


Confirm that the process capability features have been activated and
activate them, if necessary:
1. Choose Run > Run Preferences.

2. Click the Statistics tab in the Run Preferences dialog.
3. Check Calculate Capability Metrics.
4. Click the Options button to confirm the settings.
Figure 2.1 Capability Options dialog
For this example, set the options to use short-term metrics with a
Z-score shift value of 1.5 (the default Short Vs. Long Term
settings) and use the default Calculation Method settings, as
shown in Figure 2.1.
5. Click OK in both dialogs to accept the current settings and close
them.


To more closely reproduce the results in this tutorial, you might want
to set the sampling seed value on the Sampling tab of the Run
Preferences dialog:
1. Open the Run Preferences dialog and click the Sampling tab.
2. Check Use Same Sequence Of Random Numbers. Leave the
initial seed value set to 999.
3. Confirm that the sampling method is set to Monte Carlo.
4. Click OK to accept the current settings and close the dialog.

Open Loan Process.xls from the Crystal Ball Examples folder. To
choose this example from a list, choose Help > Crystal Ball >
Examples Guide or choose Start > Programs > Crystal Ball 7 >
Examples in the Windows taskbar.
In Excel 2007, choose Resources > Examples Guide in the Help group.
The workbook appears, as shown in Figure 2.2.
Figure 2.2 Loan processing example model


The loan processing spreadsheet models a process improvement effort with
two basic goals: meeting the cycle time target as closely as possible and
maximizing the sigma level. The model has these parts:
The flowchart at the top of the model illustrates the process with
approximate measured mean times for each step.
The blue box beneath the flowchart highlights the cycle time target.
The green boxes in the Simulated Cycle Time column are Crystal Ball
assumptions that represent each step of the loan processing effort.
The assumption parameters to the right of each assumption show the
distribution and the parameters entered for each assumption. They are
entered in each assumption as cell references relative to cells in column C.
The blue box at the bottom of the Simulated Cycle Time column is a
Crystal Ball forecast that represents the total cycle time.
Review the assumptions

The assumption definitions are based on the measurements obtained in the
second Six Sigma phase, described in Measure phase on page 15. For
example, Step 1, Customer Inquiry, has a mean of 1 hour and a standard
deviation of 0.25 hour as discussed on page 15. You can compare the other
assumptions with the descriptions beginning on page 15 to see how they
match.
Notice that Step 3 is defined with a custom distribution. We will examine it in

more detail shortly and then define the distribution in Step 5.
Examine the custom distribution

Because the measurement for Step 3 involves two separate sets of values, it is
defined as a custom distribution.
To explore this:
1. Select cell C18, the assumption for Step 3.

2. Choose Define > Define Assumption to display the Define Assumption
dialog for that assumption.
Figure 2.3 shows the expanded Define Assumption dialog for Step 3,
Document Verification. The dialog has been expanded by clicking the
More button.

This dialog reflects the information from page 15 that 80% of the time,
cycle time for this step ranges from two to four days (16 to 32 hours) but
20% of the time, cycle time ranges from four to six days (32 to 48 hours).
Figure 2.3 Custom assumption for Step 3, Document Verification
3. Click OK or Cancel to close the dialog.
Fit a distribution for Step 5

When you first open Loan Process.xls, no assumption has been defined for
Step 5, Loan Closing. The description on page 16 states that it takes an
average of two days (16 hours) to close loans but the distribution is not known.
To create an assumption for Step 5 and fit a distribution to it:
1. Select cell C22.

2. Choose Define > Define Assumption to display the Distribution Gallery
dialog for that cell.
3. Click the Fit button.
4. The Fit Distribution dialog appears.

Figure 2.4 Fit Distribution dialog for cell C22
5. Click the cell selector for the Range edit box. Then, click the Data tab
of the workbook and select cells A2 through A101.
When you accept the selection, the Fit Distribution dialog appears with
the range entered, as shown in Figure 2.4.
6. Leave the other default settings as shown and click OK.
The Comparison Chart dialog appears. The normal distribution appears
to be the best fit.
Figure 2.5 Comparison Chart dialog, cell C22
7. Click Accept to accept the normal distribution.

The Define Assumption dialog appears.
Figure 2.6 Define Assumption dialog, Step 5, Cell C22
Notice that the new assumption for Step 5 is a normal distribution with a
mean of 16 and a standard deviation of 4.
8. Rename the assumption to Loan Closing and click OK.
Now, all assumptions for the Loan Process model are complete.
Review the forecast

The forecast in cell C26 represents total cycle time. To view its formula in the
Excel formula bar, select cell C26. The formula is =SUM(C14:C24) the
sum of the assumptions for Steps 1 through 6.
To view and edit the forecast definition:
1. Choose Define > Define Forecast or click the toolbar button.

The Define Forecast dialog appears.

Figure 2.7 Cycle Time forecast with LSL and Target entered
The forecast has a name, a units entry, and a USL, the upper specification
limit of 96 hours. These were entered when the example model was first
defined.
As established in the Define phase of this project (page 15), 96 hours is
the loan processing target as well as the USL.
2. Enter 96 in the Target edit box and click OK.
Run the simulation

At this point, the models assumptions and forecast are complete. Click the
Start [Simulation] button to run the simulation and generate a forecast chart.

When you run the simulation for this model, the Cycle Time forecast chart
appears. Because the forecast is defined with an upper specification limit and
a target, the chart appears in Split View with the forecast chart on the left side
and process capability metrics on the right. The message above the metrics
indicates that the distribution is non-normal (the normality test failed), so
capability metrics are calculated from the forecast values.

Figure 2.8 The Cycle Time forecast with process capability metrics
Notice that marker lines appear for the USL and target. Because the USL is
defined, the maximum certainty grabber is automatically set to that value.
Because no LSL is defined, the minimum certainty grabber is automatically
set to Infinity. The Certainty field contains 72.31; about 72% of forecasted
values fall below the USL.
Looking at the process capability metrics, the forecast distribution is not

normal, so the Z scores are not generally appropriate to use. The p(N/C)-
above (defects above the USL) is about .28, which confirms the certainty level
shown in the forecast chart; more than one-quarter of the forecasted values
fall above the USL. The Cpk-upper and Cpk are about 0.21, where you had
hoped to see at least 1.00 (the 3-sigma level). The loan specialists you
interviewed were correct cycle time variation is large.
You generate a sensitivity chart (Figure 2.9) to determine which of the loan
processing steps has the most influence on the Cycle Time forecast variance.
To do this, select the forecast chart and choose Forecast > Open Sensitivity
Chart.

Figure 2.9 Sensitivity chart for the Cycle Time forecast
Figure 2.9 shows that the loan processing step with the greatest effect on cycle
time variance is Document Verification (Step 3). Obviously, this is an ideal
target for improvement.
Investigate improvement possibilities

You wonder how much you would need to reduce variation in Document
Verification time before overall quality would improve significantly. You
decide to increase the probability of a cycle time of four days or less.
To do this:
1. Click the Reset button to reset the simulation.

2. Type a new probability in cell G18. Change it to 90%.
3. Adjust cell G19 downward to match. Change it to 10%.
4. Select cell C18 and open the Define Assumption dialog.

Figure 2.10 Document Verification assumption, adjusted

This assumption previously appeared in Figure 2.3. Because the
probabilities in the table are linked to workbook cells, when you adjusted
the workbook, you also adjusted the asumption probabilities.
5. Close the Define assumption dialog and run the simulation.
6. Review the forecast chart.
Figure 2.11 The Cycle Time forecast with process capability metrics

Crystal Ball sets the upper certainty level at the USL/Target value (96). If the
lower certainty grabber is not located at Infinity, click the lower grabber and
drag it to the left end of the chart as shown in Figure 2.11. Now, the certainty
of cycle time falling at or below the USL is about 78%. You decide to make a
drastic change and edit the assumption parameters for Document Verification
as follows (change 32 to 24 in the first row; change 90% to 100% and 10% to
0%):
Now, there is 100% probability that all document verification times will fall
between two and three days.
When you run with this new assumption definition, certainty of falling at or
below the USL rises to about 93.5% and PPM-total drops to 62,548. Also, the
distribution is now normal; it was not normal for the last simulation. Z-USL
and Zst-total are 1.53, the sigma level for this simulation.
Figure 2.12 Cycle Time forecast after adjusting Document Verification

You check the sensitivity chart for this simulation and find that the impact of
Loan Application is now much greater than Document Verification.
Figure 2.13 Sensitivity chart after adjusting Document Verification
You believe that Document Verification has been pared down about as much
as it can be, so you decide to experiment further with making the Loan
Application cycle time shorter and more consistent.
To do this:
1. Reset the simulation and change the Step 2 parameters to 8, 16, and 24.
2. Run the simulation.
Results are much better. Figure 2.14 shows that the mean cycle time has
dropped to 74 hours. The certainty of falling below the USL/Target value is
100% and the sigma level has risen to 3.09. Cpk-upper and Cpk have risen
over 1 which, given the shape and location of the distribution, confirms that
the sigma level is greater than 3.

Figure 2.14 Forecast chart after Loan Application adjustment
When you check the sensitivity chart, Loan Closing and Loan Disbursement
are now the main contributors to cycle time variation. You learn that these
processes might be difficult to improve further, so you decide to implement
improvements to Document Verification and Loan Application cycle times
and then move into the Control phase, discussed on page 16.
Figure 2.15 Sensitivity chart after Loan Application adjustment

Chapter 3
Improving Design Quality Tutorial 2
In this chapter
Overview
Packaging pump design Tutorial 2
Design for Six Sigma (DFSS) and other design improvement methodologies are intended
to improve product quality at the start of product development. This chapter analyzes a
Design for Six Sigma model for designing a fluid pump and includes OptQuest
instructions for those with Crystal Ball Professional or Premium Edition.

Chapter 3 | Improving Design Quality Tutorial 2
Overview
Design for Six Sigma (DFSS) and other design improvement methodologies
are intended to improve product quality at the start of product development.
Some practitioners estimate that using DFSS methodologies in the planning
stages of product development can save up to 15% of costs in later operations.
DFSS has five phases: Define, Measure, Analyze, Design, Validate (or Verify).
These are defined beginning on page 9.
The ultimate mission of DFSS is to meet general Six Sigma goals of satisfying
customer needs while minimizing variation and to accomplish this as early in
the development cycle as possible.
The tutorial in this chapter shows how DFSS techniques can be used with
Crystal Ball to simulate various design options for a fluid pump in a food
production setting. You will see how simulation works with DFSS to:
Reduce product development cycle costs by replacing physical prototype

design-test-redesign iterations with simulations
Improve product development cycle time by reducing design-test-
redesign iterations with rapid simulations
Increase customer satisfaction while eliminating rework or scrap and
reducing end-of-line testing
Packaging pump design Tutorial 2

Suppose you are a pump manufacturer. You want to design a pump for a
liquid packaging system that draws processed fluids from a vat into jars at a
consistent rate. You want to meet the specified flow rate target and limits
while maximizing performance and minimizing costs.
Overall approach
Using the phases of DFSS, you follow this overall design approach:
Define Obtain an appropriate flow rate target and limits from the
customer and recommend a type of pump based on customer
considerations
Measure Consider the elements of the Known Flow Rate equation to
determine the pump design features that affect flow rate and obtain
information about tolerances, costs, and so on

1 Packaging pump design Tutorial 2
Analyze Use Monte Carlo analysis and sensitivity analysis to study how
different design elements affect pump performance and affect production
quality
Design Use optimization techniques with defined tradeoffs between
flow rate performance and total cost to determine the design parameters
that best meet a defined quality level while reducing cost
Validate Based on the optimized design parameters, create physical
prototypes and test to confirm that this design configuration yields the
best-performing, most cost-effective pump
In the Define and Measure phases, you obtain and use information to build a
Crystal Ball model. Then, you use Crystal Ball to simulate real-world
variations that occur in the actual manufacturing of the product. Finally, you
can use sensitivity analysis and further optimization to arrive at the best
balance between quality and cost.
The following sections give details of each phase.
Define phase
Marketing and production considerations determine the acceptable range of
flow rates based on how many units should be produced daily to meet market
demand, what is useful production time per day based on plant setup and
productivity, and how many pumps are placed in each plant.
The food processing company translates marketing requirements into these

engineering specifications and provides them to you:
Lower specification limit (LSL) = 47.26 ml/sec

Upper specification limit (USL) = 53.92 ml/sec
Target = 50.595 ml/sec
Based on these requirements, you propose a displacement pump with a
reciprocating piston. The following figure shows a basic schematic of the
system.

Figure 3.1 The jar-filling system with displacement pump
Measure phase
You notice that the variables in the Known Flow Rate equation are piston
radius, piston stroke length, backflow rate, and motor speed. You observe that
your in-house machine shop controls the piston radius and stroke length
while the backflow valve and motor are purchased components.
Your machine shop indicates it is capable of 3-sigma quality levels within a

tolerance of 1 millimeter (mm) for the piston radius and stroke length. Your
purchasing department asks you to use an inexpensive backflow valve and
motor.
Analyze phase
During the Analyze phase, you create an Excel workbook that captures the
Known Flow Rate equation, characteristics of the pump components used in
the equation (piston radius, piston stroke length, motor speed, and backflow
rate), flow rate target and limits, machining cost coefficients, plus nine motor
and backflow valve cost options.
Then, you define Crystal Ball assumption and forecast cells and simulate your
design options.

Design phase
If you have Crystal Ball Professional or Premium Editions with OptQuest, you
can also define decision variables for:
A range of possible piston radii and associated tolerances (related to

standard deviation through capability)
A range of possible piston stroke lengths and associated tolerances,
The different possible backflow valve and motor options
Once this is done, you can set up quality requirements for flow rate and
optimize for the least-cost configuration that meets those quality
requirements.
Validate phase
This phase involves the physical creation of a prototype based on simulation
forecasts followed by physical testing to validate the design. Because so much
preliminary work was done with spreadsheet modeling instead of building
additional prototypes, a final design can be developed quickly and at minimal
cost.
Using the DFSS Liquid Pump model

Now, see how to construct a model that effectively simulates the design
process with dual goals of maximizing quality and minimizing cost. Then, you
run the model and analyze the output using Crystal Balls process capability
features.
Crystal Ball Note: If you are new to Crystal Ball, be sure to work through the tutorials
in the Crystal Ball Getting Started Guide to learn about basic Crystal Ball features and
techniques before tackling these advanced features.
As you work through this tutorial, dont worry about making mistakes;
recovery is as easy as backing up and repeating the steps. If you need
additional help, see the Crystal Ball online help. You can click the Help
button in each dialog or choose Help > Crystal Ball > Crystal Ball Help in
Excel.
In Excel 2007, click Help at the right end of the Crystal Ball ribbon.

In this tutorial, you will:
Start Crystal Ball

Run the simulation
Adjust the model
The final section of the tutorial shows how to use OptQuest, included in
Crystal Ball Professional and Premium Editions, to minimize total cost and
maximize quality.
Start Crystal Ball

If Crystal Ball is not already started, start it as usual. Choose Start > [All]
Programs > Crystal Ball 7 > Crystal Ball. Or, start Excel if you have used the
Crystal Ball Application Manager to set Crystal Ball to open each time you start
Excel.

Confirm that the process capability features have been activated.
1. Choose Run > Run Preferences.

2. Click the Statistics tab in the Run Preferences dialog.
3. Check Calculate Capability Metrics.
4. Click the Options button to confirm the settings.

Figure 3.2 Capability Options dialog
For this example, use the defaults, as shown in Figure 3.2.

5. Click OK in both dialogs to accept the current settings and close them.

Follow the instructions on page 19 to set the sampling seed value to 999 in the
Run Preferences dialog, Sampling tab, and use Monte Carlo simulation.

Open DFSS Fluid Pump.xls from the Crystal Ball Examples folder. To choose
this example from a list, choose Help > Crystal Ball > Examples Guide in
Excel or choose Start > Programs > Crystal Ball 7 > Examples in the
Windows taskbar.
In Excel 2007, choose Resources > Examples Guide.
The workbook appears, as shown in Figure 3.3.

Known Flow Rate equation 1
Flow rate
2 variable
assumptions
4
Flow rate target
and limits 5 Flow rate and
Cost coefficients used to cost forecasts
calculate Component Cost
3
Functions
6
Motor and
backflow valve
cost options, 9
for each
component
Figure 3.3 Fluid pump model
This spreadsheet models the fluid pump design problem to be solved.


The liquid pump spreadsheet models a design effort with two basic goals:
meeting the flow rate target as closely and consistently as possible and
minimizing cost. The following sections describe six main parts of the model,
indicated by numbers in Figure 3.3:
The Known Flow Rate formula

The flow rate variable assumptions
The flow rate and cost forecasts
The flow rate target and limits
The cost coefficients
The motor and backflow valve cost options
The Known Flow Rate formula

1 The Known Flow Rate formula specifies the relevant variables discussed
earlier: piston radius, piston stroke length, backflow rate, and motor speed.
The flow rate variable assumptions

2 The flow rate variable assumptions are Crystal Ball assumptions that allow
each of the flow rate variables, listed under the Known Flow Rate formula (1),
to be included in the Monte Carlo simulation.
To see how these are defined:
1. Select cell K18 and click the Define Assumption button.

2. Optionally, look at K19, K20, and K21.
Each assumption is defined as a normal distribution with a mean equal to the
Nominal Initial Value in the column toward the left of the table and a
standard deviation equal to the StDev Initial Value in the middle of the table.
the Mean and Standard Deviation parameters are not entered directly.
Instead, they are entered as cell references to the Initial Value cells in the table
to their left.
Crystal Ball Note: In this model, whenever you see the word nominal, it means
approximate, designed, or theoretical, as opposed to the actual measured value.

The flow rate and cost forecasts

3 The flow rate and cost forecasts are Crystal Ball forecasts, the output of the
Monte Carlo simulation.
The Flow Rate Forecast is based on the Known Flow Rate formula (1). To
view it:
1. Select cell K23.

The formula in that cell is the Known Flow Rate formula (a function of
the flow rate variables) expressed in Excel format.
2. Click the Define Forecast button.
3. Enter the Target, LSL, and USL as cell references.
To do this, click in the Target box. Either enter =E23 or use the cell
selector to point to cell E23 and enter it as the Target source. Do the same
thing for the lower specification limit (LSL), referencing cell E24, and
upper specification limit (USL), referencing cell E25. (Note: If you dont
see these text boxes in the Define Forecast dialog, process capability
features have not been activated in the Run Preferences dialog.)
The Total Cost Forecast is the sum of the Component Cost Function column
values in the upper table. To view it:
1. Select cell K25.

Notice its formula is simply the sum of the component costs in cells J18
through J21. No target or limits have been established for this forecast.
The flow rate target and limits

4 The flow rate target and upper and lower specification limits (4) are values
defined by the food processing plant in the Define phase of the DFSS process
(page 33). The previous section shows how they can be used to set the Target,
LSL, and USL for the Flow Rate Forecast in cell K23.
The cost coefficients

5 The cost coefficients table contains values used to calculate the component
cost functions, summed to yield the Total Cost Forecast (3).
To see how these are used to calculate the component cost functions:
1. Select cell J18.

This formula uses the Base Cost Coefficient of the piston, the initial value
of the piston radius, the Tolerance Cost Coefficient of the piston, and

the initial value of the standard deviation. The cost is directly

proportional to the radius squared due to raw material usage and
inversely proportional to the standard deviation squared (a common
method to relate tolerance to cost).
2. Optionally, view the contents of cells J19, J20, and J21.
These formulas are also similarly derived from cost coefficients or
nominal costs relevant to each particular flow rate variable.
The motor and backflow valve cost options

6 The motor and backflow valve cost options are two sets of nine options each
provided by the motor and backflow valve vendors. Different performance
specifications have different costs associated with them.
Run the simulation

At this point you have created assumptions and forecasts. Click the Start
[Simulation] button to run the simulation and generate forecast charts.

When you run the simulation for this model, two forecast charts appear.
The Total Cost Forecast includes no assumption cells. It appears as a single

value instead of a range of predicted values. The forecasted total cost is
$26.73 for the pump (shown here with the Mean marker line displayed).
Figure 3.4 The Total Cost Forecast chart

Because you entered a target and specification limits, the Flow Rate Forecast
chart appears in Split View with the forecast chart on the left side and process
capability metrics on the right, shown in the following figure.
Figure 3.5 The Flow Rate forecast with process capability metrics
Notice that marker lines appear for the LSL, Target, and USL values. (You
might see different marker lines; the Mean and Standard Deviation marker
lines have been removed to simplify the screenshot.) Because the LSL and
USL are defined, the certainty grabbers are automatically set to those values.
According to the value in the Certainty field for this simulation, 95.34% of
forecasted values fall within the specification limits. The mean is about one
standard deviation lower than the target.
The distribution curve is normal. Looking at the process capability metrics,

the Z-LSL shows the LSL is 1.63 sigmas below the mean. You were hoping to
see a value of at least 3. The Cp capability index is lower than 1, so the short-
term potential sigma level is less than 3.
You generate a sensitivity chart (Figure 3.6) to determine which of the flow
rate variables has the most influence on the Flow Rate Forecast.

Figure 3.6 Sensitivity chart for the Flow Rate Forecast
Figure 3.6 shows that the flow rate variable with the greatest effect on the Flow
Rate Forecast is the piston radius. Reducing the standard deviation of the
piston radius should affect the overall flow rate variance and improve the
process capability metrics. You wonder how reducing the piston standard
deviation by 50% would affect the flow rate forecast quality. You decide to
adjust the model and find out.
Adjust the model

To see the effect of reducing the standard deviation of the piston radius:
1. Select cell H18.

2. Reduce the value by half, to 0.16667.
3. Enter this same value in the Upper Limit cell, I18.
Now, the table of flow rate variables appears as shown in Figure 3.7.
Figure 3.7 Table of flow rate variable initial values and limits

Reset and run the simulation again.
The Flow Rate Forecast chart appears, similar to Figure 3.8.
Figure 3.8 The Flow Rate Forecast chart after model adjustment
Quality appears much better than that shown in Figure 3.5. The mean is less
than 1.5 standard deviations lower than the target, and the standard deviation
is smaller. USL is almost 6 sigmas away from the mean (Z-USL = 5.68) and
LSL is over 2 sigmas away (Z-LSL = 2.49). The certainty of the forecasted flow
rate falling within LSL and USL is now over 99%.
The Total Cost Forecast chart has also changed, as shown in Figure 3.9. The
quality improvements result in higher costs. Where the total cost per pump
was $26.73, now it is $33.47, a 25% increase. You and your team must
determine whether to sacrifice quality to lower the cost or whether to test
modifications to the other three flow rate variable components as well.

Figure 3.9 The Total Cost Forecast chart after model adjustment
Using OptQuest to optimize quality and cost

If you have OptQuest, included with Crystal Ball Professional and Premium
Editions, you can use optimization to maximize quality and minimize cost. To
do this, you must consider the relationship between design parameters and
cost. And, you must consider the relationship between motor and backflow
valve options and cost.
The Total Cost Forecast is defined as the sum of the four component costs,
examined in The flow rate variable assumptions on page 39. The formulas
used to calculate these values are based on the mean and standard deviation
of the piston radius, the mean and standard deviation of the piston stroke
length, nine different motor options, and nine different backflow value
options.
Define decision variables

To optimize these variables with OptQuest, a set of decision variables are
defined in cells C20, C21, E18, E19, H18, and H19.

Cells C20, C21 Cells E18, E19 Cells H18, H19
Figure 3.10 Table of flow rate with cells defined as decision variables
To view the contents of each decision variable, reset Crystal Ball and:
1. Select a decision variable cell.

2. Choose Define > Define Decision.
3. In the Define Decision Variable dialog, there is a name, an upper and
lower bound, a type setting (Continuous or Discrete), and a step size for
discrete variables.
Crystal Ball Note: If you changed the Piston Radius standard deviation Initial
Value and Upper Limit for the last part of the DFSS Pump tutorial, be sure to
change them both back to their original values as shown in Figure 3.10. Also, be
sure that these values are included in the decision variable for the Piston Radius
standard deviation (Cell H18). Check it as described in steps 1 and 2 above.
The upper and lower bound for piston machining variables are the same
as those in the Lower Limit and Upper Limit tables of Figure 3.10. For
the motor speed and backflow valve variables, the upper and lower
bounds are the lowest and highest options (1 and 9, respectively).
In choosing the piston machining values shown in Figure 3.10, you could
identify raw stock availability to define a range of piston radii and lengths for
investigation. You could also identify a feasible range of tolerances for
machining the radius and length.
Identify optimization goals

If you have OptQuest, you can actually perform the optimization. First,
identify optimization goals. For this project, they are:
Minimize cost.
Reduce variation of flow rate to at least 3 sigma levels. That is, Z-total,
expressed in this example as Zst, should be equal to or greater than 3.

Run OptQuest
To optimize these goals in OptQuest, reset the simulation in Crystal Ball and:
1. Open the Crystal Ball Run Preferences dialog and set Number Of Trials
To Run to 500. For this example, Sampling was set to Latin Hypercube
with an Initial Seed Value of 999 (set on the Sampling tab of the Run
Preferences dialog).
2. Choose Run > OptQuest.
Excel 2007 Note: In Excel 2007, choose Run > Tools > OptQuest.
3. When the OptQuest window appears, choose New.

4. First, the Decision Variable Selection dialog appears. Click OK to
accept them all.
5. Next, the Constraints dialog appears. Click OK to continue.
6. Finally, the Forecast Selection dialog appears. Set it up as shown in
Figure 3.11 and click OK.
Figure 3.11 Forecast optimization defined in OptQuest
The Options dialog appears.

7. On the Time tab, choose Run For 10 Minutes, then click OK.
8. If you are prompted to start the optimization, choose Yes. Otherwise,
click the Run button at the top of the OptQuest window.
OptQuest starts looking for the best feasible solution. Ultimately a
solution will be found that is simular to that shown in Figure 3.12.

Figure 3.12 OptQuest solution for the Fluid Pump problem
Your optimized values should be similar to these:
Total cost $28.64
Zst (sigma level) 3.04
Piston radius (mm) 29.38
Piston radius standard deviation .23
Stroke length (cm) 31.93
Stroke length standard deviation .33
Motor option 5
Backflow valve option 7

Chapter 4
Lean Examples and More
In this chapter
Overview
Value Stream Analysis a Lean example
The Hidden Factory A Lean / Six Sigma Example
Other quality-related example models
Critical Path / Time-to-Market Analysis
Six Sigma Project Selection
Simulation with Design of Experiments
Piston Displacement
Cost-based Stack Tolerance Analysis
Workforce Planning with Queuing
This chapter analyzes two Lean quality models in depth and summarizes several other models
with quality impact included among the example models shipped with Crystal Ball.

Chapter 4 | Lean Examples and More
Overview
As described beginning on page 9, Lean quality practitioners look for process
areas where increasing efficiency and decreasing waste can have the greatest
impact on the quality of product or other output. At the same time, they try to
add customer value. Crystal Ball can help with these efforts in several ways.
The first model in this chapter, Value Stream Analysis, shows how Crystal Ball
can help Lean practitioners choose projects. The next model, Hidden Factory,
shows how Crystal Ball can pinpoint areas of waste to target for improvement.
Also review Chapter 2, which describes a simpler value stream model.
The remaining models are additional examples of how Crystal Ball can be
used in various quality programs. Some are combinations of several
methodologies discussed earlier in this book.
Value Stream Analysis a Lean example

Value stream analysis is a tool used by Lean practitioners to review major steps
in a process and locate those where improvement can have the greatest
positive effect on output. Crystal Ball is ideally suited for analysis tasks of this
type, as shown in this model, Value Stream.xls.
Figure 4.1 Value Stream Analysis example

1 Value Stream Analysis a Lean example
Model description
This model shows the order-to-cash value stream map for Positive Power, Inc.
(PPI), a manufacturer of portable electric generators. After several years of
increased competition and reduced market share, PPI has given a Lean team
the mission to find ways to improve the order-to-cash process. Their first step
was to create the value stream map shown in this model. Now, the team needs
to determine which steps are the most critical so they can focus their process
improvement efforts most effectively.
This model assumes that each trial of the simulation represents one piece,
part, or customer flowing through the entire process. The model has 13 steps
with two pathways, one for manufacturing and assembly and the other for
customer orders and collections. The process always ends in collections.
Following collection of data, the team determines that the order-to-cash
process target is 110 hours.
Columns B, C, and F (Figure 4.1) show step identifiers, descriptions, and

predecessor relationships.
Figure 4.2 Value Stream data table, shown in two parts

The data table in Columns U through AT (Figure 4.2) shows measurement

data for the process steps, such as cycle time, value-add time, defect rate, and
cost. Each process element is defined as a Crystal Ball assumption with a
triangular distribution (the bright green cells in columns Y, AD, AJ, AK, AP,
and AT). The minimum, likeliest, and maximum values appear in the three
columns before each assumption. Notice that the assumption parameters are
defined as references to these cells. When you change a value in the
worksheet, the related assumption automatically incorporates the new values
during the simulation.
The predecessor relationships in column F make it possible to determine the

process critical path. Then, you can identify steps that have poor quality and
poor process efficiency combined with high importance on the critical path.
These critical path computations are performed in columns H through M.
They use array formulas to calculate the Early Start Time (EST) and Late
Finish Time (LFT). Circular references are used deliberately for iterative
calculation of any critical path components that depend on predecessor
components listed below them in the worksheet.
Crystal Ball Note: If you are following along with this example, notice that Iteration
must be checked on the Excel Tools > Options > Calculation tab.
In Excel 2007, click the Office button. Next, choose Excel Options > Formulas, and
then check Enable Iterative Calculation (in the Calculation Options group).
Figure 4.3 The Value Stream dashboard, columns O through S
The Tables worksheet contains values that control the dashboard in columns
O through S. These values are combined to yield a Severity value, which
appears in the dashboard as color coding, shown in the following figure.

Figure 4.4 Dashboard legend and severity color key
Visual Basic for Applications (VBA) code is used to track cycle times, defects,
and value-add time for computing the sigma level and process efficiency for
each process step. VBA code also controls the highlighting of critical path
components on the process diagram. To view this code, choose Tools > Macro
> Visual Basic Editor.
Besides the assumptions in Columns Y, AD, AJ, AK, AP, and AT, this model
contains several Crystal Ball forecasts. They are in cells M5 through M21, cell
I22, and cell S22.
Using the model

This model assumes you have activated Crystal Balls process capability
features as described on page 80. When you run the model, several things
change the forecast values, the dashboard data, dashboard severity colors,
process data, and critical path highlights. If you normally run in Extreme
Speed, downshift to Normal Speed for this model. Also, on the Sampling tab
of the Run Preferences dialog, choose to use the seed value of 999 with Monte
Carlo simulation. On the Trials tab, set the number of trials to 1000. And,
make the Excel Iteration setting described in the note on page 52.
When the simulation is complete, you can display the Process Lead Time
forecast chart, shown in the following figure.

Figure 4.5 Process Lead Time forecast chart
The forecast chart shows that there is an 82.52% certainty that the process
lead time will be lower than the upper specification limit (USL)/Target value
of 110 hours. For normal distributions with short-term data, Zst-total is
equivalent to the sigma level. Since this distribution does not fit a normal
curve, it is not appropriate to use the Z scores. However, considering that a
Cpk-upper or Cpk of 1 indicates potential for a short-term 3-sigma level of
quality, while the current values are both 0.20, it is clear that there is room for
improvement in this process.
Generating a sensitivity chart with all assumptions can help pinpoint the steps
with the most impact on this forecast.

Figure 4.6 Sensitivity chart for process lead time
The sensitivity chart shows that the Collections cycle time is the most
important factor with Collections defects the second most important.
Collections seems the most fruitful step to target for improvements with a
Lean project.
Suppose you estimate that the Collections cycle time can be reduced to a
minimum of 10 hours, a maximum of 20 hours, with an expected or likeliest
time of 12 hours. When you update the worksheet with these values and run
the simulation again, results look much better. The certainty of falling below
the upper specification limit is now 100% with Cpk-upper and Cpk of 1.03.
The sensitivity chart shows that Collections defects are now the most
important influence on the Process Lead Time forecast, but the other factors
sensitivity values are not that different.

Figure 4.7 Process Lead Time charts, second simulation
At this point, the team can investigate the effects of working on the steps that
are currently of greatest importance according to the sensitivity charts and the
model dashboard. They can then implement process changes based on their
findings and use a feedback/control loop to further refine the process.

1 The Hidden Factory A Lean / Six Sigma Example
The Hidden Factory A Lean / Six Sigma Example

The Hidden Factory example model shows how Lean and Six Sigma
methodologies can be combined to reveal the hidden factory of defects,
rework, and scrap, that lurks within an organization. The Six Sigma aspects of
this example help reduce defects, while the Lean aspects reduce lead time.
Combining these methodologies has the added benefit of reducing costs.
As shown in Figure 4.8, Hidden Factory.xls models a company with three main
interactive operations, or processes: Procurement, Manufacturing, and
Distribution. Together, these operations work to maximize customer value by
delivering defect-free products and services (quality) on time (speed) at the
right price (cost). Defects are corrected in the hidden factory, where new
units are built to replace the defective ones. Undetected defects that reach the
customer are corrected in a similar way, with additional expenses for customer
relations.
I
Figure 4.8 The Hidden Factory example model
In this model, defects in each operational process are expressed as sigma

levels in the tables below each process. A lower sigma level indicates more
defects, with greater production required to meet customer demand. As
process efficiency increases, lead time decreases, and the cost of resources

associated with production drops. Because the sigma level and other factors
are uncertain, they are expressed as ranges in the assumptions in the upper
tables.
The summary tables at the bottom contain variable forecasts based on the
assumptions in the upper tables. When the simulation runs, the model
performs a backward pass to calculate required production in each process.
Production requirements include enough output to compensate for defects.
Next, process efficiency is examined and used to calculate resource
requirements. When the simulation is complete, the effects of poor quality
and poor process are included in the summary tables.
After you run a simulation, you can create and view sensitivity charts for Total
Process Cost, Cost of Poor Quality, and Cost of Poor Process (Figure 4.9) to
show the highest contributors to each cost. Here, they are Process Time
(Manufacturing) for Total Process Cost and Cost of Poor Quality, with Process
Time (Distribution) for Cost of Poor Process.
The team can then use this information to adjust these process times, check
results, and possibly adjust the next most important factors for even better
results.
Crystal Ball Note: For additional information about this model, open it and view the
Description tab. You can also highlight each forecast and check the formula for it.

1 Other quality-related example models
Figure 4.9 Sensitivity charts for Total Process Cost, Cost of Poor
Quality, and Cost of Poor Process
Other quality-related example models

The following are additional models that support Six Sigma and other quality
improvement methodologies. For more information, open them up and read
their Description tabs.
Critical Path / Time-to-Market Analysis

Critical Path.xls analyzes time to market and calculates the probability that a
particular task will be on the critical path. From a Six Sigma standpoint, the
defect is the difference between the actual product completion time and the
minimum completion time. This model helps quality practitioners evaluate
which critical tasks should be addressed to improve results for the entire
process.

Figure 4.10 The Critical Path / Time-To-Market Analysis model
In this model, the flowchart shows proper task sequence. Task durations are
defined in column N as assumptions with triangular distributions.
Predecessors, along with lead and lag times, control task start times.
Workbook formulas determine earliest and latest start and finish times.
When the simulation runs, formulas in the forecast cells in column U indicate
whether tasks are on the critical path (1) or not (0). Forecast means are auto-
extracted to column V to indicate the probability of appearing on the critical
path.
After you run a simulation, you can create sensitivity charts to see which tasks
have the greatest impact on End Last Finish Time in cell S24. Then you can
check the critical path to see whether the most important tasks are on it. If
any are, they might be fruitful targets for a Lean Speed project. This model is
a manual version of the Value Stream Analysis model described beginning on
page 50.

Six Sigma Project Selection

Project Selection EVA.xls helps quality improvement practitioners choose
from among several potential projects based on gross profit and EVA
(Economic Value Added) for each project.
Figure 4.11 Six Sigma Project Selection
This model assumes there are eight possible projects for the next year. Quality
practitioners have computed:
The expected change in revenue for each project

The expected cost savings or change in expenses
The initial investment required for each project
This information allows computation of the gross profit and EVA. The model
further assumes that there are constraints on both the budget and labor.
Several variables, including project revenues, cost savings, investment, and
staff requirements, are highly uncertain. The problem, then, is to select the
best projects based on all these considerations.
In this model, you can add or remove a project from consideration by

entering a 1 or 0 in column M. Without using Crystal Ball, you could evaluate
different combinations of projects and see which yield the best EVA. However,
this method doesnt take the variable factors revenues, savings,

investments, and staffing into account. Crystal Ball lets you define these
factors as assumptions, the variable factors mentioned in the previous
paragraph. These assumptions are in columns C, E, I and L.
EVA forecasts for each project are in column K. Other forecasts for budget,
labor, and total EVA appear below the project table. Expense data is located in
a separate table to the right of the one shown in Figure 4.11.
Column M contains decision variables. If you have Crystal Ball Professional or

Premium Edition, you can use OptQuest to make the best project selection
based on presented data.
When you run Crystal Ball, random values are selected for the four variable
factors for each project. You can then evaluate the certainty of being under
budget or achieving a certain EVA value. You can also generate sensitivity
charts to see which assumptions (variable factors by project) are the main
drivers of EVA. This can help you choose a project. You can also switch
projects on and off in column M and see how this affects total costs and
revenues.
With OptQuest, you can load the .opt file that accompanies Project Selection
EVA.xls. Then, you can let OptQuest evaluate all the input assumptions and
output forecasts to maximize the switch settings in column M. The result is
the combination of projects that yields the highest gain for the lowest cost.
For more information about using OptQuest, see Using OptQuest to

optimize quality and cost on page 45. Also see the Description tab of this
model and the current OptQuest User Manual.
Simulation with Design of Experiments

Simulation with DoE.xls (Figure 4.12) shows how you can combine Monte
Carlo simulation with Design of Experiments methodology to save money
during product design.
If you use MINITAB for Six Sigma DoE analysis, youll find a MINITAB file
(doesim.MPJ) in the Crystal Ball Examples folder that contains MINITAB
input and output data used as the basis for this model. For those who do not
use MINITAB, the transfer function and other MINITAB results have been
included in the model workbook.

Figure 4.12 Simulation with Design of Experiments model
This model uses the results from a designed experiment to simulate variability
in part length based on variability in each of three factors specified in a
transfer function from MINITAB. The three factors, defined as assumptions,
appear in column C. You can adjust these factors to minimize defective parts.
Part length, the output or forecast, is defined in cell C11. With Crystal Balls
process capability features activated, you can reference cells with the LSL,
USL, and Target values in the forecast definition. When you display the
Define Forecast dialog for cell C11 and click in one of these capability
specification fields, the cell reference appears.
Figure 4.13 Part Length forecast with LSL, USL, and Targets entered
as cell references

When you run the simulation, capability metrics are automatically extracted
to column K. You can see at a glance how changing variables affect process
capability (Pp for long-term data, and Cp for short-term data). If the forecast
distribution is normal, you can also check the Z-total value to assess the sigma
level.
You can also generate a sensitivity chart to see which of the three factors has
the greatest effect on part length.
Figure 4.14 Sensitivity chart for the Part Length forecast
Here, hold pressure (HoldPres) seems to have the dominant impact on part
length. The other factors have comparative little impact, so you would
probably focus your quality efforts on hold pressure.
Piston Displacement
Piston Displacement.xls shows how Crystal Ball can be used in the design
phase of a project to optimize production specifications. Like the model
discussed in Chapter 3, this is a Design for Six Sigma (DFSS) effort.

Figure 4.15 Piston Displacement model
The product being designed is a piston assembly. Piston displacement must

fall within a customer-specified range. Displacement is determined by the
crank length, connecting rod length, and piston height.
The displacement target value varies according the crank angle, depending
on the table of values in cells F14 through H22. The lower and upper
specification limits in cells H7 and I7 are calculated by subtracting and
adding the tolerance in cell G7, respectively.
The specification limits and target are included in the forecast definition as
cell references.
Figure 4.16 Piston Displacement forecast definition with quality

specifications

When this simulation runs, piston displacement is calculated by a formula

included in cell D7. The quality specifications appear as marker lines in the
forecast chart. Capability metrics appear to the right of the forecast.
For this run, there is a 99.49% certainty that piston displacement will fall
within the lower and upper specification limits. The sigma level (Zst-total) is
2.37.
Figure 4.17 Piston Displacement forecast chart
Generating a sensitivity chart (Figure 4.18) shows that connecting rod length
is strongly related to piston displacement and crank length has a small
negative relationship. Although quality is fairly good for piston displacement,
eliminating variance in the connecting rod length will probably make it even
better.

Figure 4.18 Piston Displacement sensitivity chart
If you have Crystal Ball Professional or Premium Edition, you can use
OptQuest to adjust target values for the three assumptions and minimize
PPM-total for the entire assembly. First, you would need to define each of the
target values as a decision variable.

Cost-based Stack Tolerance Analysis

Tolerance Analysis.xls is a design problem similar to the previous model.
However, this model not only seeks to determine optimal tolerance levels, but
cost is also a factor.
Figure 4.19 Cost-based Stack Tolerance model
In this model, an automotive engineer is designing components for piston

and cylinder assemblies. The dimensions of the components must be within
certain tolerance limits with lowest cost. Here, the engineer is working with
seven parts and must choose optimal cumulative tolerance levels that meet
the assembly gap design criteria.
Five of the assumptions in column H describe variance in piston components

and two describe cylinder components. The four forecasts project piston
assembly dimensions, cylinder assembly dimensions, the assembly gap (the
difference in length between the piston and the cylinder), and the total
assembly cost.

The Assembly Gap forecast includes a lower specification limit (LSL) and
upper specification limit (USL). These, along with the mean and standard
deviation of this forecast, are used to calculate capability metrics for the
assembly gap.
Figure 4.20 Assembly Gap forecast chart
The Assembly Gap forecast chart shows there is a 99.68% certainty that the
assembly gap will fall within the lower and upper specification limits. The
sigma level (Zst-total) for this forecast is 2.82.

Figure 4.21 Assembly Gap sensitivity chart
The sensitivity chart shows the cylinder wall dimension is most directly related
to the assembly gap. The next most important factor is the rod dimension,
which is inversely related.
Optimizing with OptQuest

If you have Crystal Ball Professional or Premium Editions, you can use
OptQuest to determine, for each part, the optimal sigma quality level
required to minimize total assembly costs while staying within the assembly
gap limits of 0.003 through 0.020 inches.
For an example, see Tolerance Analysis in Chapter 4 of the OptQuest User

Manual.
Workforce Planning with Queuing

Workforce with Queuing.xls can be used in a Lean project to offer the greatest
value to customers while eliminating waste by ensuring that various levels of
workers are used most effectively. It was designed to help businesses that serve
customers in queues find the best balance among staff size, server costs, and
customer satisfaction. The servers in this example could be tellers, store
checkers, food servers, or toll-booth attendants, among others. The summary
page of the model is shown in Figure 4.22.

The model assumes that a business can have up to five lines in service at once
with up to three levels of employees. It uses Crystal Ball and OptQuest to
determine:
The appropriate number of lines to open at different times

The number of employees of different levels to use
The goal is to minimize staffing costs while meeting customer wait time
requirements.
Figure 4.22 Summary tab, Workforce with Queuing model
Staffing costs are based on the number of employees, their turnover rate, and
the cost to train each type. Employees at the highest level, 3, have higher
salaries and cost more to train. However, they have a lower turnover rate and
a quicker mean service time.
Wait time is a user-defined threshold. The model calculates how many

customers have to wait for a longer time.
Assumptions, time between arrivals, are defined on the Model page. They are
defined to model daily customer fluctuations with peak and slack service
requirements.

Forecasts defined on the Summary tab include Total Teller Costs, Average
Customer Wait, Maximum Wait, Waits/Day > 5 min, Total Customers,
Fraction > 5 min, Fraction > Threshold.
The Teller tabs represent each service line. Teller Level is defined as a
decision variable on each tab, so this level can be optimized by OptQuest, for
those with Crystal Ball Professional or Premium Edition. Notice that an
assigned level of 0 closes that line.
If you have Crystal Ball Professional or Premium Editions, you can open
OptQuest and load Workforce with Queuing.opt to select the optimal number
and level of tellers to minimize total cost.
This simulation runs in Normal Speed. When you run it, the number of
visitors and time between arrivals changes. Afterward, you can display the
forecast charts and check costs, peak arrival times, and more.
This is a complex model with more calculations and model logic than has
been described here. For complete information, read the information on the
Description tab and examine the contents of the main Crystal Ball data cells.

Appendix A
Capability Metrics
In this appendix
Capability metrics overview
Capability metrics list
This appendix defines the capability metrics included with Crystal Ball.

Appendix A | Capability Metrics
Capability metrics overview

Table A.1 lists and briefly defines the capability metrics provided for forecasts
in Capability Metrics view when the process capability features are activated
and either a lower specification limit (LSL), upper specification limit (USL),
or both have been entered for the forecast.
Capability indices
The first group of metrics after the mean and standard deviation are the
capability indices. The short-term capability indices are Cp, Cpk, Cpk-lower,
Cpk-upper, and Cpm. Their long-term counterparts are Pp, Ppk, Ppk-lower,
Ppk-upper, and Ppm. Sometimes, these are called performance indices.
Although organizations differ in their interpretations of the indices, there is

general agreement that they describe how well a process conforms to
specifications (including the LSL, USL, and target if defined). They predict
capability (or performance) based on short-term or long-term data and are
most reliable when the underlying process is stable.
Cp and Pp compare the specification width (the distance between the USL
and LSL) with the forecast width (for normal distributions, the distance within
three standard deviations above and below the mean of the forecast values).
The widths are compared without considering location and centering.
Capability or performance increases as the width of the forecast decreases
with respect to the specification width, regardless of whether the distribution
mean is similar to the midpoint of the specification width or not.
Cpk and Ppk also compare the specification width with the forecast width.
However, these metrics also consider centering. The midpoint of the
specification width is compared with the forecast mean. The forecast width
could be quite small compared to the specification width, which would yield a
high Cp or Pp, but the Cpk or Ppk could still be low if the midpoint and mean
were sufficiently different.
Cpk-lower, Cpk-upper, Ppk-lower, and Ppk-upper are one-sided capability or

performance metrics and can be used for forecasting where only one
specification limit is available.
Cpm and Ppm are Taguchi indices. They consider the target, which might not
coincide with the midpoint of the specification width, as well as specification
and forecast widths.

1 Capability metrics overview
Z scores and sigma levels

Z scores indicate the number of standard deviations between the mean and an
upper or lower specification limit (or both), calculated for short-term or long-
term data. They are only appropriate to report for normal distributions.
A higher Z score means better process quality; more of the distribution falls
within the specification limit. Consideration of both Z-LSL and Z-USL is
useful because a distribution can be somewhat skewed, or asymmetrical, while
still fitting to a normal curve. Using both statistics, you can use a Z score to
determine whether data is centered evenly within specification limits or falls
more to either side. You can also determine which of the two limits (upper or
lower) is exceeded more often.
For normal distributions, Z-total indicates the sigma level of quality.
Defect probabilities and rates

The final group of capability metrics are defect probabilities and rates. The
defect probabilities p(N/C)-below, p(N/C)-above, and p(N/C)-total
indicate the probability of DPU (defects per unit) below the lower
specification limit, above the upper specification limit, or outside either
specification limit. The defect rates PPM-below, PPM-above, and PPM-total
indicate the number of defects below the lower specification limit, above
the upper specification limit, or outside both limits per million units.
These relate to the sigma quality levels: with no Z-score shift values, a short-
term Z-total of 3 is equal to a short-term PPM-total of approximately 2,700
and a probability of 99.73% of not having a defect (sigma level 3).
Shift and capability metrics

You can think of short-term data as a data sample, a snapshot of data
gathered during a certain time under particular circumstances. Short-term
data samples gathered at several different times might differ from each other
but together they would be representative of data gathered over a longer
time.
Some Six Sigma theoreticians proposed that short-term data would be more
representative of long-term data if a Z-score shift value were added to account
for data shifts and drifts that occur over time. Theoretically, shifting a short-
term distribution toward a specification limit by 1.5 times the short-term
standard deviation would more closely approximate long-term defect levels.

To support this theory, Crystal Ball lets Six Sigma practitioners enter a Z-score
shift value in the Capability Options dialog (page 80). The default is 1.5. You
can enter 0 to remove the shift value or enter a different Z-score shift value if
you prefer.
Documentation Note: Unless otherwise noted, all the examples in this Guide use the
default Z-score shift setting of 1.5.
Capability metrics list

The following table lists and defines the statistics shown in Capability Metrics
view and indicates whether each statistic appears for long-term or short-term
data.
Crystal Ball Note: Z scores are typically reported only for normal data. Crystal Ball
always displays Z scores. It is up to the user to determine if the values are appropriate.
Table A.1 Capability statistics calculated by Crystal Ball
Long- Short-
Metric term term Description
Mean 9 9 Mean of the forecast values
Standard 9 9 Standard deviation of the forecast values

deviation
Cp 9 Short-term capability index indicating what quality level the forecast

output is potentially capable of producing. It is defined as the ratio of
the specification width to the forecast width. If a Cp is equal to or
greater than 1, then a short-term 3-sigma quality level is possible.
Pp 9 Long-term capability index indicating what quality level the forecast

output is potentially capable of producing. It is defined as the ratio of
the specification width to the forecast width. If a Pp is equal to or
greater than 1, then a long-term 3-sigma quality level is possible.
Cpk- 9 One-sided short-term capability index; for normally distributed

lower forecasts, the ratio of the difference between the forecast mean and
lower specification limit over three times the forecast short-term
standard deviation; often used to calculate process capability indices
with only a lower specification limit.

1 Capability metrics list
Table A.1 Capability statistics calculated by Crystal Ball (Continued)
Long- Short-
Ppk- 9 One-sided long-term capability index; for normally distributed

lower forecasts, the ratio of the difference between the forecast mean and
lower specification limit over three times the forecast long-term
with only a lower specification limit.
Cpk- 9 One-sided short-term capability index; for normally distributed

upper forecasts, the ratio of the difference between the forecast mean and
upper specification limit over three times the forecast short-term
with only an upper specification limit.
Ppk- 9 One-sided long-term capability index; for normally distributed

upper forecasts, the ratio of the difference between the forecast mean and
upper specification limit over three times the forecast long-term
with only an upper specification limit.
Cpk 9 Short-term capability index (minimum of calculated Cpk-lower and

Cpk-upper) that takes into account the centering of the forecast with
respect to the midpoint of the specified limits; a Cpk equal to or
greater than 1 indicates a quality level of 3 sigmas or better.
Ppk 9 Long-term capability index (minimum of calculated Ppk-lower and

Ppk-upper) that takes into account the centering of the forecast with
respect to the midpoint of the specified limits; a Ppk equal to or
greater than 1 indicates a quality level of 3 sigmas or better.
Cpm 9 Short-term Taguchi capability index; similar to Cpk but considers a

target value, which may not necessarily be centered between the upper
and lower specification limits.
Ppm 9 Long-term Taguchi capability index; similar to Ppk but considers a

target value, which may not necessarily be centered between the upper
and lower specification limits.
Z-LSL 9 9 The number of standard deviations between the forecast mean and the
lower specification limit. Note: Z scores are typically reported only for
normal data.
Z-USL 9 9 The number of standard deviations between the forecast mean and the
upper specification limit. Note: Z scores are typically reported only for
normal data.
Zst 9 For short-term metrics when only one specification limit is defined,
equal to Z-LSL if there is only a lower specification limit or Z-USL if
there is only an upper specification limit. Note: Z scores are typically
reported only for normal data.

Table A.1 Capability statistics calculated by Crystal Ball (Continued)
Long- Short-
Zst-total 9 For short-term metrics when both specification limits are defined, the
number of standard deviations between the short-term forecast mean
and the lower boundary of combining all defects onto the upper tail of
the normal curve. Also equal to Zlt-total plus the Z-score shift value if a
long-term index is available. Note: Z scores are typically reported only
for normal data.
Zlt 9 For long-term metrics when only one specification limit is defined,
equal to Z-LSL if there is only a lower specification limit or Z-USL if
there is only an upper specification limit. Note: Z scores are typically
reported only for normal data.
Zlt-total 9 For long-term metrics when both specification limits are defined, the
number of standard deviations between the long-term forecast mean
and the lower boundary of combining all defects onto the upper tail of
the normal curve. Also equal to Zst-total minus the Z-score shift value
if a short-term index is available. Note: Z scores are typically reported
only for normal data.
p(N/C)- 9 9 Probability of a defect below the lower specification limit; DPUBELOW

below
p(N/C)- 9 9 Probability of a defect above the upper specification limit; DPUABOVE

above
p(N/C)- 9 9 Probability of a defect outside the lower and upper specification limits;
total DPUTOTAL
PPM- 9 9 Defects below the lower specification limit, per million units
below
PPM- 9 9 Defects above the upper specification limit, per million units
above
PPM- 9 9 Defects outside both specification limits, per million units

total
LSL 9 9 Lower specification limit, the lowest acceptable value of a forecast

involved in process capability, or quality, analysis.
USL 9 9 Upper specification limit, the highest acceptable value of a forecast

involved in process capability analysis.
Target 9 9 The ideal target value of a forecast involved in process capability

analysis.
Z-score 9 9 An optional shift value to use when calculating long-term capability

shift metrics. The default, set in the Capability Options dialog, is 1.5.

Appendix B
How Do I...
In this appendix
Activating Crystal Balls process capability features
Setting specification limits and targets
Charts and process capability
Extracting capability metrics
Including capability metrics in reports
This appendix summarizes the steps for activating and using the process capability features
in Crystal Ball.

Appendix B | How Do I...
Activating Crystal Balls process capability features

Crystal Balls process capability features support quality improvement
methodologies such as Six Sigma, Design for Six Sigma (DFSS), and Lean
principles. To activate the process capability features:
1. Choose Run > Run Preferences or click the Run Preferences toolbar
button. Then, click the Statistics tab in the Run Preferences dialog and
check Calculate Capability Metrics.
Figure B.1 Statistics tab of the Run Preferences dialog
2. Click the Options button to choose long-term or short-term metrics, to

add a long-term Z-score shift value, and to choose whether to calculate
metrics from the fitted distribution or forecast values.
Figure B.2 Capability Options dialog

1 Setting specification limits and targets
3. For detailed information, click the Help button. When settings are
complete, click OK.
Setting specification limits and targets

The capability metrics only appear if you specify an upper or lower
specification limit (or both). You can also specify a target value for the
forecast.
To add a lower specification limit (LSL), upper specification limit (USL), or

target to a forecast:
1. Either define a new forecast or select an existing forecast.
2. Choose Define > Define Forecast or click the Define Forecast toolbar
button.
Figure B.3 Define Forecast dialog with limits and target fields
3. Enter limit and target values (or cell references) into appropriate fields
on the Define Forecast dialog. You dont need to enter a value into each
field, but you need to enter at least one specification limit to generate
the capability metrics.
4. To set forecast preferences at the same time, click the More button.
5. When all settings are complete, click OK.
Charts and process capability

By default, forecast charts appear in Split View when at least one specification
limit has been defined for that forecast. The forecast chart appears in the left
pane and capability metrics appear in the right pane. Depending on what has
been defined, LSL, USL, and Target marker lines appear in the forecast chart.
To switch a chart between Split View and single view, choose View > Split
View in a forecast chart.

To display or hide capability metrics for a forecast, choose View >

Capability Metrics in a forecast chart or press the Space key.
To display or hide marker lines for the limits and target in a forecast
chart, choose Preferences > Chart > Chart Type. Then, check or uncheck
LSL, USL, Target at the bottom of the Marker Lines list.
For more information on charts and process capability, see the process
capability appendix in the Crystal Ball User Manual.
Extracting capability metrics
Extracting capability metrics automatically

You can automatically extract capability metrics whenever a simulation runs.
To do this:
1. In a forecast window, choose Preferences > Forecast and display the

Auto Extract tab of the Forecast Preferences dialog.
Figure B.4 Choosing to Auto Extract Capability Metrics
2. Check Extract Forecast Statistics Automatically... and scroll down to the

bottom of the data selection list.
3. Check Capability Metrics, enter a Starting Cell, and then click OK.
Now, when you run a simulation, capability metrics are written to the specified
area of your worksheet, along with any other data you have requested.

1 Including capability metrics in reports
Be sure to choose an open area of your worksheet as the Starting Cell to avoid
overwriting your model.
Extracting capability metrics manually

You can also extract capability metrics manually after a simulation runs. To do
this:
1. Choose Analyze > Extract Data to display the Extract Data Preferences
dialog.
Figure B.5 Choosing to manually extract capability metrics
2. Check Capability Metrics at the bottom of the Select Data To Extract list.
3. Choose appropriate Forecasts and Assumptions settings and specify
locations and other preferences on the Options tab. For more
information, click the Help button in the Extract Data Preferences
dialog.
4. Click OK to extract the data.
Including capability metrics in reports

You can include capability metrics in full, forecast, or custom reports. To do
this:
1. Choose Analyze > Create Report to display the Create Report dialog.
Excel 2007 Note: In Excel 2007, click the upper half of the Create Report icon.
2. Click a report type: Full, Forecast, or Custom.

If you choose Full or Forecast, the capability metrics appear in a block for
each forecast following the statistics and percentiles for that forecast.
Additional process capability information appears in the summary and all
selected marker lines appear in forecast and overlay charts.
If you choose Custom, the Custom Report dialog appears.
Figure B.6 Custom Report dialog with Forecasts Details
3. If it is not already highlighted, highlight Forecasts in the Report

Sections list.
The Forecasts Details appear. With the process capability features
activated, Capability Metrics is checked by default.
4. If you dont want to include the capability metrics for some reason,
uncheck that setting in the Forecasts Details list. Otherwise, leave it
checked and follow the instructions in online help or the Crystal Ball
User Manual to continue defining a custom report.
5. When all settings are complete, click OK to generate the report.
Saving and restoring results with capability metrics

The following rules apply when you calculate capability metrics, store the
simulation results in a .cbr file, and then restore the results: The restored
results use the preference settings on the machine where the results are
restored, which might be different from the settings when the original
simulation was run and stored. Crystal Ball refits the data when the results are
restored, so results might differ somewhat from the original results.
For more information about saving and restoring simulation results, see
online help and the Crystal Ball User Manual.

Index
In this index
A comprehensive index designed to give you quick access to the information in this manual.

Index
A phases 32 capability metrics 44

activating process capability tutorial 32 Define 33
features 18, 36, 80 Design of Experiments example Design 35
analysis, simulation 24, 41 Simulation with DoE.xls 62 illustrated 38
Analyze phase Design phase limits and target 40
liquid pump example 34 liquid pump example 35 Measure 34
loan processing example DFSS 9 parts 39
16 defined 32 Validate 35
assumption cells DMADV 32 viewing 37
liquid pump example 39 phases 32 Loan Process.xls 20
loan processing example tutorial 32 loan processing example 14
20 DFSS example Analyze phase 16
assumptions, fitting to distribu- liquid pump example 32 Control phase 16
tions 22 Piston Displacement.xls 64 Define phase 15
Tolerance Analysis.xls 68 Improve phase 16, 26
C DFSS Fluid Pump.xls 37 Measure phase 15
capability features 6 DFSS liquid pump model, using metrics 28
capability metrics 35 using 17
defined 76 DMADV 32 loan processing model 20
extracting 82 DMAIC 14 LSL
liquid pump example 42, 40
44 E defined 78
loan processing example extracting capability metrics 82 setting 81
28
reporting 81, 83
F M
capability options, setting 80 fitting distributions to assump- manual conventions 2
consulting referral service 3 tions 22 marker lines, limits and target
Control phase forecast cells 23 25, 42
loan processing example liquid pump model 40 mean, defined 76
16 Measure phase
H-K liquid pump example 34
conventions, manual 2
help, online 2 loan processing example
Cp, defined 76
hidden factory 10 15
Cpk, defined 77
Hidden Factory.xls 57 MINITAB 62
Cpk-lower, defined 76
Improve phase
Cpk-upper, defined 77
Cpm, defined 77
loan processing 26 O
loan processing example online help 2
Critical Path.xls 59
16 optimization goals 46
Crystal Ball
quality support 10 OptQuest 67, 70
L running 47
starting 17, 36
Lean example using 45
D Hidden Factory.xls 57
decision variable cells 45
Value Stream.xls 50 P
Workforce with Queu- p(N/C)-above
Define phase
ing.xls 70 25
liquid pump example 33
Lean principles 9 p(N/C)-above, defined 78
loan processing example
liquid pump example p(N/C)-below, defined 78
15
adjusting 43 p(N/C)-total, defined 78
Design for Six Sigma 9
Analyze 34 Piston Displacement.xls 64
defined 32

1
Pp, defined 76 Simulation with DoE.xls 62
Ppk, defined 77 Six Sigma features 6
Ppk-lower, defined 77 Six Sigma offshoots 8
Ppk-upper, defined 77 specification limits
Ppm, defined 77 liquid pump example 40
PPM-above setting 81
25 standard deviation, defined 76
PPM-above, defined 78 starting Crystal Ball 17, 36
PPM-below, defined 78 statistics, quality 76
PPM-total support, technical 3
25
PPM-total, defined 78 T
process capability features 6 target 40
activating 18, 36, 80 25
Project Selection EVA.xls 61 setting 81
pump example 32 target, defined 78
technical support 3
Q Tolerance Analysis.xls 68
quality improvement, loan processing example 26 training service 3
quality methodologies Tutorial 1, loan processing example 14
and Crystal Ball 10 Tutorial 2, pump design with DFSS 32
quality statistics, defined 76
U
R user manual conventions 2
referrals, consulting 3 using OptQuest 45
reporting capability metrics 81, 83 using Value Stream.xls 53
restoring results 84 USL
results, saving 84 25, 40
results, storing 84 defined 78
running a simulation 24, 41 setting 81
running OptQuest 47
V
S Validate phase
saving results 84 liquid pump example 35
screen capture notes 2 value stream analysis model, using 50
sensitivity chart 25, 42, 55, 67, 70 Value Stream.xls 50
setting
capability options 80 W
setting specification limits and target 81 Workforce with Queuing.xls 70
simulation
analyzing 24, 41 Z
running 24, 41 Z scores 25, 76
Simulation with DoE.xls 62 Z-LSL, defined 77
Six Sigma 7 Zlt, defined 78
DMAIC 14 Zlt-total, defined 78
Six Sigma example Z-score shift, defined 78
Critical Path.xls 59 Zst, defined 77
Hidden Factory.xls 57 Zst-total, defined 78
Project Selection EVA.xls 61 Z-USL, defined 77

Index

Credits
Process Capability Guide

Written by Barbara Gentry with input and reviews from Crystal Campbell, Fred Ciocetto,
Hilary Emmett, Lawrence Goldman, and Karl Luce.
Edited by David Blankinship, Lawrence Goldman, and Eric Wainwright.
Illustrations and screen captures by Barbara Gentry using Jasc, Inc. Paint Shop Pro.
Typeset using NewBskvll BT and Univers fonts.

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U.S. GOVERNMENT RIGHTS Programs, software, databases, and related

OptQuest is a registered trademark of OptTek Systems, Inc.

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MAN-CBPC 070301-1 7/13/07

Chapter 1: Process Capability Overview

Chapter 2: Improving Process Quality Tutorial 1

Chapter 3: Improving Design Quality Tutorial 2

Crystal Ball Process Capability Guide i

Chapter 4: Lean Examples and More

Appendix A: Capability Metrics

Appendix B: How Do I...

ii Crystal Ball Process Capability Guide

These features are listed in Crystal Balls process capability features on

How this guide is organized

Chapter 1 Process Capability Overview

Crystal Ball Process Capability Guide 1

Conventions used in this manual

Click the Help button in a dialog.

2 Crystal Ball Process Capability Guide

Technical support and more

Crystal Ball Process Capability Guide 3

4 Crystal Ball Process Capability Guide

Crystal Ball Process Capability Guide 5

Crystal Balls process capability features

6 Crystal Ball Process Capability Guide

Quality improvement methodologies

Methodologies for improving processes Six Sigma

Six Sigma is a methodology for improving processes to achieve any or all of

Crystal Ball Process Capability Guide 7

More about DMAIC

Define Observing procedures, financials, defect rates, and so on to

Six Sigma offshoots and related methodologies

8 Crystal Ball Process Capability Guide

Methodologies for improving design DFSS

DFSS has five phases:

Define Describing the proposed product or other opportunity

For an example of DFSS in action, see Chapter 3, Improving Design Quality

Methodologies for adding value Lean principles

Crystal Ball Process Capability Guide 9

Improvements are often implemented incrementally following relatively

How Crystal Ball supports quality

In any phase, defining model inputs (Xs) as a distribution of values yields a

10 Crystal Ball Process Capability Guide

Figure 1.1 Piston Displacement forecast chart

Capability Metrics view indicates whether the forecast distribution is normal,

Crystal Ball Process Capability Guide 11

Figure 1.2 Piston Displacement sensitivity chart

12 Crystal Ball Process Capability Guide

Crystal Ball Process Capability Guide 13

Improving process quality Tutorial 1

14 Crystal Ball Process Capability Guide

The following sections give details of each phase.

Customer Inquiry involves the creation of an initial rate quote following

Crystal Ball Process Capability Guide 15

16 Crystal Ball Process Capability Guide

Using the Loan Processing model

In this tutorial, you will:

Start Crystal Ball

Start Crystal Ball

Crystal Ball Process Capability Guide 17

Activate the process capability features