Project Risk Management: Failure Mode & Effects Analysis (FMEA) Presented by: Janette Long, SSBB, PMP May 29, 2013 This presentation is the property of

Project Risk Management: Failure Mode & Effects Analysis (FMEA)

Presented by: Janette Long, SSBB, PMP

May 29, 2013

This presentation is the property of Janette Long and may not be reproduced or distributed without express written consent.

Project Risk Management

Definition

Benefits

What is a Failure Mode and Effects Analysis (FMEA)?

Tool that identifies/analyzes risk and formulates a response plan

Objectives

Definition – Project Risk ManagementSource: PMBOK® Guide – Fourth Edition

“Project Risk Management includes the processes concerned with conducting risk management planning, identification, analysis, responses, and monitoring and control on a project.”

• To increase the probability and impact of positive events;

• To decrease the probability and impact of negative events;

• To identify and prioritize risks in advance of their occurrence, and provide action-oriented information to project managers.

Benefits Lower risk of process failure (improved cost

by reducing rework)

Lower risk of being surprised by process failure, which enables us to proactively manage customer expectations

Equip process operators with response plans to implement predefined solutions without delay in the event of an anticipated failure occurring

Foster a foundation for driving a culture of continuous improvement aimed at improving quality, cost, and speed

What is a FMEA?

FMEA is a tool that:

Validates key process inputs

Identifies, evaluates, prioritizes potential failures

Identifies causes and effects of failures

Identifies actions to eliminate or reduce potential failures

Documents and tracks action taken to reduce risk

Previous audit/quality control reports

Growth indicators (sales/call volume)

Pricing trends

Service delivery channel multiplicity/complexity

Unauthorized activity (disregard of policy,

authority limits)

Discrepant documentation

Security breach

Inconsistent deliverables (SOW and metrics)

Pain Points

Operational structure Control activities Information and communication People management Process monitoring

The main goal of internal control is to: Identify risks hindering the achievement of

an organization’s objectives Perform necessary measures to manage

risk exposures

Internal Control Components

8

YX X

XX

Outputs(Lagging Metrics)

Transfer Inputs(Leading Metrics)

Changes in inputs transfer to the output.

Focus on controlling, stabilizing, and improving the critical process inputs to improve performance.

Transfer Function

Y = f (x1, x2, x3 . . .)

STEP 1: List Process Steps

Process Step/Input

What is the process step?

Review the high level process map or pain points within process

YX XX

X

Process Step


Potential Failure Mode

What can go wrong with the process

step/output (Y’s)?

Potential Failure Effects

What is the impact on

customer or internal

requirements?

SEV

Potential Causes

What are the root cause reasons (X’s)

for the process step/output to go

wrong?

OCC

Current Controls

What are the existing controls that detect and

prevent either the cause or the failure

modes?

DET

RPN

0

Outputs

Receive Order

Enter OrderIdentify Custom Specs

Approve Invoice

Customer

• New order number issued

• Order log initialed• Customer letter sent

• Hard copy routed to Procurement

• Hard copy routed to Engineering (special orders only)

• Changes reviewed with customer

• Changes documented on order form

• Order signed by engineer

• Order entered by CSR

• Approved order sent to Planning

• Order reviewed• Parts ordered• Completed order sent

to CSR for approval and invoicing

• # order processing clerks

• New order log book• Completeness of

customer information• Accuracy of order

information• Confirmation letter

template

• # customer Service Reps

• Time per order• Order processing

software• Method of order • Type of order• Product information• Order forms• New order log book

• Special orders• Customer availability• Accuracy of order

information

• Procurement Manager approval TAT

• Planning Manager approval TAT

• CSR Manager approval TAT

• Order accuracy• Inventory levels

Inputs

Process Example

STEP 2: List Potential Failure Modes


What can go wrong with the process step/output (Ys)? How can it fail to meet process requirements?

Process Step








requirements?

SEV

Potential Causes



wrong?

OCC

Current Controls



modes?

DET

RPN

0

STEP 3: Identify Potential Failure Effects

Potential Failure Effects• What is the impact on customer or internal requirements?

• Determine the effects of failure that will be felt by internal or external customers

• Will the effect be a missed requirement?

Process Step








requirements?

SEV

Potential Causes



wrong?

OCC

Current Controls



modes?

DET

RPN

0

STEP 4: Identify Root Cause

Potential Causes• What are the root causes (x’s) for the process step/output to go

wrong?

• Identify potential causes of the failure

• Scan the process map inputs for sources of variation

Process Step








requirements?

SEV

Potential Causes



wrong?

OCC

Current Controls



modes?

DET

RPN

0

STEP 5: Identify Controls

Current Controls

Identify existing controls designed to prevent or detect the cause or the failure mode

Process Step








requirements?

SEV

Potential Causes



wrong?

OCC

Current Controls



modes?

DET

RPN

0

STEP 6: Establish Ratings

Rate the severity of each effect (SEV), probability of occurrence of each cause (OCC), and detection ability of each control (DET)

10 7 5-6 4 1

Severity Severe Moderate Minor

Occurrence High probability Medium probability Low probability

Detection Low detection Medium detection High detection

Process Step








requirements?

SEV

Potential Causes



wrong?

OCC

Current Controls



modes?

DET

RPN

10 3 5 150

STEP 7: Calculate Risk Priority Number (RPN)

• Rate the severity of each effect (SEV), probability of occurrence of each cause (OCC), and detection ability of each control (DET)

• Multiply SEV x OCC x DET to calculate a Risk Priority Number (RPN)

Process Step








requirements?

SEV

Potential Causes



wrong?

OCC

Current Controls



modes?

DET

RPN

10 3 5 150

STEP 8: Identify Action Plans

Process Step/InputWhat is the

process step?

Potential Failure ModeWhat can go

wrong with the process

step/output (Ys)?




requirements?

Potential Causes

What are the root cause

reasons (Xs) for the process step/output to

go wrong?

Current Controls

What are the existing

controls that detect and

prevent either the cause or

the failure mode?

SEV

OCC

DET

RPN

Actions Recommended

What are the actions for

reducing the OCC of the

cause or improving DET?

Plans / Responsibility

Who is responsible

and what is the target date for completion?

SEV

-

Rev

OCC

-

Rev

DET

-

Rev

RPN

-

Rev

0 0

Beginning with the highest RPNs, create an action plan to address potential failures Actions Recommended

What are the actions for reducing the OCC of the cause or improving DET?

STEP 9: Identify Responsibility/Timeline


process step?



step/output (Ys)?




requirements?

Potential Causes



go wrong?

Current Controls




the failure mode?

SEV

OCC

DET

RPN

Actions Recommended





Who is responsible


SEV

-

Rev

OCC

-

Rev

DET

-

Rev

RPN

-

Rev

0 0

Beginning with the highest RPNs, create an action plan to address potential failures Plans/Responsibility

Who is responsible and what is the target date for completion?

STEP 10: Calculate Revised RPN

Estimate the reduction in RPN that would occur if the recommended actions are taken R

PN

DET

OCC

SEV


process step?



step/output (Ys)?




requirements?

Potential Causes



go wrong?

Current Controls




the failure mode?

SEV

OCC

DET

RPN

Actions Recommended





Who is responsible


SEV

-

Rev

OCC

-

Rev

DET

-

Rev

RPN

-

Rev

0 0

A Potential Failure Mode

may have several Failure Effects

In ‘Rev’, Severity doesn’t change, but OCC and DET will

Process Steps should align with Process Maps –

High Level or Detailed

Make sure that Uncontrollable

inputs are examined carefully

Should align with

Outputs

Should align with

Inputs

Verify that high RPN Failure Modes flow down to the Control

Plan

Everything can’t be a Top Priority; make sure there’s a

wide range in RPN.

FMEA Tips

Step Task

1 List process steps

2 List potential failure modes

3 Identify potential failure effects on customer or internal requirement

4 Identify the root cause reasons (Xs) for the process step/output to go wrong

5 Identify the existing controls that prevent or detect either the cause or the failure mode

6Rate the severity of each effect (SEV), probability of occurrence of each cause (OCC), and detection ability of each control (DET)

7 Multiply SEV x OCC x DET to calculate a Risk Priority Number (RPN)

8 Identify actions for reducing the OCC of the cause or improving DET

9 Establish who is responsible and what is the target completion date

10 Estimate the reduction in RPN that would occur if the recommended actions are taken

FMEA Steps

Works best as a team effort

Must have motivated team members

Include cross-functional representation on team

Perform on “as is” process first and then on redesigned “to be” process

Treat as a living document, reflect changes

Use to take action

Guidelines

Understanding of FMEA

Clearly defined steps to perform a Baseline Failure Mode and Effects Analysis (FMEA)

Checkpoint

Janette Long, SSBB, PMP is a Lean Six Sigma Black Belt and certified Project Management Professional with over 12 years of experience within the banking/mortgage, education, insurance and nonprofit arenas.

She earned her BSC Marketing degree from DePaul University and continued her graduate studies in Lean Six Sigma at the University of Chicago and Villanova University.

Previous projects include branding initiatives, bank divestitures, compliance software implementation, operational risk audits, business process management, and IT performance management.

She is currently engaged in a business process re-engineering effort for a Fortune 50 insurance company.