Monday, 27 March 2017

What is process variation and the four basic sources of variation?

All business process experience variation to some extent. The variation could be a result of random variability or perhaps as a deliberate choice in management. 

Variations can be disruptive to supply chain processes and operations as they interfere with functions.  They can cause a number of problems such as increased costs, unhappy customers and product shortages. Here are the four basic sources of process variation:
  1. A variety of services or goods being offered by the company. Variation will be greater if there is a wider amount of variety in the goods or services that are offered.
  2. Structural variation. Structural variation in demand is caused by trends and variations that occur with seasons. These types of variations can be predictable and they are vital for capacity planning.
  3. Random variation is naturally occurring and found in all processes and the demand for services and products. Managers have little influence over random variation.
  4. Assignable variation has many different causes, such as failing to follow the correct working methods and defective inputs. Analysis can be used to reduce or remove assignable variation along with corrective action.

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