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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
What is the 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
Potential Failure Mode
What can go wrong with the process step/output (Ys)? How can it fail to meet process requirements?
Process Step
What is the 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
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
What is the 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
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
What is the 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
STEP 5: Identify Controls
Current Controls
Identify existing controls designed to prevent or detect the cause or the failure mode
Process Step
What is the 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
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
What is the 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
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
What is the 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
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)?
Potential Failure Effects
What is the impact on
customer or internal
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/InputWhat is the
process step?
Potential Failure ModeWhat can go
wrong with the process
step/output (Ys)?
Potential Failure Effects
What is the impact on
customer or internal
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 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/InputWhat is the
process step?
Potential Failure ModeWhat can go
wrong with the process
step/output (Ys)?
Potential Failure Effects
What is the impact on
customer or internal
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
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.
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