CPK AS A COSTING TOOL
Determine current CP or CPK values, then determine fall out rate (0.27% at CPK of 1.0)
Determine average cost of defect.
Estimate production rate for this year
Estimate annual cost of defects:
(production rate X fallout rate X cost/defect
Estimate cost to make improvement
Implimentation Costs
Operating Costs
Estimate CP or CPK after improvement
Determine with PDCA (Plan Do Check Act) Pilot Test
or
Resort to WAG/SWAG/ROMWAG - Wild Ass Guess, Scientific Wild Ass Guess, Rough Order of Magnitude Wild Ass Guess
Use benefit cost ratios to select projects. Return on Investment or Rate of Return or Payback Time.
Management by Fact: Team must be specific in selecting problems and solutions.
It requires data collection and estimates to develop ratios.
"You can get anything you want, if you just help other people get what they want in the process."
Establish purpose, goal, problem to solve
Define the process
Collect data
Convert data to information
Convert information to knowledge
Convert knowledge to ACTION