Six Sigma Principles

Organizations use Six Sigma principles to improve quality, decrease costs, and better meet customer needs. In the book "The Six Sigma Way", define Six Sigma as "a comprehensive and flexible system for achieving, sustaining and maximizing business success. Six Sigma is uniquely driven by close understanding of customer needs, disciplined use of facts, data, and statistical analysis, and diligent attention for managing, improving, and reinventing business process".

Six Sigma's target for perfection is the achievement of no more than 3.4 defects, errors, or mistakes per million opportunities. This target number is explained in more detail later in this section. An organization can apply the Six Sigma principles to the design and production of a product, a Help Desk, or other customer-service process.

Projects that use Six Sigma principles for quality control normally follow a five-phase improvement process called DMAIC (pronounced de-MAY-ic), which stands for Define, Measure, Analyze,Improve, and Control. DMAIC is a systematic, closed-loop process for continued improvement that is scientific and fact based. The following are brief descriptions of each phase of the DMAIC improvement process:

1. Define: Define the problem/opportunity, process, and customer requirements. Important tools used in this phase include a project charter, a description of customer requirements, process maps, and Voice of the Customer (VOC) data. Examples of VOC data include complaints, surveys, comments, and market research that represent the views and needs of the organization's customers.
2. Measure: Define measures, then collect, compile, and display data. Measures are defined in terms of defects per opportunity.
3. Analyze: Describe process details to find improvement opportunities. A project team working on a Six Sigma project, normally referred to as a Six Sigma team, investigates and verifies data to prove the suspected root causes of quality problems and substantiates the problem statement. An important tool in this phase is the Fishbone or Ishikawa diagram.
4. Improve: Generate solutions and ideas for improving the problem. A final solution is verified with the project sponsor, and the Six Sigma team develops a plan to pilot test the solution. The Six Sigma team reviews the results of the pilot test to refine the solution, if needed, and then implements the solution where appropriate.
5. Control: Track and verify the stability of the improvements and the predictability of the solution. Control charts are one tool used in the control phase.
   

Using EV Analysis to Monitor and Control Risk

Did you know that you can use earned value analysis to monitor and control risks? Earned value analysis is traditionally used to monitor overall project performance against a baseline plan and to identify any deviations from the plan. In keeping track of these deviations, you will also help your company to monitor and control project risks, which increases your chances of a successful project.

Earned value analysis calculates whether the work for a given period is accomplished as planned. This type of analysis uses three key values: earned value, actual cost, and planned value.

• earned value (EV) - EV is the budgeted value of work actually completed in a given period of time. It answers the question: "How much work is done and what was the original budget to complete that work?"
  
  
• actual cost (AC) - AC is the total of costs incurred in accomplishing work on an activity during a given period of time. It answers the question: "How much has it cost to complete the work that has been done so far?"
  
  
• planned value (PV) - PV is the portion of the approved cost estimate budgeted for an activity during a given time. It answers the questions: "What should the work planned for this period cost?" and "How much work should be done by now?"

The formula for calculating earned value is:

EV = PV x % Work Complete

EV is the PV of your project multiplied by the percent of work complete. The PV is in the project budget and you can determine the PC by dividing the amount of work completed by the total amount of work that is expected to be completed during this time period.
With a good basic understanding of these key values, you can move on to performing the calculations used in earned value analysis. A careful interpretation of the results will help you determine if additional risk identification and analysis is required.

To determine whether your project requires additional risk identification and analysis, you must calculate four performance measurements.

1. cost variance (CV)
2. schedule variance (SV)
3. cost performance index (CPI)
4. schedule performance index (SPI).

CV is the difference between the budgeted value of work actually completed and the total of costs incurred to complete that work in a given period of time. The formula is:

CV = [(EV - AC) / EV] x 100

SV is the difference between the budgeted value of work actually completed and the amount the company planned to spend to complete the work during a given period of time. The formula is:

SV = [(EV - PV) / PV] x 100

The last two performance measurements are ratio expressions of CV and SV. CV and SV tell you the percent that your project varies from the baseline, while the CPI and SPI tell you how efficiently the work has been performed.

CPI is the cost efficiency ratio of earned value to actual costs. The formula is:

CPI = EV / AC

SPI is the schedule efficiency ratio of earned value accomplished against planned value. The formula is:

SPI = EV / PV

Once you have calculated the results for CV, SV, CPI, and SPI, they must be interpreted. This is the information the company needs to decide whether additional risk identification and analysis is necessary.

When analyzing the CV and SV for a project, you must look at how close to zero the results are. A result that is equal to zero indicates that the project or activity is performing as estimated. A result that is greater than zero indicates the project or activity is ahead of the estimates. A result of less than zero indicates that the project or activity is behind the estimates. When the result varies significantly above or below zero, additional risk identification and analysis may be necessary.

When analyzing CPI and SPI for a project, you must look at how close to one the result is. A result that is equal to one indicates that the project or activity is performing as estimated. A result that is greater than one indicates that the project is performing ahead of the estimates. A result of less than one indicates that the project is performing behind the estimates. When the result varies above or below one and exceeds the company's predetermined acceptable range, additional risk identification and analysis is necessary.

Earned value analysis can help you determine when additional risk identification and analysis is necessary. Being able to perform the calculations and interpret the results will help you handle and control project risks properly.

Two Risk Monitoring and Control Techniques

Professional consultant Gary Blair says that "Thoughtless risks are destructive, of course, but perhaps even more wasteful is thoughtless caution which prompts inaction and promotes failure to seize opportunity."

The thoughtful caution of risk monitoring and control helps you seize project opportunities and avoid destructive risks. By learning how to monitor and control these opportunities, you can boost their potential for success.

Two risk monitoring and control techniques can help you learn how to handle and control risks, increasing your chances of a successful project. The techniques are:

1. project risk response audits
2. periodic project risk reviews

To determine whether a risk owner has taken appropriate action to prevent a risk from occurring, you can use a project risk response audit. Risk response audits examine and document the effectiveness of the risk response and the risk owner. Risk response audits verify that those responsible conduct the responses as planned. You perform these audits throughout the project's life cycle to help control risk.

Companies must decide when they want to conduct risk response audits and under what circumstances. A company may decide to conduct an audit on risks with a potential cost to the project over a certain amount. This amount will vary from project to project, but will be set out at the beginning of the project.

To avoid biased results, you must have an objective third party conduct your risk response audits. Your company may have a risk specialist or internal audit department, otherwise it will have to hire an external auditor.

The second risk monitoring and control technique that can help you learn how to handle and control risks is periodic project risk reviews. Periodic project risk reviews are regularly scheduled examinations of potential risks. Since project risks are always changing, they should be an agenda item at all team meetings.

Depending on the phase of the project's life cycle, risk ratings and prioritization may change. If team members decide to change the risk rating or prioritization of a risk, they may have to perform additional qualitative or quantitative risk analyses.

Project risk response audits and periodic risk reviews keep track of project risks and how your team responds to them. This helps you handle and control risks properly and increases your chances of managing a successful project.

Using Project Communication Documents to Control Risk

Often, team members spend time sharing information that may provide clues to potential project risks. How can this valuable information be incorporated into the risk monitoring and control process?

Project managers and project team members can monitor risks through project communication. Generally, these are documents that provide information on project performance and risks throughout the project's life cycle. As project performance is being monitored, so are project risks. Performance that is lower than expected may indicate that a project risk is emerging, or if performance improves, this may indicate that a risk has been brought under control.

The most obvious communication documents to use in monitoring risks are the work results, project records, and project reports.

Work results
Work results are the outcomes of a project and may include results such as information on the completion status of project deliverables, acquired or allocated costs and resources, and whether project quality standards have been met. It is important to gather reliable and consistent work results, as they are useful for performance reporting and monitoring project risks.

Project records
Project records contain other project information that you should consider when assessing project performance and risks. Project records may include correspondence, memos, and documents describing portions of the project. Project team members may even keep personal records in a project notebook.

Project reports
Project reports are a type of formal documentation that you and your project team can use for risk monitoring and control. Some of the most commonly used reports are:

• issue logs keep track of issues that are risks and issues that could lead to risks. Issue logs contain information such as the date, time, details of the issue, responses implemented, and person reporting the issue.
• action-item lists record information regarding responses to risks. These lists often include a description of the action, the name of the person assigned the action, when it is due, and its status.
• jeopardy warnings are reports that warn project team members that a risk may be about to occur. This information gives the team a chance to prepare its response.
• escalation notices are reports that inform decision makers that a risk has escalated to a higher level. With this information, decision makers can determine the best way to respond.

You and your project team can extract important clues for risk monitoring and control from project communication documents such as work results, project records, and project reports.

Using Control Charts to Identify Product Process Problems

Project managers use control charts to spot production process problems before they spin out of control. On a control chart, production data is plotted and analyzed for specific trends. Control charts are used more as a preventive measure rather than for detection or rejection of quality problems. This is extremely useful since it is cheaper to prevent mistakes than to correct them.

Control charts compare quality, cost, and time issues to an established norm. They indicate permissible behavior so that aberrations are easy to identify. Analysis of control charts determines whether a process is stable or whether corrective action needs to be taken.

Control charts can also help determine sources of variation. Variation is the range the observations fall around the process mean or average. Variation is different for every product or process since each has different characteristics.

• Common cause variation - is random variation common to any process. This type of variation requires management decisions to change the basic processes. Common cause variation is caused by chance and requires no corrections.
• Special cause variation - happens at the operational, or production, level. This variation is indicated by exceeding a control limit or a persistent trend towards the limit. Special causes exist when the variation in a process exceeds allowable standards. Corrective action is then required.

Variation is also categorized by time.

• Short-term variation - can be caused by changes in suppliers or workers' performance.
• Long-term variation - occurs in cases of tool wear, environmental changes, or increased administrative control.

There are two types of control charts classified by the type of data they collect. Variable control charts are used with continuous data in which all numerical values are possible. Variable charts are useful when measurements from a process are variable such as diameters, electrical output, or chemical concentrations.

Attribute control charts are used with discrete data, or when data can only have a certain value, or range, such as "1" for "yes" and "2" for "no" in a conformance test. Attribute charts analyze data such as conforming/non-conforming, pass/fail, go/no go, or yes/no measurements.

The use of these various charts depends on what type of quality measurement is desired. The most common type is the X bar chart, or process average chart.

Limits on a control chart are often called the three-sigma limit because most companies operate within the 3 sigma limit. In a normal distribution, 99.73 percent of the measurements lie within X bar ± 3s, or within the UCL and LCL. Some companies now employ a six-sigma limit in their quality control. This allows only 2 defects per billion. This exactness in quality is so expensive that it is only possible over very large production runs.

The high figure indicates a high degree of variation because more of the observations fall away from the average. Therefore, the taller the curve shape, or the bell curve, the lower the standard deviation will be.

Control charts can be interpreted in many ways depending on their patterns and line shifts. Experience is the greatest aid to understanding a chart. Control charts tell when to look for trouble but not where the cause lies. Control charts also indicate when to leave a process alone. Variation can be unnecessarily introduced by an operator trying to fine-tune a machine to near perfection, when the control chart indicates the operator could leave the process alone. Charts are interpreted by runs, trends, periodicity, and hugging.

Quality control inspectors also use the Rule of Seven to determine if a process is out of control. If seven or more consecutive observations are found to be on one side of the mean, then it is out of control. The reason it is said to be out of control is that there is only a 1.56 percent statistical chance of random variation that the run of seven would fall on one side of the mean.

One of the most useful quality control tasks is ensuring a process is in control, by identifying the existence of a problem. Control charts are a valuable tool in determining whether or not a project or process is in control. To be able to read control charts, you need to be familiar with the different control chart types and their components, and the various methods of interpretation.

Statistical Sampling Methods for Project Quality Control

Statistical sampling is a way of identifying the quality of a service or product when it is impractical or too expensive to examine each item. Effective sampling is based on statistical probability theory which identifies the probability of error for a sample size. Using standard deviation and variance calculations, control charts can be constructed, which accurately predict the likelihood of a sample being representative of a population or lot size.

To be accurate, the sample size must be "representative" and "valid." Representative means that enough good and bad items must be included in the sample, so that it portrays the lot it is drawn from accurately. Validity is the measure, whereby the method of testing and the attributes measured are a true indication of what needs to be measured.

Key issues for ensuring accuracy are the proper determination of the sample size and the rejection level acceptable within the sample. Sampling methods include acceptance sample, attributes sampling, special attributes sampling, and variable sampling.

• acceptance sampling
  Acceptance sampling tests selected items against an agreed upon list of necessary criteria. The inspection can be conducted in a variety of ways including electronic, stress testing, sample destruction, reaction testing, and temperature testing.
  
  It is more convenient to conduct acceptance sampling with lots in a production run. This reduces overall costs by making the sample sizes smaller and more manageable. If a quality problem is discovered, it is easier to track down the lot. It is also cheaper to rework or throw out the lot. Lots are often naturally created by factors such as shift changes, raw material lot sizes, handling or packaging sizes, or shipment sizes. Random selection within the lot is also important to ensure sample validity.
  

• attributes sampling
  After the acceptance sampling method has been chosen, attributes sampling defines what exactly will be measured for quality control. This is often based upon past sample failure experience or customer feedback. The quality inspector merely checks the individual sample against the quality criteria. The attribute is measured by a simple "yes" or "no" that the item is acceptable. This method is often used in inspecting for size, color, finishing, marking, and packing. Data is recorded on a simple checklist sheet.
  
  The use of attributes sampling has some advantages and disadvantages. Attributes testing is simpler and less expensive than inspection by variables. Recordkeeping is simplified by having one quality level for a group of like attributes. However, attributes sampling also requires a large sample size to determine the acceptability of the parent lot, which makes the process time consuming and expensive.
  

• special attributes sampling
  Statisticians have various sampling methods that simplify the inspection process, reduce time and cost, yet still ensure accuracy in the inspection process. These methods are referred to as "special attributes sampling" and include continuous sampling, chain sampling, and skip-lot sampling.
  
  With continuous sampling, inspection occurs throughout production, like on an assembly line. This method is often used when storage facilities are inadequate or it is difficult to accumulate large lots for inspection.
  
  Chain sampling occurs when a product is produced as a lot for inclusion into another product. It is tested throughout the manufacturing process. This method is useful when sample sizes are small, and there is good quality history.
  
  Skip-lot sampling reduces inspection costs by inspecting certain lots. This increases the quality risk, therefore a history of high quality is a key consideration. This type of sampling is used after the maturation of a process.
  

• variable sampling
  Variables sampling collects data on possible variable items. When the error rate exceeds a combined level for several of the variables, the lot is rejected. The sample is rated on a scale against such criteria as time, distance, weight, strength, or purity.
  
  Instead of being tested as "acceptable" or "unacceptable," the sample is compared against historic values to determine problems. Variable sampling is used when the quality characteristic is measurable or quantifiable.
  
  Variables sampling allows a quality control team to accomplish more in its inspection and analysis process. Causal links can be explored as well, helping to determine the root problem in a product, process, or sub-process.
  
  The advantages include more data to compare to quality conformance criteria. It also requires smaller sample sizes, reducing cost while ensuring high quality.
  
  The disadvantages are that the quality inspectors need more training and that more sophisticated analysis is required to determine quality conformance.
  
  Acceptance and attributes testing can be tested separately or together. An item can be tested for one or several attributes and whether it achieves the desired specifications. Variables sampling is a more complex process requiring considerable thought in not only what is measured, but how it will be analyzed.
  

Any of the above sampling techniques can use special attributes testing to reduce the time spent sampling. In practice, many companies use all four sampling techniques together to ensure the highest possible quality control.

No matter what kind of sampling plan you choose, all require a sample of a particular size to ensure confidence in the results. The sample must be cost effective to conduct and accurate according to probability and acceptance theory. Sample sizes can be determined from the operating characteristic curve. The curve represents the historic results for a particular process and operating conditions. The curves change shape depending on the size of the sample. Formulas can be used to represent the diagram.

A major tire manufacturing company installed a new tire molding machine. A trial production run tested if the tires made with the new machinery were as strong as the old ones. In a production run of 10,000 tires, only one failed in a sample installation test of 100 tires. To confirm the accuracy of the test, two more test lots were produced with the same results. Since the old process experienced 1.5 failures per 100, this machine represented an improvement and the sample size continued to be valid.

Sampling techniques help ensure quality while controlling inspection costs. It is key that the proper kind of sampling is carried out to obtain the desired results. This ensures the sample will be accurate and valid. The proper determination of the sample size is also important. Representative is the other key consideration. Proper sampling techniques ensure other analysis methods are reliable indications of reality.

How Inspections Aid in Project Quality Control

Most companies receive complaints about their products or services at some time. Since this is a common event, you should learn more about how inspections can help you produce superior goods and provide better services.

Inspection forms the backbone of quality control. Without inspection, identification of problems is impossible. This can have severe ramifications for the client-producer relationship. All projects or processes can be inspected using subjective or objective criteria for weaknesses in conformance to standards. Remember, the role of inspection is to ensure results meet specifications.

Quality control is based on a plan and work results. The work results come from the mandated inspection process. Inspection activities consist of measuring, examining and testing to ensure conformance.

• Measuring - Most products or projects require acceptance inspection against specific physical requirements, such as dimensions. Processes often have ongoing measurements of critical criteria such as pressures. The goal is to ensure machines are calibrated properly.
• Examining - Most products or projects require examinations to determine acceptability to a set standard or criteria. This can involve measuring or examination of more subjective criteria, such as appearance.
• Testing - Inspection testing requires that the project or product be tested to ensure conformance. This can be done at the end, at different stages or as a continual activity. Testing is often necessary to check that a new technology, process or method will meet quality expectations.

In the production of a computer, various measurements, tests and examinations are made. Measurements are made on individual parts and subcomponents, such as the thickness of circuit board circuitry. Tests can then be run on these parts or subcomponents to ensure they work. Lastly, examinations can be made to ensure subcomponents and the final product were assembled correctly.
The quality management plan should indicate what control system is needed for inspection, measuring, or testing. The plan should give information on:

• what test equipment is to be used
• the method of test equipment calibration
• the method of recording test equipment calibration status
• the documentation of calibration information to determine when equipment is out of calibration

Inspections are not random affairs. The quality management plan helps determine when inspections should occur. Inspections occur at the moment at which it is most appropriate to ensure achievement of quality goals. This is a balance between just enough quality and the high cost of continuous inspection of all aspects of a project or a product.
Inspections after a single activity are the most rigorous of inspection processes. This method ensures each step in a process is compared to the desired goal. This is most often used in highly regulated industries that require tight tolerances, such as electronics.

Inspections at each stage ensure that a project or product is conforming to the specifications before more work is done. This prevents work being done on a flawed item, eliminating rework and waste. This is often seen in the construction and metal-working industries.

Most projects or products require a final inspection before shipment or acceptance by the customer or client. This ensures that all other inspections were successful. Some simplistic products or projects may not require inspection until completion.

The quality management plan is key to developing an effective inspection or testing regime. The plan needs to indicate relevant inspections or tests needed for a project to proceed to the next level, or be ready for client acceptance. The plan can give the following information regarding inspections and testing:

• how suppliers verify subcontractor products
• where each inspection/test is in the process
• what characteristics, criteria, and techniques are required
• where the client needs to verify the product
• where regulatory verification is necessary
• where third party testing, verification, validation, or certification is needed

During the production of a book, whether it be a novel or a textbook, various inspections and tests occur. The objective is to produce a written work that is free of factual and grammatical errors, formatted properly, illustrated correctly, logically laid out, and has a sense of coherent style.
After the author has written each chapter, style, logic, coherence, and general grammar and spelling are checked. After each chapter is submitted to the publisher, an editor checks for style, logic, coherence, and general grammar and spelling. Once the complete manuscript is finished, a variety of people look at it. The editor again examines for style, content and logic. A proofreader comments on grammar, punctuation and spelling.

After the content has been approved, the printing occurs. Author's proofs are then checked by the author, the editor, and copy proofreaders for any last minute errors in layout and formatting, including illustrations, before the final print run.

Inspections are also called "reviews," "product reviews," "audits" and "walk-throughs." It depends on the industry, the type of process or project and the purpose of the particular inspection. These terms can have quite narrow and specific meanings.

For example, an audit can mean different things. In a firm, an accounting audit inspects the books to ensure proper procedures and bookkeeping techniques were employed. A personal income tax audit accepts or rejects entries on your taxes based on income tax laws. A quality audit does not seek to inspect any product, but rather inspects the process of quality control to ensure the methods, measurements and people are being effectively used.

Inspection is a key component of the quality control process. Acceptance and rejection of poor quality work relies on inspections. Inspection results also provide the data used in statistical analysis methods.

Using Work Results for Project Quality Control

Have you ever had a quality plan, but wondered how the plan provided quality control information that could be used for analysis? The quality plan has reporting procedures and feedback that provide this information. This information is called work results. The two most common work results are performance reports and change requests. Each will be examined in turn.

Performance reports
Performance reports provide data that can be turned into various visual charts for analysis. Three of the most useful activities that performance reports measure are:

• schedule adherence
• cost adherence
• quality standards adherence.

In performance reporting, the simpler the visual projection of the data, the better. This makes it easier to understand the requirement for action. Four of the most common performance reports are: Gantt charts, S-Curves, histograms, and tables.
In histograms, data is shown as a vertical bar graph. This illustrates major problem categories. It forms the basis for control charts and Pareto diagrams.

Tables are often used to convey more complex data in its raw data form. Tables can convey observational data.

Performance reports can have a direct impact on quality management. Simple visual images can easily emphasize the need for immediate change. They can also indicate the project plan is working well.

A project manager for a microchip project submitted a weekly performance report after a difficult week. The visual report showed that most of the department's problems were coding errors. This indicated that changes were needed to prevent errors from reaching the final product. The project manager will have to look into this problem in more detail.

Change requests
Almost every process or project encounters some difficulty that requires a change in the conditions of the project such as time, cost, or quality objectives. Project managers may request additional time or money to ensure the project meets its original definition and expectations for quality.

Change requests, another form of work results, ask for the alteration to the project's objectives or quality. This can occur if the product is urgently required or additional expenses for quality will not result in increased profits or sales.

Change requests can also require alterations to quality methodology. Changes in the handling of data used to measure the project, the measurement process and techniques of data collection, or the evaluation of data, can be requested.

The handling of data may change in its method of collection, depth of detail, or type of data. For example, a company introducing new machinery may need to develop new measurements to reflect the change in machinery or technology.

Changes to the process or techniques of data collection are meant to ensure reliability, consistency, standardization, review, timeliness and rapid access to data. For example, a company may adopt an advanced database to aid inputting and calculations.

Change requests can also require new methods of analysis and improvements to the quality of data. For example, a manufacturing company using new equipment may want more precise data and more sophisticated analysis.

The value of the work results in the form of performance reports and change requests lies in their identification of a potential problem. The data these results provide points the way for more in-depth analytical treatment.

What Makes a Quality Management Plan Effective?

Have you ever had a problem that required implementing quality control methods, but you didn't know where to start? Proper project development requires a quality management plan to ensure that time and cost objectives and standards are met.

Depending on the needs of the project, a quality management plan can be formal or informal, detailed or broad. The best plans address the three aspects of quality—quality control, quality assurance, and quality improvement—and feature operational definitions as well as any procedures and standards.

Quality control, quality assurance and quality improvement
To provide direction and focus for project plan development, your plan should include details about quality control, quality assurance, and quality improvement measures.

• Quality Control - monitors products for conformance to the quality standards and identifies ways to eliminate substandard work or failures. It requires detailed instructions based on the operational definitions, or measurements, for the project.
• Quality Assurance - audits the organizational structures, responsibilities, procedures and processes of a project to ensure that the quality plan is providing effective feedback.
• Quality Improvement - is the outcome of the quality assurance and quality control processes. A design experiment may be required to determine if there are new operating norms or if the new procedures will work. It may prevent re-occurrences of quality issues.

Operational definitions
Next, your plan must define what needs to be measured. Before the plan can be fully developed, the following operational definitions need to be identified:

• What quality aspects will be measured?
• How will each quality aspect be measured?
• When will each quality aspect be measured?

Defining what needs to be measured can be the hardest part of the operational definition process. The governing rule should be to measure anything that can be variable in nature, whether the item to be measured is a human, a machine, a product, a procedure or process, or the environment.

Most final products require some sort of measurement to ensure conformance to subjective and objective standards. Subjective standards are difficult to measure. How exactly do you measure the aesthetic appeal of flowers? Objective standards require detailed measurements including destruction testing.

Forms can be developed to record objective and subjective measurements. Objective standards include strength, time, cost and measurement criteria. These need explicit data requiring detailed inspection processes and forms. Subjective standards, such as aesthetic standards, are most often measured using checklists with comment sections.

Determining how often to measure quality is another aspect of the operational definition process. Some of the most obvious times to test quality are:

• upon delivery of raw materials - This determines if the supplier is meeting your standards. Items should also be inspected after prolonged storage, especially if they are environmentally or corrosion sensitive. Not every item needs to be inspected. Sampling techniques can be used.
• at end of major stages in a process - It is often cost effective to inspect at the end of a sub- process to ensure substandard material does not progress further. This prevents wasted time, materials, and expensive rework procedures.
• upon changes in operating conditions - An appropriate time to measure is after changes to procedures, processes, machinery settings and human operators. This can take place at different intervals: every few minutes, hourly, each shift, weekly, monthly, or yearly. The time sensitivity of the process determines the frequency.
• upon completion of job lots - Many products are often produced in lots, partly as a function of the inputs process, but also as a function of testing and tracking of outputs. It is cheaper to throw out a small lot than an entire day's production run.

Ultimately, deciding when and how often to measure quality is a cost versus quality issue. Every item or stage of a project could be inspected, but the inspection costs may outweigh the final value.

Procedures and standards
The final component of a sound quality management plan involves procedures and checklists. Quality processes and standards should become routine and may be taught and enforced through procedures in the form of checklists.

Checklists confirm whether quality control standards have been followed. They can be instructive by outlining what needs to be done by saying, "Do Y." Process checklists also ensure certain tasks have been done by asking, "Has X been completed?" In some processes or projects, inspection checklists can gather data on the number of times tasks have or have not been performed adequately.

Checklists ensure that process steps are not overlooked or forgotten. They also ensure that the product does not advance to the next process before necessary tasks are done. This prevents costly rework if changes are required.

In some cases, companies perform work to certain external standards as expressed in governmental or association regulations or guidelines. If this is the case with your project, you can develop checklists which include standards.

Project quality is only as good as the quality management plan. To ensure project quality, the plan must be well thought out and rehearsed. Project quality can be ensured by a complete understanding of: quality control, quality assurance and quality improvement; operational definitions; and checklists and standards.

Results of Quality Control Measurements

Results of quality control measurements are inputs to project quality assurance. These results are the testing and measurement records of quality control, and include acceptance decisions, rework, and process adjustments.

From a quality assurance perspective, you can use the results of quality control measurements for comparison and analysis purposes. Specifically, you can compare the results found with the expected results of the product or process, pinpoint exactly where non-conformities took place, and examine the reasons for non-conformities. Details about these important inputs to project quality assurance are provided below.

1. Acceptance decisions
How many work-related decisions do you make in one day? The number is likely to be much higher than you realize. Throughout the duration of a project, the number of quality issues that require a decision may seem endless.

One type of quality assurance decision is an acceptance decision. This results from an inspection of a process stage, or a final product or service. The acceptance decision is simply this—the item will either be accepted or rejected.

2. Rework
When an item or process is rejected as the result of an acceptance decision, it may require rework. The purpose of rework is to make non-conforming or defective items or processes meet requirements or specifications. Companies try to minimize the need for rework, as it causes projects to miss deadlines and budgets.

3. Process adjustments
Immediate corrective or preventative action should take place when rework is required as the result of an acceptance decision. This course of action is called a process adjustment.

The changes that are made as a result of a process adjustment will help prevent the defect from occurring in the future. More details about process adjustments are provided below.

• Find the source of the problem. Process adjustments involve more than fixing non-conformities. They include discovering the source of the problem itself.
• Take corrective action. Process adjustments may be small adjustments, or major undertakings, depending on the nature of the problem.

The results of quality control measurements are acceptance decisions, rework, and process adjustments. These quality assurance inputs are an important part of discovering the reasons behind non-conforming projects or processes.

Developing a Quality Management Plan

Implementing effective quality management for your project takes a great deal of organization. Developing a quality management plan and applying it to a project will help ensure that effective quality management has taken place.

A quality management plan is a document that details the quality practices and activities of a product or service. It is a part of an organization's quality system and should include the responsibilities, procedures, processes, organizational structure, and resources required to implement effective quality management.

Created by the project manager and the project team members, it should describe how a quality policy will be carried out and detail the project objectives by breaking down the project activities into lower-level activities. It should also identify specific quality actions.

Quality management plans can take on many forms. They can be formal, informal, detailed, or general, depending on the needs of each particular project. They can also be represented in many ways visually. For example, a plan can be displayed as a tree-like diagram.

A new plan should be developed, or old plans should be changed to reflect the different activities of each unique project. A quality management plan does not stand completely alone—it becomes a part of the overall project plan.

Project quality can be described as meeting or exceeding customer requirements. This means customers should have input into the quality of the project. Remember, the bottom line to any project is satisfying the customers. Without them, there are no future projects.

Effective quality management plans play an important role in this process of satisfying customers. The characteristics of good quality management plans are as follows.

• They should identify customers.
• They should prove that goals and objectives are being met.
• They should affect the design of a process that meets the ever-changing needs of customers.
• They should enable the company to bring in suppliers early in the process.

It is the responsibility of the project manager to make certain that the project's quality actions are thoroughly documented. This process will enable the company to prove that it has the right processes in place to meet the needs of its customers.

Sustaining a quality system and creating a quality management plan requires a great deal of effort, planning, and organization. The following is a list of the high-level steps in the process of creating a quality management plan.

1. State all measurable features of the project's product.

2. Identify how the product will be produced and its quality measured against specifications.

3. Determine how the project approach will be measured.

4. Conduct a quality risk assessment and develop non-conformance procedures.

5. State the method for quality reporting and monitoring.

6. Outline the formal acceptance criteria and document the project's final product.

In summary, quality management plans are documents that describe the quality practices, resources, and sequence of activities related to a specific service or product. They act as a guide for satisfying the customers' needs.

The Project Quality Management Plan

A quality management plan, which is an output of the project quality planning process, is a document that describes how a quality policy will be implemented. Quality improvement, quality control, and quality assurance are addressed in quality management plans. These plans usually are created by project management teams and project managers and are integrated into the overall project plan.

A quality plan acts as a road map to meeting customers' needs by breaking down the project objectives into lower-level activities. This process should identify specific quality actions.

Quality management plans are drawn up for specific products, individual projects, or highly complicated tasks. A new plan should be developed or changed to reflect the different activities of each project.

In contract situations, a quality plan is sometimes used by the supplier to show the customer how the project will meet quality requirements. In many cases, it's helpful to have the customer's input into the quality management plan.

Quality management plans take on different forms. They can be formal, informal, detailed, or general, depending on the needs of each particular project.

Quality plans ensure the proper documentation for a project is complete. They prove that quality goals are being met. An effective quality plan can also:

• identify all internal or external customers
• respond to the ever-changing needs of customers
• bring in the suppliers early in the project
• cause the process to be designed in a way that produces features that meet customer requirements.

Quality management plans and other aspects of quality planning require attention to detail. When defining quality, the term can mean different things to different people. Attention to detail helps ensure everyone's requirements for quality are met.

Outputs of Project Quality Planning

The project quality planning process results in a number of outputs, in the form of actual documents or documented items. Operational definitions, checklists, and inputs to other processes are three important outputs of the quality planning process. Details about these three outputs are provided below.

1. Operational definition
An operational definition, also called a metric in some application areas, is a description of what something is and how it is measured by the quality control process. Operational definitions are quality planning outputs project management teams can use to indicate the specifics about the quality of their projects.

For example, an operational definition that describes meeting schedule deadlines must also include details such as start and finish times for every activity.

2. Checklists
Quality planning, and any other activity involving steps to a process, use checklists. Checklists are structured tools for confirming that all steps to a process have been performed. They can be specific to particular activities and industries. Checklists are not always complicated. They can be as simple as a brief list phrased, "Do this!"

Checklists are important for quality planning because they help you verify a project's quality. You can use information from quality planning inputs, as well as quality planning tools and techniques, to develop the checklists for a project.

Some organizations have standardized checklists that ensure frequently performed activities are carried out with consistency. Alternatively, sometimes checklists are purchased from commercial service providers or professional associations.

3. Inputs to other processes
Sometimes the process of quality planning detects a need for activity in another project management area. These quality planning outputs are usually not anticipated at the onset of a project. These unanticipated outputs are called inputs to other processes.

In summary, inputs to quality planning, as well as quality planning tools and techniques, result in a number of outputs. These quality planning outputs help management teams stay focused on the quality details of a project.

The Project Estimate of Completion

The estimate at completion (EAC) is an important output of project cost control. It is a calculated prediction of the total costs of a project at completion, based on performance to date. You might want to calculate the EAC whenever you assess the earned value for a project as a part of your periodic evaluation.

As with other outputs, your periodic assessments of the EAC will form a vital part of the project's history. You may want to track it in a trend analysis. The EAC is useful for the project management team for the following reasons.

• It shows what the total project is expected to cost.
• You can estimate the total costs of an activity or group of activities.
• It is the best estimate of potential profitability of the project.

If the current EAC for any job gives a warning of cost overruns, you may want to assess cost variances to see if they will likely be recurring in the future and check the original cost estimates to see if they were inaccurate and should be revised.

There are four common methods for calculating the EAC. However, before you can calculate the EAC, you will need to know the budget at completion (BAC), which is the planned value (PV). The standard method used for calculating the EAC can be expressed in either of two ways, depending on whether you have the cost performance index (CPI).

• The standard formula for calculating EAC is as follows: EAC = (AC ÷ EV) x BAC. This formula, which uses the earned value (EV) variable, is based on the project's cost performance to date. Use it when cost variances are typical of future variances.
• If you have worked out the CPI already, simply divide it into the total budget at completion (or the planned value at completion). The formula is as follows: EAC = BAC ÷ CPI.

The third formula you can use is: EAC = AC + ETC. It combines actual costs to date (AC) and the estimate to complete (ETC), which is the total of all estimated costs of work that has not yet been performed. This approach is most often used when:

• past variances would have continued to occur
• original estimates have been revised significantly
• the revised estimates are deemed accurate.

The fourth formula that can be used to calculate the EAC adds the actual costs to date (AC) to the expected earned value of the work not yet completed. To find this "future earned value," you simply multiply the PV by the percentage of work that has not yet been performed. It is expressed as follows: EAC = AC + (PV x percent of work remaining).

This approach is most often used when the variances to date are seen as atypical, and the project management team expects that similar variances will not occur in the future.

However you choose to arrive at a final estimate, you can use the EAC to calculate the variance at completion for your project. The final variance can be expressed as either a dollar amount or as a percentage. You will more commonly see it as a ratio of the total variance to the budget at completion.

For example, for a project with a BAC of $75,000 and an EAC of $85,000, the variance at completion would be $10,000. Expressed as a percentage, the VAC (variance at completion) would be $10,000 divided by $75,000. This project would be 13 percent over budget.

The estimate at completion is your educated guess regarding the total cost of a project. You have to decide, before calculating EAC, how future cost variances compare to current cost variances, since each of the formulas uses a different assumption about future variances.

Project Cost Control: Corrective Action

Have you ever developed the perfect project plan? One that was implemented without a hitch, and whose stated goals were completely realized? Not likely. That is why every project plan should include ways to correct any problems that pop up.

Corrective action is an important output of project cost control. It includes anything that must be done during a project to bring actual cost performance into line with planned costs.

You can use various types of corrective action to control project costs. Some typical corrective action activities are described below.

• Subcontract work activities. For example, upon seeing that a project will overrun its budget, a project manager decides to subcontract parts of the project to a firm that has quoted a lower labor cost than it would cost the original project team to do the work.
• Use less expensive resources. Another project manager decides to use less expensive resources, such as parts, raw materials, and supplies, because his project is running over budget. He also could re-assign work to less expensive laborers, as long as this would not diminish quality or productivity.
• Find other ways to alter project scope. An example of this might be to extend the project finish date in order to reduce overtime costs.
• Change the product specifications. If your project was running over budget, you might try to convince the customer to reduce the amount of work that was originally planned, or the quality of work that is expected, so that the project can be delivered within the original budget.
• Increase or decrease the budget. Variance analysis of your project reveals that the original budget was unreasonably low. Your boss requests an increase in the budget to better reflect the true costs of the work, and to show a more accurate cost performance index.

While there is no standardized checklist to use when choosing corrective action, you can build your own checklist to follow. Ask for input from other project managers in your organization. They can tell you how they respond to different situations. Whether you implement a list of standard corrective actions as a company, or you simply develop your own plan, creating a standard to follow will greatly enhance the management of projects when things don't go according to plan.

There are some common concerns that should be addressed by every company in establishing a checklist or criteria for choosing corrective action. The company should ask such questions as:

• Does this change the original plan?
• Will any deadlines be missed?
• Are any tasks adversely affected?
• Are any cost overruns introduced?

By asking these questions, you are doing an impact assessment of the proposed action. Corrective measures should always be followed up to see whether they had the desired effect.

Remember, the root of the problem always should be identified before corrective action is chosen and implemented. By taking the appropriate corrective action when necessary, you can ensure that your project ultimately meets its goals.

Computerized Tools for Project Cost Control

Many software companies have produced computerized tools to aid in project cost control. Project management software that will run on your personal computer or network is available at many different levels of sophistication, with prices ranging from $25 to over $10,000.

Computerized tools could include anything from standalone spreadsheets and accounting packages to fully integrated cost management systems. They offer planning and tracking capabilities at varying levels of detail.

Computers and the appropriate software have helped many project managers cut down on time, costs, and effort involved in getting their work done. You can use these tools to collect information, make calculations, and produce reports. In terms of project cost control, computerized tools can help you to:

• track performance more easily and quickly
• track multiple projects at once
• design, simulate, analyze, and improve cost control processes
• conduct "What if?" analyses
• obtain organized and summarized reports
• catch potential problems early in the project that may cause damage later on.

When it comes time to choose the appropriate computerized tools, you will have to ask, "What kind of tool can I afford?" Most inexpensive applications will enable you to produce charts and basic reports. If your budget allows, you can buy software that will do just about anything you need for project management.

Bear in mind that when implementing new software, you not only have to consider the expense of the tool, but also the time you have to invest to learn how to use it properly. New software costs time as well as money.

You also must decide how "large" a tool you need. Make sure you don't invest in project management software that is not right for you. Before you go shopping, spend some time figuring out:

• the maximum level of complexity you can handle
• aspects of cost control that you need automated
• the level of analysis that stakeholders demand.

Computerized tools should be tailored to your needs. Perhaps the projects you manage are fairly simple with straightforward work breakdown structures and modest budgets. You would likely then benefit most from low-end software that is easy to use.

The larger and more complex your projects become, however, the more you will require a system that integrates schedules and the cost management plan, and one that controls change. There are mid-range and high-end products that meet increasingly complex needs.

Computerized tools are a big help to project management. However, the package your company chooses to invest in will be worthwhile only if it suits your needs and the needs of the projects' stakeholders. Provided below are details about project management software for three main categories of users.

• Low-end users. Packages that will simply automate the basics for a low-end user are simple to use and will produce pretty charts. Cost: $25 to $200.
• Mid-range project managers. Mid-range users include managers of large projects or multiple projects. Software for these projects would need a moderate level of sophistication. Cost: $200 to $500.
• High-end/multi-project users. High-end users are those with complex projects running concurrently, and whose team members work on more than one project at a time. Software would allow simulations and more complex analysis. Cost: $2,000 to $10,000.

Computer software can be a very effective tool for controlling project costs. Remember to purchase software that fits your budget, that you can quickly come up to speed on, and that will meet your needs.

The Project Cost Change Control System

The cost change control system is one of the tools you can use to control project costs and ensure the project comes in on-budget. It outlines the procedure that is followed to make changes to the cost baseline. You can incorporate it into the integrated change control system to coordinate changes across the entire project.

The cost change control system is important to the cost control process. It helps the project management team by:

• guiding the team as they make decisions about changes to the budget
• making all changes auditable and traceable
• ensuring that incorrect or unapproved changes won't be reflected in the cost baseline.

Each change control system within a project plan is initiated by a change request, whether it is for the budget, the schedule, or for contracts your organization holds with its suppliers. Stakeholders must present a fairly compelling argument in the request why the proposed change must be made.

Once a change request is submitted, the steps of the cost change control system are followed to determine whether or not the cost baseline will change as a result of the request. The cost change control system involves five steps. Companies use this procedure to ensure that all change requests are properly dealt with and that only approved changes are reflected in the cost baseline. The steps in the procedure are listed below.

1. Receive the change request. The change request is initiated in the form of an oral, written, or electronic request. The person making the request can be either internal or external to the project. The requested change can be optional or legally mandated.
2. Record the request. The specifics of the change request are recorded, usually in a change request log, so that the request can be managed. The level of detail is up to project management. Enough information should be recorded so that anyone related to the project can understand the request.
3. Assess the request. Someone on the project team assesses the impact that the proposed change will have on the rest of the project. Budget changes can potentially affect time, cost, quality, and objectives. You have to do a cost/benefit analysis of the change.
4. Make a recommendation. Based on the assessment, the assessing team member or members make a recommendation to accept, reject, or modify the change request. The recommendation is presented to the project authority.
5. Decide whether to accept or reject the request. Based on the recommendation, the project authority decides what to do with the request. If rejected, the change request is closed and the documentation is filed. If accepted, the project budget is adjusted accordingly to incorporate the approved change.

If the change is accepted, the project continues according to the revised project plan. Performance continues to be monitored against the modified cost baseline.

Notice the pattern that is evolving. Change requests and the cost baseline were inputs to cost control. The cost change control system is a tool that uses these inputs to produce an output—a change to the cost baseline.

The Project Cost Management Plan

The cost management plan is an important element of project cost control. It is developed during the cost estimating process and forms one of the main inputs used during the cost control process.

The cost management plan describes how cost variances will be managed, should they occur. Project managers must review the cost management plan regularly to ensure that the guidelines it contains continue to be appropriate throughout the duration of the project.

The cost management plan can be either formal or informal, depending on the nature of the organization. The level of detail required by the project stakeholders will determine whether the plan needs to be detailed or broad.

During the planning stages, companies decide the range by which cost variances will be permitted to deviate. The permitted range may be dependent on such factors as:

• the particular phase of the project you are in
• the length of the phase
• the length of the entire project
• the nature of the task or materials being estimated
• the perceived accuracy of the estimate.

Variance management may be different from project to project. For many projects, variances are permitted to change over the project duration. For projects that involve research and development, for example, larger deviations may be allowed during the earlier phases of the project. On the other hand, for manufacturing projects, allowed variances may be fixed over the duration of the project. Since the risk for any project decreases as time goes on, so should the allowed variance.

When a variance occurs, you can deal with it in one of four ways. You can choose to ignore the variance, make functional modifications, replan the project, or redesign the product. The first issue to consider when choosing the appropriate management technique is the size of the cost variance.

• If the variance is inside the permitted range of deviation, the two best choices are to ignore it or to make functional modifications.
• If the variance is outside of the permitted range of deviation, you need to take a more drastic approach, such as replanning or redesigning the product.

The choices available to manage a cost variance vary in terms of how drastic they are, how much work they require, and how much they change the project. Ignoring the variance or making functional modifications are mild solutions. These choices require little or no work, and make minimal changes to the project, if any.

Replanning or making changes to the product scope are more drastic solutions. They require a great deal of work and make substantial changes to the project. More details about these four choices are provided below.

• Disregard. The cost variance can be ignored if it falls within the permitted range of deviation and does not appear to be a sign of future cost problems.
• Modify. If the variance is within the permitted variance range, but could potentially grow or become a problem in the future, functional modifications can be made. These are small changes to the project that can save time and money.
• Replan. Replanning occurs if the variance is outside of the permitted range. Management attempts to replan the project without changing the product scope. This means finding less expensive ways of doing things, such as using less expensive resources or contracting out.
• Redesign. This is the most drastic measure. It involves changing the product or service you will deliver. You have to find ways to make the product less expensive to produce and deliver. Redesign only if replanning is not sufficient.

Project replanning and product redesign involve major changes to the project. Both approaches require an assessment of the impact on the overall product quality and its ultimate usability by the customer. Taking either of these approaches too far could render the product sub-standard and unmarketable.

Remember, there is comfort in having a good plan for managing costs and knowing how to implement it. The cost management plan can help you effectively manage project cost variances when they occur.

Project Cost Control: Change Requests

The secret to successful project cost control is complying with the project plan—and knowing when to be flexible. A good plan will enable you to make changes when necessary.

Nearly every project will require change at some point, whether it's to the schedule, the budget, or the project scope. Change is sparked by the submission of a change request. There are several benefits to using change requests, besides the fact that they initiate necessary change to a project. Change requests are inputs to cost control, but they also:

• enable team members to have some say in the budget, whether their requests are accepted or not
• provide useful information during a postmortem follow-up
• form a part of the paper trail you can use to audit changes to the project budget.

Change requests are used to initiate a modification in the project specifications. In project cost control, change requests apply specifically to proposed changes to the budget. Once the request has been submitted, the cost change control system is used to manage the change request.

The cost change control system is a five-step process that begins with a change request and ends in a decision to accept or reject the proposed change. The five steps involved are: initiate, record, assess, recommend, and make a decision.

Change requests can take many forms. They can be submitted in writing or verbally expressed, internally or externally initiated, direct or indirect, and legally mandated or optional. These different forms of change requests are discussed below.

• A change request can be made in writing and handed in, or verbally expressed to the appropriate project authority.
• A change request can originate from within the project team or outside the project team.
• A change request can be submitted directly to project management or can be passed on to the project manager by someone other than the person who initiated it.
• A change request can result from a law or rule imposed by the government or authorities, or it can be optionally imposed by the company.

Change requests are the first step in initiating a change to the project budget, scope, or schedule. These requests take different forms, depending on the project and the situation, and they are important inputs to project cost control.

Performance Reports and Project Costs

Have you ever had that nagging feeling that something's not quite right with a project? Accurate and timely performance reports can help you control project costs, so you can calm that uneasiness.

The time you spend reviewing performance reports and analyzing the data they contain is never wasted. Written performance reports, which are inputs to project cost control, can actually save you the time it would otherwise take to meet face-to-face with team members and other stakeholders. Performance reports are an important input for cost control because they:

• provide a summary of how a project is progressing
• compare actual versus planned results
• provide feedback to management, planners, and team members
• contain the early warning signs of future problems.

You can use performance reports to analyze variances from the cost baseline, plot the trends that will help you to forecast your total costs, and watch for events that could increase expenses in later stages of the project.

Good project managers take corrective action early on to ensure their project costs hit the mark. However, you need sufficient and accurate information in order to forecast costs properly. There are four main types of charts that summarize and report project information.

• Histograms. A histogram is a simple graph that quickly shows the over- or underrun of project costs. It indicates both the budgeted and actual cost of performing each project task.
• Tables. Tables can display data clearly and concisely. Tables can also be used to show costs, activities, project milestones, actual versus planned results, and any other information about project status. Tables can provide summaries or they can contain specific details about a project.
• Gantt charts. A Gantt chart is the combination of a table and a bar chart. Gantts summarize cost- and schedule-related information. More elaborate charts can include the duration of each activity in hours or days, the estimated start and finish dates of each activity, critical time frames, and milestones.
• Cumulative cost curves. A cumulative cost curve is a commonly used report that shows project costs plotted against time. The line usually takes the form of an S-curve, since costs are typically low early in the project, increase during the peak production period, and then trail off in the closing phases. You can use a graph to plot the cost baseline and the actual cumulative costs together for comparison. The difference between the two curves represents a cost variance.

The performance reports discussed above are just a sample of those available to project management teams. There is not a set list of performance reports because no two projects have the same reporting requirements. Choose the performance reports that work best for you, and use them to better control costs for your project.