Root Cause Analysis for Decreasing Profitability of Precision Engineering Works

This paper discusses the root cause analysis for the decreasing profitability of Precision Engineering Works (PEW) and identifies the main cause of the problem. The paper also suggests a continuous improvement plan and the competencies required for the implementation of the plan.

Running head: ROOT CAUSE ANALYSIS
ROOT CAUSE ANALYSIS
Name of the Student:
Name of the University:
Author Note:

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ROOT CAUSE ANALYSIS
Table of Contents
Introduction......................................................................................................................................2
Discussion........................................................................................................................................2
Root cause analysis for the identification of the problem:..........................................................2
Assumptions:...............................................................................................................................7
Continuous improvement plan:....................................................................................................7
Resources required:.....................................................................................................................8
Follow up and actions taken for the implementation:.................................................................8
Competencies:..............................................................................................................................8
Technical management:...............................................................................................................9
Leadership:..................................................................................................................................9
Conclusion.....................................................................................................................................10
References......................................................................................................................................11

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Introduction
Precision Engineering Works isan organization or the company which manufactures
theequipment used in the telecommunication industry. The company is operating for 30 years
and is a known name in the industry (Arcidiacono,Costantino& Yang, 2016). The client of this
company are renowned names in the telecommunication industry. However, it has been seen that
the company is losing the consumer base and as a result the profit percentage has been decreased
to 45%. There are certain factors for the happening of the situation (Mkhaimer,
Arafeh&Sakhrieh, 2017). The number of competitors in the market has been increased and the
price of the products of the PEW is higher compared to the other products made by the other
company. The main objective of this paper is to identify the root causes of the problem faced by
PEW (Tenera, &LuísCarneiro, 2014). The conduction of the root cause analysis has been done
using seven different tools and techniques (Gijo& Antony,2014). The understanding of those
tools and the techniques are discussed in this paper. Apart form that the identification of the root
cause will help to mitigate the problems (Timan et al.,2016). The plan for the smart management
of the business and the strategy for the implementation of the improvised plan has been taken in
this context(Seppänen, Modrich& Ballard,2015). The main objective of this paper is to identify
the main cause regarding the decrease of the profitability of the PEW. In this context proper
management of the resources and the leadership quality has been discussed.
Discussion
Root cause analysis for the identification of the problem:
The problem of the Pew is the decrease of the profitability of the selling. Regarding this
there are two causes has been identified. The supply of the equipment for the telecommunication
industry is an emerging field of the business (Svensson et al.,2015). In this context, many

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ROOT CAUSE ANALYSIS
organizations are investing money for this business (Perry III et al.,2016). Naturally the numbers
of the competitor of the business is growing and the Pew is facing serious challenges in the
competitive market(Mkhaimer, Arafeh&Sakhrieh, 2017). Apart form that the prices of the
products made by the Pew is relatively high compared to the products of the other company.
In order to identify the main cause of the problem root cause analysis can be done. In
order to do the root cause analysis seven techniques has been followed.
Problem: The profitability of the company is decreasing.
Tool used for the root cause analysis: Five whys tool is used for the root cause analysis.
Usage of the tool: In order to analysis the business situation five questions has been
asked.
Why the company is loosing the consumer base?
The company is loosing the consumer base as the market is becoming competitive.
Why the organization can not stand out in the competition?
The organization can not stand out in the competition as the pricing strategy is not proper
in the organization.
Why the strategy is not proper in the organization?
The strategy is not proper in the organization as the market analysis is not done in a
proper way.
Why there is no pricing strategy in the organization?

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ROOT CAUSE ANALYSIS
There is no pricing strategy in the organization and the company is understanding its
significance. Hence the organization is going to implement the proper pricing strategy.
Why the numbers of the competitor is increasing in the market?
The number of competitor is increasing in the market as the industry regarding this
business is emerging.
Problem : The company is losing the profitability.
Tool used for the root cause analysis: The tool, that can be used for the root cause
analysis is the fishbone diagram.
Usage of the tool in root cause analysis: The main feature of the fishbone diagram is that
the head of the diagram leads to the main effect or them problem (Holweg&Maylor, 2018). The
sub problems are associated with the main head. Brainstorming process can be used for finding
the main cause of the effect. Thus it is also known as the cause effect diagram.
In this case the main problem is the decreasing of the profitability for PEW (Goffnett,
Lepisto&Hayes,2016). The sub causes associated with it are the high price of the products of the
Pew and the increase of the numbers of the organizations in the market, making the market
competitive. The identification of the root cause can be done through the brain storming process.
It has been identified that the main cause regrading this is the high price of the products
of the PEW.
Problem: Decreasing profitability of PEW.
Tools used for the root cause analysis: The too, used for the root because analysis in this
context is brainstorming.

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ROOT CAUSE ANALYSIS
Usage of the tool: In the process of the brain storming the opinions of the members in the
discussion board is taken (Conger, 2015). The decision making process is developed through the
discussion about the various aspects of the problem.
In this case, the brainstorming process indicates that the main cause of the loosing of the
consumer base is the high price of the products.
Problem: the loss of the profitability of the company.
Tool used for the root cause analysis process: The tool that is used for the root cause
analysis is the current reality tree.
Usage of the tool in the process: The current reality tree indicates the current situation of
the business through the various aspects of the organization (Worley &Doolen, 2015). The future
analysis tree can be obtained from the current analysis tree which provide the improvised picture
of the organization after solving of the problem.
In this context the current analysis tree indicates that there is a absence or the lack of the
proper pricing strategy for PEW. The future analysis tree can be developed through the
implementation of the smart pricing strategy at PEW.
Problem: The decreasing profitability of the PEW.
Tools used for the root cause analysis: The too, which is used for the root cause analysis
in this context is the Kaizen tool.
Usage of the tool for the root cause analysis: The main advantage of the Kaizen tool is
that this enables the small group to evaluate the business situation and the analysis of the root

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ROOT CAUSE ANALYSIS
cause(Naveen et al.,2018). The finding of the root cause will help to detect and mitigate the
consequence of the root cause.
In this case the identified root cause for decreasing the profitability of the Pew is the high
price of the products.
Problem: Decreasing the profitability of the PEW
Tool used for the root cause analysis: In this context tool used for the root cause analysis
is check list.
Usage of the tool in the root cause analysis: The check list collects relevant data from the
different sources and the analysis of the data gives the current situation of the business (Formoso
et al.,2015). This also indicates the possible areas for the improvement by identifying the causes
of the main problems.
According to the check list method the main cause for the identified problem is the high
price of the products made by PEW.
Problem: The decreasing profit of the Pew.
Tools used for the root cause analysis: The tool which is used for the root cause analysis
in this case is the data table.
Usage of the tool in the root cause analysis: The data table collects the relevant data
regarding the organization (Antony, Rodgers &Cudney, 2017). The analysis of the data indicates
the present causes of the identified problems in the organization. It is needed to be seen that the
collected data are correct and relevant with the problem.

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ROOT CAUSE ANALYSIS
The use of the data table is applied in the context of Pew and it has been seen that the
main cause of the identified problem is the high price of the product of the PEW.
Assumptions:
There are certain assumptions are made while doing the root cause analysis. Some of the
assumptions are-
The quality of the product will not be the parameter for the enhancement of the selling of
the products.
The consumers are only concerned about the price of the product.
There are limited number of competitors for the Pew in the market.
The innovation in the products will not affect the status of the selling of the products.
Continuous improvement plan:
Identified problem:
The problem is the decrease in the profitability of the PEW. The causes have been
identified through the root cause analysis (Furterer, 2016). It has been found out that the decrease
in the sale of the products is caused by high price of the products.
Action plan:
Certain actions or steps can be taken in order to mitigate the identified problem. In this
case the implementation of the pricing strategy can be taken care of. The identification of the
action taken in this context can be classified into two categories- long term and short term.
Long term action: The long term action is concerned with the implementation of the
pricing strategy for the PEW( Vidyasagar,2016). This will take time and the impact of the

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ROOT CAUSE ANALYSIS
implementation of the pricing strategy can be beneficial in the long run for the company. In order
to do this certain business plans are needed to be considered in a proper way.
Short term action: the short term action can be taken by revising the price of the products.
The price of the products can be lower down by taking the expert advice.
Resources required:
In order to implement the plan in a proper way the certain amount of the resources are
required. The resources can be both human resource and the resources like time and the money
(Tyagi et al.,2015). In order to carry out the analysis of the market the business analysts can be
recruited (Borse&Attarde, 2016). Apart from that the implementation of the emerging
technology can be done in the organization. In order to do this the technical experts are needed to
be recruited (Al Hattab&Hamzeh, 2015). The project manager is needed to be implemented as
the implementation of the smart pricing strategy will be done through the development of the
project (Ko,2017). In order to handle the project in a proper way project manager is needed to
manage the different steps in the project.
Follow up and actions taken for the implementation:
Certain follow up and action is needed to be taken in order to evaluate the progress of the
implementation. It is needed to be ensured that the business analyst are evaluating the market
condition and is using the data from evaluation for making the blueprint of the pricing strategy.
Apart from that it is needed to be ensured that the collaboration between the technical
department and the business department is happening in a proper way.
Competencies:
Management of the strategy and the business:

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ROOT CAUSE ANALYSIS
In order to implement the business plan and the strategy in a proper way the project
management plan is needed to be followed. There are various methodologies for the
implementation of the project. Some of the project management methodologies are PRINCE2
and agile. The PMBOk acts as the guide for the development of the project. According to the
PMBOK there are five steps for the development of the project.
According to the PMBOk the project stars with the initialization phase where the
gathering of the requirements are done in a proper way. For the implementation of the pricing
strategy in the organization the gathering of the data regarding the market condition is done. This
step is followed by the design and the implementation process(Sunder,2016). The design and the
implementation process is concerned with the making of the right pricing strategy for PEW. The
execution is done based on the collected data. The monitoring and control of phase in the
development of the project is concerned with the evolution of the performance of the project.
The project closes only after it serves its purpose.
Technical management:
The organization can adopt the use of the advanced technology. In order to implement the
emerging technology the organization need the team of the technical experts. The technology can
be implemented for the improvement of the quality of the products and the mitigation of the
overhead cost of the production. In order to use the emerging technology in a proper way the
management of the technology is important.
Leadership:
There are many kinds of leaderships which can be adopted for the managing of the
project at Pew. The main quality of the leader is to motivate the employees to achieve the
organizational goal. In this case the adaptation of the democratic leadership can be taken. In the

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ROOT CAUSE ANALYSIS
democratic leadership the opinions of all the members in the discussion is considered. However,
the final decision is made by the project leader himself or herself. In this process the employees
can feel that they are also associated with the decision making process for the organization.
Apart from that the idea of the brain storming is also supported by the process of the democratic
leadership.
Conclusion
The paper has discussed about the various aspects of the root cause analysis. In this
context the case study of the Pew has been taken. The root cause analysis has been done for the
identified problem in the organization. The PEW is losing the consumer base which is not
desirable for the organization. The root cause analysis has been done in order to identify the
possible causes of this problem. The client of this company are renowned names in the
telecommunication industry. However, it has been seen that the company is losing the consumer
base and as a result the profit percentage has been decreased to 45%. There are certain factors for
the happening of the situation (Mkhaimer, Arafeh&Sakhrieh, 2017). The number of competitors
in the market has been increased and the price of the products of the PEW is higher compared to
the other products made by the other company. It can be said from the above discussion that the
cause s for the happening of the problem is the increase in the number in the organizations
selling the same products to the consumers and the smart pricing strategy of the other companies.
Certain mitigation plan have been proposed in order to resolve the issues in the PEW. In order to
do this the action plan has been discussed in the paper along with the strategy for the business
and the management. It can be said with the proper implementation of the project management
plan and the proper allocation of the human resources can be beneficial for the Pew to achieve
the objective in this case.

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ROOT CAUSE ANALYSIS
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