Selecting Improvement Subjects Using Pareto Charts and Stratification

Starlight Homes Inc. is a building contractor specializing in upscale homes in the Southwest. Before each new home is sold, Starlight conducts a final inspection of the home and repairs any defects. In addition, Starlight receives a punch list of defects (to be corrected) compiled by the buyers following the sale. Ricardo Alvarez, Starlights lead supervisor, has concluded that even if it should cost more to do the work right in the first place, it will be a lot cheaper than going back later to fix the defects. In an effort to reduce costs, improve the quality of Starlights homes, and reduce the number of complaints after the sale, Ricardo has assembled data from his final inspections and the punch lists for the last 20 homes sold. These data are listed in the following chart:

Defect Type Occurrences Defect Type Occurrences Damaged walls 13 Doors 14 Exterior paint 5 HVAC 11 Plumbing 33 Roof 3 Caulking 28 Masonry 2 Electrical 25 Interior paint 61 Cabinetry 12 Landscaping 16 Woodwork 46 Fixtures 7

Construct a Pareto chart to illustrate the defect types by number of defects. Which two defect types appear to be the most significant? Should Ricardo focus his attention on these two categories of defects? Ricardo decided to stratify the Pareto chart by cost before making any decision. His bookkeeper developed the average cost per repair event per category. The data are shown here:

Average Cost per Repair Event Defect Type Average Cost Defect Type Average Cost Damaged walls $126 Doors $11 Exterior paint 25 HVAC 110 Plumbing 78 Roof 72 Caulking 7 Masonry 290 Electrical 74 Interior paint 4 Cabinetry 88 Landscaping 34 Woodwork 5 Fixtures 31

The second-level chart developed from these numbers should show Ricardo which two or three defect types are the most significant in terms of cost, enabling him to put his efforts where they will do the most good. What are they? Was Ricardo justified in going to the second level (of stratification) before making a decision on where to focus his efforts? Why?

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• Length: strive for 500 words
• Background: should include case and company background
• Body: address the questions in the case - Build the Chart in Excel - What do your charts say
• Summary and recommendations: summarize, add what would you do and why.