INSTITUTE: UILS

DEPARTMENT: BBALLB
Project Management CMT-311

FMEA DISCOVER . LEARN . EMPOWER

Agenda

• What is FMEA?
• Types of FMEA
• Steps for FMEA
• A medical example
What is FMEA?

• Failure modes and effects analysis (FMEA) is a step-by-step approach for identifying all
possible failures in a design, a manufacturing or assembly process, or a product or service.
Types of FMEA

• System - focuses on global system functions

• Design - focuses on components and subsystems
• Process - focuses on manufacturing and assembly processes
• Service - focuses on service functions
• Software - focuses on software functions
FMEA Usage

Often the engineer (and now the healthcare provider) uses

safety factors as a way of making sure that the design or
treatment will work and protect the user against product or
process failure. As described in a recent article:
"A large safety factor does not necessarily translate into a
reliable product. Instead, it often leads to an over-designed
product with reliability problems."
Failure Analysis Beats Murphy's Law
Mechanical Engineering , September 1993
FMEA Procedure

1. Describe the product/process and its function.

An understanding of the product or process
under consideration is important to have clearly
articulated. This understanding simplifies the
process of analysis by helping the engineer
identify those product/process uses that fall
within the intended function and which ones
fall outside. It is important to consider both
intentional and unintentional uses since
product failure often ends in litigation, which
can be costly and time consuming.
FMEA Procedure
(continued)
2. Create a Block Diagram of the product or process. A block
diagram of the product/process should be developed.
This diagram shows major components or process steps
as blocks connected together by lines that indicate how
the components or steps are related. The diagram
shows the logical relationships of components and
establishes a structure around which the FMEA can be
developed. Establish a Coding System to identify system
elements. The block diagram should always be included
with the FMEA form.
FMEA Procedure: Complete the header on
the FMEA Form worksheet
FMEA Procedure
(continued)
4. Use the diagram to begin listing items or functions. If items are components, list them in a
logical manner under their subsystem/assembly based on the block diagram.
FMEA Procedure (continued)

•5. Identify Failure Modes. A failure mode is defined

as the manner in which a component, subsystem,
system, process, etc. could potentially fail to meet
the design intent. Examples of potential failure
modes include:
• Allergic reaction
• Excessive bleeding
• Ineffective treatment
• Bio compatibility
• Too late to matter
• Brain damage
FMEA Procedure
(continued)
6. A failure mode in one component or activity can
serve as the cause of a failure mode in another
component/activity. Each failure should be
listed in proper terms. Failure modes should be
listed for function of each component or
process step. At this point the failure mode
should be identified whether or not the failure
is likely to occur. Looking at similar products or
processes and the failures that have been
documented for them is an excellent starting
point.
FMEA Procedure
(continued)
• 7. Describe the effects of those failure modes. For each failure mode
identified the analyst should determine what the ultimate effect will
be. A failure effect is defined as the result of a failure mode on the
function of the product/process as perceived by the customer. They
should be described in terms of what the customer might see or
experience should the identified failure mode occur. Keep in mind the
internal as well as the external customer. Examples of failure effects
include:
• Injury to the user
• Death
• Inability to lift
• Incontinent
• Degraded flexibility
• Skin irritation
FMEA Procedure (continued)

• 8. Identify the causes for each failure mode. A failure cause

is defined as a design deficiency that may result in a failure.
The potential causes for each failure mode should be
identified and documented. The causes should be listed in
properl terms and not in terms of symptoms. Examples of
potential causes include:
• Improper size prosthesis
• Improper installation
• Contamination
• Bad procedures/conditions
• Improper alignment
• Excessive muscle damage
FMEA Procedure
(continued)
9. Enter the Probability factor. A numerical weight should be assigned to each cause that
indicates how likely that cause is (probability of the cause occurring). A common scale
uses 1 to represent not likely and 10 to indicate inevitable.
FMEA Procedure
(continued)
10. Identify Current Controls (design or process). Current
Controls (design or process) are the mechanisms that
prevent the cause of the failure mode from occurring or
which detect the failure before it reaches the Customer.
The analyst should now identify testing, analysis,
monitoring, and other techniques that can or have been
used on the same or similar products/ processes to
detect failures. Each of these controls should be assessed
to determine how well it is expected to identify or detect
failure modes. After a new product or process has been
in use previously undetected or unidentified failure
modes may appear. The FMEA should then be updated
and plans made to address those failures to eliminate
them from the product/process.
FMEA Procedure
(continued)
11. Determine the likelihood of Detection. Detection is an assessment of the likelihood that the
Current Controls (design and process) will detect the Cause of the Failure Mode or the
Failure Mode itself, thus preventing it from reaching the Customer. Based on the
Current Controls, consider the likelihood of Detection using the following table for
guidance.
FMEA Procedure
(continued)
12. Review Risk Priority Numbers (RPN). The Risk Priority Number is a mathematical product of
the numerical Severity, Probability, and Detection ratings:
         RPN = (Severity) x (Probability) x (Detection)
The RPN is used to prioritize items than require additional quality planning or action.
FMEA Procedure
(continued)
13. Determine Recommended Action(s) to address
potential failures that have a high RPN. These
actions could include specific inspection, testing
or quality procedures; selection of different
components or materials; de-rating; limiting
environmental stresses or operating range;
redesign of the item to avoid the failure mode;
monitoring mechanisms; performing
preventative maintenance; and inclusion of back-
up systems or redundancy.
FMEA Procedure
(continued)
14. Assign Responsibility and a Target Completion Date for these actions. This makes
responsibility clear-cut and facilitates tracking.
FMEA Procedure
(continued)
15. Indicate Actions Taken. After these actions have been taken, re-assess the severity,
probability and detection and review the revised RPN's. Are any further action(s)
required?
FMEA Procedure
(continued)
16. Update the FMEA as the design or process changes, the assessment changes or new
information becomes known.
Healthcare example

An 83-year-old woman who was a patient in the cardio-vascular care unit

at the Foothills Medical Center (FMC) site of the CHR died suddenly in
the presence of her physician and members of her family. She was alert
and oriented at the time and her condition, while very serious, did not
seem to indicate reasons for immediate concern. Her unexpected death
was devastating for her family and extremely distressing for all those
involved in her care. An ICU physician suspected the cause - the
composition of dialysate solution being used to treat her kidney failure.
This was quickly confirmed and 30 bags of the solution made in the same
batch were removed from patient care areas, undoubtedly preventing
the deaths of other patients. An analysis of the other bags from that
batch as well as a systematic review of patient records identified a
second patient whose death, one week earlier, was likely caused by the
same set of circumstances. This was not suspected at the time of death
due to the patient's serious condition.
Continued

Upon further investigation, it was determined that in

February 2004, pharmacy technicians in the central
production facility of the CHR pharmacy department
prepared a dialysate solution for patients receiving
CRRT. During the process, KCL was inadvertently
added to the dialysate bags instead of sodium
chloride (NaCl) solution. It is believed that these
incorrectly prepared solutions were used in the
dialysis of the two patients who died (External
Patient Safety Review, CHR June 2004).
HFMEA vs Failure Mode and
Effect Analysis (FMEA)
In the past, medicine used a human error approach which identified the
individual as the cause of the adverse event. We now recognize that
errors are caused by system or process failures (McNally et al. 1997).
FMEA was developed for use by the United States military and is utilized
by the National Aeronautics and Space Administration (NASA), to predict
and evaluate potential failures and unrecognized hazards and to
proactively identify steps in a process that could help reduce or eliminate
a failure from occurring (Reiling et al. 2003). FMEA focuses on the system
within an environment and uses a multidisciplinary team to evaluate a
process from a quality improvement perspective. The Joint Commission
for Accreditation of Healthcare Organizations (JCAHO) in the US has
recommended that healthcare institutions conduct proactive risk
management activities that identify and predict system weaknesses and
adopt changes to minimize patient harm (Adachi et al. 2001).
HFMEA - Step One

• Step one is to define the HFMEA topic. The topic is usually a process that has high
vulnerabilities and potential for impacting patient safety. It is important in a
HFMEA analysis to define boundaries and limit the scope of the topic being
reviewed.
• Following the two previously mentioned critical incidents, two reviews were
conducted in the CHR. The first was an internal review and was conducted by the
Patient Safety Task Force, and the second was considered external and performed
by the External Patient Safety Review Committee (June 2004). During the same
time, in response to the tragic events from March 2004, disparate and poorly
coordinated changes in policy regarding the storage and use of highly
concentrated potassium were initiated within the regional ICUs. The
department's ICU executive council determined the need to undertake a review
of the process for the general handling of intravenous, high-concentration KCl
and KPO4 prior to reviewing the process of preparing CRRT bags for dialysis. It
was understood that some of the steps in this process would overlap with the
CRRT process.
HFMEA - Step Two

• Step two in the HFMEA tool is to assemble a team. The team should
include six to eight multidisciplinary members who are involved in the
process being analyzed and are to some degree considered "subject
matter" experts.
• The department's PSAT was assigned this task. The team was co-led by
an intensivist and the department's quality improvement and patient
safety consultant. The team was multidisciplinary, with two intensivists,
three respiratory therapists, two nursing educators, two frontline nursing
staff from each hospital site and two pharmacists. The team had been
previously working on chart reviews of adverse events using the IHI
trigger tool methodology (Rozich et al. 2003) and staff education with
respect to incidents and incident reporting. The team met every other
week over a two-month period (April and May 2004).
HFMEA - Step Three

Step three of the HFMEA tool requires the development of a

process map for the topic and consecutively numbering each
step and substeps of that process. If the process is too
complex, a specific area within the overall process can be
focused upon. The team identified 11 steps in the process of
ordering and administering KCl and KPO4 (Figure 1). After
reviewing these 11 steps, the team focused on two critical
steps: obtaining the drug (step #6) and mixing the drug (step
#7) and then identified the substeps for each of these two
HFMEA steps (Figure 2). Site visits to review where KCL and
KPO4 were stored and conversations with frontline staff in
the units to verify the process were also conducted.
HFMEA -Step Four

In step four of the HFMEA tool, the area of focus is further

narrowed using the following four processes: identification
of failure modes, identification of the causes of these failure
modes, scoring each failure mode using the Hazard Scoring
Matrix, and working through the Decision Tree Analysis
(DeRosier et al. 2002). The team identified the failure modes
for steps #6 and #7 (Figure 2). The failure modes that
received the highest hazards scores were: nurse selecting the
wrong drug, distractions when mixing and inaccurate, or
incomplete labels. Using the HFMEA decision tree analysis,
the team worked through each hazard to determine if it
needed further action.
HFMEA - Step Five

In step five of the HFMEA tool, actions are developed. Actions

to address the identified hazards need to focus on root
causes or contributing factors and need to be specific and
concrete. Frontline staff involved directly in the process need
to review them. Actions can then be tested prior to
implementation using the Improvement Model methodology
that includes testing changes using the Plan-Do-Study-Act
(PDSA) cycle (Langley et al. 1996). Outcomes must be
measurable, with a defined sampling strategy, set timeframe
for measurement and with a realistic well-articulated goal.
Team Lessons Learned

• HFMEA was well recognized by the PSAT and it provided a solid

framework for the step-by-step analysis of potassium ordering and
administration. The team members were unaware of the numerous steps
involved in administrating this medication and it became obvious that
there were many opportunities for errors to occur. HFMEA enabled the
team to prioritize the critical items of a complex process and took the
subjectivity out of the analysis.
• The dialysate manufacturing error came as a harsh reminder to the CHR's
pharmacy department of its need for structured policies and procedures
for error avoidance. This error occurred despite existing safety
procedures that including four double checks by pharmacists. The risks
associated with intravenous potassium came to the forefront of the
pharmacy department's focus and there was a heightened awareness of
pharmacy's role in patient safety.
Conclusions

• FMEA is a valuable tool for heathcare analysis

• Many times, it appears that randomness causes failures (poor medical outcomes). These can
actually be correlated to procedures and tools.
 Foreign • Space for visual (size 24)

Direct
Investment
Course Outcome Will be covered in
CO Title Level thislecture
Number

CO1 It will help the students to understand and analyze Remember

various environmental factors and their impact on  
business

CO2 It will help the students to understand the Understan

Economic Environment and different Economic d
Systems  
CO3 Students comprehend the impact of the global Understand
factors on the environment.

35
Introduction

Question: What is foreign direct investment?

• Foreign direct investment (FDI) occurs when a firm invests

directly in new facilities to produce and/or market in a
foreign country
• Once a firm undertakes FDI it becomes a multinational
enterprise
• There are two forms of FDI
• A greenfield investment (the establishment of a wholly
new operation in a foreign country)
• Acquisition or merging with an existing firm in the foreign
country
Foreign Direct Investment
in the World Economy
• There are two ways to look at FDI
• The flow of FDI refers to the amount of FDI undertaken
over a given time period
• The stock of FDI refers to the total accumulated value of
foreign-owned assets at a given time

• Outflows of FDI are the flows of FDI out of a country

• Inflows of FDI are the flows of FDI into a country

Trends in FDI

• Both the flow and stock of FDI in the world economy has
increased over the last 20 years

• FDI has grown more rapidly than world trade and world
output because
• firms still fear the threat of protectionism
• the general shift toward democratic political institutions
and free market economies has encouraged FDI
• the globalization of the world economy is prompting firms
to undertake FDI to ensure they have a significant presence
in many regions of the world
The Direction of FDI

•Historically, most FDI has been directed at the developed

nations of the world, with the United States being a favorite
target

•FDI inflows have remained high during the early 2000s for
the United States, and also for the European Union

•South, East, and Southeast Asia, and particularly China, are

now seeing an increase of FDI inflows

•Latin America is also emerging as an important region for FDI

The Direction of FDI

• FDI can also be expressed as a percentage of gross fixed

capital formation summarizes (the total amount of capital
invested in factories, stores, office buildings, and the like)

• All else being equal, the greater the capital investment in an

economy, the more favorable its future prospects are likely
to be

• So, FDI can be seen as an important source of capital

investment and a determinant of the future growth rate of
an economy
The Source of FDI

• Since World War II, the U.S. has been the largest source
country for FDI

• Other important source countries include the United

Kingdom, the Netherlands, France, Germany, and Japan

• These countries also predominate in rankings of the world’s

largest multinationals
The Form of FDI: Acquisitions
versus Greenfield Investments
• The majority of cross-border investment involves mergers
and acquisitions rather than greenfield investments

• Firms prefer to acquire existing assets because

• mergers and acquisitions are quicker to execute than
greenfield investments
• it is easier and perhaps less risky for a firm to acquire
desired assets than build them from the ground up
• firms believe they can increase the efficiency of an
acquired unit by transferring capital, technology, or
management skills
The Shift to Services

• In the last two decades, there has been a shift towards FDI in
services

• The shift to services is being driven by

• the general move in many developed countries toward
services
• the fact that many services cannot be exported
• a liberalization of policies governing FDI in services
• the rise of Internet-based global telecommunications
networks that have allowed some service enterprises to
relocate some of their value creation activities to different
nations to take advantage of favorable factor costs
Theories of
Foreign Direct Investment
Question: Why do firms prefer FDI to either exporting
(producing goods at home and then shipping them to the
receiving country for sale) or licensing (granting a foreign
entity the right to produce and sell the firm’s product in
return for a royalty fee on every unit that the foreign entity
sells)?

• To answer this question, we need to look at the limitations of

exporting and licensing, and the advantages of FDI
Theories of
Foreign Direct Investment
1. Limitations of Exporting
• The viability of an exporting strategy can be constrained by
transportation costs and trade barriers
• When transportation costs are high, exporting can be
unprofitable
• Foreign direct investment may be a response to actual or
threatened trade barriers such as import tariffs or quotas
Theories of
Foreign Direct Investment
2. Limitations of Licensing
• Internalization theory (also known as market
imperfections) suggests that licensing has three major
drawbacks
1. it may result in a firm’s giving away valuable
technological know-how to a potential foreign
competitor
2. it does not give a firm the tight control over
manufacturing, marketing, and strategy in a foreign
country that may be required to maximize its
profitability
3. It may be difficult if the firm’s competitive advantage is
not amendable to licensing
The Pattern of
Foreign Direct Investment
3. Advantages of Foreign Direct Investment
• A firm will favor FDI over exporting as an entry strategy when
• transportation costs are high
• trade barriers are high
• A firm will favor FDI over licensing when
• it wants control over its technological know-how
• it wants over its operations and business strategy
• the firm’s capabilities are not amenable to licensing
The Pattern of
Foreign Direct Investment
• It is common for firms in the same industry to

1. have similar strategic behavior and undertake foreign

direct investment around the same time
2. direct their investment activities towards certain
locations at certain stages in the product life cycle
The Eclectic Paradigm

• John Dunning’s eclectic paradigm argues that in addition to

the various factors discussed earlier, two additional factors
must be considered when explaining both the rationale for
and the direction of foreign direct investment
• location-specific advantages (that arise from using
resource endowments or assets that are tied to a
particular location and that a firm finds valuable to
combine with its own unique assets)
• externalities (knowledge spillovers that occur when
companies in the same industry locate in the same area)
Political Ideology and
Foreign Direct Investment
• Ideology toward FDI has ranged from a radical stance that is
hostile to all FDI to the non-interventionist principle of free
market economies

• Between these two extremes is an approach that might be

called pragmatic nationalism
Shifting Ideology

• In recent years, there has been a strong shift toward the free
market stance creating
• a surge in the volume of FDI worldwide
• an increase in the volume of FDI directed at countries that
have recently liberalized their regimes
Benefits and Costs of FDI

Question: What are the benefits and costs of FDI?

• The benefits and costs of FDI must be explored from the

perspective of both the host (receiving) country and the
home (source) country
Host Country Benefits

• The main benefits of inward FDI for a host

country are

1. the resource transfer effect

2. the employment effect
3. the balance of payments effect
4. effects on competition and economic growth
Host Country Costs

• There are three main costs of inward FDI

1. the possible adverse effects of FDI on competition

within the host nation
2. adverse effects on the balance of payments
3. the perceived loss of national sovereignty and
autonomy
Home Country Benefits

• The benefits of FDI to the home country include

1. the effect on the capital account of the home

country’s balance of payments from the inward flow of
foreign earnings
2. the employment effects that arise from outward FDI
3. the gains from learning valuable skills from foreign
markets that can subsequently be transferred back to
the home country
International Trade Theory and FDI
• International trade theory suggests that home country
concerns about the negative economic effects of offshore
production (FDI undertaken to serve the home market) may
not be valid
• FDI may actually stimulate economic growth by freeing
home country resources to concentrate on activities where
the home country has a comparative advantage
• Consumers may also benefit in the form of lower prices
Government Policy Instruments
and FDI
• FDI can be regulated by both home and host
countries

• Governments can implement policies to

1. encourage FDI
2. discourage FDI
International Institutions
and the Liberalization of FDI
• Until recently there has been no consistent involvement by
multinational institutions in the governing of FDI

• The formation of the World Trade Organization in 1995 is

changing this
• The WTO has had some success in establishing a universal
set of rules to promote the liberalization of FDI
Implications for Managers

Question: What does FDI mean for international businesses?

• The theory of FDI has implications for strategic behavior of

firms

• Government policy on FDI can also be important for

international businesses
The Theory of FDI

• The location-specific advantages argument associated with

John Dunning help explain the direction of FDI

• However, internalization theory is needed to explain why

firms prefer FDI to licensing or exporting
• Exporting is preferable to licensing and FDI as long as
transportation costs and trade barriers are low
The Theory of FDI

•Licensing is unattractive when

• the firm’s proprietary property cannot be properly
protected by a licensing agreement
• the firm needs tight control over a foreign entity in order
to maximize its market share and earnings in that country
• the firm’s skills and capabilities are not amenable to
licensing
 The Theory of FDI
A Decision Framework
Government Policy

•A host government’s attitude toward FDI is an important in

decisions about where to locate foreign production facilities
and where to make a foreign direct investment

•A firm’s bargaining power with the host government is

highest when
• the host government places a high value on what the firm
has to offer
• when there are few comparable alternatives available
• when the firm has a long time to negotiate
 REFERENCES

• Reference Book:

• Mishra, S. K. and Puri, “Indian Economy” Himalaya Publishers.

• Panagariya Arvind, “India: The Emerging Giant” Oxford University Press
Reference Website:
https://corporatefinanceinstitute.com/resources/knowledge/strategy/multination
al-corporation/

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THANK YOU