What is an issue tree and how
to use it?
Practical guide with examples
1
What is an issue
tree?
2
Issue tree is one of the most important tools
used in management consulting
Bottom-up approach Top-down approach Backward logic
Compounded effect Issue Tree Priorities
Benchmarks 80/20 rule Opportunity Tree
KPIs and business Theory of constraints
drivers and bottlenecks
3
Issue tree is a concept that will help you guess in a structured
manner the problems, reasons causing those problems and on
the basis of this decide what should be analyzed
Analysis to be
Area of analysis Suspected problems Possible reasons performed
Possible Reason 1 Analysis 1
Problem 1
Possible Reason 2 Analysis 2
Area 1
Possible Reason 3 Analysis 3
Problem 2
Possible Reason 4 Analysis 4
4
It helps you do a lot of things….
Guess in a structured manner
Set priorities
the problems
See what you have to do to Coordinate a group of
check certain hypotheses Business Analysts
Show to other the whole Not to get lost in analyses you
picture do
5
Let’s have a look at
examples of issue trees
6
We will start with an example of
logistics in a chicken producer…
7
Have a look at an issue tree example for a chicken meat
producer. We guess that he has 3 problems in Logistics
Analysis to be
Area of analysis Suspected problems Possible reasons performed
High costs of transport per ton of
goods
Big level of waste and breakage in
Transport
transport
Low usage of resources
8
Then for those problems we try to guess the reasons causing them
Analysis to be
Area of analysis Suspected problems Possible reasons performed
Badly designed routes
High costs of transport per ton of
Too big fuel usage
goods
No shipments on the way back
Badly designed method of packaging
which makes the product prone to
damage
Big level of waste and breakage in
Transport
transport
Speed not adjusted to the product
Badly organized work and schedule of
deliveries
Low usage of resources
Limitation on delivery time of finished
goods
9
Finally we come up with analyzes we have to carry to prove or
disprove these hypotheses (that certain reason is causing certain
problem
Analysis to be
Area of analysis Suspected problems Possible reasons performed
Analysis of designed routes, their
Badly designed routes length and the influence of possible
changes
High costs of transport per ton of Analysis of fuel usage and kilometers
Too big fuel usage
goods covered by vehicles
Analysis of load carried on the way
No shipments on the way back
back
Badly designed method of packaging Analysis of correlation between type
which makes the product prone to of packaging and percentage of
damage damaged
Big level of waste and breakage in
Transport
transport
Analysis of time spent on the way and
Speed not adjusted to the product
kilometers covered in that time
Badly organized work and schedule of Analysis of level of overtime, daily
deliveries organization of drivers work
Low usage of resources
Limitation on delivery time of finished Analysis of Clients’ preferences on
goods delivery time
10
Now let’s have a look at an issue
tree for a Retailer….
11
When you are talking about Retail you should
have a look a the following areas
Retail chain development Expansion model
Product Range / Category
In-store process
Range Management
Pricing HR especially trainings
Logistic / Supply Chain
12
Below you can see example of issue tree in Retail
Chain Development
Analysis to be
Area of analysis Suspected problems Possible reasons performed
Low LFL due to cannibalization (on- Analyze the change in sales after opening
line, new stores in old locations) new stores / on-line introduction
Low growth in sales
Analysis of number of openings vs
Few new openings in locations
availability of new places
Increasing rents due not proper usage Analysis of rents vs comparable
of purchasing power competition
Retail chain Decreasing EBITDA of new stores
development Salaries growth vs rotation – comparison
Growing salaries to keep low rotation
with competition
No support from the shopping malls Analysis of contracts with shopping malls
High cost of building new stores
Not optimized formats, expensive Analysis of cost per 1 sq. m, number of
fixtures fixtures, cost per fixtures
13
Below you can see example of issue tree for Retail
where we cover Product Range Management
Analysis to be
Area of analysis Suspected problems Possible reasons performed
Too many supplier of Category A that Analyze of number of suppliers and their
undermines your purchasing power share in sales vs market
Low margin on Category A
Analysis of Private Labels potential –
Lack of Private Labels
benchmarks and potential supplier
Usage of middlemen instead of direct Analysis of whom we buy from Category B
suppliers and the whole value chain
Product Range Low margin on Category B
Management
Improper planning and allocation by
Analysis of planning and allocation process
stores
Improper planning and allocation by
Analysis of planning and allocation process
stores
High inventory cost
Analysis of lead times, deliverability on-
Non-responsive supply chain
time, level of breakage
14
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