An alumna of Shri Ram College of Commerce, Delhi University ( SRCC) and is currently working with Mindvalley as an experience manager. She is a CAPM and is preparing for PMP certification. She is a Bharatanatyam dancer and a writer by passion.
A set of business tools and procedures used for quality management and process improvements is called Six Sigma. It is one of the most sought-after business methodologies that helps in ensuring that operations are both effective and efficient. It was originally developed by a scientist working at Motorola in the 1980s. It is a technique that uses statistical, financial analytical, and project management processes to improve the functional and qualitative aspects of a business by reviewing mistakes and defects.
The 5 phases of six sigma method are Defining, Measuring, Analyzing, Improving, and Controlling. It can be donated by DMAIC.
- Defining: This involves identifying a faulty process and defining the problem, goals, and deliverables for the project.
- Measuring: Measuring the original performance of the process. The team then studies the list of potential inputs that may be responsible for the result and helps the team in determining a benchmark for the process.
- Analyzing: This process involves isolating inputs or potential reasons for failure and analyzing the root of the problem.
- Improving: This process involves working on the input or the process that is not working well.
- Controlling: Measuring each output after process improvement and ensuring the results do not regress and maintains the benchmark set for the process.
Lean Six Sigma
Lean Six Sigma is a managerial approach focusing on team performance to eliminate waste and defects. It boosts standardization of the process and work. It is a blend of Six Sigma tools and Lean enterprise philosophy to reduce the waste of time, physical resources, and effort while ensuring quality in production and processes. Check out the Best Six Sigma Certification Online to learn more about the lean six sigma.
Importance of Six Sigma
- Reduction in Operational costs: Operational costs and risks are the highest causes of low profits or losses all over the world. This technique helps a company reduce operational costs drastically due to standardizing processes. This also eliminates risk associated with different processes.
- Increases efficiency: Improvisation of processes helps in increasing efficiency of each process. It also helps in delivering a product or service on time. That means it helps an organization be more efficient and stick to the timelines.
- Maintains the accuracy and standard of the product or service:
This method helps in improving accuracy of processes by using Defects-Per-Million-Opportunities (DPMO) across the value streams. We will learn more about the technique in this article.
- Improving Client satisfaction: This method helps identify the variations in products or services the clients are experiencing because of existing processes. This lays a road map for the organization on how the number of dissatisfied customers can be minimized.
- Improves cash flow: Using six sigma techniques, an organization can reduce the variations in invoicing process, accounts payable and receivable process, inventory management process, etc.
Many organizations hire Six Sigma or Lean Six Sigma practitioners so that they can apply the knowledge to improve their processes and products. To be a Six sigma practitioner, you can acquire related knowledge by completing programs and gaining six sigma certifications.
You can learn more about the Online Six Sigma Green Belt Certification by taking this course.
What is DPMO?
DPMO in six sigma stands for Defects-Per-Million-Opportunities. It is a probabilistic measure of an error rate of a business process or product. In other words, it measures how efficient and effective a process or product is. It measures how good a process is towards committing a mistake.
It is also called NPMO or Nonconformities per Million Opportunities.
The DPMO calculator formula is as follows:
- As the name suggests, it is the number of defects in a process per one million opportunities, and thus, it is a long-term measure of process performance.
- Let’s go deeper in the terms to understand more about the concept.
- I suggest we start with Defects. A defect is an imperfection or inconsistency in a process or an object. A process or object can have multiple defects that are unwanted by the client and cause dissatisfaction.
- Defective is a process or object with one or more defects such that the process or objective is unacceptable to the client.
- Next up are opportunities. Opportunities refer to the number of defects that can occur in a process. It is a potential defect and not an actual defect, depending on how complex a process is. That means as the complexity of the process increases, the defect opportunities rise.
How to Calculate DPMO?
Step 1: Sampling
The first step is to determine the total number of units to be sampled or the same size of the group. The sample group should ideally be small enough to be managed easily and large enough to reflect the problem accurately.
Step 2: Number of Defect Opportunities per Unit
Determining the number of defect opportunities per unit will involve the following elements:
- Having a list of potential defects or errors in a unit or process.
- Identifying the places where a product or process can go wrong and lead to a defect.
- Identifying defects that can arise in normal course of business. It’s important to not focus on exceptions.
- Categorizing defects based on similarity.
Step 3: Defect Opportunities for selected sample size
Once we have the sample size ready and defect opportunities per unit in place, we need to get the defect opportunities for only the selected sample size.
This is done by multiplying the number of units in the selected sample by number of defect opportunities per unit.
Step 4: Counting the Actual defects within the sample group.
In this step, we simply must count the actual number of defects or errors in the sample selected. This process is effective only if the selected sample is representative of the population.
Step 5: Divide and Multiply
We start by dividing the actual number of defects by the total number of opportunities for defects. This gives us the Defect Per Opportunity (DPO).
We then multiply the result by 1 million to arrive at the Defect Per Million Opportunity (DPMO), which reflects the long-term health of a process.
Examples For DPMO
This excel sheet contains examples of how the DPMO is used in different processes and on how you can use this for your own business processes.
You can download this excel sheet to calculate the DPMO examples for your business:
What is the DPMO Value of High Quality?
DPMO assists in measuring the right factors that are involved in developing a product or a process. The aim is to minimize the defects in the quality upon completion or delivery of the product.
Under the Six Sigma methodology, the quality score that a product or process must match is 3.4 on the DPMO scale. That means for a product or process to be considered high quality it must have a maximum of 3.4 six sigma defects per million opportunities.
It is important to note that as the DPMO increases, the efficiency of the process or product decreases and as the DPMO decreases, the efficiency of the process or product increases.
The values the DPMO can take varies from 0 to 1,000,000. A process that has no defects and is efficient, will have a DPMO of 0 and a process that is inefficient will have a DPMO of 1,000,000.
What does DPMO Represent?
The 3.4 on the DPMO scale represents a certain level of product or process accuracy.
The accuracy (yield) can be calculated with the help of the DPMO table attached below:
Once you have calculated the DPMO, you can use a Six Sigma table to find the process sigma. You will look for the number closest to the DPMO under defects per 1,000,000 and will find the process sigma and yield value associated with the DPMO obtained.
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Why is Six Sigma DPMO Metric Important?
DPMO is regarded as one of the most important metrics for organizations that use the Six Sigma methodology. This is because DPMO is an efficient way of measuring the efficiency and effectiveness of a process or product in an organization.
It helps in assuring that the end clients are satisfied with the product or service, along with the highest possible quality provided.
There are two major values to note while determining the DPMO:
- Keeping the complexity of the product and process in mind, identifying the process that needs to be improved
- Establishing the cause-and-effect relationship within the process
Limitations of DPMO
- The first limitation is based on the defect opportunities per unit. Since there is no clear guideline on how this number can be extracted. An inflated value can be chosen to reduce the DPMO and show that the process is efficient. We need to ensure an accurate measure; we must always choose a conservative estimate for DPMO.
- There can be a miscalculation of actual defects if the sample is selected for a brief period. The DPMO numbers can change depending on the time frame of data collection.
- If the sample selected for observation is not equally distributed or does not accurately represent the data, the DPMO estimates may not be accurate for the entire data set.
Conclusion
DPMO works best when the process is stable. When we apply DPMO on an unstable process, the result is not reliable as when the process changes, the DPMO values may also change, and this cannot be used for predicting the viability of the process in future.
In conclusion, the DPMO is one of the most sought-after tools to improve the efficiency and effectiveness of a process/ product. It aims to reduce the defects that may arise because of deviations in the process. It is important to keep the limitations of the model in mind while calculating the numbers so that they can be minimized. Learn more about the KnowledgeHut Best Six Sigma Certification Online by taking this course.
Frequently Asked Questions (FAQs)
1. What does DPMO stand for? Why use it?
It stands for Defects-Per-Million-Opportunities (DPMO). It is a probabilistic measure of error rate of a business process or product. In other words, it measures how efficient and effective a process or product is. It is also called NPMO or Nonconformities per Million Opportunities.
2. What is the DPMO formula?
Number of defects/ (number of units * number of defect opportunities per unit) * 1000,000
3. What is the standard DPMO score and why so?
In Six Sigma, the standard DPMO score that a process or product must match to be considered high quality is 3.4 on the DPMO scale. This means that when an organization uses Six Sigma techniques, it produces a defect-free product 99.99966% of the time; allowing only 3.4 errors per one million opportunities.
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