Business Results for Projects

Business Results for Projects: Learning Objectives At the end of this Define topic, all participants will be able to:

calculate process performance metrics such as defects per unit (DPU), rolled throughput yield (RTY), cost of poor quality (COPQ), defects per million opportunities (DPMO), sigma levels, and process capability indices. track process performance measures to drive project decisions. define and describe failure mode and effects analysis (FMEA). describe the purpose and use of scale criteria, and calculate the risk priority number (RPN).

Process Performance Metrics

Proces performance metrics establish the process's current situation. When identifying which process to study for a project, performance indices compare the current status to the target. The project team then selects the process that delivers the least quality to the customer, or the process with the highest cost or variation. The upcoming modules will cover each of the following metrics in detail:

Defects per unit (DPU) Parts per million (PPM) Defects per million opportunities (DPMO) First pass yield (FPY) Rolled throughput yield (RTY) Cost of poor quality (COPQ)

Tips

Link the metrics to the needs of the identified stakeholders: shareholders, customers, and/or employees. This initial reference allows one to compare future measures to initial measures to gauge improvement. Metrics drive project decisions, but on a larger scale, they help make strategic management decisions.

Defects and Yield

To understand the effect of the overall quality throughout the process, the cumulative effect of throughput and defects through multiple steps must be known. Consider the following questions about a three-process operation: If each stage has 90% throughput, is the throughput for the entire operation 90%? If not, what is the overall throughput? What is the yield? Does the 10% lost for each stage have a monetary value? These are questions that will be answered in this section.

Defects Per Unit (DPU)

According to the Glossary and Tables for Statistical Quality Control, defects per unit (DPU) is the measure of capability for discrete (attribute) data, and is found by dividing the number of defects by the number of units:
DPU = Defects / Units

DPU refers to the average number of defects observed; it is a measurement of yield. A defect is defined as the non-fulfillment of a requirement related to an intended or specific use, such as:

Afailuretomeetacustomer'srequirement(characteristicorspecification) Anymeasuredlackofperformanceneedingimprovement Anydissatisfactionexpressedbyaninternalorexternalcustomer Anythingprohibitingaserviceoraproductfromdeliveringitsintendedvaluetothecustomer

A unit is defined as a quantity of product, material, or service forming a cohesive entity of which a measurement or observation can be made. Examples include:

Anassembly Aquantityoftime Aprocessstep Adefinableservice

Aproduct

User Tips

OnceyouobtaintheDPU,followwithananalysistounderstandtheproblembycreatinga ParetochartoraDPUhistogram. BeforecollectingdatatodetermineDPU: o defineadefect. o definetheunitofwork. o checkthecapabilityofthemeasurementsystem(discussedindetailintheMeasure lessonofthiscourse).

Using DPU

Benefits

Providesacommonbaseline(benchmark)for: Describingthecurrentsituationinquantifiableterms. Evaluatingprocessesforidentifyingimprovementactivities. Evaluatingaprocessinanexistingproject. Usewhen o Definingtheprojectandthroughouttheentireproject. o Gaininganunderstandingoftheproblem. o Generatingameasurablestatistic(number)forevaluatingaprocess. Informationneeded o Adefinednonconformityordefect o Adefinedunit o Totalnumberofnonconformancesproducedfromthelotbeingmeasured o Totalnumberofitemsinthelot
o o o

DPU Example Olivia's Toy Manufacturer produces toy cars. The company plans to analyze the finishing process and will start by measuring DPU. The finishing process involves three steps:

Applypaint Affixdecals Applyclearcoat/varnish

A sample of 100 cars is used for the observation. DPU is measured for each step and then calculated for the entire process: Step 1 Apply paint

Units=100Defects=2DPU=2100=.02

Step 2 Affix decals

Units=100 Defects=1 DPU=1100=.01

Step 3 Apply clear coat

Units=100 Defects=1D PU=1100=.01

Final

DPU=.02+.01+.01=.04

Part Per Millio (PP ts on PM)

Accordin to the ASQ Statistics Division's Glossary and Tables for S ng Q G d Statistical Quality Contr rol, parts per million (PPM or ppm) is a measurement that is expressed b dividing th data set in i by he nto ual 1,000,000 or 106 equ groups. The equa ation is: PPM = DPU x 1,000 D 0,000 The fo ollowing ima shows th sigma qua age he ality level associated wit th various services (con s nsidering the 1.5 shift of the mean): e o : The quot defect rat of a 6 pr ted te rocess is 3.4 parts per mi illion (PPM or ppm), or 3.4 defects p per million opportunities "although a normal dist o s tribution tab will indic the prob ble cate bability of exceedin six standar deviation (i.e., z = 6) is two time in a billion opportunit ng rd ns ) es n ties," accord ding to Paul A. Keller in Six Sigma Demystified. Why the dif A S D fference? Ke eller describe "When es, Motorola was develo a oping the qua ality system that would b become Six Sigma, an e engineer nam med Bill Smit considere the father of Six Sigm noticed e th, ed ma, external failu rates wer not well ure re predicted by internal estimates. Instead, exter defect r d rnal rates seemed to be consis d stently highe er than expe ected. Smith reasoned th a long-ter shift of 1 h hat rm 1.5 in the pr rocess mean would expl n lain the differ rence. In this way, Moto s orola defined the Six Sigm process a one which will achiev a d ma as h ve long-term error rate of 3.4 DPMO which equ m o O, uates to 4.5 standard dev viations from the averag m ge. While tha may seem arbitrary, it has become the industr standard f both prod and serv at m t e ry for duct vice industries."

Defe Pe Mil ects er llion Opport O tunitie (DP es PMO)

Accordin to the Glo ng ossary and Tables for Sta atistical Qua ality Control, defects per million r opportun nities (DPMO is the mea O) asure of capa ability for di iscrete (attrib bute) data or continuous data r s (which is the more co s ommon appl lication). It is calculated by dividing the number of defects b i d g r by the oppor rtunities for defects, and multiplying the result b 1,000,000 (or 106). It allows d g by 0 t comparis of differe types of product to be, in essence an "apples to apples" comparison. son ent b e, s DPMO tr ransforms ob bserved proc data into a recogniz and agree upon stan cess o zed ed ndard represent ting the aver rage number of defects a product, pr r rocess or serv produce As a yield vice es. measurem ment, DPMO indicates th number of defects in a process ob O he o bserved duri a produc ing ction of one million units. m DPMO = (Defects/To Opportu otal unities) x 1,0 000,000 OR DPMO = D DPO x 106 Benefits

Defines the cu D urrent baseli performa ine ance Provides a co ommon meas surement to use as a base u eline in asse essing the ability of a pro ocess to produce de o efect-free pro oducts Provides data to help prio a oritize future quality proj e jects

Using DP PMO Building upon the pr revious exam for discr data, ca mple rete alculate the D DPMO. The bulleted list t below ind dicates the number of op n pportunities for a defect during each step in the p h process: 1. Step 1 - Appl paint: two opportunities for defect (units = 10 defects = 2) ly o t 00; 2. Step 2 - Affix decals: thre opportuni x ee ities for defe (units = 1 ect 100; defects =1) 3. Step 3 - Appl clear coat/ ly /varnish: five opportunit for defec (units = 10 defects = 1) ties ct 00;

DPMO = (Totaldefects / Totalopportunities)(1,000,000) Totaldefects = 2 + 1 + 1 = 4 Totalopportunities = (Totalopportunities/unit)(Totalunits) Totalopportunities/unit = 2 + 3 + 5 = 10 Totalopportunities = (Totalopportunities/unit)(Totalunits) = (10)(100) = 1,000 DPMO = (4/1,000)(1,000,000) = 4,000

DPMO may be calculated for continuous data by multiplying the proportion defective or "out of specification" by 1,000,000. an example of how to find the DPMO for continuous data is shown below. Consider the following scenario: Wait time in a bank's teller line is expected to be no more than five minutes. On average, the wait time for customers is three minutes with a standard deviation of one minute. Based on this information, let's calculate the z value: z value = (5.3)/1+2 From the normal table (which will be shown in the Measure lesson), you can estimate that customers will be waiting longer that five minutes .02275 or 2.275% of the time. To calculate to DPMO: DPMO = .02275 x 1,000,000 = 22,750 To translate DPMO to a sigma level, an abbreviated sigma conversion table is shown below. Based on these calculations, out of one million opportunities, you can estimate that customers will be waiting longer than five minutes 22,750 times, thus a sigma level of 3.5.

Introduction to Yield
Yield is defined as the percentage of products that successfully complete the production process. It is calculated by dividing the amount of product that finishes the process by the amount of product that started the process. In essence, yield is the output(s) divided by the input(s). Keep in mind that this does not mean that all products are necessarily free of defects or did/did not require rework. It simply means that the products completed the production process and are presumed to be good enough to ship to the customer. For example, if 1,000 units started production, and of these, 980 units successfully completed production, then the yield is calculated as: 980/1000 = 98% First pass yield (FPY) is the percentage of units that successfully complete a process with no rework. This statistic only considers the initial input data and the final output. FPY is typically used to express the process yield for an entire operation. In the case of processes with many steps, it is calculated by multiplying the yield of each step in a process. Benefits

Provides a common measurement for evaluating a single process Provides a benchmark for measuring process improvement projects

First Pass Yield (FPY)

As previously mentioned, FPY is simply the number of good units produced divided by the number of total units going into the process. FPY does not include rework. Consider the following example: Process X: 4,000 units started and 3,800 completed; 200 defective units were scrapped and 600 additional units had one defect each that were successfully reworked FPY is calculated as: [4000-(200+600)]/4000 = .80 or 80% FPY can also be used to calculate across a number of sub-processes, simply by multiplying the yield of each step. Consider this example: Process Y is divided into four sub-processes:

100 units enter A and 90 leave. The FPY for process A is 90/100 = .9 90 units go into B and 80 units leave. The FPY for process B is 80/90 = .89 80 units go into C and 75 leave. The FPY for C is 75/80 = .94 75 units got into D and 70 leave. The FPY for D is 70/75 = .93

The total process yield is equal to FPYof A x FPY of B x FPY x C x FPYof D or (.9)(.89)(.94)(.93) = .70. You can also get the total process yield for the entire process by simply dividing the number of good units produced by the number going in to the start of the process. In this case, 70/100 = .70 or 70 percent yield.

Rolled Throughput Yield

Rolled Throughput Yield Rolled throughput yield (RTY or Yrt) is the probability that a single unit can pass through a series of process steps free of defects. RTY is calculated as the overall quality level after several steps in a process have been completed by multiplying the throughput yield of each step within the process.

Calculating Rolled Throughput Yield Apply the formula below. Note that rework is just that: rework. There is no distinction made regarding the complexity or number of times a product or service is reworked. RTY signals when a process or sub-process must be improved. RTY =[ N (units entering process) (# of reworks + # in scrap)] / N (units entering process)

__________________________ Calculating RTY Consider the following examples discussed earlier: Process A: Of 4,000 units started and 3,800 completed, 200 defective units were scrapped; each had a single defect.

RTY = (4,000 200 scrap)/4,000 = 3,800/4,000 = 0.95 Process B: Of 4,000 units started and 3,800 completed, 200 defective units were scrapped, and 600 additional units had one defect each that were successfully reworked. RTY = (4,000 (200 scrap + 600 rework))/4,000 = (4,000-800)/4,000 = 3,200/4,000 = 0.80 Process C: Of 4,000 units started and 3,800 completed, 300 units reworked for 420 defects, 200 units scrapped for 580 defects. RTY = (4,000 (200 scrap + 300 rework actions))/4,000 = (4,000 500)/4,000 = 3,500/4,000 = 0.875 RTY A, B, and C = 0.95 x 0.80 x 0.875 = 0.665 or 66.5%.

Cost of Poor Quality (COPQ)/Cost of Quality (COQ)

Cost of poor quality (COPQ) are the costs associated with providing poor quality products or services. Cost of quality (COQ) is the original term coined by Philip Crosby referring to the cost of poor quality. Whichever term is used, it is important to understand more than the cost of the process improvement or quality department is involved. Quality-related costs should not be viewed merely as expenses of an organizations process improvement or quality department. Today, strong quality and price competition require that organizations carefully manage all operations to constantly improve their quality and cost positions in the marketplace. Benefits

Provides a statistic to quantify potential savings by measuring the actual cost associated with the poor quality of a product or service Provides a baseline: for assessing projected savings for a potential project. for use during the project definition stage (when, for example, defining project goals, constructing the project charter, and during project benefit impact tracking). for showing the anticipated dollar impact of the generated project improvement. Quantifying COPQ/COQ helps identify hidden costs incorporated into the standard operating expenses of an organization

Use when

Developing the project definition to state the baseline, goal, and entitlement Developing the project charter Tracking the benefits after closing a project to assure sustained benefits Selecting future Six Sigma projects

COPQ/COQ

Number of defects produced over a selected time period, lot, or unit size Cost of labor to rework material Cost of extra material used in the reworking process (if any) Cost of material that is now scrapped Cost of the labor applied to the part up to detection Cost of extra utilities to rework part Cost of the utilities used in the process up to detection (if part was scrapped) Cost of lost opportunity to process a new part when the rework part is using the machine Loss of sales/revenue (profit margin) Potential loss of market share

Using COPQ/COQ If possible, collect current data to ensure an accurate measurement. COPQ includes:

Labor cost Rework cost Disposition costs Warranty cost Material costs Others invested in the unit up to the point of detecting the nonconformance Lost opportunity cost due to the loss of resources used in rework

COPQ/COQ Advantages and Disadvantages Advantages

Provides a snapshot of the health of the organizations quality Monitors the long-term effect of process changes Increases the efficient allocation of resources Creates a culture of quality and a continuous improvement mindset Engages senior management and is useful for gaining commitment to quality improvement efforts

Disadvantages

The exact cause of movement in the data is not always easy to pinpoint Hidden costs in the organization may not be reflected in the data Data validity is often an issue and a debate among managers, rather than a focus on improving the processes

Proc Capabi cess ilility Indice I es

rocess ca apability indi ices compare the voice of the custom (specific e o mer cations US & LSL) to the SL o voice of the process (current resu control limits UC & LCL). By using co t ( ults l CL ontrol charts s, scheduled statistical sampling, an calculatin various st nd ng tatistics, you can use pro u ocess capabil lity studies to determine the processs current situ o uation, estab blish a contro olled state an maintain that nd stable sta over time ate e. Benefits of Process Capability In C ndices

Differentiates process res D s sults when de etermining a process for a project st r tudy Summarizes process capa p ability as me eaningful val lues Predicts the processs abi p ility to hold customer sp ecs c Id dentifies sou urces of prod variabili leading t possible r duct ity, to redesign or re-engineerin ng Displays the production to the control limits (UC & LCL) D p t CL Eliminates/reduces inspec E ction

Use Whe en

Predicting the processs future capabi e f ility of produ ucing within the specs n Id dentifying op pportunities for process improvemen nt Understandin hidden sup U ng pplier costs Evaluating ne equipmen E ew nt Reviewing to R olerances Auditing proc perform A cess mance

Measuring if the outputs meet customer specifications Eliminating or reducing product-process incompatibility issues

Although this course covers the detailed information in the Measure phase, gaining an understanding of using process capability diagrams is of utmost importance. Learn some initial terms from the diagram

Failure Mode and Analysis

First used by the U.S. military in the 1940s and then by industry in the 1960s, failure modes and effects analysis (FMEA) is a step-by-step risk identification, prioritization, and prevention tool. FMEA is normally a bottom-up approach. By identifying possible failures/errors in a design, process, product, or service, FMEA aims to take action before the failures occur. FMEA is proactive and takes place before design and production. This stands in contrast to root cause/corrective action that takes place after design/production and is reactive. Also called: "potential failure modes and effects analysis (PFMEA)" and/or "failure modes effects and criticality analysis (FMECA)." Benefits

Ranks possible failures by their effect on the customer Documents information about risks of failure and risk reduction Emphasizes prevention Leads to lower development costs Improves reliability and quality, thus improved customer satisfaction Stimulates team discussion

Using FMEA Procedure Identify the design/process/service. Identify the potential failures. For each failure, identify the possible effects. For each consequence, assign a level of severity (S): o Use a 1-to-10 scale: Insignificant = 1, Catastrophic = 10. 5. For each cause, determine and assign the occurrence rating (O): o Use a 1-to-10 scale: Extremely unlikely = 1, Inevitable = 10. 6. For each failure, determine the potential root causes by listing all the possible causes. 7. For each cause, identify the current process control; the tests and/or procedures reducing the possibility of the failure reaching the customer. 8. For each process control, assign a detection rating (D): 9. Use a 1-to-10 scale: Most certain to detect = 1, Most certain not to detect = 10. o Calculate the risk priority number (RPN) by multiplying S x O x D. 10. Prioritize activities based on the highest RPN and Severity. Use When

1. 2. 3. 4.

Identifying and anticipating possible failures Designing/redesigning a process, product, or service After brainstorming about problem-solving

FMEA User Tips

Use the scoring guidelines table as a ratings guide. Helpful during both the Design and Improve phases. Cross-functional teams provide necessary broad knowledge: o Confer with process owners. o Take comments from others whose experience and/or knowledge would help the team correctly assess the risk. Use flowchart and process maps to identify the system to be analyzed. SIPOC analysis can be helpful. Document the known cause-and-effect relationships before starting FMEA. Criticality and RPN calculations provide guidance for rank-ordering potential failures. The higher the RPN, the more urgent the necessary improvement. Creating FMEA results requires disciplined cause-and-effect thinking. Different types of FMEA: o Design FMEA: for design processes o Process FMEA: for manufacturing processes o System FMEA: for linking multiple processes o Functional FMEA: for performances

Risk Priority Number Before returning to the individual types of FMEA, one must also understand a tool within FMEA. Risk priority number (RPN) is the dimensional index used to rank and evaluate the combined degree of severity, frequency of occurrence, and the ability to detect specific defects. When you add the RPN, you extend the FMEA to a FMECA (Failure Mode Effects and Criticality Analysis). Generated by multiplying the severity, occurrence, and detection for each defect, the RPN statistic reduces the number of possible failures to investigate. To help the team narrow its focus on possible root causes, address the failures with the highest RPN and any failure with a severity ranking of 10.

Risk Priority Number User Tips

Think of RPN as a risk factor The higher the RPN value, the higher the risk