Every company wants strong customer retention, happy and motivated employees, and high productivity. Companies worldwide have used Six Sigma to maintain all these things by enhancing operations and reducing organizational flaws. Six Sigma is a methodology that ensures any business can qualitatively pursue perfection in its processes, improving the quality of products or services and increasing profitability.
Six Sigma has been used for decades because it’s a data-driven methodology with quantifiable results. Metrics are core to what makes Six Sigma so effective. To measure the success of a Six Sigma project, you need to select and track the right metrics that align with your goals, process, and customers. Common goals of a Six Sigma project include eliminating waste, improving quality, and increasing customer satisfaction.
The Importance of Metrics in Six Sigma
Six Sigma metrics are common measurements that help track the quality of a business process. Metrics are a vital part of the Six Sigma methodology, equipping project teams with the necessary data to track progress, identify problems and opportunities for improvement in organizational processes.
Six Sigma projects follow the DMAIC method, which consists of five phases: Define, Measure, Analyze, Improve, and Control (DMAIC). Metrics are integral to phases two and three: Measure and Analyze. During phase two, a Six Sigma team must collect data and quantify the problem. This data allows the project team to measure performance and evaluate improvement. In phase three, the team uses the data to investigate and verify the variables impacting the problem. They then identify the relationships between the variables to understand cause and effect and determine what drives the defect at the center of the project.
Primary vs. Secondary Metrics
In any project improvement, you define primary and secondary metrics. The primary metric is the focus of the Six Sigma project, while the secondary ensures other important areas don’t suffer while achieving the primary goal. For example, a business may want to improve the quality of a process or product (primary metric) without introducing excessive spending (secondary metric) during primary metric improvement.
What are Primary Metrics?
A Six Sigma project will have only one primary metric aligned with an overarching business objective. Characteristics of primary metrics include:
- Primary metrics should be tied to the problem statement
- Primary metrics should be easy to measure
- Primary metrics can be explained through an equation
- Primary metrics align with business objectives
- Primary metrics are tracked regularly (hourly, daily, weekly, monthly, etc.)
What are Secondary Metrics?
Secondary metrics evaluate the possible positive and negative implications of changes made to the primary metric. Think of it as the thing you don’t want to be impacted or sacrificed to address the primary metric. If your goal is to increase the speed of or lower the cost of a product or process, you don’t want to sacrifice quality to achieve it.
The Six Sigma online curriculum usually mentions these metrics during the business case and early project initiation phases.
The Six Crucial Six Sigma Metrics
Here is a list of essential Six Sigma metrics, a definition of each, and an explanation of why it’s vital to the the Six Sigma method:
- Defects Per Million Opportunities (DPMO)
DPMO is the probable error rate of a business process or product and is used to determine how efficient and effective a process or product is. Essentially, DPMO is the number of defects in a process per one million opportunities. This metric is used as a long-term measure of process performance.
A defect is defined as a non-conformance to a standard requirement. Every product or service has an “x” number of CTQs or “Opportunities for Defects.” DPMO measures the AVERAGE number of defects across ALL CTQs that the current process will produce if not improved. For example, an automotive supplier with a Six Sigma process will NOT produce 3.4 defective transmissions per million. Instead, each transmission would have an average of defects per million opportunities.
- First Time Yield (FTY)
The term “First Time Yield” (FTY) refers to a quality metric commonly used in manufacturing and other process-oriented industries to measure the effectiveness and efficiency of a process. Specifically, FTY calculates the percentage of items or products going through a process completed correctly the first time without rework or correction. The goal is to assess how well a process generates defect-free outputs on the first attempt.
The formula for First Time Yield is usually:
First Time Yield (FTY)=(Number of defect-free units produced/Total number of units that entered the process)×100
For example, if 90 out of 100 products manufactured are without defects, the First Time Yield would be (90/100)×100=90%(90/100)×100=90%.
FTY is a crucial metric that directly impacts process efficiency and cost-effectiveness. A high FTY indicates a well-functioning process with lower rework, scrap, or warranty claims costs. Conversely, a low FTY signals the need for process improvements, as defects can be costly and cause production delays.
- Rolled Throughput Yield (RTY)
Rolled Throughput Yield (RTY) is a metric that quantifies a process or product’s overall quality by multiplying the Defects per Million Opportunities (DPMO) of each process step. Unlike FTY, which only focuses on the defects in the first step, roll throughput yield considers all defects and rework This provides insight into the overall process performance.
- Process Capability Indices (Cp and Cpk)
Process capability is perhaps the most impactful Six Sigma metric as it gauges whether customer specifications are being met. Capability analysis requires collecting data on process characteristics and calculating statistical values to evaluate the process’s ability to meet customer requirements. Cp and Cpk are essential for improving and optimizing product and process quality, which itself is necessary for companies trying to remain competitive.
- Sigma Level
Sigma is a statistical term for and symbol of Standard Deviation, which is one of the absolute measures of variation in data. Sigma is a measure that uses the characteristics of past data to make judgments about how the process will perform in the future.
Sigma level is used to measure the capability of a process by indicating how well a process meets customer requirements. It can also be used to compare the performance of different processes against each other.
Defects per Million Opportunities (DPMO), calculates the Sigma Level for a product or process. As a long-term measure of the success rate of a process, DPMO looks at the number of defects a process produces. Sigma Level looks at variation in a process while DPMO looks at the rate of producing defects in a process. As the DPMO of a process increases, the Sigma level decreases and vice versa.
- Cost of Poor Quality (COPQ)
In business, there are tangible and intangible costs associated with defects. COPQ is the cost of producing poor-quality products or services for the customer. This measures the financial losses incurred from scrap, rework, repair, and warranty failure.
Cost of Poor Quality tells how profit is affected by the quality of a product or process and is essential data that influences financial and strategic decisions.
Real-world Application of These Metrics
While the theory of these metrics may sound practical, it is often helpful to see them in action. Six Sigma has been used by some of the world’s largest corporations to improve their business. Some notable examples include the following:
The American manufacturer used Six Sigma to improve overall product quality and service by streamlining measures into product assurance, increasing revenue.
This aerospace giant needed to resolve issues with air fans within the engine but could not identify the exact problem. Once investigators determined the problem stemmed from foreign object damage, the company used Six Sigma to trace the problem to a more fundamental manufacturing issue causing electrical issues along with the FOD.
The software company has a long history of using Six Sigma, including Lean Six Sigma tools like value stream mapping. This allowed them to analyze customer demand and recognize they needed to develop Windows CE. They needed an operating system compatible with networking, non-computer devices, televisions, and personal digital assistants. Windows CE became one of their most successful products.
Challenges and Considerations
At Six Sigma Online, our students often ask about how to calculate Six Sigma metrics and the importance of understanding statistical formulas. While understanding formulas is beneficial, the emphasis today is on understanding the results, as today’s software handles most Six Sigma calculations. The main challenge is ensuring good data quality and avoiding biased samples.
While software is reliable for calculating data, Six Sigma teams must ensure their data collection and analysis is accurate. The correct data is crucial to obtain the evidence and insights necessary to identify and solve problems and introduce improvements.
Many of the world’s largest businesses have benefited from Six Sigma, relying on its statistical quality management methods to improve processes, products, and services by removing the causes of defects. As the business landscape changes, Six Sigma professionals that learn new skills will be able to help employers maximize evolving processes and new emerging products.