TUM School of Management

Production and Supply Chain Management

Prof Martin Grunow Technische Universität München

Parts per Million: ppm ppm is typically

used in various
scientific fields
p = # of defective units / total number of
(i.e. chemistry) as
produced units = “fraction defective” a way of
ppm = # defective units × million units quantifying small
volumes
= p×1 million

 For a 99.379% yield at each  For a 99.99966% yield at each

step what is the ppm? step what is the ppm?
1 - p = 0.99379 1 - p = 0.9999966
p = 1 - 0.99379 = 0.0621 p = 1 - 0.9999966 = 0.0000034
ppm = 0.0621×1000000 ppm = 0.0000034×1000000
= 6210 = 3.4
Holly Ott 1
 TUM School of Management
Production and Supply Chain Management
Prof Martin Grunow Technische Universität München

Process Yield – Six Sigma

Source of Graph: Automotive News Europe (Supplement), March 2008

Example: Assume a car consists of 10000 parts and production processes.

6210 ppm  0.0062 fraction defective 3.4 ppm  0.0000034 fraction defective
at each process step or part at each step process step or part
 Process Yield = (0.99379)10000 =  Process Yield = (0.9999966)10000 =
8.84×10-28 = all vehicles faulty 0.97 = 97% !
Holly Ott 2
Quality Engineering & Management
 TUM School of Management
Production and Supply Chain Management
Prof Martin Grunow Technische Universität München

Defects vs Defectives
I produce
1. pencils
2. high precision drills
If I produce 1 million pencils and 1 million drills,
and my pencils have 30 defective units  ppm = 30
and my drills have 3000 defective units  ppm = 3000
Are my drills worse than my pencils?

Holly Ott 3
 TUM School of Management
Production and Supply Chain Management
Prof Martin Grunow Technische Universität München

DPU and DPMO

If I produce 1 million pencils and 1 million drills,
and my pencils have 30 defective units  ppm = 30
and my drills have 3000 defective units  ppm = 3000

Process Yield Pencils = (1 - ppm/1 million) = (1 - 30/1000000)

= 0.99997 = 99.997%
Process Yield Drills = (1 - ppm/1 million) = (1 - 3000/1000000)
= 0.997 = 99.7%
The process yield is higher for the pencils.
But are my drills worse than my pencils?

Holly Ott 4
 TUM School of Management
Production and Supply Chain Management
Prof Martin Grunow Technische Universität München

Defects vs Defectives
A defect occurs during any process when the outcome of the process
is not the expected outcome.
There can, however, be multiple opportunities for a defect.
Additionally, an item is only defective when it is considered
unacceptable due to one or more defects.
To take this into account we can use additional measures
• DPU: Defects per Unit, the average number of defects per unit of
product
• DPMO: Defects per Million Opportunities

Holly Ott 5
 TUM School of Management
Production and Supply Chain Management
Prof Martin Grunow Technische Universität München

DPU and DPMO

Defects per Unit (DPU) is a measure of the average number of defects
per unit:
DPU = Total # of Defects
Total # of Units

Defects per Million Opportunities (DPMO) differentiates between

products with many "Defect Opportunities" (drill) and those with few
defect opportunities (pencils). If each unit has several opportunities per
unit to be defective, then we can use the metric DPMO, Defects per
Million Opportunities:
DPMO = DPU×1000000
Total Opportunities for a Defect in One Unit

= Total # of Defects×1000000
Holly Ott
Total # of Units × Total Opportunities for a Defect in One Unit
6
 TUM School of Management
Production and Supply Chain Management
Prof Martin Grunow Technische Universität München

DPMO: Process A and Process B

Let’s look at two processes Process A and B. We process 10 units
through each.
Process A had 9/10 good units; Process B had 5/10 good units.
Unit 1 Unit 2 Unit 3 Unit 4 Unit 5
Process Process Process
Step 1 Step 2 Step 3 Unit
Unit 6 Unit 7 Unit 8 Unit 9
10

Process A Yield = 9/10 = 90%

Unit 1 Unit 2 Unit 3 Unit 4 Unit 5

Process Process Process
Step 1 Step 2 Step 3 Unit
Unit 6 Unit 7 Unit 8 Unit 9
10
Based on Process Yield, Process A is better
than Process B. Process B Yield = 5/10 = 50%

Let’s look at the DPMO for each Process.

Holly Ott 7
 TUM School of Management
Production and Supply Chain Management
Prof Martin Grunow Technische Universität München

DPMO: Consider Defect Opportunities

Assume each unit has 8 defect opportunities. = defect

Unit 1 Unit 2 Unit 3 Unit 4 Unit 5

Process Process Process
Step 1 Step 2 Step 3 Unit
Unit 6 Unit 7 Unit 8 Unit 9
10

Process A Yield = 9/10 = 90%

Unit 1 Unit 2 Unit 3 Unit 4 Unit 5

Process Process Process
Step 1 Step 2 Step 3 Unit
Unit 6 Unit 7 Unit 8 Unit 9
10

Is Process A actually better than Process B? Process B Yield = 5/10 = 50%

Let’s look at the DPMO for each Process.
DPMO = Total # of Defects×1000000
Total # of Units × Total Opportunities for a Defect in One Unit
Holly Ott 8
 TUM School of Management
Production and Supply Chain Management
Prof Martin Grunow Technische Universität München

DPMO: Consider Defect Opportunities

Assume each unit has 8 defect opportunities. = defect

Unit 1 Unit 2 Unit 3 Unit 4 Unit 5

Process Process Process
Step 1 Step 2 Step 3 Unit
Unit 6 Unit 7 Unit 8 Unit 9
10

Process A Yield = 9/10 = 90%

Unit 1 Unit 2 Unit 3 Unit 4 Unit 5

Process Process Process
Step 1 Step 2 Step 3 Unit
Unit 6 Unit 7 Unit 8 Unit 9
10
Both processes generate 5 defects.
Process B Yield = 5/10 = 50%
Total # of Defects×1000000
DPMO = Total # of Units × Total Opportunities for a Defect in One Unit

Process A: DPMO = (5)(1000000)/(10×8) = 62,500

Holly OttB: DPMO = (5)(1000000)/(10×8) = 62,500  Same as Process A
Process 9
 TUM School of Management
Production and Supply Chain Management
Prof Martin Grunow Technische Universität München

DPMO: Defects per Million Opportunities

DPMO = DPU×1000000
Total Opportunities for a Defect in One Unit

= Total # of Defects×1000000
Total # of Units×Total Opportunities for a Defect in One Unit

Notice that here we are talking

about defects, not defectives!
Difference to ppm?
DPMO: Parts or processes can have more than one defect opportunity.
vs. ppm which is # defective units / million units

Holly Ott 10
 TUM School of Management
Production and Supply Chain Management
Prof Martin Grunow Technische Universität München

http://asq.org/quality-prFor a good
Yield, ppm and DPMO explanation, see:
ogress/2009/08/34-per-million/perusing-
process-performance-metrics.html

p = # of defective units / total number of produced units (“fraction

defective”)
Yield = # good units produced at a process step / # total units going
into the process step = 1- p
ppm = # defective units / million units = p×1 million
DPMO = Total # of Defects×1000000
Total # of Units×Total Opportunities for a Defect in One Unit
Now, if there is only 1 defect possible per unit, then the #defects will
be equivalent to the # of defective units (every defect will produce a
defective unit)
DPMO = Total # of Defectives×1000000 = ppm
Total # of Units×(1)
ppm and DPMO are often used interchangeably in industry and we
will look at this again in the context of Six Sigma. 11
Quality Engineering and
 TUM School of Management
Production and Supply Chain Management
Prof Martin Grunow Technische Universität München

Measuring Defect Rate

Why not just measure the defect rate directly?
• Defect rate is hard to measure when defects are rare.
• If we identify a key variable – a variable that is "Critical-To-Quality"
for the product, then we can monitor this variable to help us
monitor the defect rate. We will call this variable the "CTQ"
variable.
• The distribution of the key variable and its relation to the
specification limits offers insights into how the defect rate can be
reduced (target the mean, reduce variation or do both).
• Measuring the distribution of the key variable is straightforward
when control charts are used for the key variable.

Holly Ott 12
 TUM School of Management
Production and Supply Chain Management
Prof Martin Grunow Technische Universität München

What to do about Defects?

Detect Defects Early
Early detection/inspection is better than late detection/inspection.
Why?
 If a problem is detected early, the number of defects can be
reduced, capacity can increase and internal failure costs can be
reduced.
 If a problem is detected early, the cause can be identified more
easily.
 Culture that encourages workers to bring attention to problems.
 Built-in tests that signal problems automatically and immediately.

Holly Ott 20
 TUM School of Management
Production and Supply Chain Management
Prof Martin Grunow Technische Universität München

What to do about Defects?

Prevent Defects
Prevention is better than inspection. Why?
Inspection
 adds non-value added costs and capital for the inspection step
 does not remove the costs of scrap or rework
 is never perfect (defects slip through)
 removes responsibility
 can become a bottleneck
Prevention (quality at the source) typically costs less than the
combination of inspection, internal and external failure costs. How?
Eliminate defects by developing capable business processes, through
standardization and continuous improvement  Six Sigma

Holly Ott 14
 TUM School of Management
Production and Supply Chain Management
Prof Martin Grunow Technische Universität München

Impact of Defects
Measuring Defect Levels

Prof. Holly Ott

Production and Supply Chain Management
Chair: Prof. Martin Grunow
TUM School of Management

Holly Ott 15