In Summary: How to calculate a Sigma level

In Summary: How to calculate a Sigma level

By: Thiago Coutinho

Business performance indicators have evolved over the last decades, not considering only the financial perspective because of the main reason in particular: to quantitatively reveal the effectiveness in achieving goals in the face of the improvement actions implemented.

Through them, a company can scale the effective capacity of its actions and decisions, so that a current reference value is known before any improvement strategy is executed.

It is on the basis of this initial control that the proposed and performed actions for the combat of waste and the increase of performance can be faithfully be evaluated, revealing clearly what the new index of improvement achieved.

In this way, there can be evidence of the progress of an area, company or sector over time, where hasty decisions are revealed and effective actions are measured and analyzed.

It is only by relying on benchmarks of performance that an organization can prove its success and increasingly stimulate its sustainability in the market.

In this article, you will learn a very efficient performance indicator when assessing the new level of performance achieved through the solution actions performed. You will discover how it can be used in both productive and administrative processes and service delivery, in addition, to understand why its name is related to a powerful organizational methodology: Six Sigma.

What is Six Sigma?

Six Sigma is a quality program that was developed at Motorola in the 1980s to increase the performance of companies and to promote the full satisfaction of its customers by reducing and controlling the variability of their manufacturing and administrative processes.

It became world-renowned in the late 2000s with the financial returns on the $ 1.5 billion that General Electric obtained with its deployment a few years earlier. Since then, it has ceased to be used by restricted companies around the world and has been deployed on a large scale in the most diverse business sectors.

Why the name Six Sigma?

One of the assumptions that gave rise to its name is the seemingly utopian scope of performance of a process or product at the 6 Sigma level.

The Sigma name, if you don't remember, is represented by the Greek letter meaning standard deviation - one of the most widely used measures of variation in the corporate environment. The higher the Sigma level, the lower the variability resulting from its process or product.

For example, a company that has a process working at the 1 Sigma level generates about 700,000 defects every 1 million opportunities an industry that has a process operating at level 2 Sigma about 300 thousand defects and a company that has a Level 6 Sigma process only 3.4 defects every 1 million opportunities.

Have you now understood the reason for this name? So it is to achieve this new performance that there is the Six Sigma quality program, which through its robust organizational structure, the DMAIC method and its numerous available tools, makes it possible to achieve an apparently unimaginable performance.

How to calculate and identify the Sigma level of a process?

Before I explain to you how to calculate the sigma level of a process, I will make some considerations:

*The Sigma level assessment can be performed for both goods and services processes since the product definition goes beyond something physical and can also be considered as a service.
*The classical normal distribution - bell-shaped - is represented by 3 standard deviations for each side of the mean, do you remember?
*Then, this behavior of the data generated in the process is represented by the percentage of 99.73% of conformity, whereas for a 6 Sigma level process, the percentage is 99.9997%.
*We say that a process has 6 Sigma quality when from the mean to its nearest specification limit - upper or lower - it fits exactly 6 standard deviations. The more standard deviations from the mean to the stipulated tolerance limit, the higher the process quality - and may even exceed the 6 Sigma result.
*The Sigma metric includes defects and not defective products. So, one or more defects represent a defective product but one or more defective products cannot represent more than one defect.

Now, let's go to 4 steps to Sigma!

1. Raise the number of defect opportunities (ON) per unit

As I wrote above, a unit can be understood as a product or service. The task here is to discuss and define the number of possible defects per unit from the customer's point of view.

Let's say a company sells mint gum and their customers often evaluate the taste of the chemical blend processed, the size of the chewing gum, and the quality of the packaging, but they do not care about the color of the product. In this case, ON has a value of 3 and not 4.

2. Collect process samples and count the total number of defects (DN) found

The more comprehensive the data collection plan, including the larger the number of samples collected, the better the subsequent reliability of the DPMO indicator and the Sigma level.

While DN is the acronym corresponding to the number of defects found in the sample, the UN corresponds to the number of units produced collected according to the sample.

3. Calculate the number of defects per million opportunities (DPMO)

The indicator is a result of the division of the DN multiplied by 10 high to sixth by ON multiplied by the UN.

When it is calculated the value of DPMO, it remains to be converted according to the Six Sigma table. To be clear, the formula is as follows: DPMO = ND x 106 / NO x NU.

4. Convert DPMO to level Sigma

In Summary: How to calculate a Sigma level8

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