The term DPMO or defects per million opportunities is one of the important six sigma metrics. This value allows you to determine how effective your process is. It also allows for a comparison between processes.
Similar to PPM or parts per million, DPMO provides a more in depth look at process effectiveness. PPM is a calculation where each individual output is considered one opportunity. Consider it to be almost the same as a first time pass percentage.
The main issue with using PPM is that it is unfairly weighted toward high volume production activities. Lower volume processes are adversely affected by a single reject. In the following example we'll show you how this happens.
PPM is calculated using the equation (D/U)* 106, where D= the number of defectives, U= the number of units produced. If the process had 300 defectives in a month and 100,000 units were produced, the PPM would be (300/100,000)* 106, or 3000 PPM. If the same process exhibits 400 defectives the following month, the PPM for that month would be 4000, an important and statistically significant increase.
Suppose a different process produced 5000 units per month, and had 300 and 400 defectives over the past 2 months. The PPM for the first month would have been 60,000, and the second month would have been 80,000!
At first glance it appears that the second process is in dire need of improvement. The first process also appears to be in need of improvement as well, but the second process definitely appears to be worse than the first.
This, however, may not be the truth. PPM, while a decent metric, fails to account for the complexity of a process. It is unreasonable to assume the ability to compare two different processes without finding a way to equalize them. This is where defects per million opportunities come into play.
The defects per million opportunities metric accounts for this process complexity by factoring in the number of value-added opportunities in the process. In other words, how many process steps actually add value to the end product? A value-added step is one that the customer is willing to pay for.
Adding non-value added steps into the defects per million opportunities equation is a very bad idea.
Do not make your processes appear to be better than they are!
This is called Gaming the Process.
The equation for defects per million opportunities is very similar to the equation for PPM, but now we're adding the number of opportunities into the equation.
DPMO= (D/(U*N))* 106,
where D= Number of Defectives
U= Number of Units Produced
N= Number of Opportunities for Errors per Unit
Using the same information from the example, we'll now show how the DPMO metric is much more valuable than PPM. From the previous example we'll also add the number for opportunities for mistakes to be made:
Inserting the values for process #1 into the DPMO equation shows
(300/(100,000*2))* 106= 1500
While process #2 shows
(300/(5000*200)* 106= 300
This clearly shows how important it is to understand process complexity when making decisions regarding which process actually needs to be improved first. At first glance process #2 looked like the most likely candidate for improvement, yet in actuality it was process #1 showing a much larger defects per million opportunity value.
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