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Home Forums Old Forums General SIGMA LEVEL FOR A COMPANY

This topic contains 4 replies, has 4 voices, and was last updated by  Marc Thys 13 years, 6 months ago.

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    Some companies ( specially in software , IT and ITES) claim that they are operating  at  a particular sigma level. I know of a BPO company which had made public statement that currently they are at 4 Sigma and their goal is to move to 5.4 Sigma
    I am little intrigued by such statements. In any company there are  a large number of processes which are at different capability level and these sigma levels are constantly changing as the customer expectations are dynamic and thus the spec limits are in ever flux.
    So when a company claims that they are operating at x sigma level, does it mean that they have chosen few of their important customer facing processes /metrics and at that point in time their average sigma level for these processes are x ( given the USL/LSL applicable  at that point in time.
    I would highly appreciate if anybody who  have insights into such calculation can throw some light.   


    I think any company publishing that kind of stats is pretty lame.
    Nevertheless, some people seem to think this kind of stuff is important so they have developed a set of formulas to do it.
    At the process level, there is something called “normalised yield”, which is defined as the nth root of the “Rolled Throughput Yield” of a process with n sub-processes. The Rolled Throughput Yield is the product of the First Pass Yield of the sub-processes.
    So now you can calculate the normalised yield of a core process.
    When you have multiple parallel processes, or multiple business units, you compute a “weighted average yield”, that takes into account the normalised yield and the relative importance (based on sales for example) of the processes.
    Finally you convert the Weighted Average Yield of the company into a sigma score.
    Something for total morons, but there you go.


    Gee Marc, he asked for insights and you gave him opinions.
    The truth is when your company gets good (say > 5 sigma), such an exercise is pretty easy.
    Why do you do it? It is one of the basics of Six Sigma – to know where to go learn and know where to go help. Implemented properly, projects are secondary to learning from those who have better process knowledge. It is the whole intent of “Knowledge Management”. Knowing your individual sigma levels (or DPMO’s, or Ppk’s, or Cpm’s) is at the base of that. Rolling them up is a simple exercise if you know the individuals.


    I believe you have touched on the essence of a large error perpetrated across our industrial base.
    Marketing loves to take something and run with it.
    Sigma levels are calculated by processes. Processes have sigma values companies do not.


    I happen to be very opiniated.
    Seriously  – a sigma score could be a bit helpful to know where to improve, but in any case not what to improve. Also, it does not take into account the efficiency (ie the Voice of the Business) nor strategic direction. Finally, it depends so much on definitions – of what is a defect, of what are the opportunities, … that it is pretty meaningless in most cases.
    So sigma scores are a very poor substitute for a business scorecard, based on proper process metrics.

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