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Vendor Sigma Levels

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  • #29495

    Edwards
    Participant

    One of our business units has a goal of reaching a sigma level of 4.19 by the year end. We are now entering into meetings with our main suppliers, and setting them goals in terms of PPM defect rate, delivery performance and lead time.  We think a good method of measuring their PPm defect rate is by giving them a sigma level goal to work to.  Bearing in mind the internal goal is 4.19, what does the forum think a reasonable sigma level would be for a supplier?

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    #75689

    RR Kunes
    Member

    What do you mean when you say “your Company” has a goal of 4.19 sigma?
    Companies do not have sigma levels processes have sigma levels. With that said: You must first define what operational definition you are using with your suppliers to quantify sigma.  On time delivery, defects per delivery, what ?
    You may have two or more sigma levels for each suppliers. The goals should be 6 sigma and you should place an improvement rate across all your suppliers forthese values so that ultimately you reach 6 or better sigma.
    Placing an artificial line and saying if you do this that is good enough will not get you where you wantto go.
    Hope this helped.
     

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    #75694

    Edwards
    Participant

    R R,
    Excuse me for not being clear in my previous post…let me clarify.  The internal goal is to reach a sigma level of 4.19 on customer returns/complaints.  We are striving to improve year on year and raise the bar each year.  Remember, whilst all compainies would like to have 6 sigma performance, it is not always cost effective to do so, could involve massive investment to get the last sigma point…so do not take your point that the goal should be 6 sigma, try thinking more clearly if you answer this posting!!
    What we are trying to impose on our suppliers is a sigma level for components we recieve from them.  What I’m trying to establish is what level we should set that at?  I don’t think it’s good enough to say to them we expect 6s performance, that’s just being unrealistic.  4.19 sigma is approx 3.5k defects per million parts supplied, that’s our internal goal…should we impose the same goal on our suppliers or make it tougher than that?
    Thanks, David
     

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    #75696

    RR Kunes
    Member

    The key to successful six sigma implementation is the stretch goals. While the ultimate goal is six sigma few if any will ever get tehre. However, incremental goals shouls be established so that your suppliers continuously improve year to year.
    Arbitrarily make a 15% annual improvement a part of their requirements.  

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    #75714

    carper
    Member

    David,
    It depends on your process customer returns/complaints. If you are purchasing a product from your subcontractors and reselling it and the only reasons customers would return/compain about the product is due to the subcontractor, then I think it’s fair to ask for 4.19 sigma from your subcontractor.
    If customer could complain about other issues like:

    Your customization of the subcontractor product
    Your installation
    Your delivery
    Accompanying paperwork/guides, etc.
    then this adds to the defects that your subcontractor might produce and hence would factor into your overall sigma level for the process.
    Does that make sense and help at all?
    Teresa 

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    #75726

    Mike Carnell
    Participant

    David,
    It is a good thing that you are addressing the supply base and getting them involved. The mistake a lot of companies make is expending company resources training the supply base. For some reason a lot of Supplier groups seem to like “teaching” them SS. I really do not understand this since they don’t teach them ISO or QS, but that is irrelevant to your question.
    Legislating a sigma level will probably go down in flames pretty quickly. The idea of a rate of improvement is probably a more practical approach. If you look back at the original Motorola program it was 10 fold every 2 years and 100 fold every 4. That meant we were managing a minimum level of improvement of about 68 percent reduction in defects per year. It has the effect of pushing organizations at the lower sigma levels to get larger pieces of improvement in a 12 month period. For the 5+ organization the improvement is smaller but they are typically addressing more difficult issues.
    If you calculate the level they are currently at and lay in the 68 percent reduction then provide them the opportunity to detail out a plan of what, how and when they will get the improvement in the next 12 months it will prevent a sales guy from just telling you “Oh yeah we can do that to.” If you do something like this you need to follow up more frequently than yearly. If it is important to the organization you measure it and work it daily. They have to be accountable.
    Another metric you might want to try is a supplier rating scale. Typically these are 100 percent to the best supplier and it goes down from there. You can get these guys to pay more attention if it is 100 percent to the perfect guy and the scale goes up (bad suppliers are greater than 100 percent). Use the rating as a multiplier on bids so that the guys that have loer quality, delivery, responsiveness, etc. end up with a bid price that reflects the extra expense of doing business with lower quality suppliers. It levels the playing field and lets the shlock suppliers from buying business on price alone. Just an idea.
    Good luck 

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