Cost‐based process weights for DPMO and the overall performance of an organization

Purpose – The purpose of this paper is to propose a new approach in which cost‐based process weights are used to determine a unique weighted‐defects per million opportunity (DPMO) and its corresponding overall sigma level in order to classify an organization as either “world‐class,” “industry average” or “non‐competitive.” Design/methodology/approach – In order to achieve this objective, the proposed approach uses both internal and external performances of the products and processes in terms of costs involved to determine cost‐based process weights. These weights are then incorporated into the respective DPMOs for computing weighted‐DPMOs. Finally, a unique weighted‐DPMO and its corresponding sigma level are found. Findings – The proposed method is a new one and it involves various costs for determining process weights. The findings reveal that the weight‐based overall sigma level is more realistic than the one that is calculated without weights. Further, the results of this study could provide interesting feedback to six‐sigma practitioners, as they are particular about DPMOs and return on investments in project implementations. Research limitations/implications – The results of this paper are based on the weights of respective processes and their products that are calculated using various cost aspects. Determining such weights by means of any other process and product factors incorporating the effects of various marketing activities, if any, could extend its generality and fulfil the gap. Practical implications – The proposed method is simple to implement and the required data can be collected without any additional commitments. Also, it is more generic so that it can be adapted by organizations of any nature. This paper recommends change in the practice from simply using the DPMOs with equal importance to using the weight‐based DPMOs for evaluating overall sigma level (performance) of an organization. Originality/value – The proposed approach would have a high value among six‐sigma quality practitioners and researchers as it provides a new and more realistic measure for overall performance of an organization during the evaluation process.