Calculating Your Baseline Sigma

A process that meets Six Sigma standards allows 3.4 defects per one million opportunities. Decreasing the Sigma increases the number of defects the process produces. Organizations that achieve Six Sigma performance have a significant quality and performance advantage over their competition.

For example, a bank that processes 360,200 credit card applications every year, where each application has nine opportunities for an error, would achieve the following results under different Sigmas of statistical performance.

Six Sigma Performance – This level of quality produces a defect-free product 99.99966% of the time. During the year, 10 application errors will require correction.

Five Sigma Performance – This level of quality produces a defect-free product 99.977% of the time. Every week the bank will be required to correct 13 application errors.

Four Sigma Performance – This level of quality produces a defect-free product 99.349% of the time. Every day, 73 applications would require correction.

Three Sigma Performance – This level of quality yields a defect-free product 93.32% of the time. Every day, 770 applications would need to be corrected.

Comparing Six Sigma level performance with lower level performance can clearly illustrate the difference that a low error rate can have on productivity and profitability. In this instance, even though both levels are defect-free over 99% of the time, when the production volume is high, a tiny difference in error rate can result in over 18,700 more errors in the Four Sigma process.

What is Your Sigma?

Organizations that understand the order of magnitude between sigma levels and how it can impact customer satisfaction and financial performance are eager to calculate and constantly monitor their baseline Sigma. Knowing a process’s baseline Sigma gives organizations clarity about how well a process is working and helps them measure the impact of their performance improvement measures.

How to Calculate Six Sigma

The calculation of a Sigma level is based on the number of defects per million opportunities (DPMO). Organizations can unlock the quality performance of their processes with a few simple pieces of information:

1. The number of units produced
2. The number of defect opportunities per unit
3. The number of defects

DPMO is equal to the number of defects times 1,000,000. This number is divided by the number of defect opportunities per unit, times the number of units. Once you have calculated defects per million opportunities you can use a conversion table or a spreadsheet formula to turn DPMO into the Sigma.

Understanding your baseline Sigma is the first step in understanding how well your process is performing and how closely it compares to a Six Sigma process.