How to calculate supplier (vendor) PPM?

M

m2kulkarni

Hello!
This is my first post.I have first checked that this has not been answered before but if it has, please excuse me.

We are going in for a software powered solution for our company's functions. I need a to know how to calculate a vendor's PPM. This is further required to determine his rating. We have a few other criteria for the rating apart from the PPM for the period. (such as end customer issues, delivery etc)

1) I believe that correct PPM can be calculated when the lot is 100% inspected. We are accepting the lots after sample inspection. So, if the lot is accepted, even if it contains a few defective items, the PPM will be zero.
2) If after the lot is rejected after sample inspection, the PPM for that instance will be 1000000 even when the majority of the items will be OK.
3) What when there is further rejection of vendor supplied items on our assembly line.
4) What when after case#3 above, we re-inspect the stock (our inventory) and partially accept/reject the quantity.
5) Remember, I am going to map all this to the new software program.

Can sombody help?
 

Jim Wynne

Leader
Admin
m2kulkarni said:
Hello!
This is my first post.I have first checked that this has not been answered before but if it has, please excuse me.

We are going in for a software powered solution for our company's functions. I need a to know how to calculate a vendor's PPM. This is further required to determine his rating. We have a few other criteria for the rating apart from the PPM for the period. (such as end customer issues, delivery etc)

1) I believe that correct PPM can be calculated when the lot is 100% inspected. We are accepting the lots after sample inspection. So, if the lot is accepted, even if it contains a few defective items, the PPM will be zero.
2) If after the lot is rejected after sample inspection, the PPM for that instance will be 1000000 even when the majority of the items will be OK.
3) What when there is further rejection of vendor supplied items on our assembly line.
4) What when after case#3 above, we re-inspect the stock (our inventory) and partially accept/reject the quantity.
5) Remember, I am going to map all this to the new software program.

Can sombody help?

You've listed most of the reasons that PPM as a measure of supplier performance doesn't make sense. It represents an attempt to oversimplify what you've already found is a complex issue. Some of the issues your questions raise:

  • Sampling inspection: if you reject a lot based on sampling, what happens then? Is the lot returned to the supplier? Is it sorted in your building? If the former is true, you have no way of knowing for sure how many defective parts are in the lot, so you're better off just counting lots received vs. lots accepted. If the latter is true, then you're closer to knowing how many defectives there are (100% inspection isn't always 100% effective), but how do you know that the PPM ratio will hold up over the course of many received lots? If PPM isn't internally meaningful (i.e., you don't expect to ever receive a million of the thing in question), why PPM? Because everyone else is doing it?
  • Your #3 indicates that there might be issues with your sampling, and also reinforces the idea that inspection isn't foolproof.
  • How do PPM ratings contribute to improvement of suppliers' processes? How do you know that improved PPM levels aren't the result of increased sorting by the supplier?
 

ganglai

Registered Visitor
Agree, if there is no sorting after a lot is rejected, it is better to go with lot rejected vs. lot received.

Jim Wynne said:
How do PPM ratings contribute to improvement of suppliers' processes? How do you know that improved PPM levels aren't the result of increased sorting by the supplier?]
If supplier has introduced a new tech in inspection increasing the posibility of detection of certain defect, I think that also an improvenment. Just my thought.
 
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M

MikeP

Re: How to calculate vendor (supplier) PPM?

Here is how we do it.
For defects found at receiving inspection it depends on the disposition:
Disposition of Accept Lot = 1 PPM
Disposition of Sort = Actual quantity found from sorting
Return to supplier = Quantity against PPM is based on the calculated number defective in the lot from the receiving inspeciton sample. We give the supplier the opportunity to adjust this quantity based on their sorting results.

For defects found in-process:
The actual number of defects found is counted against PPM

If it is a labeling or identificatoin type of nonconformace then we usually count them as 1.

An important axpect of calculating supplier PPM is to stay consistent and measure it the same with all suppliers. I also believe that the number of notifications to a supplier as well as the number of repeat ocurrences is another excellent meausure of supplier performace when used in conjucnction with PPM.

Mike
 

qcman

Registered Visitor
Re: How to calculate vendor (supplier) PPM?

A few customers hold me to ppm's but not too many.I do not use them against my suppliers because most are local and I'm on the phone with them as soon as rejects are found.I have found requiring them to come sort in house has reduce the amount of rejects in the first place do to the inconvenience it causes them.
 
V

vanputten

Re: How to calculate vendor (supplier) PPM?

You are mixing number of defective parts with the number of lots. either count lots or parts or defects but do not mix the unit of measure.

There is a thread called "Measuring Customer Complaints in PPM - How does your company define PPM?" that you should check out.

There is an Electronics Industry Association (EIA) standard for measuring PPM. EIA-554.

What parts per million? Lots Defective Per Million? Detected defects per Million Opportunities? Defective Parts Per Million?

"PPM" is simply a ratio.

What you are measuring = Total if you there were a million
Total Possible to measure One Million

PPM stands for Parts Per Million. What kind of parts? Good? Bad? With one defect? With multiple defects? DPPM before inspection? After inspection? Before test? After test? Internal? At one customer? At all customers?

PPM only defines a ratio of how many occurrences there have been if there were a million opportunities. But occurences of what?

I think most speak of DPPM. D = a part with at least one defect. PPM by itself is simply a ratio. We need to define what it is that we want to count per million.

If people believe there is only one way to count "PPM", and that everyone counts it the same, you are kidding yourself.

Defective parts per million? Defects per million opportunities? Defects and defective parts are different things. And at what stage in the process?

Where one measures this can make a huge difference. If someone is trying to convince you of there product performance with an internal "PPM" measure, we need to know from where in the process they have taken the measure. For example, a DPPM measure might be dramtically different before or after a 100% electrical test for electical parts.

When discussing particles suspended in a fluid, we could measure those "parts" in different ways - size, mass, density, weight, or any other characteristic.

What is it that is being counted and where in the process?

PPM by itself only indicates a ratio. It doesn't tell you anything more than that. What per a million, where, how measured, how was the data collected?

Regards,

Dirk
 
M

m2kulkarni

Re: How to calculate vendor (supplier) PPM?

Thanks to all the Gurus who have responded to my query. I have learned a lot from your replies.I regret my late response.

The vendor PPM is mainly calculated to 'rate' the vendors and also to use those PPM numbers for further improvements. The Supplier Quality Assurance department in my company uses these figures for their performance related moving charts.

Also, these numbers rate the defect because higher the PPM, more efforts are put in to bring down the PPM number.

As I am involved in implementing an ERP system which calculates the PPM based on the formulas that I feed it; I am supposed to freeze the method of calculation, which I have done as per the Quality department's directives.

The only loopholes that remain are academic by nature; just see whether you can help me here.

e.g. If supplier supplies a lot in January and rejection occures in February; what should be the PPM for Jan and Feb? (the system adds all the receipts in one month and stores it as the supply of that month, the rejection of one month is added up to calculate the rejection for one month)

In my testing the system told me:
Supply for Jan=X, rejection=0, PPM=0
Supply for Feb=0, rejection=Y, PPM=0
 
P

potdar

Re: How to calculate vendor (supplier) PPM?

My simple suggestion. If you are in the decision maker's chair, reject ppm as a measure of incoming quality because this ratio (as understood) does not really convey the performance or the reliability of your supplier. Ppm serves well as a measure of the supplier's process control - not as a measure of his outgoing (your incoming) quality.

I will clarify at the risk of sounding too basic. The supplier uses a process for making the parts to be shipped to you. This process has an inbuilt variability. So it is going to make certain parts that are defective and lie ouside your specified limits. Ppm defective is an excellent measure for measuring the possibility of such parts being produced.

It is quite possible that your supplier's process is hopelessly out of control and produces say 70% (not ppm) rejects. He inspects them, segragates them, reworks them, reinspects them, ... and finaly ships them to you. Now you find say 1 part defective in a lot of 1 million. Can you really assign a very god rating based on these results to him? Not really I would say. What is the guarantee that the next lot would maintain the same quality?

So if at all you would like to use a ppm measure, you should go to the process capability level. Working at the incoming inspection stage a simple accepted quantity / received quantity ratio is considered sufficient. Normaly this gets represented as a fraction or as a %.
 

Luisa Reis

Registered
Re: How to calculate vendor (supplier) PPM?

Hello all


I’m also to start implementing the supplier’s PPM (we’re a tier 2, based in Portugal). I thought that, as we don’t have any metric, PPM should be a good way to start.
But I’m facing the same difficulties as m2kulkarni

1. Supply for Jan=X, rejection=0, PPM=0
Supply for Feb=0, rejection=Y, PPM=0
How can I handle this?

2. lots received vs. lots accepted
We can have defective parts in many parts of the process: at incoming inspection, assembly line and at the customer.
Our incoming inspection is basically to new and critical parts.
The traceability isn’t that good, if we have e.g. a field reject, we cannot know from which lot the defective part has come.
So how can I do a metric based in lots received vs. lots accepted?


Please help!
 

Jim Wynne

Leader
Admin
Re: How to calculate vendor (supplier) PPM?

The traceability isn’t that good, if we have e.g. a field reject, we cannot know from which lot the defective part has come.
So how can I do a metric based in lots received vs. lots accepted?

It's not clear from your question who is receiving the parts. If you're referring to parts that you send to a customer, it will affect the PPM level as calculated by the customer, if that's the criterion they use. If traceability is important, and you can't do it, that's a different problem. In my opinion, as stated further up the thread, using PPM as a metric almost always makes no sense. Count the number of parts produced, and the number rejected (regardless of the source of rejection). Divide the latter by the former, multiply the result by 100, and you'll have a useful percentage that's not improved upon by projecting the result out to a hypothetical unreasonably large number.

Of course you may want to tally the sources of rejection in order to improve processes, but if you only want to know what proportion of parts is being rejected, there's no good reason to use PPM unless you're actually producing in the millions over relatively short periods of time. Of course, you might be constrained by customer requirements for PPM measurement, in which case you do what the customer requires, whether it makes sense or not.
 
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