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Calculating Defect Rates

#1
Hi!

Our Sales department wants our goal rejection rate to be 2% of sales. Would 2% of cost be better?


We do already have some simple measurements in place to monitor our quality performance (none including dollars):

1) Total Closed Rejections Orders / Total Closed Accepted Orders

2) Total Rej Qty / Total Accepted Order Qty

3) Total Rej Qty / Total Qty Produced (rej qty + accepted qty)

We have a PPM calculation for option #2 above, but should that really be calculated using formula #3?

What other ways are companies monitoring and measuring quality performance?
 

Johnny Quality

Starting to get Involved
#2
Depends on the scope of your activities I suppose. I don't like using PPM as I believe it's a meaningless metric, especially if your products are "low volume".

I'd start with a Pareto of what your returns are and go from there.
 

Bev D

Heretical Statistician
Staff member
Super Moderator
#3
formulas 1 and 2 are useless as rejects should be trended as a proportion - or percentage - of the total (rejected plus accepted)
ppm is not appropriate unless you actually process millions of orders and your rejection rate is substantially less than 1%.
(as a straight forward math calculation, ppm is no different than percentage - they both are trying to make a small number easier to digest. When ppm is used for denominators that are not in the millions or are 'predictions' based on small sample sizes and distributional models they are silly)

not sure about the percent of sales or cost. sales is a count right? if you did as a % of cost then you would have to convert the number of rejects to the $ figure they represent right? in any account you would still need to avoid the mistake of formula 1 and 2
 
#4
formulas 1 and 2 are useless as rejects should be trended as a proportion - or percentage - of the total (rejected plus accepted)
Would you then count part rework the same as remake, where each instance increases the total produced?

Example:
2 rework
1 remake
7 accepted
_______________
10 total

We are definitely low volume, so I agree that PPM seems silly. Our recent customer audit had recommended that measurement to us because that's what they use.
 
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