The TQM Magazine

Cost-based process weights for DPMO and the overall performance of an organization
J. Ravichandran
Article information:
To cite this document:
J. Ravichandran, (2007),"Cost-based process weights for DPMO and the overall performance of an
organization", The TQM Magazine, Vol. 19 Iss 5 pp. 442 - 453
Permanent link to this document:
http://dx.doi.org/10.1108/09544780710817865
Downloaded by UNIVERSITY OF HONG KONG At 17:57 25 March 2016 (PT)

Downloaded on: 25 March 2016, At: 17:57 (PT)

References: this document contains references to 16 other documents.
To copy this document: permissions@emeraldinsight.com
The fulltext of this document has been downloaded 783 times since 2007*
Users who downloaded this article also downloaded:
(2004),"Top managers' national diversity and boundary spanning: Attitudinal indicators of a firm's
internationalization", Journal of Management Development, Vol. 23 Iss 9 pp. 848-859 http://
dx.doi.org/10.1108/02621710410558459
(1998),"The Handbook of International Financial Terms98436. The Handbook of International Financial
Terms. Oxford: Oxford University Press 1997. lxxix + 605 pp, ISBN: 0 19 828885 9 £65.00", Reference
Reviews, Vol. 12 Iss 8 pp. 20-20 http://dx.doi.org/10.1108/rr.1998.12.8.20.436
(2010),"What are business models? Developing a theory of performative representations", Research in the
Sociology of Organizations, Vol. 29 pp. 265-275 http://dx.doi.org/10.1108/S0733-558X(2010)0000029020

Access to this document was granted through an Emerald subscription provided by emerald-srm:375684 []
For Authors
If you would like to write for this, or any other Emerald publication, then please use our Emerald for
Authors service information about how to choose which publication to write for and submission guidelines
are available for all. Please visit www.emeraldinsight.com/authors for more information.
About Emerald www.emeraldinsight.com
Emerald is a global publisher linking research and practice to the benefit of society. The company
manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as
providing an extensive range of online products and additional customer resources and services.
Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee
on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive
preservation.
 *Related content and download information correct at time of download.
Downloaded by UNIVERSITY OF HONG KONG At 17:57 25 March 2016 (PT)
 The current issue and full text archive of this journal is available at
www.emeraldinsight.com/0954-478X.htm

TQM
19,5 Cost-based process weights for
DPMO and the overall
performance of an organization
442
J. Ravichandran
Department of Mathematics, Amrita Vishwa Vidyapeetham, Coimbatore, India

Abstract
Purpose – The purpose of this paper is to propose a new approach in which cost-based process
Downloaded by UNIVERSITY OF HONG KONG At 17:57 25 March 2016 (PT)

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.
Keywords Cost benefit analysis, Organizational performance, Six sigma
Paper type Research paper

Introduction
An organization’s performance depends on how well its products are selling in the
marketplace amid severe competition from every direction. Such an external
performance, in fact, stems from related internal processes at operational level,
notwithstanding the support of various marketing strategies. Hence, in this
The TQM Magazine internal-external scenario, if the processes can give higher quality products,
Vol. 19 No. 5, 2007
pp. 442-453
q Emerald Group Publishing Limited
0954-478X
The author would like to thank the anonymous referee for his useful comments on the earlier
DOI 10.1108/09544780710817865 version of this paper.
 preferably at lower prices, then they will have a direct impact on the performance of Cost-based
those products in the market. process weights
On the other hand, while the factors such as length, number and complexity of
processes may have consequences on the importance of the respective processes, it is
believed that a product’s share in the overall performance of the organization plays
a major role in determining the importance of its process (es). Therefore, in my
opinion, a process gets due attention for improvement based on the performance of its 443
products and the degree of their acceptance in the marketplace. In fact, this is the key
motivational factor over which this paper aims to develop.

Evolution of six sigma, DPMOs and ROI

Quality management concepts, such as total quality management (TQM), allow firms to
Downloaded by UNIVERSITY OF HONG KONG At 17:57 25 March 2016 (PT)

obtain a high degree of differentiation from their competitors, satisfying customers’

needs, and strengthening brand image. In addition, by allowing improvements in the
processes, these concepts help firms to reduce costs by preventing mistakes and time
wasting. This stresses the existence of internal-external relationship among processes
and their products (Claver et al., 2003). Ever since the concept of six-sigma quality has
come into being, the new equation of achieving TQM is to add six sigma into the current
business of an organization. This is evidenced from the success story of one of the first
recipients of Baldrige Award, the Motorola Inc., which introduced and propagated the
six-sigma quality program to reach this milestone (McFadden, 1993; Klaus, 1997).
In fact, six-sigma quality program started with a goal of 3.4 defects per million
opportunities (DPMOs). There are many studies in the literature that concentrated on
determining DPMOs and corresponding sigma levels from different perspectives.
For example, Fontenot et al. (1994) discussed the analysis of a customer satisfaction
survey data and presented a method of calculating sigma level for a customer
satisfaction attribute. Ravichandran (2006a) proposed a method for setting up a
quality specification by comparing the actual and the expected DPMOs and their
sigma levels. Further, Thiraviam (2006) used simple tools to identify key categories of
an assembly station and determined DPMOs both category wise and in total.
Interestingly, the six-sigma concept has evolved over the years and the present
trend is to convert all DPMOs in terms of cost, which is one of the prime measures of
organizational performance in today’s business (Freiesleben, 2004; Ferryanto, 2006;
Stahl, 2006). Further, this aspect can be realized from the fact that even for the approval
of a proposed project, the six-sigma professional has to inspire the board of approval
authorities by providing the prospective cost benefits with reduced DPMOs over the
investment, the so-called return on investment (ROI) (Palmer, 2006; Westcott, 2005).
Also, while defining six sigma in his recent publication, Parr (2006), who worked
on many six-sigma projects, has observed that six sigma is a method for reducing
variation in manufacturing, service, or other business processes and that six-sigma
projects measure the cost-benefit of improving processes that are producing
substandard products or services. However, from his own experiences, Parr further
revealed that most of the six-sigma implementations fail to include many key activities,
such as the financial analysis of six-sigma projects and the related products and
processes. According to Parr, financial analysis, specifically the ability to do a precise
and careful analysis of a project using the concepts of net present value and internal
rate of return, is found to be still in short supply among many six-sigma practitioners.
 TQM In all, the above discussions clearly point out that the cost-related studies in
19,5 six-sigma programs need extensive attention in order to achieve higher profits by
minimizing the cost of poor quality (the cost of DPMOs). Relating the value of products
and processes by means of costs involved, six-sigma practitioners can identify and
prioritise value-added projects for achieving higher organizational performance with
lower defect rates. Therefore, since cost-related studies by six-sigma practitioners are
444 always welcome as it could add to the ROI in six sigma projects, utmost importance
has been given to the incorporation of cost aspects in determining the weights of
processes. Hence, the proposed approach encourages extensive cost effective
process/quality improvement exercises for those who work with a goal of just
3.4 DPMOs.
Downloaded by UNIVERSITY OF HONG KONG At 17:57 25 March 2016 (PT)

Overall sigma level

In a six-sigma quality program, one of the performance measures of an organization is
the sigma quality level. In fact, in the literature on six sigma, an organization can be
classified as either “world-class” or “industry average” or “noncompetitive” based on
the sigma level it achieves at a given point of time as given in Table I (Harry, 1998;
Lucas, 2002). However, in an organization, different processes may not have the same
importance levels (weights) and sigma levels at a point of time. This interesting aspect
is described by Harry (1998), who demonstrates that when the company reaches its
“Industry Average” status at a point of time, various critical processes are shown to be
at different sigma levels.
While workmen are well experienced in evaluating processes and their products
(Claver et al., 2003), such an evaluation is more meaningful if they can prioritise
those processes and products according to some beliefs or actual values in terms of
costs for determining the weights. Consequently, the weights obtained so need to be
incorporated into the DPMOs resulted out of the respective processes which in turn
would help to determine an overall sigma level corresponding to the weighted-DPMO.
Organizations often struggle to do this exercise due to lack of methods and expertise.
Ravichandran (2006b) developed a method for determining the weight-based overall
sigma level of an organization. However, following his work, there remained a number
of queries on how to determine the process weights. In addition, the fact that financial
analyses are lacking their inclusion by six-sigma practitioners prompted this research
to address this topic. Hence, in this paper, a method is proposed that first obtains the
cost-based process weights and then incorporates the same into DPMOs for calculating
the overall sigma level. The overall sigma level so obtained would reflect the degree of
overall performance of an organization at a point of time.

Sigma level DPMO Category

6 3.4 World-class
5 230 Industry average
Table I. 4 6,200
Classification of an 3 67,000
organization using sigma 2 310,000 Non-competitive
levels 1 700,000
 Product types Cost-based
In order to cater to the varying needs of customers, organizations often manufacture process weights
products of different types that may fall into one of the following four categories:
(1) high quality, highly priced;
(2) low/moderate quality, low/moderately priced;
(3) high quality, low/moderately priced; and 445
(4) low/moderate quality, highly priced.

From a manufacturer’s perspective, while the first two are obvious, the remaining two
may occur due to changing demand in the marketplace. However, from the customer’s
perspective, there are customers for the first three categories and the last category
Downloaded by UNIVERSITY OF HONG KONG At 17:57 25 March 2016 (PT)

“low/moderate quality, highly priced” does exist either if the customers are unable to
judge quality before buying the product or if the market is not transparent in terms of
pricing. Hence, there exists a class of customers for each of the above categories. Ferrer
and Swaminathan (2006) studied modelling of different product mix (new and
remanufactured) with proper quantity and pricing for specific customer bases so as to
maximize the profit with relevant constraints. Such classes/customer bases are termed
as “target customer groups” with the aim to determine the weights of the respective
processes and their products.
Does an organization sell everything it produces to a target customer group? If not,
what is the fate of the processes involved? These questions need to be addressed with
known evidences, particularly from the records. In this respect, after studying the
behaviour of the products among the target customer groups with regard to cost,
quality, etc. one has to trace back the importance of the respective processes from which
they were produced. The cost of production per unit is another important parameter that
needs attention as it directly reflects the importance of the relevant processes. These
aspects are evidenced from the column, “Featured Company,” that appears in almost
every issue of Six-Sigma Forum magazine. In all, the successful six-sigma companies
present their improved financial performances (such as profits, reduction in cost per unit
produced and other intangible gains), as a result of implementation of six sigma.

Role of product and process performances

An organization’s overall performance with regard to quality and cost depends on the
degree to which its products are sold among the target customer groups. Many
survey-based studies such as the one reported by Claver et al. (2003) stand as evidence to
this effect. With an assumption that the influence of various marketing strategies is
insignificant across products and their target customer groups, it is reasonable to note that
the performance of products stems from the performance of processes that produce these
products. At an operational level, the performance of the products differs in the number,
length and complexity of their processes. This could have consequences for the calculation
of the weight of the processes. However, it may be noted that the influence these process
factors is assumed as already taken into account while determining the cost of product.
Therefore, processes of any degree of complexity, length and number would always get
their relative importance while weights are computed from various cost aspects.
Taking into account the assumptions made, it is important to note that a DPMO
produced by a process with higher weight should not be treated on a par with the one
 TQM that is produced by a process with lower weight. In other words a DPMO of higher cost
19,5 product is not the same as a DPMO of lower cost product. For example, for a
manufacturer, the processes that produce Product A with higher cost will get more
weight than the processes that produce Product B with lower cost provided that the
assumptions hold good. As a result, a reject (a DPMO) in Product A is not equivalent to
a reject (a DPMO) in Product B because a unit of Product A may be worth many units
446 of Product B.
Therefore, it is meaningful to determine the weights of processes by incorporating the
costs involved which in turn will be used to obtain the overall weighted-DPMO. Now,
corresponding to this unique weighted-DPMO, the overall sigma level that reflects the
overall performance of an organization can be determined. An overview of this scenario
is depicted by a flow diagram as shown in Figure 1. The two-way flow everywhere in
Downloaded by UNIVERSITY OF HONG KONG At 17:57 25 March 2016 (PT)

Figure 1 shows that the products and processes influence the performances of each other
and hence are undergoing continuous improvement every time.
As discussed earlier, identifying one or more processes as critical depends on the
degree of importance of the products to their respective target customer groups. If a
product is doing well in terms of both cost and quality, then the quantum of sales will
be higher among the target customer groups. This has prompted the suggestion that
“ratio of sales to dispatch” in terms of cost is used to measure the degree of importance
of the products among target customer groups. Similarly, in addition to the use of
factors, such as overheads and raw materials, the number, length and complexity of
processes are also assumed to be considered in determining the cost of products.
This aspect has supported the use of “unit cost” of the products to measure the degree
of importance of the relevant processes that manufactured those products. These
two measures are then combined to determine the required process weights.

Figure 1.
Link from process to
product to customer and
vice-versa
 Product importance based on external input Cost-based
Selling products in today’s competitive marketplace is of prime concern to many process weights
organizations. Since, the overall performance of an organization depends on the degree at
which its products perform among the respective target customer groups, the financial
returns from the sale of these products would reflect its importance in the market.
When a certain volume of a product (dispatch) is targeted for a customer group, the
volume of sale depends on its performance with regard to quality, cost and customer 447
requirement. Let CS1 be the cost of volume sold of product P1 and CD1 is the cost of
volume dispatched. Similarly, such costs for product P2 are CS2 and CD2, respectively,
that may be different from those of product P1. Now, the ratio of sales to dispatch of each
product is used to measure the degree of its performance in the target customer group.
In this regard, the following data are obtained and placed in the columns marked as
Downloaded by UNIVERSITY OF HONG KONG At 17:57 25 March 2016 (PT)

(1)-(3) of Table II:

.
Cost of dispatch. The cost of volume dispatched to the target customer group.
. Cost of sales. The cost of actual volume sold to the target customer group out of
the volume dispatched (It may be noted that the entire dispatched volume may
not be sold always).
.
Ratio 1. The ratio of cost of sales to cost of dispatch. The higher the ratio the
higher the importance of the product.

The above data are gathered for each of the products dispatched to the respective
target customer groups. This analysis helps to obtain the degree of importance of the
products in the overall marketing scenario.

Process importance based on internal input

A product is produced by one or more processes that may vary from simple to complex
and may involve many sub processes. As always, depending on the various inputs
involved such as overheads and raw materials and also the number, length and
complexity of processes, the cost per unit produced is determined. However, the
rejection of a unit product during or after its production leads to the loss equal to its
unit cost and this, in fact, would distinguish the processes that produce low-unit cost
product from the processes that produce high-unit cost product.
It is assumed that the unit cost of a product is UC1. If this product is rejected at the
process level, then there is a loss of cost equal to UC1. For other products, this cost is
UC2. UC2 may be higher or lower than UC1 and so on. Therefore, the processes would
get their due weights from the corresponding production cost per unit.
For determining the importance of the processes involved, the following data are
collected and posted in the columns marked as (4)-(6) of Table II.
(1) Unit cost. The cost of each unit produced by the respective processes.
(2) Total of unit costs. Total of the unit costs of all products.
(3) Ratio 2. Ratio of the unit cost to the total of the unit costs of all products put
together. The higher the ratio the higher the importance of the process.

The above data are gathered for each of the processes from the unit costs of their
respective products. This analysis helps to obtain the degree of importance of
processes in the overall production scenario.
 Downloaded by UNIVERSITY OF HONG KONG At 17:57 25 March 2016 (PT)

19,5

448
TQM

Table II.

combined weights
Details on product
process importance and
Product importance Process importance
Cost of Cost of Ratio 1 Set of processes/ Unit Ratio 2 Percentage of ((3) þ (6))/(7)
S.No. Product sales (1) dispatch (2) (3) ¼ (1)/(2) Sub-processes cost(4) (6) ¼ (4)/(5) (combined weight)

1 P1 CS1 CD1 RS1 PS1 UC1 RU1 W1

2. P.2 CS. 2 CD 2 RS 2 PS. 2 UC 2 RU 2 W. 2
.. .. .. ... ... .. ... ... ..
n Pn CSn CDn RSn PSn UCn RUn Wn
Total (5) Total (7)
 Combining product and process weights Cost-based
Using information based on the performance of the processes and their products, the
percentages of weights as given in the last column of Table II are calculated. It may be
process weights
noted that these percentage weight values are obtained by adding columns (3) and (6),
and dividing this sum by total (column 7) and then multiplying by 100. These weight
values represent process weights that can be assigned
P to the respective DPMOs. Note
that the total weight adds to 100 per cent, i.e. ni¼1 W i ¼ 100%for n processes. 449
Cost-based weighted DPMO: the overall sigma level
This approach is adapted from the work of Ravichandran (2006b). In his work,
Ravichandran (2006b) proposed a method for determining the overall weight-based
sigma level of an organization. Though he presented a number of illustrative examples
Downloaded by UNIVERSITY OF HONG KONG At 17:57 25 March 2016 (PT)

using various arbitrary combinations of process weights and sigma levels and their
effect on the overall sigma level, there have been a lot of queries about how to choose
the process weights. Therefore, in this paper first an approach for determining the
cost-based weights of processes is developed and then these weights are used to obtain
the overall sigma level as suggested by Ravichandran (2006b).
Accordingly, the cost-based weights of the processes are computed as shown in
Table II. Now, the data on DPMOs from these processes are collected from records.
It may be noted that each DPMO consists only of the collective rejection of a unit
product by one or more processes given the million opportunities for a product to be
defective. Therefore, each DPMO would be weighted by the respective process weight.
Now consider the rejection of a highly priced unit and a lowly priced unit from their
respective processes. If no weights are assumed then both the rejects will become part
of the overall DPMO with equal importance. This is not at all realistic. This aspect is
observed in the illustrative example given below. This is like equating a rejection in
Product A with that of Product B after paying due attention to their processes with
regard to number, length complexities and other factors in determining the weights.
Hence, a weighted DPMO is more meaningful than the one that is considered without
weight.
Using the data on DPMOs and their corresponding weights the process wise
weighted DPMOs are calculated as shown in Table III.
Now, the total weighted-DPMO from n processes is obtained as:
X
n
W i ðDPÞi :
i¼1

Corresponding to this DPMO, the overall sigma level, say K, can be calculated
either using the Normsinv function available in Microsoft Excel or from any readily

Original process-wise
Process (es) Weight (W) sigma level DPMO Weighted DPMO ¼ W £ DPMO

PS1 W1 K1 DP1 W1 £ DP1 Table III.

PS W. 2 K. 2 DP W2 £. DP2 Details on process
... ...
2 2
.. .. .. weights, DPMOs and
PSn Wn kn DPn Wn £ DPn weighted-DPMOs
 TQM available tables such as Table I. This overall sigma level will help the organization
to know whether it is a “world-class” or “industry average” or “non-competitive”
19,5 organization as shown in Table I.

Illustrative example
In order to understand the application of the proposed approach, Company X that
450 manufactures five products utilising five different processes is considered. Necessary
data are collected from records according to Table II and the process-wise cost-based
weights are obtained and presented in Table IV. Corresponding to these five processes,
the original sigma levels and their respective DPMOs are also collected from records
and given in Table V. The last column of Table V shows the weighted DPMOs against
the five processes. Now, the total DPMO and its sigma level are given as:
Downloaded by UNIVERSITY OF HONG KONG At 17:57 25 March 2016 (PT)

X
n
Total weighted DPMO ¼ W i ðDPÞi ¼ 16; 177:98
i¼1

Let q ¼ 16,177.98/1,000,000 ¼ 0.01617798. Then the overall sigma quality level,

K ¼ 1.5 þ NORMSINV (1 2 0.01617798) ¼ 1.5 þ 2.14 ¼ 3.64. Hence, we conclude
that the organization has achieved an overall sigma level of 3.64 and this falls into
the category of “industry average” (Table I). It may be remembered in this case that the
organization is not being categorised as of “world-class” though it has achieved
six-sigma level in two of the five critical processes.
On the other hand, if we simply add the DPMO values then the total becomes
90,917.75 DPMO whose sigma quality level K ¼ 1.5 þ NORMSINV
(1 2 0.09091775) ¼ 1.5 þ 1.34 ¼ 2.84 which is not at all realistic since the
minimum original sigma level achieved in Table V is 3.0.
From this particular example, it is observed that the lower sigma level has resulted
in a higher number of weighted-DPMOs. But, this need not always be the case. For
example, let us consider the processes PS3 (with 3 sigma level) and PS4 (with 3.5 sigma
level) given in Table V. If we assume that the combined weight obtained according to
Table IV for Process P3 as 10.2 percent instead of 15.2 percent and for process P4 as
30.5 percent instead of 25.5 percent, then the weighted-DPMO for Process P3 is 6,815
and for process P4, it is 6,939. Hence, the process with the lower sigma level could also
have a lower weighted-DPMO.
Therefore, the weighted-DPMO works reasonably well in providing a meaningful
sigma level as illustrated in the example. The cost aspects are, in fact, used to
determine such process weights, which in turn are used to obtain the weighted-DPMO.
At the same time, the results so obtained from the cost-based analysis are also useful
for six-sigma practitioners in identifying cost-based projects.
For more details and illustrative examples on weight-based sigma level, the reader
is referred to the paper by Ravichandran (2006b).
It may be noted that considering only the rejects does not mean that the process level
parameter problems are overlooked, such as those of number, length, and complexity
of processes. In fact, the DPMOs at all levels of processes and sub-processes ultimately
lead to the acceptance/rejection of the final product. Hence, each designated DPMO of
the critical processes has to be accounted with its respective weight determined
from both the product and process importance factors as recommended in this study.
 Downloaded by UNIVERSITY OF HONG KONG At 17:57 25 March 2016 (PT)

Product importance Process importance

Cost of Sales Cost of dispatch Ratio 1 Ratio 2 Percentage of ((3) þ (6))/(7)
S.No. Product (Rs in crores) (1) (Rs in crores) (2) (3) ¼ (1)/(2) Process Unit cost (4) (6) ¼ (4)/(5) (combined weight)

1 P1 25 30.0 0.833333 PS1 210 0.295775 21.4

2 P2 10 10.5 0.952381 PS2 135 0.190141 21.7
3 P3 8 12.0 0.666667 PS3 95 0.133803 15.2
4 P4 5 5.0 1.000000 PS4 250 0.352113 25.5
5 P5 5 6.0 0.833333 PS5 20 0.028169 16.3
710 (5) 100 (7)

combined weights
process weights
Cost-based

product importance and

Data on process and
451

Table IV.
 TQM These extensive analyses encourage the operators and six-sigma practitioners who
19,5 work with a goal of just 3.4 DPMO to become involved in process/quality improvement
activities and achieve higher level of ROI.

Conclusions
In a six-sigma quality program, a unique overall sigma level (3 sigma, 4 sigma, 6 sigma,
452 etc.) must be known for classifying an organization into one of the three categories
discussed earlier. Unless or otherwise, the process weights are equal, determining such
an overall sigma level by assigning equal weights to the DPMOs produced by different
processes appears to be unrealistic as these processes could be of different importance.
Hence, a more realistic weight-based DPMO approach for obtaining the overall sigma
level has been developed by Ravichandran (2006b). However, determining the weights
Downloaded by UNIVERSITY OF HONG KONG At 17:57 25 March 2016 (PT)

of different processes is a complicated activity though it is at the discretion of each

organization.
With this idea in mind and due to the fact that cost-based analyses by six-sigma
practitioners are welcome as it could add on to the ROI in six-sigma projects, this paper
has attempted to incorporate the cost aspects drawn from both internal and external
inputs with regard to products and their respective processes for determining the
process weights in a simple and feasible way. The cost-based process weights are
useful in obtaining the overall sigma quality level that is an important measure for
managers to judge the performance of an organization. At the same time, the results
obtained from the cost-based analysis are of prime importance to six-sigma
practitioners for identifying value-based projects. Since, the approach proposed here is
generic, its use is recommended for all types of organizations, i.e. manufacturing,
service, healthcare, financial, etc.
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 other process and product factors, if any, would extend its generality.
This paper has two important limitations:
(1) The influence of various marketing strategies on the sale of products is
assumed insignificant across products and target customer groups.
(2) The number, length and complexities of processes are assumed as taken into
account during the determination of cost of products.

Future work will address the feasibility of including specific influences of these
additional factors, if any, on process weights.

Original process-wise Corresponding Weighted

Process (es) Weight (W) sigma level DPMO DPMO ¼ W £ DPMO

PS1 21.4 6.0 3.4 0.7276

Table V. PS2 21.7 6.0 3.4 0.7378
Data on process weight, PS3 15.2 3.0 66,810.63 10,155.22
DPMOs and PS4 25.5 3.5 22,750.35 5,801.25
weighted-DPMOs PS5 16.3 4.5 1,349.97 220.05
 References Cost-based
Claver, E., Tari, J.J. and Molina, J.F. (2003), “Critical factors and results of quality management: process weights
an empirical study”, Total Quality Management, Vol. 14 No. 1, pp. 91-118.
Ferrer, G. and Swaminathan, J.M. (2006), “Managing new and remanufactured products”,
Management Science, Vol. 52 No. 1, pp. 15-26.
Ferryanto, L. (2006), “Why is quality job No. 1?”, Six Sigma Forum Magazine, Vol. 5 No. 2,
pp. 22-5. 453
Fontenot, G., Ravi, B. and Gresham, A. (1994), “Six sigma in customer satisfaction”, Quality
Progress, Vol. 27 No. 12, pp. 73-6.
Freiesleben, J. (2004), “Quality problems and their real costs”, Quality Progress, Vol. 37 No. 12,
pp. 49-55.
Downloaded by UNIVERSITY OF HONG KONG At 17:57 25 March 2016 (PT)

Harry, M.J. (1998), “Six sigma: a breakthrough strategy for profitability”, Quality Progress, Vol. 31
No. 5, pp. 60-4.
Klaus, L.A. (1997), “Motorola brings fairy tales to life”, Quality Progress, Vol. 30 No. 6, pp. 25-8.
Lucas, J.M. (2002), “The essential six sigma”, Quality Progress, Vol. 35 No. 1, pp. 27-31.
McFadden, F.R. (1993), “Six-sigma quality programs”, Quality Progress, Vol. 26 No. 6, pp. 37-42.
Palmer, B. (2006), “Selling quality ideas to management”, Quality Progress, Vol. 39 No. 5,
pp. 27-34.
Parr, W. (2006), “Making six sigma last”, Six Sigma Forum Magazine, Vol. 5 No. 2, pp. 15-19.
Ravichandran, J. (2006a), “Setting up a quality specification”, Six Sigma Forum Magazine, Vol. 5
No. 2, pp. 26-30.
Ravichandran, J. (2006b), “Six sigma milestone: an overall sigma level of an organization”,
Total Quality Management, Vol. 17 No. 8, pp. 973-80.
Stahl, A. (2006), “Transformation using lean six sigma measures for service processes”,
Journal of Financial Transformation, Vol. 18, pp. 90-3.
Thiraviam, A.R. (2006), “Simple tools for complex systems”, Quality Progress, Vol. 39 No. 6,
pp. 40-4.
Westcott, R. (2005), “Return on investment”, Quality Progress, Vol. 38 No. 5, p. 104.

Corresponding author
J. Ravichandran can be contacted at: aishwar2@rediffmail.com

To purchase reprints of this article please e-mail: reprints@emeraldinsight.com

Or visit our web site for further details: www.emeraldinsight.com/reprints
 This article has been cited by:

1. J. Ravichandran. 2015. Estimation of DPMO and EGPMO for higher-the-better and lower-the-better
quality characteristics for quality evaluation. Total Quality Management & Business Excellence 1-9.
[CrossRef]
2. Ravi S. Reosekar Department of Mechanical Engineering, Birla Institute of Technology and Science
(BITS) Pilani, Pilani, India Sanjay D. Pohekar Mechanical Engineering Area, Tolani Maritime Institute,
Pune, India . 2014. Six Sigma methodology: a structured review. International Journal of Lean Six Sigma
5:4, 392-422. [Abstract] [Full Text] [PDF]
3. M. Prasanna National Institute of Technology, Tiruchirappalli, India Sekar Vinodh National Institute of
Technology, Tiruchirappalli, India . 2013. Lean Six Sigma in SMEs: an exploration through literature
review. Journal of Engineering, Design and Technology 11:3, 224-250. [Abstract] [Full Text] [PDF]
Downloaded by UNIVERSITY OF HONG KONG At 17:57 25 March 2016 (PT)

4. Abbas Saghaei, Hoorieh Najafi, Rassoul Noorossana. 2012. Enhanced Rolled Throughput Yield: A
new six sigma-based performance measure. International Journal of Production Economics 140, 368-373.
[CrossRef]
5. Paul M. GibbonsFaculty of Engineering, Industrial Doctorate Centre, Bristol University, Bristol, UK
Stuart C. BurgessFaculty of Engineering, Bristol University, Bristol, UK. 2010. Introducing OEE as a
measure of lean Six Sigma capability. International Journal of Lean Six Sigma 1:2, 134-156. [Abstract]
[Full Text] [PDF]
6. Mohamed Gamal AboelmagedManagement Department, College of Business Administration, Ajman
University of Science and Technology, Ajman, United Arab Emirates. 2010. Six Sigma quality: a
structured review and implications for future research. International Journal of Quality & Reliability
Management 27:3, 268-317. [Abstract] [Full Text] [PDF]