MEASUREMENTS AND

HIDDEN FACTORY
A.
B.
C.
D.
E.
F.
G.
H.
I.
J.

CHAPTER OBJECTIVES
INTRODUCTION
SIX SIGMA RELATIONSHIPS
DEFINITIONS
HIDDEN FACTORY
FIRST TIME YIELD (YFT)
THROUGHPUT YIELD (YTP)
RECIPROCAL NATURE OF DATA
ROLLED THROUGHPUT YIELD (YRT)
CALCULATING THE SIGMA LEVEL (Z
VALUE)
K. PROCESS BASELINING AND
CHARACTERIZATION
L. INDIVIDUAL APPLICATION EXERCISES
M. TEAM APPLICATION EXERCISE

8-1

CHAPTER OBJECTIVES

To provide an overview of the various Six Sigma

measurements and their definitions.
To understand the concept of the hidden factory.
To understand and be able to apply first time yield,
throughput yield and rolled throughput yield.
Learn how to calculate the Sigma level (Z value).

8-2

INTRODUCTION

Throughout Leviton we collect large amounts of data that are valuable

sources of information to establish measures of process performance.
Regardless of the data collected, we often calculate the wrong indices.
Traditionally, we use the concept of Final Yield (the ratio of the number of
accepted units to the number of units tested) to determine process yield.
This concept is not accurate since rework, scrap, delays, waiting time, etc.
is not always considered.
This approach does not account for the Hidden Factory, thus giving us an
overvalued measure of the true process yield.
Hidden Factory includes the amount of work required to produce a good
unit above and beyond entitlement (the amount of work actually needed to
produce a good unit of output the first time).
Consequences of the Hidden Factory include longer cycle times, increased
inventories, inefficient use of resources, etc.

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INTRODUCTION - cont.

In order to characterize a process, it is important to understand the actual

steps and the nature/character of the process at the start of the project.
By gaining a good understanding of the process in the beginning, it will
assist you in understanding the opportunities for improvement.
Focus should be on the inputs of the process, not just the outputs.
Typically, we plot many graphs depicting the amount of scrap and rework
or processing time for a given period of time (i.e.; week, month, year).
Using Six Sigma, the objective remains the same, but we plot DPMO
(Defects Per Million Opportunities), Sigma values and other metrics that
help us measure our products and processes.
After we begin to understand and start to control variation, our processes
will start improving.

8-4

SIX SIGMA RELATIONSHIPS

Basic Relationships
Defects = D
Unit = U
Yield = Y
Defects per Unit: DPU = D/U
6
Defects per Million opportunities: DPMO = DPU X 10
(1,000,000)
Yield Relationships
First Time Yield = YFT
- DPU
Throughput Yield = YTP = e
Rolled Throughput Yield = YRT
Standardized Normal Relationships for Z
Z long term = ZLT = ZST 1.5 SHIFT
Z short term = ZST = ZLT + 1.5 SHIFT
Long Term data gathered over many process cycles.
Short Term data gathered over a few process cycles.

8-5

DEFINITIONS
First Time Yield (YFT) - is the ratio of the number of units that pass
inspection (S) to the number of units tested (U). It does not represent
the probability of zero defects because units are accepted regardless of
the presence of rework and replacement of scrapped units. This is
considered the classical or traditional approach since product is
inspected at the end of the process.
Throughput Yield (YTP) - represents the probability of producing a
defect-free unit in a process step. This is the area under the normal
curve between tolerances or that area between tolerances where there
is a probability of 0 failures. The Hidden Factory is considered, thus
providing a true picture of process performance.
Rolled Throughput Yield (YRT) represents the probability of
producing a defect free unit in a series of process steps.

8-6

THE HIDDEN FACTORY

Quality =
Customer satisfaction
= Profits
OK
Input

Operation

Inspect

Output

NOT
Rework
Scrap

OK

Hidden
Factory

Hidden Factory is a concept related to productivity, value and money.

Includes all work and costs invisible to our accounting system.
Components of the Hidden Factory vary depending on how we measure costs
and business performance.
Hidden Factory is the amount of work required to produce one good unit of
output above and beyond entitlement.
Hidden Factories are not exclusive to manufacturing and its effects are felt
across the entire business.
Using Six Sigma and Lean tools, we will strive to uncover and eliminate this
Hidden Factory.

8-7

FIRST TIME YIELD (YFT)

To illustrate the concept of First
Time Yield, consider the typical
process (manufacturing or
service) where 100 units are
submitted at operation 1 and 85
units are complete/shipped at
operation 4.
A total of 15 units (15%) have
been rejected/scrapped during
this process resulting in a First
Time Yield (YFT) of 85%.

YFT =

85
100

1 0 0 U N IT S

O P E R A T IO N 1

O P E R A T IO N 2

O P E R A T IO N 3

O P E R A T IO N 4

= .85 or 85%
8 5 U N IT S

8-8

FIRST TIME YIELD (YFT) - cont.

Approach is considered the classical or traditional
approach since it looks at quality at the end of the process
and does not take the hidden factory into account.
By considering passed units only, we do not account for
the amount of resources (time, cost, etc.) or the cycle time
of each unit.
In addition, the calculation of first time yield has no
conceptual meaning. It is merely the expression of a ratio
of units accepted over units inspected.

8-9

THROUGHPUT YIELD (YTP)

Concept of Throughput Yield represents the probability of producing

one unit of output in a process step with zero defects.
True measure of a process steps effectiveness taking into account the
hidden factory.
Throughput yield is calculated as follows:
-DPU

YTP = e

where e = 2.718282 and DPU = D/U

-DPU

Note: e
is an exponential formula which can be calculated using a
scientific calculator, Excel function represented as =EXP() or the Metrics
Conversion.xls chart located in the Gbdata folder. When using Excel,
remember to put in a negative (-) value.
Example
Five defects are observed in 467 units produced at a process step. The DPU is
.01071 (5/467) and the probability of obtaining units with zero defects is:
YTP = e-DPU = e-.01071 = .98935
VERIFY .98935 USING EXCEL OR THE CONVERSION TABLE.

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RECIPROCAL NATURE OF DATA

We can start
from either ...

To obtain
Yield ...

Discrete Data
e-DPU
Yield
Continuous
Data
P(Defect)

And an equiva lent Z value ...

That we
adjust ...

1.5 Sigma
Shift
3.67

And finally
obtain.

A Sigma
Value

1.5 =

5.17
Long-Term Adjustment Short-Term
P(Defect)

Concept of throughput yield can be used with discrete or continuous

data.
From discrete data, you can calculate Throughput Yield using the
formula YTP=e-DPU.
From continuous data, Throughput Yield is calculated from the
appropriate area under a Normal curve.
Since we can work with either continuous or discrete data to calculate
yield values, then the data must be reciprocal in nature.
You must always report and compare Sigma values using the Sigma
8-11
long term (ZLT).

SIGMA LONG TERM

DATA CONVERSION GUIDELINES
If the data is recorded over many cycles, it is considered
as long term (no adjustment is required).
If the data is recorded over short periods of time, or
cycles, it is considered as short term (subtract a 1.5 Sigma
shift).
If the data is discrete by nature, it is considered long term
(no adjustment is required).
If the data is continuous by nature and recorded under the
constraints of sequential random sampling, it is
considered short term (subtract a 1.5 Sigma Shift).

8-12

ROLLED THROUGHPUT YIELD (YRT)

SCRAP

Rolled throughput yield

(YRT) is the probability of
producing a defect free unit
in a series of process steps.
Rolled throughput yield can
give visibility to process
steps that have high defect
rates.
Consider the example
where the rework loop
(Hidden Factory) has been
included.

1 0 0 U N IT S

REW O RK

TP

7
O P E R A T IO N 1

9 3 /1 0 0 = .9 3

93

10

O P E R A T IO N 2

8 3 /9 3 = .8 9

83

10
3

O P E R A T IO N 3

7 0 /8 3 = .8 4

70

5
2

O P E R A T IO N 4

6 3 /7 0 = .9 0
63

1 5 U N IT S

8 5 U N IT S

2 2 U N IT S

8-13

ROLLED THROUGHPUT YIELD (YRT) -cont.

To measure this processs performance, rolled throughput yield will
be utilized.
The individual yields (YTP) for each of the 4 process steps are .93, .
89, .84 and .90.
YRT = .93 x .89 x .84 x .90 = .63 or 63%.
Note: A good approximation of YRT can be calculated utilizing eDPU where:
DPU = .37 (derived as 1-.63)
YRT = e-DPU = e-.37 = .6907 or 69.07%
In effect, YRT is a function of the number of defects produced.
Verify the e-DPU calculation.

8-14

CALCULATING THE SIGMA LEVEL

(Z VALUE)
In order to calculate a sigma level (Z value), four
approaches will be reviewed.
As a Six Sigma Green or Black Belt, you will become
comfortable with, and normally use one or more methods.
You should be familiar with the techniques involved with
each of the four approaches.
Utilizing the DPU = .37 and/or YRT = .63 from the previous
example, the processs Sigma level will be determined
utilizing each approach.

8-15

CALCULATING THE SIGMA LEVEL

(Z LEVEL) - METHOD 1
Metrics Conversion Table (Metrics Conversion.xls)
By entering DPU = .37 or a YRT = .63, ZLong Term = .33.
Therefore, ZShort Term(ZST) is determined as follows:
ZST=ZLT + 1.5 Shift
ZST=.33 + 1.5 = 1.83
Open-up the Metrics Conversion.xls file, located in the
Gbdata, and verify the Sigma level using the DPU and YRT.

8-16

CALCULATING THE SIGMA LEVEL

(Z VALUE) - METHOD 2
Sigma can be derived by entering the related YRT=.63 into the Excel function
=NORMSINV (YRT).
This function returns the inverse of the normal cumulative distribution for the Y RT.
Open-up Excel and verify the Sigma level using the NORMSINV function.
Click =
Select NORMSINV
Enter .63 into Probability
Returns .33 Long Term

8-17

CALCULATING THE SIGMA LEVEL

(Z VALUE) - METHOD 3
Z = .33

This is accomplished by determining the Z value for the defects per unit from the
normal distribution table (refer to Table A area under the Standardized Normal Curve
located in the Gbdata file).
Note: Since normally distributed random variables can take on many different
units of measure (inches, dollars, pounds, etc.), we refer to standard units, which
really means standard deviations, and give these units the symbol Z.
By locating .37 (DPU) in the table above (Z=.3707), the related Z value is 0.33.

8-18

CALCULATING THE SIGMA LEVEL

(Z VALUE) - METHOD 4 (MINITAB)

To find the Z value for a given YRT, proceed as follows.

1. Calc > Probability Distributions > Normal
In the dialog window:
2. Click on Inverse cumulative Probability
3. Mean = 0, Standard Deviation = 1.0
4. Enter an Input Constant = .63
5. Click on OK

Result session window returns an X = .3319 which is the related Z value.

To find a YRT given a Z value, proceed as follows:

1. Calc > Probability Distributions > Normal
In the dialog window:
2. Click on Cumulative Probability
3. Mean = 0, Standard Deviation = 1.0
4. Enter an Input Constant = .33
5. Click on OK

Result session window returns an X = .6293 which is the related YRT.

8-19

CHEAT SHEET
Note: There is a Sigma Values - Cheat Sheet located
in Gbdata (refer to Sigma Values-Cheat
Sheet.doc) which converts DPMO to short and
long term sigma values and vice-versa.

8-20

PROCESS BASELINING &

CHARACTERIZATION
It is important to have a method to evaluate the capability
of our products, services and processes.
This step will provide us with an idea of where to focus
improvement projects and point out areas where data is
available or needs to be collected in the future.
In order to determine how we are doing, we need data to
analyze.
We can only evaluate and improve what we are
measuring.
Our goal is to establish the current situation. If no data is
available, this alone is an opportunity for a Six Sigma
project.

8-21

PROCESS BASELINING &

CHARACTERIZATION CONT.
Once a product line has been selected as a Six Sigma
project, the Six Sigma Roadmap would be utilized to
identify the KPOVs (Key Process Output Variables) and
those KPIVs (Key Process Input Variables) where
improvement is required.
Process mapping would be utilized to identify value and
non-value added operations as well as data collection
points.
At each data collection point, CTQs (Critical to Quality)
are being measured.
Each CTQ being measured and reported is an active
opportunity for a defect.
Process metrics would then be developed for each step
identified on the process map.

8-22

PROCESS BASELINING &

CHARACTERIZATION CONT.
THE FUNNEL EFFECT

Keep in mind that our

objective is to start with a
lot of inputs (KPIVs)
then narrow down to
those that are critical
(i.e.; the 80-20 rule).

DEFINE
MEASURE
ANALYZE
IMPROVE
CONTROL

30 + INPUTS
10 15 XS
8 10 XS
4 8 CRITICAL
XS
3 6 CRITICAL
XS

OPTIMIZED
PROCESS

8-23

PROCESS BASELINING &

CHARACTERIZATION CONT.

The following represents an example of how process baselines were

summarized during a Black Belt project on catalog 1451 (single pole
toggle switch).
Based upon 3 level Pareto Analysis, the switchs strap subassembly
was identified as the largest contributor to scrap and rework. As a
result, the strap subassembly was selected as the focus of the
project.
A top level flow diagram was developed for the entire production
process and a detailed process diagram was developed for the
strap subassembly. Once completed, baseline metrics were
calculated for each step within the subassembly.
A Process Characterization Matrix summarizes the results of the
process baselines on the strap subassembly. Depending upon the
process and project, the type of metrics will vary. These results
provide a snap shot picture of those process steps where
improvements are required. This is evidenced by the lower sigma
values in the Sigma column (1.44, 1.64, 1.75, 1.98).

8-24

NOTE: 81.46% is the product of each individual value in the YRT

column. Also, the 18.54% is the sum of each of the values in the DPU
column or can be calculated as 1-81.46%.

KEY: 1=CONTROLLABLE, 2=SOP

3=NOISE

8-25

 Same concept is applicable to service processes.

Matrix below is from San Diego warehouse project
conducted by Laura Rivas.
In this project, CTQ was cycle time to process finished
goods and target time was 1.75 days.

8-26

INDIVIDUAL APPLICATION EXERCISE

SCRAP

The following is an application exercise using the

concept of rolled throughput yield. Using the flow
diagram, calculate the following metrics then be
prepared to present your results to the class.

1 5 0 U N IT S

REW O RK
3

20

O P E R A T IO N 1

127

1.

2.
3.

Determine the Throughput Yield (YTP) for each

operation and the Rolled Throughput Yield (YRT)
for all 3 operations.
Determine the DPU.
Determine YRT using the DPU.

4.

Calculate the Sigma Level (Z value).

STOP! Do not look at the results until

you have completed the exercise!

30

O P E R A T IO N 2

96

5
O P E R A T IO N 3

91

1 0 0 U n its

8-27

INDIVIDUAL APPLICATON EXERCISE RESULTS

SCRAP

1 5 0 U N IT S

REW O RK

TP

3
20

O P E R A T IO N 1

1 2 7 /1 5 0 = .8 4 7

127

1
30

O P E R A T IO N 2

9 6 /1 2 7 = .7 5 6

96

5
O P E R A T IO N 3

91

9 1 /9 6 = .9 4 8

1 0 0 U n its
5 0 U n its

9 U n its

Determine the Throughput Yield (YTP) for each operation and the Rolled
Throughput Yield (YRT) for all 3 operations.
YRT = .847 X .756 X .948 = .607 (60.7%)

8-28

INDIVIDUAL APPLICATION EXERCISE

RESULTS
Determine DPU
DPU = 1 - .607 (YRT) = .393 or 39.3%
Determine YRT Using the DPU
YRT = e

-DPU

=e

-.393

= .67 (This is an approximation)

Calculating the Sigma Level (Z Value)

ZLT = .27
ZST = .27 + 1.5 shift = 1.77
Note: ZLT was derived from the Normal Table with Z = .3936

8-29

Objectives of Exercise
To demonstrate the impact of process variation on:

TEAM APPLICATION
EXERCISE

Rolled throughput yield

Product cost
Cycle time
Sigma level

Production Goals

Ship 25 good units to customer

Maximize yield
Minimize scrap, rework, total cost and
total cycle time

Team and Equipment Requirements

4 to 6 participants per team

Teams need to assign roles as:
Operator(s) drop cards at each step
Material Handler moves good product to next step and recycles
defects
Data Clerk records/inputs performance data at each step
Time keeper measures the time from start to completion
Customer receives and counts good product
3 targets per team
1 deck of 52 cards per team
1 stopwatch per team
Pad to record results
Production report (Excel)

8-30

TEAM APPLICATION EXERCISE

Task 1 Production Process
There are 3 process steps (poster boards) where good products
advance to the next process step while defects are recycled. At each
process step:
An operator drops a card where the card is held vertically (or at a
slight angle) at arms length (while standing) parallel to the floor
(shoulder height). Note: Poster Board must be placed on the floor.
If the card lands complete within a poster board, the material handler
moves the card to the next process step.
If the card does not land correctly, it is considered a defect and sent to
the rework pile.
A data clerk documents performance data for each step.
The timekeeper will measure time to completion.
A customer receives/counts the number of cards completed
satisfactory.
Data clerk will tally the result and enter into Excel.

8-31

TEAM APPLICATION EXERCISE

Each team will start with a full deck of 52 cards and stop
when 25 good units are received by the customer.

INPUT

STEP 1
DROP CARD

REWORK

GOOD
UNITS

STEP 2
DROP CARD

REWORK

GOOD
UNITS

STEP 3
DROP CARD

25
UNITS

REWORK

Note: Good units advance to the next process step while

defects are reworked.

8-32

TEAM APPLICATION EXERCISE

8-33

TEAM APPLICATION EXERCISE

Task 3 Production Report (Excel)
Each team is to maximize yield while minimizing rework, total cost and total
cycle time. As a team, consider the best approach before you begin
production. Teams determine these metrics from the following relationships:
Note: There are a number of approaches that can be used to set-up and run
your production process.

Yield Calculations
Yield (for each step) = number of units in spec/total number of drops
YRT = multiplication of yield for 3 process steps
Materials Yield = shipment quantity/total input into step 1
DPU = 1 YRT
Sigma Level
Cost Calculations
Material Cost = $5.00 per unit introduced into step 1
Process Cost = $2.00 per drop
Scrap = $1.00 per unit in process at completion of customer order
Efficiency Calculations
Cycle Time = total time/number of units shipped
Business Calculations
Net Profit = total sell price total cost
Customer Purchase Price - $18.00 per unit
8-34

TEAM APPLICATION
EXERCISE
Task 4 Team Presentation
Prepare a team presentation (10 minutes maximum) including the
following inputs.

Approach taken to set-up and run the production process.

Assessment of the process relative to variability and control
considering the following questions.
Was there process variation?
Was the process in control?
What was the impact of process variation considering defect
levels, YRT, cost and cycle time?
How could you improve the process?

8-35