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A technique to establish the current performance
level of a process metric(s) Used for:
- Understanding current and historical levels of the process (at the start of the project)
- Identifying whether we are meeting customer requirements
- Quantifying the extent of the problem (problem statement at the start of the project)
- Assessing the extent of improvement (Goal statement at the start of the project)
- Quantifying the improvement benefits (towards the end of the project)
- Clearing perceptions of the stakeholders (start of the project) - In order to baseline, we must identify and understand the type of data
- Let’s say there are 100 trades, and each trade draft has 10 key attributes that need to be correctly entered e.g., National value, currency, counterparty name, initial margin %, fixed or floating, value date, etc.
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A Unit is an item being processed
- E.g., a Trade, a trade draft, application, request for service -
An Opportunity is any event/characteristic/attribute
that is essential and measured from a customer's
perspective. It provides a chance of not meeting a
customer requirement
- E.g., each of the 10 attributes on the trade draft form -
A Defect is an event of non-conformity to Customer
requirements
- E.g., Any of the 10 key attributes incorrectly drafted. -
A Defective is a Unit with one or more defects
- E.g. Trade draft with one or more of the 10 key attributes incorrectly drafted. 20% defectives if 20 out of 100 Trades had at least one defect (at least 1 key attribute incorrectly drafted)
Baselining Discrete Data
- Once DPMO is calculated, look up the value in the Sigma table to determine the Sigma value
- Sigma – The measure of process capability. At 6 sigma, there are only 3.4 defects per 1 Million opportunities (i.e., 99.99967% conformance to customer requirements
- The advantage of DPMO or Sigma measure is: Levels the playing field by providing comparability across dissimilar processes, Compounds the effect.