ASQ Six Sigma Green Belt – Blockchain 101 Part 4

29. Objective – Blockchain Key Components

Number of performance measures. So that is the first thing which we will be talking. Then in addition to that we will be talking about communication. So let’s start with process performance. Here we will look at a number of performance measures. So here is the list of measures which we will be discussing here. Defects per unit or DPU rolled throughput yield cost of poor quality, defects per million opportunities or DPMO sigma level and Process Capability Indices. Process Capability Indices which is the last item here. We will be talking about that in quite a lot of detail in section three f later on. But right now we will just introduce these. Let’s start with defect per unit. So as the name suggests, defect per unit is number of defects divided by number of units. So let’s take an example. If you have 3000 welds, so somebody has done welding and now there are 3000 welds.

These wells were tested and out of that we found out that in these 3000 welds there were ten cracks, 15 porosity and five undercut. So these are type of defects which you can have in the weld. After knowing this, if I am required to calculate DPU or defects per unit. So number of defects, I know number of defects are ten plus 15 plus five which is 30. So there are 30 defects. 30 defects in how many units? 3000 units. So 30 divided by 3000 will give me one divided by 10 or zero. One is the DPU or defects per unit. Let’s remember here we are talking about defect.

We are not talking about defective. It’s not that 30 welds are defective. These defects might have come, let’s say on a single weld itself, on a single piece itself. We could have had these 30 defects or we could have had these 30 defects on 30 different welds. So here what we are talking about is number of defects, not number of defectives. So before we go any further, let’s have a clear understanding of what is defect and what’s defective. And I guess it’s a simple thing which probably you would have understood by this time. A defective unit is a unit which is not conforming to the requirement.

So in case of welds, if that particular weld had any of the defects, then that particular weld will be called as defective. Defect on the other hand is a nonconformance of one or many possible quality characteristics of a unit that causes customer dissatisfaction. This could be something which is causing customer dissatisfaction. This could be something which is not meeting specification, not meeting requirement. So if there is something which is not meeting the requirement, that will be called as a defect. For example, let’s say you are typing an essay on a page.

So you write that essay and that essay is, let’s say 500 words out of these. If you check and you find out that there were five grammatical errors or five spelling errors in those 500 words on the that single page of essay which you have written then what we will have here is one defective because that defective is that single sheet on which we have five defects.

30. Objective – Blockchain Architecture

Call this as process one, p one. And let’s say if there are 100 units which go as the input to this process and the output will be some units which are good and some units which are bad. And here, remember, we are talking about defective units. We are not talking about number of defects here. We are discussing defectives. So out of these 100 units, let’s say three units were defective and we will have 97 units which are good. So what will be the yield of this? The yield of this process will be Y one. And this will be equal to number of units which are entering which is 100 minus number of bad units or defective units which is three divided by number of units which are entering here. So this will be 97 divided by 100 is equal to zero point 97. So the yield of this process is point 97. And this is what we have here. Let’s say unit entering a process RP. And we have D units as defective. That means we have P minus D units as good units. And the yield of this will be P minus D divided by P.

So this was for one process to find out the yield of a particular process. But once you have number of processes in the chain, then if you are required to find out the yield of the whole chain, that you can find out by multiplying the yields of each of these process that is called as rolled through yield and which you can see it here. So, in this particular example, we have three processes, process One, process Two and process Three. So p one. And after p one, the output of P one goes to process P Two.

And the output of P two goes to process P three. If the yield of first process is zero 99, yield of second process is zero point 95 and the yield of third process is zero 98, then the yield of the whole chain will be multiplication of each of these zero 99 multiplied by zero 95 multiplied by zero 98, which will come out to be 0. 92,169. What does this mean is if there are 100 units which go through this chain of operations, then we will have as an output, let’s say approximately 92 good units and we will have eight bad units. So this is another measurement of performance which is rolled throughput yield.

31. Comparing enterprise blockchains

Earlier we talked about two of those measurements coming to this third one, which is cost of poor quality. The concept of cost of poor quality was popularized by quality guru Fagan Bomb. We can broadly classify this cost into two major components. One is the visible cost and the second is the invisible or the hidden cost. This classification of visible, visible and invisible cost is something similar to an iceberg in the ocean. And if you are aware in iceberg, you only see a small portion of which above the sea level, and then you have a bulk of that which is hidden under the sea level. Same thing applies for the cost of quality as well. When we talk of cost of quality, what we see is how much would it cost for the rejection, for rework, for repair or the cost of inspection? That’s what we see. Let’s say if we are producing defective units, our concern is how much does it cost to repair that? How much does it cost to rework or reject that? That’s something which is visible.

And if you are keeping your focus only to the visible one, then you have a trouble because there are a lot of things which are hidden which you really directly cannot measure. The example of invisible cost is lost sale. So let’s say if you start selling the poor quality product slowly, your customer will move to another supplier, so you will lose sale. You will be stuck with excessive inventory because you are not able to sell it. Because there’s a lot of things which are waiting for repair. You will have additional controls which you need to put. Because the quality is poor, you will have to set up additional processes, you need to have a complaint investigation, you might end up with a legal fee, fines, et cetera. Many of these you really do not attach to the cost of poor quality.

So this is one important thing which you need to understand. So when you do a Six Sigma project to reduce number of defects, you not only save the cost related to repair of those defective pieces, you save lot much because of many of these invisible costs. You have better customer satisfaction, you have less returns, your complaint handling department doesn’t need to deal with number of complaints and so many other things. So, when you do a Six Sigma project and when you summarize what gains you made out of this, make sure that you include those invisible costs as well, which you saved as a part of your Six Sigma project. In addition to this classification which is visible versus invisible classification, we have another classification of cost of quality which is here we can classify the cost of quality into three broad categories prevention, appraisal and failure. And failure also can be subdivided into internal and external failures. Let’s quickly talk about these, starting with the prevention cost. Prevention cost is any cost which you incur to prevent bad things from happening from defective products being manufactured. Whatever you do to prevent that is an additional cost which you want to invest, which you want to put to make sure that you don’t produce defective things. That’s prevention cost. Prevention cost could include planning component. This will include education and training. This will include reviews which you want to conduct before you start production.

This will include supplier reviews and selection so that you don’t end up with the poor suppliers and keep on inspecting the units which they produce. This could include quality system audit so that you have a system in place so that you produce right thing first time. And this will also include process planning and control. So, these are some of the examples of prevention cost which you incur to avoid problems from happening in the first place.

Coming to the next classification of cost of quality, which is appraisal cost. So prevention was something to prevent. Appraisal is to check. Appraisal is related to inspection and testing. This could be at the receiving stage, this could be in process or this could be the final inspection. So whatever inspection you do, measurements you do checks you do to make sure that everything is fine. That is the appraisal cost. Appraisal cost will include supplier acceptance sampling. So you receive products from the supplier, you test some of those, that is appraisal cost. You do product audits, that’s appraisal cost.

You do calibration to make sure whatever measurements you are taking are right, that’s the appraisal cost. So these were prevention and appraisal cost. Now, coming to the failure cost, as I said, that failure cost is divided into two components, internal and external failures. Let’s talk about internal failure costs first. Internal failure costs are all the cost related to the failure of the product to meet the requirement within the organization. So anything which fails within the organization is internal failure cost. So, let’s say if your inspection department inspected a piece, found out that this doesn’t meet the requirement, they rejected that piece and that piece needed to be repaired rework, this is your internal failure cost because the failure happened inside the organization. Let’s quickly look at the examples of internal failure cost.

These are in process scrap or rework troubleshooting and repairing design changes which you make inventory required to support poor process yields and rejected lots reinsertion retest of rework the item. So you reworked on something, you corrected that, then you again need to inspect that. The cost related to that also will be internal failure cost. And internal failure cost will also include downgrading. So rather than keeping this as a level one product or grade one product, let’s say you downgrade that and sell it at a cheaper cost because this is not the best quality product. That cost or that loss of money is also internal failure costs. So these are some examples of internal failure you want to avoid all these failure costs at any time by putting something extra in prevention, by putting something in appraisal. So you might want to think of increasing your prevention cost or appraisal cost to avoid failure cost. Because failure costs are costly.

Out of failure costs. Also external failure costs are even worse. Let’s look at those as well. So here are the examples of external failure cost. External failure is something when the failure happens in the hand of the customer. So now you have sold this item, customer starts using that. And now if your product doesn’t work, then that is an external failure cost. So you bought a car, now the car is not working. That’s external failure because now this customer has to take it to the garage, get it repaired because this is under warranty, you need to pay for that. In the worst case, let’s say brake did not work properly. If there was a quality problem related to brake, if there was a quality problem related to any protection in the car, because that could even lead to the death or the injury of person using that car. And then you as an organization are in much bigger trouble because now you have legal claims. Now you are dealing with the cost of a human life. That’s a big thing.

So external failure costs are really bad, which you need to avoid. Examples of these are sales, return and allowances. The example I took was the worst example. But in small case, let’s say if you’re dealing with a mouse, mouse doesn’t work. I go back and go to the Best Buy and return this mouse. Say that okay, this mouse is not working, I get my money back. Cost related to that. Cost related to service level agreement. So if you have an agreement that this is the level of service which you will provide and if you fail to provide that, there are penalties related to that. There are complaint handling cost in the organization because you need to set up a department. Other cost could be the field service labor and part cost incurred due to warranty obligation.

My washing machine has a problem, I need to take it to the service station. The cost of the labor, the cost of the part which they have to replace, that is external failure cost. Recall and legal claims these could be worse. There have been number of legal cases, there have been number of recalls where millions of cars, millions of items have been recalled and the manufacturer has to bear the cost of that. This could be really bad. And then in the long run you will lose customers and you will lose opportunities to grow. So these were the classification of the cost of quality. When it comes to six sigma, you need to understand that where you’re are incurring these costs, where you can spend more and save more by avoiding failures.