Enhanced Rolled Throughput Yield: A new six sigma-based performance measure Abbas Saghaei a,n , Hoorieh Najafi a , Rassoul Noorossana b a Department of Industrial Engineering, Science and Research branch, Islamic Azad University, Tehran, Iran b Department of Industrial Engineering, Iran University of Science & Technology, Tehran, Iran article info Article history: Received 7 April 2010 Accepted 1 February 2012 Available online 13 February 2012 Keywords: Rolled throughput yield Six sigma Process capability Overall performance of organization Rework Scrap abstract The quality level measurement of a given process is essential to some phases of six sigma methodology. So far, different indicators have been applied to estimate the capabilities of a process such as classic yield, defect per unit, sigma quality level and rolled throughput yield. However, the examination of the efficiency of total processes in a certain organization is a recent challenge which is, unfortunately, not thoroughly explored in scarce studies undertaken. The proposed approach called Enhanced Rolled Throughput Yield (ERTY), unlike other methods, pays particular attention to such factors as the difference between scrap and rework cycles, the cost of scrap and rework and the sequence of stages. Moreover, the proposed approach is able to cover all previous methods. The presented real case illustrates the results of applying this model upon the industrial production of electronic sets. & 2012 Elsevier B.V. All rights reserved. 1. Introduction Nowadays, the global market is highly competitive and in order to survive, organizations need to produce products and services of high quality to achieve customer satisfaction and loyalty to stimulate top-line business growth (Kumar and Antony, 2008; Chen, 2008). The six sigma improvement method is problem-focused and its main objectives are decreasing scrap, earning income and creating value. This business management strategy started with manufacturing (Kwak and Anbari, 2006) but over the years it has expanded its realm to a variety of fields such as healthcare (Heuvel et al., 2005; Lazarus and Butler, 2001; Sehwall and DeYong, 2003; Woodard, 2005), banking (Jones, 2004), servicing (Antony, 2004a; Benedetto, 2003; Does et al., 2002; Hensley and Dobie, 2005; Woodall, 2001). Six sigma has been exploited by many world class organizations such as GE, Motorola, Honeywell, Bombardier, ABB, Sony, Samsung Electronics, and Johnson to name a few from the lengthy list, and resulted in billions of dollars of bottom-line savings (Snee, 2004, 2005; Antony et al., 2005a, b; Shamji, 2005; Zu et al., 2010). The term sigma is a Greek alphabet letter used to describe variability and is applied as a statistical process technology measure in organizations (McAdam and Lafferty, 2004). In a six sigma quality program, one of the widely-applied measures to evaluate the performance is the sigma quality level. The sigma level is often measured for a single product or sometimes applied for a process. Six sigma is defined as having less than 3.4 defects per million opportunities or a success rate of 99.9997% (Antony and Banuelas, 2002). Of course, other criteria such as yield, Defect Per Million Opportunity (DPMO), and Defect Per Unit (DPU) are still used for capability measurement of any process. In six sigma metho- dology, a new criterion titled Rolled Throughput Yield (RTY) was introduced to measure the quality of a process. RTY demonstrates the possibility of a product or service passing the whole process defect free (Graves, 2002; Pyzdek, 2003). Harry (1998) claims that organizations are often classified as ‘‘world-class’’, ‘‘industrial average’’ or ‘‘non-competitive’’ based on their cost of poor quality (see Table 1). However, Tort-Martorell et al. (2009) say that the numbers in Table 1 are given without any justification or research to support them. They believe that despite the advantages of sigma level it has some considerable difficulties. The tendency of managers to report the performance of organi- zation processes – overall performance of organization – has increased (Deleryd, 1999). That is why Harry (1998) attempted to draw attention to sigma level as an overall criterion for estimating performance of organizations. Ravichandran (2006) highlighted a challenge by asking ‘‘Does a six sigma organization mean that an organization has achieved six-sigma goal of 3.4 part per million in all critical processes of interest?’’. Although there are some criteria for the yield assessment of a given process, little attempt has been made on the estimation of total organization processes. Contents lists available at SciVerse ScienceDirect journal homepage: www.elsevier.com/locate/ijpe Int. J. Production Economics 0925-5273/$ - see front matter & 2012 Elsevier B.V. All rights reserved. doi:10.1016/j.ijpe.2012.02.002 n Corresponding author. Tel.: þ98 2188534460; fax: þ98 2188534461. E-mail addresses: a.saghaei@srbiau.ac.ir (A. Saghaei), h.najafi@srbiau.ac.ir (H. Najafi), rassoul@iust.ac.ir (R. Noorossana). Int. J. Production Economics 140 (2012) 368–373