Parts per million (PPM) or also known as Defect Parts per Million
The PPM rate (Defect Parts per Million) shows how many NOK parts have been produced or occurred with one million parts produced or delivered. Rates can be categorized into two main processes. Lower rate on processes where defects can be easily found and higher rate on processes where defects are mainly hidden, e.g. the structure on casted parts. The PPM rate is mainly used to determine the quality capability of deliveries of manufacturing goods.
Thinking about the automotive industry with the SOP (Start of Production) there are still many failures and defects in the process and those must be eliminated through continuous improvement (CIP) measures. In order to take the customer wishes into account, PPM rates are implemented as KPIs to see the progress of your actions concerning the reduction of those defects.
If you are dealing with the automotive industry you will find a lot of PPM regulations and they are often misused as a source of income. OEMs will give you penalties for exceeding the PPM rate, this is a very common approach. Small and mid-sized companies typically sign some sort of quality agreement with OEMs or their customer, Tier 3 up to Tier 1, this is sort of a framework for PPM rates for manufacturing processes throughout the complete value stream of production.
If you have your customer knocking at your door and asking for a PPM regulation, make sure to categorize your production into major fields of operation such as casting, molding, machining, etc. Or if you have dedicated manufacturing lines for your customer try to focus on the end of line quality check and agree on which ratio is acceptable and which not. Don’t go in the details, this will only give you a higher risk of screwing it up and a wider area of attack. And finally try to agree realistic PPM rates, nothing worse than promising something you already know you can’t achieve.
Just to make sure you got this, the way PPM will be evaluated depends on the criteria defined between you and your customers. E.g. agree on with how many non-conforming parts an entire delivery will be rejected.
Until know we looked on it as supplier, so let us change perspective and see it from customer point of view.
Supplier evaluation includes several performance measures in order to compare them and rank them properly. The PPM rate is the most meaningful evaluation to asses the quality among your suppliers. In addition to the PPM rate the number of complaints and costs per defect can be included as evaluation criteria. Specially in the automotive industry there are several rules and regulations but key is certification. You can make sure that your supplier follows several rules by being certified after standard norms, just think about EN ISO XXXX. Even when the certification process can be seen as complete waste of time and money, in the end you know that the suppliers know the rules of the game.
So what to do when the PPM rate is exceeding the agreed limit. First of all your quality management should step in. As customer I would ask for an 8D report, of course depending on the failure rate. Therefore again, agree what limits you will have and at what limit what actions will be necessary. It might also be that you will demand from your supplier to immediately conduct a sorting action.
What ever it is or you will work on make sure to follow a structured approach to successfully tackle the PPM rate. For this we recommend to read the PDCA article or the A3 article. No worries there is more that you can do but in the end problem solving in all the cases always follows the PDCA cycle.
The PPM rate is also a great example for a KPI that can measure the effect of your improvement or Kaizen actions. You see it is a versatile KPI that effectively runs your business and shows you if you’re on track.
