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Are PPM Metrics Still Useful When Evaluating Suppliers? (2019)

Written by: Michael Rapaport

Are PPM Metrics Still Useful When Evaluating Suppliers? (2019)

As the global manufacturing industry becomes increasingly linked through its network of interdependent supply chains, supplier management remains crucial to ensuring high-quality products. Poor quality inputs, such as mediocre or defective components, increase the likelihood of a product recall.

Certainly, there are many well-established methods for evaluating your company’s supply chain, e.g., order fill rates, returns rates, adherence to delivery date, etc. But, are PPM (parts per million) metrics still useful a useful supplier improvement metric?

What is Parts Per Million?

PPM stands for parts per million. Depending on your quality management approach, you may have different variations of PPM within your company. For example, it is not uncommon for automotive manufacturers to measure defects per unit and defects per million opportunities, which are distinctly different from the defect PPM metric.

How to Calculate Parts Per Million in Manufacturing

In respect to the supplier PPM formula, you can calculate defect PPM (DPPM) by dividing the number of defective parts from a particular supplier by the total number of parts received and multiplying this value by one million.

DPPM = (Number of Defective Parts / Total Number of Parts) x 1,000,000

How Do Manufacturers Use PPM?

Many automotive original equipment manufacturers (OEM) still utilize the PPM quality metric to differentiate suppliers because Six Sigma methodologies are now pervasive throughout the industry. However, Six Sigma and PPMs can be used in a mutually exclusive fashion, meaning you can use one without implementing the other.

Without delving too deeply into the statistics and mathematics behind the Six Sigma methodology, a “drift” or “fudge factor” in process variation of plus or minus 1.5 sigma equates to an ideal PPM figure of 3.4 defects per million parts received. Your company likely takes a similar approach to measuring PPM if you utilize Six Sigma methodologies extensively.

Is PPM Still a Viable Measurement for Supplier Evaluation?

PPM can be viable as one of many supplier improvement metrics used to evaluate performance. Essentially, PPM metrics fail to tell the whole story when it comes to evaluating suppliers holistically. Too many factors now come into play, and viewing only a single statistic or methodology (e.g., Six Sigma) as infallible is a huge mistake. After all, supply chains have become increasingly complex in a global marketplace.

In all industries, and particularly in manufacturing, Big Data now plays a starring role for improving efficiency, decreasing costs, improving quality performance, and creating better products faster. AI, machine learning, the Industrial Internet of Things (IIoT), and robotics are adding to the speed and size of data collection. The problem, now, is that analyzing data holistically from across lines of business and departments is not as simple as turning on a light switch.

Companies now have more data to parse through than ever before. Manufacturers not only need to analyze the quality of their parts but also determine which data and calculations provide the optimal evaluation metrics for suppliers. PPM continues to be one useful metric, but as stated above, it needs to be used in conjunction with others that precisely measure supplier quality. Thus, a holistic or comprehensive selection of metrics is the optimal solution.

PPM and EQMS

Given the pervasive use and continual improvements of cloud, mobile, Big Data, and IIoT technologies, companies need an enterprise solution for quality management. Continuing to use any type of manual process is no longer sustainable if you want to remain competitive in a global marketplace.

Enterprise quality management software (EQMS) can help manage and analyze the massive amounts of data associated with supplier management. When integrated throughout all of your business units, an EQMS can break down silos of information and enable cross-functional collaboration within your company.

In terms of PPMs in concert with an EQMS, you will be able to quickly determine whether your supplier evaluation metrics are measuring exactly what you need and then adjust accordingly. You need a 360-degree view of all facets of your manufacturing system, and PPMs are but one measure. An EQMS can help you manage and continuously analyze supplier performance, ensuring that you’re contracting with only the best suppliers.

Contact IQS today to learn more or request a demo of our EQMS solution.

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