To enter the realm of the global economy successfully, Company X needs to know its capacities, i.e., the maximum and the minimum productivity rates that it may deliver. For these purposes, the concept of the process-capability-related ratios needs to be introduced into the analysis. By locating the specified data, the entrepreneurship will allocate the resources at its disposal in the manner that it defines as the most sensible one, thus leaving every stakeholder satisfied.
Working in the food industry and producing iced tea with vitamins, the firm has already displayed that its upper limit is approximately 4,000 cans of soda per hour. In contrast, its lower limit rates land at about 2,000 cans per hour. Based on the above information, one can identify the organization’s process capability based on the formula that is commonly used for this purpose:
(Pyzdek & Keller, 2014),
where USL is the upper limit, LS is the lower one, and σ represents the standard deviation of the company’s productivity. Because Company X’s σ equals 250, the current capability rates are rather inspiring:
The above result suggests that entrepreneurship, while having potential, still needs development to fulfill its potential. In other words, it may face tough competition and, therefore, needs to choose its distribution channels and position strategy, very wisely. Given the process target (I=3.00), the company has become as efficient as possible.
At present, Company X delivers approximately 0.07% of faulty products per unit. Therefore, its DPMO can be deemed as rather high. According to the existing formula,
Given the current performance rates of the entrepreneurship, Company X’s DPMO is
The above index can be deemed very high since the average number of faults per unit produced is comparatively low. The company owes its successful performance to the TQM-based strategy’s adoption, which creates premises for a steadily improved performance (Jones, 2014).
Another essential characteristic of a company’s operations is that the yield can be identified by considering the number of stages that the soda production undergoes. Table 1 specifies the process of yield calculation:
Table 1. Yield Calculation.
In light of the above information, the process capability ratio can be identified as will. According to the existing formula, the process capability ratio can be calculated knowing the upper and the lower limits of the firm’s production:
Based on the above formula, the yield of Company X can be deemed as comparatively high (Castaneda-Mendez, 2015). In other words, the firm is likely to succeed in the target environment as long as it keeps its quality standards consistent:
Identifying the ratios related to the concepts of process capability will help Company X deliver the expected results in the target market without exhausting all of its resources. Instead, they use the above ratios to help entrepreneurship utilize its resources to its best capability, thereby creating premises for further growth. As soon as the organization is aware of its production limits, it will be able to allocate the resources available with the maximum utility, thus, becoming especially efficient in the target market.
Reference List
Castaneda-Mendez, K. (2015). Understanding statistics and statistical myths: How to become a profound learner. Boca Raton, CA: CRC Press.
Jones, E. (2014). Quality management for organizations using lean Six Sigma techniques. Boca Raton, CA: CRC Press.
Pyzdek, T., & Keller, P. (2014). The measure phase. In The Six Sigma handbook (4th ed.) (pp. 271-292). New York City, NY: McGraw-Hill Education.