A mortgage company is embarking on a project to improve the performance of its u

Question

A mortgage company is embarking on a project to improve the performance of its underwriting and loan-closing process. The company wants to establish a Sigma Level baseline in order to gage its improvement efforts. The company has identified a total of 35 possible defect opportunities that could occur during each loan approval and documentation process. Company records indicate that 2, 500 loans were processed during the last year, and out of those 2, 500 loans, 3, 500 defects were identified. Using the Sigma Level calculator compute the following: a) Defects per million opportunities. DPMO = ____ b) Sigma level (show 2 decimal places) for this DPMO. Z = ____ c) C_pk (show 2 decimal places) for this sigma level. C_pk = ___

Explanation / Answer

(a) Number of units = Number of loans processed = 2500

Number of defect opportunities per unit = 35

Number of defects identified = 3500

Total opportunities for Defects = Number of units x Number of defect opportunities per unit = 2500 x 35 =87500

Defect per opprotunity : DPO = Number of defects identified/Total opportunities for Defects = 3500/87500 = 0.04

Defects per million oppotunities DPMO = DPO x 1,000,000 = 0.04 x 1,000,000 = 40000

(a) DPMO : Defects per million opportunities = 40000

(b) Sigma level for this DPM Z= 3.250

(c) Cpk=1.083

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