For example, if we assemble 100 parts and 90 of them are working right off the line, then first-pass yield would be 90/100 or 90 percent.

First-pass yield should not be confused with scrap rate, which is the percentage of parts that can’t be reworked or become usable. Put mathematically, scrap rate = unusable parts / total parts built.

First-pass yield isn’t a perfect metric. It doesn’t account for downtime, scheduling or capacity, for example. But, it’s a quick and easy one to keep an eye on. First-pass yield can mean the difference between profit and closing, particularly for high-mix, low-volume manufacturers which don’t have the luxury of long production runs to perfect their processes.

For manufacturers to thrive, the aggregate of the products we deliver must provide value to the customer. Value is the difference between the utility of a product and its cost to the customer. If a product’s usefulness is higher than its cost, its value increases. Put mathematically, value = utility / cost.

The business case for a product does not always account for less than 100 percent of the parts produced.

Another way to measure value is quality (short- and long-term) and any associated service costs to support a product compared with its initial cost to the customer. Expressed mathematically, value = (quality + service) / cost.

It is obvious that with increased waste, one of two things will happen. The first is that our margins will erode if we keep the selling price of the product the same. Waste is often an unanticipated byproduct and is seldom included in profitability calculations. That is, the business case for a product does not always account for less than 100 percent of the parts produced. Think about your own experiences. Does the business case for a project and product account for waste? How much is acceptable? An effective and ongoing enterprise will have a strong aversion to waste and may not account for waste when calculating the selling price of a product.

Fortunately, first-pass yield at the start of production need not remain that way forever. We can apply tools and techniques from the total quality management (TQM) arsenal, such as Pareto analysis, scatter plots, control charts, flow charts, histograms, Ishikawa diagrams, checklists and check sheets. Equally important, we must engage our team members in continuous improvement.

This is the essence of the plan-do-check-act cycle made popular by Walter A. Shewhart and W. Edwards Deming:

Plan: Identify an area for improvement and ways to improve it.

Do: Execute the plan.

Check: Review of the results of our actions. Did we get the results we expected? If we got better or worse performance than expected, we will need to explore further. Our predictions were off; something is amiss.

Act: This is where we enact the results from the planning and learning from the previous steps and adjust the process accordingly.

Notice that our production process does not “officially” change until we thoroughly understand it. Uncontrolled change is more like chaos than control. Uncontrolled changes may produce the results we desire by accident, but we won’t know how or why we got there. This is not a repeatable approach to improvement. With TQM, we only change our way of working after we have planned, explored, experimented and understood the impact of a proposed change. Only when all of this is known to a sufficient level are we able to bring the change to fruition.