Process Capability Index
TermiKnowledge - Supply Chain, Procurement and Inventory Terminologies
In certain process improvement initiatives, the process capability index, sometimes called the process capability index, is a numerical measure of process capability: how well a process can produce output in accordance with specification conditions. The idea of process capability simply holds no meaning for unprocessed processes. Processes in most organizations fall into one of five phases of production: production, product development, processing, distribution, and storage/receiving. The idea behind the index is that a company can improve its capacity to control waste by monitoring and measuring process performance as part of an overall approach to quality improvement. It is important to note that this is not an absolute definition of quality management and it does not always mean that a company will always achieve better performance on each process in these processes.
There are many ways to measure the process capability index (CPI), although a common way is to use historical data to compare present against past. When looking at historical CPK data, it is important to first determine what types of inputs are used to determine the current value of the index. Some studies measure the value of physical processes, such as cycle times; others focus on process performance with regards to the information needed for scheduling, costing, and other decision making processes. Some studies even look at whether or not the company is getting a sufficient Return on Investment (ROI) from its investment in procuring and implementing the various processes, although these studies are more qualitative than quantitative in nature.
Most of the modern approaches to assessing process capabilities take a holistic approach and include a comprehensive range of statistical measures of process capabilities in order to create a single value associated with maximum or minimum target performance. Although the primary goal of improving process capability involves maximizing the current value of the index, it is often necessary to meet the needs of the customers or stakeholders in order to do so. Process capability indexes can be used to set the boundaries of acceptable performance for various processes and to establish a benchmark against which performance against these boundaries can be measured. In this way, they can provide a common reference point for companies as they strive to improve their own capabilities.
CIOP Webinar Series
Learn the Global Best Practices in Supply Chain Management, Procurement, and Inventory Management.
60 Minutes of Learning + PDU Letter
