This month, we will continue our discussion on the use of control charts for setting key performance indicator (KPI) threshold levels. In the past two columns, we discussed the concepts of variation and x-bar control charts in detail. The final piece of the puzzle is the KPI range chart which tracks the sample variation of the process being captured by the KPIs. The KPI range chart can then be combined with the KPI x-bar chart (see the May 2005 issue of DM Review, p. 8) to understand whether the existing KPI metrics (and the processes they monitor) are stable and in control. As you may recall, when a series of KPI metrics are analyzed, the variation comes from two sources: variation between the individual subgroup samples as captured by differences in the KPI means (the x-bar chart) and variations within the individual subgroup samples as captured in the KPI standard deviation (the range chart). Statistical control requires that both sources of variation be in control and that the KPI range be in control first (i.e., control variance within samples before controlling variance across samples).
Figure 1: Range Control Chart
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