Chapter 9. Monitoring Budget Variances


  • Understanding Process Control Charts

  • Getting Budget Variances

If you've ever come across a numeric analysis technique called statistical process control you probably associate it with the notion of quality management. That's a logical association, because the technique came about as a method of monitoring manufacturing operations, of getting an early warning that a manufacturing process was going out of control. Suppose that tool wear is causing your factory to turn out o-rings with inside diameters that don't conform to specifications. You want to find out about that as soon as possible so you can take corrective action. Statistical process control (or SPC) can help you diagnose the problem early on.

Like many statistical techniques, though, SPC has applications that go well beyond those that it was originally developed for. For example, the statistical methods and experimental designs that are now used to test pharmaceuticals were originally developed to determine the best ways to brew beer and to plant crops. Similarly, you find SPC methods, originally designed for manufacturing environments, being used in the service, financial, and medical industries.

A few years ago a mid-size hospital contacted me to inquire about arranging for an Excel-based utility that would do SPC for it. The idea was to measure how well the hospital conformed to various standards such as number of accidental needle sticks, the use of restraints on patients, ...

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