Number of Distinct Categories Statement
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Minitab calculates the number in this statement by dividing the standard deviation for Parts by the standard deviation for Gage, then multiplies by 1.4. Minitab then truncates this value, except when the value is less than 1. In that case, Minitab sets the number of distinct categories equal to 1.

This number represents the number of non-overlapping confidence intervals that will span the range of product variation. You can also think of it as the number of groups within your process data that your measurement system can discern.

Imagine you measured 10 different parts, and Minitab reported that your measurement system could discern 4 distinct categories. This means that some of those 10 parts are not different enough to be discerned as being different by your measurement system. If you want to distinguish a higher number of distinct categories, you need a more precise gage.

The Automotive Industry Action Group (AIAG) [1] suggests that when the number of categories is less than 2, the measurement system is of no value for controlling the process, since one part cannot be distinguished from another. When the number of categories is 2, the data can be divided into two groups, say high and low. When the number of categories is 3, the data can be divided into 3 groups, say low, middle and high. A value of 5 or more denotes an acceptable measurement system.