Traffic Light Assessment is a rating system for evaluating the performance of a process or variable in relation to a goal. It is a good way to communicate information, and have the advantage of being universally recognized by everyone. It indicates the performance using the three colors of the real traffic lights (red, yellow and green). Good and poor performance can easily be identified and addressed. The results should then help in decision making and the selection of the appropriate corrective and preventive actions.

Traffic light systems are widely used in performance management, visual management, and project management. In performance management, traffic light assessment helps presenting performance information for decision making purposes. Results are expressed in terms of colors, where red indicates a performance that is far below target, yellow typically indicates a performance that is a bit below target, and green indicates a performance that is as expected or better than expected. Traffic light colors can be applied to performance, variances and trends indicators as well as to graphical charts and dashboards.

Traffic light assessment is very effective in visual management and is frequently used in factories and workshops. The Andon display, for example, uses traffic light signals to communicate production information on the shop floor. Machines on a production line are equipped with factory control systems and traffic light indicators that are generally visible from certain places within the factory. Red indicates a production that has stopped or a line that is down. Yellow typically indicates that the production has slowed down and an attention is needed to fix something. Green indicates normal production levels and a line that is running smoothly.

Traffic light assessment is an effective tool in project management. It indicates how well activities and milestones are being achieved and how on track the overall project is. Red indicates an activity that is incomplete. Yellow typically indicates an activity that is partially complete or was completed after due date. Green indicates an activity that was completed on time or ahead of time. There are additional colors that can be used to convey specific information. Blue may indicate scheduled or on hold activities, while magenta may indicate new added or changed activities.

Traffic light assessment concepts can also be used in a number of applications, such as presenting the status of a material or product, and marking inventory levels and reorder triggers. Team members may use them to assess an idea where red indicates an idea that is poor or inappropriate, yellow indicates a good idea or an idea that needs to be reviewed, and green indicates an excellent idea. In the food industry, traffic light labels can be used to show how much fat, sugar and salt exist in the food products where red means high, yellow means medium, and green means low.