Propagation of shape variations in multi-step manufacturing processes, constrained by tolerance chains, is the consequence of sequenced operations defined in process planning. A key task in process planning is to define in-process workpiece (IPW) tolerances for efficient production ensuring conformance to the product design specification and good utilisation of the manufacturing resources. A dimension dependency chart has been developed for analysis of linked IPW tolerance chains and simulation of shape variation propagation caused by systematic and random errors. The results show how the traditional process capability index, used as an acceptance criterion for IPW tolerancing, limits the process performance utilisation.