Basic Statistics: Confidential, Proprietary Information of Tyco International LTD

Basic Statistics
Confidential, proprietary information of Tyco International Ltd.

Basic Statistics
• Types of Data
• Measures of the Center of the Data
– Mean
– Median
• Measures of the Spread of Data
– Range
– Variance
– Standard Deviation
• Properties of a Normal Distribution
2 Confidential, proprietary information of Tyco International Ltd.

Types of Data
Attribute Data (Qualitative)
– Categories
– Good / Bad
– Machine 1, Machine 2, Machine 3
– Shift number
– Counted things (# of Errors in a document, # units
shipped, etc.)
Variable Data (Quantitative)
– Continuous Data (Decimal subdivisions are
meaningful)
• Time (seconds)
• Pressure (psi)
• Conveyor Speed (ft/min)
• Rate (inches)

Sample Statistics vs Population Parameters
x = Sample Average  = Population Mean
s = Sample Standard  = Population Standard

Deviation Deviation
Statistics estimate Parameters

Measures of Central Tendency
• Mean: Arithmetic average of a set of values
– Reflects the influence of all values
– The “balance point” or “center of gravity” for the data
– Strongly Influenced by extreme values
n
 xn
x  n 1
n
• Median: Reflects the 50% rank - the center number after
a set of numbers has been sorted
– Splits the data in half. 50% of the data points will be higher
than the median and 50% will be lower than the median.
– “Robust” to extreme values. A large change in the data
may have very little, if any, effect on the median.

Measures of Central Tendency
You have been asked to summarize the average salaries of Six Sigma
Professionals.
$10, 20, 30, 40, 50 ($ in thousands)

What is the average income What is the median
(or “center of gravity”)? income?
After receiving more information, we have included the salary of

Ajoy Basu . . . Our Six Sigma Guru!!!!
$10, 20, 30, 40, 5000 ($ in thousands)
What is the average income What is the median

(or “center of gravity”)? income?

Measures of Variability
• Range: the distance between the extreme

values of a data set (Highest - Lowest)
• Variance (  ): the Average Squared
Deviation of each data point from the Mean
• Standard Deviation (  ): the Square Root of
the Variance
• The range is more sensitive to outliers than
the variance
The most common and useful measure of
variation is the standard deviation - why?

Calculating Sigma
X X- X (X - X)2
1
2
3
4
5
6
7
N
8
9
 (X  X )
i=1
i
2
10 n-1

N
Mean
square  (X  X )
i=1
i
2
 n-1
Problem: Using the form above, calculate the standard
deviation for the numbers: 21354
Example
X X- X (X - X)2
1 2 -1 1
2 1 -2 4
3 3 0 0
4 5 2 4
5 4 1 1
6 N
7  (X  X )
i=1
i
2
8 n-1
9
10

N
Mean
15
3
10
 i
(X
i=1
 X ) 2
square 2.5 n-1

 1.581139

Data Distributions
There are many types of distributions:

-Normal
-Chi-Square
-Poisson
-Binomial
-Hypergeometric
-Weibull
-Exponential
-Uniform
-Lognormal
-Logistic
Most of the tools we will use deal with . . .

The Normal Distribution
• The “Normal” Distribution is a distribution of
data which has certain consistent and
predictable properties
• These properties are very useful in our
understanding of the characteristics of the
underlying process from which the data
were obtained
• Most natural phenomena and man-made
processes are distributed normally, or can
be represented as normally distributed

• Property 1: A normal distribution can be
described completely by knowing only
the:
– mean, and
– standard deviation Distribution One
Distribution
Two
Distribution Three
What is the difference among these three normal distributions?

• Property 2: The area under sections of

the curve can be used to estimate the
cumulative probability of a certain
“event” occurring Cumulative
Probability of sample value
68% probability of
40%
obtaining a value
between two
30%
95% values
20%
99.73%
10%
0%
-4 -3 -2 -1 0 1 2 3 4
Number of standard deviations from the mean
Descriptive Statistics
• Let’s look at the different data sets
• We will start with some Descriptive Statistics
• Open Normal.mpj

Summary for Dist1
A nderson-Darling N ormality Test
A -S quared 0.33
P -V alue 0.508
M ean 4.5563
S tDev 1.0126
V ariance 1.0254
S kew ness 0.112103
Kurtosis -0.011373
N 100
M inimum 2.0154
1st Q uartile 3.9625
M edian 4.4655
3rd Q uartile 5.2483
2 3 4 5 6 7 M aximum 7.1972
95% C onfidence Interv al for M ean
4.3554 4.7572
95% C onfidence Interv al for M edian
4.1821 4.7733
95% C onfidence Interv al for S tDev
95% Confidence Intervals
0.8891 1.1763
Mean
Median
4.2 4.3 4.4 4.5 4.6 4.7 4.8

Summary for Dist2
A nderson-Darling N ormality Test
A -S quared 2.92
P -V alue < 0.005
M ean 5.6945
S tDev 3.5216
V ariance 12.4019
S kew ness 2.11132
Kurtosis 8.28447
N 100
M inimum 0.9080
1st Q uartile 3.3494
M edian 4.8154
3rd Q uartile 7.5011
0 4 8 12 16 20 24 M aximum 25.1022
95% C onfidence Interv al for M ean
4.9958 6.3933
95% C onfidence Interv al for M edian
4.0546 5.7578
95% C onfidence Interv al for S tDev
95% Confidence Intervals
3.0920 4.0910
Mean
Median
4.0 4.5 5.0 5.5 6.0 6.5

Anderson-Darling Normality Test
• Minitab uses your data as x-values and
plots the data against calculated
probabilities of being normal (y-values)
• A least squares line is fit to the plotted

points and Minitab tests the likelihood
that these points matchup with the line
and come from a normal distribution
• Minitab makes the normal probability

plot easy . . . P-Value > .05!!!!

Let’s run using

Normal.mpj

Is Distribution 1 Normal?
Probability Plot of Dist1

Normal
99.9
Mean 4.556
StDev 1.013
99 N 100
AD 0.332
95 P-Value 0.508
90
80
70
Percent
60
50
40
30
20
10
5
0.1
1 2 3 4 5 6 7 8
Dist1

What about Distribution 2?
Probability Plot of Dist2

Normal
99.9
Mean 5.695
StDev 3.522
99 N 100
AD 2.921
95 P-Value <0.005
90
80
70
Percent
60
50
40
30
20
10
5
0.1
-5 0 5 10 15 20 25
Dist2

This is great . . . But why so
Much focus on the Normal
Distribution?

Central Limit Theorem
If random samples of n observations are

drawn from a population with a finite mean,
μ, and standard deviation, σ, then when n is
large, the sample mean, x , will be
approximately normally distributed with
mean equal to μ and standard deviation
equal to σ/ n . This approximation
becomes more and more accurate as the
sample size, n, increases.

• The standard deviation for the distribution of
means is called the Standard Error of the
Mean and is defined as:
x
x 
n
 x  Standard Error of the Mean
 x  Standard Deviation for the Individual Values
n  Sample Size
• This formula shows that the sample averages

are more stable (smaller standard deviation)
than the single observations by a factor of the
square-root of the sample size
• Let’s look at two different SPC charts using the
same data
• Open project file DM Central Limit Theorem (GB),
worksheet Example 1
• Using OUTPUT perform Graphical Analysis:
– Graph>Histogram>With Outline & Groups
– Graph Variables = Output
– Categorical Variables = Sample
• Sample 1 = whole dataset (n=1)
• Sample 2 = same dataset as Sample 1, subgrouped
(n=5)
• Sample 3 = same dataset as Sample 1, subgrouped
(n=10)

Histogram of Output
25 Sample
1
2
3
20
15
Frequency
10
0
45.0 52.5 60.0 67.5 75.0 82.5 90.0
Output
Individual Data Values Sample Averages

Sample 1: n=1 Sample 2: n=5, Sample 3: n=10
How do the Means compare?

How does the variation compare?
Results
• The mean of the distribution of sample

means is very close to the population
mean
• The standard deviation of the
distribution of sample means is the
population standard deviation reduced
by a function of the square root of the
sample size
• The distribution of sample means is
very close to the Normal distribution

What did you notice about your samples?
Population Random Sample
Mean
   X = 266
 
 
 
 


 
There is variation from sample to sample . . .
So how can I use this data to reflect my population

CONFIDENCE INTERVALS
• Because there is variability, from sample to
sample, in my estimates of mean and
standard deviation, we can quantify our
uncertainty using statistically based
Confidence Intervals (CI’s)
• Most of the time, we calculate 95% CI’s
• These are interpreted as follows:
– Approximately 95 out of a 100 CI’s will contain the
population parameter, or
– We’re 95% certain the population parameter is
inside the interval

Parametric Confidence Intervals
• Parametric Statistics assumes the

sample comes from a certain reference
distribution and calculates confidence
intervals based on the assumed
distribution
• Very mathematically oriented
• If your assumption for the reference distribution
is wrong, your confidence intervals may be
wrong also

PARAMETRIC CONFIDENCE INTERVALS
• Parametric Confidence Intervals take the

general form:
(Standard Deviation)
C.I. = Statistic  K *
n
Statistic = Mean, Variance, etc.
K = Constant based on the reference distributi on
• For the Mean, k is a function of the t

distribution
• For the Standard Deviation, k is a function
of the Chi-square distribution

PARAMETRIC CONFIDENCE INTERVALS
• The Parametric CI’s assume a t-distribution of sample
means
• The general formula for Parametric CI’s for the mean is:
s s
x  t / 2,n 1    x  t / 2,n 1
n n
Where
x  sample average
s  sample standard deviation
  significance level (1 - confidence level)
t  / 2,n1  t - value for /2 and n - 1 degrees of freedom
• The reference distribution here is called the t-distribution

What is t-distribution
Normal Distribution (Z)
Sample t-value Z-value

Probability
t - Distribution
5 2.78 1.96
10 2.26 1.96
20 2.09 1.96
30 2.05 1.96
100 1.98 1.96
1000 1.96 1.96
-4 -3 -2 -1 0 1 2 3 4
t – distribution converges to normal

distribution for large samples

WHAT DOES THIS FORMULA MEAN?
• For a 95% CI with a sample size of 10, the t-value
will be 2.26
• The previous formula
s s
x  t / 2,n1    x  t / 2,n1
n n
becomes
s s
x  2.26    x  2.26
n n
CONFIDENCE INTERVAL FOR THE MEAN
• Let’s look at the Confidence Interval for
the mean
• Suppose we want to determine the 95%
CI for the mean from 10 samples from a
process. We sample the process and
get:
– Xbar = 249.6
– s = 14.15
– n = 10
• from the following data:
– 263.1, 249.2, 247.4, 263.7, 262.4, 255.6, 252.4,
251.5, 227.3, 223.0

CONFIDENCE INTERVAL FOR THE MEAN
• We now substitute the values of X, s, and n into

the formula
14.15 14.15
249.6  2.26    249.6  2.26
10 10
239.5    259.7
We have 95% confidence that the true mean of the
population falls between 239.49 and 259.71
Now let’s do the problem in Minitab.

CALCULATING CONFIDENCE INTERVALS
• Open file DM Confidence

Intervals.MPJ, worksheet
Example 1
Confidence Intervals
Variable N Mean StDev SE Mean 95.0 % CI
Data 10 249.56 14.15 4.47 ( 239.44, 259.68)
This result says we’re 95% sure the actual process

mean is between 239.44 and 259.68
We’re also taking a 5% chance that we’re wrong
CONFIDENCE INTERVAL FOR SIGMA
n 1 n 1
s 2
Chi-squared
s 2 values from
c / 2, c(1 / 2), c2 table
Where  = the Significance Level (1 – Confidence)

n = Sample Size
Suppose we take a sample of 16 data points and get a standard
deviation of 1.66. The degrees of Freedom ( is equal to n-1, which is
16-1 or 15. The 95% ( = .05) Confidence Interval for Sigma is:
16  1 16  1
1.66    1. 66
c(.2 05 / 2 ),15 c(21.05 / 2 ),15
15 15
1.66    1.66
c.2025,15 c.2975,15
1.66
15
27.49
   1.66
15
6.26
1.23    2.57
What if my data is
Not normally distributed?

Non-Normal Distributions
-Chi-Square
• Statistical tests are dependant upon
-Poisson the type of distribution that exists
-Binomial
-Hypergeometric • Using tools meant for normally-
-Weibull distributed data, when the distribution
is non-normal can lead to false
-Exponential
conclusions
-Uniform
-Lognormal • It is important to know, where
-Logistic possible, what type of distribution you
are dealing with.

Summary
Introduced basic statistics and the
concept of the distributions
Discussed Normal Theory and the
Introduced how to use Minitab to look at
the statistics behind your data
Performed simulations to demonstrate
the concept
Discussed applications in inferential
statistics

Introduction to SPC

Objectives
• Link Control Chart methods to the DMAIC

Process Improvement
• Understand the different types of variation
• Introduce a few basic Control Charting

methods
• Discuss the interpretation of Control Charts

Common Cause vs. Special Cause Variation
COMMON CAUSE (Noise)

•Is present in every process
•Is produced by the process itself (the way we
do business)
•Can be removed and/or lessened but requires
a fundamental change in the process
A process is Stable, Predictable, and In-

Control when only Common Cause Variation
exists in the process
* note - if subgroups are used, the common cause variation is a function of sub-grouping choices

Common Cause vs. Special Cause Variation
SPECIAL CAUSE (Signals)
•Unpredictable
•Typically large in comparison to Common
Cause variation
•Caused by unique disturbances or a series of
them
•Can be removed/lessened by basic process
control and monitoring
A process exhibiting Special Cause

variation is said to be Out-of-Control and
Unstable
We Need Ways of Interpreting Data
Everyday we are flooded by

data and we are forced to make
decisions:
Plants Output Decreases By 4%
US Trade Deficit Rises By $40 Billion
Company X’s Earnings Are Off $240 Million From Previous

Quarter
Should We Take Action ?

How Do We Manage Data - Historically
Pain & Leave It Alone Pain &

Suffering It Ain’t Broke Suffering
Lower “Customer” Upper “Customer”

Requirement Requirement
(Lower Spec) (Upper Spec)
THIS METHOD
•Tells you where you are in regards to customer’s needs
•It will NOT tell you how you got there or what to do next
Pressure To Achieve Customer Requirements Will Cause One To :

1. Actually fix the process
2. Sabotage the process
3. Sabotage the data (integrity)

Variation Example
Special vs. Common Cause
• The factory scrap level is at a year low of 1.5%
• Manager presents an award to the plant
• Ceremony in the cafeteria: pizza and refreshments for all!
• “Everyone should be proud of what you’ve accomplished”

3
Scrap Level (%)
2
Party Time
J F M A
1996 1997
Derived from Understanding Variation: The Key To Managing Chaos, Donald J. Wheeler, SPC Press. 1993.
Variation Example
• Three consecutive months of scrap increases

• Manager wishes he could take back the award
• Instead of holding the gains, scrap went right back up
• Manager decides: “Recognition has backfired. This group needs
3 tough management!”
Scrap Level (%)
2
Manager wants to take back award
J F M A M J J
1996 1997
Variation Example
• By November, scrap has risen to a value of 2.6% - Year High
• Manager decides to take action
• A “special meeting” is called to solve this problem once and for all
• After a sound lecture on the importance of scrap, the manager
leaves. Employees aren’t sure what to do. Besides, they have other
3 metrics which are more important. So they do nothing.
Scrap Level (%)
2
No more “Soft Management”
J F M A M J J A S O N D
1996 1997
Variation Example
• Manager has seen reduced scrap levels since the end of last year.
“Things are looking-up!”
(REMEMBER: Nothing had been done to change the system)
• His take away: “A tough management style gets results!”
Manager concludes:
“Tough Love Makes Things Happen
Scrap Level (%)
J F M A M J J A S O N D J F M A M J
1996 1997
Variation Example
What might this data look

like on a control chart?

Scrap Level (%) The REAL Story!!
3 UCL
1 LCL
J F M A M J J A S O N D J F M M J J A S O
1996 1997
Let the Process do the talking! !
The Control Chart Tells A Different Story
• Manager
“ Hey, I made my decision based on data - How can I be wrong ?”
• Black Belt
“Your decisions were made from observing high and low points as
signals, when in reality, it was all noise (Common Cause Variation).
Look at the data, there has been no significant change in the
process.”
Manager concludes, “Tough
Love Makes Things Happen!”
3 UCL
Scrap Level (%)
1 LCL
J F M A M J J A S O N D J F M M J J A S O
1996 1997
Party Time Manager Wants No more soft management
To Take Back Award

Exercise
As it relates to your project, identify some possible

forms of “common cause” and “special cause”
variation
Common Cause
Special Cause

The Basic Control Chart
Key Components
UCL
CHARACTERISTIC
MONITORED
Plotted Data
Center Line
LCL
DATA PLOTTED OVER TIME
UCL = Upper Control Limit / LCL = Lower Control Limit

Control Chart Components
UCL versus LCL
UCL
LCL
• What % of data points should fall between the UCL and LCL ?
• If a point falls beyond the UCL or LCL does this mean we are
making a defect for the customer ?

Rules of Standard Deviation
“Where does the data lie?”
% of Data Points
UCL
3 Sigma 99-99.9%
2 Sigma 90-98%
The Item
We Are 1 Sigma
Measuring 60-75%
1 Sigma
2 Sigma
3 Sigma
LCL
TIME

Specification Limits ≠ Control Limits
Upper Control Limits = UCL Upper Specification Limits = USL

Lower Control Limits = LCL Lower Specification Limits = LSL
Is The Process Below Making Defects ?
UCL
USL
LSL
LCL
TIME

Upper Control Limits = UCL Upper Specification Limits = USL

Lower Control Limits = LCL Lower Specification Limits = LSL
Is The Process Below Making Defects ?

USL
UCL
LCL
LSL
TIME

Process Control Limits are calculated based on data from
the process itself
They are based on +/- 3 (99.73% of the process variation
is expected to fall between these limits)
Product Specification Limits ARE NOT found on the
control chart
Understanding how the process matches up against
customer requirements IS important to know
To determine how the process performs to Customer

Expectations, a Process Capability Study is required

TWO BIG CONTROL CHART ERRORS
# 1) Putting specification limits on a Control Chart
#2 ) Treating UCL and LCL as a specification limit
When you do either of these the control chart becomes

just an inspection tool - it’s no longer a control chart
UCL / LCL are not directly tied to customer defects !

Types of Control Charts
Variables Charts
Individual-X and Moving Range Chart
X-Bar / R Chart
Zone Chart
EWMA
CUSUM
Attribute Charts
p-Chart
np-Chart
c-Chart
u-Chart

Two Kinds of Data
VARIABLE -
The data are continuous (measured)
Results from the actual measuring of a
characteristic such as diameter of a hose,
electrical resistance, weight of a unit , etc.
ATTRIBUTE -
The data are generally counted
Results from using go/no-go gages,
inspection of visual defects, quantity of
missing parts, pass/fail or yes/no decisions,
etc.
Exercise: What Type of Data ?
(1) Length of connector housings produced by a molding press
(2) Production rate of the manufacturing lines in a building
(3) Number of printing defects on a package label
(4) Number of typographical errors per Sales Contract
(5) Number units failing test in monthly production
(6) Percent failed units in Monthly Production
(7) Amount of time taken to close an Account Receivable
(8) Number of parts with defects per 100 parts produced

Choosing the Correct Control Chart
Variable Attribute / Discrete
What Type Of Data ?
Counting
Data Collected In
Specific Defects or
Groups or Individuals ?
Defective Items ?
GROUPS INDIVIDUAL
(Averages) VALUES Specific Defective
(n>1) (n=1) Types Of Items
“Defects”
X-Bar R Individuals
X-Bar S Moving Range Is The Probability Of If You Know How Many
A Defect Low ? Are Bad, Do You Know
NO
How Many Are Good?
NOTE: X-Bar S is appropriate
Poisson Distribution Binomial Distribution
for subgroup sizes (n) of > 10
YES YES
Individuals
Moving Range
Area of
Constant
Opportunity Constant
Sample Size ?
In Each Sample
Size ?
NO YES NO YES
U Chart C Chart P Chart NP Chart

Minitab - Control Charts

Control Chart Tests
A set of standard tests have been created to help identify
SPECIAL CAUSE events present in our process
We use the phrase “Out of Control” when the points on the
chart have failed a test.
The Tests We Will Use:
Test #1: One point outside the UCL or LCL (3-sigma limit)
Test #2: Two of three consecutive outside the 2-sigma limit
Test #3: Four of five consecutive outside the one-sigma limit
Test #4: Nine consecutive on one side of the center line
Pattern Test: A pattern repeats itself (#cycles x #points in pattern >15)
When any of the points on the chart fail a test, it means

something “unusual” has happened –
Go Check It Out !!
Detecting Lack of Control
“Rules Of The Road”

(1) Start with Test #1 and Pattern Detection test
(2) If higher sensitivity is needed, also use tests
#2, 3, & 4
The Tests We Will Use:

Test #1: One point outside the UCL or LCL (3-sigma limit)
Test #2: Two of three consecutive outside the 2-sigma limit
Test #3: Four of five consecutive outside the one-sigma limit
Test #4: Nine consecutive on one side of the center line
Pattern Test: A pattern repeats itself

Minitab Tests for Lack of Control

Detecting Lack of Control
What do you do when you determine

that the process is out of control ?

Control Chart Example
Individual /Moving Range
Use:
• When its inconvenient or impossible to obtain more
than one measurement per sample
• When technology allows for easy measurement of
every unit at minimal cost
• Data availability is sparse
Variation
• Short Term: Represented by the variation from one
unit to the next (Moving Range chart)
• Long Term: Represented by a long sequence of
such events (Individuals chart)
Charts are Based on a Subgroup Size of 1

Minitab Exercise
Individuals / Moving Range
Open worksheet: Individual
MR in DM SPC.MPJ
STAT>CONTROL CHARTS>….

Minitab Exercise
Individuals / Moving Range
I-MR Chart of Errors
10 U C L=10.13
Individual V alue
5 _
X=4.04
LC L=-2.05
2 4 6 8 10 12 14 16 18 20 22 24
O bser vation
8
U C L=7.488
6
M oving Range
4
__
2 M R=2.292
0 LC L=0
2 4 6 8 10 12 14 16 18 20 22 24
O bser vation
What are the charts telling you?

Summary
• Linked Control Chart Methods to the
DMAIC Process Improvement roadmap
• Discussed different types of variation
• Introduced a few basic Control Charting
methods
• Discussed the interpretation of Control
Charts
• The Bottom Line………….
Six Sigma addresses Common Cause variation. If
Special Cause variation exists in your process, it needs
to be addressed independently, and prior to conducting
a Process Capability study.

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Basic Statistics

Confidential, proprietary information of Tyco International Ltd.

2 Confidential, proprietary information of Tyco International Ltd.

3 Confidential, proprietary information of Tyco International Ltd.

x = Sample Average  = Population Mean

s = Sample Standard  = Population Standard

Statistics estimate Parameters

4 Confidential, proprietary information of Tyco International Ltd.

5 Confidential, proprietary information of Tyco International Ltd.

$10, 20, 30, 40, 50 ($ in thousands)

After receiving more information, we have included the salary of

$10, 20, 30, 40, 5000 ($ in thousands)

What is the average income What is the median

6 Confidential, proprietary information of Tyco International Ltd.

• Range: the distance between the extreme

7 Confidential, proprietary information of Tyco International Ltd.

square 2.5 n-1

9 Confidential, proprietary information of Tyco International Ltd.

There are many types of distributions:

Most of the tools we will use deal with . . .

10 Confidential, proprietary information of Tyco International Ltd.

11 Confidential, proprietary information of Tyco International Ltd.

What is the difference among these three normal distributions?

12 Confidential, proprietary information of Tyco International Ltd.

• Property 2: The area under sections of

Confidential, proprietary information of Tyco International Ltd.

4.2 4.3 4.4 4.5 4.6 4.7 4.8

Confidential, proprietary information of Tyco International Ltd.

4.0 4.5 5.0 5.5 6.0 6.5

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• A least squares line is fit to the plotted

• Minitab makes the normal probability

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Let’s run using

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Probability Plot of Dist1

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Probability Plot of Dist2

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If random samples of n observations are

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• This formula shows that the sample averages

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Individual Data Values Sample Averages

How do the Means compare?

• The mean of the distribution of sample

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• Parametric Statistics assumes the

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• Parametric Confidence Intervals take the

• For the Mean, k is a function of the t

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• The reference distribution here is called the t-distribution

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Sample t-value Z-value

t – distribution converges to normal

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• We now substitute the values of X, s, and n into

Now let’s do the problem in Minitab.