1. Rev. 02/24/06SJSU Bus. 142 - David Bentley1 Chapter 11 – Statistical Thinking and Applications “Red bead experiment”, random vs. non-random variation, probability distribution, sampling, statistical methodology

2. THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson Learning TM Rev. 02/24/06SJSU Bus. 142 - David Bentley2 Statistical Thinking All work occurs in a system of interconnected processes Variation exists in all processes Understanding and reducing variation are the keys to success “Variation is the enemy of quality”

3. THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson Learning TM 09/13/02SJSU Bus. 142 - David Bentley3 Sources of Variation in Production Processes Materials Tools OperatorsMethods Measurement Instruments Human Inspection Performance EnvironmentMachines INPUTSPROCESSOUTPUTS

4. THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson Learning TM Mod. 09/13/02SJSU Bus. 142 - David Bentley4 Variation Many sources of uncontrollable variation exist (common = chance = random causes) Special (assignable = special = non- random) causes of variation can be recognized and are controllable Failure to understand these differences can increase variation in a system

5. THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson Learning TM 09/13/02SJSU Bus. 142 - David Bentley5 Importance of Understanding Variation time PREDICTABLE ? UNPREDECTIBLE

6. THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson Learning TM Mod. 02/24/06SJSU Bus. 142 - David Bentley6 Two Fundamental Management Mistakes 1. Treating as a special cause any fault, complaint, mistake, breakdown, accident or shortage when it actually is due to common causes (Type I error or Producer’s Risk) 2. Attributing to common causes any fault, complaint, mistake, breakdown, accident or shortage when it actually is due to a special cause (Type II error or Consumer’s Risk)

7. THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson Learning TM Mod. 09/13/02SJSU Bus. 142 - David Bentley7 Note to Instructors “The following slides can be used to guide a class demonstration and discussion of the Deming Red Bead experiment using small bags of M&M’s® Chocolate Candies, from a suggestion I found on a TQ newsgroup several years ago. The good output (“white beads”) are the blue M&Ms, with the instructor playing the role of Dr. Deming.” - James R. Evans

8. THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson Learning TM Mod. 09/13/02SJSU Bus. 142 - David Bentley8 We’re Going into Business!!! We have a new global customer and have to start up several factories. The customer wants only blue M&M’s®. So I need 4 teams of 8 people to do the work: 5 production workers 2 inspectors 1 Chief Inspector / recorder

9. THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson Learning TM Mod. 09/13/02SJSU Bus. 142 - David Bentley9 Production Process 1. Each production worker reaches into the bag and take one piece at a time out of the bag. 2. Production worker produces 10 pieces and places them on the napkin. 3. Each inspector, independently, counts the blue ones produced by each worker, and passes the results (name and number of blue pieces) to the Chief Inspector to verify. 4. If Chief Inspector agrees, s/he records the results by individual and reports the results to me.

10. THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson Learning TM Mod. 09/13/02SJSU Bus. 142 - David Bentley10 Second pass Reward best performer Penalize worst performer Remind everyone that customer only wants blue M&M’s® Exhort workers to do better Repeat process

11. THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson Learning TM Mod. 09/13/02SJSU Bus. 142 - David Bentley11 Third pass Again reward best performer Again penalize worst performer Remind everyone that customer only wants blue M&M’s® Warn workers their jobs are in jeopardy Declare Zero Defects Day Repeat process

12. THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson Learning TM Mod. 09/13/02SJSU Bus. 142 - David Bentley12 Fourth pass Fire worst performers Put up banners, posters, slogans (see next slide) Remind everyone that customer only wants blue M&M’s® Warn that plant closure is possible Repeat process

13. THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson Learning TM 09/13/02SJSU Bus. 142 - David Bentley13

14. THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson Learning TM 09/13/02SJSU Bus. 142 - David Bentley14 Bad News! Results are not good enough Customers are not satisfied Plant must be closed!

15. THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson Learning TM Mod. 09/13/02SJSU Bus. 142 - David Bentley15 Lessons Learned Quality is made at the top. Rigid procedures are not enough. People are not always the main source of variability. Numerical goals are often meaningless. Inspection is expensive and does not improve quality. Slogans, posters, banners are not the answer

16. THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson Learning TM 09/13/02SJSU Bus. 142 - David Bentley16 Statistical Methods Descriptive statistics Statistical inference Predictive statistics

17. THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson Learning TM 09/13/02SJSU Bus. 142 - David Bentley17 Review of Key Concepts Random variables Probability distributions Populations and samples Point estimates Sampling distributions Standard error of the mean

18. THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson Learning TM 09/13/02SJSU Bus. 142 - David Bentley18 Important Probability Distributions Discrete Binomial Poisson Continuous Normal Exponential

19. THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson Learning TM Rev. 02/26/06SJSU Bus. 142 - David Bentley19 Central Limit Theorem If simple random samples of size n are taken from any population, the probability distribution of sample means will be approximately normal as n becomes large.

20. THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson Learning TM 09/13/02SJSU Bus. 142 - David Bentley20 Sampling Methods Simple random sampling Stratified sampling Systematic sampling Cluster sampling Judgment sampling

21. THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson Learning TM 09/13/02SJSU Bus. 142 - David Bentley21 Sampling Error Sampling error (statistical error) Nonsampling error (systematic error) Factors to consider: Sample size Appropriate sample design

22. THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson Learning TM 09/13/02SJSU Bus. 142 - David Bentley22 Design of Experiments A test or series of tests to compare two or more methods to determine which is better, or to determine levels of controllable factors to optimize the yield of a process or minimize the variability of a response variable. Factorial experiment Analysis of all combinations of factor levels to understand main effects and interactions

23. THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson Learning TM 09/13/02SJSU Bus. 142 - David Bentley23 Descriptive Statistics Tool - Microsoft Excel Tools…Data Analysis… Descriptive Statistics

24. THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson Learning TM 09/13/02SJSU Bus. 142 - David Bentley24 Descriptive Statistics Results

25. THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson Learning TM 09/13/02SJSU Bus. 142 - David Bentley25 Excel Histogram Tool Tools…Data Analysis…Histogram

26. THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson Learning TM 09/13/02SJSU Bus. 142 - David Bentley26 Histogram & Frequency Distribution