Transnational Corporations and Business Continuity Programs
Transnational corporations or Multinational Companies as they are also called need to have robust and well thought out business continuity programs if they are to manage the myriad risks arising out of their business operations. MNC’s typically operate in several countries and hence the risks faced by their businesses depend on the location in which […]
Importance of Measurement Systems Analysis
Measurement Systems analysis is an integral part of the Six Sigma project. No matter what project is being conducted under the Six Sigma methodology, this part of the process can never be omitted out and the successful results still be obtained. Below is an explanation about what makes Measurement Systems Analysis such an integral part […]
Companys approach to Inventory Health
Inventory means an item of value and asset in the books of the Company. This is the most important category of item that needs to be focused upon by the management for in its management lies the business efficiency as well as profits. Inventory holding is a must for any business organization that is into […]
Disaster Recovery and Business Continuity Sites and Options
Disaster Recovery and Business Continuity have become an integral part of the ongoing business process with most of the Organizations that consider it important to do risk assessment and risk mitigation to safeguard their business from all sorts of threats and crises. DR & BC plans can be drawn up in detail and elaborately to […]
What is Correlation Analysis and How is it Performed ?
Correlation analysis is a vital tool in the hands of any Six Sigma team. As the Six Sigma team enters the analyze phase they have access to data from various variables. They now need to synthesize this data and ensure that they are able to find a conclusive relationship. What is Correlation Analysis ? One […]
The confidence interval is a central concept of hypothesis testing. Although understanding its mathematical and statistical meaning is beyond the scope of this module, one needs to have a fair idea of the concept. Hence, a brief introduction of the confidence interval that is essential for the Six Sigma project team to understand is as follows:
The normal distribution is a continuous distribution. This means that the probability of reaching the exact point is zero. This conclusion has profound implication for estimation. This is because instead of reaching a point estimate, one needs to pen down an interval estimate to get a realistic answer. Thus we can’t say the probability of the value being exactly 100. However, we can make a fairly educated guess about whether the value will lie between 80 and 120.
A confidence interval attaches a probability to the above statement. For instance if we say that a value will lie between 80 and 120 with 90% confidence, we mean to say that there is a 9 out of 10 chance that this will be the case. However statistics operate on the law of large numbers and hence these values are expected to hold true only after a large number of experiments have been performed.
The confidence interval is therefore a result of using sampling. In the above case we can conclude that in a sample 90% of the total observations taken will have the value lying between 80 and 120.
The factors that influence the confidence interval have been listed down along with their precise relationship:
Hypothesis testing is almost always done on samples. Hence, we must understand that there can be a difference between the values drawn from the samples and the actual value of the population. This is what we call sampling error. This plays a vital role in interpretation of hypothesis testing. Hypothesis tests with a higher confidence level are more accurate than the ones with lower confidence levels.
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