Enterprise Application Integration and Service Oriented Architecture
ERP represents a wide suite of applications covering various enterprise functionalities. It also links together departments and business units. Whereas an ERP system provides a perfect back end system, the organization still needs to interact and collaborate with its suppliers and vendors, where an ERP system plays only a limited role. Extended ERP: The business […]
Waiting Line (Queue) Management – Meaning and Important Concepts
Introduction The waiting line or queue management is a critical part of service industry. It deals with issue of treatment of customers in sense reduce wait time and improvement of service. Queue management deals with cases where the customer arrival is random; therefore, service rendered to them is also random. A service organization can reduce […]
Role of a Project Coach in a Six Sigma Project
The Project Coach is the person concerned who is responsible to make sure that the team understand Six Sigma tools and methodologies. Six Sigma is a complex methodology encompassing multiple stages. There will be different people who will be working at different stages of the Six Sigma project. All of them do not need to […]
Focusing on Forecasting
Companies all around the world are focused on quarterly as well as annual results. As soon as these results are announced, the financial markets give some sort of reaction. If the results are good, the stock prices rise. If not, stock prices tend to fall. However, in either case, the stock price is linked to […]
Importance of Quality Management
“Quality management” ensures superior quality products and services. Quality of a product can be measured in terms of performance, reliability and durability. Quality is a crucial parameter which differentiates an organization from its competitors. Quality management tools ensure changes in the systems and processes which eventually result in superior quality products and services. Quality management […]
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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