January 21, 2016

Control of Variation in Inputs and Outputs - Management Insights from Statistics

Like many other professionals of various subjects, Statisticians also contributed to theory and practice.

Decision making under risk uses expected values based on the probability distributions of the variables involved.

Planning requires forecasts and statistics provides forecasts based on past using techniques like time series analysis and regression models.

Walter Shewart came out with idea that a process is under control as long as measurements of output units are falling within 3 sigma (standard deviation) limits. If the output measurement falls outside the limits, the setup needs investigation and correction. This guideline provided for economical process control and is considered valid even now.

Motorola executives came out with a different perspective. Reduction of variance or standard deviation of a process.  It is possible to design a process with minimum variance by experimenting on the process with various levels of variables involved. Six sigma, the technique that helps in variance reduction is proving billions in benefits to the companies producing goods as well as services by reducing defects drastically. Consumers are getting more consistent quality products.

We are going to revise basics of statistics and application in management practice in our one year revision schedule.

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Updated 21 Jan 2016, 30 Dec 2014

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