CONFIDENCE INTERVALS

Learning Objectives

• Understand the concept of the confidence interval and how it impacts

an analysis or study.

• Know how to determine the confidence interval for a specific point

value.

• Know how to use the confidence interval to test future point values
for significant change.
How does it help?

Understanding
Understanding the the confidence
confidence
interval
interval is
is key
key to:
to:
•understanding
•understanding thethe limitations
limitations of
of
quotes
quotes in
in point
point estimate
estimate data.
data.
•being
•being able
able to
to quickly
quickly and
and
efficiently
efficiently screen
screen aa series
series of
of point
point
estimate
estimate data
data for
for significance.
significance.
 IMPROVEMENT ROADMAP
Uses of Confidence Intervals

Common Uses
Phase 1: •Used in any situation
Measurement where data is being
Characterization
evaluated for significance.

Phase 2:
Analysis

Breakthrough
Strategy

Phase 3:
Improvement

Optimization

Phase 4:
Control
 KEYS TO SUCCESS

Use variable data wherever possible

Generally, more samples are better (limited only by cost)
Recalculate confidence intervals frequently
Use an excel spreadsheet to ease calculations
 WHAT ARE CONFIDENCE INTERVALS?

The possibility of error exists in almost every system. This goes for point values as well.
While we report a specific value, that value only represents our best estimate from the
data at hand. The best way to think about this is to use the form:
true value = point estimate +/- error
The error around the point value follows one of several common probability distributions.
As you have seen so far, we can increase our confidence is to go further and further out
on the tails of this distribution.

Point
Value
This “error band” which
exists around the point
estimate is called the
confidence interval.
+/- 1s = 67% Confidence Band

+/- 2s = 95% Confidence Band

So, what does this do for me?

•The
•The confidence
confidence interval
interval
establishes
establishes aa wayway toto test
test whether
whether
or
or not
not aa significant
significant change
change hashas
occurred
occurred in in the
the sampled
sampled
population.
population. This This concept
concept is is called
called
significance
significance or or hypothesis
hypothesis testing.
testing.
•Being
•Being able
able to
to tell
tell when
when aa
significant
significant change
change has has occurred
occurred
helps
helps in
in preventing
preventing us us from
from
interpreting
interpreting aa significant
significant change
change
from
from aa random
random event
event and
and
responding
responding accordingly.
accordingly.
REMEMBER OUR OLD FRIEND SHIFT & DRIFT?

All
Allof
ofour
ourwork
workwas
wasfocused
focusedininaanarrow
narrow time
timeframe.
frame.
Over
Overtime,
time,other
otherlong
longterm
terminfluences
influencescome
comeand
andgogo
which move the population and change some of
which move the population and change some of its its
characteristics.
characteristics.

e
Tim
Confidence
Confidence Intervals
Intervals give
give us
us the
the
Original Study tool
tool to
to allow
allow us
us to
to be
be able
able to
to sort
sort
the
the significant
significant changes
changes from
from the
the
insignificant.
insignificant.
USING CONFIDENCE INTERVALS TO SCREEN DATA

TIME

2 3 4 5 6 7

Significant Change? 95% Confidence

Interval

WHAT
WHAT KIND
KIND OF
OF PROBLEM
PROBLEM DO
DO YOU
YOU HAVE?
HAVE?
•Analysis
•Analysis for
for aa significant
significant change
change asks
asks the
the question
question “What
“What happened
happened to
to
make
make this
this significantly
significantly different
different from
from the
the rest?”
rest?”
•Analysis
•Analysis for
for aa series
series of
of random
random events
events focuses
focuses on
on the
the process
process and and asks
asks the
the
question
question “What
“What isis designed
designed into
into this
this process
process which
which causes
causes itit to
to have
have this
this
characteristic?”.
characteristic?”.
 CONFIDENCE INTERVAL FORMULAS

s s
Mean
Mean X − t a / 2 ,n − 1 ≤ μ ≤ X + t a / 2 ,n −1
n n

n−1 n−1
Standard
StandardDeviation
Deviation s ≤σ ≤s
χ12− a / 2 χ a2/ 2

Process
ProcessCapability
Capability χ12− a / 2 ,n − 1 χ a2/ 2 , n − 1
Cp ≤ Cp ≤ Cp
n−1 n−1

p$ (1 − p$ ) p$ (1 − p$ )
Percent
PercentDefective
Defective p$ − Z a / 2 ≤ p ≤ p$ + Z a / 2
n n

These
These individual
individual formulas
formulas enable
enable us
us to
to calculate
calculate the
the confidence
confidence interval
interval for
for many
many of
of the
the
most
most common
common metrics.
metrics.
 CONFIDENCE INTERVAL EXAMPLE

Over the past 6 months, we have received 10,000 parts from a vendor with an
average defect rate of 14,000 dpm. The most recent batch of parts proved to
have 23,000 dpm. Should we be concerned? We would like to be 95%
confident in the results.

• Calculation Values:
• Average defect rate of 14,000 ppm = 14,000/1,000,000 = .014
• Significance: a = 5% (95% confident)
• Za/2 = Z.025 = 1.96
• n=10,000
• Comparison defect rate of 23,000 ppm = .023
• Calculation:
p$ − Z a / 2
(
p$ 1 − p$ )
≤ p ≤ p$ + Za / 2
(
p$ 1 − p$ )
n n
.014 (1 − .014 ) .014 (1 − .014 )
.014 − 1.96 ≤ p ≤ .014 + 1.96 .014 − .0023 ≤ p ≤ .014 + .0023
10 , 000 10 , 000
.012 ≤ p ≤ .016
• Answer: Yes, .023 is significantly outside of the expected 95% confidence interval of .012 to .016.
 CONFIDENCE INTERVAL EXERCISE

We are tracking the gas mileage of our late model ford and find that
historically, we have averaged 28 MPG. After a tune up at Billy Bob’s auto
repair we find that we only got 24 MPG average with a standard deviation of
3 MPG in the next 16 fillups. Should we be concerned? We would like to be
95% confident in the results.

What do you think?

Learning Objectives

• Understand the concept of the confidence interval and how it impacts

an analysis or study.

• Know how to determine the confidence interval for a specific point

value.

• Know how to use the confidence interval to test future point values
for significant change.