Business Statistics, 4e

by Ken Black

Discrete Distributions Chapter 18

Statistical
Quality Control

Business Statistics, 4e, by Ken Black. © 2003 John Wiley & Sons.
18-1
 Learning Objectives
• Understand the concepts of quality, quality
control, and total quality management.
• Understand the importance of statistical quality
control in total quality management.
• Learn about process analysis and some process
analysis tools, including Pareto charts, fishbone
diagrams, and control chars.
• Learn how to construct X charts, R charts, P
charts, and c charts.
• Understand the theory and application of
acceptance sampling.

Business Statistics, 4e, by Ken Black. © 2003 John Wiley & Sons.
18-2
 Quality

• Quality is when a product delivers what is

stipulated for in its specifications

• Crosby: “quality is conformance to

requirements”

• Feigenbaum: “quality is a customer

determination”

Business Statistics, 4e, by Ken Black. © 2003 John Wiley & Sons.
18-3
 Garvin’s Five Dimensions of Quality

• Transcendent quality: “innate excellence”

• Product quality: quality is measurable
• User quality: quality is determined by the
consumer
• Manufacturing quality: quality is measured
by the manufacturer's ability to target the
product specifications with little variability
• Value Quality: did the consumer get his or
her money’s worth?
Business Statistics, 4e, by Ken Black. © 2003 John Wiley & Sons.
18-4
 Quality Control
• Quality control is the collection of strategies,
techniques, and actions taken by an organization to
assure themselves that they are producing a quality
product.
• After-process quality control involves inspecting the
attributes of a finished product to determine whether the
product is acceptable, is in need of rework, or is to be
rejected and scrapped.
– reporting of the number of defects per time period
– screening defective products from consumers
• In-process quality control techniques measure product
attributes at various intervals throughout the
manufacturing process in an effort to pinpoint problem
areas.

Business Statistics, 4e, by Ken Black. © 2003 John Wiley & Sons.
18-5
 Deming’s Fourteen Points
1. Create constancy of purpose fro improvement of product
and service.
2. Adopt a new philosophy.
3. Cease dependence on mass inspection.
4. End the practice of awarding business on price tag alone.
5. Improve constantly and forever the system of production
and service.
6. Institute training.
7. Institute leadership.
8 Drive out fear.
9. Break down barriers between staff areas.
10. Eliminate slogans.
11. Eliminate numerical quotas.
12. Remove barriers to pride of workmanship.
13. Institute a vigorous program of education and retraining.
14. Take action to accomplish the transformation.
Business Statistics, 4e, by Ken Black. © 2003 John Wiley & Sons.
18-6
 Important Quality Concepts
• Benchmarking
– examine and emulate the best practices and techniques used in
the industry
– a positive, proactive process to make changes that will effect
superior performance
• Just-In-Time Inventory Systems
– necessary parts for production arrive “just in time”
– reduced holding costs, personnel, and space needed for inventory
• Reengineering
– complete redesign of the core business process in a company
• Six sigma
– Total quality approach that measures the capacity of a process to
perform defect -free work
• Team Building:
– employee groups take on managerial responsibilities
– quality circle

Business Statistics, 4e, by Ken Black. © 2003 John Wiley & Sons.
18-7
 Process Analysis
• A process is a series of actions, changes or functions
that bring about a result.
• Flowcharts - schematic representation of all the
activities and interactions that occur in a process
• Pareto Analysis -quantitative tallying of the number and
types of defects that occur with a product
• Pareto Chart - ranked vertical bar chart with most
frequently occurring on the left
• Fishbone Diagram - display of potential cause-and-
effect relationships
• Control Charts - graphical method for evaluating
whether a process is or is not in a “state of statistical
control”

Business Statistics, 4e, by Ken Black. © 2003 John Wiley & Sons.
18-8
 Flowchart Symbols
Input/Output Symbol

Processing Symbol

Decision Symbol
Flow line Symbol
Start/Stop Symbol
Business Statistics, 4e, by Ken Black. © 2003 John Wiley & Sons.
18-9
 Pareto Chart
100 100%
90 90%
80 80%
70 70%
60 60%
Frequency

50 50%
40 40%
30 30%
20 20%
10 10%
0 0%
Poor Short in Defective Other
Wiring Coil Plug

Business Statistics, 4e, by Ken Black. © 2003 John Wiley & Sons.
18-10
 Cause-and-Effect Diagram

Methodology Workers
Wiring Scheme Training
Attitude
Pland Layout
Absenteeism
Poor
Inventory Wiring
Maintenance
Tools Transportation
Out-of-Adjustment Vendor
Out-of-Date
Equipment Raw Materials

Business Statistics, 4e, by Ken Black. © 2003 John Wiley & Sons.
18-11
 X Control Chart

3 UCL
2
Sample1 Centerline
Mean0
-1
-2 LCL
-3
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14
Sample Number

Business Statistics, 4e, by Ken Black. © 2003 John Wiley & Sons.
18-12
 Types of Control Charts

• Control charts for measurements

– X charts
– R charts
• Control charts for compliance items
– P charts
– c charts

Business Statistics, 4e, by Ken Black. © 2003 John Wiley & Sons.
18-13
 X Control Chart
Monitor process location (center)
1. Decide on the quality to be measured.
2. Determine a sample size.
3. Gather 20 to 30 samples.
4. Compute the sample average for each sample.
5. Compute the sample range for each sample.
6. Determine the average sample mean for all samples.
7. Determine the average sample range (or sample
standard deviation) for all samples.
8 Using the size of the samples, determine the value of
A2 or A3.
9. Compute the UCL and the LCL

Business Statistics, 4e, by Ken Black. © 2003 John Wiley & Sons.
18-14
 X Control Chart: Formulas
X and R Charts X and S Charts

X
 X
X
 X
k k
UCL  X  A 2
R UCL  X  AR 3

LCL  X  A 2
R LCL  X  A R 3

R
 R
S
 S
k k
LCL DR 3
UCL  B 4
R
UCL  D R 4
LCL  B 3
R

Business Statistics, 4e, by Ken Black. © 2003 John Wiley & Sons.
18-15
 Data for Demonstration Problem
18.1: Samples 1 - 10

1 2 3 4 5 6 7 8 9 10
5.13 4.96 5.21 5.02 5.12 4.98 4.99 4.96 4.96 5.03
4.92 4.98 4.87 5.09 5.08 5.02 5.00 5.01 5.00 4.99
5.01 4.95 5.02 4.99 5.09 4.97 5.00 5.02 4.91 4.96
4.88 4.96 5.08 5.02 5.13 4.99 5.02 5.05 4.87 5.14
5.05 5.01 5.12 5.03 5.06 4.98 5.01 5.04 4.96 5.11
4.97 4.89 5.04 5.01 5.13 4.99 5.01 5.02 5.01 5.04
X 4.9933 4.9583 5.0567 5.0267 5.1017 4.9883 5.0050 5.0167 4.9517 5.0450
R 0.25 0.12 0.34 0.10 0.07 0.05 0.03 0.09 0.14 0.18

Business Statistics, 4e, by Ken Black. © 2003 John Wiley & Sons.
18-16
 Data for Demonstration Problem
18.1: Samples 11 - 20
11 12 13 14 15 16 17 18 19 20
4.91 4.97 5.09 4.96 4.99 5.01 5.05 4.96 4.90 5.04
4.93 4.91 4.96 4.99 4.97 5.04 4.97 4.93 4.85 5.03
5.04 5.02 5.05 4.82 5.01 5.09 5.04 4.97 5.02 4.97
5.00 4.93 5.12 5.03 4.98 5.07 5.03 5.01 5.01 4.99
4.90 4.95 5.06 5.00 4.96 5.12 5.09 4.98 4.88 5.05
4.82 4.96 5.01 4.96 5.02 5.13 5.01 4.92 4.86 5.06
X 4.9333 4.9567 5.0483 4.9600 4.9883 5.0767 5.0317 4.9617 4.9200 5.0233
R 0.22 0.11 0.16 0.21 0.06 0.12 0.12 0.09 0.17 0.09

Business Statistics, 4e, by Ken Black. © 2003 John Wiley & Sons.
18-17
 Demonstration Problem 18.1:
Control Chart Computations
X and R Charts

X
 X

4.9933  4.9583  5.05665.0233
 5.00215
k 20
UCL  X  A R  5.00215   0.483 0136
.   5.06784
2

LCL  X  A R  5.00215   0.483 0136

.   4.93646
2

R
 R 0.25  012

.  0.34 0.09
 0136
.
k
20
LCL  D3 R   0 0136
. 0
UCL  D 4
R   2.004 0136
.   0.2725

Business Statistics, 4e, by Ken Black. © 2003 John Wiley & Sons.
18-18
 Demonstration Problem 18.1:
X Control Chart
Control Chart: Bearing Diameter
5.10963

5.05590

Mean
5.00217
Bearing Diameter

4.94844 UCL = 5.0679

Average = 5.0022

4.89471 LCL = 4.9364

1 3 5 7 9 11 13 15 17 19
2 4 6 8 10 12 14 16 18 20

Sigma level: 3

Business Statistics, 4e, by Ken Black. © 2003 John Wiley & Sons.
18-19
 R Chart
Monitor process variation
1. Decide on the quality to be measured.
2. Determine a sample size.
3. Gather 20 to 30 samples.
4. Compute the sample range for each sample.
5. Determine the average sample mean for all
samples.
6. Using the size of the samples, determine the
values of D3 and D4.
7. Compute the UCL and the LCL

Business Statistics, 4e, by Ken Black. © 2003 John Wiley & Sons.
18-20
 R Chart Formulas

R Charts

R
 R
k
LCL DR 3

UCL  D R 4

Business Statistics, 4e, by Ken Black. © 2003 John Wiley & Sons.
18-21
 Demonstration Problem 18.2:
R Control Chart
Control Chart: Bearing Diameter
.4

.3
Bearing Diameter
Range .2 UCL = .2725
.1 Average = .1360
0.0 LCL = .0000
1 3 5 7 9 11 13 15 17 19
2 4 6 8 10 12 14 16 18 20

Sigma level: 3
Business Statistics, 4e, by Ken Black. © 2003 John Wiley & Sons.
18-22
 P Charts
Monitor proportion in noncompliance

1. Decide on the quality to be measured.

2. Determine a sample size.
3. Gather 20 to 30 samples.
4. Compute the sample proportion for each
sample.
5. Determine the average sample proportion for
all samples.
6. Compute the UCL and the LCL

Business Statistics, 4e, by Ken Black. © 2003 John Wiley & Sons.
18-23
 P Chart Formulas
p 
n non
n
where: n non
 the number of noncomplying items in the sample
n  the number of items in the sample

P=
 p
k
where: p  the sample proportion
k  the number of samples
PQ
UCL = P + 3
n
PQ
LCL  P  3
n
where: Q  1  P
Business Statistics, 4e, by Ken Black. © 2003 John Wiley & Sons.
18-24
Demonstration Problem 18.3: Twenty
Samples of Bond Paper
Number Out Number Out
of of
Sample n Compliance Sample n Compliance
1 50 4 11 50 2
2 50 3 12 50 6
3 50 1 13 50 0
4 50 0 14 50 2
5 50 5 15 50 1
6 50 2 16 50 6
7 50 3 17 50 2
8 50 1 18 50 3
9 50 4 19 50 1
10 50 2 20 50 5
Business Statistics, 4e, by Ken Black. © 2003 John Wiley & Sons.
18-25
 Demonstration Problem 18.3:
Preliminary Calculations
Sample n nnon p Sample n nnon p
1 50 4 0.08 11 50 2 0.04
2 50 3 0.06 12 50 6 0.12
3 50 1 0.02 13 50 0 0.00
4 50 0 0.00 14 50 2 0.04
5 50 5 0.10 15 50 1 0.02
6 50 2 0.04 16 50 6 0.12
7 50 3 0.06 17 50 2 0.04
8 50 1 0.02 18 50 3 0.06
9 50 4 0.08 19 50 1 0.02
10 50 2 0.04 20 50 5 0.10
Business Statistics, 4e, by Ken Black. © 2003 John Wiley & Sons.
18-26
 Demonstration Problem 17.3:
Centerline, UCL, and LCL Computations

P
 p .08.06.02 .10
 .053
k 20
PQ  .053 .947
UCL  P  3 .053  3 .148
n 50
PQ  .053 .947
LCL  P  3 .053  3  .042
n 50
LCL  0
Business Statistics, 4e, by Ken Black. © 2003 John Wiley & Sons.
18-27
 Demonstration Problem 17.3:
P Control Chart
0.16
UCL = .148
0.14
0.12
0.10
p 0.08
0.06 P = .053
0.04
0.02
0.00 LCL = 0

0 5 10 15 20
Sample Number
Business Statistics, 4e, by Ken Black. © 2003 John Wiley & Sons.
18-28
 c Charts
Monitor number of nonconformances per item
1. Decide on nonconformances to be evaluated.
2. Determine the number of items to be studied (at
least 25).
3. Gather items.
4. Determine the value of c for each item by
summing the number of nonconformances in the
item.
5. Determine the average number of
nonconformances per item.
6. Determine the UCL and the LCL

Business Statistics, 4e, by Ken Black. © 2003 John Wiley & Sons.
18-29
 c Chart Formulas

c  c  c  c
c 1 2 3 i
i
where: i = number of items
c i
number of nonconformities per item
UCL = c + 3 c
LCL  c - 3 c
Business Statistics, 4e, by Ken Black. © 2003 John Wiley & Sons.
18-30
 Demonstration Problem 18.4:
Number of Nonconformities in Oil Gauges
Item Number of Item Number of
Number Nonconformities Number Nonconformities
1 2 14 2
2 0 15 1
3 3 16 4
4 1 17 0
5 2 18 2
6 5 19 3
7 3 20 2
8 2 21 1
9 0 22 3
10 0 23 2
11 4 24 0
12 3 25 3
13 2
Business Statistics, 4e, by Ken Black. © 2003 John Wiley & Sons.
18-31
 Demonstration Problem 18.4:
c Chart Calculations

c  c  c  c 2  0  33
c 
1
 2.0
2 3 i
i 25
UCL = c + 3 c  2.0  3 2.0  6.2
LCL  c - 3 c  2.0  3 2.0  2.2
LCL  0

Business Statistics, 4e, by Ken Black. © 2003 John Wiley & Sons.
18-32
 Demonstration Problem 18.4: c Chart

7
6
UCL = 6.2
5
c 4
3
2
1 c = 2.0
0
LCL = 0
0 5 10 15 20 25
Item Number

Business Statistics, 4e, by Ken Black. © 2003 John Wiley & Sons.
18-33
 Interpreting Control Charts
• Points are above UCL and/or below LCL
• Eight or more consecutive points fall above or
below the centerline. Ten out of 11 points fall
above or below the centerline. Twelve out of 14
points fall above or below the centerline.
• A trend of 6 or more consecutive points
(increasing or decreasing) is present
• Two out of 3 consecutive values are in the outer
one-third.
• Four out 5 consecutive values are in the outer
two-thirds.
• The centerline shifts from chart to chart.

Business Statistics, 4e, by Ken Black. © 2003 John Wiley & Sons.
18-34
 Interpreting Control Charts:
Points above UCL and/or below LCL

UCL

Centerline

LCL

Business Statistics, 4e, by Ken Black. © 2003 John Wiley & Sons.
18-35
Interpreting Control Charts: 8 Consecutive
Points on One Side of the Centerline

UCL

Centerline

LCL

Business Statistics, 4e, by Ken Black. © 2003 John Wiley & Sons.
18-36
 Interpreting Control Charts:
7 Consecutive Increasing Points
UCL

Centerline

LCL

Business Statistics, 4e, by Ken Black. © 2003 John Wiley & Sons.
18-37
 Interpreting Control Charts:
2 out of 3 Consecutive Points in Outer 1/3

UCL

Centerline

LCL

Business Statistics, 4e, by Ken Black. © 2003 John Wiley & Sons.
18-38
 Interpreting Control Charts:
4 out of 5 Consecutive Points in Outer 2/3

UCL

Centerline

LCL

Business Statistics, 4e, by Ken Black. © 2003 John Wiley & Sons.
18-39
 Acceptance Sampling
• Acceptance sampling is the inspection of a
sample from a lot of goods to determine if
the lot will be accepted or rejected.
– N = the lot size
– n = the sample size
• Single Sample Plan
• Double-Sample Plan
• Multiple-Sample Plan

Business Statistics, 4e, by Ken Black. © 2003 John Wiley & Sons.
18-40
 Rules for Sampling Plans
Accept lot if x  c Single Sample
Reject lot if x  c Plan

x c Accept if 1 1
First sample:
Reject if x  r 1 1
Double Sample
Take second sample if c  x  r 1 1 1 Plan
Accept if x  x  c 1 2 2
Second sample:
Reject if x  x  c 1 2 2

Business Statistics, 4e, by Ken Black. © 2003 John Wiley & Sons.
18-41
 Producer’s and Consumer’s Risk
H0: the lot is of acceptable quality State of Nature

Null True Null False

Fail to Correct Type II error

Reject Null Decision --
Actions Consumer’s
Risk
Reject Null Type I Correct
error -- Decision
Producer’s
Risk
Business Statistics, 4e, by Ken Black. © 2003 John Wiley & Sons.
18-42
 Bicycle Manufacturer Example
• N = 3,000 (Braces arrive at the manufacturer’s plant in lots of 3,000.)
• n = 15 (The bicycle manufacturer randomly selects a sample of 15 braces
to inspect.)
• X is the number of nonconforming braces in the
sample of 15.
• A 2% nonconformance rate is acceptable to the
consumer (the bicycle manufacturer).
• If the lot contains 60 nonconforming braces, what is
the probability that the consumer will reject the lot
(producer’s risk)?
• If the lot contains 360 nonconforming braces, what is
the probability that the consumer will not reject the
lot (consumer’s risk)?

Business Statistics, 4e, by Ken Black. © 2003 John Wiley & Sons.
18-43
 Bicycle Manufacturer Example:
Sampling Plan
n  15
c =1
Accept lot if x  1
Reject lot if x  1

Business Statistics, 4e, by Ken Black. © 2003 John Wiley & Sons.
 Bicycle Manufacturer Example:
Analysis for 2% Nonconforming Braces

p 0
.02
Probability of accepting
15 15
.02 .98 .02 .98
0 15 1 14
Px  0  Px  1      . 9647
 0  1
Probability of rejecting

1.9647 .0353 Producer’s Risk

Business Statistics, 4e, by Ken Black. © 2003 John Wiley & Sons.
 Bicycle Manufacturer Example:
Analysis for 12% Nonconforming
Braces

p .12
1

Probability of accepting
15 15
.12.88 .12.88 Consumer’s
0 15 1 14
Px  0  Px  1      .4476
 0  1 Risk
Probability of rejecting
1.4476.5524

Business Statistics, 4e, by Ken Black. © 2003 John Wiley & Sons.
 Bicycle Manufacturer Example:
OC Curve for n = 15 and c = 1
Probability
of .9647 1.00 } .0353 Producer’s Risk
acceptance
0.80

0.60
.4476 .4476 Consumer’s Risk
0.40

0.20

0.00
0% 10% 20% 30% 40%
2% 12%
Percent nonconforming

Business Statistics, 4e, by Ken Black. © 2003 John Wiley & Sons.
18-47
 Bicycle Manufacturer Example:
OC Curve for n = 15 and c = 0
Probability
of 1.00
acceptance
0.80
.74
0.60

0.40

.21 0.20
0.00
0% 10% 20% 30% 40%

Percent nonconforming
2% 12%
Business Statistics, 4e, by Ken Black. © 2003 John Wiley & Sons.
18-48
 Demonstration Problem 18.5

Business Statistics, 4e, by Ken Black. © 2003 John Wiley & Sons.
18-49
 Demonstration Problem 18.5

Business Statistics, 4e, by Ken Black. © 2003 John Wiley & Sons.
18-50
 n= 20

Demonstration c= 2

p P(Accept)
Problem 18.5 0.00001
0.01
=BINOMDIST(B$2,B$1,A5,TRUE)
=BINOMDIST(B$2,B$1,A6,TRUE)
0.02 =BINOMDIST(B$2,B$1,A7,TRUE)
0.03 =BINOMDIST(B$2,B$1,A8,TRUE)
0.04 =BINOMDIST(B$2,B$1,A9,TRUE)
0.05 =BINOMDIST(B$2,B$1,A10,TRUE)
0.06 =BINOMDIST(B$2,B$1,A11,TRUE)
0.07 =BINOMDIST(B$2,B$1,A12,TRUE)
0.08 =BINOMDIST(B$2,B$1,A13,TRUE)
0.09 =BINOMDIST(B$2,B$1,A14,TRUE)
0.1 =BINOMDIST(B$2,B$1,A15,TRUE)
0.11 =BINOMDIST(B$2,B$1,A16,TRUE)
0.12 =BINOMDIST(B$2,B$1,A17,TRUE)
0.13 =BINOMDIST(B$2,B$1,A18,TRUE)
0.14 =BINOMDIST(B$2,B$1,A19,TRUE)
0.15 =BINOMDIST(B$2,B$1,A20,TRUE)
0.16 =BINOMDIST(B$2,B$1,A21,TRUE)
0.17 =BINOMDIST(B$2,B$1,A22,TRUE)
0.18 =BINOMDIST(B$2,B$1,A23,TRUE)
0.19 =BINOMDIST(B$2,B$1,A24,TRUE)
0.2 =BINOMDIST(B$2,B$1,A25,TRUE)

Business Statistics, 4e, by Ken Black. © 2003 John Wiley & Sons.
18-51