Continuous Improvement Toolkit: Probability Distributions

Continuous Improvement Toolkit
Probability
Distributions
- Probability
Distributions
What is a Probability Distribution?
 It is a way to shape the sample data to make predictions
and draw conclusions about an entire population.
 It refers to the frequency at which some events or
experiments occur.
Can
height
- Probability
Distributions
 Helps finding all the possible values a random variable can
take between the minimum and maximum possible values.
 Used to model real-life events for which the outcome
is uncertain.
 Once we find the appropriate model,
we can use it to make inferences
and Sampl
e
predictions.
POPULATION
- Probability
Distributions
 Line managers may use probability distributions to
generate sample plans and predict process yields.
 Fund managers may use them to determine the
possible returns a stock may earn in the future.
 Restaurant mangers may use them to resolve
future customer complaints.
 Insurance managers may use them to
forecast the uncertain future claims.
- Probability
Distributions
 Probability runs on a scale of 0 to 1.
 If something could never happen, then it has a probability of
0.
• For example, it is impossible you could breathe and be
under water at the same time without using a tube or
mask.
- Probability
Distributions
 If something is certain to happen, then it has a probability of
1.
• For example, it is certain that the sun will rise tomorrow.
- Probability
Distributions
 You might be certain if you examine the whole population.
 But often times, you only have samples to work with.
 To draw conclusions from sample data, you should
compare values obtained from the sample with the
theoretical values obtained from the probability
distribution.
- Probability
Distributions
 There will always be a risk of drawing false conclusions
or making false predictions.
 We need to be sufficiently confident before taking any
decision by setting confidence levels.
• Often set at 90 percent, 95 percent or 99 percent.
- Probability
Distributions
 Many probability distribution can be defined by factors such
as the mean and standard deviation of the data.
 Each probability distribution has a formula.
- Probability
Distributions
 There are different shapes, models and
classifications of probability
distributions.
 They are often classified into

two categories:
• Discrete.
• Continuous.
- Probability
Distributions
Discrete Probability Distribution:
 A Discrete Probability Distribution relates to discrete data.
 It is often used to model uncertain events where the
possible values for the variable are either attribute or
countable.
 The two common discrete probability distributions are
Binomial
and Poisson distributions.
- Probability
Distributions
Binary Distribution:
 A discrete probability distribution that takes 60
only two possible values. %
40
 There is a probability that one value will occur %
and the other value will occur the rest of the
time.
 Many real-life events can only have two possible 0
outcomes: 1
• A product can either pass or fail in an inspection
test.
• A student can either pass or fail in an exam.
• A tossed coin can either have a head or a tail.
 Also referred to as a Bernoulli distribution.
- Probability
Distributions
Binomial Distribution:
 A discrete probability distribution that is used for data
which can only take one of two values, i.e.:
• Pass or fail. Defective
Pass
• Yes or no.
Pass
• Good or defective.
Pass
 It allows to compute the probability of the Fail
number of successes for a given number of Fail
trials. Pass
Pass
• Each is either a success or a failure, given the
Pass
probability of success on each trial.
Fail
 Success could mean anything you want to
consider as a positive or negative outcome.
- Probability
Distributions
 Assume that you are tossing a coin 10 times.
 You will get a number of heads between 0 and 10.
 You may then carry out another 10 trials, in
which you will also have a number of heads
between
0 and 10.
 By doing this many times, you will have a data set which has
the shape of the binomial distribution.
 Getting a head would be a success (or a hit).
 The number of tosses would be the trials.
 The probability of success is 50 percent.
- Probability
Distributions
 The binomial test requires that each trial is independent
from any other trial.
 In other words, the probability of the second trial is not
affected by the first trial.
- Probability
Distributions
 This test has a wide range of applications, such as:
• Taking 10 samples from a large batch which is 3 percent
defective (as past history shows).
• Asking customers if they will shop again in the next 12 months.
• Counting the number of individuals who own more than one
car.
• Counting the number of correct answers in a multi-choice exam.
- Probability
Distributions
 The binomial distribution is appropriate when the
following conditions apply:
• There are only two possible outcomes to each trial (success
and failure).
• The number of trials is fixed.
• The probability of success is identical for all trials.
• The trials are independent (i.e. carrying out
one trial has no effect on any other trials).
- Probability
Distributions
 The probability of ‘r’ successes P(r) is given by the binomial
formula:
P(r) = n!/(r!(n-r))! * pr(q)n-r

p: probability of success
n: number of independent trials
r: number of successes in the n trials
q:probability of failure
The binomial distribution is fully defined if we know both ‘n’ &

‘p’
- Probability
Distributions
Binomial Distribution – Example:
 In a sample of 20 drawn from a batch which is 5%
defective, what is the probability of getting exactly 3
defective items?
P(r) = n!/(r!(n-r))! * pr(1-p)n-r
P(r) = 20!/(3!(20 - 3)!) * 0.053(1 - 0.05)20-3
P(r) = 1,140 * 0.053 * (0.95)17 = 0.060

- Probability
Distributions
Binomial Distribution – Example:
 When sampling, we commonly want to accept a batch if
there are (say) 1 or less defective in the sample, and reject
it if there are 2 or more.
 In order to determine the probability of acceptance, the
individual probabilities for 0 and 1 defectives are
summed:
• P (1 or less) = P(0) + P(1)
= 0.358 + 0.377 = 0.735
 So the probability of rejection is:

• 1 – 0.735 = 0.265
- Probability
Distributions
Binomial Distribution – Other Examples:
 What is the probability of obtaining exactly 2
heads in the 5 tosses?
 What is the probability that in a random
sample of 10 cans there are exactly 3
defective
units, knowing that on average there is a 5%
defective product?
 What is the probability that a random sample
of 4 units will have exactly 1 unit is defective,
knowing that that process will produce 2%
defective units on average?
- Probability
Distributions
 In Excel, you may calculate the binomial probabilities using
the
BINOM.DIST function. Simply write:
=BINOM.DIST(number of successes, number
of trials, probability of success, FALSE)
- Probability
Distributions
 Suppose that we want to know the chance of getting exactly
4
heads out of 10 tosses.
 Instead of using the binomial formula, we might skip straight
to the Excel formula.
 In Excel, we simply write:
=BINOM.DIST(4,10,0.5,FALSE)
 The result value will be 0.205078125.
 This means that there is a 20.5% chance
that
10 coin tosses will produce exactly 4 heads.
- Probability
Distributions
Continuous Distributions:
 Relates to continuous data.
 Can take any value and can be measured with any degree
of accuracy.
 The commonest and the most useful continuous distribution
is the normal distribution.
 There are other continuous
probability distributions that are used
to model non-normal data.
- Probability
Distributions
Normal Distribution:
 A symmetrical probability distribution.
 Most results are located in the middle
and few are spread on both sides.
 Has the shape of a bell.
 Can entirely be described by its mean
and
standard deviation.
 Normality is an important assumption when conducting
statistical analysis so that they can be applied in the
right manner.

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Continuous Improvement Toolkit

 They are often classified into

P(r) = n!/(r!(n-r))! * pr(q)n-r

The binomial distribution is fully defined if we know both ‘n’ &

P(r) = 20!/(3!(20 - 3)!) * 0.053(1 - 0.05)20-3

P(r) = 1,140 * 0.053 * (0.95)17 = 0.060

 So the probability of rejection is:

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