Using Scatter Diagrams to Understand Two Variables’ Relationship

Have you ever wondered why a certain product sells more in a given season? Have you thought about how complicated forecasting sales would be without any indication of when your organization should produce more or less? What about hotel chains, how do they work around the optimum occupancy rate?

A Scatter diagram is one of the Seven Traditional Quality Tools. It offers business practitioners an easy way to understand what the correlation between two variables is. But why is it important for you to know that? Imagine that your efforts in either hiring temp workers, or producing a product, or selling a course revolves around not only market demand but also around when the demand exists. Now imagine the amount of defect parts your process produces exactly when you receive shipments from a certain supplier. Understanding the correlation between two variables does exactly that: it lets you explore the possible impact of an independent variable on a dependent variable.  Let’s work with a simple example: consider the relationship between water consumption during a marathon in the summer and the temperature outside. I can certainly state that the hotter it is outside the more water a runner tends to consume. I believe you’d agree with that. Now let us switch gears. Can I say that the more water a runner consumes the hotter it is outside? Not really, the temperatures in the summer have nothing to do with how much water one drinks.

There is also a formula for calculating the relationship between two variables (called correlation coefficient). Excel can easily and quickly calculate that for you. (Check link at the bottom of this post). Furthermore, it is equally important to understand if the two variables you are studying have a weak or a strong correlationship, or if they have a correlationship at all. The image placed at the top of this post shows the more important types of relationships. Put yourself to the challenge: what are the types of relationships your process may have? As always, eZsigma is here to help in case you need further education on this and other topics related to the Seven Quality tools and process improvement.

http://office.microsoft.com/en-ca/excel-help/correl-HP005209023.aspx