CASE NO.

10: Group 1
SEITZ CORPORATION: PRODUCING QUALITY GEAR-DRIVEN AND LINEAR-MOTION PRODUCTS

The Seitz Corporation, a QS 9000 certified organization based in Torrington,

Connecticut, is a leading designer and manufacturer of thermoplastic motion control
systems and components and an industry leader in plastics and gear trains. Founded in
1949 by the late Karl F. Seitz, the company began as a small tool-making business and
grew slowly. In the late 1960s, the company expanded its services to include custom
injection molding. As their customer base grew to include leading printer manufacturers,
Seitz developed and patented a proprietary line of perforated form handling tractors.
Utilizing its injection-molding technology, the company engineered an all-plastic tractor
called Data Motion, which replaced costly metal versions. By the late 1970s, business
was booming, and Data Motion had become the worldwide industry leader.
In the 1980s, foreign competition entered the business equipment market, and many of
Seitz’s customers relocated or closed shop. The ripple effect hit Seitz as sales declined
and profits eroded. Employment at the company dropped from a high of 313 in 1985 to
only 125 in 1987. Drastic changes had to be made at Seitz. To meet the challenge in
1987, Seitz made a crucial decision to change the way it did business. The company
implemented a formal five-year plan with measurable goals called “World- Class
Excellence Through Total Quality.” Senior managers devoted many hours to improving
employee training and involvement. New concepts were explored and integrated into
the business plan. Teams and programs were put into place to immediately correct
deficiencies in Seitz’s systems that were revealed in customer satisfaction surveys. All
employees from machine operators to accountants were taught that quality means
understanding customers’ needs and fulfilling them correctly the first time. Once the
program started, thousands of dollars in cost savings and two new products generating
almost $1 million in sales resulted. Annual sales grew from $10.8 million in 1987 to $19
million in 1990. Seitz’s customer base expanded from 312 in 1987 to 550 at the end of
1990. In the decade of the 1990s, Seitz continued its steady growth. By 1999, Seitz was
shipping products to 28 countries, and customers included Xerox, Hewlett Packard,
Canon, U.S. Tsubaki, and many more worldwide. By 1998, sales topped the $30 million
mark. In January 2000, the company established the Seitz Motion Control Systems Co.,
Ltd., in Changzhou, China, about 150 miles northwest of Shanghai, to provide product
and tooling design engineering, sourcing and supply chain management services, and
contract manufacturing. The Seitz Corporation headquarters is located in Torrington,
Connecticut in an 80,000 square foot facility with over 150 associates, 50 molding
machines ranging in size from 35 tons to 770 tons, an in-house tooling department, and
a corporate staff. While the primary core competency of the Seitz Corporation is rotary
and linear motion control, making them an industry leader in plastics and gear trains,
Seitz offers a full range of product design and tooling services.

Discussion
1. Seitz’s list of several hundred business-to-business customers continues to grow.
Managers would like to know whether the average dollar amount of sales per
transaction per customer has changed from last year to this year. Suppose company
accountants sampled 20 customers randomly from last year’s records and
determined that the mean sales per customer was $2,300, with a standard deviation
of $500. They sampled 25 customers randomly from this year’s files and determined
that the mean sales per customer for this sample was $2,450, with a standard

1|Page
CASE NO. 10: Group 1
SEITZ CORPORATION: PRODUCING QUALITY GEAR-DRIVEN AND LINEAR-MOTION PRODUCTS

deviation of $540. Analyze these data and summarize your findings for managers.
Explain how this information can be used by decision makers. Assume that sales per
customer are normally distributed.

Comparing the average dollar amount of sales per transaction per customer
between last year and present year’s transaction. This problem would utilize Two
sample T-test assuming equal variances.

H0:µ1- µ2 = 0
Ha: µ1- µ2 ≠ 0

x̄1 = 2,300 (last year)

x̄2 = 2,450 (this year)
S1 = 500
S2 = 540
n1 = 20
n2 = 25

Critical value (T-table)

Df= n1 + n2 – 2
= 20+25-2
=43
α = 0.05 (two-tailed)
t critical value = ± 2.021

t= (2,300-2,450) – (0)
√ (500)2 (19) + (540)2 (24)
20+25-2 √ 20
1+ 1
25

= -150
√ 4,750,000 + 6,998,400
43 √ 0.05 + 0.04
= -150
√ 273,218,605
√ 0.09
= -150
522.7031 (.3)

= -150
156.8109

= t stat = -0.96

2|Page
CASE NO. 10: Group 1
SEITZ CORPORATION: PRODUCING QUALITY GEAR-DRIVEN AND LINEAR-MOTION PRODUCTS

Decision: Since tstat = -0.96 > t crit -2.021, the decision is to accept the null
hypothesis. There is not enough evidence to say that there is any significant
difference in the average dollar amount of sale between this year and last year. On
the end of the business decision makers, supplemental strategies to increase sales
may be employed to make the difference statistically significant.

2. One common approach to measuring a company’s quality is through the use of

customer satisfaction surveys. Suppose in a random sample, Seitz’s customers are
asked whether the plastic tractor produced by Seitz has outstanding quality (Yes or
No).Assume Seitz produces these tractors at two different plant locations and that
the tractor customers can be divided according to where their tractors were
manufactured. Suppose a random sample of 45 customers who bought tractors
made at plant 1 results in 18 saying the tractors have excellent quality and a random
sample of 51 customers who bought tractors made at plant 2 results in 12 saying the
tractors have excellent quality. Use a confidence interval to express the estimated
difference in population proportions of excellent ratings between the two groups of
customers. Does it seem to matter which plant produces the tractors in terms of the
quality rating received from customers? What would you report from these data?

Comparison of tractors at two plants using a confidence interval to estimate µ1 - µ2

X1 = 18
X2 = 12
p̂1 = 18 = 0.40
45
p̂2 = 12 = 0.2353
51
q1 = 1-p1
= 1-0.40
q1 = .60

q2 = 1-p2
= 1-0.2353
q2 = 0.7647

n1 = 45
n2 = 51
Zcrit = ±1.96

(p̂1 - p̂2) ± z p̂1 . q1 + p̂2 . q2

√ n1 n2

√
= (0.40-0.2353) ± 1.96 (.40) (.60) + (.2353) (.7647)
45 51

3|Page
CASE NO. 10: Group 1
SEITZ CORPORATION: PRODUCING QUALITY GEAR-DRIVEN AND LINEAR-MOTION PRODUCTS

√
= 0.1647 ± 1.96 0.00533 + 0.00352812

= 0.1647 ± 1.96 (0.941175)

= 0.1647 ± 0.1845

The point estimate of the difference in quality of tractors at the two plants is 16.47%.
However, due to the relatively small samples, the error of the interval is 18.45%
which is greater than the point estimate. Combining the error of the interval with the
point estimate results in the confidence interval shown above. Note that zero is in
the interval indicating that there is possibility that there is no difference in the quality
rating of tractors produced at the two plants. If this were a hypothesis testing
problem, then the decision would be to accept null hypothesis based on the
confidence interval’s inclusion of zero.

3. Suppose the customer satisfaction survey included a question on the overall quality
of Seitz measured on a scale from 0 to 10 where higher numbers indicate greater
quality. Company managers monitor the figures from year to year to help determine
whether Seitz is improving customers’ perceptions of its quality. Suppose random
samples of the responses from 2008 customers and 2009 customers are taken and
analyzed on this question, and the following Minitab analysis of the data results.
Help managers interpret this analysis so that comparisons can be made between
2008 and 2009. Discuss the samples, the statistics, and the conclusions.

Comparison of mean ratings of customer satisfaction between year 2008 and 2009.
The MINITAB results provide a t value of -2.34 with a p-value of -0.020. This means
that there is a significant difference in the mean ratings of customer satisfaction
between 2008 and 2009. The result is statistically significant at 0.05 degree of
significance. Examining the means of customer ratings reveal mean score for 2009
is 6.604 while 6.46 for the year 2008. This then highlights the idea that customers
during 2009 are more satisfied about seitz quality than the ratings of those during
2008 with a population of 93 and 73 respectively.

4|Page
CASE NO. 10: Group 1
SEITZ CORPORATION: PRODUCING QUALITY GEAR-DRIVEN AND LINEAR-MOTION PRODUCTS

4. Suppose Seitz produces pulleys that are specified to be 50 millimeters (mm) in

diameter. A large batch of pulleys is made in week 1 and another is made in week 5.
Quality control people want to determine whether there is a difference in the
variance of the diameters of the two batches. Assume that a sample of six pulleys
from the week 1 batch results in the following diameter measurements (in mm): 51,
50, 48, 50, 49, 51.Assume that a sample of seven pulleys from the week 5 batch
results in the following diameter measurements (in mm): 50, 48, 48, 51, 52, 50, 52.
Conduct a test to determine whether the variance in diameters differs between these
two populations. Why would the quality control people be interested in such a test?
What results of this test would you relate to them? What about the means of these
two batches? Analyze these data in terms of the means and report on the results.
Assume that pulley diameters are normally distributed in the population.

Since the problem is asking for difference between manufacturing process an F-test
for Two population variances is utilized.
F = S12
S22
Let α = 0.05 (two-tailed) α/2 = 0.025
H0: S12 = S22
Ha: S12 ≠ S22

df1 = 6-1 = 5
df2 = 7-1 = 6
F critical value = 5.99

df numerator = v1 = n1-1
df numerator = v2 = n2-1

Week 1 n1 = 6
Week 5 n2 = 7
S1 = 1.14
S2 = 2.41

Week 1
µ
51-49.83 =1.172 =1.3689
50-49.83 =0.172 =0.0289
48-49.83 =-1.832 =3.3489
50-49.83 =0.172 =0.0289
49-49.83 =0.832 =0.6889
51-49.83 =1.172 =1.3689
6.8334 / 6 = 1.14 S1

5|Page
CASE NO. 10: Group 1
SEITZ CORPORATION: PRODUCING QUALITY GEAR-DRIVEN AND LINEAR-MOTION PRODUCTS

Week 5
µ
50-50.14 =1.142 =0.0196
48-50.14 =-2.142 =4.5796
48-50.14 =-2.142 =4.5796
51-50.14 =0.862 =0.7396
52-50.14 =1.862 =3.4596
50-50.14 =-0.142 =0.0196
52-50.14 =1.862 16.8572 / 7 = 2.41 S2

F = (1.14)2
(2.41)2

= 1.2996
5.8081

F = 0.2237

Since the observed value of F=0.2237 is less than the Fcrit value 5.99 the decision is
to accept the null hypothesis. The variances of product being produced these two
weeks are not significantly different. Management of Seitz would like this because
this is indicative of consistency of production patterns. Wide discrepancies in
variance would be of concern because it would indicate that in some weeks variability
is more out-of-control than others and less quality consistent products is being
produced.

6|Page