Stats Individual assignment

CONFIDENTIAL

Ryan Coldman 12984698

ryanc@pescanova.co.za +27 83 6396772

Subject: Decision Analysis Number of pages: 15

Due date: 20 September 2010 Group: MBA Modular 2010 E1 Lecturer: Dr. T Wegner

Office use only: Date received:

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Table of contents
List of tables List of figures List of acronyms and abbreviations 1 1.1 1.2 2 2.1 2.2.1 2.1.2 2.1.3 2.1.4 2.1.5 INTRODUCTION BACKGROUND MANAGEMENT OBJECTIVES MANAGEMENT PROBLEM MANAGEMENT QUESTION Formulate the Null and alternate hypothesis Calculate the region of non-rejection Compute the Z test statistic based on sample evidence Comparison of the Z stat to Z crit Conclusions iii iiv v 1 1 1 2 2 2 2 3 3 3 3 4 4 4 4 4 4 5 5 5 5 6 7 8 ERROR! BOOKMARK NOT DEFINED.9

2.1.5.1 Statistical conclusions 2.1.5.2 Management interpretation 3 3.1 3.2 3.2.1 3.2.2 3.2.3 3.2.4 3.3 3.3.1 3.3.2 3.3.3 3.3.4 4 ANALYSING THE PROBLEM POSSIBLE RELATIONSHIPS HYPOTHESIS TESTING ON INDIVIDUAL PRODUCTS Hypothesis testing on Centros Hypothesis testing on Lomos Hypothesis testing on Medallones Conclusion on single product hypothesis testing COEFFICIENT OF CORRELATION TESTING ON INDIVIDUAL PRODUCTS Coefficient of correlation testing on Centros Coefficient of correlation testing on Lomos Coefficient of correlation testing on Medallones Coefficient of correlation testing on Global sample CONCLUSION

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List of tables
Table 2.1: Z test proportion GLOBAL 3 4 5 5 6 6 7 8

Table 3.2.1: Z test proportion - CENTROS Table 3.2.2: Z test proportion - LOMOS Table 3.2.3: Z test proportion - MEDALLONES Table 3.3.1: Coefficient of correlation - CENTROS Table 3.3.2: Coefficient of correlation - LOMOS Table 3.3.3: Coefficient of correlation - MEDALLONES Table 3.3.4: Coefficient of correlation GLOBAL

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List of figures
Figure 2.1.1: Graph showing rejection rejections Figure 3.3.1.1: Relationship between age and faulty units - Centros Figure 3.3.1.2: Relationship between batch size and faulty units - Centros Figure 3.3.2.1: Relationship between age and faulty units - Lomos Figure 3.3.2.2: Relationship between batch size and faulty units - Lomos Figure 3.3.3.1: Relationship between age and faulty units - Medallones Figure 3.3.3.2: Relationship between batch size and faulty units - Medallones Figure 3.3.4.1: Relationship between age and faulty units - Global Figure 3.3.4.2: Relationship between batch size and faulty units - Global 2 6 6 7 7 8 8 9 9

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List of acronyms and abbreviations

H&G kg g IQF IVP headed & gutted kilogram grams individually quick frozen individually vacuum packed

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1 1 1.1 INTRODUCTION BACKGROUND

This statistical analysis was performed on behalf of a Spanish fishing company operating out of Namibia. Below we will give some background information into the operations of the company to allow insight into the management problem addressed. The company catches hake using trawler vessels, the fish is the gutted and headed on board and then offloaded in iced bins onto land for reprocessing into value added retail packs. Various forms are produced ranging from packing as is into H&G form to skinless and skin-on fillets. Further specialized cutting of these fillets into portions such as steaks and loins also occur to create further value addition. Products are packed in various box sizes varying from 250g to 15 kg. Pieces are traditionally either pouched (individually put into a plastic pouch) or interleaved (packed with a sleeve of plastic interleaving the pieces to allow for easy separation whether still frozen or defrosted. Freezing takes place via blast freezing, a room with high power blowers, or plate freezing, a faster process normally aimed at retail pack freezing of a flat box in between 2 flat freezing plates. They have recently developed a new product in which they individually quickly freeze (IQF) portions and then individually vacuum pack wrap them (IVP). It is the first of its kind on the market, but they have now recently started getting complaints from distributors and final consumers that on opening the box they are finding that some of the portions have lost their vacuum. The purpose of the IVP is to lock in freshness and create a cooking envelope when put into a microwave. Managements objective is to achieve a 97,5% success rate in ensuring a properly vacuumed packed product to the customer, thus only tolerating a 2,5% vacuum loss rate. This is a major concern for them and the reasons for it happening could be many, of which some have been identified by management. 1.2 MANAGEMENT OBJECTIVES

We have been approached to analyze the following question: Can we conclude at a 5% level of significance can we state that 97,5% of vacuumed units will not be punctured? Objectives include ascertaining if the product is achieving the management goals and if not, using the sample data supplied to assess any relationships that might exist between data and proportion of faults found in the samples.

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2 2 2.1 MANAGEMENT PROBLEM MANAGEMENT QUESTION

The question itself indicates that it is a probability type question. It also indicates that inference is needed about a population. The parameter of interest is the population proportion . The logical statistic to use is the sample proportion . = x/n = (1- )/n :x= number of success and n = sample size

Therefore the test statistic for : z = ( - )/ (1- )/n

The confidence interval estimator of z /2 (1- )/n

We will assess this question using a 5 step approach to hypothesis testing. Sample data was obtained from the client distribution centres in Spain on which tests on various batches for loss of vacuum were done on the 3 products involved. We will assess the sample as a whole in the next section and then look at the same variables and KPI s for each product sample. It is important to note here that we are assuming that batch sample sizes are proportional to batch population sizes. 2.1.1 Formulate the Null and alternate hypothesis H: p >= 97,5% H: p < 97,5%

2.1.2 Calculate the region of non-rejection (region where we will not reject the null hypothesis)

Rejection region to reject the null hypotheses

H z = -1,96 z = 1,96

Figure 2.1.1: Graph showing rejection rejections 12984698 CONFIDENTIAL

z > z = z0.05 = 1,645 = x/n :x= number of success and n = sample size x = 1.845 n = 2.145 = 0,8601 2.1.3 Compute the Z test statistic based on sample evidence z = ( - )/ = (0,8601 (1- )/n 0,975)/ 0,975(1-0,975)/2145

= (-0,1149) / 0,003370999 = -34,0848 2.1.4 Comparison of the Z stat to Z crit The Z stat is -34,08 which does not lie inside the region of non-rejection, therefore sample evidence suggests we should reject the Null hypothesis. From table 2.1 we can see that this distribution has a p-value of 0, thus showing overwhelming evidence to reject.

Table 2.1: Z test proportion - GLOBAL

Statistic Sample Proportion Observations Hypothesized Proportion z Stat P(Z<=z) one-tail z Critical one-tail P(Z<=z) two-tail z Critical two-tail Value 0,860 2.145 0,975 -34,073 0,000 1,645 0,000 1,960

2.1.5 Conclusions 2.1.5.1 Statistical conclusions The Z stat lies in the rejection region and thus we will have to reject the Null hypothesis. The P value of Zero also shows that there is overwhelming evidence to reject the Null hypothesis.

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4 2.1.5.2 Management interpretation The statistical evidence suggests that we cannot accept that we are achieving a 97,5% success rate in the IVP process of the production process. Less than 97,5% of the population are losing their vacuum by the time they are being opened at the distribution centres in Spain. Therefore at 5% level of significance we cannot state that there is enough evidence to suggest that 97,5% of product are successfully vacuum packed to reach the customer in the desired state. In the next section we will address some of the possible causes for the loss using descriptive statistics and regression analysis. 3 3.1 ANALYSING THE PROBLEM POSSIBLE RELATIONSHIPS

In this section we will attempt to see if there are any descriptive statistics or regression analysis indicators that might assist in indicating why the product is losing its vacuum, or at least contributing to it. Firstly we will apply the same management question as in section 2 to each of the three products that get IVP. Then we will use the coefficient of correlation to test if age or batch size and vacuum loss have a linear relationship, and if so the strength of it. 3.2 HYPOTHESIS TESTING ON INDIVIDUAL PRODUCTS 3.2.1 Hypothesis testing on Centros As you will see in table 3.2.1 below for the product centros there also overwhelming evidence that more than 2,5% of product are losing their vacuum. Table 3.2.1: Z test proportion - CENTROS
Statistic Sample Proportion Observations Hypothesized Proportion z Stat P(Z<=z) one-tail z Critical one-tail P(Z<=z) two-tail z Critical two-tail Value 0,909 562 0,975 -9,9833 0,000 1,645 0,000 1,960

3.2.2 Hypothesis testing on Lomos As you will see in table 3.2.2 below for the product lomos there is also overwhelming evidence that more than 2,5% of product are losing their vacuum.

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5 Table 3.2.2: Z test proportion - LOMOS

Statistic Sample Proportion Observations Hypothesized Proportion z Stat P(Z<=z) one-tail z Critical one-tail P(Z<=z) two-tail z Critical two-tail Value 0,850 1.261 0,975 -28,4042 0,000 1,645 0,000 1,960

3.2.3 Hypothesis testing on Medallones As you will see in table 3.2.3 below for the product medallones there is also overwhelming evidence that more than 2,5% of product are losing their vacuum. Table 3.2.3: Z test proportion - MEDALLONES
Statistic Sample Proportion Observations Hypothesized Proportion z Stat P(Z<=z) one-tail z Critical one-tail P(Z<=z) two-tail z Critical two-tail Value 0,795 322 0,975 -20,6849 0,000 1,645 0,000 1,960

3.2.4 Conclusion on single product hypothesis testing From the statistical evidence gained when analysing the hypothesis per product the global test is confirmed in that all products have overwhelming evidence that they do not achieve the 2,5% vacuum loss objective, and therefore it is not a single product that might be causing the global sample to give the results it is. This also serves as a test for outliers. 3.3 COEFFICIENT OF CORRELATION TESTING ON INDIVIDUAL PRODUCTS 3.3.1 Coefficient of correlation testing on Centros Below we have used excel to calculate the coefficient of correlation between age and % faults found, and size of batch and % faults found. From the table and figures below it is evident that there are positive relationships between proportion of faulty units and the 2 variables of product age and batch size but in the case of batch size it is a much stronger relationship than that of age. As mentioned in section 1 it is important to note here that we are assuming that samples drawn on 12984698 CONFIDENTIAL

6 batches were equal in proportion to the size of the population batch produced. We are also only showing that there is a relationship and the strength of it, we are not proving that it is a causal one. Table 3.3.1: Coefficient of correlation - CENTROS
Coefficient of correlation Product age and proportion of faulty units Batch size and proportion of faulty units Value 0,194 0,717

Figure 3.3.1.1: Relationship between age and faulty units - Centros

Figure 3.3.1.2: Relationship between batch size and faulty units - Centros 3.3.2 Coefficient of correlation testing on Lomos The same tests were performed on Lomos. From the table and figures below it is evident that there are positive relationships between faulty units and the 2 variables of product age and batch size but in the case of batch size it is stronger relationship than that of age. The relationships are not nearly as strong as for the product Centros. Table 3.3.2: Coefficient of correlation - LOMOS
Coefficient of correlation Product age and proportion of faulty units Batch size and proportion of faulty units Value 0,022 0,142

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Figure 3.3.2.1: Relationship between age and faulty units - Lomos

Figure 3.3.2.2: Relationship between batch size and faulty units - Lomos 3.3.3 Coefficient of correlation testing on Medallones The last product tested was Medallones. From the table and figures below it is evident that there is a strong negative relationship between faulty units and the product age and a strong positive relationship between batch size and % faulty units. The negative relationship is not in line with that obtained in the other 2 products tested. Table 3.3.3: Coefficient of correlation - MEDALLONES
Coefficient of correlation Product age and proportion of faulty units Batch size and proportion of faulty units Value -0,886 0,848

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Figure 3.3.3.1: Relationship between age and faulty units

Medallones

Figure 3.3.3.2: Relationship between batch size and faulty units - Medallones 3.3.4 Coefficient of correlation testing on global sample Below we have used excel to calculate the coefficient of correlation between age and % faults found and size of batch and % faults found. From the table and figures below it is evident that there are positive relationships between faulty units and the 2 variables of product age and batch size but in the case of batch size it is a much stronger relationship than that of age.. Due to the fact that the product Medallones had a negative relationship with product age and the other 2 products have a weak relationship we will have to assume that product age and faulty units found do not have a relationship based on tests done. Table 3.3.4: Coefficient of correlation
Coefficient of correlation Product age and proportion of faulty units Batch size and proportion of faulty units

GLOBAL
Value 0,133 0,422

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Figure 3.3.4.1: Relationship between age and faulty units

Global

Figure 3.3.4.2: Relationship between batch size and faulty units - Global

CONCLUSION

From the hypothesis testing at a global level and at an individual product level there was overwhelming evidence to suggest that the products are not achieving their desired level of a 97,5% success rate on IVP processes. When doing statistical tests on the possible relationships that might exist, he relationship of batch size to the proportion faulty units 2 of the products had a strong positive linear relationship suggesting not that this could be a possible cause in the products losing the vacuum, but that an increase in one causes a strong increase in the other. Due to the fact that we are assuming that sample sizes were drawn proportionally to batch sizes this might be giving us skewed information. We will have to do further testing. Due to the fact that the product Medallones had a negative relationship with product age and the other 2 products has a weak relationship we will have to assume that product age and proportion of faulty units found have no relationship. 12984698 CONFIDENTIAL

10 A third possible correlation which can be tested is that of plastic thickness used to proportion of faulty units. This information is not yet available but as it does it would be worthwhile for management to review so as to ascertain where the problem is. At the moment and for the purposes of this analysis we can conclude that the objective of 2,5% vacuum loss is not being achieved and management should pursue further investigations. We would also at this point like to state that this work has been performed by the author alone, and acknowledgement should be given to Dr, T Wegner for his insight into possible methods of assessing this problem as well as the client for which this analysis was done for providing sample data. This was not included in the report due to volume, but is available on request.

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