Statistical Methods for Decision Making

Assignment (Cold Storage Case Study)

Prepared by: Atanu Bhaumik

 Content:

1. Problem 1 overview:

Cold Storage started its operations in Jan 2016. They are in the business of storing
Pasteurized Fresh Whole or Skimmed Milk, Sweet Cream, Flavoured Milk Drinks. To
ensure that there is no change of texture, body appearance, separation of fats the
optimal temperature to be maintained is between 2 - 4 C.
In the first year of business they outsourced the plant maintenance work to a
professional company with stiff penalty clauses. It was agreed that if the it was
statistically proven that probability of temperature going outside the 2 - 4 C during the
one-year contract was above 2.5% and less than 5% then the penalty would be 10% of
AMC (annual maintenance case). In case it exceeded 5% then the penalty would be
25% of the AMC fee.
Solution Breakdown Structure:
Set work directory and data import
Mean by Season
Overall mean
Standard deviation
Assumption is normal distribution
Probability of temp by lower-tail
Probability of temperature by upper-tail
Total probability beyond range.
Check for the penalty.

2. Problem 2 overview:

In Mar 2018, Cold Storage started getting complaints from their Clients that they have been
getting complaints from end consumers of the dairy products going sour and often smelling.
On getting these complaints, the supervisor pulls out data of last 35 days’ temperatures. As a
safety measure, the Supervisor decides to be vigilant to maintain the temperature 3.9 C or
below.
Assume 3.9 C as upper acceptable value for mean temperature and at alpha = 0.1 do you feel
that there is need for some corrective action in the Cold Storage Plant or is it that the problem
is from procurement side from where Cold Storage is getting the Dairy Products. The data of
the last 35 days is in “Cold_Storage_Mar2018.csv”
Solution Breakdown Structure:
Set working directory and import data
Find the mean of Temperature.
Check for standard deviation.
Check for type of hypothesis to be used.
Find the P-Value.
Inference.
 Problem 1
1.a. Set work directory and data
import
For setting the working directory we need to get R point towards the
directory where the raw data is stored.
1.b. Mean by Season

Mean cold storage temperature for Summer, Winter and

Rainy Season

1. Rainy: 3.039344
2. Summer: 3.153333
3. Winter: 2.700813

1.c. Overall mean

Overall mean of Temperature for the entire year: 2.963

1.d. Standard deviation

Standard Deviation for the full year: 0.508589

1.e. Assumption is normal

distribution

1.f. Probability of temp by lower-

tail
Assuming Normal distribution, the probability of
temperature having fallen below 2 degree C: 0.02914744

1.g. Probability of temperature by upper-tail

Assuming Normal distribution, the probability of

temperature having gone above 4 degree C: 0.02072629

1.h. Total probability beyond

range.

Total probability for getting temperature beyond the

range:
(probability below 2 degree) 0.02914744 +
(probability above 4 degree)0.02072629 = 0.04987373
1.i. Check for the penalty.

2.5%< 4.987373 <5%

So, the penalty is 10% for the AMC Company.

__ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ _
 Problem 2

> summary(mardata)
Season Month Date Temperature
Summer:35 Feb:18 Min. : 1.0 Min. :3.800
Mar:17 1st Qu.: 9.5 1st Qu.:3.900
Median :14.0 Median :3.900
Mean :14.4 Mean :3.974
3rd Qu.:19.5 3rd Qu.:4.100
Max. :28.0 Max. :4.600
> sd(mardata$Temperature)
[1] 0.159674
> mean(mardata$Temperature)
[1] 3.974286
As a safety measure, the Supervisor decides to be vigilant to maintain the temperature 3.9 C or
below.
Diagram showing mean as 3.97 and considering 3.9 as the permissible limit.

Available data:
 Mean for the last 35 days: 3.974286. || The
sample size is more than 30.

 Standard deviation of the Temperature for the

last 35 days: 0.159674. || the standard deviation
is found from the data received.

We have two points with us:

1. The sample size is more than 30.
(n>30).
2. The standard deviation is known.
So, we can do one sample Z test.

Computing the values:

Z=-2.927
Type one error: α= 0.1
So, if we use excel function: NORM.S.INV (0.1)
Z(critical) = -1.28155
Hypothesis
H0 = 3.9 (Milk is ok nothing to be done for
improvement for cold storage)
H1 > 3.9 (Milk is NOK)

Diagram: Consider 3.9 as the mean and then draw a

Bell curve with the coloured portion which is less
that the X(critical).
So, P Value= 0.425
> pnorm(q=3.87, mean=3.9 , sd= 0.159674, lower.tail=T
)
[1] 0.4254843

Inference:
P-value > alpha H0 Fails to Reject.
So there is a need for corrective action cold
storage.