SPC CASE ANALYSIS: AMERICO DRILLING SUPPLIES

MGT 3332 – Spring 2019

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Important Notice: All team members must do all parts of the project and compare results. DO
NOT divide up parts of the project as many parts are related. Teams must submit a copy of
Word file and Excel file of their work through Blackboard Dropbox.

Do not submit any file until all team members agree on the deliverables. Only one team member
will submit the files. There is no second chance on submittal.

On November 1, 2013 John Adams, a customer service representative of Americo

Drilling Supplies (ADS), was summoned to the Houston office of Drilling Contractors,
Inc. (DCI), to inspect three boxcars of mud-treating agents that ADS had shipped to
the Houston firm. DCI had filed a complaint that the 25 Pound bags of treating
agents that it had just received from ADS were light-weighted.

The light-weight bags were initially detected by one of DCI’s receiving clerks, who
noticed that the rail road side scale tickets indicated that the net weights were
significantly less on all three of the boxcars than those of identical shipments
received on October 25, 2013. ADS’s traffic department was called to determine if
lighter-weight dunnage or pallets were used on the shipments. (This might explain
the lighter weights.) ADS indicated, however, that no changes had been made in the
loading or palletizing procedures. Hence, DCI randomly checked 25 of the bags and
discovered that the average net weight was almost 24.5 pounds. Consequently, they
concluded that the sample indicated a significance short-weight. ADS, was then
contacted, and Adams was sent to investigate the complaint and to issue credit (???)
to DCI.

DCI, however, was not completely satisfied with only the issuance of credit for the
short shipment. The charts followed by their mud engineers on the drilling platforms
were based on 25-pound bags of treating agents. Lighter-weight bags might result in
poor chemical control during the drilling operation and might adversely affect drilling
efficiency. (Mud-treating agents are used to control the pH and other chemical
properties of the open during drilling operations.) This could cause severe economic
consequences because of the extremely high cost of oil and natural gas drilling
operations. Consequently, special use instructions had to accompany the delivery of
these shipments to the drilling platforms. Moreover, the light-weight shipments had
to be isolated in DCI warehouse, causing extra handling and poor space utilization.

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Hence, Adams was informed that CDI might seek a new supplier of mud-treating
agents if in the future it received bags that deviated significantly below 25 pounds.

The quality control department at ADS suspected that the light-weight bags may
have resulted from “growing pains” at the Orange, Texas plant. Because of the earlier
energy crises, oil and natural gas exploration activity had greatly increased. This
increased activity, in turn, created increased demand for products produced by
related industries, including drilling muds. Consequently, ADS had to expand from
one shift (6 A.M. to 2 P.M.) to a two-shift (2 P.M. to 10 P.M.) operation in Mid 2011s,
and finally to a three-shift operation (24 hours per day) in January of 2013.

The additional night shift bagging crew was staffed entirely by new employees. The
most experienced foremen were temporarily assigned to supervise the night shift.
Most emphasis was placed on increasing the output of bags to meet the ever-
increasing demand. It was suspected that only occasional reminders were made to
double-check the bag weight feeder. (A double check is performed by systematically
weighting a bag on a scale to determine if the proper weight is being loaded by the
weight-feeder. If there is significant deviation from 25 pounds, corrective
adjustments are made to the weight-release mechanism.)

To verify this expectation, the quantity control staff at ADS randomly sampled the
bag output and prepared the following table (see Excel dataset). Four bags were
sampled and weighted each hour.

ANALYSIS

Assume you are John Adams of ADS. Based on the following analysis, prepare a
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 report to be submitted to both ADS and DCI executives regarding the status of the
filling process at ADS and recommend method to improve quality control at the
filling station and estimate the amount of credit to DCI. Use the data provided in the
Excel data file.

Insert all graphs and provide analysis in this word file after every question.
Only The Word file is graded.

a- Calculate the Range Column in Excel (Largest-Smallest) and find mean and
standard deviations for Average Weight, Smallest, Largest, and Range
columns.

Average (X-
bar)   Smallest   Largest   Range  

Mean 24.55555556 Mean 23.69027778 Mean 25.41666667 Mean 1.726388889

Standard Error 0.068999356 Standard Error 0.096923726 Standard Error 0.085075682 Standard Error 0.085990343
Median 24.6Median 23.8Median 25.3Median 1.6
Mode 25.2Mode 23.9Mode 25.1Mode 1.6
Standard Standard Standard Standard
Deviation 0.585478951 Deviation 0.822425085 Deviation 0.7218911 Deviation 0.729652253
Sample Sample Sample
Variance 0.342785603 Variance 0.67638302 Variance 0.521126761 Sample Variance 0.53239241
- -
Kurtosis -0.96656452 Kurtosis 0.585895392 Kurtosis 0.437803468 Kurtosis -0.17507134
-
Skewness 0.375693005 Skewness -0.11167807 Skewness 0.059752967 Skewness 0.421381587
Range 2.1 Range 3.3 Range 3 Range 3.4
Minimum 23.4 Minimum 22 Minimum 23.8 Minimum 0.4
Maximum 25.5 Maximum 25.3 Maximum 26.8 Maximum 3.8
Sum 1768 Sum 1705.7 Sum 1830 Sum 124.3
Count 72 Count 72 Count 72 Count 72

Xbb = 24.55555556
R-bar = 1.726388889

b- What is the standard deviation of individual bags if sample averages are based
on 4 bags? Explain your finding. Hint: x-bar = /sqrt(n). Having x-bar based
on part (a) calculation, solve for  given n= 4. So  = (x-bar)(sqrt(n))

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 (0.585478951)sqrt(4) =  = 1.170957902

c- Construct a time series plot of all four variables (two graphs: one includes
avg., smallest, and largest and the other has range data) and discuss your
findings based on the graphs.

d- Construct X-bar and R Charts, graph, and discuss your findings based on the
control charts. Make sure to include the control limit calculations below. Is
the process out of control? Why? Explain.

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e- Is there any differences between performances of three shifts? Hint: (Carve out
the morning, afternoon, and night shift data into three columns and graph
their averages. Explain your findings based on graph.

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 f- Use One Way Analysis of Variance (ANOVA) to compare the three groups
(shifts) to test if there is significant differences in the performance of three shift
averages. Use Alpha =0.01. Indicate the Null and Alt. hypotheses and explain
your findings based on ANOVA table.

Anova: Single
Factor

SUMMARY
Groups Count Sum Average Variance
Morning 24 603.6 25.15 0.035652
Afternoon 24 590.9 24.62083 0.046938
Night 24 573.5 23.89583 0.148243

ANOVA
Source of Variation SS df MS F P-value F crit
1.54E-
Between Groups 19.02861 2 9.514306 123.6516 23 3.129644
Within Groups 5.309167 69 0.076944

Total 24.33778 71        

g- Assume Tolerance limits of 25±1.5 lbs. is specified in the sales contract and
find the Process Capability index Cpk. Discuss if this process is capable to
meet contractual agreement.
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 USL=26.5 LSL=23.5 Xbb=24.55555556 =1.170957902
(26.5 - 24.55555556)/(3*1.170957902)
1.94444444/3.512873706 = 0.5535
(24.55555556 – 23.5)/3*1.170957902)
1.05555556/3.512873706 = 0.3005
Cpk = min(0.5535,0.3005)
Cpk = 0.3005

h- Redo part g for all three shifts separately and determine their C pk. Note that
you must carve out the three shifts and find the mean and standard deviations
for each shift separately and go through part b calculations for each shift.

Morning
Xbb = 25.150
R-bar = 1.579
N= 4
 = 0.378
USL 1.192
LSL 1.456
CPk 1.192

Afternoon
Xbb 24.621
R-bar 1.754
N= 4
 = 0.433
USL 1.446
LSL 0.862
CPk 0.862

Night
Xbb 23.896
R-bar 1.846
N= 4
 = 0.770
USL 1.127
LSL 0.171
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 CPk 1.127

i- If the process average is adjusted to 25.0 lbs. and process standard deviation
(answer in part b) is reduced by 60%, what is the new C pk? Are you
comfortable for making such recommendation to management? Explain.
Adjusted Avg 25
Std Dev. Reduced by
60% 0.234
Sigma 0.468
USL 1.068
LSL 1.068
Cpk 1.068

j- Find the control limits for an X-bar and R chart if a new improved process has
average of 25.0 lbs. and R-bar of 1.0 lbs. Assume n=6 for new process control.
No graph needed.

X-bar UCL 25+(0.48*1) = 25.48

X-bar LCL 25-(0.48*1) = 24.52
R-bar UCL 0*0.48 = 0
R-bar LCL 1*2.28 = 2.28

k- Estimate the amount of credit ($) must be given to DCI (for the past 24
months) if it purchased 20,000 bags per month at cost of $4 per lb.

(0.5)*(20,000*24)
(0.5)480,000 = 240,000
$4(240,000) = 960,000
A Credit of $960,00 is owed to DCI

l- Provide complete conclusion regarding your findings and make

recommendations regarding the filling process in your conclusion paragraph.

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Grading Criteria
Completeness/Correctness 70%
Quality of Interpretations/Analysis 20%
General Quality of Report/graphs/writing 10%

Due Date: Sunday April 28, 2019

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