Situational Analysis

Situational analysis

Rejection rate faced at current variable levels by the Pikko company is around 35%.

Sample size= 300 units. (Chosen from lots of size 20000 units)

C1=6. C2=13.

The case also states that about 4-5% defective rate in production, acceptance rate is only around 65%. The goal is to get an acceptance rate of around 97.5% to maintain profitability. At the given input levels, we found using goal-seek in MS Excel that the defective rate is only about 2.22%. Mr. Mitra wants to find a solution for the problem, and determine whether a change in production efficiency or in the sampling method/parameters is required.

Goal

We have tried to solve the problem by adopting the following steps:

1. To calculate acceptance and rejection probabilities given the current input parameters.

2. Calculating a defect rate that Pikko can afford if all other variables are to be kept constant and yet, a 97.5% acceptance is to be achieved.

3. To determine an appropriate smaple size that could increase the acceptance rate to around 97.5%.

Data Provided:-

Let A1 be the acceptance No. for the first sample of the first and second sample pooled together

A2= Outright rejection No.

Probability of ‘x' defects in a sample of size n is calculated using Binomial Distribution.

P(X=x) = nCx.px.(1-p)x

no. of defectives pmf

0 0.001188529

1 0.008095321

2 0.027477563

3 0.061969239

4 0.104466143