MGT 3332 SPC case analysis: Americo Drilling Supplies� Fall 2015

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1SPCCASEANALYSIS:AMERICO DRILLINGSUPPLIESMGT 3332–Fall 2015Dr. NayebpourInNovember2013,JohnAdams,acustomerservicerepresentativeofAmericoDrillingSupplies(ADS),wassummonedtotheHoustonwarehouseofDrillingContractors, Inc.(DCI), to inspect three boxcars of mud-treating agents thatADShad shipped to the Houston firm.DCIhad filed a complaint that the 50 Pound bagsoftreatingagentsthatithadjustreceivedfromADSwereshort-weightbyapproximately 5%.The light-weight bags were initially detected by one of DCI’sreceiving clerks, whonoticed that the rail road side scale tickets indicated that the net weights weresignificantlylessonallthreeoftheboxcarsthanthoseofidenticalshipmentsreceived on October 25, 2013.ADS’s traffic department was called to determine iflighter-weight dunnage or pallets were used on the shipments. (This might explainthe lighter weights.)ADSindicated, however, that no changes had been made in theloading or palletizing procedures. Hence,DCIrandomly checked 50 of the bags anddiscovered that the average net weight was 47.51 pounds. They noted from pastshipmentsthatthebagnetweightsaveragedexactly50.0pounds,withanacceptable standard deviation of 1.2 pounds.Consequently, they concluded that thesample indicated a significance short-weight.ADS, was then contacted, and Adamswas sent to investigate the complaint and to issuea 5% credit to DCI.DCI, however, was not completely satisfied with only the issuance of credit for theshort shipment. Thecharts followed by their mud engineers on the drilling platformswere based on 50-pound bags of treating agents. Lighter-weight bags might result inpoor chemical control during the drilling operation and might adversely affect drillingefficiency.(Mud-treatingagentsareusedtocontrolthepHandotherchemicalproperties of the open during drilling operations.)This could cause severe economicconsequences because of the extremely high cost of oil and natural gas well-drillingoperations. Consequently, special use instructions had to accompany the delivery ofthese shipments to the drilling platforms. Moreover, the light-weight shipmentshad

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2to be isolated in DCIwarehouse, causing extra handling and poor space utilization.Hence,Adamswas informed thatCDImight seek anew supplier of mud-treatingagents if in the futureit received bagsthat deviated significantly below50 pounds.The quality controldepartment at ADSsuspectedthat the light-weight bags mayhave resulted from “growing pains” at the Orange plant. Because of the earlier energycrises, oil and natural gas exploration activity had greatly increased. This increasedactivity,inturn,createdincreaseddemandforproductsproducedbyrelatedindustries, including drilling muds. Consequently, ADShad 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, andfinally to a three-shift operation (24 hours per day) in September of 2013.The additional night shift bagging crew was staffed entirely by new employees. Themost experienced foremen were temporarily assigned to supervise the night shift.Mostemphasiswasplacedonincreasingtheoutputofbagstomeettheever-increasing demand. It was suspected that only occasional reminders were made todouble-check the bag weight feeder. (A double check is performed by systematicallyweighting a bag on a scale to determine if the proper weight is being loaded by theweight-feeder.Ifthereissignificantdeviationfrom50pounds,correctiveadjustments are made to the weight-release mechanism.)To verify this expectation, the quantity control staffat ADSrandomly sampled thebag output and prepared the following table.Sixbagswere sampled and weightedeach hour.

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3ANALYSISAssume you are John Adams of ADS.Based on the following analysis, prepare areport to be submitted to both ADS and DCI Executives regarding the status of thefilling process at ADS and recommend method to improve quality control at thefilling station.Use the data provided in the Excel data file.Insert all graphs and provide analysis in this word fileafter every question.Only The Word file isgraded.a-Calculatethe Range Columnin Excel(Largest-Smallest) and find mean andstandarddeviationsforAverageWeight,Smallest,Largest,andRangecolumns.After calculating the range column the obtained values (mean and standarddeviations) for the 4 columns is calculated. The obtained output is given below,Average(X-bar)SmallestLargestRangeMean49.169447.311151.11253.8014StandardDeviation1.25571.94061.56901.5102b-What is the standard deviation of individual bags if sampleaverages are basedon 6bags?Explain your finding.Hint:x-bar=/sqrt(n). Havingx-barbased onpart b calculation, solve forgiven n= 6In part a we calculated the standard deviation for sample averages based on asample size 6 hence using thegiven formula,Standard deviation of individual bags =𝑆𝐷𝑓𝑜𝑟𝑎𝑣𝑒𝑟𝑎𝑔𝑒∗ඥ𝑠𝑎𝑚𝑝𝑙𝑒𝑠𝑖𝑧𝑒=1.2557∗√6= 3.075824

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