Summary Of Hypothesis Test & Application ( For Normal Data )

Statistical Hypothesis Testing

Hypothesis testing has been widely use in inferential statistic for quantitative hypothesis analysis. One could face difficulties making decision without quantified measure of different hypothesis.

Hypothesis for statistical analysis must be translated into mathematical term to make it possible for probability calculation. In other word, we need to transform the hypothesis in to numerical form and data collection for the test is possible. The main objective of statistical hypothesis testing is to analyze the response of a treatment being tested against its original condition.

The observation could be;

• Shift of mean, median or standard deviation against a targeted value
• Changes of mean, median or standard deviation after certain treatment
• Different of mean, median or standard deviation between two group of data set from two different population.
• Different of mean between multiple group of data set.

More info related to statistical hypothesis testing could be obtained from www.wikipedia.org. Those mathematical equation are too technical to me, anyway, this is not a big problem since all statistical calculation can be done through Minitab.

The most important one are the knowledge of forming precise test hypothesis and the rules that need to fulfilled. Statistical calculation can be done by input the data and test stat into Minitab. The software will tell you the result with a comprehensive report after a few mouse clicks.

The Concept Of Hypothesis Testing

A hypothesis consist either of a suggested explanation for a phenomenon (observable event) or of a reasoned proposal suggesting a possible correlation between multiple phenomenon.
(Source from : http://www.wikipedia.org)

Hypothesis testing is the procedure of making rational decision about the validity of the hypothesis formed.

Example of hypothesis testing can be found in the jury system. There are three party involved in a court case. i.e. plaintiff (prosecutors), defendant (accuse) and the judges.

The judge will form a hypothesis as below before hearing a case;

Hypothesis

Ho : The evidences are not significantly strong enough to proof the defendant guilty

H1 : The evidences are significantly strong to proof defendant guilty

The main function of the plaintiff play in a case is to continuously supply strong evidence to proof the defendant guilty.

Whereas the function of the defendant is to defend himself by rejecting the evident provide by the plaintiff.

The judges role is to collect information supplied by the plaintiff and defendant and make decision about the hypothesis validity.

Excess Inventory

I spend most of my time in cleaning up inventory for the past 10 years of work life. I don’t know why. Two company I served in the past having the problem of raw material overly stocked.

The problem is quite critical in fact. I were asked to manage about 5 million RM of excess raw material in the first company I joint, and about 1.5 million USD of rejected raw material + WIP in the later company I joint. I don’t know why both companies end up in this situation.

When I tell people about this, most of them very interested to know my solution and end result. Can I turn the multimillion “asset” into cash?

Answer to you: Not very successful, I can reduce the inventory, but I don’t have the magic to turn the number into cash. I recover less than 500K RM for the first company I served over 5 year period, and I disposed about 800K USD of rejected material but cash back less than 200K USD.

It is very difficult to recover the money when it tight up as excess inventory. Most material has its shelf life. They degrade by itself over time.

There are high proportion of excess material in the warehouse were expired to fit product specification. Because of accounting purpose, usually were kept in the warehouse as raw material. Scrapping off the material may affect balance sheet, this is what top management don’t like to see.

The best way to minimize the excessive material stock up is “Don’t Keep” at the first place. This is possible for high volume low mix production operation, whereas it could be a challenge for low volume high mix business operation.

No More WIP

When go back to the office, I re-look the existing production system, trying to bring in the Mc Donald’s system into the assembly process.

I did a process system study together with respective process engineers and industrial engineers. We finalize the new production system as below.

Changes in the new production system are;

Regroup the process into 3 main section, i.e. Material loading, Assembly and Final Test

• Material loading : 1 operator
• Assembly process : 4 operators
• Final test : 2 operators

Only one WIP station located between material loading and assembly. The bin size was customized to contain only 4 set of WIP.

Benefits of the new production system are;

• One operator can be remove from the production line, labor cost saving.
• No change in production capacity even though with lesser head count per line
• No investment requirement for WIP storage facilities
• 30% shorter production line
• The most important point is, no more WIP build up in the production line.
• Easier production line control due to low WIP level
• Better quality control

Note : This is just one out of thousand activities I did to lean the production system.

Work In Progress

I don’t know much about Lean production concept. But my boss wants it, I have to learn and make it happen.

Lean production concept emphasis on running production operation with minimum and flexible resources, and minimum material inventory pile up. Lean suggest production only triggered when there is a “pull” from downstream process.

Before my boss think about Lean production system, the company actually operate in a high inventory level condition. Cash flow was tight up by the WIP, excess raw material and finish product.

My new assignment is to clean up the inventory. Because I start the assignment from the scratch, I need to choose an easy way to start the journey. Finally, I choose to kill WIP as my top priority.

What’s wrong with the existing production system?

The line layout of the existing production system as below

The production system consists of a motorized conveyor system; figure above shows an assembly line for portable battery charger. Operators at the upstream process performing some assembly and pass the semi finish product to the next operator at the downstream for subsequent assembly processes.

All the operators were told to produce as many as they can regardless the WIP level at the next process station. The over produced WIP can be temporary store in the bin next to the operator. Downstream operators were “Push” to ensure the WIP level low all the time.

So many years working in this kind of environment, I don’t see any problem with the production system. WIP build up is mainly due to the low efficiency of a specific operator, or problem of the line balancing. The WIP on the other hand can be a driving force to motivate the downstream operators work harder.

To minimize the WIP level, I tried many ways to balance the line again and again, yet the WIP level still high. Why?

I read through some article related to lean, but I can’t really understand the concept behind. I understand Lean better when I hear a Mc Donald crew scolded by his restaurant manager in the kitchen.

The manager shouted to the crew; “Mc Chicken tray is full, why can’t you stop making it!”

Now I know why my WIP always high…

Hidden Factory

Hidden factory are non value added activities hided or embedded in any process operation. Because it is invisible to us, therefore we are not aware of it most of the time.

Toyota production system ( Lean ) classify the non value added processes as waste in the production system. Waste in the production system affecting process efficiency, resulting of higher operation cost.

Founder of Toyota production system Taiichi Ohno & Shigeo Shingo identified 7 critical wastes that need to remove from the main stream process flow. There are;

1. Overproduction
2. Waiting
3. Transportation
4. Inappropriate processing
5. Excess inventory
6. Unnecessary motion
7. Defect

Out of the 7, I would like to add one more: Inspection

Wastes listed above is not unique to Toyota, it exist in our work place as well. We did not aware the existence most of the time, because it is invisible or it is being accepted as part of the main stream process operation.

When a company accepts hidden factory build up in their main stream process operation, a portion of the company resource will be take up to support the invisible operation that do not generate income for the company.
Hidden factory will growth over time. The cost to maintain the hidden factory will roll like a snow ball if management did not clean up their main stream process regularly. The bigger the size of the invisible factory, the more money will be taken up by the invisible monster.