Business Statistics - Hypotheses Testing Histogram

Gulf Tech Company has been working with the North Company for a considerably a long time. That is primarily because the screws which the North Company has been providing meet the companys quality standards. However, Gulf Tech seems to be struggling with the high cost of materials and parts from the North, and they want to reconsider their relationship.

The manufacturing manager, Mrs. Layla has instructed the purchasing department to look at the alternative supplier who would provide Gulf with screws. But the cost doesnt seem to be the only issue; quality is also a major consideration since that is what has enabled the firm to establish a competitive advantage in the market. Apparently, the company has identified two extra companies which would provide the screws, and both claim that they will deliver high-quality screws. But since you cant trust people in business, it is important to subject the screws to a test against the one that Gulf has been using, from North Company. Therefore the business aims to procure a supplier who will deliver products which meet the current quality, at a lower cost than the current one.

Histograms

The North Company

The West Company

The East Company

The histograms show that the screws from the north have a normally distributed diameter. Most of the screws have a diameter slightly on either side of 6mm. Each side of the mean has an almost equal distribution of screws. In contrast, the West is skewed to the right, and both the histogram and the skewness value indicate. It has the mean values around 6.4, but the left side has more screws than the right. The East Company is skewed to the right, where most of the elements lie. However, the three histograms, other than skewness, do not show significant differences. Their mean and median are almost equal, so is the variance and standard deviation.

Some of the requirements for hypothesis testing, in any case, is that the data must be randomly obtained, which in this case we can assume each company did. It is also important that the overall data is normally distributed, and more importantly, the variables were measured using the same scale of measurement. The data that is under consideration meets all the assumptions, and therefore is satisfies all the assumptions for testing.

Hypothesis Testing

Null hypothesis: The population means for screws provided by North and those provided by either West or East are equal.

Alternative hypothesis: The population means for screws provided by North and those provided by either East or West are not equal.

With the hypothesis testing, we can now proceed to conduct an hypothesis testing using the Eviews Software.

North and West Company

North and East Company

The results of the two tests, North and West, and North and East are contrasting. The p-value for North and West is significantly small. The p-value for the test is 0.0000 when rounding up to four significant figures. That is significantly small compared to the default level of significant, which is assumed to be 0.05. However, that value will still be less than any other value for the level of significance, even if we had to change it.

The p-value between North and East is 0.04, which is slightly smaller than 0.05, the default level of significant. Either way, the value is below 0.05, and the conclusion is we take the alternative hypothesis at the expense of the null hypothesis.

ANOVA for North, West, and East

An analysis of the three companies gives a p-value of 0.0000, which is lower than any value for the level of significance. That means that there is a significant difference between screws provided by each company. The resulting table also shows varying differences in standard deviation, meaning the diameters for screws from the three firms have some significant variations.

Conclusion

Provision of quality products is often important to maintain a market leader, and this is precisely what Gulf Tech has been exploiting. But along the way things may change, despite that, quality should never be compromised particularly for companies that have spent so much to build a loyal customer base. Therefore every step must be taken to ensure all decisions the company makes considers customers needs.

Gulfs decision to search for cheaper options for materials and parts should not lead it to undermine the quality of their products. An analysis comparing screws from prospective suppliers indicate that they provide screws significantly different from what Gulf Tech Company has been dealing with. That means the two companies West and East Company- do not meet the quality standards to take over from the North Company as lead suppliers form the Gulf Tech. It is therefore important, based on what has been revealed in this statistical analysis, for the company to continue looking for other potential suppliers who would meet the quality standards of the screws they are already using. West and East Companies do not meet the qualifications to replace the North Company.