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BITS Pilani
Pilani Campus
<METHODS IN
SYSTEM
ENGINEERING>
PROF V.MURALIDHAR
MS(SOFTWARE ENGINEERING)
(TECHNIP)-(2013-2014) BATCH
Data Analysis and Quality

Assurance
Control charts for Mean :
Upper control Limit
Central Line
Lower Control Limit
( x , s ) chart : LCL x A1 s
CL
UCL x A1 s
where A1 3 / c2
n is tabulated in tables for
different values of n.
( x , R ) chart : LCL x A2 R
CL
UCL x A2 R
where A2 3 / d 2
n is tabulated in tables for
different values of n.
BITS Pilani, Pilani Campus
Control charts for Range

(R-chart)
S tan dard specified :
LCL D1 '
CL
d 2 '
UCL D2 '
where D1 d 2 3D and D2 d 2 3D and d 2
are obtained from tables.
S tan dard not specified :
LCL D3 R
CL
UCL D4 R
where D3 1 3( D / d 2 ) and
D4 1 3( D / d 2 )
are obtained from tables.
INTERPRETATION OF MEAN
CHART AND R-CHART
The choice between the mean and R-chart is a managerial
problem. Mean chart is used to control the quality
averages of the samples drawn from a given process,
where as R-Chart is used to control the quality variability's
of the samples.
Also it is better to construct R-Chart first. If it indicates that
the dispersion of the quality by the process is out of
control, it is better not to construct Mean chart, until the
quality dispersion is brought under the control.
Mean chart reveals undesirable variations between samples
while R-Chart reveals any undesirable variations within the
samples
problems
1. A drilling machine bores holes with a mean diameter of
0.5230cm and a standard deviation of 0.0032cm.
Calculate the 2-sigma and 3-sigma upper and lower
control limits for means of samples of 4 and prepare a
control charts.
[Ans: LCL=0.5198cm,UCL=0.5262cm
LCL=0.5182cm,UCL=0.5278CM]
Control charts for number

of defectives (or np-Chart)
Suppose random samples of size n are taken from the
product output at some time intervals. If d be the number
of defectives in a sample, then the fraction defective in
that sample is given by p=d/n.
We may suppose that the number of defectives d=np is
binomial with E(np)=nP and V(np)= nP (1 P )
Where P is the population fraction defective.
The process will be in statistical control if P is the same for
all the samples.This will be so if the statistic np lies
within the 3-sigma limits nP3 nP (1 P )
np-Chart
LCL nP '3
CL
nP ' (1 P ' )
nP '
UCL nP '3
nP ' (1 P ' )

calculate the mean fraction defective( p )
LCL np 3
CL
np (1 p )
np
UCL np 3
np (1 p )
Control chart for Fraction

Defective ( or p-chart)
LCL p ' A p ' (1 p ' )
CL
p'
UCL np ' A np ' (1 p ' )

where A 3 / n is tabulated in tables
calculate the mean fraction defective( p )
LCL p A p (1 p )
CL
UCL p A p (1 p )
where A 3 /
n is tabulated in tables
Choice between p-chart and

np-chart
When the sample size is constant, it is immaterial whether
one uses np-chart or p-chart. However, when the sample
size varies, all the three control lines will vary with n, in
the case of an np-chart. The resulting chart will be highly
confusing.
On the other hand in a p-chart the central line remains
invariant. Therefore in case the sample size varies, it is
simpler and preferable to use the p-chart.
Control charts for the number

of defects (or c-chart)
Defective : It is an item that fails to satisfy some given
specification(s)
Defect : It is an event of the items lack of conformity to
given specifications.
Every defectve item contains one or more defects.
Examples : defective rivets in an aircraft , exposed
wires in a refrigerator, surface defects in a roll of a
paper, Crumpled pages in a book, loose screws in a
bicycle etc.
C-chart control limits

LCL c '3 c '
CL c '
UCL c '3 c '
calculate the mean number of defects (c )
LCL c 3 c
CL
UCL c 3 c
Control charts for per unit

Defects ( or u-chart)
The c-chart relates to samples of constant size. In case of
varying sample sizes, it is more convenient to study the
control charts for the number of defects per unit, u=c/n.
Control limits for u-chart

LCL u '3 u ' / n
CL u '
UCL u '3 u ' / n where u is the mean per unit defects
calculate the mean number of defects(c)
LCL u 3 u / n
CL u
UCL u 3 u / n
Applications of u-chart
An u-chart is applied to control the number of defects per
unit in the case of fairly complex assembled units as
T.V.sets, aircraft engines, refregirators etc.
FORECASTING AND
REGRESSION MODELS
In Decision making we deal with devising Future Plans :
For instance, in Financial Planning like share markets,
Investments in Fixed and Recurring deposits, we need to
predict the pattern of cash-flow over time.
THREE TECHNIQUES FOR

FORECASTING FUTURE VARIATIONS
Moving Average Technique
Exponential Smoothening
Regression
Moving Average Technique

The value for a period of time t is given by
yt b t
Where the time series is stable, follows a constant process

b = Unknown constant parameter estimated from historical
data
= Random component for period t with zero mean and

constant variance
The data for different periods are not correlated
Regression method
problems
Exponential Smoothening
problems
DECISION THEORY(Sequential
Decision Models)
A Constructive process for

selecting the best alternatives.
The goodness of a selected
alternative depends on the
quality of the data used in
describing the decision
situation
THREE CATEGORIES OF
DECISION MAKING
I Decision making under certainty in which the data are
known deterministically (Data well defined)
II Decision making under risk in which the data can be
described by probability distribution (Data are
ambiguous)
III Decision making under uncertainty in which the data
cannot be assigned weights that represent their degree
of relevance in the decision process. (Data middle-ofthe-road situation)
Decision making under risk in which the data can be

described by probability distribution (Data are ambiguous)
EXPECTED MONETARY VALUE (EMV) :

S-1 : List the conditional profit for each act event
combination, along with the corresponding event
probabilities.
S-2 : For each act, determine the expected conditional
profits.
S-3 : Determine EMV for each act.
S-4 : Choose the act which corresponds to the optimal
EMV.
EXPECTED OPPORTUNITY
LOSS(EOL)
S-1 : List the conditional profit table for each act-event combination ,
along with corresponding event probabilities.
S-2 : For each event, determine the Conditional Opportunity Loss
(COL=Highest Pay off-other act loss) values by first locating the
most favorable act (maximum pay-off) for that event and then
taking the difference between that conditional profit value and
each conditional profit value for that event.
S-3 : For each act, determine the expected COL values and sum
these values to get the expected opportunity loss (EOL) for that
act.
S-4 : Choose that act which corresponds to the minimum COL value.
problems
1.A manager has a choice between (i) A risky contract
promising Rs.7 lakhs with probability 0.6 and Rs.4 lakhs
with probability 0.4 , and (ii) A diversified portfolio
consisting of two contracts with independent outcomes
each promising Rs.3.5 lakhs with probability 0.6 and
Rs.2 lakhs with probability 0.4. Construct a decision tree
for using EMV criteria. Can you arrive at the decision
using EMV criteria ?
Using the EMV criteria , the manager must go for the risky contract which
will yield him a higher expected monetary value of Rs.5.8 lakhs
Event
Probabili
ty
Conditio
nal
Payoffs
(Decisio
n)
Expected
payoff
(Decisio
n)
Et
P(Et)
Contract
Portfolio
Contract
Portfolio
(i)
(ii)
(iii)
(i)X(ii)
(i)X(iii)
E1
0.6
3.5
4.2
2.1
E2
0.4
1.6
0.8
EMV =
5.8
2.9
The Bayesian Decision

-Making
Posterior (or Bayes) probabilities: The probabilities
obtained using sampling or experimentation.
Prior probabilities are obtained from the raw data.
Problems.
Decision making under certainty in which the

data are known deterministically
Analytic Hierarchy process(AHP) :

Designed for situation in which ideas , feelings and
emotions are quantified based on subjective
judgment to provide a numeric scale for prioritizing
decision alternatives
problems
1.Mr X has received full academic scholarships from three
Institutions : U of A , U of B and U of C. To select a
university Mr X specifies two main criteria : location and
academic reputation. Being excellent student he judges
academic reputation to be five times as important as
location, which gives a weight of approximately 17% to
location and 83% to reputation. Analyze the best choice
of the university by ranking the three universities from
the standpoint of location and reputation.
Given the table of ranks based on two

criteria for the three universities :
Two criteria
Calculation
Percent
Weight
estimates
for
Three
Decision
Alternatives
criterion
U of A
U of B
U of C
Location
12.9
22.7
59.4
Reputation
54.5
27.3
18.2
Composite
weight
0.129x0.17
+
0.545x0.83
=
0.17x0.227
+
0.83x0.273
=
0.594x0.17
+
0.182x0.83
=
0.4743
0.2737
0.2520
Summary of AHP calculations :

DECISION : SELECT A UNIVERSITY
H1
H2
Alt
ern
ati
ves
P1
U
of
A
P1
1
U
of
B
P1
2
P2
U
of
C
P1
3
U
of
A
p2
1
U
of
B
U
of
C
p2
3
P2
2
Summary of AHP calculations :

DECISION : SELECT A UNIVERSITY
H1
H2
Alt
ern
ati
ves
Q1
U
of
A
Q1
1
U
of
B
Q1
2
Q2
U
of
C
Q1
3
U
of
A
Q2
1
U
of
B
U
of
C
Q2
3
Q2
2
Determination of relative weights :

nxn comparison matrix
It reflects the decision makers judgment of the relative importance
of the different criteria.
Aij = criteria in the row i is ranked relative to each of the criteria
represented by the n columns.
Also Aij = 1 signifies that i and j are equally important
Aij = 5 indicates that i is strongly more important than j
Aij = 9 indicates that I is extremely more important than j
Other intermediary values between 1 and 9 are interpreted
correspondingly
For consistency Aij = 1 automatically implies that Aij=1/k
Also all the diagonal elements Aii of A must equal 1 because they
rank a criteria against itself.
Consider the previous

problem
Let L represent location and R represent reputation.
Then the correspnding matrix is given by
L
R
A=L(1
1/5 )
R(5
1)
To determine relative weights :
Normalized matrix is given by
L
R
Row Average
N = L(.17 .17)
WL = .17
R(.83 .83)
WR= .83
The columns are identical implies the charecteristic that occurs only when decision
maker exhibits perfect consistency in specifying the entries of the comparison
matrix A.
DECISION UNDER UNCERTAINTY

This involves alternative actions whose payoffs depend on the (random) states of nature.
PAYOFF MATRIX (m ALTERNATIVES AND n STATES OF NATURE) :
S1
s2
..
sn
a1
V(a1,s1)
V(a1,s2)
..
..
V(a1,sn)
a2
V(a2,s1)
V(a2,s2)
..
..
V(a2,sn)
V(am,s1)
V(am,s2)
..
..
V(am,sn)
.
.
am
CRITERIA FOR ANALYSING

DECISION MAKING :
1.LAPLACE CRITERION
2.MAXIMIN(OR MINIMAX) CRITERION
3.SAVAGE CRITERION
4.HARWICZ CRITERION
NOTE : All the above criterion differ in the degree of
conversation the decision maker exhibits in the face
of uncertainty.
1.LAPLACE CRITERION
This criterion is based on the principle of insufficient
reason. Basic steps are :
Step-1 :Assign equal probabilities (1/n) to each payoff
of a strategy (having n possible payoffs)
Step-2 : Determine the expected payoff value for each
alternative.
Step-3 : Select the alternative which corresponds to
the maximum of the above expected payoffs.
2.MAXIMIN (OR MINIMAX)

CRITERION
This criterion is based on the conservative attitude of
making the best out of the worst possible conditions.
If v(ai,sj) is loss then we select the action that corresponds
to the minimax criterion
Min[max v(ai,sj)]
ai sj
If v(ai,sj) is gain then we select the action that corresponds
to the maximin criterion
Max[min v(ai,sj)]
aj si
minimax criterion
minimax criterion
Step-1 : Determine the minimum assured payoff for each
alternative
Step-2 : Choose the alternative which corresponds to the
maximum of the above minimum payoffs.
maximin criterion
Step-1 : Determine the maximum assured payoff for each
alternative
minimum of the above maximum payoffs.
maximax criterion
Step-1 : Determine the maximum possible payoff for each
alternative
maximum of the above maximum payoffs.
4.HARWICZ CRITERION
This is designed to reflect the decision-making attitudes
ranging from the most optimistic to the most pessimistic.
Define 01 and assume that v(ai,sj) represents gain.Then
the selected action must be associated
Max[max v(ai,sj) + (1-)min v(ai,sj)} The parameter is
ai
sj
sj
the index of optimism.
Different cases :
Case-1 : If =0 the criteria is conservative because it applies
the regular minimax criterion.
Case-2 : If =1 the criterion produces optimistic results
because it seeks the best of the best conditions.
One can adjust the degree of the optimism (or pessimism) through a proper
selection of in the range (0,1) . In the absence of strong feeling regarding
optimism and pessimisim one can choose =0.5
If v(ai,sj) represents loss then the criterion is changed to

Min[min v(ai,sj) + (1-)max v(ai,sj)}
ai
sj
sj
3.SAVAGE CRITERION
The savage regret criterion aims at moderating
conservatism in the minimax(or maximin) criterion by
replacing the (gain or loss)payoff matrix v(ai,sj) with a
loss or regret r(ai,sj) matrix by using the following
transformation :
r(ai,sj) = { v(ai,sj) min(v(ai,sj)} , if v is a loss
max(ai,sj) v(ai,sj) , if v is a gain
PROBLEMS
QUEUEING THEORY
Arrival of Customers(
Service of customers()
Number of servers(1)
Capacity of system(FINITE OR
Queue discipline(FCFS,FIFO,LIFO,SIRO)
SINGLE SERVER MODEL

PROBLEMS :
1.A TV repairman finds that the time spent on his jobs has an exponential
distribution with mean 30 minutes. If he repair sets in the order in which they
came in and if the arrival of sets is approximately poisson with an average
rate of 10 sets per 8 hours day, what is the repairmans expected idle time
each day? How many jobs are ahead of the average set just bought in?
[Ans : 3 hours , 5/2 jobs].
2. In a railway marshalling yard, goods trains arrive at a rate of 30 trains per
day. Assuming that the inter-arrival time follows an exponential distribution
and the service time distribution is also exponential with an average of 36
minutes, calculate (i)the mean line length and (ii)the probability that the
queue size exceeds 10. If the input of trains increases to anaverage of 33
per day, what will be the change in (i) and (ii).
3.
[Ans : 3 trains and 0.06
4.
5 trains and 0.2]
INVENTORY PROBLEMS
An inventory usually maintains a reasonable inventory
of goods to ensure smooth operation.
1. Too little of it causes costly interruptions
2. Too much results of in idle capital.
NOTE :
Inventory level balances the two extreme cases
In other words it is a physical stock of goods kept for the purpose
of future affairs.
To promote smooth and efficient running of business.
Provide adequate service to the customer.
Take advantage of price discounts by the bulk purchasing
Take the advantage of batching and longer production runs etc.
How much to order?

When to order?
Total Inventory Cost = purchasing cost+setup cost+
holding cost+shortage cost
Purchasing cost : It is based on the price per unit of the item. It may be
constant or it may be offered at a discount
Set up cost : It represents the fixed charge incurred when an order is placed.It
is independent of order quantity.
Holding cost : It represents the cost of maintaining inventory in stock. It
includes interest on capital and the cost of storage,maintenance and
handling.
Shortage cost : It is the penalty incurred when we run out of stock.It includes
potential loss of income and the more subjective cost of loss in customerss
goodwill.
Demand : Number of units required per period (known or unknown or in terms
of probabilities
Continued.
Order Cycle : An order cycle is the time period between two
successive order placements.((i) Continous review and (ii) periodic
review
(i)Continous review : In this case the level of inventory is updated
continuously until a certain lower limit is reached at which point (reorder point) a new order is placed. (Two-bin system or Q-system)
(ii) periodic review : In this case the orders are placed at equal
intervals of time, but the size of the order may vary with the
variations in demand.(Fixed order interval system or p-system)
Lead time : The time between placing an order and its actual arrival in
the inventory is known as lead time.If the lead time is known and is
equal to zero and also if the demand is known, then it is advisable to
place an order in advance by an amount of time equal to the lead
time.
Continued
Time horizon : The time period over which the inventory
level will be controlled is called the time horizon. This
horizon may be finite or infinite depending upon the
nature of the demand for the commodity.
Stock Replenishment :
Although an inventory problem may operate with lead time,
the actual replacement of stock may occur
instantaneously or uniformly. Instantaneous
replenishment occur in case the stock is purchased from
outside sources whereas the uniform replenishment may
occur when the product is manufactured by the
company.
Formulation and Solution of

an inventory models
1.Demand per unit of an item may be deterministic (known
with certainty).
2.Demand per unit of an item may be probabilistic
(described by probability distribution)
Economic Lot Size

Problems (EOQ)
Replacement problems
The study of replacement is concerned with situations that
arise when some of the items such as machines, men ,
electric light bulbs etc., need replacement due to their
deteriorating efficiency, failure or break down. The
deteriorating efficiency or complete breakdown may be
either gradual or all of a sudden.
Types of Replacement
problems
1. Replacement of items that deteriorate with time
2. Replacement of items that beak down competely , and
3. Replacement of items that become out of date due to
new developments.

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BITS Pilani

Data Analysis and Quality

n is tabulated in tables for

n is tabulated in tables for

Control charts for Range

BITS Pilani, Pilani Campus

BITS Pilani, Pilani Campus

Control charts for number

BITS Pilani, Pilani Campus

S tan dard not specified :

BITS Pilani, Pilani Campus

Control chart for Fraction

UCL np ' A np ' (1 p ' )

BITS Pilani, Pilani Campus

Choice between p-chart and

BITS Pilani, Pilani Campus

Control charts for the number

BITS Pilani, Pilani Campus

C-chart control limits

BITS Pilani, Pilani Campus

Control charts for per unit

BITS Pilani, Pilani Campus

Control limits for u-chart

S tan dard specified :

BITS Pilani, Pilani Campus

BITS Pilani, Pilani Campus

BITS Pilani, Pilani Campus

THREE TECHNIQUES FOR

BITS Pilani, Pilani Campus

Moving Average Technique

Where the time series is stable, follows a constant process

= Random component for period t with zero mean and

BITS Pilani, Pilani Campus

BITS Pilani, Pilani Campus

BITS Pilani, Pilani Campus

A Constructive process for

BITS Pilani, Pilani Campus

Decision making under risk in which the data can be

EXPECTED MONETARY VALUE (EMV) :

BITS Pilani, Pilani Campus

BITS Pilani, Pilani Campus

BITS Pilani, Pilani Campus

BITS Pilani, Pilani Campus

The Bayesian Decision

BITS Pilani, Pilani Campus

BITS Pilani, Pilani Campus

Decision making under certainty in which the

Analytic Hierarchy process(AHP) :

BITS Pilani, Pilani Campus

BITS Pilani, Pilani Campus

Given the table of ranks based on two

BITS Pilani, Pilani Campus

Summary of AHP calculations :

BITS Pilani, Pilani Campus

Summary of AHP calculations :

BITS Pilani, Pilani Campus

Determination of relative weights :

BITS Pilani, Pilani Campus

Consider the previous

BITS Pilani, Pilani Campus

DECISION UNDER UNCERTAINTY

BITS Pilani, Pilani Campus

CRITERIA FOR ANALYSING

BITS Pilani, Pilani Campus