Question

Scenario 4

A warehouse has a new leadership team and they wanted to prove their performance was as good or better than the previous leadership team. They measured on-time shipping and accurate order fulfillment. Their data showed a correlation value of 0.70 and a regression value of 0.49 between on-time shipping and accurate order fulfillment. The previous leadership teams’ corresponding numbers for on-time shipping and accurate order fulfillment were a correlation value of 0.80 and a regression value of 0.64.

1. What conclusions can you summarize from these numbers in plain English?

2. Based on this data what future course of action do you recommend for your client?

Scenario 5

The same warehouse leadership team in Scenario 4 measured damaged products and warehouse capacity. Their data showed a correlation value of -0.50 and a regression value of 0.25 between damaged products and warehouse capacity.

1. What conclusions can you summarize from these numbers in plain English?

2. Based on this data what future course of action do you recommend for your client?

Answer 1

Before going to the answers lets revisit correlation and regression (coefficient of determination)

correlation is the strength of association between two variables.

For a negative correlation, the variables work opposite each other. When there is a positive correlation between two variables, as the value of one variable increases, the value of the other variable also increases. The variables move together.

Whereas, the coefficient of determination (R squared ) is the percentage of variance explained by the dependent variable.

For example, if R squared is 0.5, then 50% of the variation in independent variable can be explained by the dependent variable. Rest 50% can not

Coming to the questions.

1.

In plain English - previous leadership team had a stronger association between on-time shipping and accurate order fulfillment (With increase in on-time-shipping, accurate order fulfillment also increases) and also, on-time shipping explained more of the accurate order fulfillment than this leadership team.

2.

Client should either ask the new leadership team to perform better or go back to the previous leadership team as the results show that previous team was performing better in terms of association of on-time shipping and accurate order fulfillment and variation explained by on-time shipping for accurate order fulfillment

Scenario 5 -

1.

In plain English, this means that a decrease in warehouse capacity causes an increase in damaged products.

Also, the variation in the damaged products explained by warehouse capacity is less. Meaning there are other factors responsible for damaged products along with warehouse capacity

2.

Recommendations -

Identify other sources responsible for damaged products and work on them

Increase warehouse capacity