Solving a Statistical Paradox
Using the Monte Carlo method to uncover why customers and suppliers view product defect rates differently
- Quality Progress
- July 2020
- Volume 53 Issue 7
- pp. 20-27
- Faltin, Frederick W.
- Virginia Tech, Blacksburg, VA
It is common for customers and suppliers to have different perceptions of product defect rates. The supplier only ships product that is within specifications. When the customer receives the product, it finds that some of the product is out of specification and returns it to the supplier. Upon receipt of the returned product, the supplier verifies that it is indeed within specifications. How does this happen? The author uses Monte Carlo simulation to study this statistical phenomenon. He creates a virtual population of parts and tracks them through the process of supplier and customer inspections to tabulate the real and perceived defect rates experienced by the supplier and customer.