W.9_Lilly Wasitova_Statistical Process Control Analysis
Problem Statement
Observing the fluctuation of the gold value especially in the past decade is the perfect case to do the exercise and to increase my skills in working out the statistical process control analysis, which is at first to study the variation and its source of the process and/or performance over time.
In order to do so, two sets of data of the Gold Price Statistics from Seeking Alpha α [3] and Kitco [4] will be analyzed.
Alternative Solutions
The charts to be used from [3] for the Gold Price Reference from the year 1790 to date and [4] for the monthly Gold Price in 2011 are captured as below:
Figure 1 : Gold Price of a constant Value “CPI Basket” [3]
Figure 2 : 2011 Monthly Gold Price [4]
Selection Criteria
To be analyzed from the two charts are the performance of the processes shown based on the statistical calculation of their:

Mean Values

Upper and Lower Control Limits

Probabilities / “Comfort Levels” of the 1.78 ounce baseline
Selection of the preferred alternatives
The statistical calculation for both data sets are as per below table:
Table 1 : Calculated Statistical Parameters
* Data # 1 from [3] since the Market determined Gold Price from 1970 to date, using the given values.
** Data # 2 from [4] for the 2011 monthly Gold Price
Using the steps to determine if the process is “Out of Control” from [2], will have to draw the zones between the LCL to UCL for both data sets, as shown in the Figure 3 and Figure 4 below.
Figure 3 : Control Chart of Gold Price of a constant Value “CPI Basket” [3]
Figure 4 : Control Chart of 2011 Monthly Gold Price [4]
Analysis and Comparison of Alternatives
From the control charts we can make the analysis of “Out of Control Process” for both data sets using reference [2] p.62, as follows:

For Figure 3, there is no statement of “Out of Control Process” is meet. Therefore we can say that the data taken is not out of control

For Figure 4, there are two statements describing the “Out of Control Process”, namely:

Point 2.d à There are six consecutive point increasing or decreasing

This will give the statement that the Gold Price in 2011, which is in continuous increase, is Out of Control.

Selection of the preferred alternatives
In the similar Situation concerning currency exchange fluctuation, I have actual data from 2009 when purchasing US Dollar from Indonesian Rupiah for business purposes as below listed in the below Table with its statistical parameter calculation and plotted as per Figure 5.
Table 2 : Historical Currency Exchange USD to IDR in 2009 with its Calculated Statistical Parameters
Figure 5 : Control Chart of the Historical Currency Exchange in 2009
Performance Monitoring & Post Evaluation of Results
From the control chart, with reference to [2] it is showing that the currency exchange is not out of control despite almost 10% standard deviation from the average rate and a big difference for over 26% for the range to average rate, statistically it is under control, however the fluctuation especially in the first 5 months of that year has brought some uncertainty in the market back then.
References:
 Sullivan, William G., Wicks, Elin M. & Koelling, C. Patrick (1942), Engineering Economy 15^{th} Edition, Singapore: Prentice Hall, Inc.
 Michael Bassard & Diane Riter (2010), The Memory Jogger 2^{nd} Edition, Canada, GOAL/QPC
Seeking Alpha α
http://seekingalpha.com/article/262560usinghistorytodeterminegoldsintrinsicvalue
 Kitco http://www.kitco.com/scripts/hist_charts/yearly_graphs.plx
 XE, The World’s Favorite Currency Site
Excellent, Bu Lilly…….
Nice set up of the data and nice assessment and analysis!!!
My only follow on question is what implication does it have that at least short term, that the price of gold is out of control? First, do we (does anyone?) have control over this process? So if there is a process we have little or no control over, and it is out of control, what would or should be the strategy from a management perspective?
Asked another way, knowing this information, (large variances, process unstable or out of control) how should management use this information in making better, safer, more responsible decisions?
My only other comment would be too bad you did not collaborate with David, so BOTH of you could have gotten credit……. “Two for One Deal”………. Work SMART, don’t work hard!!
Now the challenge is how to get this down so you can do all this in 105 minutes or less……??
Keep up the good work… You are on the right track and will get there by W26….
BR,
Dr. PDG, Jakarta