Target Selection in Process Control under Asymmetric Costs

Abstract

Many production processes require specific control variables to be kept at preset values. The variables are often subject to random influences and being off-target is generally associated with costs. The great majority of papers in this area have considered symmetric cost functions which take the mean value as target. When there is asymmetry in the cost function the target value needs to be adjusted to minimize the expected cost. This is demonstrated in the present article and illustrated with an application in the manufacture of construction panels. A table of adjustment factors is given.

• Cost Functions
• Economic Design
• Process Control

Additional information

Notes on contributors

Michael Cain

Dr. Cain is a Reader in the Department of Economics.

Christian Janssen

Dr. Janssen is a Professor in the Department of Finance and Management Science.