Economic capital investment for quality improvement

Abstract

In this paper, the author considers the quality improvement by capital investment for reducing the bias and variability of product. Assume that the quality characteristic is normally distributed with known mean and standard deviation. One can adopt the predictive method, i.e., capital investment, for improving the process parameters. The product is sold to the primary market when its quality characteristic meets the lower specification limit. The product is replaced and sold to the second market when its quality characteristic is below the lower specification limit. The optimal capital investment is determined based on the maximization of the expected total profit per unit.

Subject Classifications:

• 60 Probability Theory and Stochastic Processes

Keywords:

• Capital Investment
• Process Mean
• Process standard Deviation