Selection of the Optimal Precision Level and Target Value for a Production Process: The Lower-Specification-Limit Case

Abstract

In a complete inspection plan, every finished item is subject to repeated measurements for inspection of quality. The average of these measurements is used to determine its disposition. Items are acceptable and sold at the regular price to the primary market if the average value of repeated measurements meets a lower specification limit. Otherwise the items are sold as scrap at a reduced price. With a consideration of inspection error, this paper presents an economic model to determine the most profitable target value and optimal measuring precision level for a production process. As expected, the model without error consideration is a special case of our model when the inspection precision level approaches infinity. Moreover, the optimal number of repeated measurements is given, based on maximizing the net expected profit per item.

Additional information

Notes on contributors

Shieh-Liang Chen

Shieh-Liang Chen is associate professor of Business Education at National Changhua University of Education, Taiwan. He received a Ph.D. in Business Administration from National Taiwan Institute of Technology, Taiwan. His research interests include quality control, inventory control, and logistics. His work has been published in European Journal of Operational Research, Engineering Optimization, and Computers and Industrial Engineering.

Kun-Jen Chung

Kun-Jen Chung is Professor of Industrial Management at the National Taiwan Institute of Technology, Taiwan. He holds a Ph.D. in industrial management from Georgia Institute of Technology. His research interests include Markov decision processes, economic design of control charts, inventory control and reliability. His work has been published in journals such as Operations Research, International Journal of Quality and Reliability Management, SIAM Journal on Control and Optimization, Computers and Industrial Engineering, Microelectronics and Reliability, Yugoslav Journal of Operations Research, Proceedings of National Science Council of R. O. C. (Part A), International Journal of Operations and Production Management, and IIE Transactions.