Optimal Process Adjustment with Considering Variable Costs

This paper studies a single-stage production system and two-stage production system where specification limits are designed for inspection. When quality characteristics fall below a lower threshold or above an upper threshold, a decision is made to rework or scrap the item. The target is to determine the optimum target for a process based on rework or scrap costs. In contrast to previous studies, costs are not assumed to be constant. This paper provides Markovian model for optimum process target levels. Numerical examples are performed to illustrate the application of the proposed method.