Selection of the Most Economical Production Plan in a Tool-Wear Process

This article considers the problem of selecting the most profitable target value for a continuous production process in which there is a shift in the mean value of the quality characteristic. If the characteristic of a given item falls in value below a given specification level, the item is sold as scrap. Otherwise, it is sold at its regular price. The objective is to select the initial setting and the run size that will maximize the unit profit. Profit per unit is defined as the expected profit from a given run minus the setup cost divided by the run size. Unique optimal solutions are derived. In addition, a heuristic is proposed that yields near-optimal solutions at substantial computational savings.