Production quantity and specification limits settings by considering specified process capability value

In the present paper, we propose a modified Kouikoglou and Phillis’s produce-to-stock system with a the specified process capability index value under the partly loss sales or complete backlogging. The economic specification limits, specified process capability value, output quantity, and incoming order are jointly determined by maximizing the expected total profit of product. Hundred percent inspection is executed before the products are shipped to the customer. The finite output buffer (production quantity) and rejection of incoming order are also considered in our model. Assuming that the target value of product characteristic is equal to its specification center, the Taguchi’s asymmetric quadratic quality loss function is applied to evaluate the product quality. From the above numerical examples and sensitivity analysis of parameters, the results suggest that one can adopt the modified Kouikoglou and Phillis’s produce-to-stock system under the complete backlogging. If the produce-to-stock system under the partly loss sales, then one should use the original Kouikoglou and Phillis’s model for obtaining the larger expected total profit of product than that of modified one.