Optimum Mean Value and Screening Limits for Production Processes

This paper presents the problem of jointly determining the optimum process mean and screening limits for each market in situations where there are several markets with different price/cost structures. All items are inspected prior to shipment, and the inspection is performed on a variable which is highly correlated with the quality characteristic of interest. It is assumed that that quality characteristic is normally distributed with an unknown mean and a known variance. A profit model is constructed which involves selling price, production cost, penalty cost and inspection cost. Methods for finding the optimum process mean and screening limits for each market are presented.