Costs and benefits of inspection systems and optimal inspection allocation for uniform defect propensity

Abstract

PurposeThe objective of this paper is to demonstrate basic economic principles underlying the use of inspection systems and to derive a basis for comparing inspection costs with the alternative costs of quality improvement.Design/methodology/approachFor this purpose, the impact of final, rectifying and sequential inspection on unit production costs is assessed using a production process model with uniform defect propensity in the single process steps. Based on this model, an objective function with the objective of minimizing unit production costs including inspection costs is formulated and a genetic algorithm method used to optimize it.FindingsTwo distinct patterns of optimal inspection allocation could be detected for changing defect rate, processed volume, fixed inspection costs and variable input costs. These allocation patterns highlight the basic economic relations of an inspection approach and verify the assumption that sequential inspection schemes are cost‐optimal. However, the benefits of quality improvement are found to be superior to any inspection scheme for a majority of cases.Research limitations/implicationsThe findings are derived from a theoretical examination. Further limitations stem from the cost‐centred approach which only covers the internal component of an economic assessment of quality. However, the economic perspective advanced in this paper can in future be subjected to empirical testing and be elaborated by subsequent research.Practical implicationsAlthough built on simplifying assumptions, the process model can provide important insights into basic economic relations and demonstrate that inspection is an inferior way of dealing with quality problems. It can thereby help to promote a better economic understanding of quality.Originality/valueThis paper provides an economic assessment of an important aspect of quality management, which has so far not been advanced.