Modified economic production and raw material model with quality loss for conforming product

Abstract

In 2000, Roan et al. developed an imperfect production system including raw material procurement cost and finished product cost for determining the optimal process mean, production run size, and raw material order quantity, in which the quality cost of conforming products was not included. Taguchi proposed the quadratic quality loss function for measuring the product quality and redefined the product quality as the loss of society when the product is shipped and sold to the customer. In the present paper, the model developed by Roan et al. is modified with quality loss for obtaining the optimal parameters associated with raw material and production process. Numerical results show that our modified model leads to larger process mean, larger raw material order quantity, higher expected total relevant cost of products, smaller production run size, and smaller number of order quantity of the raw material satisfying each production run than those from the original model, which indicates that the original model given in Roan et al. may underestimate the expected total relevant cost of products due to ignoring the quality loss of conforming products.