An Integrated Production Cost Model with Possiblity to Reduce

This paper addresses the problem of reworking of defective items and develops an integrated cost model so as to minimize the extra costs of reworking/scraping of work pieces. Items to be reworked are the results of quality problem. To improve a product’s quality, the selection of process target is extremely important since it directly affects the process defective rate, material cost, rework or scrap cost, and loss to customer due to deviation of product from desired specification. The amount of investment necessary to economically correct a defective process is still an issue of research. This research is a contribution to this type of problem. In addition to cost estimation, the integrated cost model focuses on optimal tolerance, and optimal mean and variance of the output characteristics. The symmetrical truncated loss function is used to evaluate the cost of poor quality in a production system. Specifically, we investigate the possible economic investment in a process improvement to reduce its variance and shifting the process mean close to its target, resulting in the reduction of waste like rework/scrap. Numerical examples are presented to show all the steps involved and to verify the proposed model. Utilizing this model, decision-makers can evaluate any quality investment in order to achieve a significant financial return