Optimum mean value and screening limits for production processes with multi-class screening

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.