Optimal process control policies under a time-varying cost structure. (Q1811155)

The authors formulate a basic model to study optimal process control policy under a time-varying cost structure based on internal and external failure costs for jointly determining the optimal process control policy and inventory holding time. Using the model, they also study the process control policies when the value of the product may decrease over time. The benefit of process improvement on the process control and inventory policy is illustrated and situations in which a JIT (just-in-time) system becomes economically are shown. The basic model is extended to consider also fixed-life product perishability and exponential product value drop. The result of the paper, in general, demonstrates that a tighter process control policy should be used when the inventory holding time is lower, because the external failure cost is increased by a smaller inventory holding time.