OPTIMAL INVESTMENT AND LOT-SIZING POLICIES FOR IMPROVED PRODUCTIVITY AND QUALITY

Productivity and quality are an integrated component of the operationa l strategy of any firm. An increase in productivity implicitly assumes an improvement in quality. The concept of dynamic process quality con trol and smaller lot-size production have been employed to eliminate d efective items, to reduce the cycle time of a product and to improve q uality and productivity. We present a mathematical model to establish the relationship between various parameters of productivity and qualit y. In addition, the proposed model is used to determine the optimal le vels of productivity and quality parameters such as batch sizes, and i nvestment in set-up and process control operations. The basic criterio n considered for optimizing the level of such parameters is the minimi zation of total system cost. The proposed model relates productivity a nd quality to set-up reduction, queueing of batches, batch sizes, and drift rate reduction. We conclude with an example problem to illustrat e the behaviour and application of the model.