This paper presents a model of a bottleneck facility that performs two
distinct types of operations: ''regular'' and ''repair.'' Both switch
-over time and cost are incurred when the facility switches from perfo
rming one type of operation to a different type, Upon the completion o
f a batch of jobs in the regular mode, each batch is subjected to a te
st, where the entire batch (of jobs) will be classified accordingly as
either nondefective, repairable, or nonrepairable. A nondefective bat
ch continues its process downstream, a nonrepairable batch is scrapped
, and a repairable batch can be cycled back to the bottleneck facility
for repair. The objective of this paper is to determine the optimal r
epair policy for the bottleneck facility so that the long run average
operating profit is maximized. We first characterize the optimal repai
r policy by showing that the optimal repair policy must take one of th
e two forms: a ''repair-none'' policy under which all repairable batch
es are scrapped, or a ''repair-all'' policy under which all repairable
batches are repaired. We then develop optimality conditions for the r
epair-none policy and the repair-all policy. When the repair-all polic
y is optimal, we further show that there exists an optimal ''threshold
'' operating policy that can be described as follows: upon completion
of a regular batch, switch over to the repair mode only if the number
of available repairable batches exceeds a certain threshold value. We
also evaluate the impact of batch sizes, yield, and switch-over cost o
n the optimal operating policy.