EFFECT OF QUALITY LOSS FUNCTIONS ON THE ECONOMIC DESIGN OF (X)OVER-BAR PROCESS-CONTROL CHARTS

There has been considerable research on the economic design of Statist ical Process Control (SPC) models, for example (x) over bar charts. Ho wever, the effects of the nature of variability costs (cost due to pro cess variation or, alternatively, the risk position of the firm) on th e design parameters of such models have not been investigated. To exam ine the effects of variability cost, we develop a continuous shift mod el that plausibly assumes that a process mean stochastically undergoes numerous small, possibly undetectable shifts, some moderate size shif ts, and a few larger shifts each having some cost. Using this continuo us time model, we show in what manner the optimal design parameters of an (x) over bar chart are significantly affected by the nature of the variability cost function. Moreover, contrary to the results of past research, we show that under certain conditions, there can be signific ant differences in expected costs and design parameters between contin uous and single shift models.