A note on determining an optimal target by considering the dependence of holding costs and the quality characteristics

Yuehjen E. Shao, John Fowler, George Runger

Research output: Contribution to journalArticle

2 Scopus citations

Abstract

Products that do not meet the specification criteria of an intended buyer represent a challenge to the producer in maximizing profits. To understand the value of the optimal process target (OPT) set at a profit-maximizing level, a model was developed by Shao et al. (1999) involving multiple markets and finished products having holding costs independent from their quality. Investigation in cases considered previously has involved holding costs as a fixed amount or as a normal random variable independent of the quality characteristic (QC) of the product. Less specific in nature, this study considers more general cases in which the HC can be a truncated normal random variable, which is dependent on the QC of the product.

Original languageEnglish (US)
Pages (from-to)813-822
Number of pages10
JournalJournal of Applied Statistics
Volume32
Issue number8
DOIs
StatePublished - Oct 1 2005

Keywords

  • Dependence
  • Optimal process target
  • Profit function
  • Quality characteristics

ASJC Scopus subject areas

  • Statistics and Probability
  • Statistics, Probability and Uncertainty

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