Acceptance Sampling, Imperfect Production, and the Optimality of Zero Defects

Naval Research Logistics, Vol.44, No. 6, pp. 515-30, 1997

Posted: 12 Jun 2006

See all articles by S. Andrew Starbird

S. Andrew Starbird

Santa Clara University - Department of Information Systems & Analytics

Abstract

Acceptance sampling is often used to monitor the quality of raw materials and components when product testing is destructive, time-consuming, or expensive. In this paper we consider the effect of a buyer-imposed acceptance sampling policy on the optimal batch size and optimal quality level delivered by an expected cost minimizing supplier. We define quality as the supplier's process capability, i.e., the probability that a unit conforms to all product specifications, and we assume that unit cost is an increasing function of the quality level. We also assume that the supplier faces a known and constant pass-through cost, i.e., a fixed cost per defective unit passed on to the buyer. We show that the acceptance sampling plan has a significant impact on the supplier's optimal quality level, and we derive the conditions under which zero defects (100% conformance) is the policy that minimizes the supplier's expected annual cost.

Keywords: acceptance sampling, zero defects, quality

JEL Classification: M11, C44, L15

Suggested Citation

Starbird, Sterling Andrew, Acceptance Sampling, Imperfect Production, and the Optimality of Zero Defects. Naval Research Logistics, Vol.44, No. 6, pp. 515-30, 1997, Available at SSRN: https://ssrn.com/abstract=907382

Sterling Andrew Starbird (Contact Author)

Santa Clara University - Department of Information Systems & Analytics ( email )

500 El Camino Real
Santa Clara, CA 95053
United States

HOME PAGE: http://omis.scu.edu/

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