Economic Design of a One-Sided Screening Procedure Using a Correlated Variable

Abstract

In a complete inspection (screening) procedure, all of the items are subject to acceptance inspection. If an item fails to meet the predetermined inspection specifications, it is rejected and excluded from shipment. When the inspection on the performance variable is destructive or very costly, it may be economical to use another variable that is correlated with the performance variable and is relatively inexpensive to measure as the screening variable. Suppose that the performance variable is a “larger is better” variable and is positively correlated with the screening variable, The items for which the measured values of the screening variable are smaller than the screening specifications are rejected and excluded from shipment. An economic model for this screening procedure is developed with the consideration of the cost incurred by imperfect quality and the cost associated with the disposition of the rejected items. Solution procedures for the optima1 screening specifications are developed for three quality cost functions. Empirical studies show that using the correct quality cost function is essential in implementing the screening procedure, and the correlation between the performance variable and the screening variable significantly affects the economy ofthe screening procedure.