Economic optimization of off-line inspection in a process that also produces non-conforming units when in control and conforming units when out of control

A finite batch of units is produced by a process subject to random failures. The process starts from the in-control state and may shift, while producing a unit, to the out of control state. We consider the case that inspection is conducted after all the units of the batch have been produced, when the production order of the units is preserved. Most research has assumed that while in the in-control state, the process produces only conforming units and in the out of control state, it produces only non-conforming ones. In our research we relax this assumption, i.e. we consider that in the in-control state the process may also produce non-conforming units and in the out of control state, it may also produce conforming ones. Using dynamic programming, we develop an optimal inspection/disposition policy that finds which units to inspect and how to dispose of uninspected units in order to minimize the expected cost, which includes inspection and penalty costs due to classification errors. In addition to the optimal policy, we develop several heuristic policies since the computational complexity of the dynamic programming calculations is O (3^N). We then perform computational studies to check the behavior of the optimal and heuristic policies and also to compare the latter policies.