An Economic Model of the X Control Chart

1. The problem
A manufacturing process with an x control chart to monitor the process
The process starts with in-control and could become out-of-control after a while
due to assignable causes
The occurrence of assignable causes of the manufacturing process follows
Poisson distribution
The production is a continuous process and does not stop
The control chart has Types I and II errors in detecting the assignable causes
It has certain cost and time to sample the products
The decisions are the size of the sample, the control chart limits and the
frequency of sampling
The objective is to minimize the expected cost related to product quality and
quality control per unit time (hour) of production
The decision variables:
o h time interval in hours to take samples
o n the sample size
o k the parameter for control limit of the x chart as in 0 k / n

and 0 k / n

The parameters:
o the rate that the production system fails due to assignable causes.
The number of system failures in a certain time period follows
Poisson distribution (or the time that the process remains in control
follows exponential distribution with mean 1 / hour)

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o The expected number of inspections during the in-control state can be
estimated by:
1
h
o probability of type I error (the false alarm) with

2 (k )
z z2

where ( z )
1
2 e

2
dz , the standard normal cumulative

distribution function

o the number of false alarms among the inspections would be:

h
o probability of type II error (the consumers risk) with

(k n ) (k n)
where indicates the magnitude of the shift caused by the assignable
cause so that the mean will be moved from 0 to 0 or to

0
o D the time needed to restore the process following an action signal
o g time to inspect 1 unit of the products, so the time to inspect a
sample of n units is gn
o the elapsed time between the last inspection in the in-control
period and the process shifts to out-of-control state

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 o The expected cycle time E (T ) can be found as:

1 h
E (T ) gn D
1

1* 1* 1* 1* 1*

h h h h

gn gn D
inspection
interval

sampling
time 3*

in-control period ( 1 / ) out-of-control period

2*

h /(1 )
4*

Cycle Time E(T)

1*: inspection epochs;

2*: time that the process shifts
3*: type II error signal
4*: time that the shift will be detected and corrected

o For this process, can be estimated by:

h h 2

2 12

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 Other parameters:
o V0 income per hour of operation in in-control state

o V1 income per hour of operation in out-of-control state

o ( a1 a 2 n ) the cost of taking a sample of size n

o a 3 the cost of finding the assignable cause

'
o a 3 the cost of investigating a false alarm
o The expected total cost for investigating false alarms in the cycle is:
a 3'
h
o The total expected net income per cycle is:

1 h a ' E (T )
E (C ) V 0 V 1 gn D a 3 3 ( a 1 a 2 n )
1 h h

o The expected net income per hour is then

1 h a 3'
V 0 V1 gn D a 3
E (C ) 1 h a a2n
E ( A) 1
E (T ) E (T ) h

Let a 4 V 0 V 1 , the penalty cost for out-of-control production, then the above
equation can be written as:
h a'
a4 gn D a 3 3
E ( A)
E (C ) a a2n
V0 1 1 h
or
E (T ) h E (T )

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 h h h 2 a '
a 4 gn D a 3 3
a a2n
E ( A) V0 1 1 2 12 h
V0 E ( L)
h E (T )

where
a1 a 2 n a4 h h h 2 a3 a 3'
E (L) gn D
h E (T ) 1 2 12 E ( T ) hE ( T )
and
1 h h h 2
E (T ) gn D
1 2 12

the problem then becomes to minimize the value E ( L ) by selecting different

values of n, k and h in order to maximize the expected net income.

2. Example 9.5

A manufacturing process with x chart for quality control

Assignable causes will make the process mean to shift for 2 times of its
( 2.0)

The fixed cost of taking a sample is $1 ( a1 1)

The variable cost of measuring one unit is $0.1 ( a 2 0.1)

The time to measure one unit is 1 minute ( g 0.0167 )
An assignable cause may occur so that the process becomes out-of-control
every 20 hours ( 0.05)
Average time required to investigate an out-of-control signal is 1 hour ( D 1)
The cost of finding the assignable cause is $25 ( a3 25)

The cost of investigating a false alarm is $50 ( a3' 50)

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 The penalty cost for the process to operate in the out-of-control state is
$100/hour ( a4 100 )

With the given values of the parameters, the expected cycle time can be calculated
by:
1 h h h 2
E (T ) gn D
1 2 12
h h 0 . 05 h 2
20 0 . 0167 n 1
1 2 12
h h
21 0 . 00417 h 2 0 . 0167 n
1 2
or
h h
E ( T ) 21 0 . 00417 h 2 0 . 0167 n
1 2
The expected loss per hour can be calculated by:
a1 a 2 n a4 h h h 2 a3 a 3'
E (L) gn D
h E ( T ) 1 2 12 E ( T ) hE ( T )

1 0 . 1n 100 h h 0 . 05 h 2 25 50
0 . 0167 n 1
h E (T ) 1 2 12 E ( T ) 0 . 05 hE ( T )
Or
1 0 . 1n 100 h h 25 1000
E (L) 0 . 00417 h 2 0 . 0167 n 1
h E (T ) 1 2 E ( T ) hE ( T )

where is a function of k, is a function of k and n, and E (T ) is a function of

n, k and h.

Optimal solutions of the minimization problem:

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 1 0 . 1n 100 h h 25 1000
min E ( L ) 0 . 00417 h 2 0 . 0167 n 1
n ,k ,h h E (T ) 1 2 E ( T ) hE ( T )

should be similar to those given in Figures 9-24 and 9.25.

3. Some observations from previous investigations

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 The sample size n is mainly affected by the shift, .
The penalty costs mainly affect the sampling frequency, h.
The costs related to looking for assignable causes mainly affect the width of the
control limit, k. They also affect the sample size n. As they increase, the chance
for false alarms reduces.
The sampling costs affect all design parameter.
The system failure rate due to assignable causes mainly affects the sampling
frequency, h.

4. Other Research Results Based on this Model

h 2 h h 2 h
We can treat E (T ) as constant and let 0 . Then . If n
12 2 12 2
and k are given, then the optimal sampling interval h * can be found by letting
d
E ( L ) 0 to obtain:
dh

( a 1 a 2 n ) E ( T ) a 3' /
h*
a 4 1 1 12

There are other results under different assumptions as in W-H Chen and D.
Tirupati (International Journal of Quality & Reliability Management, Vol. 14,
pp. 234-259, 1997)

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