Scrap minimization in production processes with stochastic outputs

Occurrence of scrap due to uncertainties in a production process is considered in this paper. Two raw materials undergo preparatory processing before they are combined in a definite ratio to make a final product. During the processing, the materials expand or shrink by random amounts, so that at the end of the process one or the other material is in excess. This excess is worthless and is scrapped. A model is developed for the optimal ex ante ratio of the raw materials that would minimize the expected cost of scrap. Data from a field study are used to illustrate the effectiveness of the model.